After the fall of Egyptian President Hosni Mubarak in 2011, the U.S. Agency for International Development hired several nongovernmental organizations to set up pro-democracy programs in Egypt — even though they were not registered to work in the country.
Less than a year later, the Egyptian government charged 43 NGO workers with operating illegally. Sixteen of them were Americans, including the son of then-U.S. Transportation Secretary Ray LaHood.
The Americans were freed in March 2012 after USAID secretly paid the Egyptian government $4.6 million in “bail” money.
That May, USAID’s Office of the Inspector General (OIG) completed a confidential draft audit of the program that questioned the wisdom of the program and the legality of using the money to post bail.
But when the inspector general’s office publicly issued its final audit report five months later, those findings and other critical conclusions had been removed, according to internal audit documents obtained by The Washington Post. What was once a 21-page report had been reduced to nine.
In recent interviews, eight current auditors and employees who spoke on the condition of anonymity because they feared retribution complained about negative findings being stricken from audits between 2011 and 2013. In some cases, the findings were put into confidential “management letters” and financial documents, which are sent to high-ranking USAID officials but are generally kept from public view.
The auditors said the office has increasingly become a defender of the agency under acting inspector general Michael G. Carroll. Some auditors said Carroll did not want to create controversy as he awaited Senate confirmation to become the permanent inspector general.
On Wednesday, Carroll withdrew his nomination, which had been pending for 16 months. Carroll declined to discuss his decision. A career government employee, he has been with the office since 2000 and took over as acting inspector general in 2011.
“As much as I have enjoyed the latter experience, it has not been without its challenges and I will be withdrawing my name from consideration for the Inspector General position,” he said in an e-mail to his staff. “In reflecting back on the past several years, there are clearly some things I would have done differently, but I, nevertheless, believe that we have made a great deal of progress as an organization.”
Carroll also noted that the Senate has not acted to confirm more than 160 other presidential nominees. “With upcoming elections, little progress is expected through the balance of the year,” he said. He told his staff that he plans to remain in the office as a deputy inspector general.
Carroll’s withdrawal comes at a time of growing criticism from whistleblowers who have been in contact with Senate investigators and Post reporters.
“The office is a watchdog not doing its job,” said Darren Roman, an audit supervisor at the inspector general’s office who retired in 2012 after a 23-year career. “It’s just easier for upper management to go along to get along. The message is: ‘Don’t make waves, don’t report any problems.’ ”
Sen. Tom Coburn (R-Okla.) said he was concerned after his office looked into complaints by a half-dozen whistleblowers who say their audits were altered.
“You don’t hardly ever see this with other IGs,” Coburn recently told The Post. “You certainly don’t see it to this extent. This is the worst we’ve seen.”
Carroll’s chief of staff, Justin H. Brown, told The Post that the office has changed its policy and started putting management letters on its Web site in April. He said it was not the intent of the office to conceal information.
“I think there was a recognition of that perception,” Brown said.
The allegations of improperly altered audit reports were independently examined last year by the National Labor Relations Board’s inspector general under the auspices of the Council of the Inspectors General on Integrity and Efficiency, a group within the executive branch.
Brown said the confidential examination, which concluded in May 2013, “did not substantiate the allegations” and recommended that “no disciplinary or administrative action be taken.”
NLRB Inspector General David P. Berry said through a spokeswoman: “We cannot confirm nor deny the existence of an investigation.”
Coburn questioned the thoroughness of the NLRB report.
“I don’t think they’re cleared at all,” said Coburn, the ranking Republican on the Senate Homeland Security and Governmental Affairs Committee, which oversees all federal inspectors general. “The people who actually knew what was going on were never actually interviewed. This is the first time in my career that I have some doubts about the integrity of one of these investigations.”
Brown said the inspector general’s office has recently changed the way audits are conducted. He said that in the past the office placed too much “emphasis on the timeliness of audits,” and that staff shortages at different levels exacerbated the situation. He said auditors now have more time to conduct their work.
“The narrative that this is a headquarters concealment enterprise is simply not true,” Brown said.
The USAID inspector general is responsible for ensuring that the billions of dollars the agency devotes to foreign assistance programs each year are spent wisely. The agency hires nongovernmental organizations and private contractors to carry out its projects, which include improving medical facilities, stabilizing economies, and rebuilding war-wrecked nations such as Afghanistan and Iraq.
The Post obtained draft versions of 12 audits by the inspector general’s office, covering projects from the Caribbean to Pakistan to the Republic of Georgia between 2011 and 2013. The drafts are confidential and rarely become public. The Post compared the drafts with the final reports published by the inspector general’s office and interviewed former and current employees. E-mails and other internal records also were reviewed.
The Post tracked changes in the language that auditors used to describe USAID and its mission offices. The analysis found that more than 400 negative references were removed from the audits between the draft and final versions.
In one audit, the number of negative references fell from 113 to 61; in another, from 170 to 13.
As a rule, inspectors general try to ensure that their reports are accurate and reflect the perspectives of the agencies and private contractors they examine. It is not unusual for audits to change between the draft and final reports, but whistleblowers say the changes have gone too far.
Speaking in general, Earl E. Devaney, who served as inspector general of the Interior Department, said all audits go through an editing process, but the changes should not materially affect the meaning of the audit.
“I never allowed the true meaning, the essence of the points that were being made by the auditors, to be changed, unless they were wrong,” Devaney said.
Complaints that information has been concealed to shield government officials from embarrassment are not uncommon. Earlier this year, the Department of Homeland Security’s acting inspector general stepped down following allegations that he altered and delayed negative reports about the Secret Service. Last year, the Pentagon’s inspector general was accused of altering a report about a leak of classified information to the makers of the film “Zero Dark Thirty,” which depicted the intelligence operations leading to the May 2011 raid in which Osama bin Laden was killed.
At the USAID inspector general’s office, several auditors and employees told The Post that their authority has been undermined, and some have hired attorneys to file whistleblower and employment discrimination claims. Auditors stationed in different offices around the world have come forward with similar complaints.
For example, in October 2010, USAID launched a program to reduce waste and fraud in the nearly $1 billion in U.S. assistance to Pakistan. USAID hired three contractors to help monitor the spending and train Pakistanis to manage the money.
In a draft audit of the program written in 2012, auditors found that $32 million of the program’s $44 million budget went to “fringe benefits, consultants and travel.” Auditors also found that one contractor hired to provide training billed the agency $954,000 for “expenses such as salaries, fringe benefits, and travel” but did not train anyone for the 16 months of the contract.
One key section of the audit was titled “Program Is Not Being Efficiently or Effectively Implemented.” The section detailed how the USAID mission office in Pakistan increased spending on the project, even though there were few or no reports documenting whether the program was working.
Those findings and that section were removed from the draft report, along with other negative findings, and placed in a confidential management letter. A finding that the auditors were not provided with detailed records of the spending was also placed in the management letter. It was sent to the USAID mission director in Pakistan on Sept. 30, 2012 — the day the final audit was publicly released by the inspector general’s office.
The inspector general defended the changes, saying in a letter to Coburn that the auditor’s overall assertion that the program was ineffective could not be supported by evidence of “cause, and effect.”
The inspector general said it was more appropriate to put those findings in a management letter.
“This approach enabled OIG to bring the matters to the attention of mission management without requiring the significant additional investment in time required to rewrite the finding,” the inspector general said.
“That’s ridiculous,” Coburn said. “The finding shouldn’t have been removed, and it should have been a glaring recommendation that said, ‘Hey, here’s where Americans are spending their money.’ ”
Brown, the inspector general’s chief of staff, acknowledged in a recent interview that his office could have spent more time on the audit, tracking down leads and developing information that could have been included in the final public report.
“Looking back on this, there may have been opportunities to constitute a finding,” Brown said. “There does seem to be some material that’s worth working with there.”
Glenn A. Fine, who served as the Justice Department’s inspector general from 2000 to 2011, said he used management letters only in emergency situations, when information needed to be transferred quickly.
“I think it’s very important for reports and findings to be public,” Fine said. “When you shine a spotlight on problems, management has more incentive to make changes. Some management might say, ‘Give the report to me and we’ll make the changes.’ But that is not consistent with human nature or the way things normally operate in Washington.”
The USAID inspector general’s office also used a management letter after examining an agricultural program in Haiti in 2012. The $128 million project was designed to stabilize deforested landscapes, which are prone to deadly mudslides. When the final audit was released in April 2012, two of the seven critical findings from the draft report had been removed and placed in the management letter.
One removed finding said that revisions to the contract, expanding the scope of the work after the earthquake in Haiti in 2010, may have violated federal contracting regulations. Another criticized USAID for failing to define what should be delivered under the contract.
Gweneth Hughes, the auditor who wrote the draft audit, complained to Jon Chasson, at the time the agency’s regional inspector general for Central America.
Hughes called the removal of the findings “arbitrary,” according to internal e-mails reviewed by The Post. She said a legal counsel for the office, who was not named in the e-mail, agreed that the findings should have stayed in the audit.
But she was resigned to the worst.
“Do with it what horrors you decided on,” Hughes wrote.
“Yeah, it’s a horror,” Chasson replied.
Chasson said a management letter had one benefit for the inspector general’s office: “We don’t get to participate in another round (or three) of Endless Drama.”
Hughes responded that her report was being “censored from the public,” the first time that had happened in her career.
Chasson said that he was joking in his e-mail to Hughes and that the outcome was a positive one because the management letter kept the office from wasting time on “minor matters.”
Hughes did not respond to an e-mail from The Post seeking comment.
Coburn said that the Haiti contract was “out of scope” and poorly defined, and that those findings should have been made public, not put into a management letter.
In response to Coburn, the inspector general’s office said the findings removed from the draft were “minor matters that could be appropriately addressed in a management letter.”
In one case, the inspector general’s office removed negative findings from draft reports and a standard performance audit and put them into confidential financial documents, which are not generally made available to the public. A key finding about the $4.6 million payment to free the NGO workers in Egypt was removed from the performance audit and placed into financial documents.
On Dec. 29, 2011, Egyptian security forces raided the offices of several of the NGOs funded by the U.S. government. They included two groups with powerful Washington ties: the International Republican Institute (IRI) and the National Democratic Institute (NDI).
Both groups are chartered by Congress to promote democratic reforms overseas and had worked in Egypt before. The IRI’s program in Egypt was headed by Sam LaHood, the transportation secretary’s son. Sen. John McCain (R-Ariz.) serves as the institute’s chairman.
Egyptian authorities charged the NGO workers with operating without licenses, receiving unauthorized foreign funding and engaging in unsanctioned political activities. They were banned from leaving the country and faced five years in prison if convicted.
The Obama administration threatened to cut off $1.3 billion in military assistance to Egypt. Ray LaHood told the Wall Street Journal at the time that his son was being held hostage.
“They’re playing hardball and they want to get something out of it,” he said.
On March 1, 2012, the Americans were permitted to leave the country after USAID transferred $4.6 million from a local currency trust fund to the Egyptian government as “bail.” USAID’s connection to the money was not disclosed at the time.
“This was paid by the NGOs,” a State Department spokeswoman said that day.
On May 6, the USAID inspector general’s office completed a draft audit of the incident, internal records show.
On June 7, Esther Park, USAID’s regional inspector general in Cairo, sent an e-mail to James Charlifue, who was then Carroll’s chief of staff. She included a copy of the draft audit.
“I’m sending this report for your review because it contains controversial information regarding the use of trust funds and the registration status of grantees,” Park wrote. “Mission staff have noted their concern with publicizing some of the information contained in this report because it may affect U.S.-Egypt relations and the ongoing NGO trial of U.S. grant employees. It’s my understanding that Ambassador [Anne] Patterson of U.S. Embassy/Cairo met with Mike Carroll last month regarding these issues.”
Some of the information regarding the trust funds ended up being removed from the final audit, which was published on Oct. 22.
In a statement issued by the inspector general’s office, Carroll said he played no role in the removal of findings from the audit.
“The only discussion I had with Ambassador Patterson was to convey that we were not going to classify the report,” Carroll said. “At no time did I ever take any steps to remove any findings or recommendations from the report. I left those determinations to audit professionals in our organization.”
Several findings were condensed; entire sections disappeared. They included a section titled “USAID/Egypt Borrowed Local Currency From the Trust Fund for Bail Expenses.”
That section raised questions about the legality of using the $4.6 million to free the NGO workers. Also deleted were concerns that the use of trust fund money for “bail payments” could set a bad precedent for USAID.
A USAID deputy inspector general said in a recent interview that the State Department wanted to keep the entire audit from public view. “They wanted the report classified,” said Catherine Trujillo, who reviewed the Egypt audit before the final version was released. Trujillo said she decided to remove some findings on the trust fund and refer them to the inspector general’s financial audit division because it had the necessary expertise.
She said that division discovered that USAID had few policies regulating how money from local currency trust funds can be spent. She said that discovery is contained in the financial audit documents concerning the Egypt program. They have not been made public.
Alice Crites contributed to this report. Kaley Belval, Moriah Balingit, Mel Jones and Miranda Strong also contributed through an investigative reporting program at American University.