On Feb. 2, the Obama administration announced that it was delaying the implementation of the controversial Partner Vetting System (PVS) rule and opening a 30-day public comment period. The rule is now scheduled to go into effect on April 3.

The U.S. Agency for International Development (USAID) first introduced the proposed rule on the PVS in July 2007. An effort ensued to get the rule withdrawn, but despite objections from the nonprofit sector, USAID made the rule final on Jan. 2. However, the final rule said that it would be up to the incoming Obama administration to decide whether or not PVS would be implemented.

If implemented, PVS would require that all nonprofit groups that apply for USAID grants and contracts provide detailed information on "key individuals." The federal government would then check names and information against intelligence databases that contain data on terrorists.

According to the final rule, "The information collected for these individuals would be used to conduct screening to ensure USAID funds and USAID-funded activities are not purposefully or inadvertently used to provide support to entities or individuals deemed to be a risk to national security."

Despite criticism from nonprofits that the program is burdensome, unwarranted, and dangerous for workers, the substance of the final rule remains largely unchanged. OMB Watch submitted comments in August 2007 and did so again on March 4, calling for the withdrawal of the rule. The comments note that USAID was unresponsive to previous public comments and reiterated some of the original concerns. Other issues OMB Watch addressed include:

• Lack of any evidence that PVS is needed
• Problems with due process
• Safety of aid workers
• Problems with list checking

USAID has insufficiently demonstrated that agency funding has gone to support terrorists or terrorist organizations. The Office of Inspector General (IG) issued a report on Dec. 10, 2007, in response to concerns that USAID provided funds to universities and students in Gaza that were allegedly linked to or controlled by Hamas. The IG found that although procedural violations occurred, none of these grants assisted a designated terrorist organization. The students and universities were vetted more than once, but USAID does not believe it should wait for evidence to implement a vetting system. According to the agency, "USAID does not believe that it should wait for hard proof that our funds are actually flowing to terrorists before implementing additional safeguards to its anti-terrorist financing program. Even the suggestion that our funds or resources are benefiting terrorists is harmful to U.S. foreign policy and U.S. national interests."

The PVS rule disregards the benefits of due diligence nonprofits already engage in that focus on knowing their grantees and knowing how resources are used. Organizations build trust with local communities to ensure that those they work with are not affiliated with terrorist groups. Many organizations already check names against the public list of Specially Designated Nationals and Blocked Persons maintained by the Department of the Treasury's Office of Foreign Assets Control (OFAC).

OMB Watch pointed out that some important details are absent in the final rule. "The assurances listed in the response to comments and background information are not binding, offering no real legal protection to grantees or individuals whose personal information may be submitted. And the final rule leaves many central details to be determined later," OMB Watch said. For example, if a group is denied a grant or contract, USAID will provide a reason and an opportunity for the organization to appeal administratively; however, this appeal process is not described in any way. The OMB Watch comments go on to say, "More information should be made available for comment regarding this appeal process before implementing PVS."

OMB Watch also reiterated the concern about the safety of aid workers and the value of organizations' neutrality, especially in areas of increased conflict. Local populations may consider collecting such information to be compromising the groups' independence, creating the perception that USAID grantees are instruments of the U.S. government, putting aid workers' lives at risk. The final rule overlooks these concerns and simply states that one of the purposes of the PVS is to enhance the safety of personnel.

In comments to USAID, InterAction, a coalition of U.S.-based international relief and development non-governmental organizations (NGOs), noted that "if U.S. NGOs are perceived to be working in concert with the law enforcement or intelligence agencies of the U.S. or a foreign government (friendly or hostile), the risk of violence, which is already significant in some contexts, can only increase." InterAction continued, "Either consequence will likely cause U.S. NGOs to scale back or end programs in countries where the local populations may not have a favorable opinion of the U.S. Government. Given the role that U.S. NGOs play in showing the best face of America to the world, and the fact that humanitarian and development programs mitigate the poverty and hopelessness that contribute to the violence and extremism that leads to terrorism, such a scaling back of programs is not in the U.S. interest."

Parts of PVS are exempt from the Privacy Act, which governs record keeping by federal agencies. On July 20, 2007, USAID published the proposed rule in the Federal Register, exempting portions of PVS from sections of the Privacy Act. During the initial 60-day comment period, USAID received more than 175 comments on these exemptions. InterAction wrote in its comments, "The Privacy Act provides exemptions from its procedures for law-enforcement agencies if and when the use of the information is considered 'routine use.' USAID is not a law enforcement agency, and USAID sharing the collected information with unnamed third parties for investigative purposes is not a 'routine use' within the scope of USAID's mission, as the purpose of the information collection is purportedly to allow USAID to meet its own compliance requirements with law enforcement and counterterrorism mandates. The law enforcement and 'routine use' exemptions, therefore, do not apply to the Rule."

The International Center for Not-for-Profit Law (ICNL) made another interesting distinction in comparing the vetting of individuals associated with charities and those directly receiving government bailout funding. "Other parts of the US Government ('USG') expend significantly greater amounts of taxpayer money than USAID," said ICNL. "As but one example, the amount of taxpayer funding allocated to the 'bailout' of the automobile industry is many times USAID's entire operating budget. We suspect, however, that the officers, directors, and 'key individuals' of automakers and their subcontractors (foreign or domestic) were not required to submit their social security numbers to the USG so they could be vetted against terrorism lists before receiving taxpayer funding."

ICNL also made an important note about the role of USAID: "Countries around the world are monitoring the USG's approach to the regulation of NGOs, seeking precedential support for implementing their own restrictive measures against civil society. In a number of countries, these restrictions take the form of intrusive reporting requirements justified in terms of counter-terrorism objectives. As the lead development agency dependent on NGOs to achieve a host of developmental objectives, it is important that USAID follow Secretary Clinton's advice to 'lead by example' on this critical issue."

Even if the PVS rule is not implemented, the program could come back in another form. A bill has been introduced in the House with almost the exact language as the regulation. On Feb. 13, Rep. Ileana Ros-Lehtinen (R-FL) introduced H.R. 1062, the United States Foreign Assistance Partner Vetting System Act of 2009, which would mandate the PVS. However, unlike the USAID rule, the bill includes a detailed appeals process for grantees. The bill has been referred to the House Foreign Affairs committee, where Ros-Lehtinen is the ranking member.