Securities and Exchange Commission: Division of Enforcement Should Document Its Procedures for Generating Public Reports

Enforcement supports SEC's mission by bringing civil and administrative actions against individuals and entities for fraud, financial and accounting irregularities and misstatements, and other misconduct. According to SEC, these enforcement actions serve as a deterrent against future wrongdoing. Since 2017, Enforcement has published an annual report that provides statistics on its enforcement activities and highlights its priorities for the coming year.

GAO was asked to examine SEC reporting of enforcement statistics. This report examines (1) the ways that enforcement statistics reporting changed over the last 10 years, and (2) policies and procedures for recording, reviewing, and reporting enforcement statistics. GAO reviewed SEC's internal policies, procedures, and manuals for recording, verifying, and reporting data. GAO also interviewed SEC officials and reviewed past SEC reports containing enforcement statistics.

Since 2009, the Division of Enforcement (Enforcement) in the Securites and Exchange Commision (SEC) has made modifications to its reporting of enforcement statistics, including by releasing a stand-alone annual report beginning in fiscal year 2017. The Enforcement Annual Report included additional data on enforcement statistics not previously reported and narratives about enforcement priorities and cases. Enforcement staff told us the annual report was created to increase transparency and provide more information and deeper context than previous reporting had provided.

Enforcement has written procedures for recording and verifying enforcement-related data (including on investigations and enforcement actions) in its central database. However, Enforcement does not have written procedures for generating its public reports (currently, the annual report), including for compiling and verifying the enforcement statistics used in the report. To produce the report, Enforcement staff told GAO that staff and officials hold meetings in which they determine which areas and accomplishments to highlight (see figure). Enforcement was not able to provide documentation demonstrating that the process it currently uses to prepare and review the report was implemented as intended. Developing written procedures for generating Enforcement's public reports and documenting their implementation would provide greater assurance that reported information is reliable and accurate, which is important to maintaining the division's credibility and public confidence in its efforts.

GAO recommends that SEC's Co-Directors of Enforcement develop written procedures for generating Enforcement's public reports, including procedures for compiling and verifying statistics used in the reports, and documenting their implementation. SEC agreed with the recommendation.

The Securities and Exchange Commission (SEC) is responsible for  overseeing the nation’s securities markets. Within SEC, the Division of  Enforcement (Enforcement) supports the agency’s mission by bringing  judicial enforcement actions and administrative proceedings against  individuals and entities for fraud, financial and accounting irregularities  and misstatements, and other misconduct. Enforcement has stated that it  intends for its actions to protect investors and the markets, including by  serving as a deterrent against future wrongdoing.

Data on Enforcement’s activities in pursuit of its goals—or enforcement  statistics—have been included in different published SEC reports since at  least 2005. In fiscal year 2017, Enforcement developed and released a  stand-alone annual report as part of an effort to measure effectiveness in  achieving its objectives and to assist with the goal of deterring future  wrongdoing. According to SEC staff with whom we spoke, Enforcement’s  annual report is not required by statute; rather, Enforcement voluntarily  publishes the report, which contains selected enforcement statistics and  narratives about enforcement priorities and cases. Enforcement has  noted limitations to evaluating the effectiveness of an enforcement  program solely through the use of statistics, stating that the effectiveness  of the program may be better assessed by looking at the nature, quality,  and effects of enforcement actions.

You asked us to examine SEC policies and procedures relating to its  reporting of enforcement statistics, including any year-to-year changes in  its reporting. This initial report in response to the request (1) examines  Enforcement’s policies and procedures for data collection and reporting  and (2) describes changes since 2009 in SEC publications that include  enforcement statistics.

To examine policies and procedures related to enforcement statistics, we  reviewed Enforcement’s internal policies, procedures, and guides for  inputting, reviewing, and outputting data. These included the internal  guide for Enforcement’s database and documentation on the  responsibilities of case management specialists (CMS), who are the  primary staff that enter and manage Enforcement data. We also  conducted five interviews with Enforcement staff and interviewed SEC’s  Chief Operating Officer to understand internal guidelines and  responsibilities.

To describe changes to SEC publications with enforcement statistics, we  collected and reviewed past reports from 2009 through 2018 that included  enforcement statistics and analyzed what changes occurred from year to  year. These reports included Select SEC and Market Data reports from  2009 through 2017 and Enforcement’s annual reports in 2017 and 2018.  We reviewed other SEC reports that included enforcement-related  information, such as the SEC Congressional Budget Justification and its  Annual Performance Report. We also interviewed Enforcement staff to  learn the purpose of the changes.

We conducted this performance audit from March 2019 to October 2019  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

SEC is a federal agency responsible for protecting investors, maintaining  fair, orderly, and efficient markets, and facilitating capital formation.  Among its efforts, SEC requires public companies to disclose meaningful  financial and other information to the public, examines firms it regulates,  and identifies and investigates potential violations of federal securities  laws. Each year, SEC brings hundreds of enforcement actions—including  judicial enforcement actions and administrative proceedings—against  individuals and companies as a result of its investigations. Examples of  actions taken in fiscal year 2018 include charges against a company that  allegedly defrauded investors in a Ponzi scheme and charges against a  bank for misconduct in its sales practices for certain financial products  offered to retail investors. SEC’s responsibilities are divided among five  divisions and 24 offices.

The Division of Enforcement conducts investigations of potential  violations of federal securities laws. Enforcement recommends, when  appropriate, that SEC bring enforcement actions, litigates these actions,  negotiates settlements on behalf of SEC, and works with other law  enforcement agencies to bring criminal cases when warranted.  Enforcement is currently led by two co-directors who report to the  Chairman. Enforcement staff operate from headquarters in Washington,  D.C., and in 11 regional offices.

Enforcement maintains a database that tracks enforcement-related  activities, including all cases from investigation through litigation, and is  the source of statistics used in public reporting (see fig. 1). For tracking  purposes, “case” encompasses all stages of a possible enforcement  action, beginning either as a matter under inquiry or as an investigation.  Some cases advance and become an enforcement action. Enforcement’s  database includes all key case data other than data on financial penalties  and disgorgements, which SEC’s Office of Financial Management stores  and manages.

Enforcement’s CMS are responsible for recording key data into the  database and conducting quality checks on the data throughout the  investigative and litigation processes of a case. There are two groups of  CMS: local CMS and national CMS, both of which can be located in SEC  regional offices or at SEC headquarters. Local CMS in regional offices  report to their regional managers but coordinate with the Enforcement  Case Management and Systems Reporting Group. National CMS and  local CMS at SEC headquarters report to the Case Management Systems  and Reporting Group. National CMS have the responsibility of reviewing  and verifying case data input by local CMS.

SEC Has Written Procedures for Recording Enforcement Data but Not for Public Reporting of Enforcement Statistics

Enforcement Has Documented Procedures for Recording and Verifying Enforcement Data

Enforcement has documented procedures for recording and verifying  enforcement-related data in its central database. More specifically, the  Enforcement database user guide has step-by-step procedures for  recording case data and clear descriptions of each data entry field. For  example, the guide includes brief descriptions of primary classifications— or categories—used to describe the nature of the enforcement action  (such as insider trading or delinquent filing).

According to the database user guide and other SEC documentation,  local CMS have the primary responsibility for recording most case data  used in Enforcement metrics. Local CMS may assist with data recording  in the opening of a case as a matter under inquiry or, if it is known the  case will advance to the next stage, as an investigation. The user guide  also states that local CMS are responsible for recording the advancement  of a case from an investigation to an enforcement action. According to the  user guide, CMS use information (generally, case documentation)  received from the courts or SEC staff responsible for the case to create  the action entry in the central database, including the primary  classification for the action. CMS also facilitate closing completed cases  in the database.

Enforcement procedures call for Enforcement staff to perform multiple  data reviews for all information in the Enforcement database, according to  Enforcement staff and the user guide. According to the user guide, local  CMS review the accuracy of key case-related data recorded in the system  at certain stages as a case proceeds (see fig. 2). The local CMS add  case information by checking any new documentation, such as court  filings. In addition to the review by the local CMS, national CMS also are  to review newly opened cases, as well as cases that have advanced to an  investigation, changed from an investigation to an action, or closed. To do  this, national CMS compare information recorded in the system against  any primary documents related to the case, such as court documentation.  Finally, Enforcement staff told us that they have an informal process  whereby a group of attorneys in the Case Management and Systems  Reporting Group review all primary classifications for enforcement  actions.

Enforcement Does Not Have Documented Procedures for Generating Its Annual Report and Verifying the Statistics Used in It

Enforcement lacks written procedures for generating the Enforcement  Annual Report, including for compiling and ensuring the accuracy of the  statistics published within. Enforcement staff explained that they follow an  informal process to generate the annual report, which includes steps to  help ensure reliable reporting and detect and prevent errors (see fig. 3).  However, Enforcement was unable to provide documentation of this  process or of the implementation of the steps to help ensure accuracy.

According to staff, the process for generating the annual report includes  selecting what statistics to include and what activities and  accomplishments to describe in the report narrative. Specifically,  Enforcement staff said that the division’s co-directors hold regular weekly  meetings with their staff to discuss management of the division. Staff said  program metrics and other measures may be discussed at these  meetings, including the types of information and statistics that might be  used in the Enforcement Annual Report. According to the staff, at the end  of the fiscal year the co-directors determine what information and  statistics the division will include in reports.

Once decisions have been made about the annual report’s content,  Enforcement staff told us a contractor uses software queries of the  database to compile statistics for the report based on data parameters  defined by Enforcement staff. An Enforcement staff member familiar with  the data reviews the queries’ output to verify accuracy, according to  Enforcement staff. Staff then add the compiled statistics to the draft  annual report.

According to staff, the draft report is then sent to the Office of Public  Affairs for formatting and publication. Enforcement staff stated that staff  familiar with the data perform an additional check to ensure that no data  values were mistyped or otherwise edited in the formatting process.  Finally, the co-directors of Enforcement are to review the draft report.  After they give a final approval, the annual report is published.

Control activities such as written procedures help ensure that operational  processes are effective and actions are taken to address risks. In  particular, federal internal control standards identify documentation— including documentation that demonstrates procedures are being  implemented—as a necessary part of an effective internal control system  and as a means to help detect and prevent errors.

Enforcement staff stated that the division does not have written  procedures for generating its annual report or documenting the  implementation of review processes because the report is not required by  law and is discretionary. The staff said they were confident about the  reliability of report data because staff were familiar with enforcement data  and the informal processes they currently use to verify accuracy. In  contrast, Enforcement uses documented SEC guidelines for reviewing  and verifying the data used to support performance metrics in the agency- wide SEC Annual Performance Report.

Documenting written procedures for generating both Enforcement’s  annual report and the processes it uses to verify published statistics— including documentation that procedures were implemented—would  provide Enforcement with greater assurance that staff follow necessary  steps to help ensure the reliability and accuracy of reported information.  Reliability and accuracy of information are important to maintaining the  division’s credibility and public confidence in its efforts. In addition,  developing written procedures would better position Enforcement to  manage risk associated with staff turnover and help ensure continuity of  operations in its public reporting.

SEC Has Made Modifications to Its Reporting of Enforcement Statistics Since 2009

Since 2009, SEC has made changes to how it reports and presents  enforcement or enforcement-related statistics, which are included in a  number of reports (see table 1). As previously discussed, we reviewed  reports from 2009 through 2018 that included enforcement statistics.

More specifically, SEC made the following changes to its public reporting  of enforcement statistics, which include the creation of a stand-alone  Enforcement Annual Report in 2017. Prior to 2017, Enforcement reported  similar statistics in the annual Select SEC and Market Data Report.

Definition of enforcement actions. Enforcement staff told us that  before 2013, the Select SEC and Market Data Reports changed little  from year to year, with the previous year’s report used as a template  to create the next one. SEC adjusted its definition of enforcement  actions in the 2013 report, and included notes explaining the change  and providing what the number of enforcement actions would have  been under the previous definition.

Presentation of enforcement statistics. Enforcement staff said the  Office of the Chief Operating Officer determined changes in  presentation (such as the order of enforcement action classifications)  in the Select SEC and Market Data Report. In 2015, Enforcement  changed how the report presented summary data for enforcement  actions. Previously, Enforcement counted enforcement actions as civil  actions or administrative proceedings, but the fiscal year 2015 report  separately identified and counted the proceedings as stand-alone  (initial) or follow-on (after initial action). Enforcement staff said these  changes were made possible by better software that allowed for  enhanced and expanded presentation of the data.

Enforcement Annual Report. As previously mentioned, the Select  SEC and Market Data Report was discontinued after the fiscal year  2017 report and the Enforcement Annual Report was first published in  November 2017. The annual report included additional data tables of  enforcement statistics not previously reported (some comparing  statistics to the previous year) and narratives about enforcement  priorities and cases. Enforcement staff told us the annual report was  created to increase transparency and provide more information and  deeper context than previous reporting had.

The SEC Division of Enforcement voluntarily issues an annual report that  includes statistics and highlights significant enforcement actions and  initiatives of the previous fiscal year. Enforcement has documented  procedures and has designated staff to input and review enforcement- related data in its case-tracking system. However, the division does not  have written procedures for generating its public reporting (currently, the  annual report), including for compiling and verifying the report’s statistics,  or documenting that procedures were implemented as intended. Written  procedures would help Enforcement ensure the reliability and accuracy of  reported information, manage risk associated with staff turnover, and  promote continuity of operations in its public reporting.

The Securities and Exchange Commission’s Co-Directors of Enforcement  should develop written procedures for generating Enforcement’s public  reports, including procedures for compiling and verifying statistics used in  the reports and documenting their implementation. (Recommendation 1)

We provided a draft of this report to SEC for review and comment. In  written comments (reproduced in appendix I), SEC generally agreed with  our findings and concurred with our recommendation. In addition, SEC  provided technical comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Chairman of the  Securities and Exchange Commission, and other interested parties. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-8678 or clementsm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix II.

Appendix I: Comments from the Securities and Exchange Commission

In addition to the contact named above Kevin Averyt, John Forrester,  (Assistant Directors), Jordan Anderson (Analyst in Charge), Tim Bober,  Ryan Braun, Marc Molino, Kirsten Noethen, Barbara Roesmann, and  Farrah Stone made key contributions to this report.

SEC’s Division of Enforcement investigates and litigates fraud, financial and accounting irregularities, and other misconduct. Since 2017, it has published an annual report highlighting its accomplishments and presenting enforcement statistics.

But the division lacks written procedures for generating the annual report. Written procedures—including documentation requirements—could help ensure the reliability and accuracy of the report content and that processes could be repeated annually even if personnel changed.

To help ensure continuity of the division’s report process, we recommended developing and implementing such procedures.


U.S. Assistance to Mexico: State and USAID Allocated over $700 Million to Support Criminal Justice, Border Security, and Related Efforts from Fiscal Year 2014 through 2018

For more than a decade, the activities of transnational criminal organizations have led to increased crime, violence, and lawlessness in parts of Mexico. In October 2007, Mexico and the United States created the Mérida Initiative, a bilateral partnership to address crime and violence and enhance the rule of law in Mexico.

State/INL and USAID are the lead U.S. agencies for developing programming for the Mérida Initiative. Both State/INL and USAID also manage and fund the Mérida Initiative with the support of a wide range of project implementers, including the Departments of Defense (DOD), Homeland Security (DHS), and Justice (DOJ); contractors; nongovernmental organizations; and international organizations.

GAO was asked to describe funding and projects the United States has provided under the Mérida Initiative. This report describes (1) State/INL and USAID funding for the Mérida Initiative from fiscal year 2014 through 2018 and (2) the number and type of Mérida Initiative projects active during these years. GAO reviewed State and USAID documents and data, and interviewed officials from State, USAID, DOD, DHS, and DOJ in Washington, D.C., and Mexico City.

From fiscal year 2014 through 2018, the Department of State's (State) Bureau of International Narcotics and Law Enforcement Affairs (State/INL) and the U.S. Agency for International Development (USAID) allocated about $723 million for the Mérida Initiative, which aims to mitigate the impact of the drug trade on the United States and reduce violence in Mexico. State/INL and USAID allocated this funding under the following government-wide foreign assistance funding categories: Civil Society, Counternarcotics, Good Governance, Rule of Law and Human Rights, and Transnational Crime. U.S. agencies use these categories to broadly define foreign assistance programs for planning, budgeting, and reporting across agencies, countries, and regions. Over 80 percent of the funding went toward Rule of Law and Human Rights, and Counternarcotics efforts. Of the $723 million, State/INL allocated about $542 million and USAID allocated about $182 million.

There were 445 State/INL and USAID Mérida Initiative projects active from fiscal year 2014 through 2018. State/INL funded 388 of the projects and USAID funded 57, which tended to be larger with higher funding amounts than State/INL projects. State/INL projects generally focused on providing training and assistance to Mexican officials from the justice sector, border security, military, and law enforcement, as well as equipment, including for forensic drug laboratories, drug detection, and border surveillance. Many USAID projects were intended to engage with Mexican civil society organizations and the public to address corruption, promote trust in government, or prevent crime and violence, such as through skill-building for youth, efforts to advance human rights, or technical support for judicial system development. State/INL and USAID implemented their projects mainly through contracts, grants, and interagency agreements, as well as through agreements with international organizations, such as the United Nations Office on Drugs and Crime and the Organization of American States.

For more than a decade, the presence of transnational criminal  organizations (TCO) has led to increased crime, violence, and  lawlessness in parts of Mexico, and has also threatened security along  the U.S.–Mexico border. In addition, in the midst of an unprecedented  opioid crisis in the United States, TCOs in Mexico supply the majority of  heroin consumed in the United States. According to U.S. government  reports, organized crime–related violence in Mexico declined from 2011  to 2014, but rose to record levels in 2017. As a result of this violence,  more than 109,000 people may have died since December 2006, and the  Government of Mexico (GOM) estimates that more than 40,000 people in  Mexico may have disappeared.

In October 2007, the United States and Mexico created the Mérida  Initiative and, in doing so, committed to work together to address crime  and violence, and enhance the rule of law in Mexico. Through this  bilateral partnership, the United States has funded Mérida Initiative  projects broadly related to the four pillars of the initiative—combating  TCOs, rule of law and human rights, border security, and building strong  and resilient communities—with the goals of mitigating the impact of the  drug trade on the United States and reducing violence in Mexico. Since  fiscal year 2008, U.S. funding allocated for the Mérida Initiative has  totaled about $3 billion.

You asked us to review U.S. government assistance for the Mérida  Initiative. This report describes (1) funding for the Mérida Initiative from  the Department of State (State), Bureau of International Narcotics and  Law Enforcement Affairs (State/INL) and the United States Agency for  International Development (USAID) from fiscal year 2014 through 2018,  and (2) the number and type of Mérida Initiative projects in place during  this period.

To describe the funding provided for the Mérida Initiative, we analyzed  data provided by State/INL and USAID on funding allocated for the  Mérida Initiative from fiscal year 2014 through 2018. The data were  categorized by agency—State/INL or USAID—and by U.S. government– wide foreign assistance funding categories. To describe the number and  type of Mérida Initiative projects active during this period, we analyzed  detailed project-level data provided to us by State/INL and USAID,  including implementers, project descriptions, time frames, and obligated  or estimated funding amounts. Some projects that were active from fiscal year 2014 through fiscal year 2018 started before this time frame and  some projects ended after this time frame. We assessed the reliability of  the funding and project data by checking for missing data and obvious  errors, and by interviewing State and USAID officials about how the data  were compiled. When we found potential errors or duplicate data, we  contacted relevant agency officials, and obtained additional information to  resolve these data issues. We also obtained additional information about  Mérida Initiative funding and projects by reviewing relevant agency  documentation, and by interviewing officials from State, USAID, and the  Departments of Justice (DOJ), Homeland Security (DHS), and Defense  (DOD) in Washington, D.C., and Mexico City. We determined that the  data were sufficiently reliable for the purposes of our reporting objectives.  As part of our review of Mérida Initiative project information, we reviewed  State/INL and USAID strategy documents to determine how the initiative’s  projects align with the initiative’s goals. In particular, we reviewed  State/INL’s Mexico Country Plans and USAID’s Mexico Country  Development Cooperation Strategy, which outline each agency’s goals  and objectives related to the Mérida Initiative.

We conducted this performance audit from November 2018 to September  2019 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.

When Mexico and the United States created the Mérida Initiative in 2007,  the Mexican government pledged to tackle crime and corruption and the  U.S. government pledged to address domestic drug demand and the illicit  trafficking of firearms and bulk currency to Mexico. During the early years  of the Mérida Initiative, much of the U.S. funding for the initiative was  intended to purchase equipment to support Mexican federal security  forces, including about $591 million for aircraft and helicopters from fiscal  years 2008 through 2010. In 2011, U.S. and Mexican officials agreed to  expand the scope of the initiative to prioritize institution building, and later  increased the initiative’s focus on community engagement and human  rights efforts. According to State, an Executive Order on TCOs issued in  2017 signaled that the focus of the Mérida Initiative would shift to  countering TCOs’ illicit activities, such as drug production and the cross- border movement of drugs, cash, and weapons.

State/INL and USAID are the lead U.S. agencies for developing the  Mérida Initiative’s programming. In these roles, State/INL and USAID  work with GOM officials to help outline Mérida Initiative projects’ plans,  objectives, and intended impact. State/INL and USAID both manage and  fund the Mérida Initiative with the support of a wide range of project  implementers, including DOJ, DHS, DOD, contractors, nongovernmental  organizations, and international organizations.

All Mérida Initiative projects are currently funded through three  appropriations accounts:   the International Narcotics Control and Law Enforcement (INCLE)  account administered by State/INL,  the Economic Support Fund (ESF) account, from which the Mérida  Initiative project funding is administered by USAID, and  the Development Assistance (DA) account, also from which the  Mérida Initiative project funding is administered by USAID.

According to State/INL and USAID officials, GOM does not provide direct  funding to Mérida Initiative projects. Instead, State/INL considers any  GOM funding for justice, national security/defense, and public order and  domestic security as indirectly supporting the goals of the Mérida  Initiative. In addition, according to USAID data, Mexican nonprofit and  private sector entities provided about $23 million in matching funds for  USAID-funded Mérida Initiative projects active from fiscal year 2014  through 2018.

State and USAID Allocated Over $700 Million for Mérida Initiative Projects from Fiscal Year 2014 through 2018

From fiscal year 2014 through 2018, State/INL and USAID allocated  about $723 million for Mérida Initiative projects under the following five  U.S. government–wide foreign assistance funding categories: Civil  Society, Counternarcotics, Good Governance, Rule of Law and Human  Rights, and Transnational Crime. U.S. agencies use these government- wide categories to broadly define foreign assistance programs for  planning, budgeting, and reporting, which provides a common language  to describe programs across agencies, countries, and regions. Over 80  percent of the funding, or $589 million, went toward Rule of Law and  Human Rights, and Counternarcotics efforts. (See fig. 1.) Funding  allocated for the Mérida Initiative has decreased over time from $178  million in fiscal year 2014 to $139 million in fiscal year 2018.

Of the $723 million, State/INL allocated about $542 million and USAID  allocated about $182 million. (See fig. 2.)

445 State and USAID Mérida Initiative Projects Were Active from Fiscal Year 2014 through 2018, Supporting a Wide Range of Efforts

Four hundred and forty-five Mérida Initiative projects were active from  fiscal year 2014 through 2018, with State/INL funding 388 projects and  USAID funding 57 generally larger projects. State/INL and USAID each  categorized their projects with greater specificity than the broad  categories used for overall allocated funding. Both State/INL and USAID  funded projects to assist Mexico’s transition to a newly reformed criminal  justice system that includes oral arguments and the presumption of  innocence, categorized by State/INL as “criminal justice” and by USAID  as “rule of law.” In addition to projects related to criminal justice, most  funding for State/INL projects was for those that focused on border and  port security, professionalizing the police, and counternarcotics. For  example, numerous State/INL projects provided training; technical  assistance; and equipment—including for drug detection, border  surveillance, and forensic drug laboratories—for Mexican law  enforcement, border security, justice sector, and military officials. In  addition to rule of law projects, most funding for USAID projects was for  those that focused on crime and violence prevention, human rights, and  transparency and accountability. Similar to State/INL, numerous USAID  projects provided technical assistance to Mexican justice sector officials.  Other USAID projects were designed to engage with civil society groups  to address crime and violence, and corruption, and to promote trust in  government. State/INL and USAID implemented these projects primarily  through contracts, grants, cooperative agreements, interagency  agreements, and agreements with international organizations.

State/INL Mérida Initiative Projects Focused on Criminal Justice, Border and Port Security, Professionalizing the Police, and Counternarcotics

State/INL-funded Mérida projects focused on criminal justice, border and  port security, professionalizing the police, and counternarcotics. State/INL  categorizes its Mérida Initiative projects under priority lines of effort  developed by State/INL Mexico specifically for the Mérida Initiative. These  lines of effort are defined in State/INL’s Mexico Country Plan: Advance  Criminal Justice, Counternarcotics, Disrupt Illicit Finance, Professionalize  the Police, and Secure Border and Ports. While State/INL uses these  lines of effort to categorize State/INL-funded Mérida Initiative projects,  these lines of effort also align with the broader U.S. government–wide  foreign assistance funding categories outlined in figure 1 above. See  table 1 for a description of State/INL’s lines of effort for the Mérida  Initiative, and how these lines of effort align with the U.S. government– wide foreign assistance funding categories.

The State/INL projects with the highest percentage of State/INL funding  were those focused on Advancing Criminal Justice (28 percent) and  Securing Borders and Ports (25 percent). Law enforcement related  categories—Counternarcotics and Professionalize the Police—also  constituted a substantial proportion (30 percent) of State/INL funding, as  shown in figure 3. For a list of State/INL’s highest dollar value projects  active from fiscal year 2014 through 2018 by these categories, see  appendix I.

Below are some examples of State/INL-funded Mérida Initiative projects  supporting the agency’s five lines of effort in Mexico:

Advance Criminal Justice. These 99 projects, with State/INL funding  estimated at $241 million, focused on providing training, technical  assistance, and equipment to Mexican justice sector and law  enforcement officials as they transition to a new judicial system.  These projects also provided tools and guidance to civil society to  promote the rule of law and trust in government. For example:

One DOJ project supported criminal investigations and  prosecutions by providing training to GOM officials to improve  their forensic laboratories, and by providing technical assistance  to forensic scientists testifying as expert witnesses in criminal  cases.

Through another project, DOJ developed training materials and  instructors to assist the GOM Attorney General’s office with the  mechanics of Mexico’s judicial system reforms and to create a  culture of professionalization within the Attorney General’s office.

Some criminal justice projects engaged with civil society, such as  a project that worked to promote a culture of lawfulness among  Mexican children who attend elementary school in high-crime  areas.

Counternarcotics. These 76 projects, with State/INL funding  estimated at $115 million, focused on assisting Mexican agencies  countering the illicit drug trade in Mexico, primarily through technical  assistance and equipment, including for forensic labs, drug detection,  and surveillance. For example:  Intelligence surveillance and reconnaissance technology has been  provided to the Mexican Navy to expand its capacity to conduct  counternarcotics operations.

The Organization of American States implemented a project that  expanded Mexico’s drug treatment courts, which offer  rehabilitation services and other nonpunitive alternatives for drug  offenders who would otherwise face time in prison.

Disrupt Illicit Finance. These nine projects, with State/INL funding  estimated at $17 million, provided equipment, training, and a public  awareness campaign to assist the GOM in its efforts to address  TCO’s money-laundering and other illicit financial activities. For  example:

One DOJ project provided anti–money laundering training to  Mexican prosecutors at the state and federal levels.

Another United Nations Office on Drugs and Crime project aims to  combat money laundering through a public awareness campaign  and complaint call center in Mexico.

Professionalize the Police. Many of these 97 projects, with  State/INL funding estimated at $144 million, provided training and  technical assistance to Mexican law enforcement officials at all levels  to improve their effectiveness, accountability, and adherence to the  rule of law.

An aspect of one project conducted surveys with law enforcement  personnel and civil society to better inform effective police  practices and to link these practices with levels of citizen trust.

Two other projects supported tours to the United States for  Mexican officials to study issues related to gender-based violence  and women’s access to justice.

Secure Borders and Ports. These 68 projects, with State/INL  funding estimated at $217 million, focused on various efforts and  equipment for GOM border and military officials—including equipment  for biometrics, surveillance, and telecommunications—to secure  Mexico’s air, land, and sea borders and ports. For example, DHS’s  Customs and Border Patrol provided mentors and training to GOM  border officials to improve their capacity to stem the northward flow of  migrants entering Mexico along its southern border.

USAID Mérida Initiative Projects Focused Primarily on Crime and Violence Prevention and Rule of Law

USAID-funded Mérida Initiative projects focused on crime and violence  prevention, rule of law, transparency and accountability, and human rights  efforts. USAID categorizes its Mérida Initiative projects under the  following development objectives developed by USAID Mexico and  outlined in USAID’s Mexico Country Development Cooperation Strategy:  Crime and Violence Prevention, Human Rights, Rule of Law, and  Transparency and Accountability. Similar to State/INL’s Mérida Initiative  lines of effort, USAID Mexico uses its development objectives to  categorize USAID-funded Mérida Initiative projects. These objectives also  align with the broader U.S. government–wide foreign assistance funding  categories outlined in figure 1. See table 2 for a description of USAID’s  development objectives for the Mérida Initiative, and how these objectives  align with the U.S. government–wide foreign assistance funding  categories.

The USAID projects with the highest percentage of USAID funding were  those focused on Rule of Law (39 percent) or Crime and Violence  Prevention (22 percent) with Transparency and Accountability and  Human Rights constituting slightly smaller percentages (15 percent and  14 percent, respectively). While funding for USAID projects was  concentrated in the Rule of Law category, the number of USAID projects  was spread relatively evenly among the categories of Crime and Violence  Prevention, Human Rights, and Transparency and Accountability, as  shown in figure 4. For a list of USAID’s highest dollar value projects  active from fiscal years 2014 through 2018, see appendix II.

Below are some examples of USAID-funded Mérida projects supporting  the agency’s four development objectives in Mexico for the Mérida  Initiative:

Crime and Violence Prevention. These 20 projects, with USAID  funding estimated at $70 million, worked with civil society,  nongovernmental organizations, the private sector, and GOM officials  to implement various activities, such as training, workshops, and  outreach efforts, to mitigate crime and violence. A number of these  projects focused on building the skills and knowledge of at-risk youth,  such as those in high-crime areas or at risk of dropping out of school.  For example, one project aimed to help at-risk youth in communities  and detention centers return to school, gain employment, and improve  life skills.

Human Rights. These 15 projects, with USAID funding estimated at  $46 million, worked to advance human rights through various activities  that, for example, focused on protecting journalists and human rights  defenders, preventing forced disappearances, and promoting freedom  of expression. For example, one project supported the GOM’s  efforts to implement its National Human Rights Plan by implementing  clear procedures in line with international human rights standards.

Rule of Law. These three projects, with USAID funding estimated at  $126 million primarily provided technical assistance and outreach to  assist Mexican officials as they transitioned to a new judicial system.

For example, two large projects—one $68 million project and one  $56 million project that has since closed—provided a wide range  of technical assistance to GOM judges, public defenders, and  attorneys general.

Another smaller project worked with law schools to adapt their  curricula to the new criminal justice system.

Transparency and Accountability. These 15 projects, with USAID  funding estimated at $49 million engaged with Mexican officials and  civil society to address corruption and promote ethical behavior.  Projects helped Mexican officials develop and implement  anticorruption policies, strengthen transparency in their procurement  processes, and implement GOM’s National Anti-Corruption System.  For example, one project aimed to deter corruption and support  transparency by improving the quality of investigative and data  journalism in Mexico.

State and USAID Primarily Use Contracts, Grants, and Interagency Agreements to Implement Mérida Initiative Projects

State/INL and USAID implement Mérida Initiative projects primarily  through contracts, grants, and agreements with international  organizations, but State/INL also employs agreements with U.S. agencies  (DOJ, DHS, and DOD). See tables 3 and 4 for the number of and funding  for each type of State/INL and USAID funding mechanism, respectively.

We provided a draft of this report to State and USAID for review and  comment. State and USAID both provided technical comments, which we  incorporated as appropriate. USAID also provided formal comments,  which are reproduced in appendix III. In these comments, USAID noted  that, with its support, the Mérida Initiative has been instrumental in  advancing reforms to the Mexican criminal justice sector, promoting  human rights, building strong and resilient communities, and improving  integrity and accountability.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of State, and the USAID Administrator. In  addition, the report will be available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-7141 or groverj@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made contributions to this report are  listed in appendix IV.

Appendix I: Highest Dollar Value State/INL Mérida Initiative Projects, by Category, Active from Fiscal Year 2014 through 2018

This appendix provides a detailed list of the 10 highest dollar value  Department of State, Bureau of International Narcotics and Law  Enforcement Affairs (State/INL) Mérida Initiative projects active from fiscal  year 2014 through 2018 by State/INL’s five lines of effort—Advance  Criminal Justice, Counternarcotics, Disrupt Illicit Finance, Professionalize  the Police, and Secure Border and Ports. State/INL provided the details in  tables 5 to 9 below.

Appendix II: Highest Dollar Value USAID Mérida Initiative Projects Active from Fiscal Year 2014 through 2018

This appendix provides a detailed list of the 10 highest dollar value United  States Agency for International Development (USAID) Mérida Initiative  projects active from fiscal year 2014 through 2018. USAID provided the  details in table 10 below.

Appendix III: Comments from the United States Agency for International Development

In addition to the contact named above, James Michels (Assistant  Director), Teresa Heger (Analyst-in-Charge), Terry Allen, Ashley Alley,  Lilia Chaidez, Martin DeAlteriis, Neil Doherty, Francisco Enriquez, John  Hussey, and Andrew Kincare made key contributions to this report.

In 2007, Mexico and the United States created the Mérida Initiative, a partnership to address crime and violence and enhance the rule of law in Mexico.

From fiscal year 2014 through 2018, the State Department and the U.S. Agency for International Development allocated about $723 million for the initiative.

State projects included training and assistance for Mexican justice sector, military, law enforcement, and border security officials.

USAID projects included efforts to engage with Mexican organizations and the public to address corruption, promote trust in government, and prevent crime and violence.