American aid continued to flow to the university even after the democratic elections that brought Hamas to power in January 2006.
Throughout the four-year period, the agency conducted several inquiries into its funding of the Gaza institution and on each occasion concluded that there was no reason to cease American funding.
The Islamic University also repeatedly claimed that there was no reason to halt the aid on the grounds that it did not support terrorism.
It should be noted that the US labeled Hamas a terrorist organization in 1997 and US law prohibits transactions with terrorist groups or their supporters.
Illinois Congressman Mark Kirk requested that the USAID inspector-general look into a report by the Washington Times about US aid to the Islamic University. After examing the matter, the inspector responded that this was not departure from US policy not to fund organizations associated with Hamas.
Kirk, unsatisfied with the response, told the Chicago Tribune in an interview on Tuesday that the failure to detect terrorist ties at the school suggested "either incompetence or a complete breakdown of the vetting system as run by the State Department."
The Illinois representative pointed the inspector general of the aid agency to the fact that former Palestinian Prime Minister and current Hamas government head, Ismail Haniyeh, sits on the Islamic University's board of trustees. Additionally, Palestinian security forces seized assault rifles and rocket-propelled grenades during a raid of the university in January.
In wake of Representative Kirk's complaint, USAID conducted a number of follow-up audits one of which concluded that the US government has inadequate controls in place to stop foreign aid from flowing to terrorists. The report also concluded that USAID had funded terrorist-linked groups on at least two occasions.
One of the follow-up audits concluded that USAID "did not always follow applicable federal laws" when approving aid to the University. That includes several occasions where grant recipients did not receive a notice detailing their responsibility to avoid using aid dollars to support terrorism.
Most of those occasions came between 2003 and 2005, before USAID implemented new anti-terrorist funding policies, the audit concluded.
The Chicago Tribune contributed to this report