Examination of Fiscal Year 1981 Overseas Private Investment Corporation Financial Statements and Related Issues

ID-82-33: Published: Aug 16, 1982. Publicly Released: Aug 16, 1982.

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GAO examined the Overseas Private Investment Corporation's (OPIC) fiscal year (FY) 1981 financial statements.

GAO found that the statements disclosed no exception, weakness of internal control, or departure from law and regulation having a material impact on its financial position at September 30, 1981, and its operating results for the year then ended. However, the report also noted that: (1) although OPIC is experiencing significant losses on its loans, its insurance and guaranty reserves appear to be adequate to cover existing commitments; (2) OPIC did not fully disclose the effects of delinquent project financing in its statement; and (3) tighter control and monitoring of OPIC administrative expenditures are needed.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Since the 1981 audit, OPIC has completed its Accounting and Cash Procedures and Procurement Manual. While additional formal written manuals may be desirable, GAO feels that existing directives are consistent with the small size and professional makeup of the organization.

    Recommendation: The President, OPIC, should require operating policies having significant financial or internal control implications to be in writing and subject to review by the Board of Directors and independent auditors.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  2. Status: Closed - Not Implemented

    Comments: After the issue was raised in the FY 1981 audit, OPIC took steps to limit luncheon meetings, so as not to embarrass either OPIC or the client. Since that time, "representational expenses" have been significantly below the $35,000 spending limitation. As $35,000 is immaterial when compared to a net imcome of $97 million, no further action is deemed necessary.

    Recommendation: The President, OPIC, to enable a determination on whether OPIC is adhering to the congressional spending limitation on entertainment, should obtain clarification from Congress regarding what costs constitute entertainment versus business meeting expenses and thus are chargeable to the limited annual entertainment allowance.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  3. Status: Closed - Not Implemented

    Comments: Statutory instruction on transferring funds to DIF is unclear and contradictory. Increased disclosure in current year footnotes accommodates these contradictions, and DIF new loan commitments are now limited by annual appropriation acts. OPIC feels it is in compliance with congressional intent and with changes in the DIF footnote. GAO does not feel the reader will be misled.

    Recommendation: The President, OPIC, to preclude a possible misunderstanding of how Congress intended additional authorized resources to be made available for DIF lending, should seek clarification from Congress regarding how the funds are to be transferred to the DIF.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  4. Status: Closed - Not Implemented

    Comments: The recommendation is based on an interpretation of congressional intent that DIF be charged with administrative costs and credited with interest income. Provisions of the OPIC Amendments Act of 1981 nullify this interpretation and make the recommendation no longer valid.

    Recommendation: The President, OPIC, should require that future years' financial statements show all net gains or losses realized from Direct Investment Fund (DIF) lending activity.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  5. Status: Closed - Not Implemented

    Comments: DIF loans outstanding as of September 30, 1984 are only 3 percent of total assets. The delinquent/nonearning assets contained therein are entirely encompassed by the allowance and are accordingly immaterial to total assets and would, therefore, not require disclosure.

    Recommendation: The President, OPIC, should require that future years' financial statements disclose the outstanding balance of delinquent, nonearning assets held for investment and the related amounts of principal and interest that are due from them.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  6. Status: Closed - Not Implemented

    Comments: GAO continues to stress the need for improved OPIC internal review and oversight of administrative practices, but believes that recent management actions to tighten controls, cost/benefit considerations, and congressional concern over possible duplication of audit effort combine to render this recommendation no longer effective.

    Recommendation: The President, OPIC, should request the Agency for International Development Inspector General to monitor OPIC financial and management policies and controls, and to conduct such reviews or inspections of administrative expenditures as often as he deems necessary, though not less frequently than once every 3 years.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

 

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