AID Management:

Effort To Improve Cash Management and the Payment Process at AID

NSIAD-86-36: Published: Jan 16, 1986. Publicly Released: Jan 16, 1986.

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GAO reviewed the Agency for International Development's (AID) efforts to improve management procedures relating to cash management and the payment process.

GAO found that AID has made progress in improving cash management practices for certain programs and activities, including the Commodity Import Program (CIP), the Egyptian decentralization program, and advances to contractors and grantees. GAO believes that AID can further improve its decentralization program disbursements and overseas cash-advance management by: (1) avoiding premature disbursement of funds for the decentralization program; and (2) ensuring that cash advances are limited to those needed to cover immediate disbursement needs. GAO also found that: (1) when AID uses bank letters to reimburse contractors and grantees for carrying out agency programs and activities, agency officials do not have the opportunity to review vouchers and supporting documents before the bank pays the recipients; and (2) the AID headquarters policy guidance recognizes the agency's increased vulnerability to making improper payments through bank letters and discourages use of this financing procedure.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The AID mission in Egypt issues checks for the decentralization program directly to lower-level governmental entities, saving a minimum of 14 calendar days, and it developed a checklist that ensures projects submitted for funding meet technical requirements and are ready for immediate contracting. Local units use small allocations to fund feasibility studies to ensure project readiness.

    Recommendation: The Assistant to the Administrator for Management, AID, should instruct the mission in Egypt to make additional improvements in cash management for the Basic Village Services project, particularly to: (1) further reduce the number of days it takes the Egyptian central government and governorates to transfer funds to the village councils; and (2) improve controls to ensure that projects are fully planned and ready for contracting before AID disburses funds.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: AID missions in India and Indonesia now perform quarterly reviews of outstanding cash advances. The mission in Niger increased oversight of advances with a resulting reduction in amounts outstanding.

    Recommendation: The Assistant to the Administrator for Management, AID, should instruct AID missions in Indonesia, Niger, and India to review outstanding cash advances at least quarterly to determine whether the advances are excessive and should be reduced or eliminated. The mission in India should be instructed to include justification in project files for cash advance requests.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: The mission in Niger complied with AID headquarters payment verification policy requiring project officers to state the number of visits to the project site or other basis for approving vouchers. The mission in India is developing new financing approaches for projects with multiple sites, which include monitoring and inspection. AID headquarters will assist with the new financing arrangements.

    Recommendation: The Assistant to the Administrator for Management, AID, should have headquarters officials monitor efforts by these missions to improve the payment process. If necessary, these officials should help the mission in India develop a sampling method for inspecting large projects and change the handbook requirements to accommodate this inspection method.

    Agency Affected: United States Agency for International Development

 

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