Foreign Aid:

Improvement Needed in Loan Reporting and Administration

NSIAD-87-2: Published: Oct 23, 1986. Publicly Released: Nov 3, 1986.

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In response to a congressional request, GAO reported on economic and military loan and grant aid to foreign countries, focusing on the Agency for International Development's (AID) loan management and reporting.

GAO noted that: (1) AID did not adequately consider current income levels or future economic prospects of recipients in establishing loan interest rates and repayment periods; (2) recipients of minimum loan terms did not strictly meet statutory criteria; (3) AID provided minimum interest rates to countries with significantly different per-capita incomes; (4) AID accelerated only one country's loan repayments, and did not accelerate loan repayments for some countries with highly developed economies; (5) a number of loan recipients rescheduled their loans, sometimes repetitively, to avoid being in default and cut off from further aid; (6) in 1985, AID provided new loans to several countries at the same time that they rescheduled the old loans; (7) AID had not determined the collectibility or realizable value of loans in its portfolio, and had written off few loans; (8) loan data AID and other agencies independently submitted to Congress provided much useful information, but reports had varying formats and classifications which hindered program analysis and, in some respects, the information presented was incomplete and misleading; and (9) Congress may not be fully aware of how debt reschedulings have prevented loan defaults and allowed countries to receive further aid, since AID ceased publishing annual program summaries, including financial statements, of its loan operations in 1979.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The House passed legislation in May 1988 requiring that AID include a description of its efforts to accelerate loan repayments in the annual report to Congress. AID agreed to do so when it was appropriate. The DCC Chairman's 1988 report was not published at the time of this update.

    Recommendation: The Administrator, AID, should describe, in the annual report to Congress on foreign assistance, the efforts made to accelerate loan repayments pursuant to requirements of section 127 of the Foreign Assistance Act of 1961.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: AID agreed to revise loan handbook to reflect this recommendation. The AID central accounting and reporting system, including that for loans, and related manual orders are currently undergoing significant change. It is not considered necessary to hold this recommendation open pending completion of the new system.

    Recommendation: The Administrator, AID, should revise AID manual orders to make clear that no Foreign Assistance Act loan, except from the private sector revolving fund, whether to a public or private borrower, may be written off.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Not Implemented

    Comments: It is the Secretary of State, not the DCC Chairman, which is primarily responsible for reporting to Congress on foreign debt reschedulings. Recent legislation clarifies what information the Secretary should include in reporting on proposed debt relief.

    Recommendation: The Chairman, Development Coordination Committee (DCC), should provide more information in reporting debt rescheduling activities to Congress, specifically: (1) notifications of proposed reschedulings should state clearly why the rescheduling is necessary and in the U.S. interest; and (2) reports of completed official debt reschedulings should present a more complete picture of how agreements affect U.S. financial interests, including how much and how many times debts owed to U.S. agencies have been rescheduled and the prospects for collecting rescheduled receivables.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: Recent legislation clarifies what information the Secretary should include in reporting on proposed debt relief. State officials acknowledged the more stringent congressional requirement for reporting on proposed debt relief and they are now providing more detailed justifications in notifications of proposed reschedulings and in the explanation of completed agreements.

    Recommendation: The Secretary of State should provide more information in reporting debt rescheduling activities to Congress, specifically: (1) notifications of proposed reschedulings should state clearly why the rescheduling is necessary and in the U.S. interest; and (2) reports of completed official debt reschedulings should present a more complete picture of how agreements affect U.S. financial interests, including how much and how many times debts owed to U.S. agencies have been rescheduled and the prospects for collecting rescheduled receivables.

    Agency Affected: Department of State

  5. Status: Closed - Not Implemented

    Comments: It is the Secretary of State, not the Secretary of the Treasury, which is primarily responsible for reporting to Congress on foreign debt reschedulings. Recent legislation clarifies what information the Secretary of State is to include in reporting on proposed debt relief.

    Recommendation: The Secretary of the Treasury should provide more information in reporting debt rescheduling activities to Congress, specifically: (1) notifications of proposed reschedulings should state clearly why the rescheduling is necessary and in the U.S. interest; and (2) reports of completed official debt reschedulings should present a more complete picture of how agreements affect U.S. financial interests, including how much and how many times debts owed to U.S. agencies have been rescheduled and the prospects for collecting rescheduled receivables.

    Agency Affected: Department of the Treasury

  6. Status: Closed - Implemented

    Comments: Recent legislation would supplement existing debt reporting requirements by having the President ensure that the various reports submitted to Congress provide full and compatible information on the status of all loans provided to foreign governments. While AID loan reports have been reconciled, the DCC Chairman's 1988 report was not published at the time of preparation of this update.

    Recommendation: Pursuant to the requirements of section 634 of the act, the Administrator, AID, as DCC Chairman, should revise the annual congressional report and accompanying annexes as may be necessary to show clearly the amounts of foreign assistance loan authorizations, disbursements, rescheduled debt, repayments, and balances outstanding, by program and country.

    Agency Affected: United States Agency for International Development

  7. Status: Closed - Implemented

    Comments: Recent legislation would supplement existing debt reporting requirements by having the President ensure that the various reports submitted to Congress provide full and compatible information on the status of all loans provided to foreign governments.

    Recommendation: Pursuant to the requirements of section 634 of the act, the Administrator, AID, as DCC Chairman, should define the status of repayments, including applicability of aid cut-off sanctions and collectibility of non-current loans, by country.

    Agency Affected: United States Agency for International Development

  8. Status: Closed - Implemented

    Comments: Recent legislation would supplement existing debt reporting requirements by having the President ensure that the various reports submitted to Congress provide full and compatible information on the status of all loans provided to foreign governments.

    Recommendation: Pursuant to the requirements of section 634 of the act, the Administrator, AID, as DCC Chairman, should disclose the reasons for any significant shortfalls in repayments of billed loan principal and interest for the preceding year.

    Agency Affected: United States Agency for International Development

  9. Status: Closed - Implemented

    Comments: AID officials agreed to reconcile its various loan reports and reports to the underlying AID records. They said that the action is complete and the recently issued 1987 U.S. Overseas Loans and Grants report reflecting changes in data format for repayments and outstanding balances appears to bear them out.

    Recommendation: Pursuant to the requirements of section 634 of the act, the Administrator, AID, as DCC Chairman, should ensure consistency with the underlying agency loan records.

    Agency Affected: United States Agency for International Development

  10. Status: Closed - Implemented

    Comments: AID agreed in principle with this recommendation, but pointed out that the congressionally mandated February 1 deadline is difficult to meet because of various constraints. While the act would require comprehensive information on foreign assistance provided during the prior fiscal year; no mention is made of a reporting deadline.

    Recommendation: Pursuant to the requirements of section 634 of the act, the Administrator, AID, as DCC Chairman, should meet the required February 1 reporting deadline.

    Agency Affected: United States Agency for International Development

  11. Status: Closed - Implemented

    Comments: AID agreed with the need to have reconcilable data and revised the 1987 U.S. Overseas Loans and Grants report to make it consistent with other loan records and reports.

    Recommendation: The Administrator, AID, should revise the U.S. overseas Loans and Grants Report to provide certain information and ensure that the data reported in this book is consistent with other loan records and reports submitted to Congress by other executive agencies.

    Agency Affected: United States Agency for International Development

  12. Status: Closed - Not Implemented

    Comments: In May 1988, AID completed a review of the economic situation of all countries with outstanding concessional loan balances and determined that none of them had achieved sufficiently high economic development to warrant consideration of seeking early repayment.

    Recommendation: The Administrator, AID, should initiate negotiations with countries which received concessional loans from predecessor agencies, or which have achieved high economic development, and seek agreements on early repayment.

    Agency Affected: United States Agency for International Development

  13. Status: Closed - Not Implemented

    Comments: AID cited lack of reader interest and significance of financial statement data as considerations for not spending scarce AID resources to prepare recommended loan summary and accompanying statements. AID stated that it was willing to prepare the recommended data should it be required to do so, to improve agency financial management and report has not made headway since hearings were held.

    Recommendation: The Administrator, AID, should prepare and submit to Congress an annual loan program summary, consisting of financial statements, program data, and loan information by country, which adequately discloses the condition and collectibility of loan receivables and operating results of AID lending activity.

    Agency Affected: United States Agency for International Development

 

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