Foreign Aid:

Better Management of Commodity Import Programs Could Improve Development Impact

NSIAD-88-209: Published: Sep 26, 1988. Publicly Released: Sep 26, 1988.

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Pursuant to a congressional request, GAO reviewed the Agency for International Development's (AID) commodity import programs (CIP) in Egypt, Pakistan, Zambia, and Zaire to assess how CIP could achieve greater development impact.

GAO found that: (1) CIP have helped sustain economic production in countries experiencing foreign exchange shortages; (2) the Egypt and Pakistan CIP, which supplied commodities to public activities at subsidized prices, contradicted the AID goal of encouraging governments to eliminate subsidies; (3) in Zaire and Zambia, AID missions programmed local currencies to support specific development activities; (4) AID officials in Pakistan believed that emphasizing programming of local currency would reduce their leverage in economic policy reform discussions, and they minimized local currency deposit requirements; and (5) as of January 1987, Egypt had accumulated about $325 million in local currencies generated from commodity sales, instead of programming those funds to support development. GAO also found that: (1) in Pakistan, Egypt, and Zambia, AID did not ensure that funds were used for the intended purposes; (2) AID accounting systems for monitoring commodity arrival, disposition, and end use operated on a country-by-country basis and did not consistently account for imported commodities; and (3) when end-use checks showed that commodities were idle or not fully used, AID did not resolve the problems before approving further transactions, and the problems recurred.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: AID issued a worldwide cable on June 8, 1990 reiterating individual mission responsibilities for end-use checks, citing relevant AID regulations, and advising missions to review procedures.

    Recommendation: To ensure that AID can adequately account for the arrival and disposition of CIP commodities, the Administrator, AID, should specify the extent to which missions should conduct end-use checks and a minimum level of expected coverage.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: AID has instituted such a system in Egypt and is investigating whether that system could be modified and extended to other CIP programs in other countries.

    Recommendation: To ensure that AID can adequately account for the arrival and disposition of CIP commodities, the Administrator, AID, should require that arrival accounting systems provide a clear link between CIP obligations, commodity receipts, and local currency deposits for all import transactions.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: AID and Egypt programmed $184.9 million in local currency for development purposes and agreed to program future deposits for support of development budgets. These funds had been idle in the account and were not contributing to the goal of promoting the use of local currency funds to support development activities.

    Recommendation: The Administrator, AID, should develop with Egypt a plan to liquidate accumulations of local currency funds and program future generation for development at a pace more commensurate with the rate that funds are deposited.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: The AID Office of Financial Management issued guidance in June 1991 which requires missions to verify the accuracy of host government reports on local currency special accounts at least annually.

    Recommendation: The Administrator, AID, should require missions to independently verify, on a sample basis, host government reports on the uses of local currencies.

    Agency Affected: United States Agency for International Development

  5. Status: Closed - Implemented

    Comments: AID believes its strengthening of end-use monitoring will greatly reduce the incidence of underutilized AID-funded commodities.

    Recommendation: To ensure that AID can adequately account for the arrival and disposition of CIP commodities, the Administrator, AID, should require missions to resolve problems of underused commodities before approving financing of additional transactions by the importer.

    Agency Affected: United States Agency for International Development

 

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