Foreign Aid:

Use of Local Currencies for AID's Operating Costs

NSIAD-89-7: Published: Oct 17, 1988. Publicly Released: Nov 29, 1988.

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Pursuant to a congressional request, GAO reviewed the Agency for International Development's (AID) implementation and management of trust fund local currencies accruing from Economic Support Fund agreements to pay local operation expenses at AID missions overseas.

GAO found that AID: (1) increased the use of trust funds to pay the operating expenses of its missions from $12.4 million obligated in fiscal year (FY) 1983 to $55 million in FY 1985; (2) has not always fulfilled its fiduciary responsibilities in reporting trust fund expenses to host governments; and (3) sometimes gave inaccurate information to Congress and did not disclose real property acquisitions.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: Congress has not acted on this recommendation, and no action is anticipated.

    Matter: Because of large capital expenditures by AID in Costa Rica and the potential for large capital expenditures in the future by other missions due to expanding trust funds, Congress may wish to consider whether more statutory controls over trust fund real property acquisitions are needed.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The AID Administrator is encouraging regional bureaus to have missions obtain a 18-month reserve of trust funds, where feasible, to cover periods of declining trust fund availability. This will somewhat increase the use of trust, but not to the extent it would have if the recommendation was fully implemented.

    Recommendation: The Administrator, AID, should direct AID missions with trust funds to maximize trust fund use by converting operating expenses payable in dollars to local currency expenses and, if necessary, attempt to negotiate larger trust funds to pay these expenses.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: While the Administrator disagreed with the recommendation, he agreed that trust funds may be used to pay dollar expenses through reverse accommodation exchange in instances where the expenditure would normally be made in local currency, but due to specific overriding conditions, payments must be made in dollars. GAO does not expect further AID action on this matter.

    Recommendation: The Administrator, AID, should direct AID missions with trust funds to maximize trust fund use by seeking opportunities to use reverse accommodation exchange to convert trust fund local currencies to dollars to pay local operating expenses payable only in dollars, and, if necessary, attempt to negotiate a larger trust fund to cover these additional expenses.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: AID has issued guidance to the missions to use the average daily exchange rate when converting trust fund local currency to dollars for reporting purposes. A cable with such guidance was sent to all missions to re-use the average daily exchange rate.

    Recommendation: To improve the accuracy of trust fund expenditures submitted to Congress, the Administrator, AID, should issue guidance to the missions instructing them to use the average daily exchange rate when converting trust fund local currency, as shown in their accounting records, to dollars for use in its trust fund mission operating expense reports and annual budget submissions to AID headquarters.

    Agency Affected: United States Agency for International Development

 

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