El Salvador:

Accountability for U.S. Military and Economic Aid

NSIAD-90-132: Published: Sep 21, 1990. Publicly Released: Sep 21, 1990.

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Pursuant to a congressional request, GAO reviewed accountability for and controls over U.S. military and economic assistance to El Salvador, to determine: (1) whether any assistance was subject to misuse or diversion; and (2) what accountability and controls are in place.

GAO found that: (1) the United States has provided $3.5 billion in economic and military aid to El Salvador since 1980; (2) there was no evidence that U.S. military aid to El Salvador had been diverted or misused since the time that GAO reported on illegal fuel transfers; (3) Salvadoran officials did not emphasize management controls over logistics, due to combat activities; (4) some written guidance was lacking, storage space was inadequate, and inventories and spot checks were not regularly performed; (5) between 1980 and 1989, U.S. economic assistance to El Salvador totalled nearly $2.6 billion, the fourth-largest economic aid program in the world; (6) Salvadoran agencies continue to be affected by serious internal control weaknesses despite the Agency for International Development (AID) mission's efforts to control funds; and (7) by improving El Salvador's financial management capability, reductions in the vulnerability of local currency funds could be accomplished.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: AID has initiated contracts with U.S. affiliated accounting firms in El Salvador to perform in-depth financial management assessments of Salvadoran organizations scheduled to receive U.S. assistance and to provide technical assistance to these organizations to correct identified problems. The agency's mission in El Salvador has also established a four-person financial compliance unit.

    Recommendation: The Administrator, AID, should ensure that its mission in El Salvador: (1) performs in-depth financial management assessments of Salvadoran organizations scheduled to implement new AID projects; and (2) works with El Salvador to correct identified problems.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: U.S. MILGROUP in El Salvador has prepared a Standard Operating Procedure, dated December 15, 1991, for an Inventory Spot-Check Program on El Salvador's controls over Defense articles provided by the United States. It requires the U.S. MILGROUP to do periodic unannounced spot-checks at least quarterly and indicates that El Salvador's military is to perform annual 100 percent physical inventories.

    Recommendation: The Secretary of Defense should, after coordination with the Department of State, direct DSAA and the Military Group in El Salvador to work toward reaching an agreement with El Salvador's military on actions needed to improve internal controls, including authorizing MILGROUP to conduct periodic spot checks of selected U.S.-funded military items to provide reasonable assurance of accountability and control.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: El Salvador's military has agreed to perform regular inventories of its property to improve internal controls. El Salvador's military performed a 100 percent inventory of major end items in January 1991, and began monthly 10 percent inventories of all property in February 1991. El Salvador has also installed a computer network to automate its logistics system.

    Recommendation: The Secretary of Defense should, after coordination with the Department of State, direct DSAA and MILGROUP in El Salvador to work toward reaching an agreement with El Salvador's military on actions needed to improve internal controls, including performing periodic inventories of Salvadoran Armed Forces property to ensure that accountability for their custody and use is maintained and to reconcile physical counts with records.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: El Salvador's military has appointed a colonel in the logistics section to serve as a property accountability officer to ensure proper control and accountability of all items in the inventory. The Inspector General position at the Ministry of Defense remains vacant because the Armed Forces cannot locate a suitable person willing to assume the responsibility.

    Recommendation: The Secretary of Defense should, after coordination with the Department of State, direct the Defense Security Assistance Agency (DSAA) and MILGROUP in El Salvador to work toward reaching an agreement with El Salvador's military on actions needed to improve internal controls, including appointing independent high-level officials to the Salvadoran property accountability and Inspector General positions.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: AID has prepared a modification of its local currency policy and detailed operational guidance setting minimum standards for accountability and clarifying the degree of U.S. monitoring necessary. The policy and guidance will impose more rigorous accountability standards for managing local currency use. The new policy and guidance was transmitted to field missions on June 20, 1991.

    Recommendation: The Administrator, AID, should clarify the AID local currency accountability guidance for El Salvador. The guidance should clearly state: (1) what constitutes reasonable assurance that host government agencies have adequate financial systems to manage local currency funds; and (2) what degree of AID oversight and monitoring is required.

    Agency Affected: United States Agency for International Development

 

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