Foreign Economic Assistance:

Better Controls Needed Over Property Accountability and Contract Close Outs

NSIAD-90-67: Published: Jan 22, 1990. Publicly Released: Jan 22, 1990.

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Pursuant to a congressional request, GAO reviewed the Agency for International Development's (AID) contracting and procurement system, focusing on AID procedures for: (1) maintaining accountability for both AID-owned and cooperating-country-titled nonexpendable property in the possession of contractors; and (2) closing out and auditing expired contracts in conformance with federal and AID contracting policies and regulations.

GAO found that: (1) AID did not adequately comply with its regulations requiring accountability for project-funded nonexpendable property in the possession of its contractors and did not know the value or condition of the property or whether the property was properly disposed of at contract completion; (2) AID missions did not keep such records because of a lack of priority for project-funded property accountability, failure of contractors to submit annual and final inventory reports, and inadequate closure of completed contracts; (3) although the AID Inspector General identified the lack of accountability in 1984 and recommended that AID establish an accounting system for this property, AID made no progress in establishing the system; (4) although AID directed its missions to establish contract closeout and audit procedures similar to those it used in Washington, many missions either did not establish adequate procedures or did not perform closeouts; (5) AID could not accurately identify the extent to which it audited its expired contracts; (6) AID was in the process of implementing a new contract information system to keep track of contract expiration dates, audit dates and contract closeout dates; and (7) the latest AID internal control assessment report cited the lack of adequate audit coverage but did not address the inadequate property accountability or the lack of adequate contract closeouts.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Prior action on this recommendation has been overtaken by events at AID. While AID began developing a system to address this recommendation under the previous Administrator, the current Administrator's overarching "Results-Oriented Operations Reengineering" initiative made this work obsolete. As part of this agencywide reform effort, AID's staff are conducting assessments of each business area before overhauling agency procedures and operations. The next business area assessment will cover AID's management of nonexpendable property and will result in improved processes to ensure accountability and control of such property.

    Recommendation: To correct areas of vulnerability, the Administrator, AID, should develop an inventory of AID-owned and cooperating-country-titled nonexpendable property in the possession of contractors and, based on the significance of this inventory, develop and implement an appropriate system for the proper accountability and control of such property.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: AID has issued policy and procedures for mission contract closeouts. The policy provides: (1) requirements for contract closeout; (2) thresholds for final contract audits; and (3) standard forms.

    Recommendation: To correct areas of vulnerability, the Administrator, AID, should ensure that specific requirements for contract close-outs are established for the overseas missions, including standard requirements or thresholds for final contract audits.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: The new AID Contract Management Information System (CIMS) tracks the extent that expired contracts are being closed out. However, a different system is being developed to track audits, including contract closeout audits. The system developed to track audits, including contract close outs, is now fully operational.

    Recommendation: To correct areas of vulnerability, the Administrator, AID, should ensure that its new contract information system is used to keep track of the extent that expired contracts are being closed out and audited for both AID/Washington and the overseas missions.

    Agency Affected: United States Agency for International Development

  4. Status: Closed - Implemented

    Comments: The Regional Inspector General for Audit/Washington has developed a plan for eliminating the backlog of requested contract closeout audits.

    Recommendation: To correct areas of vulnerability, the Administrator, AID, should develop a plan for eliminating the backlog of completed but unaudited contracts.

    Agency Affected: United States Agency for International Development

 

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