Foreign Assistance:

Clearer Guidance Needed on When to Use Cash Grants

NSIAD-94-30: Published: Dec 22, 1993. Publicly Released: Dec 22, 1993.

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Pursuant to a legislative mandate, GAO reviewed the Agency for International Development's (AID) cash grant assistance program, focusing on: (1) the use of cash grant assistance to purchase U.S. goods and services; (2) AID systems for ensuring accountability and monitoring the use of cash grant assistance; and (3) AID basis for deciding when to use cash grants rather than other forms of assistance to achieve U.S. objectives.

GAO found that: (1) AID prefers but does not require cash grant recipients to use grant funds to purchase U.S. goods; (2) in fiscal year (FY) 1992, grant recipients used 83 percent of their cash grants to repay debt and 17 percent to purchase goods; (3) the accuracy and reliability of AID data on cash grant usage are doubtful because of significant data and methodology limitations; (4) AID has maintained adequate accountability and monitoring controls for cash grant assistance, but the accountability standards for cash grants are less stringent than the ones required for Commodity Import Programs (CIP) and capital projects; (5) AID has improved its oversight to ensure that recipient governments implement economic reforms as a condition for receiving cash grant assistance; (6) AID officials do not agree on the staffing levels needed to provide adequate accountability for the different types of assistance because of mission personnel's lack of experience and knowledge about the advantages of the different AID assistance programs; (7) AID has not provided clear and consistent guidance to its missions on which form of assistance would best meet U.S. objectives under certain circumstances; (8) AID officials face competing demands in determining which forms of assistance to use; and (9) AID frequently fails to consider all alternative forms of assistance before approving cash grant assistance programs due to a lack of specific guidance.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In March 1996, AID issued Agency Directive 324, entitled "Revised Agency Guidance on Program Assistance," which includes clear guidance on when to use various assistance mechanisms, such as cash grants and CIP.

    Recommendation: To achieve clearer and more consistent guidance for mission officials and a more systematic record of program decisions, the Administrator, AID, should provide clear guidance to missions on when and under what circumstances various assistance mechanisms, such as cash grants, CIP, or projects, are the most appropriate for accomplishing U.S. program goals and objectives.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: In March 1996, AID issued Agency Directive 324, entitled "Revised Agency Guidance on Program Assistance," which includes guidance on when to use one type of assistance mechanism rather than another, and should help to establish a record of mission program decisions.

    Recommendation: To achieve clearer and more consistent guidance for mission officials and a more systematic record of program decisions, the Administrator, AID, should require missions to fully document the rationale for using one type of assistance mechanism rather than another.

    Agency Affected: United States Agency for International Development

 

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