B-245360.2, Sep 1, 1991

B-245360.2, Sep 1, 1991

DIGESTS: 1. The Agency for International Development (AID), congressional documents and a GAO report all take the position that foreign currencies generated under foreign assistance agreements between AID and foreign countries are owned by the foreign countries. Although AID's Inspector General has made the plain assertion that there is no legal basis for AID officials to take this position, we find no basis to disagree with AID and others on the ownership of the local currencies. 2. The specific steps the Agency for International Development (AID) should take under its 1990 and 1991 AID appropriations acts to ensure that local currencies generated under Foreign Assistance Act programs are appropriately accounted for and used is not only a matter of discretion, but will be affected by the agreements AID reaches with host countries. We see no legal requirement that AID employ its accounting system to achieve the desired accountability over foreign currency.

Ownership of and Accountability Requirements over Local Currency Generated by AID Programs in Host Countries (B-245360.2; Job Code 903126):

As part of the General Management Review of the Agency for International Development (AID), you have asked for our opinion on whether AID owns foreign currencies generated by AID foreign assistance programs. You also have asked whether AID must monitor the use of the local currencies through its accounting systems. For the reasons stated below, we have no basis for disagreeing with AID and others that the host countries own the local currencies generated under the foreign assistance agreements those countries have with AID. We also find no legal requirement for how AID must account for the deposit and use of host country-owned currencies.

OWNERSHIP

As discussed in a recent report, Foreign Assistance: Use of Host Country- Owned Local Currencies, (GAO/NSIAD-90-210BR, B-238869, Sept. 25, 1990), the operations of certain AID foreign assistance programs often generate foreign currencies. For example, a program may provide a foreign government with commodities which, when sold by the foreign government, produce foreign currencies. In that report, GAO took the position that the local currencies generated in these programs are owned by the foreign government which received the AID assistance. GAO/NSIAD-90-210BR at 13. Our review of the Bfile for that report shows that this position was fully coordinated with OGC.

Further, the official position of AID is that such currencies are owned by the foreign countries involved. Foreign Operations, Export Financing, and Related Programs Appropriations for 1990: Hearings Before the Subcomm. on Foreign Operations, Export Financing, and Related Programs of the Senate Comm. on Appropriations, 101st Cong., 1st Sess. 166 - 167 (1989); Memorandum of John E. Mullen, Office of the General Counsel, AID, March 8, 1991 at footnote 11. Agency interpretations of statutes which the agencies are required to implement are entitled to great deference. E.g., Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 867, reh'g denied 468 U.S. 1227 (1984). Finally, such currencies are routinely characterized in congressional documents as "host government -owned local currency". E.g., S. Rep. No. 519, 101st Cong., 2d Sess. 18 (1990).

The materials you provided us contain a record of a discussion between the AID Inspector General and GAO officials. The write-up implies that the IG believes AID owns the local currency, and that there no basis for the contrary position taken by other AID officials. However, neither the IG's plain assertion, the other materials you supplied, nor our research on recent legislation provides us with any basis for disagreeing with AID and others on the ownership of local currencies generated under foreign assistance agreements.

ACCOUNTING REQUIREMENTS

Under section 575(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1991, Pub.L. 101-513, 104 Stat. 2042 - 2044, AID must: require foreign currencies generated under AID agreements with foreign governments to be deposited in a separate account; reach agreements with the local governments on the use, depositing and accounting of those currencies; and take "all appropriate steps to ensure" that the currencies are used as agreed. The same appropriation act for fiscal year 1990 contains virtually identical requirements. See Pub.L. 101-167,Sec. 592(a), 103 Stat. 1195, 1253-1254.

Because these local currencies are owned by the host country and not AID, the general laws governing an agency's accounting and recording of its funds do not apply to the currencies. Nevertheless, the provisions cited above reflect a congressional expectation that AID will assume some responsibility for accounting and monitoring these local currencies. However, the legislative history of section 575 suggests that this responsibility can be satisfied in part by AID efforts to see that host countries have "suitable budgeting and financial management systems and resources." S. Rep. No. 519 at 18. Further, AID and the host countries are to agree on their respective responsibilities for monitoring and accounting for the local currencies generated by AID programs. Pub.L. 101 -167, Sec 592(a)(1)(c); Pub.L. 101-513, Sec. 575(a)(1)(c).

The specific steps AID should take to ensure that local currencies are appropriately accounted for and used is not only a matter of discretion, but will be affected by the agreements AID reaches with host countries. We see no legal requirement that the method AID employs to achieve the desired accountability over foreign currency must be through its accounting system.