Foreign Currency Purchases Can Be Reduced Through Greater Use of Currency Use Payments Under Public Law 480 Commodity Sales Agreements

NSIAD-84-76: Published: Apr 10, 1984. Publicly Released: Apr 10, 1984.

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GAO examined the U.S. collections of local currencies payable under provisions in certain commodity sales agreements to see whether they are being collected in a timely manner.

GAO found that amounts owed remained uncollected while needed local currencies were purchased with dollars from commercial sources. Purchases of local currencies could have been reduced by $29 million between October 1981 and September 1983 by collecting the amounts payable. Since the dollar equivalent of collections is credited to the Commodity Credit Corporation, the Corporation may have to reduce its program level or obtain necessary funds from other sources, if receipts are less than projected. If amounts uncollected as of September 1983 are collected, they may reduce further dollar purchases; if they remain uncollected, their equivalent amounts are payable in dollars when the credit installments become due. GAO found that no system has been established to ensure timely currency-use payments collections. The collections are the responsibility of individual State Department missions. However, the missions do not directly benefit from the collection efforts. Agreements for fiscal year 1982 with seven countries where local currencies were purchased contained no currency-use payment provisions because of political reasons or oversight. In addition, greater use of these provisions may be constrained by the conflicting interests of the agencies involved.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA believes that present guidelines and procedures for collecting currency-use payments are adequate if properly administered and followed, and it has not taken the lead to establish Subcommittee guidelines. However, it has worked with other members of the Subcommittee to increase the use of currency-use provisions in commodity sales agreements and to improve collections.

    Recommendation: The Secretary of Agriculture, as Chairman of the Subcommittee on Food Aid, should take the lead in establishing guidelines and procedures for: (1) collecting currency-use payments on a timely basis; and (2) determining the extent to which needed local currencies will be obtained through the Public Law 480 commodity sales program rather than through dollar outlays.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: Treasury now has procedures in place to: (1) improve the collection of local currency payments and for monitoring and rectifying payment delinquencies; and (2) increase the use of currency-use provisions in commodity sales agreements with countries where there are U.S. currency needs. Treasury stated that it has reviewed these procedures and they are operating effectively.

    Recommendation: The Secretary of the Treasury should: (1) establish procedures for systematically identifying delinquent local currency payments, sending timely reminders to the missions, and bringing delinquencies before the Subcommittee on Food Aid when negotiating agreements for additional commodities; and (2) promote greater use of currency-use payment provisions in commodity sales agreements to generate local currencies for U.S. needs.

    Agency Affected: Department of the Treasury

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of State should issue a directive to the missions to expedite commodity-use payment collections by: (1) requesting payments promptly to satisfy local currency needs in accordance with Treasury notifications of commodity-use payment availability and collection guidelines; and (2) obtaining approval from the Treasury and the Subcommittee on Food Aid before delaying collections. In transmitting information to the missions regarding future commodity-use payment availability and collection procedures for individual agreements, the Secretary should refer the missions to this directive.

    Agency Affected: Department of State

  4. Status: Closed - Implemented

    Comments: Treasury and USDA representatives to the Subcommittee on Food Aid stated that AID respresentatives have been more cooperative and flexible during Subcommittee meetings to approve the inclusion of currency-use provisions in P.L. 480 commodity sales agreements.

    Recommendation: The Administrator of the Agency for International Development (AID) should collaborate with other members of the subcommittee in establishing interagency currency-use payment guidelines. Until such time as overall guidelines have been established, the Administrator should ensure that the AID guidelines are applied in a manner that balances the AID development mandate with the desirability of reducing dollar outlays to meet U.S. local currency needs.

    Agency Affected: United States Agency for International Development


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