Financial Management Problems in Developing Countries Reduce the Impact of Assistance

NSIAD-85-19: Published: Nov 5, 1984. Publicly Released: Nov 5, 1984.

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GAO determined how the Agency for International Development (AID) and other major donor assistance agencies can better help to identify and meet the financial management training and technical assistance needs of aid recipients.

GAO found that AID and the other donors have not adopted policies or developed well-articulated and coordinated programs of assistance to improve host countries' financial management systems. The donors have not: (1) analyzed the constraints of financial management as they affect the main sectors of development; or (2) formulated specific policies and programs to address major problem areas. Further, the lack of personnel trained in basic accounting and related financial management functions has adversely affected development program performance in many of these countries.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Price-Waterhouse completed its report in August 1987. The report's recommendations are expected to be used to formalize the AID strategy statement. The statement will include the other components which AID has agreed to perform. AID also initiated a regional financial management project in Latin America.

    Recommendation: The Administrator, AID, should begin a program for financial management assistance that establishes training priorities and mechanisms on a country-by-country basis and in a regional context, if appropriate.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Not Implemented

    Comments: The Price-Waterhouse report rejects the OECD approach. Rather it suggests that AID establish direct links with the international organizations to try to promote better accountability.

    Recommendation: The Administrator, AID, through the U.S. delegation to the Development Assistance Committee of the Organization of Economic Cooperation and Development (OECD) and its participation in Cooperation for Development in Africa, should initiate donor discussions of the constraints of financial management weaknesses and their effect on the main sectors of development assistance programming. Such discussions should also encourage the World Bank's involvement in working with bilateral donors to: (1) discuss the extent to which donors can systematically emphasize improving host-country financial management capability when designing development assistance projects; (2) identify countries requiring major levels of donor training and technical assistance and formulate donor strategies accordingly; and (3) identify the elements of ongoing donor financial management assistance programs which offer potential for long-term replication.

    Agency Affected: United States Agency for International Development


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