Inter-American Development Bank:

Questions Concerning Payment to Nicaragua

NSIAD-89-167: Published: Jul 5, 1989. Publicly Released: Jul 10, 1989.

Additional Materials:


Harold J. Johnson, Jr
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Pursuant to a congressional request, GAO reviewed the Inter-American Development Bank's (IDB) loan disbursements to Nicaragua in November 1987, focusing on: (1) whether the payments complied with IDB regulations or violated U.S. law; (2) whether IDB should recover the funds; and (3) an audit memorandum the IDB Auditor General prepared concerning the transaction.

GAO found that IDB: (1) followed procedures in notifying Nicaragua in May 1987 that it was in arrears on loan payments, and in suspending disbursements on all Nicaraguan loans; (2) did not follow established procedures in clearing Nicaragua's arrearages, since it acted on notification that the Nicaraguan government had instructed the Central Bank of Nicaragua to clear the arrearages and did not actually receive the payments until November 20, 1987; (3) after investigating disbursements, released a memorandum providing information about the Nicaraguan loan disbursements, but not fully detailing the IDB Auditor General's conclusions and recommendations; (4) did not release the Auditor General's audit memorandum to the Department of the Treasury or participating countries; and (5) issued revised procedures to strengthen loan payment collection procedures. GAO also found that: (1) its lack of authority to audit internal IDB records precluded it from independently determining how Nicaragua actually used the November 1987 disbursements or confirming whether IDB implemented the revised procedures; and (2) Nicaragua again fell into arrears before the end of November 1987.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Treasury requested the U.S. Executive Director to initiate action on this recommendation. IDB auditors completed their work concerning the use of loan funds and reported that revised procedures were implemented that satisfied the Auditor General's recommendations. In 1991, it was determined that about $3.4 million in advances could not be justified.

    Recommendation: The Secretary of the Treasury should request, through the IDB U.S. Executive Director, the IDB Auditor General to determine whether the: (1) revised procedures issued in 1988 for clearing arrears have been implemented by IDB and whether they satisfy the recommendations of the Auditor General; and (2) funds disbursed in November 1987 as advances have been actually used for loan purposes.

    Agency Affected: Department of the Treasury

  2. Status: Closed - Implemented

    Comments: In 1991, Nicaragua repaid IDB $3.4 million which represented advances that could not be justified.

    Recommendation: If it is found that these funds, or equivalent funds of the government of Nicaragua, have not been used for valid loan purposes, the Secretary of the Treasury should request IDB to recover these amounts from the government of Nicaragua.

    Agency Affected: Department of the Treasury


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