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Highlights

Pursuant to a congressional request, GAO reviewed accountability for and controls over U.S. military and economic assistance to El Salvador, to determine: (1) whether any assistance was subject to misuse or diversion; and (2) what accountability and controls are in place.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should, after coordination with the Department of State, direct the Defense Security Assistance Agency (DSAA) and MILGROUP in El Salvador to work toward reaching an agreement with El Salvador's military on actions needed to improve internal controls, including appointing independent high-level officials to the Salvadoran property accountability and Inspector General positions.
Closed - Implemented
El Salvador's military has appointed a colonel in the logistics section to serve as a property accountability officer to ensure proper control and accountability of all items in the inventory. The Inspector General position at the Ministry of Defense remains vacant because the Armed Forces cannot locate a suitable person willing to assume the responsibility.
Department of Defense The Secretary of Defense should, after coordination with the Department of State, direct DSAA and MILGROUP in El Salvador to work toward reaching an agreement with El Salvador's military on actions needed to improve internal controls, including performing periodic inventories of Salvadoran Armed Forces property to ensure that accountability for their custody and use is maintained and to reconcile physical counts with records.
Closed - Implemented
El Salvador's military has agreed to perform regular inventories of its property to improve internal controls. El Salvador's military performed a 100 percent inventory of major end items in January 1991, and began monthly 10 percent inventories of all property in February 1991. El Salvador has also installed a computer network to automate its logistics system.
Department of Defense The Secretary of Defense should, after coordination with the Department of State, direct DSAA and the Military Group in El Salvador to work toward reaching an agreement with El Salvador's military on actions needed to improve internal controls, including authorizing MILGROUP to conduct periodic spot checks of selected U.S.-funded military items to provide reasonable assurance of accountability and control.
Closed - Implemented
U.S. MILGROUP in El Salvador has prepared a Standard Operating Procedure, dated December 15, 1991, for an Inventory Spot-Check Program on El Salvador's controls over Defense articles provided by the United States. It requires the U.S. MILGROUP to do periodic unannounced spot-checks at least quarterly and indicates that El Salvador's military is to perform annual 100 percent physical inventories.
United States Agency for International Development The Administrator, AID, should ensure that its mission in El Salvador: (1) performs in-depth financial management assessments of Salvadoran organizations scheduled to implement new AID projects; and (2) works with El Salvador to correct identified problems.
Closed - Implemented
AID has initiated contracts with U.S. affiliated accounting firms in El Salvador to perform in-depth financial management assessments of Salvadoran organizations scheduled to receive U.S. assistance and to provide technical assistance to these organizations to correct identified problems. The agency's mission in El Salvador has also established a four-person financial compliance unit.
United States Agency for International Development The Administrator, AID, should clarify the AID local currency accountability guidance for El Salvador. The guidance should clearly state: (1) what constitutes reasonable assurance that host government agencies have adequate financial systems to manage local currency funds; and (2) what degree of AID oversight and monitoring is required.
Closed - Implemented
AID has prepared a modification of its local currency policy and detailed operational guidance setting minimum standards for accountability and clarifying the degree of U.S. monitoring necessary. The policy and guidance will impose more rigorous accountability standards for managing local currency use. The new policy and guidance was transmitted to field missions on June 20, 1991.

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