Audit of controls over project-related cash advances of USAID/Egypt

Audit is based on review of 59% of outstanding advance balances (as of 6/30/86), detailed review of ten advance balances over $100,000 each, and interviews with Mission officals and advance recipients. USAID/E"s management of cash advances has been deficient. Advances were not limited to the immediate needs of all the recipients tested, nor was there an effective follow-up system in place to resolve outstanding advances. Although cash advances in dollars or local currency are generally limited to expected project expenditures for 30 days, special written authorization may be made for advances of up to 90 days. USAID/E generally issued 90 day advances, and on occasion made advances to cover periods of up to 1 year. In all ten cases examined in detail, the Mission had responded to advance requests which were overestimated, and which resulted in excessive buildup of recipients" bank account balances. Funds were also transferred between advance accounts without appropriate Mission review and approval. As of 6/30/86, the Mission"s had 207 unliquidated cash advance balances totaling $18.6 million, 87% of which should have been liquidated in prior periods ranging from one month to 8 years. Failure to settle these has resulted in a loss to the U.S. Government of an estimated $854,000 in interest. Some recipients contacted by the audit team claimed they never received the advances, others claimed that vouchers had been submitted or advances had been refunded. Numerous recipients disagreed with the balances recorded on the Mission"s books. This situation reflects the lack of fundamental financial controls within the Mission"s Office of Financial Management (OFM). The OFM, for example, did not regularly or routinely follow up on advances which were unpaid as of the date they were to be liquidated; no aging analysis was regularly prepared to identify long-time outstanding balances; and no system existed for periodically verifying the balances on Mission accounting records with recipients. The Mission concurs with the audit"s findings and its recommendations to correct deficiencies, and is taking appropriate steps. Audits in previous years found similar problems which the Mission then took steps to correct. However, the systemic problems recurred.