Audit of income generating projects

Overall, the two projects, along with a predecessor population project, have generated substantial income - over $1 million/year - from the public sector sale of A.I.D.- and non-A.I.D.-funded contraceptives and ORS. However, there have been serious management weaknesses on the part of both USAID/E and the Government of Egypt (GOE). USAID/E did not establish effective systems for overseeing cost-recovery activities. The two GOE offices responsible for implementing the projects - the National Population Council (NPC) and the National Control of Diarrheal Diseases Project (NCDDP) - had the semblance of systems for controlling project income, but still failed to properly account for, control, or use income generated by the projects. Specific findings are as follows. (1) More than $2 million from sales of A.I.D.-funded contraceptives were not segregated and used for mutually agreed-upon project purposes. (2) At least $701,000 from public sector sales of family planning devices to pharmacies was not remitted to the NPC by its distributor, the Egyptian Pharmaceutical Trading Company, which instead kept the funds and used them in its commercial operations. (3) About $2 million in income from the sales of ORS was left over a 3-year period to accumulate in a non-interest bearing commercial bank account with no agreement as to how the funds would be used. (4) USAID/E paid $261,518 in excess of the official exchange rates for commodities imported for ORS production. (5) USAID/E purchased $3.2 million of ORS from an Egyptian monopoly parastatal supplier without benefit of a cost analysis to support the price. (6) USAID/E did not have measures in effect to ensure that the NCDDP met A.I.D. source and origin requirements for locally producted ORS. USAID/E is generally in agreement with audit recommendations addressing these problems, and in some cases has already initiated corrective actions. (Author abstract, modified)