Audit of selected USAID/Costa Rica local currency activities

Audit covered the period 1982-86 and was based on document review, site visits, and interviews with Mission and Costa Rican Government (GOCR) officials, contractors, and program beneficiaries. (1) By not following the normal budgetary and disbursement process for the special LC program account, USAID/CR may have assumed fiduciary responsibilities and possible liabilities for A.I.D. should an expenditure be determined inappropriate. USAID/CR did not create a system to fully consult with the GOCR and the Central Bank on LC use and, as a result, made what could be construed as unilateral decisions to use funds which were the property of Costa Rica. The Mission has already taken appropriate actions to resolve this situation. (2) Two LC trust fund accounts intended to be used for USAID/CR"s local operating expenses and some program expenses have been used also for regional activities and large capital acquisitions. This practice, while within the letter of the trust fund agreement, goes against its spirit: USAID/CR should have consulted the GOCR before using the funds for such purposes and should have reported to the GOCR subsequently. Although the Mission believed the existing practice favorable to A.I.D., it has reluctantly complied with an audit recommendation to renegotiate trust fund agreements. (3) Procurement and approval procedures were not followed for land hastily purchased for a proposed new USAID/CR office. The Mission has not been able to build on the land due to security restrictions, but has kept the site in its possession because the State Department may wish to purchase it. As a result, $439,000 in trust funds have been tied up for several years and the program has been deprived of some $177,000 in interest that would have been generated. The land should be disposed of and the sales proceeds distributed to the appropriate accounts. The Mission disagrees and intends to hold the land pending a State Department decision; thus the recommendation remains open. (4) A large divestiture project was ineffectively carried out and two projects implemented by Costa Rican agencies encountered planning and implementation problems which caused long delays. Additionally, a successful pilot project with the private sector may have little effect for lack of follow-up plans. The Mission disagrees with the finding regarding the divestiture project, citing the relative importance of local planning experience vs. pure efficiency. (5) Finally, other matters have been deleted from the report because of their sensitive nature and communicated directly to top Agency management.