Audit of subcontract costs submitted by Foodpro International, Inc.

Audit covers the period 5/83-9/85 and is based on document review and interviews with personnel from the grantee, Partners of the Americas: Vermont-Honduras (PAVH); the subcontractor, Foodpro, International; and USAID/H. Although both PAVH and Foodpro had accounting and internal control systems in place, neither implemented these systems effectively. In October 1984, PAVH terminated the second of two contracts with Foodpro (which had, at that time, received $179,426 and $187,500 in local currency equivalents, respectively) because PAVH administration and effective USAID/H oversight of Foodpro activities raised doubt that the goals and objectives of the SP would be accomplished. Foodpro"s system for developing cost claims, especially for labor, was based on standard cost allocations rather than on actual costs incurred; as a result, some $153,792 and $78,854 in local currency equivalents have been questioned. Also, Foodpro did not adequately account for at least $20,990 and $36,400 in local currency equivalents; another $22,566 from sales was not refunded to the Government of Honduras (GOH); and $3,682 in local currency equivalents from interest earned on deposits is due to A.I.D. and GOH. PAVH did not account for $133,794 in outstanding advances made by USAID/H nor did it create a formalized accounting for $102,152 in subadvances made to Foodpro. It is recommended that USAID/H: (1) reconcile with PAVH $133,794 in advances earmarked for the SP and collect any unsupported amounts; and (2) negotiate all of the questioned costs with PAVH, especially those related to labor (profit-sharing, bonuses, commissions, and fee), as part of a negotiated settlement of Foodpro claims. PAVH should also work in coordination with USAID/H to determine and collect outstanding dollar and lempira subadvances and collect (for project use) income earned from produce sales and interest on lempira deposits.