Audit of the accountability for local currency in Africa

Audit covers FY 1979-86 and is based on review of Missions" and recipient governments" administration of P.L. 480 agreements, Commodity Import Programs, and cash transfer grants in ten countries (Burkina Faso, Congo, Gambia, Kenya, Liberia, Mauritania, Madagascar, Somalia, Sudan, and Zaire). While those countries in which the Mission Controller"s office participated in local currency oversight were better able to account for funds, A.I.D. Missions and the recipient governments in nine of the ten countries reviewed did not have adequate accounting or internal controls for local currency proceeds. As a result, the Missions and governments could not account for the local currency equivalent of $107 million, delays occurred in collecting the local currency equivalent of $113.4 million, and A.I.D. had forfeited the use of the local currency equivalent of $9.4 million. This problem was exacerbated be inadequate P.L. 480 agreements, which did not clearly indicate how much local currency proceeds should be generated for development use and did not contain provisions specifying the use of interest-bearing accounts. As a result, host country officials disputed deposit requirements, deposits were delayed, interest earnings wer forfeited, development projects were cancelled or delayed, and millions of dollars worth of development impact was delayed or lost. All this was due in large part to inadequate A.I.D. guidance relative to varied country conditions. Recommendations are made to, inter alia: (1) require Mission controllers to review internal control systems for each A.I.D. program accruing local currency proceeds; (2) require A.I.D. controllers to attest to the adequacy of local currency accounting procedures before programs are implemented; (3) develop specific guidelines for determining the amount of P.L. 480 local currency to be generated or used for agreed upon development purposes; and (4) design standardized agreement provisions for the dates deposits are required and the exchange rate to be applied, and issue criteria requiring local currency proceeds to be deposited in interest-bearing accounts.