Audit of the immunization and oral rehydration therapy services for child survival project managed by the Applied Program Unit of the Ministry of Health, USAID/Guatemala project no. 520-0339

Audit, conducted by Peat Marwick, covers the period 10/86-9/87. Peat Marwick disclaimed an opinion on the project"s fund accountability statement due to scope limitations caused by inaccurate accounting records, lack of supporting documentation for disbursements and project payrolls, inadequate inventory records and controls, and a lack of physical inventories of fixed assets, materials and supplies, which could not be verified by alternative procedures. Peat Marwick"s study and evaluation of internal accounting control revealed weaknesses which, in their opinion, result in more than a relatively low risk that errors or irregularities in amounts that would be material in relation to the fund accountability statement may occur and not be detected within a timely period. The major weaknesses observed were (1) insufficient documentation supporting project expenditures and payrolls, (2) insufficient financial data and budgetary controls, (3) lack of segregation of incompatible functions, (4) lack of bank statement reconciliations, (5) inadequate controls over checks, (6) inadequate records and controls over inventories, (7) inadequate safeguarding of materials and supplies, and (8) inadequate controls over payrolls and per diem payments. Also, Peat Marwick believes that the APU"s procurement system is inadequate to prevent or detect errors or irregularities. Peat Marwick disclaimed an opinion on those items tested for compliance as well as on untested items due to the scope limitations mentioned previously. However, they determined that procurement laws and regulations were circumvented by breaking-up purchases to avoid requirements for obtaining competitive bid quotations and per diem payments were made at higher rates than allowable. Peat Marwick identified $41,103 in questionable costs related to insufficient supporting documentation for project payrolls and per diem payments and non-compliance with procurement regulations. They also found indications of irregular transactions which are detailed in a separate report. It is recommended that USAID/G: (1) provide TA to the APU in implementing 17 recommendations made by Peat Marwick to improve internal controls and 2 recommendations on compliance; and (2) negotiate a settlement on the questioned $41,103. (Author abstract, modified)