Audit of USAID/Bolivia economic support fund programs

The ESF programs have experienced basic management problems since inception and have been of limited benefit. Four major problems occurred. (1) None of the $7.2 million provided under the 1987 program has been used and both the 1986 and 1987 programs were affected by arrearages in local currency deposits. Due to the Government of Bolivia"s (GOB"s) limited administrative capacity and USAID/B"s inadequate monitoring, these deficiencies were neither corrected nor fully disclosed to A.I.D./W. However, USAID/B maintains that the ESF did have an impact on balance of payments by improving the GOB"s credit status, thus enabling the GOB to borrow foreign exchange. (2) The dollar accounting procedures for the 1987 program do not comply with applicable guidance. Although dollar reimbursement for import transactions should be part of a timely sequence, USAID/B approved reimbursement in 7/88 of transactions which took place from 8/87 forward. If these procedures are implemented, USAID/B will not be able to determine the actual use of $7.2 million in ESF dollars. USAID/B disagreed, claiming that the procedures do comply with regulations. (3) No interest was earned on ESF local currency, and no determination justifying this decision has been prepared. Interest equivalent to about $500,000 could be earned during the next year. However, USAID/B does not favor earning interest on ESF local currency primarily because of the effect this could have on Bolivia"s money supply. (4) USAID/B was managing a narcotics awareness activity using GOB-owned local currency without proper GOB authorization. This could lead to misunderstandings if the GOB felt these funds were not used correctly. Upon audit recommendation USAID/B returned these funds to the GOB. In response to a previous audit and evaluation, USAID/B"s new management team has been working to strengthen ESF program management. The Mission plans to reorganize the Executive Secretariat and the Project Coordination and Control Unit, which have experienced internal control problems, and is establishing a new implementation unit in the Ministry of Planning. To strengthen its own management of the ESF program, the Mission has assigned three financial analysts to work exclusively on monitoring local currency activities.