Audit of USAID/Egypt"s management of the section 416(b) food donation program

The audit covers the period 5/91-3/92. USAID/E declined to provide information needed to determine whether or not it had conformed to A.I.D. policies. Nonetheless, some problem areas are evident. USAID/E did not design quantifiable targets and measurement indicators to monitor program progress, apparently because it believed that the program objective was merely to provide budget support and foreign exchange. However, the donation agreement between A.I.D. and the GOE states that local currency generations may be used for humanitarian and development activities of the Ministries of Agriculture and Irrigation, and that these activities are to be mutually agreed upon by the GOE, USAID/E, and the U.S. Department of Agriculture"s (USDA) Foreign Agricultural Service Counselor. On the positive side, the GOE cannot use the sales proceeds -- which totalled $29.9 million as of 1/92 -- unless it signs a sales proceeds agreement. It is recommended that this agreement, which is near completion, include quantifiable objectives and indicators for measuring program progress. Other problems are that the GOE"s General Authority for Supply Commodities has reneged on its commitment to sell all donated commodities at a fair market price. Two of commodities -- corn and sorghum -- were sold at the market price, but butter-oil was sold at a lower price. Finally, six of ten food storage facilities had significant quantities of grain exposed to potential damage from winter rains and two were vulnerable to theft. In response to the draft audit, USAID/E maintained that its refusal to issue a representation letter did not preclude the auditors from issuing an unqualified opinion. The Mission also claimed that Section 416(b) program guidance was vague, and questioned whether it applied to a monetization program such as this. After completion of the draft audit, the GOE"s Secretary of Agriculture terminated the Memorandum of Understanding under which A.I.D. had managed the program and transferred program responsibilities to the USDA.