Audit of USAID/Egypt"s procedures to review unliquidated obligations

As of 9/30/88, unliquidated obligations for USAID/E projects and programs totaled about $2.3 billion, of which some $35 million in obligations and/or commitments were either no longer valid, not current, or not fully required for the purposes intended. Internal controls were appropriate and operational except for a lack of adequate oversight and management controls that contributed to the problems cited. Three items constituted the above-mentioned $35 million: $11.3 million uncommitted in projects with expired completion dates; $1.3 million in expired commitments; and $22.1 million that remained unspent on projects far behind scheduled implementation. We recommended that USAID/E improve oversight and management controls by completing a special, mid-fiscal-year review by 4/30/89. The Mission agreed. In addition, local currency devaluations were not taken into consideration and thus budget adjustments were not made to reflect supluses that became available. The Mission stated it had issued appropriate instructions in this regard. Mission management requested the following statement be included in the Executive Summary of the audit: "In order to lend some perspective to the problems the auditors discuss, it is important to remember that the pipeline for projects at September 30, 1988, was $1.8 billion. We believe the reasonable conclusion to be drawn from the audit report is that, on balance, the Mission is doing an excellent job of identifying possible deobligations and decommitments. The cases discussed by the auditors were known to the Mission and had been discussed and analyzed by Mission staff and management. "The Mission tries to be cautious and sensitive to the political implications of premature decommitments and deobligations. Since deobligations prior to the PACD of a project require host country concurrence, if A.I.D. does not have deob/reob authority in the fiscal year the desirability of an actual project deobligation becomes apparent, it may be politically more sensible to let the PACD expire and allow for unilateral deobligation of unneeded funds. "For this reason there are occasions where deobligations or decommitments have not been effected which, in hindsight, could have been effected." (Author abstract, modified)