Audit of USAID/South Africa"s controls over project funds

development assistance program in the Republic of South Africa was designed to promote an end to apartheid and the emergence of a non-racist democracy. Specifically, the A.I.D. program seeks to: (1) support the development of future South African leaders through education, training, and scholarship programs; (2) expand black participation in the South African economy; (3) strengthen the development of democratic institutions and processes; and (4) assist victims of apartheid laws and promote an awareness of human rights. To achieve these objectives, A.I.D. supports projects in the areas of education, human rights, labor union training, private enterprise development, community leadership, and self-help. As of July 31, 1990, the USAID Mission in South Africa managed a portfolio of 8 active projects, funded directly by the Mission, which had cumulative obligations and disbursements totalling approximately $69.4 million and $25.4 million, respectively. Under these 8 active projects, the Mission financed a total of 940 grants and contracts. Between August 20 and October 12, 1990, the program was audited in accordance with generally accepted government auditing standards. For the items tested, USAID/South Africa followed A.I.D. procedures and terms of the grant agreement in managing and accounting for cash advances and processing vouchers for payment, except as follows: (1) USAID/South Africa was not effectively managing $999,050 in cash advances which were outstanding more than 90 days, resulting in additional borrowing costs to the federal government and potential unsupported or uncollectible advances. (2) The U.S. Government lost an undetermined amount of interest income because USAID/South Africa was not ensuring that its grantees maintained project funds in interest-bearing accounts and remitted the earnings to A.I.D. (3) An estimated $12 million in payments for fiscal year 1991 may be at risk as a result of inadequate separation of duties within the voucher payment process. (4) A total of $117,092 in questioned costs were reimbursed by the Mission to a grantee. The report includes recommendations to establish systems that will improve the Mission"s management of cash advances and interest income and strengthen controls within the voucher payment process. It also (1) presents an assessment of internal controls and (2) reports on USAID/South Africa"s compliance with applicable laws and regulations. (Author abstract)