Audit report on CID agricultural development support program in Yemen

Audit report covers the period 6/79-6/82 and is based on document review and interviews with USAID/Y and CID officials. Of $2,575,406 in costs applied against advances to the CID, $364,889 were suspended and $75,767 were questioned. Suspended costs resulted from a lack of internal control, especially on the Core subproject (SP), where costs suspended or questioned amounted to 24.5% of the $1.8 million advanced compared to only 0.8% (of $800,000 advanced) for the Ibb Secondary Agricultural Institute SP. Questioned costs included costs not documented for review, advances treated as expenses, costs not supported by invoices or receipts, costs questioned because of record-keeping errors, unauthorized payments, and entertainment expenses. Problems on the Core SP were due to a lack of accounting procedures in the first 6 months of SP operation. Cash management was adequate at both SP"s but was inadequate at the Jarouba station. Control over personal use of project vehicles and communication equipment was poor at both sites. Housing expenses were unnecessarily high because CID, at the request of the USAID/Y, leased apartments in a new complex after signing leases for five houses; these costs are, however, allowable. Controls over the shipping and receipt of commodities procured for the Core SP were seriously inadequate. Many of the difficulties encountered in controlling project costs may have been mitigated had key financial management positions been filled. Required life of program, life of SP, and annual workplans have either not been prepared or have been subject to long delays in approval, making their usefulness questionable. Finally, the Government of Yemen has not met certain conditions precedent, including the provision of 30-40 ha of land for the Ibb SP and the provision of housing for long-term Core staff; however, USAID/Y believes that the conditions should not have been a part of the original grant agreement and that the Government of Yemen"s failure to meet them has not hampered project implementation. Eight recommendations address the above-noted issues.