Audit report on the AID Office of Foreign Disaster Assistance (OFDA) grant to Catholic Relief Services for cyclone in South India during 1979

Audit report covers the period 5/25-8/30/79 and is based on document review, site visits, and discussions with project personnel. Due to a serious lack of internal controls and poor fiscal management, auditors were unable to determine if the $322,875 grant was properly or effectively used. CRS implemented the grant through a sub-grant of $319,141 to the Diocese at Nellore (DON). DON records show that $318,387 of these funds were used - properly - to procure clothing and shelter materials, but that, contrary to Indian tax law and sound fiscal practice, all payments were made by cash or bearer check. Of these expenditures, $245,414 proved unacceptable. A total of $216,174 was not supported by regular vendor invoices. Reasons for this advanced by DON and/or CRS officials, e.g., that most procurement was from small vendors lacking invoices or that some vendors sold unauthorized materials, were rejected by the auditors. Also, $16,643 worth of cloth was procured from a vendor who could not be located at the address provided, and $30,180 for cloth and shelter materials were charged both to A.I.D. and to a grant from CARITAS. Moreover, distribution was not according to a needs survey, as agreed, and was to more than the planned 12,000 families. CRS reports that clothing was distributed to 20,884 families in 342 villages and shelter materials to 13,560 families in 351 villages. According to DON, distribution was broadened when it was found that family clothing needs were less than estimated. The auditors also note that: no effort was made to coordinate relief with the State government, as required; much of the distribution was in the final days of the emergency period; and earlier and later CRS reports on the number of recipients varied. The auditors recommend that the Office of Foreign Disaster Assistance (OFDA) obtain a $245,414 refund from CRS, and, in light of the history of discrepancies affecting OFDA grants, require compliance from future grantees in regard to supporting documentation, financial records, internal controls, and auditing standards.