AUDIT REPORT : SMALL FARMERS ORGANIZATIONS

AUDIT WAS COMPILED THROUGH DISCUSSIONS WITH APPROPRIATE OFFICIALS, REVIEW OF PERTINENT RECORDS, FIELD TRIPS TO SEVERAL IC"S, AND INTERVIEWS WITH FARMERS RECEIVING LOANS FROM IC"S. ALTHOUGH PROGRESS HAS BEEN MADE TOWARD ACHIEVING THE PROJECT PURPOSE, IMPLEMENTATION IS BEHIND SCHEDULE. IT WAS ESTIMATED THAT 4 IC"S WOULD BE IN OPERATION BY 8/78, BUT ONLY 3 HAVE BEEN ESTABLISHED AS OF 5/31/79. ALSO, LOAN/GRANT PROJECT EXPENDITURES WERE $2,350,000 BEHIND PROJECTIONS, MAINLY BECAUSE FUNDS BUDGETED FOR LOANS TO IC"S FOR COFFEE PROCESSING AND POTATO STORAGE FACILITIES HAVE NOT BEEN EXPENDED. THE OPERATIONS OF IC"S HAVE BEEN HAMPERED BY POOR MANAGEMENT, A HIGH RATE OF LOAN DELINQUENCIES, WEAK INTERNAL CONTROLS, INACCURATE FINANCIAL STATEMENTS, LACK OF EFFECTIVE CONTROLS TO INSURE THAT LOAN PROCEEDS ARE USED FOR INTENDED PURPOSES, LACK OF A SUFFICIENT EXTENSION STAFF, AND LACK OF ADEQUATE CREDIT REGULATIONS. IT IS RECOMMENDED THAT NATIONAL COMMUNITY DEVELOPMENT SERVICE S (CNDS) MANAGEMENT OF THE PROJECT BE IMPROVED. WEAKNESSES IN NCDS MANAGEMENT INCLUDE LACK OF A PROGRAM OF TECHNICAL COLLABORATION WITH OTHER INSTITUTIONS, LACK OF AN ADEQUATE PLANNING AND CONTROL SYSTEM, LACK OF CONTROL OVER FUNDS LOANED TO COOPERATIVES, LACK OF AN ADEQUATE TRAINING PROGRAM, AND INCOMPLETE RECORDS. AN EXTERNAL AUDIT OF THE PROJECT IS RECOMMENDED. IT IS ALSO RECOMMENDED THAT USAID REVISE THE PROJECT IMPLEMENTATION PLAN, OBTAIN MORE INFORMATION ON PROJECT OPERATIONS, IMPROVE ITS DISBURSEMENT CONTROLS, AND COMPLETE THE PROCUREMENT OF ACCOUNTING MACHINES WHICH HAS BEEN DELAYED FOR 20 MONTHS.