GRAIN SILOS PROJECT : REVIEW OF CONTRACT PAYMENTS TO DE LAUREAL ENGINEERS, INC.

AUDIT COVERS THE PERIOD 2/14/77 TO 6/30/79, AND CONSISTED OF A REVIEW OF PERTINENT FINANCIAL RECORDS AND/OR SUPPORTING DOCUMENTATION OF BOTH DE LAUREAL AND ITS MAIN SUBCONTRACTOR, AS WELL AS THOSE OF ANOTHER DIVISION OF DE LAUREAL"S PARENT ORGANIZATION WHICH PERFORMED SOME SERVICES FOR DE LAUREAL. THE AUDIT REVEALED THAT $102,624 OF DIRECT COSTS CLAIMED BY AND PAID TO DE LAUREAL WERE NOT ELIGIBLE FOR REIMBURSEMENT, CONSISTING MAINLY OF PAYMENTS TO A SUBCONTRACTOR FOR SALARIES AT FIXED RATES RATHER THAN AT COST. IN ESTABLISHING DE LAUREAL"S FINAL OVERHEAD RATES FOR 1977 AND 1978, SEVERAL ADJUSTMENTS WERE MADE TO THE OVERHEAD COST POOLS PREPARED BY DE LAUREAL, INCLUDING THE DISALLOWANCE OF ABOUT $120,000 IN COMMISSION PAYMENTS AND EXPENSE REIMBURSEMENTS TO DE LAUREAL"S EGYPTIAN AGENT. THESE COSTS WERE EXCLUDED FOR SEVERAL REASONS, INCLUDING THE FACT THAT THE AGENT"S FEE IS A LOCAL COST AND BOTH THE CONTRACT AND LOAN AGREEMENT PROHIBIT THE USE OF AID FUNDS FOR LOCAL COSTS. IN ADDITION, IT WAS FOUND THAT THE ACCOUNTING RECORDS MAINTAINED BY DE LAUREAL WERE NOT ENTIRELY ADEQUATE. ACCOUNT BALANCES HAD NOT BEEN PROPERLY CARRIED FORWARD, WORKPAPERS WERE USED FOR CONTROL TOTAL PURPOSES, AND COST INFORMATION HAD NOT BEEN SUBMITTED TO THE HOME OFFICE IN A TIMELY AND COMPLETE MANNER. IN LIGHT OF THESE FINDINGS, THE AUDITORS RECOMMENDED THAT USAID/GOE ADJUST FUTURE PAYMENTS TO DE LAUREAL TO RECOVER A NET AMOUNT OF $73,709, AND APPLY THE NEW PROVISIONAL OVERHEAD RATE OF .7520 FOR BILLINGS FROM 7/1/79 ON. THEY ALSO SUGGESTED THAT USAID/GOE TAKE ACTION TO ENSURE THAT DE LAUREAL MAINTAINS A FULL AND COMPLETE ACCOUNTING SYSTEM WHICH WILL REFLECT ALL FINANCIAL TRANSACTIONS RELATED TO THE CONTRACT.