Internal operating procedures applicable to non-durable and durable commodities of the commodity import programs of Egypt; audit report, 1/29/81

Audit report covers the period 2/75-7/80 and is based on a review of all pertinent documents and procedures. Despite generally adequate commodity management, problems surfaced regarding the importation of and control over selected durable and non-durable commodities. Because USAID/E has managed high-visibility durable goods as routine imports, 2,400 tractors and 1,600 buses imported under the CIP were incompatible with Egyptian needs, vehicle quality was disappointing, and guaranties did not conform to contractual requirements. In addition, the Egyptian Electrical Authority (EEA) -- which administers about $77.6 million of CIP-financed equipment -- has maintained substandard accounts and has sold or transferred vehicle to police authorities -- a practice strictly prohibited by A.I.D. Regarding non-durable imports, $111.5 million of CIP funds were used to import tobacco and acetate tow (cigarette paper) although the P.L. 480 program is the preferred vehicle for such purchases. In violation of A.I.D. regulations, imported tobacco blends have been re-exported. Further, the GOE"s extremely high requirements for corn, tallow, and frozen poultry have led to high administrative and advertisement costs, discouraged small suppliers from bidding, impeded compliance with shipping requirements, and resulted in high demurrage costs. It is recommended that USAID/E: (1) obtain refunds of $116,408 for 16 vehicles and of $312,816 for 49 tractors transferred to the police; (2) inform the EEA that CIP funding will cease pending establishment of an effective equipment control system; (3) require the EEA to report on the location and end use of CIP-financed equipment; (4) require the Ministry of Interior and the importer to segregate sales of AID-financed tractors from other sales and determine the use of tractors sold to non-farmer groups; (5) obtain a report on bus problems and repair costs; (6) review and revise its procedures for managing CIP procurements; (7) reevaluate the emphasis on tobacco and acetate tow imports; and (8) determine the allowability of re-exportation of tobacco products.