Management of cash advances by AID overseas missions needs improvement

Audit report is based on a complete inventory of Missions" cash advance records as of 9/30/82 and site visits to Bangladesh, Barbados, El Salvador, Honduras, Indonesia, and Nepal. The failure of Mission controllers to follow A.I.D. and U.S. Treasury cash management policies and procedures has resulted in inadequate management of cash advances. As of 9/30/82, overseas Missions had made 1,669 advances worth about $161 million. Some of these advances had been outstanding for several years. Of the 90 advances reviewed in the six Missions visited, 45.5% were excess. Although these latter figures did not represent a statistically valid sample, the auditors used them to project the potential amount of excess advances that may have been provided worldwide as of 9/30/82. The result totaled $73 million - at an annual cost to the U.S. government of $10.2 million in unnecessary interest. Mission controllers have not adequately managed cash advances, but have provided them routinely with little or no regard for A.I.D. and U.S. Treasury procedures. Specifically: the cash flow needed to fund projects has been overestimated; advances beyond immediate disbursing needs have been intentionally provided; the processing time required to replenish advances has not been determined; revolving funds with fixed amount advances have been set up without considering immediate cash needs; and periodic and systematic reviews of advances are not being made. In response to OMB Bulletin No. 83-6, A.I.D. recently issued a six-point plan to improve cash management. The plan requires Missions to reduce advances by $40 million and advises them that: the use of permanent or fixed amount revolving balances is not sound cash management policy; regular periodic review of advances should be standard procedure; Mission controllers should have thorough knowledge of A.I.D. procedures to assure full compliance therewith; and the Office of Financial Management will monitor Missions" advance accounts. As a result of this audit, additional recommendations are made to eliminate cash management weaknesses and to hold Mission controllers accountable for failure to follow procedures.