Problems in host country accounting for utilization of AID funds in the Sahel

local currency funds in the Sahel. Audit report covers the period through 1/81 and is based on interviews with officials of the Sahelian governments and USAID"s and reviews of: four projects in Senegal and Upper Volta; recent audits of nine other projects; other project records; and host country use of local monies obtained through P.L. 480, Title II commodity sales. Generally, host country implementing agencies do not know the principles or recognize the importance of effective financial management. Financial reporting was seriously deficient in virtually every project. Books and records were not properly established or maintained and often expenditures were not recorded or documented. Transactions were generally in cash and were frequently initiated, performed, and documented by the same person, creating a potential for misuse of funds. Some A.I.D. funds have been diverted to cover the normal budgetary expenses of the financially troubled Sahelian nations. P.L. 480 funds have probably also been used for purposes other than intended. Little is being done to address these problems. Few Sahelians are being trained in financial management. While the Missions are aware of the problems, they tend to deal with them on an ad hoc basis. USAID project officers have not adequately monitored the financial management of projects and A.I.D. financial management officers failed to assess host country financial management capabilities during project design stages. Therefore, the Assistant Administrator, Bureau for Africa should: (1) review with the two major Sahelian development organizations - the Club du Sahel and the Permanent Interstate Committee for Drought Control in the Sahel (CILSS) - the need for a comprehensive financial training program; (2) ensure that project officers perform financial monitoring and receive supplemental financial guidance and staffing when needed; and (3) consider programming technical advice in financial management for projects involving large sums of local monies. The A.I.D. Controller, Office of Financial Management, should ensure that staff are available to participate in project design and monitoring and should not release project funds unless financial management capability is assured.