USAID/Azerbaijan, Belarus, Ukraine, and Other Offices Would Benefit From Additional Guidance and Training on Using Cost Sharing

The awards were worth approximately $77.5 million, with awardees required to match about $6 million, bringing the total to about $83.5 million. The objectives of the audit were to determine whether the cost-sharing mechanisms were achieving their intended results and whether the selected USAID offices were adhering to cost-sharing guidelines. The audit found that cost-sharing mechanisms benefited the majority of the awards, encouraging local nongovernmental organizations to search for new donors and becoming less reliant on U.S. funding. Some organizations found that sharing costs also brought legitimacy to their projects, as beneficiaries were more committed to the project and its sustainability. However, the audit also identified several areas for improvement, including a lack of donor support and insufficient USAID guidance, which hindered some awardees' ability to meet cost-sharing requirements. The audit also found that USAID lacks sufficient guidance and training to ensure cost-sharing requirements are designed to achieve activity goals. In 6 of 13 awards reviewed, there was no evidence that USAID designed cost sharing to support project goals. Additionally, USAID did not conduct thorough analyses in determining the amount of cost sharing to require, with employees conducting financial analyses for only two awards. For the remaining 11 awards, the amount of cost sharing seemed arbitrary, not factoring in the specifics of the activity. Furthermore, the audit found that USAID agreement officer's representatives did not monitor cost sharing, even though they are responsible for doing so. Lack of monitoring impedes USAID's ability to identify and mitigate risks before they become problems that could undermine an activity's success. These findings were common to all three offices, and the audit identified a lack of Agency-wide guidance and training in key areas that could impede effective implementation of cost sharing at other USAID locations. The audit made several recommendations to improve the cost-sharing practices of the different USAID offices. These recommendations include issuing additional guidance and training materials to clarify the allowability of and accounting for in-kind and cash contributions, reminding agreement officers about the Automated Directives System (ADS) 303 requirement for cost-sharing memorandums, and developing supplemental guidance on cost-sharing determination and best practices. The audit also recommended that USAID teams document their analysis on how they arrived at the amount of cost sharing to require.