Foreign Assistance

Improvements Needed in AID's Oversight of Grants and Cooperative Agreements Gao ID: NSIAD-93-202 September 17, 1993

The Agency for International Development (AID) distributes project money mainly through direct contracts, host country-awarded contractors, and grants and cooperative agreements. Specific support grants and cooperative agreements are intended to support clearly defined programs established or proposed by the recipients. During fiscal year 1991, AID had nearly $5 billion in such grants with about 900 private voluntary groups, educational institutions, and other nonprofit organizations. GAO examined AID missions in Bolivia, Egypt, El Salvador, and Indonesia to see whether AID had effective control and procedures to (1) maximize competition in grant awards, (2) ensure proper use of grant funds, and (3) monitor grantee performance.

GAO found that AID: (1) does not consistently implement key internal controls; (2) does not ensure maximized competition for grant awards, since project officers fail to prepare noncompetitive award justifications; (3) guidance does not specify what evidence is necessary to support competition exceptions; (4) does not ensure that applicants do not seek grants in order to avoid more stringent contract competition requirements; (5) does not ensure that grantees' budgets are reasonable and do not include excessive costs or unallowable expenses; (6) grant officers do not routinely document their determinations of grantees' management and financial capabilities or cite primary source data in support of their determinations; (7) has initiated an audit management and resolution program to improve its financial audits of U.S. grantees, and issued guidelines for financial audits contracted by foreign recipients; (8) grant monitoring is restricted because project officers often do not use measurable benchmarks and target dates and face time and travel constraints in conducting site visits; (9) headquarters often fails to delegate monitoring duties to field missions; and (10) Financial Integrity Act reviews fail to assess its compliance with its internal control procedures.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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