# Presentation: 377424

## OFFICE OF INSPECTOR GENERAL

**OFFICE OF INSPECTOR GENERAL**
**ACCOUNTABILITY COMPLEXITIES IN INTERNATIONAL OPERATIONS**

**Notes:**
1.  Introductory slide (put up before presentation begins).

2. Gauge audience composition (government v. private sector, etc.)

## OFFICE OF INSPECTOR GENERAL

- PRESENTATION BY
- DEPUTY INSPECTOR GENERAL
- EVERETT L. MOSLEY
- TO THE INSTITUTE OF INTERNAL AUDITORS
- WASHINGTON CHAPTER
- APRIL 22, 1999

**Notes:**
1. Introduce Self; thank Institute for invitation.

2. Let audience know you will take questions.

## PRESENTATION AGENDA

- INTRODUCTION TO USAID
- INTRODUCTION TO USAID/OIG
- AUDIT AND INVESTIGATIVE CHALLENGES

## USAID

- U.S. GOVERNMENT’S PRINCIPAL FOREIGN ASSISTANCE MANAGEMENT AGENCY
- 94 COUNTRIES
- 2,150 DIRECT-HIRE EMPLOYEES
- 5,000 CONTRACTORS
- $7 BILLION (1999)

**Notes:**
1. Other U.S. agencies have role in foreign assistance (Agriculture, Treasury, Commerce).  USAID under general authority of U.S. State Department

2. 94 countries receive USAID funding in some form (1998 CDIE U.S. Overseas Loans & Grants database)  Approx. 45 countries have full scale missions.  Many others have small missions, or no missions at all.  Approx. 70 have some form of USAID “presence.” (LPA estimate)

3. 2,152 Total Direct Hires = 1,043 Foreign Service + 1,109 Civil Service.  Does not include OIG.  Contractors, including FSN, PSC,  nonPSC, TCN, PASA and RSSA = 5,097 (From USAID World-Wide Staffing Pattern Sept 98).

4. Organization size shrinking.  Since 1992, the Agency’s USDH  workforce has declined 29.5 percent (not including OIG).  The total workforce (USDH and non-USDH) declined 33 percent over the same period. (From  USAID Workforce Task Force Report)  

5.  Program funding  fairly steady; though supplemental appropriations to meet emergencies can be large (e.g., FY 99 $600+million for Hurricane Mitch relief).  (From CPs)

## USAID’S MISSION

- “TO CONTRIBUTE TO U.S. NATIONAL INTERESTS THROUGH THE RESULTS IT DELIVERS BY SUPPORTING THE PEOPLE OF DEVELOPING AND TRANSITIONAL COUNTRIES IN THEIR EFFORTS TO ACHIEVE ENDURING ECONOMIC AND SOCIAL PROGRESS AND TO PARTICIPATE MORE FULLY IN RESOLVING THE PROBLEMS OF THEIR COUNTRIES AND THE WORLD”

**Notes:**
1. Definitions of developing and transitional based on World Bank criteria.  See World Bank World Development Reports.

2. Organization sees itself as providing assistance and advice, not all answers to development problems. Those must be answered by the  people of these countries.

3. USAID typically works in countries:
-committed to achieving sustainable development;
-committed to shedding economically repressive and ruinous totalitarian regimes;
-emerging from post-conflict situations;
-victimized by natural disasters.

## USAID’S OBJECTIVES

- ECONOMIC GROWTH & AGRICULTURAL DEVELOPMENT
- DEMOCRACY
- EDUCATION & TRAINING
- POPULATION & HEALTH
- ENVIRONMENT
- DISASTER ASSISTANCE

**Notes:**
1. Economic growth:  private market expansion; food security; greater access to economic opportunity for the rural and urban poor.

2. Democracy:  rule of law; human rights; competitive political processes; civil society; government transparency.

3. Education:  access to quality basic education, esp.. for females; contribution institutions of higher ed.. make to sustainable development increased.

4. Population & Health:  unintended pregnancies reduced; child health nutrition improved; impact of HIV & other infectious diseases reduced.

5. Global climate change threat reduced; biological diversity conserved; pollution management; environmentally sound energy encouraged; natural resource management.

6. Crisis impact reduced; urgent crisis needs met; personal security & human rights reestablished.

## DELIVERY MECHANISMS

- CONTRACTS
- GRANTS
- COOPERATIVE AGREEMENTS

**Notes:**
1. Grant:  “A legal instrument used where the principal purpose is the transfer of money, property, services or anything of value to the recipient in order to accomplish a public purpose of support or stimulation authorized by Federal statute and where substantial involvement by USAID is not anticipated.” (ADS)

2. Contract:  “A mutually binding legal instrument where the principal purpose is the acquisition, by purchase, lease, or barter, of property or services for the direct benefit or use of the Federal Government, or in the case of a host country contract, the host government agency that is a principal signatory party to the instrument.” (ADS)

3. Cooperative Agreement:  A cooperative agreement is used when:
- the principal purpose of the relationship is the transfer of money, property, services or anything of value to the recipient in order to accomplish a public purpose of support or stimulation authorized by Federal statute, and
- a grant would be appropriate except that substantial involvement is anticipated between AID and the recipient during performance of the proposed activity. 

## DELIVERY PARTNERS

- RECIPIENT GOVERNMENTS
- PRIVATE VOLUNTARY ORGANIZATIONS
- NON-GOVERNMENTAL ORGANIZATIONS

**Notes:**
1. USAID moving away from grants to recipient government agencies, toward funding through grant, contracts, and cooperative agreements with private organizations.

2. Reasons for the change in emphasis

- lack of government accountability

- lack of effectiveness in implementing programs

- lack of efficiency in implementing programs (governments often passed the money through to private organizations which implemented programs; USAID, therefore, eliminating the “middle man” in directly funding the private organizations.

## USAID’S ACCOUNTABLE RESOURCES

- ANNUAL PROGRAM FUNDING:  $7 BILLION
- AVAILABLE FUNDS (PIPELINE):  $9.7 BILLION
- ANNUAL OPERATING FUNDS:  $485 MILLION
- ANNUAL OIG OPERATING FUNDS:  *$30 MILLION*

**Notes:**
1.  All statistics from USAID FY 99 CP, except “Pipeline” which is from OIG Unliquidated Obligations Audit Report.

2. Pipeline= unliquidated obligations for project + nonproject assistance (from audit report).

## THE OIG’S MISSION

- “TO PROMOTE AND PRESERVE USAID’S EFFECTIVENESS, INTEGRITY AND EFFICIENCY.”

**Notes:**
1. From the OIG’s 5-Year Strategic Plan for the period 1999-2003.  

2. Modified to delete “security” which appears in the Strategic Plan and the OIG Business Strategy.

## OIG ORGANIZATION

**Notes:**
1.  RIGs,  under administrative control of the Office of Audit, may also have Investigative staff which report directly to the Office of Investigations in Washington, D.C.

## OIG STAFFING

- AUDIT  -  126
- INVESTIGATIONS  -  30
- OVERSEAS OFFICES  -  6

**Notes:**
1.  Audit FTE:  126

2. Investigations FTE:  30

3. Overseas offices:
- Budapest, Cairo, Dakar, Manila, Pretoria, San Salvador
- Office size: 8 auditors, up to 5 investigators

## OIG OVERSEAS LOCATIONS

**Washington, D.C.**

**Dakar**

**Cairo**

**San Salvador**

**Pretoria**

**Budapest**

**Manila**

**OIG OVERSEAS LOCATIONS**

**Notes:**
FTE Staffing by RIG:

1. Budapest:  Auditors - 8, Investigators - 1 (5)*

2. Cairo: Auditors - 8, Investigators - 2 (1)*

3. Dakar:  Auditors - 8, Investigators - 1

4. Manila:  Auditors - 6, Investigators - 1

5. Pretoria: Auditors - 8, Investigators - 1

6. San Salvador:  Auditors: Auditors - 10, Investigators - 1

* Planned reorganization of overseas investigative staff.  Reorganization expected to be completed by end of calendar year.  Numbers in parenthesis represent planned staffing after reorganization.

## CHALLENGES OF THE OVERSEAS ENVIRONMENT

- MULTIPLE LOCATIONS
- CULTURAL DIFFERENCES
- COMMUNICATIONS
- DIVERSE LEGAL ENVIRONMENTS

**Notes:**
1. USAID operates in 94 countries, though only about 70 have physical USAID presence (see notes to slide # 2).  All 94 fall within the OIG’s universe of responsibility.  All RIG offices are regional.  Require extensive regional travel, often over dangerous roads (Africa, LA in particular), often unreliable airlines (West Africa, NIS in particular).  Staffing problems at less desirable posts.

2. Cultural differences include:  perception of time (in Asia & LA meetings often begin/end later than scheduled); social formalities (business meetings preceded by informal/personal discussions); local customs (don’t show soles of feet or pat heads of children in certain parts of Asia).

3. Auditors/Investigators usually have only English/French/Spanish language facility.  Must work through intermediaries when other language capability needed (esp. on trips to rural program sites where Arabic, Swahili, Tagalog, Nahuatl, or other such language may be the norm).

4. Investigators, in particular, must deal with varying local laws and law-enforcement agencies.  E.g., Egypt: can’t use consensual monitoring of locals, have strong local labor laws restricting dismissal remedy against local hires

## BALANCING DEMANDS

*CONGRESSIONALLY MANDATED ASSIGNMENTS*
- REQUESTS
- SELF-INITIATED ASSIGNMENTS

**Notes:**
1. Congressionally mandated assignments are legislative requirements placed on the OIG to report upon specific aspects of Agency operations.

2. Requests can arrive from Congress, USAID management, other Government entities, or the public.

3. Self-initiated assignments arise from both our own risk analyses showing areas of Agency vulnerability and  from our perceptions of Congressional interest.

## CONGRESSIONALLY MANDATED ASSIGNMENTS

**GOVERNMENT MANAGEMENT REFORM ACT**
**SINGLE AUDIT ACT**
**FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT**

**Notes:**
1. GMRA (1994).  Requires audit of USAID’s organizational financial statements.  USAID’s multiple accounting stations around the world present one challenge (among others) in auditing Agency financial statements.  Difficulty in collecting, accumulating and attributing performance information in a multi-donor, world-wide environment inhibits both the Agency’s ability to develop accurate financial statements and the OIG’s ability to audit those statements.

2. Single Audit Act (as amended in 1996).  A-133 audits of U.S. grantees.  USAID has voluntarily extended many of the principles of A-133 to the overseas environment where maintaining auditing standards creates particular challenges.  USAID rules require, in most cases, use of U.S. Government auditing standards.  OIG must ensure standards are maintained for all reports.

3. FFMIA (1996).  OIG must report to Congress on USAID’s compliance with the Act’s requirement to implement acceptable financial management systems.  USAID has accounting stations all around the world and has recently tried to implement integrated information (including financial) management system.  OIG must report upon implementation covering the Agency’s world-wide operations. 

## REQUESTS

*CONGRESS*
- AGENCY MANAGEMENT
- PUBLIC

**Notes:**
1. Congressional requests often arise either from hearings or constituent communications.  Examples include 10 management problem areas requested by Armey, Burton, Thompson, Shays.  OIG maintains close contact with Congressional staffs which often inquire into the OIG’s opinion of USAID operations, or specific work OIG has performed in any given area of USAID operations.  Some requests are made in conjunction with requests to the General Accounting Office, in which case OIG coordinates its work with the GAO to maximize efficiency.  Congressional staffs are asked to identify areas they consider of high risk and possible subjects for OIG audits and investigations during the OIG’s annual planning exercises.

2. Agency Management requests various types of audit and investigative work throughout the year, especially investigations of possible fraud and financial audits of USAID contractors.  Each year, during OIG’s planning exercise, Agency managers are asked to identify areas for audit and investigation.  E.g., procurement audits included in FY 99 plan based on such input.

3. Public requests come primarily through the OIG’s “Hot Line” and are generally handled by OIG/Investigations. 

## SELF-INITIATED ASSIGNMENTS

- ANNUAL RISK ASSESSMENT
- AD HOC ADJUSTMENTS TO THE ANNUAL PLAN

**Notes:**
1. Risk Assessments:  OIG/Audit and OIG/Investigations perform risk assessments when devising their portions of the OIG Annual Plan, to facilitate efficient use of limited resources.  
E.g.:  Led OIG/Investigations to pro-active efforts in identifying and combating fraud in USAID’s world-wide procurement operations.  
E.g.:  OIG/Audit identified the U.S. Government’s food transfer program (P.L. 480) as highly vulnerability to abuse and targeted audit resources to coverage of P.L. 480 operations around the world.  Assessments have led to identification of operations in the New Independent States of the Former Soviet Union as highly vulnerable to fraud & mismanagement.  Will be used in planning use of FY 2000 audit resources.
E.g.:  Devotion of resources to ENI based upon assessment of generally high risk of operations in Eastern Europe (esp. in the Balkans) and the NIS.
2.  Ad Hoc Adjustments:  Cognizance visits by investigators in the field can lead to investigations of possible fraud.  Auditors sometimes identify situations outside of the scope of their ongoing audit  which  require immediate attention, leading to refocusing of resources.  E.g.,  cash counts performed at Missions where internal controls are seen to be suspect.

## WORKING WITH OTHER AUDITORS

- GENERAL ACCOUNTING OFFICE
- OTHER U.S. GOVERNMENT AUDITORS
- INDEPENDENT PUBLIC AUDITORS
- NATIONAL SUPREME AUDIT INSTITUTIONS

**Notes:**
1. Audit coordinates closely with the GAO.  E.g., coverage of Hurricane Mitch/Georges relief. USAID supplemental funding for Mitch/Georges may run as high as $600+ million.   Coverage of Nicaraguan Contra assistance (concurrent audits run by OIG closely coordinating with GAO evaluation efforts).

2. Coordination in coverage of funds transferred from USAID to other U.S. Government agencies under section 632 of the Foreign Assistance Act.  Coverage of the International Cooperative Administrative Support Services Program (ICASS).  OIG/Audit has participated in meetings of ICASS coordinating committee in Washington.  The Defense Contract Audit Agency (DCAA) performs audits of USAID contractors at OIG request. 

3. OIG/Audit contracts with Independent Public Auditors (IPAs) outside the U.S., to audit USAID grants and contracts.  This “Agency-contracted Financial Audit Program” generally utilizes IPAs affiliated in some manner with the U.S. “Big Five” accounting firms.  OIG/Audit will probably expand use of these firms still further in covering the Mitch/Georges program in Central America.

4. SAIs - see next slide

## WORKING WITH OTHER LAW ENFORCERS

- STATE DEPARTMENT
- OTHER LAW ENFORCEMENT ORGANIZATIONS

**Notes:**
1. State Department:

OIG/Investigations has a long history of collaboration with the U.S. State Department, particularly with the Regional Security Officers stationed at American embassies.  Examples of collaborative work include:
- Forged checks in Namibia (FY 98)
- Property theft in South Africa (FY 98)
- Contractor “kickbacks” in Bosnia (FY 98)

2. Work with Other Organizations:

OIG/Investigations has worked with many such organizations in the U.S. & overseas, including:
- Federal Bureau of Investigation (FBI)
- Drug Enforcement Administration (DEA)
- Central Intelligence Agency (CIA)
- Immigration & Naturalization Service (INS; capture in Nevada of Salvadorans who had embezzled $800,000 in USAID funds from PVO (FY 96).

## SUPREME AUDIT INSTITUTIONS (SAI’S)

- Government Organizations Created to Oversee/Report Upon Government Operations & Accountability
- “Auditors General”

**Notes:**
1. “SAIs play a major role in auditing government accounts and operations and in promoting sound financial management and accountability in their governments.  As citizens, international donors and others have increasingly higher expectations of national governments, these governments depend on SAIs to help ensure public accountability.” (International Organization of Supreme Audit Institutions - INTOSAI).

2. Auditors General, Courts of Account, Chambre des comptes, Contraloria general.

## WORKING WITH SUPREMEAUDIT INSTITUTIONS

*TRAINING*
- CONFERENCES
- AUDITS OF USAID FUNDS

**Notes:**
1. Training: 
- participation in OIG/Audit CPE training in auditing techniques (Bangladesh, Philippines, Indonesia, Hungary, Slovenia);
- OIG/Audit staff-provided training in audit methodology (Ethiopia, Tanzania, Zambia, Ecuador);
- quality control reviews of auditor workpapers (Tanzania, El Salvador, Guatemala);
-fraud awareness training by OIG/Investigative staff  (South Africa);
-Hungary:  Assistance to Hungarian State Audit Office - training, assistance in chairing regional audit conferences; assistance in chairing upcoming INTOSAI conference to be held in Budapest (1999 or 2000).
2. Conferences:
- hosting auditing/accountability conferences sponsored by OIG/Audit (1994-95; Singapore, South Africa, Senegal, Costa Rica)
-  participating in accountability/anti-corruption conferences (particularly in Latin America; Eastern Europe; 2nd Global Conference of IIA in Uruguay[1998]).
3. Memoranda of Understanding  (9): Bolivia, Ethiopia, Ghana, Honduras, Peru, St. Lucia, Tanzania, Zambia, Zimbabwe

## EXPANDING OVERSIGHT THROUGH TECHNOLOGY

- COMPUTERS
- STATISTICAL SAMPLING

**Notes:**
1.  All auditors and investigators are computer literate, using a variety of specialized and general software.  

Auditors use specialized programs for “mining”, collating and analyzing data, flow-charting internal control systems,  performing data matches, and generating electronic workpapers.

Investigators use the Lexis-Nexus data base in researching their cases.

Auditors and Investigators use a variety of off-the-shelf consumer software such as Microsoft Word, Excel, Access, PowerPoint, Project Manager, LotusNotes, and Corel software packages.

2. Auditors have moved toward greater reliance on statistical sampling to give findings greater breadth, scope and impact.  E.g., almost $.5 billion in questioned costs from the 1998 Unliquidated Obligations audit.  Auditors using IDEA commercial software to help in using statistical software.  

OIG recently brought a full-time statistician on staff.

## INTERNAL COLLABORATION

- REVIEWS OF USAID PROGRAMS
- REVIEWS OF USAID PROGRAM IMPLEMENTORS

**Notes:**
1.  Programs:
- OIG auditors and investigators are jointly formulating a plan to assist Agency management in maintaining accountability over the $600 million in emergency aid flowing to Latin America in wake of Mitch/Georges.  A-AIG/A and DAIG/I jointly traveled to area to assess requirements and plan joint operations.
- Bosnia oversight involved collaboration between auditors and investigators (1998 group award named both).
-Kiev Lease collaborative audit/investigation into improper real property transactions by USAID management (FY 97).
- Auditors and investigators working on MetroCheck review (ongoing).

2. Implementers:
- HIID investigation (ongoing), used auditors to assist and work with investigators to establish the prima facie case. 
- Joint audit/investigation of $152,000 diversion of funds by PVO director in South Africa (FY 98).
- Joint Investigation/Audit of $20,000 embezzlement by El Salvador NGO (FY 97)

## THE END

**THANK YOU**

**Notes:**
1. Thank the assembled multitude for their attention.

2. Copies of presentation are available at the website www.info.usaid.gov/OIG

3. Offer to answer questions.