United States General Accounting Office

GAO Report to Congressional Requesters

September 1998 INTERNATIONAL

BOUNDARY AND WATER

COMMISSION

U.S. Operations Need

More Financial Oversight

GAO/NSIAD-98-238

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-280776 

September 28, 1998

The Honorable Benjamin A. Gilman

Chairman, Committee on International Relations

House of Representatives

The Honorable Harold Rogers

Chairman, Subcommittee on Commerce, Justice,

 State, the Judiciary, and Related Agencies

Committee on Appropriations

House of Representatives

The United States provides funds for a number of independent

international commissions, such as the International Boundary and Water

Commission. You expressed concern about the lack of visibility and

transparency (openness) of these commissions’ programs and operations.

This report provides information on the U.S. Section of the International

Boundary and Water Commission. The Commission is responsible for

resolving water and boundary issues along the U.S.’ and Mexico’s

1,952-mile common border.

As agreed with your staff, we examined (1) the sources and uses of the

U.S. Section’s funds, (2) certain aspects of the U.S. Section’s system of

accounting and internal controls, (3) the cost-sharing arrangements for

joint projects between the United States and Mexico, (4) the

administration of U.S. Section operations and maintenance contracts, and

(5) the extent of oversight over the U.S. Section’s programs and

operations.

In completing this review, we examined the U.S. Section’s activities for

fiscal years 1994 through 1998, including project documents, program and

financial records, contracts, and internal and external oversight

mechanisms. We interviewed officials of the Commission’s U.S. Section,

the Department of State, the U.S. Environmental Protection Agency (EPA),

and selected state and local officials. We also visited selected Commission

project sites along the U.S.-Mexico border. (See app. I for a detailed

description of our scope and methodology.)

Background The International Boundary and Water Commission was established in

March 1889 by treaty between the governments of the United States and

Page 1 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

Mexico.1 Under the treaty and subsequent agreements, the Commission is

responsible for resolving boundary problems and maintaining the

boundary between the United States and Mexico and managing issues

involving the waters of the Rio Grande and Colorado Rivers. The focus of

Commission responsibilities has evolved over time to include resolving

border water quality problems and, more recently, to designing,

constructing, and operating and maintaining wastewater treatment

facilities along the border (see fig. 1). Much of this change in

responsibilities has occurred in response to the expansion of economic

activity and the growth of population along the border. These

developments have heightened the need for additional water sources and

an enhanced environmental infrastructure.

Figure 1: Evolution of Commission Responsibilities

1889 1933 1944 1963 1983 1993 2000

Boundary Cases

Border Sanitation

Control of Waters

Water Investigations

Dam Construction and Operation

Management of Water Resources

Source: International Boundary and Water Commission.

1

The International Boundary and Water Commission was known as the International Boundary

Commission until it was reconstituted as the International Boundary and Water Commission by the

Water Treaty of February 3, 1944.

Page 2 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

The International Boundary and Water Commission is composed of a U.S.

Section and a Mexican Section, each headed by a Commissioner, who

must be an engineer. The U.S. Commissioner is appointed by the President

for an indefinite term. The current Commissioner was appointed on

June 15, 1994. The U.S. Section is located in El Paso, Texas; the Mexican

Section is in the adjoining city of Ciudad Juarez, (Chihuahua) Mexico. As

of July 1998, the U.S. Section had 254 staff at its headquarters and project

offices located along the border. (See fig. 2.)

Figure 2: Location of Commission Projects

NEW MEXICO

ARIZONA

CALIFORNIA

TEXAS

OKLAHOMA

Baja

California

Norte

Baja

California

Sur

Sonora

Chihuahua

Coahuila

Nuevo

Leon

Tamaulipas

Durango

Sinaloa

MEXICO

Colorado River

Gila River

Pecos River

Red River

Colorado River

Brazos River

Rio Grande

Tijuana River

Flood Control

Tijuana

Sanitation

Mexicali

Sanitation Nogales

Sanitation

Nogales

Flood Control

Naco

Sanitation

Rio Grande

Canalization &

American Dam

Boundary

Preservation

Project

Presidio Valley

Flood Control

Amistad Dam

and

Power Plant

Nuevo Laredo

Sanitation

Falcon Dam

and

Power Plant

Retamal Dam

Lower Rio Grande

Flood Control

Lower Rio Grande

Water Quality

Improvement Project

Douglas - Agua

Prieta

Sanitation

1970 Treaty

Boundary Maintenance

International

Salinity Control

Project

Anzalduas Dam

Source: International Boundary and Water Commission.

Page 3 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

The U.S. Section must comply with applicable federal rules and

regulations regarding financial management and contracting, including the

Federal Acquisition Regulation. When problems such as the need for

wastewater treatment plants on the border require joint actions to resolve,

the two Commissioners work together to define the problem, plan the

solution, and negotiate the level of participation for each country. The

Commissioners jointly prepare draft agreements (referred to as “Minutes”)

on all aspects of each country’s participation (including cost-sharing

arrangements) to present to both countries’ governments for approval. For

joint projects determined to require binding international obligations, the

U.S. Commissioner must obtain the approval of the Secretary of State.

Results in Brief The U.S. Section of the International Boundary and Water Commission has

received total funding of approximately $217.9 million over the last 

4 years. The funds were from appropriations and grants or payments from

other federal agencies and state and local governments. It also received

reimbursement from the Mexican government for costs incurred on joint

projects. The U.S. Section expended $46.7 million in fiscal year 1997,

including $21.9 million from its appropriations and $24.8 million from

grants and payments from others. The funds were used for salaries and

benefits, administrative costs, operation and maintenance of International

Boundary and Water Commission projects, and construction activities.

The cost-sharing agreements between the United States and Mexico for

two recently completed projects had payment terms that varied from those

used on other joint developments. For these two projects, the United

States agreed to finance Mexico’s share of costs due to Mexico’s economic

difficulties and in order to cover the cost of meeting environmental

standards of the United States, which are higher than those in Mexico.

This resulted in $8.6 million worth of increased costs to the United States.

The total investment for those two projects—Nogales, Arizona, and South

Bay, California—is $321.9 million.

There are weaknesses in certain aspects of the U.S. Section’s finance and

accounting systems. For example, funds owed by Mexico were not

reflected in year-end financial statements, accounting duties were not

properly segregated within the financial management system, and

previously identified financial management deficiencies had not been

corrected.

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B-280776 

Regarding the administration of U.S. Section operations and maintenance

contracts, required monthly reports on contractor performance were not

submitted. As a result, the U.S. Section made payments of $1.2 million to

the contractors without proper documentation verifying that the required

work was completed.

Oversight of the U.S. Section is minimal. Although the State Department

reviews the U.S. Section’s budget submission and provides policy guidance

to the U.S. Commissioner, the Section is not a constituent part of the State

Department and, therefore, the Department does not formally examine the

Section’s managerial activities because it operates administratively as an

independent agency. While the Environmental Protection Agency funds

some projects along the Southwest border, it only reviews U.S. Section

contracts and monitors resulting construction projects where it is a major

contributor. In addition, there have been no external financial statement

audits of U.S. Section activities since the year-end audit for fiscal 

year 1995. Further, there are no requirements for program management

audits, and none have been conducted since 1980. Moreover, internal

audits were not being performed.

The U.S. Commissioner informed us in a July 1998 letter that actions have

been taken or are in progress to correct the deficiencies discussed in this

report. However, this report contains a matter that Congress may wish to

consider to require periodic external financial statement audits of U.S.

Section operations.

U.S. Section Receives

Funding From Many

Sources

The U.S. Section receives its direct appropriations through the Department

of State’s budget.2

 The Section’s appropriations for salaries, expenses, and

construction activities totaled $85.7 million from fiscal years 1994 through

1997. The Section also receives contributions from federal, state, and local

municipalities and the government of Mexico to help construct new

projects and operate and maintain existing facilities, such as wastewater

treatment plants. Contributions for these purposes totaled approximately

$132.2 million from fiscal years 1994 through 1997. Total funding for the

4-year period, therefore, came to approximately $217.9 million, as shown

in table 1.

2

The U.S. Section is funded through federal budget code 300—natural resources and environment,

subcode 301—water resources.

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B-280776 

Table 1: Sources of U.S. Section Funds, Fiscal Years 1994-97

Funding source FY1994 FY1995 FY1996 FY1997 Total

Appropriations $25,600,000 $19,479,000 $18,669,000 $21,953,000 $85,701,000

Grants, payments, and reimbursementsa 22,831,000 50,106,000 34,446,000 24,780,000 132,163,000

Total funds $48,431,000 $69,585,000 $53,115,000 $46,733,000 $217,864,000

Note: This table was developed from unaudited data provided by the U.S. Section. We did not

attempt to verify the data or determine that it includes all grants, payments, or reimbursements

from all possible sources.

aIncludes funds from EPA; the General Services Administration; the Western Area Power

Administration; Mexico; and the cities of Nogales, Arizona, and Hildalgo and El Paso, Texas.

Source: GAO analysis based on Commission data.

EPA provided $123 million during this period. Approximately $108 million

was provided to construct wastewater treatment facilities along the

border; another $15 million was given for the administration of an

EPA-supported facilities planning program for resolving border sanitation

problems. The remaining funds were provided by Mexico ($1.6 million),

the General Services Administration and the Western Area Power

Administration ($1.9 million), local municipalities ($4.4 million), and other

($1.3 million).

Uses of Funds in Fiscal

Year 1997

The U.S. Section received funds totaling approximately $46.7 million in

fiscal year 1997. These funds were used for U.S. Section operations,

project engineering activities, operation and maintenance of existing

projects, and construction activities. The expenditures included payments

for personnel and benefits, training, travel, and supplies and materials;

operating and maintaining field offices, dams, and sanitation plants;

monitoring river water quality; and directing various construction projects.

(See table 2.)

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B-280776 

Table 2: U.S. Section’s Use of Funds,

Fiscal Year 1997 Use of funds Amount

Administration and engineeringa $5,415,000

Operations and maintenanceb 10,070,000

Reimbursements used for operations and maintenancec 2,132,000

Construction 6,463,000

Reimbursements used for constructiond 22,647,000

Unused funds 6,000

Total $46,733,000

Note: This table was developed from unaudited data provided by the U.S. Section. We did not

attempt to verify the data or determine that it includes all grants, payments, or reimbursements

from all possible sources nor did we attempt to verify actual expenditures by program category.

aIncludes personnel compensation, benefits, travel, training, supplies, materials, printing, and

copying.

bIncludes field offices, dams, sanitation plants, and flood control and water quality projects.

cWork for which other entities provided a share of the cost in the form of reimbursements.

dFunds from other entities that are sponsoring the cost of projects, such as EPA, or are sharing in

the project cost, such as El Paso.

Source: GAO analysis based on U.S. Section data.

Financial and

Accounting Systems

Contain Weaknesses

Our examination of certain aspects of the U.S. Section’s financial and

accounting system found several weaknesses. These weaknesses included

problems in recording reimbursements and accounting for funds owed by

Mexico. We also observed that the U.S. Section did not follow applicable

internal control standards3

 regarding separation of duties and had not yet

corrected previously identified financial management deficiencies. In

addition, we noted that the U.S. Section has had no external financial

statement audits conducted since 1995.

Funds Owed by Mexico

Not Reflected in Financial

Statements

In light of prior audit findings and the size of reimbursements to the U.S.

Section by Mexico, we examined the U.S. Section’s accounting procedures

for billings to Mexico. We found that the U.S. Section had not corrected

deficiencies identified in prior external audit reports. In fact, we observed

that approximately $16 million owed by Mexico for construction and

operations and maintenance costs, including $400,000 that had been billed

between July 23, 1997, and March 6, 1998, was not properly recorded as

3

GAO Policy and Procedures Manual for Guidance of Federal Agencies, “Standards for Internal

Controls in the Federal Government” (Washington, D.C.: U.S. General Accounting Office, 1983), title 2,

appendix II.

Page 7 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

required by generally accepted accounting principles for federal financial

reporting purposes. These billings were for the South Bay, California, and

Nogales, Arizona, Wastewater Treatment facilities. Since these receivables

were not included in the accounting records, the U.S. Section’s financial

statements and reports did not reflect the Section’s true financial position.

This discrepancy occurred because the U.S. Section lacks an integrated

accounting system. For example, record-keeping for funds owed by

Mexico was maintained independently from the accounting and finance

system. However, the U.S. Section subsequently provided documentation

to adequately support payments made.

Standards for Separation

of Duties Are Not Met

To reduce the risk of error, waste, or wrongful acts and ensure that

effective checks and balances exist, “Standards for Internal Controls in the

Federal Government”4

 require a separation of duties and responsibilities.

Our review of selected U.S. Section disbursements in fiscal years 1997-98

identified that the individual who created an obligation for an expenditure

also had the authority to approve a bill for payment without any

requirement for approval from contracting or procurement officials that

goods or services were received. This scenario is inconsistent with the

guidance contained in the “Standards for Internal Controls in the Federal

Government,” which call for the separation of duties.

Previously Identified

Deficiencies Remain

To ensure that resources are not put at risk and that financial reports are

based on accurate data, federal internal control standards require prompt

resolution of audit findings. We found that the U.S. Section had not

corrected 11 of 26 deficiencies, or about 42 percent, identified in annual

financial statement audits conducted from fiscal years 1992 through 1995.

As these deficiencies remained, the U.S. Section was vulnerable to

unreliable financial reporting, noncompliance with laws and regulations,

and inadequate safeguarding of assets.

The 11 deficiencies that the U.S. Section had not corrected include

• no procedures for tracking and recording costs to prepare annual financial

statements;

• no monitoring of receivable accounts and failure to assess interest on late

payments;

4

GAO Policy and Procedures Manual for Guidance of Federal Agencies.

Page 8 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

• insufficient procedures to record amounts due from state and local

governments and the government of Mexico to ensure that all amounts

due were properly recorded;

• outdated and/or incomplete written accounting policies and procedures;

• no performance of periodic vulnerability assessments and tests of internal

controls;

• no system directive providing policy guidance to establish a single,

integrated financial management system;

• no submission of payment performance data to the Office of Management

and Budget as required by the Prompt Payment Act of 1983;5

• no audit follow-up system or procedures to evaluate the system;

• no system to identify and monitor compliance with applicable laws and

regulations;

• no performance of periodic, independent reviews of electronic data

processing controls; and

• no performance of periodic, physical counts of inventory on hand.

Cost-Sharing

Arrangements on

Recent Joint Projects

We examined the negotiated cost-sharing arrangements for the five most

recent Commission projects undertaken jointly by the United States and

Mexico. These projects had terms that varied from those for the other

three. For three projects—two wastewater treatment plants and a

cross-border bridge—each country assumed full responsibility for their

respective project costs. However, for the other two projects—the Nogales

Wastewater Treatment Plant, completed in 1992, and the South Bay

Wastewater Treatment Plant, completed in 1998—the United States

financed Mexico’s share of the construction costs with a no-interest loan.

Mexico will repay the loaned funds in 10 annual installments and was

given a grace period until the plants were fully operational to initiate

repayment.

Mexico’s agreed-upon shares of the construction costs for the Nogales and

South Bay projects were $1 million and $16.8 million, respectively. In

present value terms, the net cost to the United States to finance Mexico’s

share for the two projects is approximately $8.6 million, as shown in 

table 3. U.S. Section and Department of State officials informed us that

this type of arrangement was made by the United States, following

negotiation with Mexico, in response to the state of the Mexican economy

and the dire need to build these joint projects in the United States, which

is the preferred location from technical points of view, but where costs

and standards are higher than in Mexico. This arrangement was made due

5

31 U.S.C. 3901-07.

Page 9 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

to the strong desire on the part of the U.S. communities, with the support

of their congressional delegations, that these two projects go forward

expeditiously.

Table 3: Difference Between Mexico’s Actual and Discounted Cost-Share Payments for the Nogales and South Bay Projects

Project

Mexico’s

annual

payments

Total Mexican

payments

Discounted

present value

of Mexican

payments Difference

Nogales Wastewater Treatment Facility $100,000 $1,000,000 $603,000 $397,000

South Bay Wastewater Treatment Plant 1,680,000 16,800,000 8,606,000 8,194,000

Total $ 1,780,000 $ 17,800,000 $ 9,209,000 $8,591,000

Source: Our analysis based on International Boundary and Water Commission Minutes.

Weaknesses in

Contract

Administration by the

U.S. Section

The primary tool used to validate payment claims by contractors is

monthly reports prepared by the on-site contract operations

representative. We found that the contract operations representative did

not submit these required monthly reports on the performance of the

contractors at the international wastewater treatment facilities at South

Bay, California, and Nogales, Arizona, to the contract administrator. The

reports were not submitted because the reporting requirement was not

enforced by the contract administrator. As a result, payments of

$1.2 million were made without proper documentation demonstrating that

the required work had been completed.

U.S. Section officials agreed with our findings. They issued directives to

the U.S. Section’s on-site representatives at both facilities stating that the

representatives should immediately begin submitting written reports

evaluating the contractor’s overall performance and documenting specific

performance for each month’s work.

Minimal Oversight of

U.S. Section Programs

and Activities

Oversight of the U.S. Section of the Commission is minimal. While the

Department of State reviews the U.S. Section’s budget requests and

provides foreign policy guidance to the section, the Department told us

that it does not have the authority to routinely monitor or oversee the

management of the U.S. Section because the Section is not a constituent

part of the Department of State. And, EPA’s oversight authority over the

Commission’s operations is limited to construction projects for which it

provides funding. In addition, there is no requirement that financial or

Page 10 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

program audits of the U.S. Section be conducted. In fact, the U.S. Section

has not undergone an external program review since 1980, and, as pointed

out earlier, no financial statement audit has taken place since 1995.

Moreover, internal audits were not being conducted.

Good management practices call for periodic program audits to determine

the extent to which the organization is achieving the desired results or

benefits established by its charter, the effectiveness of its programs and

activities, and the compliance with the laws and regulations applicable to

its programs. The U.S. Section has received no external program audits of

its activities since 1980.

The Commission acts as the project manager for selected EPA-funded

projects along the southwest border. EPA officials informed us that they

(1) review U.S. Section construction contracts, (2) monitor disbursement

of project funds, (3) participate in periodic sessions to review the progress

of projects with the U.S. Section and other involved agencies, and

(4) conduct periodic site visits. They also said that, when appropriate, they

contract with other entities to inspect actual construction activities. With

respect to contracting, EPA provides advice to the Commission on both

technical and business issues. However, EPA’s review focuses only on

contracts for which it provides funding.

While the head of the Department of State’s Office of Mexican Affairs told

us that the Department does not routinely exercise management oversight,

the Department’s Inspector General said that it has authority6

 to conduct

audits and contracted for financial statement audits from 1992 to 1995.

However, in a July 1998 letter, State’s Inspector General informed us that

the Inspector General has not conducted audits since 1995 due to resource

constraints.

Lack of Internal Audits Our review also found that the U.S. Section did not have a well-functioning

internal audit capability. The U.S. Section recognizes that internal audit is

to be used to determine, through unbiased examinations, that operations

are efficient and economical and that other internal controls are sufficient,

adequate, and consistently applied. Although the U.S. Section had a

compliance office with internal audit responsibilities, the head of the

office stated that he was working on other critical personnel issues. He

told us that 10 audits had been scheduled for 1998, but no audits had been

completed to date.

6

Inspector General Act of 1978 (5 U.S.C. app. 3).

Page 11 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

In a July 29, 1998, letter to us, the U.S. Commissioner agreed with our

observations regarding the Section’s financial and accounting systems’

weaknesses. The Commissioner told us that actions had been taken or

were in process to (1) correct general ledger accounts to assure that the

accounting reports reflect correct accounts receivable amounts,

(2) establish proper segregation of duties and assure that all payments are

approved by contracting officers, (3) correct previously identified

weaknesses, and (4) provide the internal auditor more time to conduct

audits. In light of the Commissioner’s actions, this report contains no

recommendations for corrective actions regarding the Section’s financial

and accounting systems.

Conclusions Border issues between the United States and Mexico form an increasingly

critical part of the bilateral relationship. The Commission is involved in a

growing number of issues along the U.S.-Mexico border. The expected

increase in commerce between the two countries and the resulting impact

on the environmental infrastructure are likely to expand the importance of

the Commission’s operations. Moreover, in addition to its own annual

appropriations, the Commission directs funding from other federal, state,

and local sources. In light of our findings regarding the finance and

accounting systems, including the failure to correct previously identified

weaknesses, weaknesses in contract administration, and minimal

oversight of programs and activities and the significance of the U.S.

Section’s activities, we believe greater oversight of the U.S. Section’s

financial and program operations is needed.

Matter for

Congressional

Consideration

In order to provide greater oversight over International Boundary and

Water Commission operations, Congress may wish to consider requiring

the U.S. Commissioner to obtain annual financial statement audits of the

U.S. Section’s activities by an independent accounting firm in accordance

with generally accepted government auditing standards.

Agency Comments In written comments on a draft of this report, the State Department agreed

with our matter for congressional consideration. The Department also

provided technical comments, which we have incoporated in the report

where appropriate. The Department of State’s comments are reprinted in

appendix II.

The EPA reviewed a draft of this report and had no comments.

Page 12 GAO/NSIAD-98-238 International Boundary and Water Commission
B-280776 

We are sending copies of this report to the Secretary of State; the

Administrator, EPA; and the U.S. Commissioner of the International

Boundary and Water Commission. Copies will also be made available to

other interested parties on request.

If you or your staff have any questions concerning this report, please call

me at (202) 512-4128. Major contributors to this report are listed in

appendix III.

Benjamin F. Nelson, Director

International Relations and Trade Issues

Page 13 GAO/NSIAD-98-238 International Boundary and Water Commission
Contents

Letter 1

Appendix I 

Objectives, Scope,

and Methodology

16

Sources and Uses of Funds 16

Accounting and Internal Controls 17

Cost-Sharing Arrangements 18

Contract Administration 18

Program and Operations Oversight 19

Appendix II 

Comments From the

Department of State

20

Appendix III 

Major Contributors to

This Report

22

Tables Table 1: Sources of U.S. Section Funds, Fiscal Years 1994-97 6

Table 2: U.S. Section’s Use of Funds, Fiscal Year 1997 7

Table 3: Difference Between Mexico’s Actual and Discounted

Cost-Share Payments for the Nogales and South Bay Projects

10

Figures Figure 1: Evolution of Commission Responsibilities 2

Figure 2: Location of Commission Projects 3

Abbreviations

EPA Environmental Protection Agency

FY fiscal year

Page 14 GAO/NSIAD-98-238 International Boundary and Water Commission
Page 15 GAO/NSIAD-98-238 International Boundary and Water Commission
Appendix I 

Objectives, Scope, and Methodology

Our objectives were to examine (1) the sources and uses of the funds for

the U.S. Section of the International Boundary and Water Commission,

(2) certain aspects of the U.S. Section’s system of accounting and internal

controls, (3) the cost-sharing arrangements for joint projects between the

United States and Mexico, (4) the administration of U.S. Section

construction and operations and maintenance contracts, and (5) the

extent of oversight over the U.S. Section’s programs and operations.

We conducted our review at the Department of State and the

Environmental Protection Agency (EPA) in Washington, D.C.; the

International Boundary and Water Commission’s U.S. Section in El Paso,

Texas; the International Wastewater Treatment plants in Nogales, Arizona,

and South Bay, California; and at EPA Region 9 in San Francisco,

California. At all these locations, we examined available program records

and files and interviewed knowledgeable officials involved with the

Commission’s activities.

We did not conduct a full internal control review nor a financial audit of

the U.S. Section. Instead, we focused on key aspects of U.S. Section

activities that were related to our audit objectives. Further, we did not

evaluate the effectiveness of the U.S. Section’s activities.

Sources and Uses of

Funds

To identify the amount of the U.S. Section’s direct appropriation, we

reviewed the U.S. Department of State’s appropriation data for fiscal 

years 1994 to 1998 and its budget request for fiscal year 1999. Specifically,

we analyzed the U.S. Section’s funding development schedules,

Department of State apportionment schedules, and reports on budget

execution.

To identify those funding sources in addition to the direct appropriation,

we analyzed records supporting the U.S. Section’s financial statement. We

reviewed the funds reimbursed to the U.S. Section for construction, as

well as for operations and maintenance expenses from Mexico, other

federal agencies (such as EPA), and state and local municipalities. We

examined interagency agreements between the Commission and EPA for

the administration of EPA’s Facility Planning Fund. We reviewed the

history and status of construction project funding, schedules of

anticipated and earned reimbursements, and various congressional

hearing records and correspondence.

Page 16 GAO/NSIAD-98-238 International Boundary and Water Commission
Appendix I 

Objectives, Scope, and Methodology

To obtain an understanding of various budget and execution records, we

interviewed the U.S. Section’s key financial management officers,

including the Chief Administrative Officer, the Chief of the Finance and

Accounting Division, and the Budget Office Analyst. We inspected the

records of all funds provided to the U.S. Section for fiscal years 1994-98,

identifying direct appropriations from the Department of State and all

other funding sources. We also analyzed the uses of those funds and

reviewed fiscal year 1997 expenditures.

Accounting and

Internal Controls

To determine that funds owed to the U.S. Section from Mexico and other

entities for construction and operations and maintenance costs were

properly included and classified in the accounts and financial reports, we

reviewed appropriation and funding data documents and project Minutes

to identify arrangements for and amounts of payments the accounting

system should reflect. We examined accounting system reports maintained

by the U.S. Section’s Finance and Accounting Division that included

monthly trial balances, accounts receivable aging, and general ledger

unbilled receivables. We also reviewed the Mexico receivables records

maintained by the Foreign Affairs Office. We analyzed and scheduled

construction and operations and maintenance receivable receipts for fiscal

year 1994 through April 1998. To assess whether any corrective measures

have been instituted, we reviewed earlier financial statement audits to

identify and follow up on any condition of improper accountability of

funds due to the U.S. Section. In cases of identified deficiencies in the

accounting system processes, we discussed the results with the U.S.

Section’s Chief Administrative Officer and the Chief of the Financial

Services Division to consider what needed to be done to correct the

process.

To determine that disbursements were exercised by personnel who had

delegated authority and were separate from the obligation function, we

selected 11 payments made in fiscal years 1997-98 to review for

compliance with requirements. These payments were chosen because they

were of an international nature requiring more sensitive scrutiny and were

processed outside the unit that initiates contractor payments. We reviewed

the transactions’ documentation and steps followed to determine who

initiated, who reviewed, and who approved the execution of these

disbursements. We also documented and reviewed the certifications of

delegated monetary authority and obligation authority for personnel

associated with these payments. In cases of deficiencies in the process and

to understand the consequences of not meeting the “Standards for Internal

Page 17 GAO/NSIAD-98-238 International Boundary and Water Commission
Appendix I 

Objectives, Scope, and Methodology

Controls in the Federal Government,” we discussed the results with

cognizant officials to consider what needed to be done to correct the

process.

To determine the extent to which previously identified oversight

weaknesses have been addressed, we obtained and reviewed all available

U.S. Section reports and management letters related to external audits

conducted from 1992-95 and compiled a list of all deficiencies identified.

For each deficiency, we interviewed cognizant U.S. Section officials and

their staff members and reviewed U.S. Section policies and procedures to

determine if corrective actions had been taken. To the extent that

previously identified deficiencies had not been corrected, we obtained the

rationale for not doing so and documented whether a plan for corrective

action had been determined.

To assess the adequacy of internal oversight, we interviewed the

Compliance Officer and obtained and reviewed pertinent U.S. Section

requirements for compliance reviews. We reviewed the U.S. Section’s

Internal Audit Directive, the current Compliance Officer’s activities since

joining the U.S. Section, reports and working papers related to completed

audits, and the Compliance Officer’s future audit plans.

Cost-Sharing

Arrangements

To evaluate the cost-sharing arrangements for joint projects with Mexico,

we reviewed the Minutes associated with the five most recent negotiations

and compared the agreed-upon terms with both Commission and

Department of State documentation that demonstrated the level of

involvement and when that involvement occurred. To determine how the

terms provided to Mexico on two recent joint projects would affect costs,

we performed a present value analysis of the repayment schedule. We also

reviewed the appropriate Minutes to determine if there were other

agreements reached that were not beneficial to the United States.

Contract

Administration

To determine the adequacy of the U.S. Section’s oversight of contract

administration, we reviewed the contract administrator’s performance on

five recent contracts awarded by the U.S. Section. We identified the

applicable regulations, policies, and procedures that govern U.S. Section

contracting processes. We selected the five contracts based on their

having been awarded in the 1990s, having exceeded $1 million in value,

and having files and key personnel located at the U.S. Section in El Paso,

Texas. We assessed the performance of the contract administrator on two

Page 18 GAO/NSIAD-98-238 International Boundary and Water Commission
Appendix I 

Objectives, Scope, and Methodology

operations and maintenance contracts to ensure that certified payments

were supported by proper documentation. We also reviewed the

contractor’s performance by evaluating the extent to which the contractor

corrected known deficiencies.

Program and

Operations Oversight

To assess the adequacy of management oversight over U.S. Section

activities, we obtained and reviewed policies and procedures associated

with oversight of the U.S. Section. We interviewed cognizant officials of

the Department of State, EPA, and state and local entities to identify

requirements for oversight of the U.S. Section. We analyzed regulations,

policies, and procedures provided by these organizations and compared

the requirements to the level of oversight achieved.

We performed our work between April and July 1998 in accordance with

generally accepted government auditing standards.

Page 19 GAO/NSIAD-98-238 International Boundary and Water Commission
Appendix II 

Comments From the Department of State

Page 20 GAO/NSIAD-98-238 International Boundary and Water Commission
Appendix II 

Comments From the Department of State

Page 21 GAO/NSIAD-98-238 International Boundary and Water Commission
Appendix III 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

David R. Martin

Rona Mendelsohn

Office of the General

Counsel, Washington,

D.C.

Mark Speight

Dallas Field Office Elliott C. Smith

Jeffrey A. Kans

John E. Clary

James B. Smoak

Linda Kay Willard

(711339) Page 22 GAO/NSIAD-98-238 International Boundary and Water Commission
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