January 1 to June 30, 2000

Audit Reports

Six audits which were scheduled in the Inspector General's 2000 audit plan were performed during the period ended June 30, 2000.

Audit (SG/OIG/AUDIT-01/00) was carried out to evaluate internal controls within the Office of Science and Technology (OST). Selected operational procedures and transactions were examined to verify whether OST is carrying out its responsibilities in accordance with OAS policies and procedures. The audit determined that for the most part, internal controls within OST are adequate. The main weaknesses identified were (a) Monthly leave Report balances did not agree with the summaries obtained from the records provided by the Department of Financial Services and (b) the need for correct classification of project expenditures and follow up action on balances remaining from completed projects. Seven recommendations were provided and were approved by the Secretary General.

Audit (SG/OIG/AUDIT-02/00) was undertaken primarily for following up action and to review the progress made in implementing recommendations of the prior audit of the NT-based servers (SG/OIG/AUDIT- 08/99). Our examination included review of systems security and operations, including the security of the SICE domain and NT servers as well as the functions and performance of the newly appointed Information Security Officer (ISO). The audit determined that overall progress has been made within OAS Information Systems with regard to NT domains and Oracle Server security and operational control. Physical security is much better, many technical exposures have been closed, an internal reorganization has provided administrative responsibilities and the appointment of the ISO has increased security focus. Although the Secretariat for Management is in agreement with the findings and recommendations of the report, there are a number of challenges, which face the OAS Information System and should be effectively addressed. One concern is that although some progress had been made, many of the original findings and recommendations of the previous audit, which had been declared, completed by OAS staff were still incomplete. At the time of the audit, the auditor concluded that 20 of the original 44 findings were completed and closed and 24 were incomplete and still outstanding. We were told that funds requested in the 2001 budget for implementing critical recommendations for systems upgrades, increased systems security and additional human resources were not approved. The nine high risk recommendations (to be implemented in 30 days) and four medium risk recommendations (to be implemented in 90 days) which were provided to address the findings of this audit have been approved by the Secretary General. The OIG continues to monitor efforts made by the Secretariat for Management in addressing audit findings and the Inspector General is satisfied that every effort is being made by the Secretariat to comply with the recommendations within the constraints of available resources.

Audit (SG/OIG/AUDIT-03/00) was undertaken to review progress made in implementing recommendations of the prior audit of Oracle Government Financials™ (SG/OIG/AUDIT-09/99) and the new Oracle Human Resources family of applications which went into production this year. Because the same hardware/system software and technical support organizations are similar for both families of applications and because high-risk recommendations have not been implemented, weaknesses identified in the previous audits also affect Human Resources. The auditor determined that of the 20 approved recommendations in the 1999 audit, only two might be said to be completed. The lack of completion of the work to solve the problems identified in the prior audit causes the OIG serious concern, particularly because recommendations for standards of auditability were not implemented. Additionally, there were no responsibilities established for the auditors to effectively trace activities within the Oracle Financials™ or Project Accounting. Because the requested access to the system was not given, the technical auditor had to use a more difficult means of extracting the technical evidence.

The data control issues addressed in the audit report are extremely serious and should be addressed as a priority, particularly since the auditor found that the financial data in the Oracle Financials™ System did not always represent the financial status of certain programs, projects, offices or organizations. The audit also identified a need for formally documented organization wide security policies and procedures and we are pleased to report that this is now in process. However, there is an urgent need for written policies and procedures for the operational processes resulting from the Oracle Financials™ System. The audit also determined that control over significant aspects of the Oracle Financials™ and payroll applications and related systems and hardware is not adequate and needs improvement. In the 1999 audit report, the Board of External Auditors stated that weaknesses in control structure identified by the OIG were not immediately addressed and these impacted on the 1999 financial operations. They also added that because ongoing problems are significant, OAS management must continue to take appropriate action to ensure adequate and reasonable controls over the financial resources. Nine high-risk recommendations and five medium risk recommendations were approved by the Secretary General. We wish to point out that the recommendations outlined in this audit report had originally been provided in the prior audit report.

Management's commitment to competence is an important factor in ensuring a positive control environment. The audit report states that the Assistant Secretary for Management must ensure that appropriate arrangements are made for more effective overall management of the Oracle Technical Environment, ensure those critical business processes that are conducted are properly documented and determine appropriate financial and staffing requirements for an environment that sets a positive and supportive attitude toward internal controls.

We are pleased to report that work has now started on the recommendations and we commend the Secretariat for Management for the significant progress, which has been made. Training classes have been offered to some departments specifically to meet their needs. Discussions to address the apparent overlapping of responsibilities between the Department of Technology and Facility Services (DTFS) and the Department of Management Analysis, Planning and Support Services ( MAPSS) and the Department of Financial Services (DFS) are ongoing and this matter should soon be resolved. Subsequent to the issue of the audit report, MAPSS designed a series of systematic detailed Oracle training courses to provide users, including GS/OAS Executives, the necessary knowledge for performing assigned responsibilities. The Memorandum dated July 27, 2000 from the Assistant Secretary for Management to all Executive and Assistant Secretaries, Directors and Office Chiefs provided an outline of some of the attributes of the Oracle Financials™ and proposes a plan of "hands on" training and evaluation for all staff members to ensure that all staff members possess the required skills for performing their assigned responsibilities. That memorandum, which was issued in response to specific audit recommendations, is designed to improve overall system security and awareness, provide staff with ability to manage their financial information within the Oracle System and retrieve required financial information from the system for reporting purposes.

Audit SG/OIG/Audit 04/00 was undertaken to evaluate the administrative and internal controls of Petty Cash funds at Headquarters and ensure compliance with the OAS directives and procedures. Our examination determined that all Petty cash accounts were accounted for and all expenses were supported by documentation. However, we found that the Department of Financial Services (DFS) and Petty Cash Custodians do not always comply with OAS procedures regarding the maintenance and disbursement of Petty Cash Funds. The main weaknesses identified were:

1. The listing provided by DFS was incomplete as it omitted one custodian.
2. Petty Cash funds, although not large amount, were inappropriately deposited in personal OAS/Credit Union accounts of two custodians.
3. Six of the 15 custodians did not have prior authorization before disbursing funds and some did not complete the required OAS Form 370 before making disbursements.
4. In some cases certain custodians both disbursed and approved the transaction and some custodians did not maintain on file the required specimen signature of the individual authorized to disburse these funds.
5. Although no transactions were processed since 1998 one custodian retained the vouchers and did not submit these to the DFS for retirement of the account.

Four recommendations were provided for improved internal controls and have been approved by the Secretary General.

Audit (SG/OIG/AUDIT-05/00) was performed to identify those controls in effect over the operational activities of the GS/OAS Office in Saint Kitts and Nevis (OAS St. Kitts and Nevis). We examined selected operational and financial activities including cash receipts and disbursements for the period January to December 1999. We evaluated effectiveness, efficiency and economy of internal controls to determine whether the office is executing its responsibilities in accordance with OAS rules and procedures. We ascertained that, for the most part, internal controls in the GS/OAS in Saint Kitts and Nevis are adequate for providing proper authorization and recording of transactions, activities and disbursements and adequate safeguards over assets. The main weaknesses identified during the audit were the need for that office to (1) comply with OAS directives regarding personal use of the telephone (2) maintain a mileage log for the official vehicle (3) ensure that monthly Attendance Reports submitted to the Department of Financial Services are accurate and (4) provide the annual inventory listing for proper recording of OAS assets. The Director of the GS/OAS Office in Saint Kitts and Nevis reimbursed the OAS for his personal telephone calls, which were identified during the audit. We also found that the Department of Financial Services (DFS) did not maintain a record of authorized signatures for all local bank accounts in the Member States as required by OAS guidelines. We reviewed two projects executed in the GS/OAS Office in Saint Kitts and Nevis during the audit period (1) Small Business Development and (2) Computer Programming and Entrepreneurial Training. The audit determined that project balances in the Oracle Financials™ System at Headquarters did not agree with the disbursement registers in the National Office because amounts were erroneously posted to the wrong projects and there were clerical errors in the disbursement register. More effective management of projects by project managers at Headquarters is needed to ensure that disbursements are properly recorded and account balances are accurate. Thirteen recommendations were provided and approved by the Secretary General.

Audit (SG/OIG/AUDIT-06/00) was performed to identify those controls in effect over the operational activities of the General Secretariat Office in Antigua and Barbuda (OAS Antigua and Barbuda). We examined selected operational and financial activities including cash receipts and disbursements for the period January to December 1999 to evaluate effectiveness, efficiency and economy of internal controls and to verify whether the office is executing its responsibilities in accordance with OAS Rules and Procedures. We ascertained that for the most part, the GS/OAS Office in Antigua and Barbuda records all operational transactions. The main weaknesses identified during the audit were the need for that office to (1) comply with OAS directives regarding personal use of the telephone (2) maintain a mileage log for the official vehicle (3) ensure that attendance reports submitted to the Department of Financial Services are accurate (4) submit quarterly reports on goods imported duty free in that Member State and (5) provide the annual inventory listing for proper recording of OAS assets. The Director of GS/OAS Antigua and Barbuda reimbursed the OAS for his personal telephone calls, which were identified during the audit. The audit also identified a need for training in OAS operational directives for the Secretary/Technician, which was provided by the GS/OAS Office in Saint Kitts and Nevis prior to the completion of the audit report. Our earlier comments regarding the need for the Department of Financial Services to maintain a record of authorized signatures for all local bank accounts in the Member States as required by OAS guidelines are also relevant for the GS/OAS Office in Antigua and Barbuda. Two projects were executed in Antigua and Barbuda during the audit period: (1) The Promotion of Environmentally Sustainable Agricultural Pest Management Systems through the Use of Biopesticides such as Neem and (2) the Integrated Approach to Development Planning and Land Management for Environmental Sustainability. We were unable to review these projects because (1) project records are retained by the Executing Agency in another Member State and (2) the disbursement period was extended due to delays in carrying out project activities because of hurricane damages. The audit also identified an unpaid liability for automobile expenses related to the Parham Harbor Project, which was completed in 1997. Twelve recommendations were provided for approval of the Secretary General.

Staffing

During the period ended June 30, 2000 the recruitment of auditors to fill the four vacant positions in the OIG was in process. As a result of this process three auditor positions were filled with significantly experienced and qualified auditors. Recruitment for the position of Deputy Inspector General--the only remaining vacant position in the OIG--is in its final stages and it is expected that the position will shortly be filled.

Other

The OIG continued to participate as observers in meetings particularly related to the Selection and Bids Committee and the Oracle Financials™ System.

Linda P. Fealing
Inspector General
August 14, 2000

Thirteen audits were performed during the period July 1 through December 31, 2000 and recommendations were provided to correct identified internal control weaknesses. All audit reports were approved by the Secretary General.

Audit SG/OIG-07/00 was performed with focus on the new policies and procedures of the procurement process, which are outlined in Executive Order 00-1 Corr.1. The audit reviewed selected samples of the integrated functions related to the procurement process including the requisition, purchase, payment and posting of procurement transactions during 1999 and 2000. The implementation of the Oracle Financialsä System has changed OAS procurement processes. The new system now requires originating departments to forward a requisition to the Office of Procurement Management Services (OPMS) for preparation and approval of a purchase order. The audit determined that the System works to a certain degree but not to its full function in terms of data accuracy, consistency, data integrity, degree of automation and user friendliness. Subsequent to the issue of the draft report, we were informed that several of the weaknesses identified in the audit regarding negative encumbrances, reconciliation of invoices, open purchase orders, zero balances and reconciliation of the purchase order file to the encumbrances recorded in the General Ledger, were corrected. We commend the General Secretariat for Management for those efforts undertaken to effectively manage and control the procurement process and correct the weaknesses identified in the audit. We encourage continued OPMS monitoring of the integrated processes of OAS procurement to ensure the adequacy of internal controls.

Audit SG/OIG-08/00 was undertaken to evaluate internal controls in the GS/OAS Office in Guatemala. The audit determined that there is need for more effective supervision by the Director of that office, as well as compliance with OAS directives relating to the disbursement functions, bank reconciliations, record of authorized signatures in local bank records and record of OAS assets maintained by the Department of Technology and Facility Services (DTFS). We reviewed four projects executed in that Member State: (1) Assistance to the Supreme Electoral Tribunal in Guatemala (2) Diminishing Abstinence in Guatemala, (3) 1999 Electoral Observatory Mission and (4) Modification of Schools Curriculum. The audit determined that those projects were executed in accordance with their respective agreements and that project objectives were achieved.

Audit SG/OIG-09/00 provides the details of our review of the Culture of Dialogue (PROPAZ) and the Assistance for Demining projects, which were also executed in Guatemala. The audit determined that the projects were successfully executed in accordance with the respective agreements.

The main purpose of Audit SG/OIG-10/00 was to review the internal controls relating to selected GS/OAS payroll processes, following the implementation of the new Human Resources/Payroll Module. We determined that despite the limited time available for preparation, the system was successfully implemented. The ability to process salaries on time, with minimum glitches during the developing, transition and implementation periods was primarily due to the hard work, commitment and dedication of the staff. The main weaknesses identified were (1) policies and procedures are not yet documented for ensuring consistency in the application of payroll processes (2) journal entries used to record transactions are not always documented (3) there was a lack of an adequate audit trail through which transactions, which have been processed such as reimbursements for salary overpayments, may be reviewed (4) despite the recommendations of a 1999 audit report, all claims for overtime were not supported by the appropriate security records to document claimants' presence at OAS during the hours paid, (5) all Notifications of Personnel Action (NPAs) were not prepared on a timely basis and were not effectively reviewed by DFS and (6) GS/OAS did not comply with the Staff Rules regarding special duty allowances for employees who have been assigned duties of a higher level.

Audit SG/OIG-11/00 was performed to identify internal controls of the operational activities of the General Secretariat Office in Peru (OAS Peru). The audit determined that internal controls were less than satisfactory in the operational processes of that office, including receipt and disbursement of OAS funds, preparation of bank reconciliations and quarterly releases for goods imported duty free. There was an apparent lack of the necessary understanding of OAS financial rules and regulations by the Administrative Technician/Secretary of OAS Peru and the Director of that office did not provide effective supervision. The three projects reviewed during that audit were: (1) the Field Research Site Tarapoto (2) Electoral Observatory Mission and (3) the Sustainable Development of the Amazon Frontal areas. The OIG determined that although project objectives were achieved, progress and final reports were not provided to donors on a timely basis and there is a need for more effective project management from Headquarters.

Audit SG/OIG-12/00 reviewed the project for Joint Reconstruction of Homes in Communities of Central and Northern Nicaragua and determined that project objectives were achieved. However, there is need for (1) more effective management supervision from Headquarters, (2) for strengthening internal controls in administrative functions and (3) compliance with OAS financial directives in the receipt and disbursement of project funds.

The main objective of Audit SG/OIG-13/00 was to determine whether the Inter-American Telecommunication Commission (CITEL) fulfills its mandate and to evaluate its administrative and internal controls in keeping with assigned responsibilities. We ascertained with reasonable assurance that internal controls in CITEL are adequate, that CITEL complies with GS/OAS directives for proper authorization and disbursement of expenditures. The main weaknesses identified were the need to: (1) update some job descriptions to record duties actually being performed by some individuals (2) ensure that monthly leave reports and leave balances are correct and (3) notify the Department of Technology and Facility Services (TFS) of surplus/ obsolete items for the timely update of the records related to fixed assets.

Audit SG/OIG-14/00 reviewed the internal controls for financial transactions of the new Inter-American Agency for Cooperation and Development (IACD) i.e., receipt and disbursement of funds. The audit also set out to determine whether the computer system used by the IACD for financial transactions is operating in an effective and efficient manner and satisfies financial reporting requirements. IACD policies and procedures are not yet available and consequently, the Agency is required to follow the existing guidelines and procedures of the General Secretariat. The audit revealed several inefficiencies of the computer system as well as the need for monthly reconciliation of expenditures by the IACD against account analysis reports, which are produced by the Oracle Financials™ System. Further, there is need for procedural manuals, more effective supervision and improvement in the financial operational processes, as well as compliance with GS/OAS procedures, including Staff Rules. Recommendations were provided for an effective review of the efficiency and effectiveness of the computerized financial system that is currently being used by Inter-American Agency for Cooperation and Development to ensure that an efficient system is available for IACD accounting and reporting purposes. Other recommendations were also provided to correct internal control weaknesses which were identified.

Audit SG/OIG-15/00 was undertaken as a follow up to the 1999 audit of the Department of Financial Services (DFS) and to evaluate the administrative and internal controls of the following operational processes: (1) Cash Receipts and Receivables, Payables and Disbursements (3) Petty Cash, Bank Accounts and (4) Bank Reconciliations. The implementation of the Oracle Financials™ System has significantly changed some DFS operational processes. Despite those weaknesses identified, the audit determined that there is marked improvement in internal controls for those DFS operational processes, which were examined. It is the opinion of the OIG that the December 2000 bank reconciliation process shows marked improvement, mainly because of the absence of a large number of adjusting entries for stale dated checks and other accompanying schedules.

The audit determined that there is need for clear audit trails to facilitate the review process and document all adjusting entries, so as to ensure transparency in the recording and accounting functions related to the financial data and information contained in the Oracle Financials™ System. Despite the prior audit of Petty Cash Funds at Headquarters (SG/OIG-04/00), a list of Petty Cash Custodians at Headquarters was not up to date and Petty cash balances in the GS/OAS Offices in the Member States could not be confirmed, as the listing of the authorized persons and relevant amounts was not available. Other weaknesses identified were (1) journal entries used to record transactions and make changes to initial recorded entries are not documented on the supporting documents, (2) DFS did not maintain copies of the signature cards with authorized signatures for the local banks in the Member States where GS/OAS offices are located (3) DFS was not following its "stop payment" policy for checks that had not been presented to the bank within 180 days of issuance and (4) bank reconciliations were not prepared on a timely basis. At the time of the audit, desk procedural manuals to document DFS operational processes were not yet available. However, these have now been finalized and distributed.

Audits SG/OIG-16/00 and SG/OIG-17/00 were performed to identify controls in the General Secretariat Offices in Dominica and Barbados. We examined selected operational and financial activities including cash receipts and disbursements for the period January 1999 to August 31, 2000. We evaluated effectiveness, efficiency and economy of internal controls to determine whether those offices are executing their responsibilities in accordance with OAS rules and procedures. The audit determined that the GS/OAS Offices in Dominica and Barbados are effectively managed and that strong internal controls exist for safeguarding OAS assets, proper recording of transactions and amounts, efficient use of resources and compliance with established rules and directives. We also reviewed the ongoing Youth Technology Resource Centers and Mini-Orchid Tissue Culture/Biotechnology projects executed in those Member States. The audit found no discrepancies in the disbursement records and determined that project objectives have been achieved. Main weaknesses identified were the need to: (1) comply with OAS directives regarding two signatures for checks in excess of US$5,000, (2) maintain a postage log. (3) submit quarterly reports on releases of goods imported duty free and (4) update records at Headquarters for OAS fixed assets.

Audit SG/OIG-18/00 reviewed the Multinational Integrated Approach to Development Planning and Land Management for Environment Sustainability Project, which was executed in three Member States. The main weaknesses identified were (1) funds were disbursed by the Executing Agency after the December 31, 1999 deadline, contrary to the project agreement (2) the total value of the project equipment listed on the inventory listing provided by the Executing Agency did not agree with the cost of equipment purchases reported in final reports or the supporting vouchers (3) all disbursements were not supported by adequate documentation and (4) there is need to reimburse the FEMCIDI account for the balance of unused project funds.

Audit SG/OIG-19/00 reviewed the operational activities of the OAS Model General Assembly Program (MOAS) for 1999 and 2000. The program is designed to enable high school and university students develop knowledge and skills of participatory democracy through the experience of representing a member nation at a MOAS. OAS topics have been incorporated into the formal curricula of several hemispheric academic institutions, some participating universities have created OAS depository libraries containing OAS documents and since 1994, MOAS pilot programs have been held in some Member States. In 1996, a Cooperative Agreement was signed between the GS/OAS and the MOAS Inter-American Foundation, which was created to promote, assist and support the MOAS. In 2000 a third Model Assembly, called MAYA MOAS was started. Interest and participation in the MOAS have increased substantially since its inception and throughout the years, the main objectives of the Program have been achieved. The audit determined that the major part of this growth can be traced to the present Coordinator, whose missionary zeal, dedication, knowledge and love for its objectives are exemplary. However, there is an urgent need to establish the base for performing specific procedures to handle all the activities of the Program, including the selection of locations for the MOAS, the establishment of a fee structure and exemptions from payment. In order to ensure its continued success, the MOAS program requires additional resources, including training in the Oracle Financials™ System for the GS/OAS staff members of that program, adequate facilities, and a competent back up for the Coordinator. In addition, there is need for (1) improvement in the management of the administrative activities of the MOAS, (2) the strengthening of internal controls regarding financial transactions, including receipt and timely deposit of funds, (3) proper segregation of duties in the operational processes, and (4) classification and allocation of fees and disbursements for improved transparency and accountability in respect of each MOAS.

Staffing

The position of Deputy Inspector General was filled by a national of Peru with significant audit experience. She reported for duty in January 2001.

Other

The staff members of the OIG continued to participate as observers in selected meetings related to the operational activities of the General Secretariat.

Linda P. Fealing
Inspector General
March 2001

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