I. Audit Reports
 
Twelve audits and five investigations were completed during the year ended December 31, 2001 and recommendations were provided to correct identified internal control weaknesses. All reports and recommendations have been approved by the Secretary General.

Audit (SG/OIG-01/01) was undertaken primarily to (1) review the Tax Reimbursement Program, (2) determine compliance with the terms of signed agreements, (3) examine the amount of taxes reimbursed to staff members and (4) follow up on the implementation of recommendations provided in the 1998 internal audit and the 1999 ruling of the Administrative Tribunal in Judgment 140. At the time of the audit we determined that there was room for improved supervision and management of the program by the Department of Financial Services (DFS). There was also a need to comply with OAS directives regarding the bidding process for procuring those services, the payment and recording of disbursements as well as performing audits of staff members’ tax returns as required by the agreements. OIG noted that DFS noncompliance with OAS directives in contracting for the outsourcing of the tax services was due in part to the technicality of the required services and the need to continue making advance statutory payments during contract negotiations. Effective follow up action has been taken by the Secretariat for Management to address the weaknesses identified during the audit, including the award of a new contract for supplying those services to the OAS.

Audit SG/OIG-02/01 was undertaken to evaluate internal controls in the GS/OAS Office in Belize. The audit determined that there was need for compliance with OAS directives relating to the disbursement functions, bank reconciliations, maintaining a record of authorized signatures in local bank records, submission of quarterly reports on goods imported duty free and updating the record of OAS fixed assets assigned to that office.

Audit (SG/OIG-03/01) was undertaken primarily to review the performance contract (CPR) process at Headquarters for contracts issued during the period January 1, 1999 through June 30, 2001. The audit determined that during that period 4,036 purchase orders for amounts in excess of US$50,000,000 were issued for consulting services. Main weaknesses identified related to compliance with OAS procurement and financial directives regarding (1) the terms identified in some performance contracts and purchase orders that were issued, (2) contracts issued in excess of the one year continuous service period and (3) compliance by other areas of the GS/OAS with the terms identified in approved bids. New procedures for more effective and timely monitoring of CPR terms and conditions have been implemented to correct the weaknesses identified.

Audit SG/OIG-04/01 was undertaken to review selected administrative and operational processes of the Division of Human Development of the Department of Information Technology for Human Development (formerly Fellowships Department), now a dependency of the Inter-American Agency for Cooperation and Development (IACD). The audit determined that there have been some improvements in the administration of fellowship programs since the last audit that was performed in 1994. In general, the Division complies with its mandate for the promotion and support of human resource and capacity development through fellowships programs and training. However, the main weaknesses identified in the audit are the need for (1) updated job descriptions and written directives for staff members, (2) an effective and reliable automated database and tracking system for managed programs (3) more effective management and administration of the fellowship program in the tracking of fellows’ status, attendance and graduation/completion dates (4) collection of overpayment of allowances (5) physical inspection of the fixed assets for accurate recording of OAS assets and (6) compliance with OAS directives regarding retention of records.

Audit SG/OIG-05/01 was undertaken to evaluate the administrative and internal controls within the Secretariat for Conferences and Meetings (SCM). The audit determined that for the most part, internal controls within the Secretariat for Conferences and Meetings are adequate and that the Secretariat complies with GS/OAS directives for proper authorization and disbursement of expenditures. In addition to the need for written procedures for each of the Divisions within the Secretariat, the main audit findings were the need for (1) compliance with OAS directives regarding attendance reports and statements of Ethics of Conduct and Conflict of Interest and (2) physical inspection of inventory items for accurate recording of OAS assets. There is also need to improve access to the OAS Enterprise System (OASES) to the relevant SCM staff for improved productivity, and increased efficiency in the timely production of official documents.

Audit SG/OIG-06/01 was undertaken to evaluate internal controls in the GS/OAS Office in El Salvador. The audit determined that there is need for compliance with OAS directives relating to the disbursement functions, recording of OAS inventory and submission of quarterly reports on goods imported duty free. We also reviewed three projects executed in that Member State: (1) “Technology transfers to reactivate the Communities affected by Hurricane Mitch” (2) “Apoyo al Funcionamiento de Programa Regional de Gestión Tecnológica y Científica and (3) “Apoyo Informático Organización Electoral”. The audit determined that those projects were executed in accordance with their respective agreements, that project objectives were achieved and final reports were submitted as required.

The main purpose of Audit SG/OIG-07/01 was to evaluate internal controls for travel expenditures paid by the Regular Fund at Headquarters and verify compliance with OAS directives related to travel costs, including AG/RES. 1697 (XXIX-O/99) that required reduction of GS/OAS travel costs paid by the Regular Fund. The audit noted that GS/OAS has successfully reduced Regular Fund travel costs during the period 1998 through 2000 and a report (CP/doc. 3436/01) has been provided to the Permanent Council. The audit noted that (1) travel expenditures were not always appropriately authorized and recorded, (2) Travel Expense Claims (TECs) were not appropriately reviewed for systematic closing of purchase orders, (3) travel advances were not deducted from salary when staff members were delinquent in the timely submission of TECs and (4) travel expenditures were not always supported by adequate documentation. There is also a need for several GS/OAS areas to comply with OAS travel directives regarding submission and approval of quarterly official travel plans, to ensure that adequate insurance coverage is available for persons traveling on official missions, when travel costs are paid from sources other than the Regular Fund.

Audits SG/OIG-08/01 and SG/OIG-09/01 were performed to identify internal controls of the operational activities of the GS/OAS Offices in Grenada (OAS Grenada) and Guyana (OAS Guyana) respectively. The audits determined that strong internal controls exist in both of those offices for safeguarding assets, recording of financial transactions, efficient use of resources and compliance with OAS rules and directives. Main weaknesses identified in both of those offices were a need for monthly replenishment of the Petty Cash Funds, timely submission of quarterly reports for goods imported duty free and accurate information on monthly leave reports. In addition, there is need for improvement in the collection of arrears of repayments of Leo S. Rowe Fund loans made to nationals of those Member States. The audit also included a recommendation for the payment of all project expenses disbursed in Guyana to be paid from project funds so that the Regular Fund is not penalized by those payments. The OIG review of the DMS/CTCS Technology Based Learning project executed in Grenada, and the Intermediate Savannah Agricultural Project (INSAP) project that was still in process in Guyana determined that reports were submitted as required, disbursements were fully supported by appropriate documentation and project objectives were achieved according to agreements.

SG/OIG/AUDIT-10/01 was undertaken to evaluate the effectiveness of internal controls in GS/OAS Jamaica (OAS Jamaica). The audit determined that for the most part, strong internal controls exist in that office for the recording and disbursement of financial transactions. However, there was need for (1) updating the inventory records to ensure that assets are accurately recorded and (2) maintaining the long distance telephone and mileage logs. The review of the Rural Women in Agriculture, Informal credit and the Cooperation in Development and Transfer of Biotechnologies for Sustainable Development projects determined that objectives were achieved, that reports were submitted as required and that disbursements were fully documented. OIG examination of the Climate Control and Adaptation Planning for the Coastal Zone project indicated that all project objectives were not met and that project expenditures were not fully documented. The audit identified a need for effective follow up action by IACD project managers regarding reimbursement of US$5,273 for unspent FEMCIDI funds.

Audit SG/OIG/11/01 reviewed operational processes in GS/OAS Honduras and determined that financial transactions were completely recorded. However, the audit identified a need for compliance with OAS directives regarding (1) the use of pre-numbered forms for receipts, (2) voided checks, (3) checks issued over US$5,000, (4) maintenance of the automobile log and (5) updating the Fixed Assets inventory report.

SG/OIG/AUDIT-12/01 was performed to evaluate (1) the administrative and internal controls within the Inter-American Agency for Cooperation and Development (IACD) that relate to the operational processes, including cash receipts and disbursements and bank reconciliations (2) the adequacy of the financial manageability of IACD funds and (3) follow up action taken by the IACD on the Remediation Plan outlined for addressing the “material weakness” cited in the 2000 Report of the Board of External Auditors. Many of the issues identified by the OIG in this audit had been reported not only in the 2000 OIG Internal Audit Report (SG/OIG/AUDIT-14/00) but also by the independent auditors and the Board of External Auditors. The IACD is required to comply with existing GS/OAS rules and directives as formal policies and procedures for the IACD are still not available.

The OIG determined that the internal control environment within the IACD is less than satisfactory. In addition to the need to update the Fixed Asset Report for inventory items assigned to the IACD, the main weakness identified in this audit was a need for improvement in overall management of financial processes for all funds entrusted to the IACD including:

• registration of financial transactions related to all funds managed by the IACD.
• transfers between Specific Fund accounts for operating costs
• receipts, segregation of duties, timely payment of accounts payable;
• recording obligations prior to incurring expenditures so that accounts do not
• registered deficit balances.
• travel expenditures;
• preparation of bank reconciliations;
• retention of supporting documentation and audit trails.

Investigations

A total of five investigations were completed during 2001. SG/OIG/INVEST/01, SG/OIG/INVEST/02 and SG/OIG/INVEST/03 were performed by the Office of the Inspector General. The OIG assisted office directors of the General Secretariat in carrying out investigations SG/OIG/INVEST/04 and SG/OIG/INVEST/05. The OIG determined that although some OAS directives had been violated, there was no monetary loss to the Organization in the circumstances of those five investigations. Disciplinary action was recommended against the relevant staff members for inappropriate activities.

II. STAFFING

The OIG continues to utilize contracting services to supplement the four auditor positions approved in the Program Budget of the Regular Fund. Additional resources are required to effectively perform auditing, investigation and inspection activities as well as timely follow up action on the measures taken by the various areas of the GS/OAS in implementing recommendations. Additional resources would also facilitate the OIG process of providing some technical assistance both to the Board of External Auditors as well as the independent firm retained by the Board during their annual review. A request has been made in the 2003 proposed program budget for the approval of an additional auditor post at the P3 level.

April 15, 2002

Linda P. Fealing
Inspector General