Independent Auditor's Report – USAID's Process for Accumulating Foreign Currency Information in Phoenix Needs Improvement
| Summary: USAID’s process for accumulating foreign currency information in Phoenix needs improvement. USAID prepares an adjustment using information reported via e-mail from its overseas missions on a quarterly basis, instead of using foreign currency information already in Phoenix. This is because USAID’s foreign currency information in Phoenix is incomplete and inaccurate. As a result, USAID did not use Phoenix to assist in compiling foreign currency information for its FY 2006 financial statements. The quarterly email information does not report the balance per the mission’s books but reports the balance per the mission’s bank statement. This process eliminates USAID’s ability to separately identify interest earned and currency exchange gains or losses affecting the accounts. As long as the information in Phoenix is incorrect, USAID will continue to rely on external sources for foreign currency assets and liabilities, and will not have complete accounting information. |
USAID’s foreign currency balances represent cash held in local banks throughout the world. These accounts are owned and managed by USAID on behalf of local governments. As a result, USAID records an asset and a liability for the balances in these accounts.
We observed that, despite the accounting migration to Phoenix, USAID continues to collect foreign currency balance information by requesting the data from the Missions via e-mail. Because Phoenix foreign currency information is considered to be unreliable, many USAID missions maintain cuff records of the foreign currency accounts they manage locally. However, when USAID/Washington requests quarterly balance information from these missions, it is only looking for the mission’s cash balance per the mission’s bank statement. This would not allow the missions to account for reconciling items between its bank statements and cuff records. To record this activity, USAID makes one accounting entry for the net change in the cash balances between the current quarter and the previous quarter by charging the foreign currency asset against Other Liabilities, and records a second entry against Operating and Administrative Expenses and Donated Revenue. By simply recording the differences in the account value between quarters, USAID does not provide information on interest earned or on the difference in the value of the cash balances due to currency market fluctuations.
We also noted that, in the event that a Mission fails to respond to the request, M/CFO/CAR uses the amount reported on the R0010 (Trust Fund Status Report – Status of Funds/U-106) report downloaded from USAID’s Phoenix reporting tool (Business Objects Enterprise). Because Business Objects Enterprise contains the same information as that recorded in Phoenix, the amounts reported on the R0010 are only as reliable as the information in Phoenix. USAID’s total Foreign Currency asset balance, as well as its corresponding liability balance as of September 30, 2006, was $327 million.
The Missions are not entering their foreign currency transactions in Phoenix because staff members do not believe that the system is working properly. USAID agrees that the transactions ideally should be processed by the system. We also inquired as to why there was no entry posted to record the interest expense and the fluctuation in the foreign currency. USAID responded by saying that the funds do not really belong to the Agency, and that the CFO’s Office is only really interested in ensuring that the cash balance is properly reflected, and that revenue and expenses are accurate in total. As a result, USAID does not have a complete accounting of its foreign currency accounts, and
cannot identify the amount of interest earned on these accounts, or the periodic differences associated with currency exchange gains and losses. USAID has already instructed its overseas Missions to use Phoenix for all foreign currency transactions.
Recommendation No. 4: We recommend that USAID’s Office of the Chief Financial Officer perform monthly reconciliations of local bank balances with the same information in Phoenix and record, in Phoenix, interest earned and gains or losses associated with foreign currency fluctuations for each of its foreign currency accounts.
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