Summary: In response to a congressional request, GAO reviewed the operations of the Agency for International Development's (AID) Private-Sector Revolving Fund, specifically, its: (1) financial management; (2) funding levels; and (3) management and monitoring of field projects.
GAO found that the fund had several financial management weaknesses, including: (1) a database that was inadequate for accurately projecting cash flow and additional appropriations requirements; (2) a lack of complete and audited financial statements to ensure the integrity of its annual reports; (3) no loss reserve account; and (4) inadequate procedures for converting loan reflows of principal, interest, and fees into U.S. securities. GAO also found that: (1) the $8.5 million AID requested for its fiscal year (FY) 1989 appropriation would exceed its requirements; (2) staff limitations affected the quality of field mission project management and monitoring; (3) AID could not effectively operate a larger program; and (4) AID did not have an overall risk policy for the fund that defined the balance between projects' credit worthiness and AID developmental goals. In addition, GAO found that AID took several actions to address the fund's financial difficulties, including: (1) revising cash flow projections; (2) preparing financial statements; (3) establishing a loss reserve account; (4) strengthening reflow investment procedures; and (5) hiring a financial consultant.
