Regional Inspector General for Audit Ir 7 K2 Bonn

Audit of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA

Program in Slovakia

Report No 8-193-93-04 March 31 1993

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AUDIT OF AIDS MONITORING OF GRANTS AND COOPERATIVE AGREEMENTS UNDER THE VOCA PROGRAM IN SLOVAKIA

Report No 8-193-93-04 March 31 1993

Slovakian farm leaders told the audit team that VOCA volunteers had provided invaluable advice and insight on how to turn currently unprofitable cooperatives into potentially profitable private entities However VOCA reports did not document their follow-up on results achieved from the volunteers recommendations Further no formal AID site visits had been made to VOCA projects and better coordinated monitoring is needed to determine whether the VOCA Programs demand and impact warrant its continuation in the country

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USAED MAR 3 1993

US AGENCY FOR

INTERNAT1ONAL

DEvnoImENT

MEMORANDUM FOR THE ACTING MISSION DIRECTOR BUREAU FOR EUROPE Mr Robcrt Nachtrieb

FROM RIGABONN John P Competello

SUBJECT Audit Report of AIDs Monitoring of Grantand operative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

Enclosed are ten copies of our report on the subject audit We considered your comments on the draft report and included them as an appendix to this report We have also included as an appendix the representation letters from the Regional Mission for Europe and the AIDRepresentative for Slovakia

I appreciate the cooperation and courtesies extended to my staff during the audit

Background

Pursuant to the strategy and priorities established by the Coordinator for US assistance to Central and Eastern Europe the AID Assistant Administrator Bureau for Europe (EUR) authorized the $67 million five-year Restructuring Agriculture and Agribusiness Project on March 26 1991 The purpose of the project is to support the development of an open market in the agricultural sector in Central and Eastern Europe by providing technical assistance and training to three target groups

o private cooperatives

o private agribusinesses and

o public sector agencies and organizations needed to facilitate private trade in an open market

Private cooperatives and agribusinesses were to receive the bulk of the assistance In providing this assistance AID was to fund the services of US private voluntary

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320 TwETNTY-FIRST STREET NW WASHINGTON DC 20523

organizations universities commercial firms and Federal agencies On May 211991 in accordance with the project authorization memorandum EUR awarded a $95 million non-competitive grant (on September 30 1991 amended to $1015 million) to

Volunteers in Overseas Cooperative Assistance (VOCA) a private voluntary

organization Of this amount the Project Manager estimated Slovakia would have

projects totalling about $500000 The grant which is to be funded incrementally over

a three-year period defrays the administrative and volunteer costs of carrying out the

VOCA program Under the objectives of the grant VOCA was to provide volunteer

advisory services of 1)US cooperative management and 2) farmerboard members

of cooperatives and agricultural sector specialists to

o assist agricultural leaders in preparing business development plans for

farmer-owned and controlled rural enterprises closely resembling US private agricultural cooperatives

assist state companies attempting to privatize and assist discreditedo agricultural cooperatives that want to reorganize along private cooperative lines

o assist emerging agribusiness persons in feasibility analysis and start-up

activities in private enterprises being established to zerve the farm

community in such categories as food processing feed and flour

milling farm equipment and machinery repair

provide training focused on business planning operations managemento and marketing for East European organizations

Based on the availability of this assistance private and public sector entities were to

prepare and submit requests for assistance directly to VOCA Upon review and

approval of those requests VOCA then searched its data bank of listed consultants

to locate suitable volunteers When volunteers had been matched to the assistance

required VOCA defrayed the costs of sending the volunteers abroad to provide the

required technical assistance The length of the volunteers services abroad varied

from two to six weeks although VOCA is allowed to send volunteers for up to 90 days

To plan and manage its program activities VOCA has established a network of field

offices largely staffed by local nationals Local staffing usually comprises a country

national director an assistant and a secretary American representatives are thinly

spread among these offices to overview the activities of two or more country offices

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In May 1991 VOCA established an office in Prague Czech Republic to cover both the Czech Republic and Slovakia When the separation of the Czech Republic and Slovakia became apparent VOCA established a separate office in Bratislava Slovakia on October 1 1992 From May 21 1991 through September 30 1992 VOCA completed 21 projects in Slovakia and planned another 25 for Fiscal Year 1993

Audit Objectives

Based on the Inspector Generals revised Fiscal Year 1993 Audit Plan we audited the VOCA program in Slovakia to answer the following audit objectives

1 What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

2 Are the Project Officer and AID Representative monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

In answering these objectives we tested whether VOCA had established proper procedures to promote implement and evaluate its program in accordance with the grant and whether the Project Officer and the AID Representative (AIDREP) were monitoring the program as required by Regional Mission for Europe (EURRME) policies and procedures

Appendix I contains a complete discussion of the scope and methodology for the audit

Audit Findings

What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

In auditing this objective we found that VOCA had completed 21 projects at one state farm and 13 cooperative farms However the fact that there are approximately 1000 such similarly sized farms in Slovakia and VOCA has only consulted with 14 raises questions concerning the demand for the Program and its overall impact According to VOCA the limited number of projects was due to difficulty in making promotional efforts from the Prague office With the opening of the VOCA office in Bratislava Slovakia promotional efforts are underway to make the program better

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known to potential recipients Because minimal efforts have been made to promote the program VOCA representatives stated they will monitor to determine the demand for the program in Slovakia

Though the level of assistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profit-making farms Many of the recommendations by the volunteers were being implemented Others could not be implemented due to the lack of capital

7hough the level ofassistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profitshymaking farms

In reporting on its performance we found that VOCA provided little detail on the results achieved from the recommendations Though this matter is being addressed by the Food DivisionEUR VOCA was not doing enough in documenting its followshyup of recommendations This documented follow-up is the only basis for reporting results by VOCA

Demand for Assistance

Making US assistance such as the VOCA Program widely known to private and public entities wilAin countries is a critical aspect in fostering the use of the Program At an official level the Coordinator the US embassies EURRME and the AIDREP offices in the countries have important roles to play At a project or sector level those providing the assistance have the task of making the assistance known to the intended recipients This latter aspect is particularly applicable in the case of assistance provided under the VOCA grant

When VOCA established the Prague office in May 1991 it set an annual target of 50 completed projects for Czechoslovakia Within this target no specific distinction was made between the Czech Republic and Slovakia In implementing its program in Czechoslovakia VOCA completed 19 projects in 1991 and 77 projects in 1992 Of the 19 projects completed in 1991 10 projects were located in the Czech Republic and 9 projects in Slovakia In 1992 65 projects were located in the Czech Republic and 12 projects in Slovakia Thus as the VOCA program in Czechoslovakia grew

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even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

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Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

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office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

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Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

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rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

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VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

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audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

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Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

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APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

AUDIT OF AIDS MONITORING OF GRANTS AND COOPERATIVE AGREEMENTS UNDER THE VOCA PROGRAM IN SLOVAKIA

Report No 8-193-93-04 March 31 1993

Slovakian farm leaders told the audit team that VOCA volunteers had provided invaluable advice and insight on how to turn currently unprofitable cooperatives into potentially profitable private entities However VOCA reports did not document their follow-up on results achieved from the volunteers recommendations Further no formal AID site visits had been made to VOCA projects and better coordinated monitoring is needed to determine whether the VOCA Programs demand and impact warrant its continuation in the country

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EUROPE~

USAED MAR 3 1993

US AGENCY FOR

INTERNAT1ONAL

DEvnoImENT

MEMORANDUM FOR THE ACTING MISSION DIRECTOR BUREAU FOR EUROPE Mr Robcrt Nachtrieb

FROM RIGABONN John P Competello

SUBJECT Audit Report of AIDs Monitoring of Grantand operative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

Enclosed are ten copies of our report on the subject audit We considered your comments on the draft report and included them as an appendix to this report We have also included as an appendix the representation letters from the Regional Mission for Europe and the AIDRepresentative for Slovakia

I appreciate the cooperation and courtesies extended to my staff during the audit

Background

Pursuant to the strategy and priorities established by the Coordinator for US assistance to Central and Eastern Europe the AID Assistant Administrator Bureau for Europe (EUR) authorized the $67 million five-year Restructuring Agriculture and Agribusiness Project on March 26 1991 The purpose of the project is to support the development of an open market in the agricultural sector in Central and Eastern Europe by providing technical assistance and training to three target groups

o private cooperatives

o private agribusinesses and

o public sector agencies and organizations needed to facilitate private trade in an open market

Private cooperatives and agribusinesses were to receive the bulk of the assistance In providing this assistance AID was to fund the services of US private voluntary

1

320 TwETNTY-FIRST STREET NW WASHINGTON DC 20523

organizations universities commercial firms and Federal agencies On May 211991 in accordance with the project authorization memorandum EUR awarded a $95 million non-competitive grant (on September 30 1991 amended to $1015 million) to

Volunteers in Overseas Cooperative Assistance (VOCA) a private voluntary

organization Of this amount the Project Manager estimated Slovakia would have

projects totalling about $500000 The grant which is to be funded incrementally over

a three-year period defrays the administrative and volunteer costs of carrying out the

VOCA program Under the objectives of the grant VOCA was to provide volunteer

advisory services of 1)US cooperative management and 2) farmerboard members

of cooperatives and agricultural sector specialists to

o assist agricultural leaders in preparing business development plans for

farmer-owned and controlled rural enterprises closely resembling US private agricultural cooperatives

assist state companies attempting to privatize and assist discreditedo agricultural cooperatives that want to reorganize along private cooperative lines

o assist emerging agribusiness persons in feasibility analysis and start-up

activities in private enterprises being established to zerve the farm

community in such categories as food processing feed and flour

milling farm equipment and machinery repair

provide training focused on business planning operations managemento and marketing for East European organizations

Based on the availability of this assistance private and public sector entities were to

prepare and submit requests for assistance directly to VOCA Upon review and

approval of those requests VOCA then searched its data bank of listed consultants

to locate suitable volunteers When volunteers had been matched to the assistance

required VOCA defrayed the costs of sending the volunteers abroad to provide the

required technical assistance The length of the volunteers services abroad varied

from two to six weeks although VOCA is allowed to send volunteers for up to 90 days

To plan and manage its program activities VOCA has established a network of field

offices largely staffed by local nationals Local staffing usually comprises a country

national director an assistant and a secretary American representatives are thinly

spread among these offices to overview the activities of two or more country offices

2

In May 1991 VOCA established an office in Prague Czech Republic to cover both the Czech Republic and Slovakia When the separation of the Czech Republic and Slovakia became apparent VOCA established a separate office in Bratislava Slovakia on October 1 1992 From May 21 1991 through September 30 1992 VOCA completed 21 projects in Slovakia and planned another 25 for Fiscal Year 1993

Audit Objectives

Based on the Inspector Generals revised Fiscal Year 1993 Audit Plan we audited the VOCA program in Slovakia to answer the following audit objectives

1 What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

2 Are the Project Officer and AID Representative monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

In answering these objectives we tested whether VOCA had established proper procedures to promote implement and evaluate its program in accordance with the grant and whether the Project Officer and the AID Representative (AIDREP) were monitoring the program as required by Regional Mission for Europe (EURRME) policies and procedures

Appendix I contains a complete discussion of the scope and methodology for the audit

Audit Findings

What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

In auditing this objective we found that VOCA had completed 21 projects at one state farm and 13 cooperative farms However the fact that there are approximately 1000 such similarly sized farms in Slovakia and VOCA has only consulted with 14 raises questions concerning the demand for the Program and its overall impact According to VOCA the limited number of projects was due to difficulty in making promotional efforts from the Prague office With the opening of the VOCA office in Bratislava Slovakia promotional efforts are underway to make the program better

3

known to potential recipients Because minimal efforts have been made to promote the program VOCA representatives stated they will monitor to determine the demand for the program in Slovakia

Though the level of assistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profit-making farms Many of the recommendations by the volunteers were being implemented Others could not be implemented due to the lack of capital

7hough the level ofassistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profitshymaking farms

In reporting on its performance we found that VOCA provided little detail on the results achieved from the recommendations Though this matter is being addressed by the Food DivisionEUR VOCA was not doing enough in documenting its followshyup of recommendations This documented follow-up is the only basis for reporting results by VOCA

Demand for Assistance

Making US assistance such as the VOCA Program widely known to private and public entities wilAin countries is a critical aspect in fostering the use of the Program At an official level the Coordinator the US embassies EURRME and the AIDREP offices in the countries have important roles to play At a project or sector level those providing the assistance have the task of making the assistance known to the intended recipients This latter aspect is particularly applicable in the case of assistance provided under the VOCA grant

When VOCA established the Prague office in May 1991 it set an annual target of 50 completed projects for Czechoslovakia Within this target no specific distinction was made between the Czech Republic and Slovakia In implementing its program in Czechoslovakia VOCA completed 19 projects in 1991 and 77 projects in 1992 Of the 19 projects completed in 1991 10 projects were located in the Czech Republic and 9 projects in Slovakia In 1992 65 projects were located in the Czech Republic and 12 projects in Slovakia Thus as the VOCA program in Czechoslovakia grew

4

even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

I V

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EUROPE~

USAED MAR 3 1993

US AGENCY FOR

INTERNAT1ONAL

DEvnoImENT

MEMORANDUM FOR THE ACTING MISSION DIRECTOR BUREAU FOR EUROPE Mr Robcrt Nachtrieb

FROM RIGABONN John P Competello

SUBJECT Audit Report of AIDs Monitoring of Grantand operative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

Enclosed are ten copies of our report on the subject audit We considered your comments on the draft report and included them as an appendix to this report We have also included as an appendix the representation letters from the Regional Mission for Europe and the AIDRepresentative for Slovakia

I appreciate the cooperation and courtesies extended to my staff during the audit

Background

Pursuant to the strategy and priorities established by the Coordinator for US assistance to Central and Eastern Europe the AID Assistant Administrator Bureau for Europe (EUR) authorized the $67 million five-year Restructuring Agriculture and Agribusiness Project on March 26 1991 The purpose of the project is to support the development of an open market in the agricultural sector in Central and Eastern Europe by providing technical assistance and training to three target groups

o private cooperatives

o private agribusinesses and

o public sector agencies and organizations needed to facilitate private trade in an open market

Private cooperatives and agribusinesses were to receive the bulk of the assistance In providing this assistance AID was to fund the services of US private voluntary

1

320 TwETNTY-FIRST STREET NW WASHINGTON DC 20523

organizations universities commercial firms and Federal agencies On May 211991 in accordance with the project authorization memorandum EUR awarded a $95 million non-competitive grant (on September 30 1991 amended to $1015 million) to

Volunteers in Overseas Cooperative Assistance (VOCA) a private voluntary

organization Of this amount the Project Manager estimated Slovakia would have

projects totalling about $500000 The grant which is to be funded incrementally over

a three-year period defrays the administrative and volunteer costs of carrying out the

VOCA program Under the objectives of the grant VOCA was to provide volunteer

advisory services of 1)US cooperative management and 2) farmerboard members

of cooperatives and agricultural sector specialists to

o assist agricultural leaders in preparing business development plans for

farmer-owned and controlled rural enterprises closely resembling US private agricultural cooperatives

assist state companies attempting to privatize and assist discreditedo agricultural cooperatives that want to reorganize along private cooperative lines

o assist emerging agribusiness persons in feasibility analysis and start-up

activities in private enterprises being established to zerve the farm

community in such categories as food processing feed and flour

milling farm equipment and machinery repair

provide training focused on business planning operations managemento and marketing for East European organizations

Based on the availability of this assistance private and public sector entities were to

prepare and submit requests for assistance directly to VOCA Upon review and

approval of those requests VOCA then searched its data bank of listed consultants

to locate suitable volunteers When volunteers had been matched to the assistance

required VOCA defrayed the costs of sending the volunteers abroad to provide the

required technical assistance The length of the volunteers services abroad varied

from two to six weeks although VOCA is allowed to send volunteers for up to 90 days

To plan and manage its program activities VOCA has established a network of field

offices largely staffed by local nationals Local staffing usually comprises a country

national director an assistant and a secretary American representatives are thinly

spread among these offices to overview the activities of two or more country offices

2

In May 1991 VOCA established an office in Prague Czech Republic to cover both the Czech Republic and Slovakia When the separation of the Czech Republic and Slovakia became apparent VOCA established a separate office in Bratislava Slovakia on October 1 1992 From May 21 1991 through September 30 1992 VOCA completed 21 projects in Slovakia and planned another 25 for Fiscal Year 1993

Audit Objectives

Based on the Inspector Generals revised Fiscal Year 1993 Audit Plan we audited the VOCA program in Slovakia to answer the following audit objectives

1 What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

2 Are the Project Officer and AID Representative monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

In answering these objectives we tested whether VOCA had established proper procedures to promote implement and evaluate its program in accordance with the grant and whether the Project Officer and the AID Representative (AIDREP) were monitoring the program as required by Regional Mission for Europe (EURRME) policies and procedures

Appendix I contains a complete discussion of the scope and methodology for the audit

Audit Findings

What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

In auditing this objective we found that VOCA had completed 21 projects at one state farm and 13 cooperative farms However the fact that there are approximately 1000 such similarly sized farms in Slovakia and VOCA has only consulted with 14 raises questions concerning the demand for the Program and its overall impact According to VOCA the limited number of projects was due to difficulty in making promotional efforts from the Prague office With the opening of the VOCA office in Bratislava Slovakia promotional efforts are underway to make the program better

3

known to potential recipients Because minimal efforts have been made to promote the program VOCA representatives stated they will monitor to determine the demand for the program in Slovakia

Though the level of assistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profit-making farms Many of the recommendations by the volunteers were being implemented Others could not be implemented due to the lack of capital

7hough the level ofassistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profitshymaking farms

In reporting on its performance we found that VOCA provided little detail on the results achieved from the recommendations Though this matter is being addressed by the Food DivisionEUR VOCA was not doing enough in documenting its followshyup of recommendations This documented follow-up is the only basis for reporting results by VOCA

Demand for Assistance

Making US assistance such as the VOCA Program widely known to private and public entities wilAin countries is a critical aspect in fostering the use of the Program At an official level the Coordinator the US embassies EURRME and the AIDREP offices in the countries have important roles to play At a project or sector level those providing the assistance have the task of making the assistance known to the intended recipients This latter aspect is particularly applicable in the case of assistance provided under the VOCA grant

When VOCA established the Prague office in May 1991 it set an annual target of 50 completed projects for Czechoslovakia Within this target no specific distinction was made between the Czech Republic and Slovakia In implementing its program in Czechoslovakia VOCA completed 19 projects in 1991 and 77 projects in 1992 Of the 19 projects completed in 1991 10 projects were located in the Czech Republic and 9 projects in Slovakia In 1992 65 projects were located in the Czech Republic and 12 projects in Slovakia Thus as the VOCA program in Czechoslovakia grew

4

even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

USAED MAR 3 1993

US AGENCY FOR

INTERNAT1ONAL

DEvnoImENT

MEMORANDUM FOR THE ACTING MISSION DIRECTOR BUREAU FOR EUROPE Mr Robcrt Nachtrieb

FROM RIGABONN John P Competello

SUBJECT Audit Report of AIDs Monitoring of Grantand operative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

Enclosed are ten copies of our report on the subject audit We considered your comments on the draft report and included them as an appendix to this report We have also included as an appendix the representation letters from the Regional Mission for Europe and the AIDRepresentative for Slovakia

I appreciate the cooperation and courtesies extended to my staff during the audit

Background

Pursuant to the strategy and priorities established by the Coordinator for US assistance to Central and Eastern Europe the AID Assistant Administrator Bureau for Europe (EUR) authorized the $67 million five-year Restructuring Agriculture and Agribusiness Project on March 26 1991 The purpose of the project is to support the development of an open market in the agricultural sector in Central and Eastern Europe by providing technical assistance and training to three target groups

o private cooperatives

o private agribusinesses and

o public sector agencies and organizations needed to facilitate private trade in an open market

Private cooperatives and agribusinesses were to receive the bulk of the assistance In providing this assistance AID was to fund the services of US private voluntary

1

320 TwETNTY-FIRST STREET NW WASHINGTON DC 20523

organizations universities commercial firms and Federal agencies On May 211991 in accordance with the project authorization memorandum EUR awarded a $95 million non-competitive grant (on September 30 1991 amended to $1015 million) to

Volunteers in Overseas Cooperative Assistance (VOCA) a private voluntary

organization Of this amount the Project Manager estimated Slovakia would have

projects totalling about $500000 The grant which is to be funded incrementally over

a three-year period defrays the administrative and volunteer costs of carrying out the

VOCA program Under the objectives of the grant VOCA was to provide volunteer

advisory services of 1)US cooperative management and 2) farmerboard members

of cooperatives and agricultural sector specialists to

o assist agricultural leaders in preparing business development plans for

farmer-owned and controlled rural enterprises closely resembling US private agricultural cooperatives

assist state companies attempting to privatize and assist discreditedo agricultural cooperatives that want to reorganize along private cooperative lines

o assist emerging agribusiness persons in feasibility analysis and start-up

activities in private enterprises being established to zerve the farm

community in such categories as food processing feed and flour

milling farm equipment and machinery repair

provide training focused on business planning operations managemento and marketing for East European organizations

Based on the availability of this assistance private and public sector entities were to

prepare and submit requests for assistance directly to VOCA Upon review and

approval of those requests VOCA then searched its data bank of listed consultants

to locate suitable volunteers When volunteers had been matched to the assistance

required VOCA defrayed the costs of sending the volunteers abroad to provide the

required technical assistance The length of the volunteers services abroad varied

from two to six weeks although VOCA is allowed to send volunteers for up to 90 days

To plan and manage its program activities VOCA has established a network of field

offices largely staffed by local nationals Local staffing usually comprises a country

national director an assistant and a secretary American representatives are thinly

spread among these offices to overview the activities of two or more country offices

2

In May 1991 VOCA established an office in Prague Czech Republic to cover both the Czech Republic and Slovakia When the separation of the Czech Republic and Slovakia became apparent VOCA established a separate office in Bratislava Slovakia on October 1 1992 From May 21 1991 through September 30 1992 VOCA completed 21 projects in Slovakia and planned another 25 for Fiscal Year 1993

Audit Objectives

Based on the Inspector Generals revised Fiscal Year 1993 Audit Plan we audited the VOCA program in Slovakia to answer the following audit objectives

1 What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

2 Are the Project Officer and AID Representative monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

In answering these objectives we tested whether VOCA had established proper procedures to promote implement and evaluate its program in accordance with the grant and whether the Project Officer and the AID Representative (AIDREP) were monitoring the program as required by Regional Mission for Europe (EURRME) policies and procedures

Appendix I contains a complete discussion of the scope and methodology for the audit

Audit Findings

What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

In auditing this objective we found that VOCA had completed 21 projects at one state farm and 13 cooperative farms However the fact that there are approximately 1000 such similarly sized farms in Slovakia and VOCA has only consulted with 14 raises questions concerning the demand for the Program and its overall impact According to VOCA the limited number of projects was due to difficulty in making promotional efforts from the Prague office With the opening of the VOCA office in Bratislava Slovakia promotional efforts are underway to make the program better

3

known to potential recipients Because minimal efforts have been made to promote the program VOCA representatives stated they will monitor to determine the demand for the program in Slovakia

Though the level of assistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profit-making farms Many of the recommendations by the volunteers were being implemented Others could not be implemented due to the lack of capital

7hough the level ofassistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profitshymaking farms

In reporting on its performance we found that VOCA provided little detail on the results achieved from the recommendations Though this matter is being addressed by the Food DivisionEUR VOCA was not doing enough in documenting its followshyup of recommendations This documented follow-up is the only basis for reporting results by VOCA

Demand for Assistance

Making US assistance such as the VOCA Program widely known to private and public entities wilAin countries is a critical aspect in fostering the use of the Program At an official level the Coordinator the US embassies EURRME and the AIDREP offices in the countries have important roles to play At a project or sector level those providing the assistance have the task of making the assistance known to the intended recipients This latter aspect is particularly applicable in the case of assistance provided under the VOCA grant

When VOCA established the Prague office in May 1991 it set an annual target of 50 completed projects for Czechoslovakia Within this target no specific distinction was made between the Czech Republic and Slovakia In implementing its program in Czechoslovakia VOCA completed 19 projects in 1991 and 77 projects in 1992 Of the 19 projects completed in 1991 10 projects were located in the Czech Republic and 9 projects in Slovakia In 1992 65 projects were located in the Czech Republic and 12 projects in Slovakia Thus as the VOCA program in Czechoslovakia grew

4

even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

organizations universities commercial firms and Federal agencies On May 211991 in accordance with the project authorization memorandum EUR awarded a $95 million non-competitive grant (on September 30 1991 amended to $1015 million) to

Volunteers in Overseas Cooperative Assistance (VOCA) a private voluntary

organization Of this amount the Project Manager estimated Slovakia would have

projects totalling about $500000 The grant which is to be funded incrementally over

a three-year period defrays the administrative and volunteer costs of carrying out the

VOCA program Under the objectives of the grant VOCA was to provide volunteer

advisory services of 1)US cooperative management and 2) farmerboard members

of cooperatives and agricultural sector specialists to

o assist agricultural leaders in preparing business development plans for

farmer-owned and controlled rural enterprises closely resembling US private agricultural cooperatives

assist state companies attempting to privatize and assist discreditedo agricultural cooperatives that want to reorganize along private cooperative lines

o assist emerging agribusiness persons in feasibility analysis and start-up

activities in private enterprises being established to zerve the farm

community in such categories as food processing feed and flour

milling farm equipment and machinery repair

provide training focused on business planning operations managemento and marketing for East European organizations

Based on the availability of this assistance private and public sector entities were to

prepare and submit requests for assistance directly to VOCA Upon review and

approval of those requests VOCA then searched its data bank of listed consultants

to locate suitable volunteers When volunteers had been matched to the assistance

required VOCA defrayed the costs of sending the volunteers abroad to provide the

required technical assistance The length of the volunteers services abroad varied

from two to six weeks although VOCA is allowed to send volunteers for up to 90 days

To plan and manage its program activities VOCA has established a network of field

offices largely staffed by local nationals Local staffing usually comprises a country

national director an assistant and a secretary American representatives are thinly

spread among these offices to overview the activities of two or more country offices

2

In May 1991 VOCA established an office in Prague Czech Republic to cover both the Czech Republic and Slovakia When the separation of the Czech Republic and Slovakia became apparent VOCA established a separate office in Bratislava Slovakia on October 1 1992 From May 21 1991 through September 30 1992 VOCA completed 21 projects in Slovakia and planned another 25 for Fiscal Year 1993

Audit Objectives

Based on the Inspector Generals revised Fiscal Year 1993 Audit Plan we audited the VOCA program in Slovakia to answer the following audit objectives

1 What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

2 Are the Project Officer and AID Representative monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

In answering these objectives we tested whether VOCA had established proper procedures to promote implement and evaluate its program in accordance with the grant and whether the Project Officer and the AID Representative (AIDREP) were monitoring the program as required by Regional Mission for Europe (EURRME) policies and procedures

Appendix I contains a complete discussion of the scope and methodology for the audit

Audit Findings

What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

In auditing this objective we found that VOCA had completed 21 projects at one state farm and 13 cooperative farms However the fact that there are approximately 1000 such similarly sized farms in Slovakia and VOCA has only consulted with 14 raises questions concerning the demand for the Program and its overall impact According to VOCA the limited number of projects was due to difficulty in making promotional efforts from the Prague office With the opening of the VOCA office in Bratislava Slovakia promotional efforts are underway to make the program better

3

known to potential recipients Because minimal efforts have been made to promote the program VOCA representatives stated they will monitor to determine the demand for the program in Slovakia

Though the level of assistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profit-making farms Many of the recommendations by the volunteers were being implemented Others could not be implemented due to the lack of capital

7hough the level ofassistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profitshymaking farms

In reporting on its performance we found that VOCA provided little detail on the results achieved from the recommendations Though this matter is being addressed by the Food DivisionEUR VOCA was not doing enough in documenting its followshyup of recommendations This documented follow-up is the only basis for reporting results by VOCA

Demand for Assistance

Making US assistance such as the VOCA Program widely known to private and public entities wilAin countries is a critical aspect in fostering the use of the Program At an official level the Coordinator the US embassies EURRME and the AIDREP offices in the countries have important roles to play At a project or sector level those providing the assistance have the task of making the assistance known to the intended recipients This latter aspect is particularly applicable in the case of assistance provided under the VOCA grant

When VOCA established the Prague office in May 1991 it set an annual target of 50 completed projects for Czechoslovakia Within this target no specific distinction was made between the Czech Republic and Slovakia In implementing its program in Czechoslovakia VOCA completed 19 projects in 1991 and 77 projects in 1992 Of the 19 projects completed in 1991 10 projects were located in the Czech Republic and 9 projects in Slovakia In 1992 65 projects were located in the Czech Republic and 12 projects in Slovakia Thus as the VOCA program in Czechoslovakia grew

4

even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

In May 1991 VOCA established an office in Prague Czech Republic to cover both the Czech Republic and Slovakia When the separation of the Czech Republic and Slovakia became apparent VOCA established a separate office in Bratislava Slovakia on October 1 1992 From May 21 1991 through September 30 1992 VOCA completed 21 projects in Slovakia and planned another 25 for Fiscal Year 1993

Audit Objectives

Based on the Inspector Generals revised Fiscal Year 1993 Audit Plan we audited the VOCA program in Slovakia to answer the following audit objectives

1 What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

2 Are the Project Officer and AID Representative monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

In answering these objectives we tested whether VOCA had established proper procedures to promote implement and evaluate its program in accordance with the grant and whether the Project Officer and the AID Representative (AIDREP) were monitoring the program as required by Regional Mission for Europe (EURRME) policies and procedures

Appendix I contains a complete discussion of the scope and methodology for the audit

Audit Findings

What results are being achieved under the objectives of the AID financed grant to VOCA in Slovakia

In auditing this objective we found that VOCA had completed 21 projects at one state farm and 13 cooperative farms However the fact that there are approximately 1000 such similarly sized farms in Slovakia and VOCA has only consulted with 14 raises questions concerning the demand for the Program and its overall impact According to VOCA the limited number of projects was due to difficulty in making promotional efforts from the Prague office With the opening of the VOCA office in Bratislava Slovakia promotional efforts are underway to make the program better

3

known to potential recipients Because minimal efforts have been made to promote the program VOCA representatives stated they will monitor to determine the demand for the program in Slovakia

Though the level of assistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profit-making farms Many of the recommendations by the volunteers were being implemented Others could not be implemented due to the lack of capital

7hough the level ofassistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profitshymaking farms

In reporting on its performance we found that VOCA provided little detail on the results achieved from the recommendations Though this matter is being addressed by the Food DivisionEUR VOCA was not doing enough in documenting its followshyup of recommendations This documented follow-up is the only basis for reporting results by VOCA

Demand for Assistance

Making US assistance such as the VOCA Program widely known to private and public entities wilAin countries is a critical aspect in fostering the use of the Program At an official level the Coordinator the US embassies EURRME and the AIDREP offices in the countries have important roles to play At a project or sector level those providing the assistance have the task of making the assistance known to the intended recipients This latter aspect is particularly applicable in the case of assistance provided under the VOCA grant

When VOCA established the Prague office in May 1991 it set an annual target of 50 completed projects for Czechoslovakia Within this target no specific distinction was made between the Czech Republic and Slovakia In implementing its program in Czechoslovakia VOCA completed 19 projects in 1991 and 77 projects in 1992 Of the 19 projects completed in 1991 10 projects were located in the Czech Republic and 9 projects in Slovakia In 1992 65 projects were located in the Czech Republic and 12 projects in Slovakia Thus as the VOCA program in Czechoslovakia grew

4

even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

known to potential recipients Because minimal efforts have been made to promote the program VOCA representatives stated they will monitor to determine the demand for the program in Slovakia

Though the level of assistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profit-making farms Many of the recommendations by the volunteers were being implemented Others could not be implemented due to the lack of capital

7hough the level ofassistance was limited to 21 projects we were told that individual projects had been very effective in assisting farm leaders in their planning to reorganize as private profitshymaking farms

In reporting on its performance we found that VOCA provided little detail on the results achieved from the recommendations Though this matter is being addressed by the Food DivisionEUR VOCA was not doing enough in documenting its followshyup of recommendations This documented follow-up is the only basis for reporting results by VOCA

Demand for Assistance

Making US assistance such as the VOCA Program widely known to private and public entities wilAin countries is a critical aspect in fostering the use of the Program At an official level the Coordinator the US embassies EURRME and the AIDREP offices in the countries have important roles to play At a project or sector level those providing the assistance have the task of making the assistance known to the intended recipients This latter aspect is particularly applicable in the case of assistance provided under the VOCA grant

When VOCA established the Prague office in May 1991 it set an annual target of 50 completed projects for Czechoslovakia Within this target no specific distinction was made between the Czech Republic and Slovakia In implementing its program in Czechoslovakia VOCA completed 19 projects in 1991 and 77 projects in 1992 Of the 19 projects completed in 1991 10 projects were located in the Czech Republic and 9 projects in Slovakia In 1992 65 projects were located in the Czech Republic and 12 projects in Slovakia Thus as the VOCA program in Czechoslovakia grew

4

even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

even beyond anticipated levels the growth was largely taking place in what was to become the Czech Republic

In discussing the growth of the program VOCA officials acknowledged that most of their publicity efforts were focused in the Czech Republic This was due in part to the location of the office in Prague According to the AIDREP in Bratislava this imbalance was not unusual since there was a tendency to focus other US programs in the Czech Republic Consequently when it became officially known that Czechoslovakia would separate into two republics as of January 11993 the AIDREP in Bratislava now the capital of Slovakia requested VOCA to open an office there Accordingly on October 1 1992 VOCA officially opened an office in Bratislava

it is unclearwhether (1)the target of 25 completed projects will be achieved without additionalpromotionalefforts and (2) there is a sufficient demand for VOCA assistanceto warranta program in the country

With the opening of the Bratislava office VOCA set an annual target of 25 projects for Slovakia To attain this goal the country director and regional representative conducted a promotional campaign to foster interest in its program This campaign included interviews on radio talk shows articles and interviews in newspapers talks at agricultural cooperative conferences and direct mailings Through mid-January 1993 VOCA had approved and was in the process of recruiting volunteers for five projects Another five projects were in the early stages of development As of February 1 1993 four months after the office was established no fiscal year 1993 projects had been completed Therefore it is unclear whether (1) the target of 25 completed projects will be achieved without additional promotional efforts and (2) there is a sufficient demand for VOCA assistance to warrant a program in the country

Project Review Process

Though no formal US country strategy had been developed for Slovakia the AIDREP stated that one of the strategic objectives is the privatization of the agricultural sector Since the VOCA program in Central and Eastern Europe is designed to assist the privatization of agricultural cooperatives state farms and

5

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

agnbusinesses the program fits into the strategic focus for Slovakia

We found that when project proposals were received they usually were not specific Direct contact with the recipient was thus made by VOCA to determine what the recipient wanted and the specific technical expertise needed Once this need and expertise were determined the VOCA regional director sent the project proposal to VOCA headquarters in Washington DC to recruit the volunteer

When VOCAWashington received the proposal it undertook a search of its data bank of consultants to find the right match Once the volunteer was identified an agreement was signed under which VOCA agreed to reimburse the volunteer for the cost of travel per diem and miscellaneous costs The volunteer in turn agreed to prepare and provide a final report including appropriate recommendations to the recipient organization and VOCA

Upon arrival in country the volunteer spent from two to six weeks advising the recipient on such matters as organizational structure cost control and specific technology related to various operations of the organization A report was then prepared upon completion of the assignment which was translated into Slovak by the translator provided by the recipient

Ninety days after completion of the volunteers assignment VOCA was to follow up with the recipient to determine whether the recommendations in the report were implemented We were told this follow-up was conducted either by direct contact telephone or mail

On an annual basis VOCA evaluated those projects completed during the year These evaluations were conducted using a combination of sources including direct contact telephone and mail

To keep AID informed VOCA provided the AID Project Officer with monthly reports on country activities and invited him to debriefings of the volunteonrs Also in line with the grant agreement VOCA provided quarterly reports on activities and copies of country evaluations The AIDREP informed us that VOCA plans to start monthly reports in Slovakia during 1993 and that these will be in addition to the Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

In analyzing these operational procedures we found that VOCA had generally established good control over project assignments The objectives of the volunteers assignments were clearly spelled out so the volunteers had a clear understanding of

6

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

11- 1 - - --4 1 I ll

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

Cooperative Farms need capital to moderize and privatize for future profit-making

I

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

what the recipients wanted Based on discussions with the recipients we found that they were highly pleased with the volunteers assistance and in many cases continued to maintain contact with the volunteers to seek additional advice Upon completion of the volunteers assignments we found VOCA had prepared debriefing reports for follow-up

However once an assignment was completed VOCAs control over the program seemed to diminish This was particularly true in the case of the ninety day followshyup Though VOCA indicated it followed up on all recommendations we found no evidencc in the files to support this assertion Recognizing the need to do so VOCA indicated that it has begun doing this

In analyzing the annual evaluation we found that it lacked detail on the implementation of the recommendations In discussions with the AID Program Manager we were informed that AID recognized VOCA was putting too much emphasis on the description of inputs rather than outputs The Program Manager stated his division was working with VOCA to address this problem

Addressing this problem may require looking at the way VOCA performs and documents its follow-up of project recommendations A volunteers report serves no purpose unless something happens as a result of it Thus unless the follow-up focuses more on the implementation of recommendations VOCA will be unable to provide the required detail on results

Project Results

There are approximately 25 million hectares (one hectare is equal to 247 acres) of agricultural land in Slovakia Under the agriculture ownership structure there are

o 917 cooperative farms accounting for 208 million hectares or 85 percent of the agricultural land

o 80 state farms accounting for 250000 hectares or 10 percent of the agricultural land and

o approximately 20000 private individuals who farm 120000 hectares or 5 percent of the agricultural land

In reviewing the 21 completed VOCA projects we found that they dealt with 13 cooperative farms and one state farm However with the establishment of a separate

7

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

office for Slovakia VOCA expects the number of projects to increase and thereby achieve greater impact in the sector

To determine whether any results had been achieved in implementing the volunteers recommendations we visited seven cooperatives and one state farm In discussions with the chairmen of the state farms and cooperatives we were informed that the volunteers had provided invaluable advice and insight into running the farms as private entities Without exception they stated that they had gained a new perspective that was much needed In regard to the volunteers recommendations we were informed that most had been implemented These recommendations concerned such matters as

o Establishing and defining the membership and responsibilities of the board of directors based on the report developed by the volunteers

o Reorganizing operations in line with organization charts developed by the volunteers

o Instituting cost centers based on operational components identified by the volunteers and

o Reducing the number of staff and workers to reduce losses and increase productivity Though this reduction is underway at all farms it is proceeding at a slower than planned pace because of social concerns

The volunteers also made recommendations concerning the streamlining of farm operations This included such things as improvement of dairy operations through the upgrading of herds (with better gene pools) and the upgrading of equipment improvement offeeding and storage facilities and establishing maintenance programs for equipment Implementing these recommendations was proceeding at a slower pace becauqe the farms did not have the capital to make the needed investments

In discussing the profitability of the farms with the leaders we were informed that with one exception the farm operations were losing money The only farm not losing money was a large producer of commercial grains sugar beets and hops Since the farms also conduct such non-farm operations as operating retail stores manufacturing firms (parts for other manufacturing firms) construction firms and transport companies they are important in providing employment in the villages where the

8

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

Inadequate maintenance of equipment will hinder attempts to privatize for profit

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

farms are located Though these non-farm operations are not large scale activities they are generally able to cover the losses of the farm operations One cooperative farm we visited was on the verge of bankruptcy The non-farm activities of this cooperative farm had ceased to exist since they had served defense plants which were drastically scaling back

Exhibit I provides specific comments and observations concerning the farms we visited

Are the Project OMcer and AIDREP monitoring the implementation of the grant to VOCA in Slovakia in accordance with EURRME policies and procedures

The Project Officer and AIDREP did monitor the VOCA grant in Slovakia in accordance with EURRME policies and procedures except that the Project Officer and AIDREP need to coordinate their efforts and schedule formal site visits Because the Bureau issued new monitoring quidance one month prior to our audit fieldwork we are not making any recommendations

Though the VOCA grant was being monitored through the review of VOCA reports and evaluations and contact with the VOCA offices in Washington and Bratislava we found that neither the Project Officer nor the AIDREP had performed formal site visits to the VOCA projects What information AID had about the results was obtained from other sources To comply with AID Handbook requirements and Mission Order No 103 the Project Officer and AIDREP need to coordinate their monitoring efforts to ensure that site visits are performed and to determine whether the VOCA Programs demand and impact warrant its continuation in the country However to do this the AIDREP believes additional staffing needs to be recruited In this regard the AIDREP has recruited an American and will recruit an additional foreign national professional Whether these additional personnel will address the problem is uncertain since the Congress has legislated increased program responsibilities for the AIDREP

AID Monitoring

Under the AID mission in Washington structure the Project Officer is located in AIDWashington Though located in Washington the Project Officer is responsible for monitoring performance to ensure that performance goals are being achieved In this regard AID Handbook 13 Chapter 1N states

9

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

rhe AID Project Officer shall make site visits as frequently as practicable to

a Review program accomplishments and management control systems and

b Provide such technical assistance as may be required

To carry out these responsibilities the August 1991 Action Plan for US Assistance to Central and Eastern Europe prepared by EUR and approved by the Coordinators Office states

Program Managers or senior project officers will manage the Missions portfolio of regional projects assisted by additional project officers and office support staff As each Program Manager has responsibility for a sector of activity heshe may have several projects under his authority

Since the program will be managed from Washington Program Manager and their staffs will travel regularly to Central and Eastern Europe (at least 25 of their time) to oversee implementation of their projects This need for frequent travel underscores the importance of assigning an adequate number of project officers to each office with line management responsibility

In discussing monitoring with the Missions Program Manager for the Food System

Division we were informed that no formal site visits to Slovakia had been performed and that on-site monitoring needs to be increased According to the Program Manager the absence of site visits was due to the lack of adequate staffing For

example the Food Division is responsible for five projects which in turn finance 16

multiple sub-project activities A case in point is the Restructuring Agriculture and Agribusiness Project 180-0024 which consists of four grants including VOCA and

one interagency agreement with the US Department of Agriculture These five

project sub-activities have a total of 12 components and each component is the

equivalent of a project in regular AID missions Since VOCA and other grants are

technical in nature the Program Manager feels the activities should be monitored from Washington However according to this official to do so will require additional

staffing

According to the Project Officer monitoring the VOCA grant he plans to travel

about 25 percent of the time Because of the extent of his workload he is not yet

able to perform on-site visits as frequently as required However to stay abreast of

10

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

VOCAs performance he meets periodically with VOCA officials in Washington periodically attends debriefings held by VOCA volunteers and reviews the periodic reports and evaluations

Pursuant to the Action Plan AID established AIDREP offices throughout Central and Eastern Europe In an audit (see Report No 8-180-92-01 dated June 30 1992) of the AID Organizational Structure for Central and Eastern Europe we found that the AIDREPs were not playing a significant role in assisting Project Officers in planning and monitoring the activities financed under the projects This occurred because EUR had not specifically defined the AIDREPs management roles and responsibilities for planning and monitoring As a result the AIDREPs were not being effectively used as AIDs overseas resource in Central and Eastern Europe Accordingly the audit report recommended that EUR develop policies and procedures defining the role and responsibilities of the AIDREPs for planning and monitoring of project activities and defining how Project Officers should use AIDREPs in their planning and monitoring of project activities

Since making the recommendations Congress included language in the Fiscal Year 1993 Appropriations Act dealing with the role of AIDREPs in the Central and East European Program According to this Act the AIDREP under the general direction of the Presidents Coordinator for United States assistance to Central and Eastern Europe shall have primary responsibility to the maximum extent practicable

o for the day-to-day implementation of the assistance program

o for identifying and making recommendations for potential AID programs and projects in such couitry

o for identifying and making recommendations for potential AID programs and projects to the maximum extent practicable in consultation with host country government representatives and

o for coordinating the implementation in the field of the overall activities of all United States Government agencies in Central and Eastern Europe carrying out assistance using funds appropriated under the Support for East European Democracy Act

Pursuant to the legislation EURRME issued a Mission Order on December 1 1992 providing guidance for implementing the Act At the present time EURRME is in the process of developing policies and procedures to comply with the legislation and

11

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

audit recommendations These policies and procedures will not only strengthen the AIDREP role and responsibilities in monitoring activities but also should result in better coordination with Project Officers

In discussing monitoring the VOCA program the AIDREP informed us that neither she nor the foreign national professional on her staff had conducted any site visits However once during an extended stay in the US a member of the Food Division temporarily substituted for her Using the opportunity this person conducted some informal site visits (no trip reports were prepared) to the VOCA projects

With a two-person professional staff the AIDREP is hard-pressed to do much monitoring particularly site visits Since the in-country program has rapidly grown to $50 million over the past few months she has recruited an American professional and will recruit another foreign national professional to augment the staff She is uncertain whether this additional staffing will be able to monitor all activities as required since the program is growing She is uncertain how the additional duties imposed by the recent legislation will impact on staffing And in the absence of specific policies and procedures she is uncertain how planning and monitoring is to be coordinated with Project Officers and how these responsibilities will impact on staffing

Prudent management requires that the Project Officer in conjunction with the AIDREP more closely monitor VOCA activities by scheduling periodic site visits Since the AIDREP is in the process of recruiting additional professional staff this may provide the means of doing so Since additional responsibilities are being imposed on the AIDREP and as discussed earlier there may not be sufficient demand for VOCA assistance EURRME needs to monitor the situation to determine if additional staffing is necessary If additional staffing is warranted EURRME then needs to determine how that staffing should be distributed between Washington and the field offices

EYaluaton

Pursuant to the Project Authorization Memorandum for the Restructuring of Agriculture and Agribusiness the program of each grantee will be subject

o to its own evaluation procedures and

o to evaluation by the Office of the Coordinator by AID or by independent evaluators selected by AID

12

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

Based on our review we found that VOCA was performing the required semi-annual review However as noted these evaluations did not provide much detail on results In their comments to our draft report EURRMF management informed us that VOCA activities recently have been evaluated in a sample of three countries (not Slovakia) as part of an overall EUR evaluation of PVO Assistance to the Private Sector

Manarement Comments and Our Evaluation

In commenting on the draft report EURRME stated they found the report to be helpful constructive and in general on target They stated that the report would be sent to VOCA with appropriate comments concerning the need to assess their evaluation process and provide more information on evaluation results Also the EUR Program Manager and AIDREP will more closely coordinate monitoring and increase site visits when staffing allows

Commenting on some specific points in the report EURRME objected to our original wording concerning the minimal impact of the project This wording was changed to say that the low level of VOCA activity in Slovakia raises questions concerning the demand for the Program and its overall impact Related to monitoring EURRME objected to our characterizing EUR site visits as being a coincidence This wording was changed to reflect the site visits as being informal since no trip reports were filed We also used the AIDREPs input to clarify how VOCA reports on its program in Slovakia Finally we made other minor report changes based on management comments which are included in their entirety in Appendix II

13

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX I PAGE 1 OF 3

SCOPE AND METHODOLOGY

Scope

We audited the Bureau for Europes grant to VOCA in Central and Eastern Europe but only those amounts provided to the newly formed Republic of Slovakia formerly a part of Czechoslovakia As of December 1992 $875 million had been obligated $389 million expended and $317 million disbursed under the $1015 million grant to VOCA for their operations in Central and Eastern Europe Of the total grant $500000 was planned for Slovakia As of December 1992 21 volunteer projects in Slovakia had been completed and 25 more were planned for Fiscal Year 1993 Of the 21 completed projects we reviewed 14

We conducted the audit from December 21 1992 through January 28 1993 in accordance with generally accepted government auditing standards We conducted our field work in the offices of AIDWashington and AIDBratislava and at various VOCA project sites within Slovakia for VOCA activities covering the period from March 29 1991 through December 31 1992

The criteria and evidence used in answering our audit objectives included AID Handbooks site visits and official AID documents such as the Grant Agreement and Amendments faxes and cables and memorandums VOCA project files and other documentation were reviewed in the field along with other documentation received from VOCA headquarters in Washington DC Interviews were held with AID officials including the Project Officer in Washington and the AIDREP in Bratislava VOCA officials were interviewed in Washington and the regional representative for VOCA from Prague Czech Republic along with the VOCA local national representative for Slovakia were interviewed in the field Both VOCA officials accompanied us on the project site visits described in Appendix IV

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX I PAGE 2 OF 3

Methodology

The methodology for each audit 6bjective follows

Audit Oblective 1

To accomplish the first audit objective we determined whether (1) terms of the grant

agreement were being implemented in the field by AID in a manner that would

allow grant objectives to be met and (2) actual results could be ascertained from

VOCA volunteers work that matched the purpose of the Grant Agreement

To determine whether the terms of the grant agreement were being implemented in

the field we discussed the program with EUR representatives responsible for

oversight of the grant and -eviewed implementation documentation including the We then discussedAuthorization Memorandum and the VOCA Grant Agreement

implementation details with VOCA at their headquarters and planned a coordinated

field trip to VOCA project sites in Slovakia for the purpose of ascertaining actual

We reviewed project documentation with the localresults achieved in the field national country representative at the VOCA office in Slovakia and then made site

visits to eight project sites encompassing fourteen of the twenty-one total projects

implemented by VOCA in Slovakia from May 24 1991 through December 31 1992

Audit ObjectiveI

To accomplish the second objective we determined whether (1) the Project Officer

and the AIDREP understood their respective responsibilities for monitoring the

implementation of the grant to VOCA under the new Mission Order for monitoring

in the field and (2) these monitoring activities were adequate to ensure that VOCA

project activities are achieving the results intended under the grant agreement

To determine whether the Project Officer in Washington and the AIDREP in the

field understood their relative roles in monitoring the VOCA grant we discussed this

understanding of these roles in monitoring the grant Both the Project Officer and the

AIDREP indicated that the Mission Order setting out the policy of field monitoring

was too new to have been fully coordinated as of our audit

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX I PAGE 3 OF 3

To determine whether monitoring activities have been adequate to ensure that VOCA project activities are achieving the results intended we discussed the extent of physical monitoring of VOCA results in Slovakia with both the Project Officer in Washington and the AIDREP in Slovakia We also reviewed monitoring documentation in the VOCA project files to determine how much follow-up had been documented by the grantee

poundli

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX H USAJI PAGE I OF 3

USAGENCY FO

INTUMRTKONm

DFAULOFMENT March 27 1993

MEMORANDUM

TO RIGAEURW Toby L Jarman

FROM EURRMEA-DIR Robert Nachtrieb

SUBJECT Draft Audit Report of AIDs Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia (Audit Report No 8-193-93-04)

We received the subject draft audit report and are generally satisfied with RIGs work on this audit We find the report helpful constructive and in general on target with minor exceptions noted later Although the report contains no specific recommendations we will take action to follow up on issues raised in the report as follows

1 We will send a copy of the final report to VOCA and specifically note in an accompanying letter the need for VOCA to follow up on recommendations of completed projects and to document these efforts In addition VOCA will be requested to assess its evaluation process and to provide more information on evaluation results

2 The EUR Project Manager and the AIDREP will more closely coordinate the VOCA activities We would like to bring to RIGs attention the fact that this coordination should be facilitated in the future through the issuance of a mission order on the role of project officers currently in the process of being finalized We anticipate this order will be issued in May 1993

3 We agree completely with the statements in the draft report that staffing constraints both in AIDWashington and in the AIDREPs office have been a major factor in the ability of AID to closely monitor this activity We are currently attempting to increase both the Slovakia and EURDR staffs It is our feeling however that staffing shortages in EUR will always be a problem

4 We will attempt to increase our site visits but as noted in 3 above staffing constraints limit our ability to do so

320 TWENY-FIRST STREET NW WASHINGTON DC 20523

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX H PAGE 2 OF 3

We also have several additional comments on the contents of this

draft report and have listed them below

1

2

3

4

5

6

We do not fully agree with the statement on page 3 last

paragraph that the grant operations in Slovakia appear to be of minimal impact The implication seems to be

that small-value projects have small impact and so we

ought to have much larger projects with larger numbers of

farms benefiting Although only 21 projects on 14 farms need to consider thehad been implemented we

farms have on other farmsdemonstration effect the 14 which see VOCA-trained farms using new procedures

We do not agree with RIGs statement on page 12 first full paragraph that the site visits conducted by the

EURDRFS employee were a coincidence FS released its

employee to substitute for the AIDREP with the express purpose that this person would make VOCA site visits as

he was qualified to review agricultural issues FS would not have released its staff member if this VOCA project monitoring purpose could not have been achieved

The statement on page 13 that an evaluation is scheduled for June 1993 is not accurate In fact VOCA activities under this project have already been evaluated as part of an overall EUR evaluation of PVO Assistance to the Private Sector A sample of three countries where VOCA operates was chosen (Bulgaria Poland and Latvia) for

evaluation and a draft report issued in March 1993 Although VOCA activities in Slovakia were not

specifically included in the scope of the evaluation an

adequate sample of VOCA operations was looked at to be

able to evaluate the VOCA program

For purposes of consistency we suggest that the Project Manager be referred to as such throughout rather than at time referring to him as the Project Officer

3 the AIDREP does not necessarilyOn page 5 line subscribe to the notion of reluctance of Slovaks to deal with an office in Prague More likely this is attributable to the simple impracticality of communicating with Prague from anywhere in Slovakia In addition prior to opening the Bratislava office VOCA was not marketed sufficiently for Slovaks to know about the program

Regarding the statement about monthly reports on page 6 the AIDREP has never received these reports The only monthly reports prepared by VOCA were internal monthly reports which were not sent to the AIDREPs office VOCA plans to start monthly reports to the AIDREP this year VOCA also fills out the AID Slovakia Quarterly Report which the AIDREP office instituted January 1 1993

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX II PAGE 3 OF 3

7 In Appendix IV page 3 delete new in Due to a new policy of reducing armaments production

8 In Appendix V in lieu of Ambassador to Slovakia please substitute Charge dAffaires of Slovakia

thisWe would like to thank the RIG staff for its good work on report and look forward to issuance of the final report

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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931G99ULWSo6LaIMvAIV G42m34 P 7

APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

USaAD APPENDIX IlI

US AGeNCYioR PAGE IOF 4

March 25 1993

Mr Toby L Jarman Regional Inspector General Audit Europe Washington DC 20523-1604

Dear Mr Jarman

This representation letter is issued in connection with your audit of AID s Monitoring of Grants and Cooperative Agreements Under the VOCA Program in Slovakia for Grant No EUR-0024-G-00-1036-00 Your audit was conducted from December 21 1992 to January 28 1993 As of March 25 1993 and to the best of my knowledge and belief I confirm the following representations made to you during your audit

1 Where your audit relates to accounting for monitoring evaluating and reporting on the VOCA (Volunteers in Overseas Cooperative Assistance) Grant Agreement as it relates to Slovakia the Regional Mission for Europe (EURRME) office shares responsibilities with the AID Representative as set out in Mission Order 103 and 92 State 388241 for

- The internal control system and

- The fairness and accuracy of the management information

2 I have asked the most knowledgeable responsible members of my staff to make available to you all records in our possession for the purposes of this audit Based on the representations made by those individuals and my own personal knowledge I believe that those records are accurate and complete and that they constitute a fair representation as to the status of the VOCA Grant provided to Slovakia

320 TwENTY-FIRST STET NW WASHINGTON DC 20523

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

11- 1 - - --4 1 I ll

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX IH PAGE 2 OF 4

3 To the beat of my knowledge and belief EURRME has disclosed any

- Known irregularity involving management or employees who have roles in the internal control structure

- Known irregularity involving any other organizations that could affect the subject audit of the VOCA Grant Agreement and

- Known communications from any other organnizations concerning non-compliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the best of my knowledge and belief as a layman and not as a lawyer EURRME has not withheld information about material

AID policies and procedures ornon-compliance with violations of US laws and regulations

5 The EURRME is not aware of any Government of Slovakia instances of non-compliance with the aspects of the Grant Agreement that could materially affect the VOCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other facts as of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

SCerely

Robert W Nachtrieb Acting Mission Director Regional Mission for Europe

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APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

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931G99ULWSo6LaIMvAIV G42m34 P 7

APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

931G99ULWSo6LaIMvAIV G42m34 P 7

APPENDIX M PAGE 4 OF 4

2shy

- Known communications from any other organizations concerning nonshycompliance with or deficiencies related to the subject audit of the VOCA Grant

4 To the INt of my knowledge and belief as layman and not as lawyerthe Office of the AID Representative has not withheld Information about material non-compliance with AID policies and procedure or violations of US laws and regulations

S The Office of the AID Representative is not aware of any Government of Slovakia insces of nqfl-CmDiiMGC With th9 aln nf the frtnt A rmilli ka suld naterially affect the VWCA Grant

6 Following our review of your Report and further consultation with my staff I know of no other ampactsas of the date of this letter which to the best of my knowledge and belief would materially alter the conclusions reached in that document

Sincerely

Patricia J Lerner AID Representative Bratislava Slovakia

APPENDIX IV PAGE I OF 3

FIELD TRIP SITE VISITS

Bratislavia State Poultry Farm Located just outside the capital of Bratislavia this State Farm had 1000 employees on eight separate farms with 2500 hectares (one hectare equals 247 acres) of arable land It supported 1000 head of cattle including 450 dairy cows and extensive poultry operations that produce 76 million eggs and 6800 tons of poultry

We spoke with the Director General who had accepted and implemented the VOCA volunteers recommendations on streamlining his operations by reducing his dairy and beef operations from 1000 to 800 cattle and reducing total employees from 1000 to 730 He would also like to follow the volunteers advice by buying a feed company and increasing his distribution and marketing network However this recommendation could not be implemented until the government finalized a policy on State Farm privatization which had been stalled within the Ministry of Agriculture Once decisions are made at the ministry level this manager believed he could implement more recommendations that would allow the restructured private farm to become profitable

Dubove Cooperative Located an hours drive from the capital of Bratislavia zhis cooperative had 2200 hectares with 380 employees It grows grains malt barley canola sunflower and sugar beets About 800 heifers are raised for sale each year and 600 metric tons of pork from the hog operation are marketed each year

We spoke to the President of the Cooperative who at 29 years old was one of the youngest farm managers in the country He said that he had accepted the recommendations of the VOCA volunteer and consequently split off one part of the operation to a separate entity In addition he had reduced employees increased product lines in the cooperative stores and improved the quality of livestock feed through better drying techniques He believed the VOCA voluntee had given him good ideas and a sense of direction he should be moving in to become a profitshymaking cooperative

APPENDIX lV PAGE 2 OF 3

TRENCIN DISTRICT

This district is situated in the northern part of the West Slovak Region neighboring the central part of Moravia of the Czech Republic Out of 36 districts in Slovakia this one district received eight out of the total of twenty-one country-wide VOCA projects at 4 of 30 Trencin cooperative farms We visited all four of these cooperatives which had an average size of 1400 hectares with crop production mostly in wheat and barley but also in sugar beets potatoes and profitable hops growing Animal production included dual purpose cattle (milk and meat) hog operations and poultry for both eggs and broilers and sheep farming in hilly areas

Comments from our visits to each of these four cooperatives follow

Cachtice Coogeratve The Chairman of this cooperative told us the VOCA volunteer assisted with a privatization model including an organization chart and the development of cost centers based on product lines He believed the assistance had been helpful to the cooperative in building a new organization structure that would use profitability as the basis for decision-making rather than volume of production

Stars Tura Cooperative The Chairman stated the VOCA volunteer reviewed the entire field operation and was helpful by assisting in developing cost centers and recommending an organization chart In addition the volunteer made several production related recommendations including conservation practices that should be developed for slope erosion areas in the fields

Trencianska Turna The Vice-Chairman stated the cooperative had made substantial progress toward privatization prior to the volunteers arrival He felt the volunteer had agreed with the measures they had already taken to make their operation profitable He stated the volunteer had also made recommendations regarding feed grinding and mixing that could increase profits He also agreed with the volunteers ideas on marketing feed and the possibility that they could use their superior marketing knowledge of feeds to broker these skills to others for a fee

Drietoma Cooperative The Chairman indicated that the privatization law had weak points and that it would be difficult to work through all the issues concerning land ownership He felt that the VOCA volunteer had provided some ideas on how to structure a private cooperative so that it could make money Due to their current need for capital the Chairman felt their biggest non-operational problem was to find sources and methods of financing

APPENDIX IV PAGE 3 OF 3

Dubnlca Cooprstive This cooperative is located in Western Slovakia near the Vah river about 140 kn north of Bratislava The area is one of intensive agricultural production but was also used by the former regime for heavy military production Due to a policy of reducing armaments production the area has lost thousands of jobs

The cooperative produces grain crops on 530 hectares of its land for feeding about 1000 cattle and also produces sugar beets It has a large 5000 unit hog operation and in the past it has also produced non-agriculture goods for the military industry The Chairman indicated to us that the cooperative was losing money without the nonshyagriculture sector earnings to subsidize it He was not sure how the privatization transformation process could go forward without continuing subsidies from the Ministry of Agriculture Generally the Chairman felt the VOCA volunteer had provided him with a good exchange of ideas and some information on new techniques for managing his dairy herd He indicated he could use additional assistance to manage hog waste disposal problems

Private Entrevreneur We visited a veterinarian who had requested VOCA assistance in establishing a yogurt or cheese factory on a cooperative farm This effort would require extensive technical expertise outside capital and marketing skills VOCA had provided a volunteer to advise the veterinarian and a group of his fellow entrepreneurs on the feasibility of this type of operation Prospects were still in the distant future because of rapid changes in the market place and the fact that the cooperative from which they needed to lease land for their operation had not been privatized as of the time of our visit

I$

REPORT DISTRIBUTION

Charge dAffairs of Slovakia Special Adviser for East European Assistance

to the Deputy Secretary of State (DEEA)AAEURDAAEUR EURRME AIDREP Slovakia EURRMEFMS EURRMEECANT Slovakia Desk RFMCCEEBudapest XAPR LEG GC

AAOPS POLICDIEIDI Acquisitions AAFA FAFM FAMCS FAFMFPS IG AIGA DAIGA IGAPPO IGLC AIGRM AIGRampI IGAFA IGAPSA RIGACairo RIGADakar RIGANairobi RIGASingapore

RIGATegucigalpa

APPENDIX V

No of

1

1101 1 1 1 1 1 1 1 1 1 1 1 1 2 2 1 1 1 3 1

12 1 1 1 1 1 1 1

1

41

APPENDIX lV PAGE 2 OF 3

TRENCIN DISTRICT

This district is situated in the northern part of the West Slovak Region neighboring the central part of Moravia of the Czech Republic Out of 36 districts in Slovakia this one district received eight out of the total of twenty-one country-wide VOCA projects at 4 of 30 Trencin cooperative farms We visited all four of these cooperatives which had an average size of 1400 hectares with crop production mostly in wheat and barley but also in sugar beets potatoes and profitable hops growing Animal production included dual purpose cattle (milk and meat) hog operations and poultry for both eggs and broilers and sheep farming in hilly areas

Comments from our visits to each of these four cooperatives follow

Cachtice Coogeratve The Chairman of this cooperative told us the VOCA volunteer assisted with a privatization model including an organization chart and the development of cost centers based on product lines He believed the assistance had been helpful to the cooperative in building a new organization structure that would use profitability as the basis for decision-making rather than volume of production

Stars Tura Cooperative The Chairman stated the VOCA volunteer reviewed the entire field operation and was helpful by assisting in developing cost centers and recommending an organization chart In addition the volunteer made several production related recommendations including conservation practices that should be developed for slope erosion areas in the fields

Trencianska Turna The Vice-Chairman stated the cooperative had made substantial progress toward privatization prior to the volunteers arrival He felt the volunteer had agreed with the measures they had already taken to make their operation profitable He stated the volunteer had also made recommendations regarding feed grinding and mixing that could increase profits He also agreed with the volunteers ideas on marketing feed and the possibility that they could use their superior marketing knowledge of feeds to broker these skills to others for a fee

Drietoma Cooperative The Chairman indicated that the privatization law had weak points and that it would be difficult to work through all the issues concerning land ownership He felt that the VOCA volunteer had provided some ideas on how to structure a private cooperative so that it could make money Due to their current need for capital the Chairman felt their biggest non-operational problem was to find sources and methods of financing

APPENDIX IV PAGE 3 OF 3

Dubnlca Cooprstive This cooperative is located in Western Slovakia near the Vah river about 140 kn north of Bratislava The area is one of intensive agricultural production but was also used by the former regime for heavy military production Due to a policy of reducing armaments production the area has lost thousands of jobs

The cooperative produces grain crops on 530 hectares of its land for feeding about 1000 cattle and also produces sugar beets It has a large 5000 unit hog operation and in the past it has also produced non-agriculture goods for the military industry The Chairman indicated to us that the cooperative was losing money without the nonshyagriculture sector earnings to subsidize it He was not sure how the privatization transformation process could go forward without continuing subsidies from the Ministry of Agriculture Generally the Chairman felt the VOCA volunteer had provided him with a good exchange of ideas and some information on new techniques for managing his dairy herd He indicated he could use additional assistance to manage hog waste disposal problems

Private Entrevreneur We visited a veterinarian who had requested VOCA assistance in establishing a yogurt or cheese factory on a cooperative farm This effort would require extensive technical expertise outside capital and marketing skills VOCA had provided a volunteer to advise the veterinarian and a group of his fellow entrepreneurs on the feasibility of this type of operation Prospects were still in the distant future because of rapid changes in the market place and the fact that the cooperative from which they needed to lease land for their operation had not been privatized as of the time of our visit

I$

REPORT DISTRIBUTION

Charge dAffairs of Slovakia Special Adviser for East European Assistance

to the Deputy Secretary of State (DEEA)AAEURDAAEUR EURRME AIDREP Slovakia EURRMEFMS EURRMEECANT Slovakia Desk RFMCCEEBudapest XAPR LEG GC

AAOPS POLICDIEIDI Acquisitions AAFA FAFM FAMCS FAFMFPS IG AIGA DAIGA IGAPPO IGLC AIGRM AIGRampI IGAFA IGAPSA RIGACairo RIGADakar RIGANairobi RIGASingapore

RIGATegucigalpa

APPENDIX V

No of

1

1101 1 1 1 1 1 1 1 1 1 1 1 1 2 2 1 1 1 3 1

12 1 1 1 1 1 1 1

1

41

APPENDIX IV PAGE 3 OF 3

Dubnlca Cooprstive This cooperative is located in Western Slovakia near the Vah river about 140 kn north of Bratislava The area is one of intensive agricultural production but was also used by the former regime for heavy military production Due to a policy of reducing armaments production the area has lost thousands of jobs

The cooperative produces grain crops on 530 hectares of its land for feeding about 1000 cattle and also produces sugar beets It has a large 5000 unit hog operation and in the past it has also produced non-agriculture goods for the military industry The Chairman indicated to us that the cooperative was losing money without the nonshyagriculture sector earnings to subsidize it He was not sure how the privatization transformation process could go forward without continuing subsidies from the Ministry of Agriculture Generally the Chairman felt the VOCA volunteer had provided him with a good exchange of ideas and some information on new techniques for managing his dairy herd He indicated he could use additional assistance to manage hog waste disposal problems

Private Entrevreneur We visited a veterinarian who had requested VOCA assistance in establishing a yogurt or cheese factory on a cooperative farm This effort would require extensive technical expertise outside capital and marketing skills VOCA had provided a volunteer to advise the veterinarian and a group of his fellow entrepreneurs on the feasibility of this type of operation Prospects were still in the distant future because of rapid changes in the market place and the fact that the cooperative from which they needed to lease land for their operation had not been privatized as of the time of our visit

I$

REPORT DISTRIBUTION

Charge dAffairs of Slovakia Special Adviser for East European Assistance

to the Deputy Secretary of State (DEEA)AAEURDAAEUR EURRME AIDREP Slovakia EURRMEFMS EURRMEECANT Slovakia Desk RFMCCEEBudapest XAPR LEG GC

AAOPS POLICDIEIDI Acquisitions AAFA FAFM FAMCS FAFMFPS IG AIGA DAIGA IGAPPO IGLC AIGRM AIGRampI IGAFA IGAPSA RIGACairo RIGADakar RIGANairobi RIGASingapore

RIGATegucigalpa

APPENDIX V

No of

1

1101 1 1 1 1 1 1 1 1 1 1 1 1 2 2 1 1 1 3 1

12 1 1 1 1 1 1 1

1

41

REPORT DISTRIBUTION

Charge dAffairs of Slovakia Special Adviser for East European Assistance

to the Deputy Secretary of State (DEEA)AAEURDAAEUR EURRME AIDREP Slovakia EURRMEFMS EURRMEECANT Slovakia Desk RFMCCEEBudapest XAPR LEG GC

AAOPS POLICDIEIDI Acquisitions AAFA FAFM FAMCS FAFMFPS IG AIGA DAIGA IGAPPO IGLC AIGRM AIGRampI IGAFA IGAPSA RIGACairo RIGADakar RIGANairobi RIGASingapore

RIGATegucigalpa

APPENDIX V

No of

1

1101 1 1 1 1 1 1 1 1 1 1 1 1 2 2 1 1 1 3 1

12 1 1 1 1 1 1 1

1

41