.” ~.._ .II _.l”“, II_... - ._..... _-.-..--..--.- __.-.._-..-..__-.. -- II ,11 _..._. “_,l__ “I,. _.._ _^_. - _-.-_ - .._._...-._.--.-..._ - ---- -_.-“-.-.--1----.” ..--.. II_. I”c~lrtw;lI*\~ , * I’M) CENTRAL AMERICA Activities of t !he Verification Commission -. .-.*_. - ..__. - (;A() IvSIAI)-!bO-tiT, United States General Accounting Office Washington, D.C. 20648 Comptroller General of the United States B-235946 February 23,199O The Honorable Patrick J. Leahy Chairman, Subcommittee on Foreign Operations Committee on Appropriations United States Senate The Honorable Christopher J. Dodd Chairman, Subcommittee on Western Hemisphere and PeaceCorps Affairs Committee on Foreign Relations United States Senate The Honorable David R. Obey Chairman, Subcommittee on Foreign Operations, Export Financing and Related Programs Committee on Appropriations House of Representatives The Honorable George W. Crockett, Jr. Chairman, Subcommittee on Western Hemisphere Affairs Committee on Foreign Affairs House of Representatives Public Law loo-276 (Apr. 1, 1988) required GAO to independently audit the expenditure of funds to provide assistance to Central America. These funds included $10 million in unobligated fiscal year 1986 funds transferred from the Department of Defense to the Agency for Interna- tional Development (AID) to support activities of the Verification Com- mission The Commission was established to ensure compliance with the Sapoa Agreement between the Nicaraguan government and the Nicara- guan Democratic Resistance in March 1988. The Agreement called for, among other things, a cease-fire and relocation of Resistance forces to zones inside Nicaragua. Results in Brief lion authorized. Political events in Nicaragua prevented the Commission from fully carrying out its verification activities. Thus, the Commission could not use some vehicles and equipment it had purchased for those Page 1 GAO/NSIAD-9066 Central America 5238946 activities. In addition, other items were not used becausethey were impounded by the Nicaraguan government, power or other equipment necessaryfor operation was lacking, or the items were not needed.The Commissioninitially paid high salaries to someof its employeesbut sub- sequently reduced the salaries and recouped some funds. As of February 1990, the Commission’sfuture role was uncertain. Few people remained employed and disposition of equipment had not been determ ined. On March 23,1988, the government of Nicaragua and the Nicaraguan Creation of the Resistancesigned a prelim inary cease-fire agreement at Sapoa,Nicara- Comrnission gua. In addition to a cease-fire,the agreementcalled for relocation of Resistanceforces to seven zonesinside Nicaragua where they would receive humanitarian assistance;amnesty for political prisoners; peace- ful reintegration and full political, economic,and social participation for those who had left Nicaragua; and freedom of expression. The Verifica- tion Commission,to be headed by Cardinal Obando y Bravo of the Nica- raguan Catholic Church and Joao Baena Soares,Secretary General of the Organization of American States (w), was established to verify compliancewith all aspectsof the agreement. Public Law loo-276 transferred $10 m illion of unobligated fiscal year 1986 DefenseDepartment funds to AID for periodic payments to support Commissionactivities. These funds were to remain available until expended. The AID Administrator established a task force to implement this assistanceand other programs funded under the legislation.’After signing a cooperative agreementwith the Commissionin May 1988, AID began advancing funds to the Commission. In March 1988, the Commissionbegan hiring staff, purchasing equip- ment, and conducting initial verification activities.2Specifically, the Car- dinal’s organization investigated and reported on alleged cease-fire and human rights violations. On behalf of the 0~s Secretary General, the W Inter-American Commissionon Human Rights studied and reported on ‘P *L . loo-276 also provided $17.7 million in humanitarian assistice tb the Nicaraguan Resistance and $17.7 million to aid children injured in the Nicaraguan war. 2The Verification Commission was not established as a unified legal entity. The Cardinal’s organiza- tion and the OAS conducted activities and expended funds separately under the cooperative agreement. Page 2 GAO/NSIAD9OB6 Central America B-235946 amnesty eligibility and due processfor membersof the National Guarda From March through June 1988 and in September 1988, the QASSecre- tary General, the Cardinal, or their representatives attended negotia- tions between the Nicaraguan government and the Resistance. Shortly after the Commissionbecameoperational, political events in Nicaragua prevented it from fully carrying out its duties. In June 1988, negotiations between the Resistanceand the Nicaraguan government broke down. The cease-firezonesdid not becomeoperational, and the Nicaraguan government withdrew logistical support of the Commission. In August 1988, the government proposed to lim it the Commission’s duties to verifying cease-fireviolations and issuing statements on nego- tiations that had taken place. In October 1988, the government decreed that any Nicaraguans receiving U.S. funds under Public Law loo-276 were guilty of treason and subject to imprisonment4 Due to the decree and the low level of verification activity, the Cardi- nal’s organization reduced its staff to a core level. Since October 1988, Commissionactivities have been lim ited to occasionalcease-fire investi- gations, verification of the releaseof former National Guard members, and talks with AID, the Nicaraguan government, and the Nicaraguan Resistanceconcerning a possible role in carrying out a plan devised by the Central American presidents to demobilizeand repatriate Resistance members.” Fund Transfers and m ission. The 0~s additionally earned about $107,000 in interest. Thus, Expenditures total funds available to the Commissiontotaled about $4.2 m illion. As of June 30, 1989, the Commissionhad spent about $1.9 m illion, primarily for salaries, vehicles, and equipment. It returned about $2.2 m illion in unspent funds, proceedsfrom vehicle sales, and earned interest to AID 3The National Guard was the militia for the Somoza government, which held power until the current government, headed by the Sandtnistss, took over in 1979. 4A special agreement was to be reached allowing the Commission to continue activities. Although an agreement was never fmaliied, Commission officials stated, in December 1989, that the government has indicated its willingness to allow the Commission to operate by releasing items purchased by the Commission from customs and waiving certain fees. “In August 1989, the presidents met and approved a plan for the demobilization of the Resistance and voluntary repatriation or regional relocation of Resistance members, families, and supporters and other Nicaraguan refugees in Central America. Page 3 GAO/NSIAD4085 Central America and had a remaining balance of about $92,000. Table I.1 in appendix I provides a detailed breakdown of fund transfers and expenditures. The Cardinal established offices in Washington, DC., and Nicaragua-in High Staff Salaries Managua and the seven cease-firezones-and hired advisers, bishops, were Adjusted observers, and support staff to carry out verification duties. Someof the monthly salary levels were set high for Nicaragua, and in two cases,the organization paid salaries that exceededthe monthly limit established by AID guidelines for payment of contractor salaries. Through June 30,1989, the Cardinal’s organization expended about $660,000, or 41 percent of its total expensesfor salary payments. The organization paid monthly salary rate@to the cease-fire zone and Mana- gua-basedobservers and to advisers and bishops on the Managua staff in amounts ranging from $1,000 to $9,000 between April and June 1988. These salaries were high in a country with an average monthly income of about $33. In July 1988, AID questioned the salary levels after receiv- ing the organization’s financial statement for the period May 31 through June 30,1988, and requested an independent audit. Price Waterhouse, a public accounting firm, completed a preliminary review in September 1988 and questioned salary payments totaling $29,700 for two advis- ers-one in Managua and one in Washington, D.C.- becausethe monthly rate paid exceededthe $6,900 limit established for contractors by AID guidelines. Officials from the Cardinal’s organization and AID stated that the Cardinal’s staff was not familiar with these guidelines and therefore included travel and per diem expensesin salary payments. The Cardinal’s organization subsequently reduced the two advisers’ monthly salaries to a level below $6,900 in July 1988 to recoup overpay- ment from prior months and began paying them $5,900 per month in August 1988. The organization also decreasedsalaries for the other advisers, bishops, and observers. “Salary figures reflect the salary rate rather than the actual amount paid per month because some employees worked for only a portion of a given month or for only a portion of the period from April through June 1988. Page 4 GAO/NSIAB9O5~ CentralAmerica . The Cardinal’s organization purchased 19 vehicles and 17 electrical gen- Sotie Unused erators at a total cost of about $399,000. However, the items were never Equipment Remains in used becausethe Nicaraguan government impounded them in June Storage 1988. In February 1989, the government allowed the Cardinal’s organi- zation to sell the vehicles. As of August 1989, the Commissionhad sold 13 vehicles at a total loss of about $17,000. By September 1989, the gov- ernment had released the remaining vehicles and the generators. According to the Cardinal’s staff, these items are now being stored in Managua pending possible use. The OASand Cardinal’s organization were also unable to use certain items due to curtailment of activities resulting from political events dur- ing 1988. Of six vehicles purchased at a total cost of $98,000, the QAS was able to use only one. The 0~s sold two vehicles for about $600 less than originally paid, and the remaining three were stored in Panama. These three vehicles are now in Nicaragua for use in election monitoring activities. The OASand the Cardinal’s organization also purchased items such as a radio communications system and computers that remain in storage in Washington, Miami, and Managua. In some cases,office equipment purchased by the Cardinal’s organiza- tion for the seven zoneswas not used to its fullest extent. For example, one zone did not have telephone service or electricity, rendering a fac- simile machine and electrical equipment useless.If the generators had been available, the zone personnel could have made use of the equip- ment. An air conditioner in another zone was not used becausethe cli- mate is fairly moderate, and a refrigerator was not needed because another was available. As of January 1990, the Commissionwas still operating at a reduced Future Role of the level. The Cardinal’s organization may have a role in monitoring the Commission treatment of Resistancemembers and supporters who decide to repatri- ate to Nicaragua under the Central American presidents’August 1989 plan. However, as of January 1990, the Resistanceremained intact. In June 1989, the OASreceived $1.5 million under Public Law 101-45 to monitor activities leading up to elections to be held in Nicaragua in Feb- ruary 1990. AID supplemented this funding in January 1990 with $2 mil- lion from remaining Commissionfunds authorized under Public Law 100-276.Thus, the w is continuing to monitor election activities as part of its Commissionresponsibilities. Page 5 GAO/NSIALHO85 Central America The results of our review are discussedin more detail in appendix I. Appendix II describesour objectives, scope,and methodology. We did not request that AID provide us with formal written commentson a draft of this report, but we did obtain oral commentsfrom its task force officials on the matters discussed.We also discussedthe applicable portions of the report with officials of the QASand representatives from the Cardinal’s organization. The report has been revised to reflect the commentsmade by each of these parties. Copies of this report will be sent to interested congressionalcommittees; the Administrator of AID; the Secretary of State; and the Director, Office of Managementand Budget. The report was prepared under the direc- tion of Joseph E. Kelley, Director, Security and International Relations Issues.He can be reached on (202) 275-4128 if you or your staff have any questions. Charles A. Bowsher Comptroller General of the United States Page 6 GAO/NSIADM-fJ5 Central America Y Page 7 GAO/NSIAD-90435 Central America Contents A utter 1 / Appendix I 10 Activities of the Commission Activities and Impact of Political Events 12 Fund Transfers and Expenditures 13 Verification OASActivities 15 C&mission Activities of the Cardinal’s Organization 17 Future Role of the Commission 23 Abpendix II 25 Objectives, Scope, and lk$ethodology Tkbles Table 1.1: Funding and Expenditures of the Verification 14 Commission From March 31, 1988, Through June 30, 1989 Table 1.2:OAS Net Expenditures for Verification 16 Commission Activities From March 31, 1988, Through June 30,1989 Table 1.3:Expenditures of the Cardinal’s Organization for 18 Verification Commission Activities From March 3 1, 1988, Through June 30,1989 Figures Figure I. 1: Map of Nicaragua Showing the Seven Cease- 10 Fire Zones Established by the Sapoa Agreement Figure 1.2: Vehicles Impounded in Managua Dealerships 22 (May 1988) Abbreviations AID Agency for International Development OAS Organization of American States Page 8 GAO/NSIAD90-65 Central America Page 9 GAO/NSLAD-9065 Central America Appendix I &tivities of the Verification Commission On March 23,1988, the government of Nicaragua and the Nicaraguan Resistancesigned a preliminary cease-fire agreement at Sapoa, Nicara- gua. In addition to cessationof hostilities, the SapoaAgreement called for relocation of Resistanceforces to seven zones(SeeFigure I. 1) inside Nicaragua where they would receive humanitarian assistance;amnesty for political prisoners; peaceful reintegration and full political, eco- nomic, and social participation for those who had left Nicaragua; and freedom of expression. It also established the Verification Commission, to be headed by Cardinal Obando y Bravo, head of the Catholic Church in Nicaragua, and Joao Baena Soares,Secretary General of the Organiza- tion of American States (OAS), to verify compliance with all aspectsof the agreement. Flguro 1.1: Map of Nicaragua Showing the Seven Ceare-Fire Zones Established by the Sapoa Agreement HONDURAS D PACIFIC OCEAN CARIBBEAN COSTA RICA \ Page IO GAO/NSIAD4086 Central America Appendix I Activitlee of the Verifkation Commbeion Public Law loo-276 transferred $10 m illion of unobligated fiscal year 1986 DefenseDepartment funds to the Agency for International Devel- opment (AID) for periodic payments to support Commissionactivities. These funds were to remain available until expended. The AID Adminis- trator established a Task Force on Humanitarian Assistanceto imple- ment this assistanceand other programs funded under the legislation. In April 1988, the W A requested S that AID advance the entire $10 m illion to the w treasurer to support Commissionactivities. Before agreeing to transfer funds, the AID Task Force Director requested that the 0~s Secre- tary General and the Cardinal submit a program description and budget. The OASsubmitted this information on behalf of the Commissionin early May 1988. By the end of May 1988, the AID director had approved the submission,signed a cooperative agreementwith representatives of the OASSecretary General and the Cardinal, and began providing funds in periodic payments. As of June 30,1989, AID had advanced about $4.1 m illion to the Commission. Under the cooperative agreement,the Commissionwas responsible for establishing a system in the seven zonesto verify . the cease-fire and relocation of Resistanceforces; . the delivery of humanitarian aid to Resistanceforces through neutral organizations; . freedom of expression in Nicaragua; . Resistanceparticipation in the National Dialogue, a forum for talks between the government of Nicaragua and the civic opposition; . guarantees of political, social, and economicrights for expatriates who had returned to Nicaragua, including assurancesagainst persecution; . participation in Central American Parliament elections and Nicaraguan municipal and national elections by Nicaraguans who had peacefully integrated; and . compliancewith any subsequent agreementsbetween the Nicaraguan government and the Resistance. In addition, the OAS Secretary General was responsible for facilitating and monitoring the amnesty process for political prisoners, including membersof the National Guard, and verifying their release. Page 11 GAO/NSIAD-90-M Central America Appendix I AcUvitiem of the Veriflcntion Chmmiseion 1 Beginning in March 1988, the OASand the Cardinal’s organization began C&n-missionActivities hiring staff, purchasing equipment, and conducting verification activi- arid Impact of Political ties. The Cardinal’s organization primarily investigated and reported on Eients- alleged cease-fire and human rights violations by the Nicaraguan gov- ernment and the Resistance.On behalf of the OASSecretary General, the Inter-American Commissionon Human Rights studied and reported on amnesty eligibility and due process for former membersof the National Guard. Both the cw Secretary General and the Cardinal, or their repre- sentatives, attended negotiating meetings between the Nicaraguan gov- ernment and the Resistanceheld from March through June 1988 and in September 1988. However, shortly after the Commissionbecameoperational, political events in Nicaragua prevented it from fully carrying out its duties. On June 9,1988, negotiations between the Resistanceand the Nicaraguan government on the terms of the SapoaAgreement broke down, and the government withdrew its support of the Commission.The cease-fire zonesdid not becomeoperational, and most Resistancemembersand their fam ilies went to Honduras to receive humanitarian assistancefrom AID.’ In August 1988, the Nicaraguan government proposed lim iting the Commission’sduties to verifying cease-fire violations and issuing state- ments on negotiations that had taken place. On October 6, 1988, the Nicaraguan government decreed that any Nicaraguans receiving funds under Public Law loo-276 were guilty of treason and subject to 4 to 12 years in prison2 Due to the decree and the low level of verification activity, the Cardinal reduced his staff to a core level. Since that time, Commissionactivities have been lim ited to peri- odic cease-fire investigations, receiving and forwarding to the Nicara- guan government allegations of human rights violations, verification of the March 1989 release of former National Guard members,and discus- sions with AID, the Nicaraguan government and the Nicaraguan Resis- tance concerning the Commission’srole in carrying out a plan devised by the five Central American presidents in August 1989 to demobilize and ‘AID began delivering humanltarlan assistance to Resistance members in Honduras in mid-April 1988 while the Resistance and Nicaraguan government were attempting to reach agreement on operation of the cease-fire zones. After negotiations broke down, AID continued to deliver assistance in Honduras. *According to Commission officials, this decree stipulated that the Commission could continue to use P.L. loo-276 funds upon reaching agreement with the Nicaraguan government on allowable activities. Although no agreement was reached, these officials stated, in December 1989, that the government has indicated its willingness to allow the Commission to operate by releasing items purchased by the Commission from customs and waiving certain fees. Page 12 GAO/NSIAtHO-65 Central America Appendix I Acthititm of the Verlf’ication C%mmbeion repatriate Resistancemembers.3In November 1989, the Cardinal and the Secretary General witnessed negotiations between the Nicaraguan gov- ernment and the Resistancein New York and Washington, D.C. Fued Transfers and the O.Utreasurer, with a designated amount to be further disbursed to Expenditures the Cardinal’s organization. The amounts transferred were based on expensesincurred in the previous month and a proposed budget to cover projected expensesfor the following month. As of June 30,1989, AID had advanced about $4 m illion to the OASand about $111,000 directly to the Cardinal’s organizationP The OASdis- bursed about $1.87 m illion to the Cardinal’s organization, retained about $2.1 m illion, and earned about $107,000 in interest. Total funds availa- ble to the Commissiontotaled about $4.2 m illion. Of these funds, the Commissionspent about $1.9 m illion; returned about $2.2 m illion in unspent funds, proceedsfrom vehicle sales and earned interest to AID”; and had a remaining balance of about $92,000. Table I. 1 summarizesthe Commission’sfunding and expenditures from March 31,1988, through June 30,1989. aIn August 1989, the presidents met and approved a plan for the demobilization of the Resistance and voluntary repatriation or regional relocation of Resistance members, families, and supporters, and other Nicaraguan refugees in Central America. 4Accordlng to an AID official, AID began advancing funds directly to the Cardinal’s organization in March 1989, after Commlssion activities had been curtalled and the OAS had experienced severe staff cutbacks. “Of these funds, AID returned about $102,000 ln interest earned by the OAS to the U.S. Treasury and credited about $2.1 million in unspent funds and proceeds from vehicle sales to the AID account for the Commission. Page 13 GAO/NSIALMO86 Central America Appendix I Activitkm of the Verifkation C-ommhlon Tab 1.1: Funding and Expenditures of the erlflcatlon Commission From March Funding Amount 31, : 988, Through June 30,1989 flAS -. ..s $2.125085 - ~I Cardinal 1 ,960,496a Interest earned -- -- I0A.S) \- -, 106,757 Total $4,212,330 Expenditures OAS Expenditures 359,925b Returned to AID 1856,765 Total $2,216,710 Cardinal Expenditures 1,567,61 7b Returned to AID 335,561 Total $1,903,178 Total Exwnditures $4,119,= Ending balance $92,450 %cIudes $1,869,854 disbursed by the OAS and $110,642 transferred directly from AID bTables 1.2and I.3 provide a further breakdown of expenditures. Accounting and Audit The cooperative agreementrequired the QASSecretary General and the Requirements Cardinal’s organization to maintain accounting records, report periodi- cally to AID on the use of program funds, and hire an independent audi- tor. The QASBoard of External Auditors audited QASexpenditures for Commissionactivities as part of its annual financial audit and issued a financial statement that reflected expenditures as of December31, 1988. In June 1988, the Cardinal’s organization contracted with Raffa Associ- ates, a public accounting firm , to maintain accounting records. At AID’S request, the organization contracted with Price Waterhouse, also a pub- lic accounting firm , in August 1988 to conduct an independent concur- rent financial and compliance audit. As of January 1990, Price Waterhouse had issued quarterly reports on expenditures incurred from June 30,1988, through March 31,1989, and had found no material weaknessesin the organization’s internal accounting system, However, the reports pointed out the need for more detailed supporting documentation for purchases and payments made by the Cardinal’s organization. According to the Raffa accountant, the Page 14 GAO/NSIAD9086 Central America I Appendix I Activities of the Verification C o n n n l s s i o n organizatio nh a s s u b s e q u e n tlyi m p r o v e dits submissiono f s u p p o r tin g d o c u m e n ta tio n . A IDO versight A ID Task Forceo fficials said th a t their role in administeringC o m m ission fu n d s h a s b e e nto review a n d a p p r o v eth e p r o g r a mdescriptiona n d sub- s e q u e n pt r o p o s e db u d g e tsa n d to transfer fu n d s w h e n n e e d e dT. h e y stated th a t their review o f e x p e n d i turesh a s b e e nlim ite d to ensuring th a t fu n d e d activities w e r e relatedto th e verification process.In their view, a d d i tio n a linvolvementin th e C o m m ission’s o p e r a tio n sis n o t appropriateb e c a u s eth e C o m m issionis a n e u tral organizatio na n d shouldn o t b e influencedby a n y g o v e r n m e n t. / T h e O A SS e c r e taryG e n e r a relied l primarily o n his 0 ~ sstaff in W a s h i n g - O A SA ctivities to n , D .C.,a n d two a d d i tio n a le m p l o y e e to s p e r fo r m C o m m issiond u ties. T h e s epersonstraveledperiodicallyto N i c a r a g u a In . a d d i tio n ,1 6 per- sonsfrom th e O A SIn te r - A m e r i c a nC o m m issiono n H u m a nR i g h tstraveled to N i c a r a g u ain th e springo f 1 9 8 8to evaluateth e a m n e s tyeligibility o f prisonersw h o w e r e m e m b e r so f th e fo r m e r r e g i m e ’sN a tio n a lG u a r d . T h e S e c r e taryG e n e r a al n d his staff a tte n d e dn e g o tia tin gm e e tin g s b e tweenth e g o v e r n m e not f N i c a r a g u aa n d th e Resistancefrom M a r c h th r o u g h J u n e 1 9 8 8a n d in S e p te m b e 1r 9 8 8in C e n tralA m e r i c a .In M a r c h 1 9 8 9 ,th e y witnessedth e p a r d o no f 1 ,8 9 4fo r m e r N a tio n a lG u a r dm e m - bers a n d th e releaseo f 1 ,6 4 9m e m b e r so f this g r o u pfrom prison in Nicaragua. E x p e n d itu r e s A s o f J u n e 3 0 , 1 9 8 9 ,th e 0 ~ sh a d receiveda to tal i n c o m eo f $ 4 .1 m illion to carry o u t C o m m issionactivities, includinga b o u t$ 4 m illion in fu n d s transferredfrom A ID a n d a b o u t$ 1 1 0 ,0 0 0in interest e a r n e do n th e trans- ferred fu n d s . O f th e $ 4 .1 m illion, Q A Sdisburseda b o u t$ 1 .8 7m illion to th e Cardinal,e x p e n d e da b o u t$ 3 6 0 ,0 0 0a, n d retu r n e da b o u t$ 1 .8 6m il- lion to A ID. T h e Q A eSx p e n d e dfu n d s primarily for salaries,travel,”equip- m e n t, a n d vehicles.T h e fu n d s retu r n e dto A ID includeda b o u t $ 1 .7 5m illion in u n s p e n tfu n d s in February 1 9 8 9a n d a b o u t$ 1 0 2 ,0 0 0in interest e a r n e dth r o u g h January 1 9 8 9 . “T h e salaries of r e g u l a r O A Sp e r s o n n e la n d the travel e x p e n s e si n c u r r e d b y the SecretaryG e n e r a l w e r e not c h a r g e dto this grant. A c c o r d i n g to a n O A Sofficial, these f u n d i n g decisionsw e r e m a d e in o r d e r to maintain i n d e p e n d e n c efrom the unilateral n a t u r e of P L l o o - 2 7 6 funds. Page 16 G A O / N S I A D - 9 0 6 8 Central A m e r i c a :, Appendix I Actlvkies of the Verification Commiesion Table I.2 shows net expenditures incurred by OASfrom March 31, 1988, through June 30,1989. Tab& 1.2: OAS Net Expenditures for Verifikation Commission Actlvitiea From Exoenditure Amount March 31,1988, Through June 30,1989 Inter-American Commission Salaries $4,819 International travel 30,537 Eaubment - 1,234 Total $36,590 Secretary General’s Staff Salaries $16,972 International travel 87,460 Vehicles 68,299 Equipment 118,556 Total $291,287 Administrative swoort 32,048 Grand Total $359.925 Some Vehicles and The OAS purchased six vehicles and various equipment, such as a radio Equipment Could Not Be communicationssystem, cameras,and a generator, for use in conducting verification activities in Nicaragua. Someof these items could not be Used used due to the low level of verification activity and were either sold or stored pending possible use for OASelection monitoring activities. Of the six vehicles, the OASsold two back to a Panamaniandealer for a total of $28,600-about $600 less than originally paid becausethe OAS had to pay customs fees and storage and handling costs. One of the remaining vehicles was sent to Managua and has been used by OASper- sonnel for Commissionbusiness.The other three had been stored at the U.S. Southern Commandin Panamabut are now in country and are being used for 0~s election monitoring activities. Part of the radio system is stored in Washington, D.C., and part is being used in Nicaragua. Other items are in Washington and Managua. Accord- ing to OASofficials, they are able to use someof these items for election Y monitoring activities in Nicaragua. Page 16 GAO/NSLUMO-65 Central America Appendix I Actlvitiee of the Verification Connnid~n Beginning in March 1988, the Cardinal established offices in Washing- Acqivities of the ton, DC., and Managua, Nicaragua; hired field observers; and purchased Caddinal’s equipment and vehicles for use in the seven cease-fire zones.The Wash- Orgjanization ington office employed three advisers to coordinate on behalf of the Car- dinal with AID, the State Department, and the QASand to conduct public affairs. These advisers also hired the accounting services on behalf of the Cardinal. Two additional advisers were employed in M iam i to over- I see equipment purchases and to perform other administrative duties. In May 1988, the Cardinal opened an office in Managua and by June 30, 1988, had hired a full-time staff of 83 employeesin Nicaragua, including 23 at the Managua office and 60 in the cease-firezones.The Managua staff included three advisers, five observers, and three bishops responsi- ble for oversight of verification activities in the zonesand 12 support personnel such as secretaries,security guards, and drivers. In addition, the office employed three part-time instructors to train observers in investigating and documenting cease-fire and human rights violations. Each of the seven zoneswas staffed by a coordinating observer, who supervised between 3 and 14 senior observers and “apoyos,” or support- ing observers. The apoyos were natives of the area and reported alleged cease-fire and human rights violations. The coordinator then directed the senior observers, who were often legal professionals with human rights experience, to investigate the claims. Each zone’s coordinator pre- pared periodic reports on the results of the investigations and submitted them to the Cardinal and the State Department. In addition to written reports, several video reports were issued. Since the Nicaraguan government’s October 1988 decreethat prohibited the use of Public Law loo-276 funds, the Cardinal’s organization has retained only a few employees.As of October 1988, the bishops, observ- ers, and M iam i advisers were no longer employed. As of June 30, 1989, the Managua staff consisted of two advisers, a bookkeeper, two secre- taries, and a driver. Their work is lim ited to periodically reporting infor- mation to the Washington staff on cease-fireviolations and the status of talks between the Cardinal and the Nicaraguan government on future Commissionwork. Expenditures- As of June 30, 1989, the Cardinal’s organization had received a total income of about $1.9 m illion to carry out Commissionactivities, includ- ing $1.87 m illion disbursed by the QAStreasurer and about $111,000 transferred directly from AID. Of these funds, the organization expended Page 17 GAO/NSWLHNIB Central America Appends I Activities of the Verification Commission about $1.6 m illion and returned about $336,000 in proceedsfrom vehicle sales and excessfunds to AID. Expenditures were primarily for salaries and the purchase or rental of vehicles, generators, and other equipment. Table I.3 summarizesexpenditures by the Cardinal’s organization from March 31, 1988, through June 30,1989. TabI+ 1.3: Expenditures of the Cardinal’s Org@izstion for Verification Commission Expenditure Amount Activities From March 31,1988, Through Salaries Jury 30,1989 Advisers $357,267 Observers 167,303 Bishops 45,420 Support staff 87,738 Instructors 1,900 Total $659,628 Equipment and vehicles Office equipment purchase $176,829 Office equipment rental 3,446 Vehicle burchase 182,341 Vehicle rental 7,136 Other equipment purchase 136,501 Other equipment rental 1,450 Total $507,703 Washington office Rent $26,454 Telephone 16,359 Subolies II 2,558 Printinq 3,605 Newsletter 12,496 Emblover taxes I , 14,967 Miscellaneous 5,167 Total 81,606 (continued) Y Page 16 GAO/NSIAD9O85 Central America \ Appendix I Activities of the Verlf’lcntion Commission Expenditure Amount Managua office I__ Rent $57,500 Telephone 1,349 Maintenance 2,152 Supplies 4,339 Printing 2,473 Mules 2,122 Miscellaneous 4,432 Total $74,367 Accounting/legal/ translation services 144,234 Travel/per diem expense 100,080 Grand Total $1,507,618 Some Staff Were Paid High As table I.3 indicates, the Cardinal’s organization expended about Salaries $660,000, or 41 percent of its total expensesthrough June 30,1989, for salaries. Monthly salary levels for someemployeesin Nicaragua were high compared to the average salary paid to a Nicaraguan, and in two cases,the organization paid salaries that exceededthe monthly limit established in AID regulations. The organization paid monthly salary rates to the cease-fire zone and Managua-basedobservers and to advisers and bishops on the Managua staff in amounts ranging from $1,000 to $9,000 between April and June 1988. Specifically, the apoyos in the zonesreceived the US. dollar equivalent of $1,000 per month in Nicaraguan cordobas; all other per- sonnel received U.S. dollars.7The zone observers received $2,000 per month, and the five Managua-basedobservers were paid $3,000 per month. Monthly salaries for the three advisors ranged from $1,800 to $9,000, and the three bishops received $5,000. These salaries were high in a country with an average monthly income of about $33. The Cardinal’s staff explained that the Nicaraguan gov- ernment had initially intended that all salaries paid in US. dollars be exchanged for cordobas at the official rate of 13 cordobas to $1. Eco- nomic indicators at that time predicted inflation and a devaluation of Y 7The Cardinal’s staff told us that since the apoyos were native to their remote regions, they would have little need for dollars. On the other hand, many of the senior observers often visited their fami- lies in Managua, where U.S. dollars are required to purchase many commodities. Page 19 GAO/NSIAD-9985 Ckntrd America Appendix I Activities of the Verification Commission the cordoba; therefore, they believed that these salary levels were nec- essary to maintain adequate buying power. However, the government did not enact the currency exchangeprogram , and the organization con- tinued to pay salaries in US. dollars. In July 1988, AID officials questioned the level of salary payments after receiving the organization’s statement of expensesfor May 31 through June 30, 1988, and its budget request for July 1988. At AID’S request, the Cardinal’s organization hired Price Waterhouse in August 1988 to audit the statement and subsequentexpenditures. The organization discontin- ued salary payments until after Price Waterhouse auditors completed a prelim inary review in September 1988. In its review, Price Waterhousequestioned salary payments totaling $29,700,8including salaries for one Managua adviser and a Washington. D.C., adviser who had been paid at a rate of $9,000 per month in May and June 1988. These salaries exceededthe $5,900 lim it established in AID Handbook 14 for contractor salaries. The Cardinal’s staff told us that prior to the Price Waterhouse audit, they had been unfam iliar with AID guidelines regarding salary lim its and included travel and per diem expensesin salary payments. The Cardinal’s organization subsequently reduced the two advisers’ monthly salaries for the month of July 1988 to a level below $5,900 to recoup overpayment from prior months and began paying them at a rate of $5,900 per month for August and subsequentmonths. The organiza- tion also reduced salaries for the three bishops and the zone and Mana- gua-basedobservers. For July 1988 and subsequentmonths, the bishops received $2,500 per month, and the zone observers were paid only for days worked. By September 1988, their monthly salaries ranged from $23 to $1,300. The salary rates for the Managua-basedobservers were reduced to $1,500 per month beginning in July 1988 for two observers and in Sep- tember 1988 for the other three. The three bishops were no longer employed after September 1988, and no observers were employed after October 1988. “Price Waterhouse also questioned $13,346 for travel, telephone, and other expenses because of inad- equate documentation. In response, the Cardinal’s organization submitted documentation, offset disal- lowed costs against subsequent salary payments, or obtained reimbursement for those costs. Page 20 GAO/NSIAD90-55 Central America Appendix I of the Verification Actititiea Gmmbsion These reductions significantly decreasedoverall salary expenses.In June 1988, the total amount expended for salaries was $156,846. This figure dropped to $98,413 in July and $39,121 in October 1988. From January through June 1989, the monthly salary expensefor the entire Cardinal’s organization averaged about $22,760. Some Equipment From April through September1988, the Cardinal’s organization pur- Pu4chasedCould Not Be chased someitems for the offices in the cease-firezonesthat could not be used becausethey had been impounded by the Nicaraguan govern- Us$d ment, conditions in Nicaragua curtailed Commissionactivities, or power or other equipment necessaryfor operation was lacking. Also, some I equipment was not used becauseit was excessor inappropriate for existing conditions. For example, the organization purchased 19 vehicles and 17 generators at a total cost of about $399,000. The generators were needed because electricity is periodically cut off in Nicaragua, and one zone does not have electricity at all. However, the items were never used because, after withdrawing support of the Commissionin June 1988, the Nicara- guan government impounded the vehicles in car dealerships and the generators in a government warehouse. In February 1989, the government allowed the Cardinal’s organization to sell the vehicles but would not releasethem for Commissionuse. As of August 31,1989, the organization had sold 13 vehicles to the Managua dealers from which they were purchased and returned $171,866 to AID. The Cardinal’s staff attempted to avoid a loss on the vehicle sales;how- ever, twelve of these vehicles were sold for about 10 percent less than their original cost, for a loss of about $17,000. The organization decided to retain the remaining six vehicles for possible future use. The Nicara- guan government releasedthese vehicles in September 1989 and the generators in August 1989 and waived storage fees. According to the Cardinal’s staff, the vehicles and generators are now being stored in Managua. Page 21 GAO/NSIAD-90-66 Central America Appendix I Activities of the Verification Commission FiguCe 1.2: Vehicles Impounded in Msnbgua Dealsnhipr (May 1988) The organization also purchased equipment that could not be used due to the curtailment of verification activities resulting from political events during 1988. Of 13 computers purchased at a cost of about $32,000 for use in Washington,D.C., Managua,and the cease-firezones, only four could be used-two in the Washington office and two in the Managua office. According to the Cardinal’s staff, the remaining nine are now being stored in M iam i, pending possible use. In somecases,cease-firezone personnel could not use the equipment to its fullest extent. For example, one zone near the Atlantic Coast did not have telephone service or electricity, rendering the facsimile machine and other equipment useless.If the generators had been available, zone personnel could have made use of the equipment. The coordinating observer of another zone told us that he did not use the air conditioner becausethe climate in that zone is fairly moderate, and he did not use the refrigerator becauseanother was available. He stated that he rarely used the facsimile machine becausethe telephone lines are inadequate and that one videocamerarather than two would probably have been sufficient. The Cardinal’s staff in Managua stated that offices in the other five zonesalso had someequipment that was not used. Officials from the Cardinal’s organization acknowledgedthat they used poor judgment regarding someequipment purchasesand salary levels. They attributed their decisionsto enthusiasmin getting the program Page 22 GAO/NSIAIWO%S Central America . Appendix I Activities of the Verlflcation Commlsdon started, a desire to be ready as soon as the cease-fire zonesbecameoper- ational, and uncertainty over how these zoneswould operate. Further, the changing political climate made it difficult to assessthe type and amount of equipment that would be needed.Although talks between the Resistanceand the Nicaraguan government broke down in June 1988, the organization continued to purchase equipment in anticipation that future talks might result in opening of the zonesand additional verifica- tion activities. The two parties met again in Guatemala on September 1988 but did not reach agreement. An AID official stated that AID was aware of the type of equipment being purchased and that equipment had been impounded by the Nicaraguan government; however, AID was not aware that some equipment could not be used. AID'S position is that Commissionofficials are responsible for purchasing and other operational decisions and that AID'S role should be limited to reviewing expenditures to determine if they are reasonable. The cooperative agreement does not require AID to approve purchases and other payments before expenditures are incurred. The Commissionis still operating at a reduced level, and its future role Future Role of the is uncertain. The Commissionand the government of Nicaragua have Commission discussedthe possibility of a role for the Cardinal’s organization in car- rying out the Central American presidents’August 1989 plan calling for demobilization, relocation, or repatriation of Resistancemembers.Also, according to the Cardinal’s staff, the State Department submitted a pro- posal in September 1989 to the Cardinal to use his organization to moni- tor alleged human rights violations against Resistancemembers and supporters who decide to repatriate, if the Nicaraguan government allows such verification activity to take place. Although the presidents’plan called for disbanding of the Resistanceby December8,1989, as of February 1990, the Resistanceremained intact. Thus, the role of the Cardinal’s organization is uncertain. Although observers previously employed by the organization have not been work- ing since October 1988, the Cardinal’s staff believes that they could quickly resume their duties. In addition, much of the equipment pur- chased for the zonesremains in Nicaragua and is thus available. AID has elected to defer any decisions regarding disposition of the equipment, pending the outcome of any decisions to demobilize and repatriate the Resistance. Page 23 GAO/NSIALHO86 Central America I - Appendix I Activities of the Verification C h n m i s e i o n TheO A S is currently m o n i toringactivities leadingu p to electionsto b e h e l d in N i c a r a g u ain February 1 9 9 0 .PublicL a w 1 0 1 - 4 5e, n a c te do n J u n e 3 0 , 1 9 8 9 ,a u thorized$ 1 .6 m illion for th e w to m o n i tor election-related activities. T o s u p p l e m e nthist fu n d i n g ,O A S r e q u e s te dA ID to provide $ 2 m illion from C o m m issionfu n d s a u thorizedu n d e rPublicL a w lO O - 2 7 6 .In January 1 9 9 0 ,A ID transferredth e s efu n d s to th e O A Sa,n d th e O A S is c o n tin u i n gth e m o n i toringactivity as p a r t o f its C o m m ission responsibilities. Page 24 G A O / N S I A D - 9 0 4 %Central A m e r i c a ’ Appendix II Ol$jectives,Scope,and Methodology Public Law loo-276 required GAO to independently audit funds provided to support the Verification Commission,Our objectives were to examine and report on the use of funds expended by the Commission.We con- ducted our review at AID, OAS,and offices of the Cardinal’s organization, Raffa Associates, and Price Waterhouse in Washington, D.C. In Nicara- gua, we met with U.S. Embassy officials and Cardinal Obando y Bravo and his staff in Managua and visited the Cardinal’s office located in La Fonsecain the Chontales province. At each location, we interviewed knowledgeable officials and reviewed pertinent documents, including the Sapoa agreement,accounting records, financial statements, audit reports, and invoices. We also observed the use of vehicles and equipment by the Cardinal’s organiza- tion in Managua and La Fonseca. We performed our review between April 1988 and October 1989 in accordancewith generally accepted auditing standards. (489781) Page 25 GAO/NSL4IbfM-66 Central America - ___.-.__. _-.-_-_ _-__._. _ .-.__ ““_ .._” “.l. I -.-. _.._-- .___ -._---l--____ ----~ --~-- I J.S. (;twtvaI Aworrrrt.ing O ffice Post, O ff’i<Y~ ~3ox 60 15 (;;lit,htwburg, Maryland 20877 ‘I’t~lc~pholw 20%27!x241 ‘J ’ht~firsl, fivth cwpit~s of Citdl rtlporl. are frtw. Additional copi It’ $2.00 twh ‘I’htw~ is ;I. 25% discount. on orders for 100 or mart! copiw ma .i s ingle ;rtltlrtw. Ordt~rs rnrrst. be prttjmid by cash or by check or tnont?y order made oul, I.0 Lht! Supt~rint,t~ndent of Docunwnts. P
Central America: Activities of the Verification Commission
Published by the Government Accountability Office on 1990-02-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)