_.--_---_ -- -’ ‘- INTERNATIONAL TRADE Export Enhancement Program Bonus Overpayments (i/IO NSIAI)-!Jo-X:l United States General Accounting Office Washington, D.C. 20548 National Security and International Affairs Division B-23792 1 February 7,lQQO , Mr. R.E. Anderson Jr., Administrator Foreign Agricultural Service Department of Agriculture Dear Mr. Anderson: At the,request of several Members of Congress we are currently review- ing the Export Enhancement Program (EEP). Under EEP,,SU~~~US govern- ment-owned agricultural commodities are made available as bonuses to U.S. exporters to expand sales in specific markets. These bonuses enable exporters to lower the prices of U.S. agricultural commodities and make them competitive with subsidized foreign agricultural exports. One phase of our review is an examination of the process used to distribute generic commodity certificates as bonuses to U.S. exporters. Our objec- tives in this phase were to determine (1) whether adequate internal con- trols were in place for the bonus payment process, and (2) whether any overpayments had been made. Our review indicated that internal controls over the bonus payment pro- Results in Brief cess were not adequate to ensure that bonus payments were properly made. We identified eight cases in which unauthorized overpayments totaling about $635,000 had apparently been made. Under EEP,the Foreign Agricultural Service (FAS) approves a commodity Ba@kground sales agreement between an exporter and a participating country for a specified quantity of agricultural goods that can be exceeded by up to 5 percent. Once the exporter has satisfactorily completed the shipment and provided proof of performance, the Agricultural Stabilization and Conservation Service (AXS) in Kansas City, Missouri, awards generic commodity bonus certificates to the exporter. The amount of the bonus awarded is based on the quantity shipped. However, if the quantity shipped exceeds 106 percent of the approved sales quantity, the excess is not eligible for a bonus. Any bonus awarded for these excess quanti- ties shipped is considered an overpayment. Over $2.6 billion worth of surplus U.S. agricultural commodities have been made available as bonuses to eligible US. exporters from the incep- tion of the program in 1986 through October 26,1989. These bonuses Page 1 GAO/NSIAD90-83IntemationalTrade 8237921 were spread among 105 initiatives (country/commodity pairings) target- / ing 66 countries and 12 commodities. An additional 144 quantity alloca- tions were approved and announced under these initiatives through September 29,1989. making EEP bonus payments. Because ASCShad not consistently kept an accurate tally of the amount shipped under a particular contract and continually compared that figure to the approved sales quantity, the ASCSdid not routinely know if the 105percent ceiling had been exceeded. Further, bonus payment calculations were not independently reviewed by anyone. The Federal Managers’ Financial Integrity Act of 1982 (31 USC. 3512 (b)) requires executive agencies to establish and maintain systems of internal control which are to be consistent with the Comptroller Gen- eral’s Standards for Internal Controls in the Federal Government. These standards call for internal controls to provide reasonable assurance that the use of resources is consistent with applicable laws, regulations, and policies; resources are safeguarded against waste, loss, or abuse; and reliable data are maintained and fairly reported. The standards recog- nize that the cost of internal control should not exceed the benefits to be derived and that judgment needs to be exercised in determining the extent of control needed. Before our review, FAS officials were aware that the bonus payment pro- cess lacked an adequate internal control system. The Export Credits sec- tion of FM had submitted a proposal to establish such internal controls to the FAS Information Systems Management Division for review. The purpose of the proposal was to greatly reduce the possibility of over- payments by strengthening ASCS’Sability to determine and monitor the amount of payment required. According to FM officials, this proposal was approved for inclusion in the Information Resources Management Plan for fiscal years 1990 to 1994 and given priority over other FM proposals. However, the priority was reduced after review by FAS management, At the time of our review, the proposal had not been implemented. Page 2 GAO/NSIADBO-83 International Trade 5227221 We obtained an FAS database which contained EEP contract information. Extent of Bonus Using a computer program, we examined the figures in the database for Overpayments every EEP contract approved from May 1986 through September 30, 1988. We compared actual bonuses awarded with the maximum bonuses allowed under each of 2,146 contracts and identified 69 apparent overpayments. Of the 69 cases, we found that 49 were due to differences in rounding or that they involved overpayments that ranged from one cent to $666.91. Our analysis of the relevant contract files kept at the ASCS’SSales Invoice Branch in Kansas City showed that for 12 of the remaining 20 contracts, keypunch errors had been made when ASCSentered con- tract or payment information or that FAS had already reconciled or recouped the overpayment. The eight remaining apparent overpayments totaled $634,926. Two of the eight accounted for close to $600,000 of this amount. We discussed these cases with ASCSstaff in Kansas City, who agreed that based on the information in their files, these eight cases repre- sented overpayments. During a meeting in November 1989, we informed FM officials in Washington, D.C., of the apparent overpayments. They said that they would investigate the circumstances of each case to con- firm whether any overpayments had been made. These officials said they would act to recoup any overpayments from the exporters. Appen- dix I provides more detailed information on these apparent overpayments. We recommend that the Administrator of FAS complete the review of the Rebommendations eight apparent overpayments and recover any actual overpayments from the exporters. While we recognize the extent of significant over- payments is limited, we believe that there is sufficient potential for fur- ther occurrences of overpayments to warrant better internal controls. Therefore, we also recommend that you develop sufficient internal con- trols over the bonus payment process to safeguard against future overpayments. * Page 2 GAO/NSlAD-QOM lntemational Trade B-237921 The principal GAO staff members responsible for this review were Phillip J. Thomas, Juliann M. Gerkens, Michael J. Morgan, Larry D. Van Sickle, and Shirley A. Franklin. If you have any questions, please feel free to call me at (202) 275-4812. We would appreciate learning of whatever actions you have taken or plan to take with regard to our recommendations. Sincerely yours, Allan I. Mendelowitz Director, International Trade and Finance Issues Page 4 GAO/NSIAD-90-83 International Trade Page 5 GAO/NSIAD-90-83 Intemational Trade Lebter 1 / AIbpendix I 8 Pdyments That Edceededthe 1Oi5-PercentLimit ~_-- Appendix II 9 Oejectives, Scope,and Mqkhodology Abbreviations ASCS Agricultural Stabilization and Conservation Service EEP Export Enhancement Program FM Foreign Agricultural Service Page 6 GAO/NSLAD-90433 International Trade ,I y c -...--,i..- .______ Page 7 GAO/NSIAD-SO-83 1nternationa.l Trade Appendix I l3ayments That Exceededthe 105-PercentLimit Contract number Ma”d:i? Amount paid Amount overpaid 500-l 1-FP-6 $1,729,367 $2,057,664 $328,297 512-50-W-43C 94,142 357,354 263,212 500-l A-W-74C 711,659 738,092 26,433 500-l A-W-69C 636.035 641.633 5.597 500-86-W-l c 743,061 748,233 5,173 506.39.E-29C 751 4,950 4,199 505-2-WF-59C 989.127 990.140 1.013 500-8-R-2 902,580 903,582 1,002 Total $634,926 Note: Figures may not add due to rounding Page 8 GAO/NSIAD-SO-83 International Trade 8,” : *Appendix II Ol)jectives, Scope,and Methodology Objectives of this study were to determine (1) whether adequate inter- nal controls were in place for the bonus payment process associated with the Export Enhancement Program (EEP), and (2) whether any over- payments had been made. Information for this report was obtained from our review of documents and interviews with officials at the Agricultural Stabilization and Con- servation Service (ASS) offices in Kansas City, Missouri, and the Foreign Agricultural Service (FM) offices in Washington, DC.. We interviewed ASCS officials in Kansas City to develop an understand- ing of what internal controls were established to ensure that payments were processed according to program guidelines. We documented pro- gram guidelines and interviewed ASCS staff directly involved in making bonus payments. To test to see if these guidelines were being followed we examined the files of selected contracts for which bonuses were awarded. We obtained an FAS database, jointly developed and maintained by FAS and ~~cs/Kan- sas City, which contained EEP contract information, performed a reliabil- ity assessment of that database, and used it to review the propriety of contract payments. For all contracts approved from May 1985 to September 30,1988, we developed a methodology that would (1) search the entire database, (2) compare actual bonus payments with the maximum allowed under the contracts, and (3) identify any payments that exceeded the 105-per- cent tolerance level. We then discussed the status of each significant case with the ASCSSales Invoice Branch accountants and attempted to reconcile the apparent overpayments. This inquiry included examina- tion of the contract files. We conducted this phase of our review between April and October 1989 in accordance with generally accepted government auditing standards. (433436) Page 9 GAO/NSIAD-99-33 International Trade 1I.S. (h~rrt~rd Awoullt,ilrg Of’fiw I’ost, ( Wiw 130x 60 15 (;ait,trtArst)lll.~, M;lryl;lIld 20877 ‘I’t~lt~pttoIit~ 20%2754324 1
International Trade: Export Enhancement Program Bonus Overpayments
Published by the Government Accountability Office on 1990-02-07.
Below is a raw (and likely hideous) rendition of the original report. (PDF)