Automated Directives System (ADS) 591.3.2, Audits of Foreign Organizations and Host Government Entities, provides guidance on audits of foreign organizations. Specifically, ADS 522.214.171.124, Foreign Organizations, states that a mission must assess risk at least annually to determine whether financial audits of foreign for-profit organizations are warranted.
Furthermore, ADS 5126.96.36.199 requires a Federal cognizant agency or independent auditor to audit the direct and indirect costs incurred under an award to determine allowable direct costs and to recommend indirect cost rates.
The USAID guidance states that the prime recipient must impose the Guidelines for Financial Audits Contracted by Foreign Recipients on foreign subrecipients. These guidelines state that USAID agreements with foreign recipients require recipients to contract independent auditors acceptable to USAID’s Office of Inspector General (OIG) to perform financial audits of the funds provided under the agreements.
In addition, ADS 591.3.6, USAID Audit Rights, clearly states that USAID retains the right to require audits or otherwise ensure adequate accountability of recipient organizations regardless of the audit requirement.
 According to the Federal Acquisition Regulation, a direct cost is any cost that can be identified with a particular final cost objective, and an indirect cost is any cost that is not directly identified with a single, final cost objective but can be identified with two or more final cost objectives, such as rent, utilities, and supplies.
 Such audits are in accordance with the Inspector General Act of 1978, as amended. The OIG reserves the right to conduct audits using its own staff, notwithstanding acceptable audits performed by other auditors, in cases where special accountability needs are identified.
- Develop and implement procedures to require the prime contractor to periodically conduct independent financial reviews of for-profit local subcontractors’ incurred costs to determine if audits are warranted.
- Conduct incurred costs audits as required by the Guidelines for Financial Audits Contracted by Foreign Recipients.
Source:AUDIT REPORT NO. 6-278-10-004-P March 31, 2010
The recommendations are derived from audit reports of the Office of the Inspector General. The source refers to the audit report, which is available on this site as part of the Audit Database Project: an educational tool for compliance with USAID regulations. Please see the disclaimer of this site before using recommendations.
|←Previous Unauthorized Commitments - 22 CFR 226.25(e) - ADS 303.3||Implementing Partner Record Retention Regulations - 22 CFR 226.53(b) Next→|
- Intellectual Property Rights Clauses in Agreements - ADS 318.2
- Program Lacks a Detailed Gender Strategy - ADS 188.8.131.52
- Prioritize or Follow Up on Significant Vulnerabilities - ADS 303.3.9.2
- The Authorization to Make Changes to the Contract’s Terms and Conditions
- Contractor Overbilling - FAR 31.2, Contracts with Commercial Organizations
- Contractor Performance Reviews Were Not Completed - FAR 42.15024 - USAID Acquisition Regulation (AIDAR) 742.15
- Unauthorized Commitments - 22 CFR 226.25(e) - ADS 303.3
- Implementing Partner Record Retention Regulations - 22 CFR 226.53(b)
- Verify Continued Separate Maintenance Allowance Eligibility - Department of State Standardized Regulations, General Provisions, Section 077.3, Granting Allowances and Difficult to Staff Incentive Differential on SF-1190 (Foreign Allowances Application
- Local Subgrantees Need Codes of Conduct for Interactions with Orphans and Vulnerable Children - U.S. Global AIDS Coordinator (OGAC) Guidance July 2006
- Technical Representative Requirements - ADS 4184.108.40.206 - ADS 303.3.14
- Assistance Awards and Requirements - ADS 303 - ADS 621.3.4
- Certification Regarding Responsibility Matters - FAR 9.104-6 - FAR 9.105-2(b) - FAR 9.4
- Excluded Parties List System Reviews During the Bidding and Awarding Process - FAR 9.404 - 22 CFR 208 - ADS 502.5.1b - FAR 9.405(d) - FAR 9.105-2(b)
- Strengthen Program Oversight - ADS 302
- Implementer Performed Unauthorized Program Activities - ADS 220.127.116.11
- Ensure That Funding Requests Are Appropriate - ADS 602.3.2