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Audit (A-04-13-04004)

06-05-2014
The Republic of Zambia, Ministry of Health, Did Not Always Manage the President's Emergency Plan for AIDS Relief Funds or Meet Program Goals in Accordance With Award Requirements

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Summary

Through its Global HIV/AIDS Program, the Centers for Disease Control and Prevention (CDC) implemented the President's Emergency Plan for AIDS Relief (PEPFAR), working with ministries of health and other in-country partners to combat HIV/AIDS by strengthening health systems and building sustainable HIV/AIDS programs in more than 75 countries. Through a 5-year cooperative agreement, CDC awarded PEPFAR funds totaling $3.7 million to the Republic of Zambia, Ministry of Health (the Ministry), to implement a coordinated national response to the HIV/AIDS epidemic for the budget period September 30, 2010, through September 29, 2011.

The Ministry did not always manage PEPFAR funds or meet program goals in accordance with award requirements. With respect to financial management, specifically financial transaction testing, $225,000 of the $516,000 reviewed was allowable, but $291,000 was unallowable. Of the 33 financial transactions tested, 16 transactions totaling $225,000 were allowable, but 17 transactions totaling $291,000 were unallowable because they lacked adequate supporting documentation or were related to another cooperative agreement.

Additionally, the Ministry (1) did not maintain accounting records that adequately identified the source and application of PEPFAR funds, (2) did not report expenditures for this cooperative agreement on its Financial Status Report (FSR), (3) submitted its FSR 1 month late, (4) used an undetermined amount of PEPFAR funds to pay value-added taxes (VAT) on expenditures, and (5) did not have an annual financial audit completed and the report submitted on time as required by United States Government (Federal) regulations.

Our program management review showed that, of the 81 goals from its cooperative agreement, the Ministry reported accomplishments for 53 in its annual progress report. However, it did not report accomplishments for the remaining 28 goals. Our sample review of 38 reported accomplishments showed that 27 were fully supported by documentation, 4 were partially supported, and 7 were not supported. Also, the Ministry submitted its annual progress report to CDC 1 month late.

The Ministry's policies and procedures were not adequate for managing CDC cooperative agreements. As a result, the Ministry did not exercise proper stewardship to ensure that it properly managed PEPFAR funds or met program goals in accordance with the award requirements.

We recommended that the Ministry (1) refund to CDC $290,575 of unallowable expenditures; (2) work with CDC to resolve whether VAT was an allowable expenditure under the cooperative agreement; (3) apply for a VAT exemption with the Republic of Zambia Government; (4) file an amended FSR using expenditures instead of draws from the Payment Management System; (5) develop and implement adequate policies and procedures; (6) implement a financial management system that complies with Federal regulations, such as adequately identifying the source and application of PEPFAR funds and allocating salary expenses based on detailed payroll records; and (7) submit an annual financial audit report on time to the applicable Federal agency.

In comments on our draft report, Ministry officials partially agreed with our findings but did not directly address our recommendations. They also described actions they had taken.

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