Report of Audit of the Inter-American Foundation’s Financial Statements for the Fiscal Year Ended September

Oig/A/Fa

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Report of Audit of the Inter-AmericanFoundation’s Financial Statements for theFiscal Year Ended September 30, 2001Audit Report No. 0-IAF-02-004-FMarch 20 2002Washington, DCPage intentionally left blank1U.S. Agency for International DevelopmentOffice of Inspector GeneralFinancial Audits DivisionMEMORANDUMFOR: Mr. David ValenzuelaFROM: IG/A/FA, Alvin A. BrownSUBJECT: Report on Audit of the Inter-American Foundation’s FinancialStatements for the Fiscal Year Ended September 30, 2001(Report No. 0-IAF-02-004-F)The enclosed Report on the Audit of the Inter-American Foundation’s (IAF’s)Financial Statements for the Fiscal Year Ended September 30, 2001, preparedby the firm of Gardiner, Kamya & Associates, P.C. (GKA), is provided for yourinformation.The auditors formed an unqualified opinion on the financial statements and thereport does not contain findings or recommendations for IAF management.The report prepared by GKA is included in its entirety in Appendix I. Yourcomments from the draft report and draft management report are included inAppendix II. We will issue the management report under separate cover.We appreciate the cooperation and courtesies that your staff extended to mystaff, and to the GKA staff during the audit. If you have questions concerningthis report, please contact Andrew Katsaros at [phone].Enclosure (as stated)2This page intentionally left blank3Appendix IPage 1 of 35INTER-AMERICAN FOUNDATION(IAF)FINANCIAL ...

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Report of Audit of the Inter-American Foundation’s Financial Statements for the Fiscal Year Ended September 30, 2001

Audit Report No. 0-IAF-02-004-F

March 20 2002

Washington, DC

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U.S. Agency for  International  Development Office of Inspector General Financial Audits Division MEMORANDUM

FOR:Mr. David Valenzuela

FROM:IG/A/FA, Alvin A. Brown

SUBJECT: on Audit of the Inter-American Foundation’s Financial Report Statements for the Fiscal Year Ended September 30, 2001 (Report No. 0-IAF-02-004-F)

The enclosed Report on the Audit of the Inter-American Foundation’s (IAF’s) Financial Statements for the Fiscal Year Ended September 30, 2001, prepared by the firm of Gardiner, Kamya & Associates, P.C. (GKA), is provided for your information.

The auditors formed an unqualified opinion on the financial statements and the report does not contain findings or recommendations for IAF management.

The report prepared by GKA is included in its entirety in Appendix I. Your comments from the draft report and draft management report are included in Appendix II. We will issue the management report under separate cover.

We appreciate the cooperation and courtesies that your staff extended to my staff, and to the GKA staff during the audit. If you have questions concerning this report, please contact Andrew Katsaros at [phone].

Enclosure (as stated)

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INTER-AMERICAN FOUNDATION (IAF)

FINANCIAL STATEMENTS SEPTEMBER 30, 2001 and 2000

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INDEPENDENT AUDITOR’S REPORT THEREON

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Appendix I Pa

INTER-AMERICAN FOUNDATION (IAF)

Audit of Fiscal Year Ended September 30, 2001 Financial Statements

TABLE OF CONTENTS

Appendix I Pa

Page No. Independent Auditor's Report on Financial Statements.................................................... 5

Independent Auditor's Report on Internal Control............................................................ 7 Independent Auditor's Report on Compliance with Laws and Regulations ..................... 9

Management’s Discussion and Analysis(Overview)...............................................11 Balance Sheets ............................................................. 20 Statements of Net Cost.................................................................................................... 21

Statements of Changes in Net Position........................................................................... 22

Statements of Budgetary Resources................................................................................ 23

Statements of Financing.................................................................................................. 24

Notes to Financial Statements......................................................................................... 25

Status of Prior Year Findings.......................................................................................... 31

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Independent Auditor's Report on Financial Statements To the Board of Directors and the President Inter-American Foundation

Appendix I Pa

We have audited the accompanying Balance Sheet of the Inter-American Foundation (IAF), a US Government Corporation, as of September 30, 2001, and the related Statements of Net Cost, Changes in Net Position, Budgetary Resources and Financing for the year then ended. These financial statements are the responsibility of the management of the IAF. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the IAF as of, and for the year ended September 30, 2000, were examined by other auditors whose report dated April 2, 2001, expressed a disclaimer thereon. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards,issued by the Comptroller General of the United States; and the Office of Management and Budget Bulletin No. 01-02,Audit Requirements for Federal Financial Statements standards require that we. Those plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the IAF as of September 30, 2001, and its net costs, changes in net position, budgetary resources, and the reconciliation of budgetary obligations to net cost for the year then ended in conformity with generally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion on the financial statements referred to in the first paragraph of this report as a whole. The information presented in IAF Management’s Discussion and Analysis (Overview) section is not a required part of the financial statements but is supplementary information required by OMB Bulletin No. 97-01,Form and Content of Agency Financial Statements as amendedAlthough we have read the information presented, such information has. not been subjected to the auditing procedures applied in the audits of the financial statements and, accordingly, we express no opinion on it. In accordance withGovernment Auditing Standards,we have also issued reports dated February 1, 2002 on our consideration of the IAF's internal control over

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Appendix I Pa

financial reporting, and on our tests of its compliance with certain provisions of applicable laws and regulations. These reports are an integral part of an audit performed in accordance with Government Auditing Standards, and, in considering the results of the audit, these reports should be read in conjunction with this report.

/s/

Gardiner, Kamya & Associates, P.C.

February 1, 2002

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Independent Auditor's Report on Internal Control

To the Board of Directors and the President Inter-American Foundation

Appendix I Pa

We have audited the financial statements of the Inter-American Foundation (IAF), an US Government Corporation, as of, and for the year ended September 30, 2001, and have issued our report thereon dated February 1, 2002. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States; and, Office of Management and Budget (OMB) Bulletin No. 01-02,Audit Requirements for Federal Financial Statements.

In planning and performing our audit, we considered the IAF’s internal control over financial reporting by obtaining an understanding of the IAF’s internal control, determined whether internal controls had been placed in operation, assessed control risk, and performed tests of controls in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements. We limited our internal control testing to those controls necessary to achieve the objectives described in OMB Bulletin No. 01-02. We did not test all internal controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity Act of 1982, such as those controls relevant to ensuring efficient operations. The objective of our audit was not to provide assurance on internal control. Consequently, we do not provide an opinion on internal control.

Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be reportable conditions. Under standards issued by the American Institute of Certified Public Accountants, reportable conditions are matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the IAF’s ability to record, process, summarize, and report financial data consistent with the assertions by management in the financial statements. Material weaknesses are reportable conditions in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions.

Because of inherent limitations internal controls, misstatements, losses, or noncompliance may nevertheless occur and not be detected. However, we noted no matters   involving the internal control and its operation that we consider to be material weaknesses as defined above. We noted other matters involving the internal

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Appendix I Pa control structure and its operations that we   have reported to the management of IAF in a separate letter dated February 1, 2002.

In addition, with respect to internal controls related to performance measures reported in the Management’s Discussion and Analysis (MD&A), we obtained an understanding of the design of significant internal controls relating to the existence and completeness assertions, as required by OMB Bulletin No. 01-02. Our procedures were not designed to provide assurance on internal control over reported performance measures, and, accordingly, we do not provide an opinion on such controls.

This report is intended solely for the information and use of the management of the Inter-American Foundation (IAF), the Office of the Inspector General (OIG) of the Agency for International Development, Office of the Management and Budget (OMB), and Congress, and is not intended to be and should not be used by anyone other than these specified parties

/s/

Gardiner, Kamya & Associates, P.C.

February 1, 2002

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Appendix I Pa

Independent Auditor's Report on Compliance with Laws and Regulations To the Board of Directors and the President Inter-American Foundation We have audited the financial statements of the Inter-American Foundation (IAF), an US Government Corporation, as of, and for the year ended September 30, 2001, and have issued our report thereon dated February 1, 2002. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States; and, Office of Management and Budget (OMB) Bulletin No. 01-02,Audit Requirements for Federal Financial Statements. The management of the IAF is responsible for complying with laws and regulations applicable to the agency. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the IAF’s compliance with certain provisions of laws and regulations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts, and certain other laws and regulations specified in OMB Bulletin No. 01-02, including the requirements referred to in the Federal Financial Management Improvement Act (FFMIA) of 1996. We limited our tests of compliance to these provisions and we did not test compliance with all laws and regulations applicable to the IAF. The results of our tests of compliance with laws and regulations described in the preceding paragraph exclusive of FFMIA disclosed no instances of noncompliance that are required to be reported underGovernment Auditing Standards OMB and Bulletin No. 01-02. Under FFMIA, we are required to report on whether the IAF’s financial management systems substantially comply with the Federal financial management systems requirements (FFMSR), applicable Federal accounting standards, and the United States Standard General Ledger at the transaction level. The Administrative Resource Center of the Franchise Fund, Bureau of Public Debt, performs the accounting and reporting functions for the IAF. We are not the auditors of the Franchise Fund and did not perform tests of compliance with the FFMSR using the implementation guidance included in Appendix D of OMB Bulletin No. 01-02.

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