Finding 1144431 (2024-002)

Finding 2024-002: Procurement Material Weakness Federal Program: Plastics Recycling Program in Southern New Guinea (72062024CA00002) Federal Award Agency: USAID Foreign Assistance for Program Overseas (ALN 98.001) See Finding 2024-001. Questioned costs: None Context: Internal controls around procurement did not identify fraudulent overpayments for seven equipment purchases within the federal program due to collusion amongst several field office employees. These overpayments were identified by TechnoServe’s internal audit team and were subsequently reversed by management prior to December 31, 2024, and therefore, were not allocated to the federal program. Repeat finding? No Finding 2024-001: Field Office Internal Controls Criteria: Under established internal control frameworks, such as the “COSO” model, an organization’s internal controls over financial reporting should include policies and procedures that provide reasonable assurance about the prevention or detection of unauthorized acquisition, use, or disposition of the organization’s assets that could result in unintended losses, including fraud losses. Condition: TechnoServe’s controls failed to prevent overpayments for seven equipment procurements due to a fraud scheme involving local companies who submitted inflated invoices. Cause: Collusion among multiple TechnoServe employees at one field office location to bypass the organization’s standard procurement controls. Effect: This resulted in an estimated loss of $263,256, reflecting the difference between payments made and market prices for the purchased equipment. Recommendation: We recommend that procurement controls at the field office include review and approval by either the Country Director or Regional Procurement Officer. Views of Responsible Officials: Management agrees with the finding. See corrective action plan.