1. Organization of American States Report of the Board of External Auditors to the Permanent Council May 7, 2008 May 7, 2008

2. Presentation to the Secretary General Members of the Board of External Auditors Bradford R. Higgins, Chair Bradford R. Higgins, Chair - United States Terrance S. Bastian, Member Terrance S. Bastian, Member - The Bahamas Joseph Freamo, Member Joseph Freamo, Member - Canada Board of External Auditors

3. Presentation to the Secretary General Responsibility of Board n Oversee audits of OAS and related entities financial statements. n Review OAS and related entities operations and identify internal control issues and opportunities to improve efficiency. n Assess the resources, work, and plans of the Office of Inspector General. n Issue report on these issues within the first four months of the year.

4. Presentation to the Secretary General Ernst and Young performed the following audits: Regular Fund, Voluntary Funds, and Specific Funds of the OAS Leo S. Rowe Pan American Fund (Rowe Pan American) Rowe Memorial Benefit Fund (Rowe Memorial) Trust for the Americas Medical Benefits Trust Fund (Medical Benefits) Inter-American Defense Board Fund (IADB) Retirement and Pension Fund (Pension) Agreed-upon procedures related to the Regular and Specific Funds Received unqualified (clean) opinions. One significant deficiency. Strengthen review process over significant accounts and processes. Financial Statement Audit Results

5. Presentation to the Secretary General Regular Fund – Financial Results and Projections Notes: A Income mainly consists of quota collections, but also includes such items as rental and interest income. Regular Fund Financial Results (in millions) Account/Line Item20062007200820092010 Income without Reserve Fund (A) $76.6$82.4$82.1$83.3$85.8 Funds from Reserve Fund3.7-5.4 6.87.0 Expenditures80.380.587.5 90.192.8 Operating Results Increase (Decrease) (3.7)1.9--- Fund Balance at end of year $13.8$15.7$10.3$3.5$(3.5)

6. Presentation to the Secretary General FINANCIAL CONDITION Quota Collections –OAS has chronic funding shortfall because quotas are not set to match mandatory cost increases. –Situation made worse by irregular (late) timing of quota payments. –Liquidity situation unacceptable (not in compliance with OAS policy for 30 percent reserve). –Day-to-day funding requirements are driving strategic policy decisions.

7. Presentation to the Secretary General FINANCIAL CONDITION Budgetary Resources* –Annual quotas are not set to cover the operating budget. –Continuing decline in critical cash reserves. –Recommendation from Secretary General for semi-automatic mechanism has not been implemented. –In order to maintain current services, Member States need to provide funding adjusted for inflation. –Unless Member States invest in this important multi-lateral organization, OAS will have no choice but to drastically cut back programs and activities in the next five years. * - New recommendations.

8. Presentation to the Secretary General MODERNIZATION Integrated Real Property and Capital Plan* –Maximize the potential of OAS property, including alternative fundraising strategies. –Make a decision on real property needs and goals. –Begin to address the serious deferred maintenance needs. –Sell the Pink Palace and use funds to cover some of the needed capital expenditures. Relocate IADB staff to acceptable accommodations. * - New recommendations.

9. Presentation to the Secretary General MODERNIZATION Recovery of Administrative and Oversight Costs –The Board was pleased to see the ICR initiative was implemented, providing for more realistic cost allocation between Regular and Specific Funds. –Important to institutionalize process and ensure it continues to be viable. –Provides incremental funding for Specific Fund oversight and accountability.

10. Presentation to the Secretary General OTHER MODERNIZATION ISSUES The Board recognizes various modernization initiatives within OAS that will lead to improved efficiencies, transparency, and accountability. n STAMP Initiative* n Planning and Strategic Goals* n Accounting Standards* n Financial and Accounting Systems n Project Management * - New recommendations.

11. Presentation to the Secretary General OTHER MODERNIZATION ISSUES n Reliance on Short-term Staff* n Planning for the Aging Workforce* n Job Descriptions n Reassessing the Procurement Process* n Contractor Oversight Process n Travel Voucher Process* n Training n Web Pages* * - New recommendations.

12. Presentation to the Secretary General OTHER CONTROL ISSUES n National Offices n Vendor Listings n Information Technology System Issues n Accountable Advances* n Departure Process* n Performance Evaluation and Award Process* n Fixed Asset Tracking n Ownership of Assets* n Personally Identifiable Information* * - New recommendations.

13. Presentation to the Secretary General Issues Related to Other OAS Entities Trust for the Americas* –Develop a strategic plan to support the significant current growth and long-term potential of the Trust. IADB* –Consider consolidating administrative functions with GS/OAS. * - New recommendations.

14. Presentation to the Secretary General Office of Inspector General Issues n Staffing and Budget n Training and Professional Development n Professional Standards Review