OPIC Investments Increased Chile’s Energy Capacity, but Weak Processes and Internal Controls Diminish OPIC’s Ability To Gauge Project Effects and Risks

Audit Report
Report Number
9-OPC-19-002-P
OPIC Investments Increased Chile’s Energy Capacity, but Weak Processes and Internal Controls Diminish OPIC’s Ability To Gauge Project Effects and Risks Report No.: 9-OPC-19-002-P Historically, Chile has relied heavily on imported energy, subjecting the country’s energy sector to the volatility of international market prices and supply restrictions. To address these challenges, Chile’s government passed various laws, including the 2008 Non-Conventional Renewable Energy Law, and developed long-term state policies that focused on developing a renewable energy market in the country. OPIC holds approximately $900 million in U.S. guarantee investments that support the construction and operation of six renewable energy projects in Chile. Our audit of OPIC’s Chile energy sector portfolio found that OPIC-supported U.S. business investments in Chile’s solar energy market have contributed to the country’s increased capacity to generate nonconventional renewable energy. In addition, each of the six Chile energy projects met OPIC’s U.S. private sector requirements at the approval phase. However, the Chile projects demonstrated a lack of rigor in OPIC’s processes for approving projects, assessing progress in achieving its mission, and reporting results. Further, OPIC’s process for identifying and mitigating risks in its Chile energy portfolio revealed broader weaknesses in OPIC’s internal control system. We made 16 recommendations to improve OPIC’s strategic approach to advancing its mission and U.S. foreign policy and to strengthen its internal control system.

Recommendations

Recommendation 1

OPIC implement a process and related guidance for verifying and documenting that OPIC is not competing with the private market in a given country.

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Recommendation 2

OPIC revamp the development impact profile process to sufficiently capture and assess projects' projected and actual effects, and report reliable data to Congress. This should include establishing clear criteria, requiring evidence, aligning application questions to obtain data needed, and documenting the process for determining actual effects.

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Recommendation 3

OPIC implement a formal process for consulting with USAID on its development impact profile criteria that includes the documentation of the consultations.

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Recommendation 4

OPIC implement a process and related guidance to verify and document how projects seeking approval complement U.S. development assistance objectives. It should include considerations for connecting to the Department of State's integrated country strategies and for complementing the work of other U.S. Government agencies and other donors.

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Recommendation 5

OPIC implement a performance management framework that complies with the Government Performance and Results Modernization Act of 2010 and enables OPIC to fully capture its goals and report on progress in achieving its mission.

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Recommendation 6

OPIC implement a process with a sound methodology for validating data provided by borrowers in the self-monitoring questionnaire, and strengthen procedures for timely submissions.

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Recommendation 7

OPIC update the Office of Investment Policy's process for identifying and selecting projects for site visits, and for tracking and documenting planned and actual visits, so that it is streamlined and based on reliable data.

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Recommendation 8

OPIC modify the Office of Investment Policy's guidance to include relevant staff members' roles and responsibilities for providing input into independent engineers' scopes of work and documenting reviews of materials related to environmental and social protection.

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Recommendation 9

OPIC implement a formal process with defined roles for handling environmental and social concerns that various stakeholders refer to OPIC.

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Recommendation 10

OPIC conduct and document a baseline assessment of all policies and procedures to identify and update outdated material, and implement controls to ensure periodic reviews and updates.

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Recommendation 11

OPIC conduct and document a review of the Office of Investment Policy's guidance to identify any gaps and check for consistency among other offices' related guidance, and update as necessary.

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Recommendation 12

OPIC consistent with addressing the National Archives and Records Administration's recommendations, develop policies and corresponding training for complying with Federal Government records management requirements that define roles and responsibilities and require supervisory compliance reviews, periodic testing of the official records management system, and documentation of these review and testing results.

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Close Date:
Recommendation 13

OPIC conduct a baseline assessment to determine the information access needs of each office to accomplish their respective work, and develop protocols to ensure each office has access to needed information.

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Recommendation 14

OPIC implement a system to track the receipt, review, and certification of all project deliverables, including third-party reports.

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Recommendation 15

OPIC develop and implement a borrower evaluation system that contains information on performance, including violations, repayment history, compliance, and development impact. Develop a policy requiring this information to be used in the review process for future deals with reoccurring borrowers.

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Recommendation 16

OPIC formalize a process for capturing and disseminating lessons learned agencywide that acknowledges strengths and weaknesses associated with business practices, and modify relevant policies and procedures accordingly.

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$0