We also reviewed the regional MDBs’ 1997 through 2000 audited financial statements and auditors’ opinions on the financial statements and identified the accounting and auditing standards used by each MDB,   analyzed and compiled information from the regional MDBs’ annual reports and their audited financial statements,   analyzed the external audit reports to determine the extent of the external auditors’ reporting on internal control and compliance in conjunction with the financial statement audits, reviewed the banks’ terms of reference (charters) to identify the scope of their audit committees’ oversight and compared them to relevant guidance on widely accepted internal control frameworks and principles on banking supervision,   obtained information from the U.S. Executive Directors of each MDB group on the MDBs’ audit committees, external audits, and the extent of external auditor reporting on internal control and compliance, reviewed widely accepted internal control frameworks, such as the Guidelines for Internal Control Standards developed by the International Organization of Supreme Audit Institutions, and   discussed various options for external auditor reporting with representatives from three international accounting firms that were responsible for some of the MDB audits. Background

MDBs are multilateral, international entities that finance economic and social development projects and programs in developing countries and countries of central and eastern Europe and the former Soviet Union. The Congress appropriates funds for the United States’ contributions and capital subscriptions to the MDBs. All of the regional MDBs included in our report received unqualified or “clean” audit opinions on their financial statements for the 4 most recent years. The MDBs’ external financial statement audits also do not provide and are not intended to provide specific assurance about the internal control over the MDBs’ lending operations and whether the funds are spent for their intended purposes. Attestation services can cover internal control over financial reporting, operations, and compliance with laws, regulations, or key policies. 3. Based on our review of the regional MDBs’ Web sites, most of the regional MDBs that we reviewed have developed anti-corruption strategies that state that they recognize the importance of strong internal control systems.
What GAO Found

Multilateral Development Banks (MDBs) provide financial support to promote social and economic progress in developing countries and the countries of central and eastern Europe and the former Soviet Union. Under the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 2001, the United States is providing $1.3 billion to support the MDBs, with $460 million going to the regional development banks and $840 million going to the World Bank Group. All of the MDBs GAO reviewed have received unqualified or "clean" opinions on their external audits. However, none of the MDBs GAO reviewed are required to report on their internal controls over financial reporting, lending operations, or compliance with their governing charters or policies. In addition, the regional MDBs' external financial statement audits are not intended to, and do not, provide assurances about internal controls over the MDBs' lending operations and whether funds are spent as intended. Most of the regional MDBs that GAO reviewed have developed anti-corruption strategies that recognize the importance of strong internal control systems. Each of the regional MDBs GAO studied has established internal audit functions as part of their controls.