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NOTE 15. Commitments and Contingencies

USAID is involved in certain claims, suits, and complaints that have been filed or are pending. These matters are in the ordinary course of the Agency’s operations and are not expected to have a material adverse effect on the Agency’s financial operations.

As of September 30, 2007 a total of twelve cases were pending.

Seven cases have been designated as reasonably possible, a total of $13.7 million:

• The first case is a contract claim arising out of a contractor’s contract to repair and operate an Iraqi port. The estimated loss is $4.4 million.
• The second case is a contract claim that USAID wrongfully withheld payment for invoices submitted under “Hurricane Mitch” host-country, contract in Honduras. The estimated loss is $2.2 million.
• The third case is a companion case. A contractor seeks compensation for efforts and expenses it claims to have incurred under a terminated host country contract with the Honduran Government. The estimated loss is $1.8 million.
• The fourth case is an appeal of the Contracting Officer’s disallowance of the costs of supplemental Accidental Death and Dismemberment and Business Travel Insurance for contractor employees related to initial deployment to Iraq. The estimated loss is over $1 million.
• The fifth case is an appeal of a contractor for claims that arise out of the storage and delivery of 483 health kits in Iraq. The estimated loss is $1.5 million.
• The sixth case is a case that USAID/Egypt disallowed costs already paid to a contractor for incubators that were installed in Egyptian hospitals but which quickly proved unsafe and was removed from the hospitals. The estimated loss is $1 million.
• The seventh case is a case where a contractor seeks costs that were incurred by one of its subcontractors; however USAID disputes those costs as unsubstantiated. The estimated loss is $1.8 million.

Also, the Agency submitted one unasserted claim and assessment. The matter related to the early termination of the Homer lease agreement. The amount of potential loss is $2,940,000, which is $60,000 less then what was disclosed in 2006 financial statements. An adjusting journal entry was made to reflect the new potential loss in the second quarter of 2007.

The statuses of the remaining four litigation cases are at a remote designation.

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