Audit of Honduras rural water and sanitation systems project no. 522-0166

Audit report covers the period 3/80-9/85 and is based on document review and site visits. With about one fourth of the implementation period remaining, only half of the project"s targets have been reached. A major reason activities are behind schedule is that the three project executing units have operated separately and with no central decisionmaking authority. Also, only 40.5% of the $20.7 million in A.I.D. funds has been disbursed, and an additional $1,207,315 has been committed but not used. Ten villages in the project area had never been visited and one community had not been helped to find effective means of destroying old pit latrines. Internal and administrative controls over project finances and commodities have been weak, and local law and regulation have been circumvented by one of the implementing organizations. A discrepancy of $97,804 in cash advances exists between USAID/H"s records and those of the Government of Honduras (GOH). Unauthorized fees (totaling an estimated $75,675 in local currency equivalents) for pour-flush latrines have been collected from beneficiaries and deposited in the GOH general fund. At project warehouses, $409,509 in commodities lie idle; about 10% of the pour-flush commodes (costing about $10,200) have been damaged; $9,826 in commodities were diverted; 2 warehouses do not have an inventory system (one of these was not secure and did not have a warehouse manager); and about 1,000 pieces of project PVC and metal piping costing about $29,000 lie abandoned. Controls over vehicle use and in-country travel have been unsatisfactory. Also, USAID/H has used a modified set of targets - lower, except in one category, than those originally established with the GOH - in its semiannual reporting to AID/W. These problems notwithstanding, substantial progress has been made in addressing rural health and sanitation needs. A recent study indicates that trained local personnel are in place and that institutionalization at the community level is virtually ensured. USAID/H reports that as many as 60,000 persons have been provided water via hand pumps and wells, another 86,000 have piped water, and 300,000 benefit from AID-financed latrines. The project is conceptually sound and can potentially benefit many needy Hondurans.