Audit of Mauritius shelter program no. 642-HG-001

Compliance audit covers the period 11/85-12/87 and is based on document review and interviews with personnel from RHUDO/ESA, the Mauritius Housing Corporation, the Ministry of Finance, and the American Embassy. The program experienced subtantial delays due to such unexpected problems as difficulties in obtaining local land development permits and inadequate soil for septic tank sewage treatment. As a result, only $1.7 million of the $4 million received by the Ministry of Finance (of a program total of $6 million) had been applied to the program at the time of the audit. Contrary to the provisions of the Program Implementation Agreement, the Government of Mauritius (GOM) used HG funds for non-project purposes, specifically, for budgetary support. This occurred because the Agreement and RHUDO/ESA policy did not require establishment of an escrow account. Such a situation could lead to misappropriation and the unavailability of sufficient loan funds to complete the HG program - notwithstanding the GOM"s assurance that funds for the program would be made available when needed. Such an assurance depends on a favorable GOM financial position. The audit recommended that RHUDO/ESA require the GOM to establish escrow accounts to protect loan funds. Negotiations to do so are underway. A.I.D. has collected only $40,000 of $60,000 in loan disbursement fees from the GOM. The remaining $20,000 was not collected because RHUDO/ESA did not enforce the provision in the Program Implementation Agreement that 1% of the total loan amount be paid at the time of the first disbursement. RHUDO/ESA replied that such a provision was unfair, that it had collected 1% on each of the two $2 million disbursements so far, and that it intends to collect the remaining $20,000 when the final tranche is disbursed. Nonetheless, the audit recommended that RHUDO/ESA collect the $20,000 legally owed by the GOM. RHUDO/ESA has not indicated what action it will take on this recommendation. If the recommendation is not acted upon, however, A.I.D. may lose $20,000, as RHUDO/ESA is considering cancelling the final $2 million loan disbursement due to the program delays noted above.