Audit of PL-480 Title I local currency funds managed by the National Emergency Commission (USAID/Costa Rica)

480 Title I local currency (LC) generations by Costa Rica"s National Economic Commission (CNE). Audit covers the period 7/84-7/87 and is based on document review, site visits, and interviews with Mission and Government of Costa Rica (GOCR) officials, and consultants and contractors. CNE lacked the qualified staff and administrative systems needed to maintain proper control over Title I LC generations. The Commission did not have written accounting and disbursement procedures, it did not promptly and accurately record financial transactions, and it did not properly monitor the implementation of LC-financed projects (including six road construction projects and three emergency activities). Some of these projects, however, were closely monitored by USAID/CR and the Ministry of National Planning and Economic Policy. The GOCR, with USAID/CR"s concurrence, had chosen CNE to administer the LC funds because it was exempt from most provisions of Costa Rica"s Financial Administration Law, including a provision permitting unsuccessful bidders the right to appeal contract awards. The Mission"s perception was that Costa Rican businesses often abused this provision, creating unreasonable contracting delays, a perception unsupported, however, by actual experience. Because CNE lacked the ability to manage the funds, using it to manage LC projects introduced an unnecessary risk of waste and misuse, and it also diverted CNE from its responsibility to plan for and respond to emergencies. The audit recommends that CNE be used to implement Title I activities only if a bona fide emergency exists. USAID/CR objects to the recommendation on the basis that the decision on agencies should be left to the GOCR, whose funds the LC are. It also feels that its own oversight, combined with that of the Planning Ministry, are sufficient. Two of the road projects financed with LC had been abandoned by their contractors in a state of partial completion, although recently one contractor returned to repair roadwork that had been rejected by the consulting engineers and the Ministry of Public Works and Transport (MOPT). The other road was abandoned when its budget was exhausted (due to the MOPT"s underestimation of costs and its allowing the contractor to perform work not in the contract). Work done on both roads is already deteriorating, even as the cost of eventually repairing and completing the roads is climbing. It is recommended that the first road be completed and that the Mission decide on completing the other. The Mission generally agreed with this recommendation, but felt that the audit did not adequately recognize the controls implemented and the actions taken to get these projects completed.