Audit of Salvadorian Foundation for Economic and Social Development

Program results audit covers the period 1984-10/87 and is based on document review, site visits, and interviews with officials of USAID/ES and FUSADES. Results are mixed. On the positive side, FUSADES, during its brief 3-year existence, has developed into a responsive organization with highly capable and dedicated management staff, helped to strengthen private business associations, increased the Government of El Salvador"s (GOES) awareness of alternative economic policies, stimulated interest and investment in nontraditional products, and provided financial and technical assistance to businesses and entrepreneurs that might not otherwise have been provided. FUSADES has had adequate financial controls and accounting systems for A.I.D. funds. Nonetheless, certain problems exist. First, four of eight A.I.D.-funded activities are behind schedule because of implementation delays, and their impact on achieving FUSADES" overall objectives (e.g., generating jobs and foreign exchange) is uncertain. Also, some activities were not in compliance with A.I.D. regulations or project agreements. Specifically: (1) required contributions from project beneficiaries were not always used for project purposes or in accordance with A.I.D. allowable cost provisions, nor did FUSADES actively encourage beneficiaries to contribute more than the 25% required; and (2) the actual impact of FUDADES" activities is not known, in part because accomplishments of two activities were not properly classified or reported, and in part because some data may have been erased from computer memory by a FUSADES contractor; and (3) the activities" cost-effectiveness is also uncertain, because no independent evaluations have been performed (due to the 10/86 earthquake, and the fact that USAID/ES did not want to burden FUSADES by having an evaluation conducted simultaneously with this audit). It is recommended that USAID/ES either obtain an agreement with FUSADES to restrict use of beneficiary contributions to project purposes or obtain a formal legal opinion as to why the use of these monies should not be restricted. (The Mission believes that mandatory contributions should be used in a manner consistent with FUSADES" overall goals and objectives, but does not think it is in A.I.D."s interest to restrict the contributions to specific projects or programs.) The report also recommends that: FUSADES establish a more aggressive policy on obtaining contributions; a monitoring and reporting systems be established,; and USAID/ES begin to evaluate FUSADES" project. The Mission is taking appropriate action.