Audit of the Kismayo Port rehabilitation project (Somalia), project no. 649-0114

Audit covers the period 9/85-12/87. The project is progressing satisfactorily, with port rehabilitation approximately 75% complete, and the terms and provisions of the project agreement with the U.S. Navy and the construction contract with the George A. Fuller Company are being complied with in general. However, some routine construction costs were paid from a contingency fund instead of the contract fund. Using its Form 2277, which does not itemize billing data, the Navy claimed a total of $111,467 for vehicle maintenance, purchase of a satellite communication system, and airfare and per diem costs for naval personnel. All these costs were specified in the construction contract, and should not have been paid from the contingency account. The contingency fund was also charged $36,111 for a contractor"s claim for reimbursement of port charges which were defined as excessive, and therefore beyond the scope of the construction contract. The contractor was unable to produce supporting documentation to substantiate this claim, however. One can only conclude that the charges were misclassified and should have been charged to the construction contract. It is recommended that USAID/S: (1) reclassify the total disallowed charges ($147,578) as normal construction costs and (2) obtain from the U.S. Navy an adequate justification for each item of contingency expenditure when submitting the monthly billing invoices. The Mission has problems with the recommendation to recover the $36,111 in excess port charges. It concedes that the services represented by these billings have not been rendered, however, so the audit stands by the recommendation. The Mission also requested that the recommendation to require itemized supplemental reports be dropped because of prior unsuccessful attempts by the Mission to modify U.S. Navy billing practices. Unfortunately, the audit sees no other way to ensure that the contingency fund is not misused again, and so stands by this recommendation also. The audit also noted a lack of provisions for maintenance and repair of the port facility, including the proposed water treatment plant. Although no recommendation is made, the audit believes that maintenance and repair require closer management attention.