Audit of the Panama assistance program funded by Public Law 101-302 as of May 31, 1991

The Panama Assistance Program consists of two cash transfers and 16 projects. Audit covers the period 5/90-5/91. Due to Panama"s urgent need, A.I.D. implemented the program using temporary personnel from A.I.D./W until the Mission was re- established in 2/90. In certain instances, required A.I.D. processes were implemented through alternative methods or bypassed. A.I.D. did not: (1) develop the normal strategy documents prior to beginning assistance activities; (2) always prepare the normal planning documentation for development projects, instead following less stringent documentation guidance issued by the A.I.D/W/LAC Bureau; (3) issue a Mission order formally establishing a monitoring and evaluation system; (4) prepare information plans as part of its assistance designs; (5) track the use of cash transfer dollars to the individual transaction level; or (6) effectively seek delinquent financial data on one project. Furthermore, A.I.D. failed to conduct a needs analysis prior to the design of the second cash transfer program, which aimed to help mitigate a run on the Panamanian banking system and to provide banks with liquidity to make private sector loans. No run on the banks occurred, leaving the entire $107.9 million to be used for loans. No analysis was made to determine that this was the best available method for reactivating private sector development or that credit demands could not be met through normal banking operations. In addition, rather than allotting cash transfer funds on the basis of proposed private sector lending, funds were provided on the basis of the banks" past lending activity. As a result, there is no assurance that funds are having a direct impact on the private sector.