Audit of the regional agricultural higher education project, USAID/Costa Rica project no. 596-0129

Audit report covers the period 9/85-9/90 and is based in part on interviews with officials of USAID/CR, the college, and California Polytechnic State University Foundation (Cal Poly). The college began academic operation in 3/90. Its financial viability is uncertain, however. Fluctuations in the local currency have contributed to a $14.1 million shortfall in the interest expected from an $60 million endowment fund created to sustain the college when A.I.D. assistance ends in 1995. In addition, delays in starting college operations have translated into higher operating costs and lower tuition revenues than expected. Future revenue shortfalls projected by the college"s financial director may have to be covered by eroding the principal of the endowment. An independent verification of these projections is recommended. A second problem concerns the college"s student selection policy. While the project was designed to focus on the agricultural production problems of Central America, the Board of Directors of the college have decided to include students from all Latin American countries having lowland humid tropics in order to give the college a more international image. It is recommended that the college develop a written policy on student selection with emphasis on choosing students from Central America. A review of commodity procurement under a contract with Cal Poly revealed that $277,000 worth of commodities procured during 1990 had not yet been recorded by USAID/CR as accrued expenditures due to lack of documentation, and that the college and Cal Poly recorded substantially different values for the commodities. Also, USAID/CR had not been diligent in enforcing regulations requiring quarterly remittance of interest earned on funds provided by A.I.D. In this case, the college had failed to remit interest totaling $44,066 in a timely manner. Four areas needing further study were identified: control over the use of project vehicles; requirements for marking A.I.D.- financed commodities; USAID/CR"s approval of project implementation plans; and onsite inspection reports. USAID/CR agreed with the audit recommendations and planned to take immediate action.