Audit of the Zimbabwe shelter project, project no. 613-HG-001

Program results audit covers period 1/82-5/87 and is based on document review, site visits, and interviews with officials of the A.I.D. Regional Housing and Urban Development Office, East and Southern Africa (RHUDO/ESA), and the Government of Zimbabwe (GOZ). Program objectives were being accomplished and were, in some cases, exceeding targets. During the course of the audit, the GOZ agreed to program $1.4 million of the $2.7 million total interest earnings for HG use. This, along with a currency devaluation which provided the HG with an additional $4.8 million, have allowed the program to expand from 5 to 10 sites and to increase housing units from 16,000 to 19,000. However, two problems need attention. First, $1.3 million (of a total $2.7 million) in interest earnings have not been programmed for use in the program, as required under the escrow agreement. Neither RHUDO/ESA nor the GOZ were aware of the escrow agreement requirements. Second, many community facilities in the housing sites are without electricity because the GOZ has failed to provide foreign exchange to finance the import of needed electrical components. In a separate incident, the GOZ withdrew $1.9 million from the escrow account without A.I.D."s authorization; although this was a clear violation of the escrow agreement, the Inspector General"s Legal Counsel has determined there there is no basis for recovery. It is recommended that RHUDO/ESA: (1) program the estimated $1.3 million in interest for use in the HG or make a decision in writing about the uses of these funds; and (2) advise the GOZ of the terms of the implementation and escrow agreements. Also, RHUDO/ESA should authorize no additional loan disbursements until the GOZ has allocated foreign exchange for buying electrical parts, and remind the GOZ of its responsibilities for providing electrical service to the housing sites. RHUDO/ESA disagrees with the first recommendation, stating that the implementation agreement, not the escrow agreement, should govern the use of interest earnings, and noting that the GOZ has paid more interest on the HG loan than has been earned in the escrow account. RHUDO/ESA"s comments are appended.