Audit of USAID/Ecuador"s integrated rural development project no. 518-0012

Audit report covers the period 9/80-12/85 and is based on document review, site visits, and interviews with beneficiaries and with personnel of Secretariat for Integrated Rural Development (SEDRI) and other involved agencies. Project accomplishments are far short of those planned, although two small subcomponents - demonstration activities in Jijijapa and the building of community centers - have been successfully implemented and the irrigation component has had some success (30 small canal improvements and a 495-ha irrigation site in Salcedo have been completed and 2 pilot sprinkler irrigation systems, one in Salcedo and the other in Quimiag-Penipe, are close to completion). SEDRI, the Ecuadorean coordinating agency, has not been effective in planning, coordinating, monitoring, or evaluating project activities, nor in administering a key Integrated Rural Development Fund. Many implementation problems occurred because SEDRI, which has suffered from frequent personnel turnover, did not meet specified schedules in executing agreements with Ecuadorean implementing agencies or in satisfying certain conditions precedent. Detailed planning for each project component was not performed. A.I.D., for its part, did not provide sufficient monitoring and guidance to enable SEDRI to implement the project satisfactorily. USAID/E"s project monitoring and cash management has been poor. Specifically, (1) the Mission could not verify whether the Government of Ecuador (GOE) was abiding by loan and grant agreements because it did not receive (or request) copies of physical progress or financial reports from SEDRI; (2) loan-funded activities have been shortchanged (in sucres) because of deficient currency exchange practices; (3) cash advances to GOE implementing agencies have been too large and remained outstanding too long; (4) USAID/E has not adequately monitored the deposit of A.I.D. funds into local accounts to ensure that they were managed and accounted for separately from other donor contributions; (5) commodity management has not met A.I.D. Handbook standard; and (6) a 7/84 interim project evaluation was mishandled. USAID/E should halt further disbursements until it and the GOE have decided which project activities should continue; deobligate unnecessary funds; obtain financial and progress reports; and improve financial management and monitoring and evaluation procedures.