Audit of USAID/Egypt"s provincial cities development project no. 263-0161

In 1985 this goal was revised and the project objectives changed to improve and expand water and wastewater (W&WS) systems in the cities of Fayoum, Beni Suef, and Minia, and to improve the capacity of the cities to plan, implement, and maintain urban infrastructure systems. To achieve these ends, A.I.D. has authorized $110 million in life-of-project funding, of which $93.6 million had been committed and $61.9 million expended as of September 30, 1990. The GOE agreed to provide about 57.4 million Egyptian pounds ($68 million in 1985). An audit conducted between May and October 1990 disclosed that the PCD project has successfully assisted the cities of Fayoum, Beni Suef, and Minia plan and implement urban infrastructure projects. The project has also made considerable progress in constructing, rehabilitating, and expanding the cities" W&WS systems. However, we did note the following. (1) Construction tasks and related activities were being completed more slowly than planned. The project is currently about 3 years behind the schedule described in the amended Project Paper. (2) Contract activities cannot be completed prior to the current PACD and may have to be significantly reduced unless the PACD is extended. The Mission had planned to request a project extension from A.I.D./W. (3) Quarterly implementation status reports to Mission and A.I.D./W top management did not accurately reflect the status of the project. While these reports showed contract delays, they did not reflect progress in terms of the Project Paper"s implementation schedule. The report also did not mention inevitable PACD extensions. (4) Implementation and completion of 38 small-scale W&WS projects had been slower than planned. Some of these projects will probably not be completed prior to the PACD. USAID/E has established a comprehensive and adequate system for monitoring this project which conforms to A.I.D. standards and is generally effective in keeping Mission management informed about potential problems. The management system used for monitoring construction activities is extensive and well coordinated with the GOE implementing organization. However, the sustainability of A.I.D. financed capital investments eventually totalling more than $83 million has yet to be assured. Participating local authorities had yet to assert their authority to retain and use local revenues in order to be able to operate and maintain W&WS facilities financed by the project. The provincial cities operations and maintenance (O&M) capabilities for W&WS facilities need strengthening. The project had also not adequately defined the Mission"s program to improve the cities" O&M capabilities. The report contains four recommendations. It also discusses our assessment of internal controls, and includes our report on USAID/E"s compliance with applicable laws and regulations. A draft of this report was provided to Mission officials for comment. In responding to the draft report, the Mission indicated concurrence with the intent of our recommendations and requested their closure. (Author abstract, modified)