Audit of USAID/El Salvador"s agrarian reform credit program, project no. 519-0263

Audit covers the period through 3/86 and is based on document review and interviews with project staff, personnel of project-related agencies, and beneficiaries. The project"s objectives have been only partially achieved. Available credit has increased, and the ability of the Salvadoran Agricultural Development Bank (ADB) to deliver credit has improved, but the ADB"s long-term capacity to provide credit independently is doubtful. The ADB is operating at a loss, and some loans may be uncollectable; ADB financial statements understated the amount of problem loans, the true extent of which jeopardize the ADB"s ability to meet its obligations under the reform program. ADB credit agents did not effectively disseminate information regarding available TA to reform clients, and because of a cumbersome accounting system, branch office and central office records did not always reconcile, making full accounting for A.I.D. funds questionable. Delays have been encountered in installing an AID-funded computer system for the ADB. Finally, it is the opinion of the auditors that the ADB should not be involved in purchasing, storing, and marketing crops. Despite project shortfalls, due in part to internal political strife and to declining world prices for agricultural commodities, many reform beneficiaries have been able to obtain crop financing loans for up to 18 months, and investment loans for 5 to 20 years have been available to farmers and cooperatives. Recommended are, inter alia, an analysis of the ADB to find ways of reducing costs, increasing earnings, and simplifying accounting procedures, and the development of means to ensure the ADB"s future viability. USAID/ES has agreed to utilize better the results of project evaluations, to take action to seek recuperation of costs to repair project vehicles, and to improve its monitoring procedures.