Audit of USAID/Panama"s economic support fund program, funded by Public Law 101-302, for the period May 25, 1990 through November 30, 1990

The program provides a total of $420 million in assistance, including: (1) two cash transfers totalling $351.7 million; (2) $51.4 million to finance 14 development projects; (3) $10.9 million to two housing, food, and shelter projects; and (4) $6 million to USAID/P for developing projects and operating expenses. Each cash transfer includes one potential weakness. The first cash transfer provides $130 million for repayment of Government of Panama (GOP) debt arrearages and $113.8 million for support to Panama"s public investment budget. The latter funds, however, will be transferred into a commingled account, and thus A.I.D. will not be able to trace these funds to their final expenditure. The second cash transfer provides $107.9 million for private bank lending. Specifically, A.I.D. funds will be used to purchase interbank certificates of deposit for one-half the value of qualifying loans made by private banks. However, these certificates are backed only by the good faith of the institutions, and should an institution fail, a loss of program funds could occur. Of the 14 development projects, 5 are marked by potential minor weaknesses. For example, a civic education center which is being established under one project lacks financial and accounting systems. In addition, the Mission has failed to adequately monitor the contractor"s expense vouchers under its Central American Peace Scholarship project. Most funds for food and shelter assistance are allocated to catered food deliveries to four project feeding sites. Although the Mission orders food in meal form, deliveries are made in bulk, and there is no means of verifying that the bulk amount of food delivered equals the number of meals ordered.