Audit of USAID/Philippines" assistance for policy reform

The Mission ensured that the Philippine Government met conditions precedent and special covenants before releasing funds for the Local Development Assistance Program and the Targeted Child Survival Program, but not for the Natural Resources Management (NRM) Program. When the Mission determined that the Philippine government had not met the conditions precedent for the release of the third tranche to NRM Program, the Mission decided to redirect the remaining $39 million. However, the project to which the funds were redirected belonged to the same government agency that had failed to make the policy reforms required for the original release of the money. In so doing, the Mission defeated the purpose of having conditionality with the assistance. Policy reforms reaped the expected benefits under the first two programs but not under the third (the NRM Program) for which good performance indicators were not developed, and which provided no detailed plan for the implementation of policy reforms. The program had to be redesigned. Finally, because the Mission did not implement its plans for tracking the use of cash transfers, it was impossible to determine whether funds were used for agreed-upon purposes. It is recommended that the Mission review statements from lenders to obtain reasonable assurance that funds were used for debt repayment.