AUDIT REPORT - LOCAL WATER PROJECT

Evaluates period 1/1/76-12/31/79 and was based on an audit review of project documents, interviews with project personnel, and site visits. The report also reviews a related water project (PD-AAF-871-A1). This project to construct 25-30 relatively small waterworks subprojects is now two years behind schedule. The Government of Philippines" (GOP) and the project implementing agent, the Local Water Utilities Agency (LWUA), are responsible for this delay. The GOP decided to construct or repair about 60 scaled down small waterworks subprojects instead of the 25-30 originally planned. As of 2/29/80, three subprojects were essentially complete, three under construction, and the remaining 51 in various pre-construction stages of planning. Although the revised completion date for total subproject construction is 6/30/83, it is likely that the project will substantially overrun this amended deadline. In addition, LWUA has unexpectedly received many requests from outside donors to conduct additional subprojects. LWUA is thus implementing over a total of 100 subprojects. Considering that the administrative and technical requirements of small water district organization are about the same as those of larger water districts, this expansion has stretched LWUA to the limits of its institutional capabilities. It is recommended that USAID consider including an appropriate number of public faucets in further subproject construction, so that additional numbers of the poor will benefit without jeopardy to the water districts" economic viability. LWUA has been curiously lending water districts more funds than specified in the individual subproject designs and agreements. LWUA"s explanations for such lending were inadequate and it is recommended that USAID determine LWUA"s reasons for this practice. While USAID insistence has improved the project reporting of LWUA and the outside consultant, it is further recommended that USAID schedule an in-depth evaluation of the project, to ensure a timely assessment of project shortfalls.