AUDIT REPORT ON REVIEW OF SYRIA AID PROGRAM

EVALUATION, PART OF AN AUDIT OF AID"S ENTIRE SYRIA PROGRAM, INCLUDING TECHNICAL ASSISTANCE PROGRAMS (XD-AAH-182-1), IS BASED ON STANDARD AUDIT PROCEDURES. THE CD PROGRAM COMPRISES SIX PROJECTS: 008, DAMASCUS WATER SUPPLY (DWS) I; 010, DWS II; 011, EUPHRATES BASIN IRRIGATION; 012, DAMASCUS-DERA"A HIGHWAY; 017, LATTAKIA-TARTOUS HIGHWAY; AND 018, RURAL ELECTRIFICATION. ONLY $1.4 MILLION OF $220.7 MILLION CD FUNDS (WHICH ARE 60% OF TOTAL SYRIA PROGRAM FUNDS) WERE EXPENDED. ALL PROJECTS ARE BEHIND SCHEDULE AND, EXCEPT FOR 011, THE CD PROGRAM IS AT A STANDSTILL. IN LIGHT OF SARG"S GROWING IMPATIENCE WITH SLOWNESS OF IMPLEMENTATION AND WITH THE POLITICAL CONDITIONS OF AID"S PROGRAM, IT IS RECOMMENDED THAT AID REASSESS THE POLITICAL SITUATION IN SYRIA TO DETERMINE IF THE CD PROGRAM SHOULD CONTINUE. IF SO, THE FOLLOWING STRATEGIES SHOULD BE CONSIDERED: (1) THE CAUSES OF HIGH BID RESPONSES BY US CONTRACTORS (A MAJOR CAUSE OF DELAY) SHOULD BE DETERMINED, AS SHOULD THE POSSIBILITY OF MODIFYING SARG REGULATIONS/CONDITIONS (ANOTHER CAUSE OF DELAY); (2) IT SHOULD BE DETERMINED IF THERE IS A LOCAL CAPABILITY AND FUNDING SOURCES FOR CONSTRUCTION SERVICES; (3) THE FEASIBILITY OF USING INDIVIDUAL LOAN PROCEEDS SOLELY FOR US ENGINEERING SERVICES AND PROJECT COMMODITIES SHOULD BE DETERMINED. SARG"S RECENT PROPOSAL, WHICH IS SIMILAR TO (3), SHOULD ALSO BE CONSIDERED. AID"S CI PROGRAM CONSISTS OF FIVE LOANS: J-007; K-013; K-015; K-017; AND K-019. OF $87.8 MILLION COMMITTED FUNDS (OF A TOTAL OF $225 MILLION), $55 MILLION WERE EXPENDED. INCREASED EXPENDITURES ARE DUE TO SARG"S GROWING FAMILIARITY WITH AID"S DOCUMENTATION REQUIREMENTS AND TO IMPROVED PROCUREMENT PROCEDURES. IT IS RECOMMENDED, NEVERTHELESS, THAT USAID ESTABLISH A FORMAL ARRIVAL ACCOUNTING SYSTEM AND ENSURE THAT ALL CARDIOVASCULAR EQUIPMENT PROCURED UNDER LOAN K-013 IS INSTALLED AND OPERATING WITHIN A YEAR OF ARRIVAL. IF THIS CANNOT BE DONE, A CLAIM FOR FRAUD SHOULD BE FILED. (USAID IS RESERVING JUDGEMENT ON THIS MATTER.)