AUDIT REPORT USAID/BRAZIL HEALTH SECTOR LOAN NO. 512-L-074 (6/15/72-9/31/72)

EVALUATION BASED ON DOCUMENTS, ON-SITE OBSERVATIONS, AND INTERVIEWS. DESPITE A YEAR EXTENSION, MISSION"S FINANCIAL & ADMINISTRATIVE MONITORING OF THE PROJECT HAS GENERALLY BEEN EFFECTIVE AND PROJECT HAS PROGRESSED RAPIDLY. WATER & SEWERAGE PROJECTS HAVE BEEN CONDUCTED IN OVER 250 CITIES & 463 MUNICIPALITIES. A NAT SANITATION PLAN (PLANASA) HAS BEEN DEVELOPED TO PROVIDE SAFE WATER & SANITATION SERVICE TO BRAZIL"S URBAN POPULATION. PAYROLL TAX TRUST FUNDS HAVE PROVIDED ADEQUATE FUNDING TO DEVELOP AND EXECUTE PROJECT ACTIVITIES. A NEW TECHNICAL ASSISTANCE PROGRAM IS EXPECTED TO SATISFY DEMANDS FOR TECHNICIANS AND ENGINEERS OVER THE NEXT 5-10 YEARS BY TRAINING 60, 000 PERSONS AT VARIOUS LEVELS. FURTHER, WATER COMPANY ENGINEERING STAFFS HAVE ESTABLISHED STATE PROGRAMS TO IMPROVE CONSTRUCTION MONITORING BY WITHHOLDING FUNDS UNTIL DEFICIENCIES ARE CORRECTED. UNFORTUNATELY DUE TO AID"S RELATIVELY INSIGNIFICANT FINANCAIL INPUT, IT HAS BEEN DIFFICULT TO ASSESS LOAN"S SPECIFIC CONTRIBUTIONS. THERE HAS ALSO BEEN CONFUSION CONCERNING THE ELIGIBILITY OF INTERMEDIATE CREDIT INSTITUTIONS REQUESTING LOANS. POOR STAFF PERFORMANCE AT ALL LEVELS HAS DELAYED PROJECT ACTIVITIES. TECHNICAL AGENTS, INSPECTION AGENTS, AND THIRD PARTY PROJECT MONITORING AGENTS HAVE NOT PERFORMED SATISFACTORILY. TRAINING PROGRAMS FOR ENGINEERS & TECHNICIANS HAVE LAGGED BEHIND DUE TO ADMINISTRATIVE & BUREAUCRATIC DELAYS BY USAID & NATL HOUSING BANK (BNH). QUALITY OF STAFF PERFORMANCE HAS VARIED FROM STATE TO STATE (SAO PAULO HAS AN ADEQUATE SYSTEM, BAHIA DOES NOT). BNH HAS NOT ADEQUATELY COMPLETED & SUBMITTED AUDIT REPORTS TO AID. FURTHER, LOAN STIPULATIONS HAVE BEEN IGNORED REQUIRING THAT AID RECIEVE PUBLICITY FOR PROJECT PARTICIPATION & ISSUE BNH AN IMPLEMENTATIONAL LETTER OUTLINING PROJ DETAILS. RECOMMENDATIONS ARE THAT: 1)MINIMUM PERFORMANCE STANDARDS BE REQUIRED FROM TECH & INSPECTN STAFF; 2)MISSION TAKE EFFECTIVE MEASURES TO ASSURE TIMELY RECEIPT/REVIEW OF BNH AUDIT REPORTS; & 3)BNH SUBMIT AUDITED FINANCIAL STATEMENTS TO AID.