AUDIT REPORT USAID/BRAZIL SAO PAULO HIGHWAY MAINTENANCE EQUIPMENT PROJECT LOAN NO. 512-L-059 (8/1/72-10/31/72)

PROJECT PURPOSE WAS TO PROVIDE SAO PAULO"S STATE HIGHWAY DEPT (DER) WITH THE NECESSARY FUNDS AND TECHNICAL ASSISTANCE TO DEVELOP ITS ADMINISTRATIVE PROGRAM AND TO MAINTAIN AND PLAN A HIGHWAY MAINTENANCE PROGRAM. EVALUATION BASED ON ON-SITE OBSERVATIONS AND DOCUMENTS. US FUNDING HAS RESULTED IN PROCUREMENT OF US EQUIPMENT (HIGHWAY MAINTENANCE & REPAIR SHOP) WHICH HAS BEEN DISTRIBUTED IN APPROXIMATELY 54 DIFFERENT LOCATIONS AND IN ACCORDANCE WITH PROJECT TERMS. AN EQUIPMENT SPECIALIST HAS ADEQUATELY PROVIDED SERVICES AT THE CENTRAL WAREHOUSE. ALSO, TRAINING ASPECTS OF LOAN BY THE TECHNICAL ASSISTANCE CONSULTANT & DER HAVE BEEN SATISFACTORY. DER PERSONNEL RECIEVED BOTH IN-HOUSE TRAINING (1,063 STAFF) AND SHORT-TERM US TRNG (124 STAFF). IN ADDITION TO US FUNDS, DER SECURED LOANS AND TECHNICAL ASSISTANCE FOR TRANSPORT STUDIES, ETC, BY NEGOTIATING CONTRACTS WITH OTHER COMPANIES. AS A RESULT OF A FEASIBILITY SURVEY FOR SAO PAULO, A BELTWAY AROUND THAT CITY IS NOW UNDER CONSTRUCTION. DER ALSO USED ITS OWN RESOURCES TO PROCURE MAINTENANCE EQUIPMENT MANUFACTURED IN BRAZIL. MAJOR PROBLEMS AND DELAYS WERE ENCOUNTERED SINCE ORIGINAL AID CONTRACT VIOLATED BRAZILIAN LAW BY REQUIRING FUNDS BE USED FOR THE PURCHASE OF US EQUIPMENT SIMILAR TO THAT MANUFACTURED IN BRAZIL; AND DER FAILED TO USE FUNDS FOR THE PURPOSES THEY WERE INTENDED, MAINTAIN ACCURATE RECORDS, OR MEET SCHEDULES. AS A RESULT, PROJECT WILL REQUIRE 40 MONTHS LONGER THAN ANTICIPATED, ROAD MAINTENANCE HAS BEEN NEGLECTED, AND MISSION IS IN THE PROCESS OF DEOBLIGATING UNUTILIZED FUNDS EXCEPT $800,000 PLUS WHAT IS NECESSARY TO MEET OUTSTANDING US EQUIPMENT CONTRACTS. TEAM RECOMMENDS THAT DER SUPPLY MISSION WITH QUARTERLY REPORTS REGARDING IMPLEMENTATION STATUS ACCORDING TO 5.01 (A) OF LOAN AGREEMENT, AND A DETAILED LIST OF EQUIPMENT APPROVED AS COMPARED TO THAT ACTUALLY OBTAINED FROM THE 1972 BUDGET. LIKEWISE, MISSION SHOULD NOTIFY DER THAT IF EQUIPMENT PURCHASED UNDER LOAN IS NOT USED WITHIN A REASONABLE TIME, DER MUST REIMBURSE MISSION.