His Royal Majesty"s Government of Nepal family planning and maternal and child health project

funds under the Government of Nepal"s (GON"s) Family Planning and Maternal/Child Heatlh project. Special evaluation covers the period 1975-12/79 and is based on site visits, document review, and interviews with GON and USAID/N officials. The partially AID-funded project, as it grew and its budget increased over the last 14 years, has experienced problems with financial management. Funds have been commingled -- i.e., when monies are disbursed to the 47 districts, funding sources are not identified. Of the 40 district accountants, 31 are untrained in GON accounting procedures, many have deficient bookkeeping skills, and turnover is high. Salary and travel advances are frequently not cleared, and USAID/N release of funds is slow. Finally, past USAID/N audits have questioned the propriety of future A.I.D. support unless these problems are resolved and have suggested USAID/N cease funding projects with outstanding accounts after a set time period. Workable solutions were found for each problem. An accounting procedure that ties expenditures to discrete funding sources and leaves a valid audit trail was devised. A training program was formulated to introduce untrained accountants to GON procedures, upgrade the skills of trained accountants, and institute recording/reporting procedures by funding source. Uncleared salary and travel advances for 1976-78 were intensively reviewedand the results forwarded to USAID/N which was in turn asked to write off a small amount of funds. USAID/N"s fund release procedures were reviewed and suggestions were made to accelerate the process. Finally, the GON implemented the recommendations from the above audits to A.I.D."s satisfaction. It is recommended that project officials hire an on-call fiscal management advisor and a chartered accountant. In addition, A.I.D. should retain working papers of detailed budgets and, in the case of formal agreements, should budget funds according to the GON Chart of Accounts.