Municipal earthquake recovery program

Audit report covers the period 9/76-6/81 and is based on document review and limited site visits. The project is far behind schedule and only 43% of the $8 million loan has been disbursed. Of four project components, only the Municipal Institutional Development has exceeded goals; 840 rather than a planned 535 municipal officials received administrative training. Although by far the largest component, only 55 of 98 planned Municipal Reconstruction Fund subprojects (SP"s) have been completed and have overemphasized construction of municipal buildings; 27 SP"s are in process and 16 others have not yet begun. A component to strengthen the capacity of the Instituto de Fomento Municipal (INFOM) to carry out municipal recovery and development activities has not gone well. Only recently did INFOM formulate training plans. Finally, under the Municipal Enterprise Fund component, constant turnover of counterpart personnel has resulted in only one of 48 planned SP"s being completed. Although USAID/G monitored the project as well as possible given difficult political circumstances, several financial and internal controls require attention. INFOM was given a $500,000 advance which, based on a draft audit recommendation, A.I.D. has since withdrawn. USAID/G made $2,592 in duplicate payments (subsequently corrected) and reimbursed INFOM $1,957 for an undocumented payment to an advisor. Another $12,181 in undocumented reimbursements and voucher adjustments totaling $52,421 have been corrected. Surplus funds of $55,683 have accumulated in SP accounts because projections overestimated inflation. Publicizing A.I.D. assistance, although required, did not occur due to the tense political situation. It is recommended that USAID/G: (1) determine a specific time frame for achieving project goals; (2) obtain from INFOM a report on expenditures under the Municipal Enterprise Fund; (3) require INFOM to document the $1,957 technical advice payment; (4) reprogram $55,683 of already identified surplus funds; (5) review and reprogram surplus Municipal Reconstruction Funds and deobligate unneeded funds; and (6) document the justification for not indicating A.I.D. assistance at construction sites.