RURAL ROAD CONSTRUCTION

THIS EVAL INCLUDED AN EXAMINATION OF FINANCIAL RECORDS & LOAN-RELATED DOCUMENTS, DISCUSSIONS WITH USAID & GOB PERSONNEL, AND VISITS TO FIVE SITES IN THE STATE OF GOIAS. USAID PROVIDED A $25 MIL LOAN IN 1971,WITH THE NATL BANK FOR ECON DEVELOPMENT (BNDE) PROVIDING MATCHING FUNDS. IMPLEMENTATION OF THE PROJ HAS NOT PROGRESSED AS ANTICIPATED. INITIALLY,THERE WERE ORGANIZATIONAL DELAYS FOLLOWED BY CONSTRUCTION DELAYS. RECENT FLOODING WILL FURTHER DELAY SOME SUBPROJS. AS OF 4/30/74,THE MISSION HAD RELEASED A TOTAL OF $5.7 MIL IN LOAN FUNDS -- ONLY 63% OF THAT PROJECTED TO BE RELEASED. BNDE FAILED TO ESTABLISH A CENTRAL ADMIN UNIT TO EFFECTIVELY OVERSEE PROG COORDINATION & MGMT. MONTHLY ON-SITE INSPECTIONS ARE NOT ALWAYS BEING MADE; AND THERE IS NO EVIDENCE THAT BNDE IS FOLLOWING UP ON CONSTRUCTION DEFICIENCIES. AUDITORS RECOMMEND THAT LOAN DISBURSEMENTS BE SUSPENDED UNLESS AN ADMIN UNIT IS ESTABLISHED. AUDITORS ALSO NOTE THAT BNDE IS ADVANCING LOAN FINDS TO SUB-BORROWERS AHEAD OF SCHEDULE DUE TO THE INCLUSION OF AN ADMINISTRATIVE FEE IN CONSTRUCTION COST TOTALS. AUDITORS RECOMMEND THAT SUCH A FEE BE JUSTIFIED,IF ALLOWABLE. ON-SITE INSPECTIONS REVEALED THAT ROADS WERE BEING BUILT AT HIGHER CONSTRUCTION STANDARDS THAN ORIGINALLY PLNND. IN ONE SUBPROJ,A 12-METER ROADWAY WAS CONSTRUCTED RATHER THAN THE SIX METERS SPECIFIED. IN ADDITION,CONCRETE BRIDGES WERE GENERALLY BUILT INSTEAD OF WOODEN ONES. AUDITORS RECOMMEND THAT PROCEDURES BE ESTABLISHED TO SEPARATE OUT COST-OVERRUNS RESULTING FROM SPECIFICATION DEVIATION TO PREVENT THE USE OF USAID FUNDS FOR SUCH ADDED COSTS. THE USE OF "FORCE ACCOUNT" CONSTRUCTION(THE USE OF THE STATE HIGHWAY DEPT"S OWN WORK FORCE FOR CONSTRUCTION) WAS ALSO NOTED. SINCE THIS PRACTICE JEOPARDIZES MAINTENANCE OF EXISTING ROADS,BNDE SHOULD ASSURE THAT REGULAR ROAD MAINTENANCE WILL NOT BE IGNORED,BEFORE REIMBURSING ANY SUB-BORROWERS FOR THEIR CONSTRUCTION COSTS.