Survey of the private investment encouragement fund project

Audit report covers the period 6/79-1/82 and is based on document review and interviews with A.I.D., PIEF, and Robert R. Nathan Associates (RRNA) contractor personnel. Because conditions precedent were not met until 18 months after the project agreement was signed, only $786,000 of the $33 million PIEF received from A.I.D. had been expended as of 9/30/81. The first subloan ($3 million) was not approved until 11/81; three additional subloans totaling $3.67 million were approved 1/82. Problems have centered on questionable costs billed by RRNA and on inadequate staffing of the PIEF. Regarding the former, RRNA billed A.I.D. $554,374 for technical assistance rendered from 3/80-7/81. Of this amount, $64,034 in claims are ineligible -- $8,734 in home office fringe benefits for outside consultants, $48,440 in overhead on payments to consultants, and RRNA"s 12% fee on these ineligible costs ($6,860). In addition, RRNA billed $9,499 for transportation and travel that were not adequately documented -- copies of airline tickets were lacking ($3,540), air fares were to destinations other than Cairo (2,683), and there were undocumented "preparation and enroute" expenses. The PIEF has not recruited the staff--including a financial specialist, a professional staff assistant, and a secretary--needed to promote the project, to screen and select proposals for PIEF funding, to provide consulting assistance and training for participating banks, or to ensure reporting on PIEF investments. In fact, as of 12/81 the PIEF staff consisted only of a part-time executive director, two other part-time employees, and a chauffeur. Since the grant agreement did not earmark funds to meet PIEF"s start-up payroll expenses, further hiring is dependent on generation of sufficient income from PIEF loan activities. It is therefore recommended that USAID/E issue to RRNA a bill for $64,034 in questioned costs; request RRNA to justify $9,499 in undocumented claims or forward to RRNA a bill for same; and work with the Egyptian Ministry of Economy to ensure adequate PIEF staffing.