oversight

Foreign Assistance: USAID's Earthquake Recovery Program in El Salvador Has Made Progress, but Key Activities Are Behind Schedule

Published by the Government Accountability Office on 2003-05-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States General Accounting Office

GAO          Report to the Subcommittee on Foreign
             Operations, Export Financing, and
             Related Programs, Committee on
             Appropriations, House of
             Representatives
May 2003
             FOREIGN
             ASSISTANCE
             USAID’s Earthquake
             Recovery Program in
             El Salvador Has Made
             Progress, but Key
             Activities Are Behind
             Schedule




GAO-03-656
             a
                                               May 2003


                                               FOREIGN ASSISTANCE

                                               USAID's Earthquake Recovery Program in
Highlights of GAO-03-656, a report to
Subcommittee on Foreign Operations,            El Salvador Has Made Progress, but Key
Export Financing, and Related Programs,
Committee on Appropriations, House of
Representatives
                                               Activities Are Behind Schedule


In early 2001, two major                       USAID is implementing a $159 million recovery program to assist El
earthquakes struck El Salvador,                Salvador in recovering from two earthquakes in 2001. Nearly two-thirds of
causing more than 1,100 deaths and             the funding is allocated for the construction of approximately 26,000 houses
$1.7 billion in damage to property             for low-income families who lost homes in the earthquakes.
and infrastructure. GAO has been
periodically monitoring the
recovery program being
                                               Because of concern that recovery funding could be susceptible to misuse or
implemented by the U.S. Agency                 corruption, USAID established oversight measures, such as conducting
for International Development                  concurrent audits of host country expenditures. USAID also applied lessons
(USAID), the lead U.S. agency. The             learned from its recovery program in Central America following Hurricane
House Appropriations Committee’s               Mitch in 1998, including using implementing organizations with a proven
Subcommittee on Foreign                        record in accounting for funds and implementing disaster recovery activities.
Operations, Export Financing, and
Related Programs asked GAO to                  USAID has made progress in implementing the recovery program but some
review USAID’s (1) oversight and               activities are behind schedule or did not meet original target dates. As of
accountability measures, (2)                   March 31, 2003, USAID had expended $58 million (36 percent) of its $159
progress and factors affecting                 million in program funding and is making progress in implementing some
progress, and (3) coordination with
other donors and the government
                                               activities. For example, USAID-funded private voluntary organizations had
of El Salvador.                                completed all of the houses scheduled during the first phase of the program.
                                               Other implementers had installed potable water systems for more than
                                               70,000 recipients in rural areas and assisted micro- and small businesses that
                                               were damaged or destroyed. Due to a number of factors, however, some
To ensure that USAID achieves its              USAID construction activities, such as repairing and rebuilding schools,
goal of building over 26,000 houses            health facilities, municipal buildings, and local markets, are behind schedule.
by September 2004, we recommend                Also, as of March 31, 2003, El Salvador’s housing agency (FONAVIPO) had
that the USAID Administrator take
                                               completed less than two-thirds of the nearly 3,000 houses it was originally
action to accelerate construction
activities and establish interim               scheduled to complete by September 2002. USAID revised its agreement
milestones to benchmark progress               with FONAVIPO but the new agreement does not establish milestones to
and determine whether                          benchmark progress and determine whether housing construction will be
construction will be completed as              completed as scheduled. At its current pace, it may be difficult for USAID to
scheduled. Also, if warranted and              complete the recovery program by the end of September 2004, as planned.
to the extent possible under
existing agreements, USAID should              USAID coordinated its earthquake recovery efforts with other donors at the
consider reducing the number of                international, national, and local levels; the government of El Salvador; and
houses to be built by FONAVIPO                 community members. During our review, we found no evidence that USAID
and increasing the number of                   was duplicating other donors’ recovery efforts.
houses to be built by private
voluntary organizations with a
proven record of meeting                       USAID’s Earthquake Recovery Program Activities in El Salvador
construction goals.




www.gao.gov/cgi-bin/getrpt?GAO-03-656.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Jess Ford at
(202) 512-4268 or fordj@gao.gov.
Contents



Letter                                                                                                     1
                             Results in Brief                                                              2
                             Background                                                                    4
                             USAID Established Additional Oversight and Applied Lessons
                               Learned                                                                    10
                             USAID Has Made Progress in Some Activities, but Others Are Behind
                               Schedule or Did Not Meet Original Target Completion Dates                  13
                             USAID Coordinated with Other Donors and the Government of El
                               Salvador                                                                   26
                             Conclusions                                                                  28
                             Recommendation for Executive Action                                          28
                             Agency Comments and Our Evaluation                                           28


Appendixes
              Appendix I:    Scope and Methodology                                                        31
             Appendix II:    Comments from the U.S. Agency for International
                             Development                                                                  33
                             GAO Comments                                                                 37
             Appendix III:   GAO Contacts and Staff Acknowledgments                                       38
                             GAO Contacts                                                                 38
                             Staff Acknowledgments                                                        38


Tables                       Table 1: U.S. Agencies with Agreements to Assist with USAID’s
                                      Earthquake Recovery Program and Budgeted Funding
                                      Amounts                                                             13
                             Table 2: USAID Earthquake Recovery Assistance Budgeted and
                                      Expended, as of March 31, 2003                                      15
                             Table 3: USAID-Funded Houses to Be Built and Completed during
                                      Phase I, as of March 31, 2003                                       17
                             Table 4: Status of Other Construction Activities and Key Dates               23


Figures                      Figure 1: Areas Affected by the January and February 2001
                                       Earthquakes in El Salvador                                          4
                             Figure 2: Earthquake Recovery Activities, by Amount and
                                       Percentage of Funds Budgeted                                        6
                             Figure 3: Municipalities in El Salvador Where USAID Is
                                       Constructing Houses during Phase I, and Municipalities
                                       Visited by GAO                                                      7



                             Page i                     GAO-03-656 Earthquake Recovery Program in El Salvador
Contents




Figure 4: Houses under Construction, Being Inspected, and
          Completed                                                                        9
Figure 5: Timeline of USAID’s Housing Program and the Number of
          Houses Scheduled and Completed                                                   19
Figure 6: USAID-Funded Houses in the Community of El
          Guarumal                                                                         25




Abbreviations

CDC              Centers for Disease Control and Prevention
FONAVIPO         El Salvador’s National Popular Housing Fund
ILP              El Salvador’s Institute for Freedom and Progress
PVO              private voluntary organization
USACE            U.S. Army Corps of Engineers
USAID            U.S. Agency for International Development


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Page ii                           GAO-03-656 Earthquake Recovery Program in El Salvador
A
United States General Accounting Office
Washington, D.C. 20548



                                    May 15, 2003                                                                    Leter




                                    The Honorable Jim Kolbe
                                    Chairman
                                    The Honorable Nita M. Lowey
                                    Ranking Minority Member
                                    Subcommittee on Foreign Operations,
                                     Export Financing, and Related Programs
                                    Committee on Appropriations
                                    House of Representatives

                                    In January and February, 2001, two major earthquakes struck El Salvador,
                                    leaving over 1,100 persons dead and thousands more injured. Damages to
                                    infrastructure, houses, and other property were estimated at more than
                                    $1.7 billion. The United States and other donors initially responded by
                                    providing emergency relief, such as food, water, medical supplies, and
                                    temporary shelter. In March 2001, the international donor community
                                    pledged $1.3 billion to assist in the recovery and reconstruction of
                                    earthquake-affected areas of the country. The Congress and the
                                    administration made available approximately $159 million for the U.S.
                                    Agency for International Development (USAID) to carry out earthquake-
                                    related disaster recovery activities—$59 million and $100 million in fiscal
                                    years 2001 and 2002, respectively. USAID, in coordination with several
                                    other U.S. departments and agencies, is currently implementing the
                                    recovery program. USAID officials have stated that the program will be
                                    completed and the funds expended by September 30, 2004.

                                    Because of congressional concerns about potential corruption and prior
                                    misuse of foreign aid for relief and reconstruction, you asked us to monitor
                                    the delivery of the assistance through frequent visits to El Salvador. We
                                    agreed to review USAID’s (1) oversight of, and accountability measures
                                    associated with, the recovery program; (2) progress in the recovery
                                    program and factors affecting its progress; and (3) coordination of
                                    recovery efforts with other donors and the government of El Salvador.

                                    This is an interim report on the progress of the earthquake recovery
                                    program. To address these matters, we reviewed the objectives and
                                    oversight strategy of the program and made five trips to El Salvador
                                    between July 2001 and January 2003. On our trips, we visited numerous
                                    project sites, traveling to some of the most remote areas of the country,
                                    talking with many people affected by the earthquakes, and monitoring the
                                    progress of USAID projects across a wide range of sectors. We briefed



                                    Page 1                      GAO-03-656 Earthquake Recovery Program in El Salvador
                   USAID officials on our findings during these trips so that they could take
                   corrective actions, if needed. (For details of our scope and methodology,
                   see app. I.)



Results in Brief   USAID established oversight measures for its earthquake recovery
                   program, including concurrent audits of host country expenditures, to
                   augment the standard financial controls that it requires for development
                   assistance programs, and it applied lessons learned from its work after
                   Hurricane Mitch. Specifically, the Court of Accounts, a government of El
                   Salvador audit institution, is conducting concurrent audits of more than
                   $50 million in USAID funds for construction activities being implemented
                   by the government. In addition, USAID’s Regional Inspector General
                   reviewed USAID’s housing program and is conducting other audits. We
                   reviewed numerous reports issued by the oversight organizations, and, to
                   date, they have found no substantive problems except for delays in housing
                   construction. Also, USAID applied lessons it had learned in carrying out the
                   disaster recovery program following Hurricane Mitch in 1998. It contracted
                   with implementing organizations it had worked with successfully after the
                   hurricane and with four U.S. government agencies to provide technical
                   assistance and quality control for various activities.

                   USAID has made progress in implementing the earthquake recovery
                   program, but several activities are behind schedule and housing
                   construction did not meet its initial target completion date. As of March 31,
                   2003, USAID had expended approximately $58 million (36 percent) of its
                   $159 million in earthquake recovery funding, building houses, installing
                   potable water systems for more than 70,000 beneficiaries in rural
                   communities, and providing financial support to micro- and small
                   businesses that were damaged or destroyed. For example, private
                   voluntary organizations have completed all of the houses they were
                   scheduled to complete during the initial construction phase. However,
                   several USAID construction activities, including the rebuilding of schools,
                   health facilities, municipal buildings, and local markets, are behind
                   schedule. Also, housing construction by FONAVIPO (El Salvador’s
                   government housing agency) did not meet its original target completion
                   date. Specifically, as of the end of March 2003, FONAVIPO had completed
                   only about two-thirds of the houses it was originally scheduled to finish in
                   September 2002. In November 2002, USAID approved a revised plan that
                   established September 2003 as the new date for FONAVIPO to complete its
                   Phase I houses. The revised plan includes some financial and other changes
                   but does not establish interim milestones so that USAID will be able to



                   Page 2                       GAO-03-656 Earthquake Recovery Program in El Salvador
benchmark FONAVIPO’s progress in building and completing houses. At
current construction rates, it may be difficult for USAID to achieve its goal
of completing the earthquake recovery program by September 30, 2004.
Delays in housing construction resulted from several factors, including the
lengthy process of ensuring that housing beneficiaries had clear title to
their property and initial difficulties regarding payments to some
contractors. In addition, the organizations implementing USAID’s housing
construction program have not consistently built houses completely and
correctly, which has necessitated repeated inspections by U.S. Army Corps
of Engineers personnel. USAID reports that implementers have been
making slow but positive progress in improving the quality of houses.

USAID is coordinating its earthquake recovery efforts with other donors
and with the government of El Salvador. USAID has worked with donors at
the international, national, and local levels to prevent duplication of
recovery activities. USAID also has coordinated with government of El
Salvador ministries, municipal officials, and community members. During
our periodic visits to El Salvador, we found no evidence that USAID was
duplicating the activities of others because, in part, the country’s
reconstruction needs exceed the amount of support that has been pledged
and provided by other donors.

We are recommending that, to increase the likelihood of meeting USAID’s
housing construction goals, the USAID Administrator take action to
accelerate the pace of construction activities and establish interim
milestones to benchmark progress and determine whether construction
will be completed as scheduled. Also, if warranted and to the extent
possible under existing agreements, the USAID Administrator should
consider reducing the number of houses to be built by FONAVIPO and
increasing the number to be built by private voluntary organizations that
have performed well to date. In commenting on a draft of this report,
USAID agreed with our recommendation that it accelerate the pace of
construction activities. On the basis of comments USAID provided on the
draft, we modified our recommendation to state that USAID should
establish interim milestones to benchmark progress and determine
whether FONAVIPO and other housing implementers are making progress
in meeting the overall goal of constructing 26,400 houses by September 30,
2004.




Page 3                       GAO-03-656 Earthquake Recovery Program in El Salvador
Background                               On January 13, 2001, a severe earthquake measuring 7.6 on the Richter
                                         scale caused major loss of life, injuries, and damage in El Salvador. The
                                         earthquake was centered about 65 miles off the country’s Pacific coastline
                                         and particularly affected six of the country’s departments that border the
                                         ocean. One month later, on February 13, another devastating earthquake
                                         struck. It was centered about 20 miles east of the capitol of San Salvador
                                         and measured 6.6 on the Richter scale. Both earthquakes are estimated to
                                         have damaged the dwellings, economic livelihoods, and health conditions
                                         of about 1.5 million people, nearly a fourth of the country’s population. As
                                         shown in figure 1, these earthquakes affected much of the country.



Figure 1: Areas Affected by the January and February 2001 Earthquakes in El Salvador




                                         Page 4                         GAO-03-656 Earthquake Recovery Program in El Salvador
U.S. relief efforts began immediately after the first earthquake, and USAID
began providing some recovery assistance using redirected program funds
and funds from other sources. The Congress and the administration,
recognizing the need for longer term assistance for recovery and
reconstruction, made available approximately $159 million—$137 million
in newly appropriated funds and $22 million in funds redirected from other
sources.

The overall objective of USAID’s earthquake recovery program is to
improve the lives of earthquake victims, using the guiding principle of
“building back better.” For example, houses built by USAID include
reinforced construction designed to better withstand future seismic events.
Specific efforts within USAID’s overall program include

• restoring community infrastructure and housing for the rural poor,

• reconstructing municipal government infrastructure,

• reactivating economic activities, and

• mitigating the effects of future natural disasters.

USAID’s recovery program also included an emphasis on ensuring the
sustainability of its efforts. For example, USAID required that housing
implementers include stone or block retaining walls, when needed, to
ensure that houses are not affected by erosion. USAID also required that
other implementers perform sustainability analyses to assess the financial
viability of projects when USAID funding ends.

USAID’s program consists largely of construction activities. More than $135
million (85 percent) of USAID funding is budgeted for construction,
including about $104 million (65 percent) allocated to build approximately
26,000 houses. Other planned construction activities include rebuilding
approximately 35 schools, 30 child care centers, 6 health clinics, 40
municipal buildings, and 5 local markets and rehabilitating or repairing
potable water systems. Nonconstruction activities, which account for more
than $20 million (15 percent) of USAID’s program, include providing
training and equipment to micro- and small businesses; providing technical
assistance to farmers; and working with communities to improve their
disaster preparedness, mitigation, and response. Figure 2 shows
earthquake recovery activities by amount and percentage of funds
budgeted.



Page 5                       GAO-03-656 Earthquake Recovery Program in El Salvador
Figure 2: Earthquake Recovery Activities, by Amount and Percentage of Funds
Budgeted




a
Approximately $2.4 million for USAID program management is included in nonconstruction costs.


Nearly two-thirds of USAID’s earthquake recovery funding is allocated to
build new houses for low-income recipients in more than 300 communities
in approximately 90 earthquake-affected municipalities. Many of the
communities are in rural areas that are dispersed throughout the country.
During our periodic visits to El Salvador, we visited numerous communities
in 17 of the 50 municipalities in which USAID implementers were building
houses during the initial phase of the program, as shown in figure 3. During
the first and second phases of housing construction, work will take place in
90 municipalities, according to USAID.




Page 6                              GAO-03-656 Earthquake Recovery Program in El Salvador
Figure 3: Municipalities in El Salvador Where USAID Is Constructing Houses during Phase I, and Municipalities Visited by GAO




                                          To implement its housing activities, USAID signed agreements with
                                          FONAVIPO and eight private voluntary organizations (PVOs), some of
                                          which were implementing other USAID development activities in El
                                          Salvador prior to the earthquakes. Although housing layouts and
                                          construction techniques differ by housing implementer, all of the
                                          implementers are required to build basic structures that are a minimum of
                                          40 square meters in size and are reinforced to minimize damage and bodily
                                          harm in the event of earthquakes. The houses typically have two bedrooms,
                                          a living room, a concrete porch, and a separate kitchen. For houses without
                                          access to municipal sewage connections, contractors must construct a
                                          latrine as well. USAID’s program also requires that beneficiaries be
                                          provided with access to water and sanitation and that environmental and



                                          Page 7                         GAO-03-656 Earthquake Recovery Program in El Salvador
disaster mitigation measures, such as stone or block retaining walls, be
included, if necessary. The average cost of each house is approximately
$3,800. Figure 4 shows examples of typical USAID-funded houses under
construction, being inspected, and completed.




Page 8                      GAO-03-656 Earthquake Recovery Program in El Salvador
Figure 4: Houses under Construction, Being Inspected, and Completed




                                        Page 9                        GAO-03-656 Earthquake Recovery Program in El Salvador
                          The houses or housing sites undergo inspections at three intervals.
                          Specifically, the U.S. Army Corps of Engineers (USACE)

                          1. inspects the site prior to construction to ensure that houses will not be
                             built in disaster-prone areas, such as in flood plains or near steep hills;

                          2. performs a second inspection during construction to examine the
                             quality of materials and workmanship and, if necessary, recommend
                             corrective actions; and

                          3. conducts a final inspection to assess whether site mitigation measures
                             were implemented correctly and completely and to detect problems
                             with structural components (walls, roofs, doors, or windows).

                          When USACE staff identify incomplete or incorrect work, implementing
                          organizations must correct the problems before the houses can receive
                          final approval.



USAID Established         In addition to the measures USAID normally uses to monitor its
                          development programs, the agency established additional oversight
Additional Oversight      measures to ensure accountability of recovery funds, and it applied lessons
and Applied Lessons       learned from its work after Hurricane Mitch. USAID’s normal oversight
                          measures include preaward surveys and audits of prospective awardees,
Learned                   standard audits as required by U.S. government acquisition regulations, and
                          management and oversight of the program by USAID mission staff. To
                          address concerns about funds’ susceptibility to misuse or corruption,
                          USAID also required concurrent audits of some activities. In addition,
                          USAID’s Office of the Regional Inspector General for Latin America
                          performed risk assessments and conducted oversight of USAID’s housing
                          program. We reviewed numerous periodic reports issued by these oversight
                          organizations and, to date, they have found no major weaknesses or misuse
                          of funds, other than delays in housing construction. USAID applied lessons
                          learned from its recently completed hurricane recovery program, such as
                          working with organizations that had successfully administered USAID-
                          funded projects and contracting with a few key U.S. government agencies
                          that had previously worked on disaster reconstruction programs.



USAID Set Up Additional   At the outset of the earthquake recovery program, USAID reached an
Oversight Measures        agreement with the Salvadoran government’s Corte de Cuentas (Court of



                          Page 10                      GAO-03-656 Earthquake Recovery Program in El Salvador
                         Accounts) to concurrently audit over $50 million in funds provided to the
                         government of El Salvador. USAID has certified that the Court of Accounts
                         is qualified to perform audits of U.S. funds. The USAID Regional Inspector
                         General is responsible for overseeing the audit work of the Court of
                         Accounts and conducts on-site reviews and periodic visits to ensure quality.
                         USAID officials told us that the quality of the work performed by the Court
                         of Accounts has been satisfactory, and that they plan to continue to rely on
                         the Court of Accounts for further financial oversight.1

                         Other monitoring efforts are being conducted by USAID’s Regional
                         Inspector General for Latin America. The Inspector General conducted a
                         review of USAID’s housing activities from the outset of the program
                         through July 2002 and issued a report in November 2002.2 The Inspector
                         General reported that USAID’s housing implementing organizations were
                         selecting beneficiaries appropriately, with no evidence of discrimination on
                         the basis of religious or political affiliations. The Regional Inspector
                         General is tentatively planning to begin a follow-on review of the housing
                         program during late 2003.

                         USAID also required that a private accounting firm conduct a concurrent
                         audit of a USAID-funded health clinic being implemented by AmeriCares, a
                         U.S.-based PVO that provides medical supplies overseas. According to
                         USAID officials, this was done because AmeriCares had no experience
                         implementing a USAID-funded program and was working through a
                         Salvadoran nongovernmental organization to carry out the construction.



USAID Applied Lessons    When the two earthquakes struck El Salvador in early 2001, the USAID
Learned from Hurricane   mission was winding down its recovery efforts associated with Hurricane
                         Mitch, which struck Central America in November 1998. As it had done
Recovery Program




                         1
                          According to USAID officials, the Court of Accounts has received USAID technical
                         assistance and training for more than 7 years, and its capabilities improved substantially
                         during that period.
                         2
                          USAID Regional Inspector General, Audit of USAID/El Salvador-Financed Housing
                         Reconstruction Activities, 1-519-03-001-P (San Salvador, El Salvador: Nov. 19, 2002).




                         Page 11                            GAO-03-656 Earthquake Recovery Program in El Salvador
for the hurricane recovery program,3 USAID contracted with numerous
PVOs that had previously worked for the mission. USAID also contracted
with fewer U.S. agencies to help implement the program than it had hired
during the hurricane recovery program that began in 1999.

USAID contracted with at least five PVOs that it had previously worked
with to implement earthquake recovery projects because, according to
USAID officials, using organizations that have proven to be capable and
reliable reduces the likelihood of misuse of funds and corruption. USAID
had previous or ongoing agreements with some of these organizations
under its regular development program. As a result, USAID was familiar
with the capabilities and qualifications of staff that would be carrying out
the projects.

Also on the basis of its hurricane recovery program experience, USAID
signed agreements totaling about $5.8 million with four U.S. government
agencies (see table 1). These agencies provide technical assistance,
training, disaster mitigation, and quality control for numerous project
activities. USAID officials told us that they selected these agencies because
they had (1) experience working abroad; (2) staff that possessed Spanish-
language skills; or (3) technical skills and expertise that supported USAID’s
program.




3
 For a discussion of hurricane recovery efforts, see U.S. General Accounting Office, Foreign
Assistance: Disaster Recovery Program Addressed Intended Purposes, but USAID Needs
Greater Flexibility to Improve Its Response Capability, GAO-02-787 (Washington, D.C.:
July 24, 2002).




Page 12                           GAO-03-656 Earthquake Recovery Program in El Salvador
                         Table 1: U.S. Agencies with Agreements to Assist with USAID’s Earthquake
                         Recovery Program and Budgeted Funding Amounts

                         Dollars in millions
                         U.S. agency                          Funding       Program goal
                         Centers for Disease Control               $2.2     Strengthen the National Health
                         and Prevention (CDC)                               Surveillance System.
                         U.S. Army Corps of                         2.1     Provide quality control of construction
                         Engineers (USACE)a                                 activities.
                         U.S. Geological Survey                     1.3     Enhance disaster preparation and
                                                                            response capabilities with training,
                                                                            technical assistance, and equipment.
                         National Oceanic and                       0.2     Train Salvadoran technicians in disaster
                         Atmospheric Administration                         mitigation issues.
                         Total                                     $5.8
                         Source: USAID.
                         a
                          USAID funding to USACE expires December 31, 2003. According to USAID officials, additional
                         funding will be needed to enable USACE to continue its work through the end of the program because
                         some construction projects are not scheduled to be completed until the end of September 2004.




USAID Has Made           USAID has spent a substantial amount of its funding for the earthquake
                         recovery program and made progress in implementing a number of the
Progress in Some         program’s components, but USAID did not meet its initial schedule for
Activities, but Others   constructing houses and most of its other construction projects are behind
                         schedule, including health facilities, municipal buildings, and local
Are Behind Schedule      markets. As of March 31, 2003, USAID had expended about $58 million (36
or Did Not Meet          percent) of its $159 million in earthquake recovery funding. USAID has
Original Target          made progress in several earthquake recovery construction projects,
                         including housing, potable water systems, and child care centers. USAID
Completion Dates         also has made progress in some nonconstruction projects, such as
                         supporting micro- and small businesses and assisting farmers. However, as
                         of the end of March 2003, FONAVIPO, the government housing
                         implementer responsible for building the largest number of houses, had
                         completed only about two-thirds of the houses it was initially scheduled to
                         finish by September 2002. In November 2002, USAID revised FONAVIPO’s
                         scheduled completion date for the initial building phase to September 2003.
                         Several factors have affected USAID’s implementation of some program
                         activities, particularly housing construction. At the start of the program, for
                         example, USAID encountered difficulties certifying land titles, getting
                         approval for locations of building sites, and attracting qualified contractors
                         to build small numbers of houses in remote communities that were widely



                         Page 13                              GAO-03-656 Earthquake Recovery Program in El Salvador
dispersed throughout the earthquake-affected areas. Later, USACE
inspectors found that housing implementers consistently had problems
constructing houses completely and correctly.

USAID faces challenges that may lead to increased health and security
risks at a particular housing site as well as difficulties sustaining the
operations of a USAID-funded health clinic that AmeriCares is
implementing. USAID is aware of these challenges and has taken some
actions to address them. USAID is coordinating with local government and
nongovernment officials in an effort to assist families at the housing project
to pay for water and electricity services through monthly installments.
Additionally, in recognizing the potential sustainability challenge of the
health clinic, USAID required that the implementing organization conduct
extensive analyses during its planning and design phases so that a solution
can be reached prior to the cessation of USAID support.

USAID’s earthquake recovery program consists of about $159 million that it
plans to expend by September 30, 2004. USAID was able to begin some
recovery activities soon after the earthquakes struck by redirecting
ongoing project funding into earthquake recovery projects.4 Expenditures
vary considerably by activity. Table 2 explains the earthquake recovery
activities, funds budgeted, and funds expended as of March 31, 2003.




4
 Redirected funds total $22 million (14 percent) of USAID’s overall $159 million in recovery
program funding and are comprised of $12 million and $10 million for fiscal years 2001 and
2002, respectively.




Page 14                            GAO-03-656 Earthquake Recovery Program in El Salvador
                          Table 2: USAID Earthquake Recovery Assistance Budgeted and Expended, as of
                          March 31, 2003

                          Dollars in millions
                                                                                                                  Percentage
                          Recovery program activity                            Budgeted         Expended           expended
                          Construction activities
                              Housing                                             $103.5             $37.4                  36
                              Potable water systems                                   9.5               7.3                76
                              Schools                                                 7.5               0.2                  3
                              Municipal infrastructure                                5.0               0.0                  0
                              Public health facilities                                4.7               0.8                 16
                              Local markets                                           3.0               0.0                  0
                              Small infrastructure projects                           1.2               0.4                 34
                              Child care centers                                      0.9               0.3                30
                              Subtotal                                            $135.4             $46.4                 34
                          Nonconstruction activities
                              Micro- and small business                             $7.0               $2.3                 33
                              Disaster mitigation                                     6.6               1.5                 23
                              Agriculture                                             3.9               2.6                 67
                              Othera                                                  3.8               3.8                100
                              Subtotal                                             $21.3             $10.2                 48
                          USAID program management                                    2.4               0.9                 38
                          Total                                                   $159.1             $57.6                  36
                          Source: USAID.

                          Note: Figures do not add to total due to rounding.
                          a
                           Includes various funding for training, technical assistance, purchases of computers and other
                          equipment, and operating costs for some health activities.




USAID Has Made Progress   USAID has made progress in several earthquake recovery construction
in Some Projects          projects, including housing, potable water systems, and child care centers.
                          As of the end of March 2003, about 7,500 houses had been completed and
                          27 potable water systems, serving nearly 70,000 persons in rural
                          communities, had been built. The water systems, some of which include
                          wells and underground pipes that are particularly vulnerable to
                          earthquakes, are crucial in maintaining health standards and controlling
                          diseases. USAID also has made progress in repairing and reequipping 11
                          child care centers serving poor families. USAID plans to complete 30 of
                          these centers, which allow low-income mothers to work outside the home



                          Page 15                               GAO-03-656 Earthquake Recovery Program in El Salvador
                                  and school age girls, who otherwise might have to stay home and care for
                                  younger siblings, to attend school. As of the end of March 2003, USAID had
                                  expended about $267,000 (30 percent) of the $900,000 budgeted for the
                                  centers.

                                  In addition, USAID has made progress in some nonconstruction projects,
                                  which typically can be started more quickly because they do not require
                                  lengthy design, procurement, and construction phases. These projects
                                  provide loan programs, training, and technical assistance. Specifically, to
                                  assist micro- and small businesses recover from earthquake damages,
                                  USAID provided grants that have helped more than 2,500 persons,
                                  including nearly 2,000 women, in earthquake-affected departments. We
                                  interviewed microentrepreneurs who were able to restart their home-based
                                  businesses, including bakers whose ovens were destroyed and
                                  seamstresses whose sewing machines were no longer usable. Progress also
                                  has been made in assisting farmers in earthquake-affected areas, including
                                  providing technical assistance to broaden the farmers’ opportunities to
                                  export agricultural products.



USAID Construction                Despite some progress, USAID construction activities, notably housing,
Projects Have Not                 have not progressed as originally planned and many are currently behind
                                  schedule. In particular, by the end of March 2003, after about 15 months of
Progressed as Planned             construction, FONAVIPO had completed fewer than 2,000 of approximately
                                  3,000 houses it was originally scheduled to finish in September 2002.
                                  Construction projects involving schools and health facilities also are
                                  behind schedule, in part because USAID and the government of El Salvador
                                  had differing positions regarding facility designs and items to be included
                                  in the projects. Construction of municipal buildings and local markets has
                                  not started because the selection, design, and contracting processes took
                                  longer than originally anticipated.

Housing Activities Did Not Meet   USAID’s housing construction program did not meet its original completion
Original Target Dates             dates, as planned. Overall, approximately 26,400 houses are scheduled to
                                  be completed in two phases, including about 7,500 during Phase I and
                                  18,900 during Phase II. Table 3 provides a detailed breakdown of progress
                                  in meeting Phase I of the housing construction program.




                                  Page 16                     GAO-03-656 Earthquake Recovery Program in El Salvador
Table 3: USAID-Funded Houses to Be Built and Completed during Phase I, as of
March 31, 2003

                                                                Phase I houses
                                             Houses to be          completeda
                                              built during                as of     Percentage
Housing implementer                                Phase I      March 31, 2003       completed
FONAVIPO (government of El
Salvador’s housing agency)                            3,050                1,973              65
Private voluntary organizations
    Cooperative Housing Foundation                    1,315                1,315             100
    Samaritan’s Purse                                 1,248                1,248             100
    CARE                                              1,009                1,009             100
    World Vision                                        325                  325             100
    Catholic Relief Services                            300                  300             100
    Save the Children                                   300                  300             100
    Subtotal                                          4,497                4,497             100
Total                                                 7,547               6,470b              86
Source: USAID.
a
 Completed houses are those that implementing organizations have submitted to USAID for
inspection; some may not have been inspected or given final approval.
b
 As of March 31, 2003, PVOs had also completed an additional 1,014 houses under Phase II. Thus,
the total houses completed for the entire program was 7,484.


The PVOs’ Phase I deadlines for completing houses varied between June
and October 2002. Some of the PVOs completed their Phase I houses on
time but others did not. As of the end of February 2003, PVOs had
completed all 4,500 of the Phase I houses they were responsible for
building. In contrast, FONAVIPO was initially scheduled to complete over
3,000 houses by September 2002 but, at that time, had only completed 600,
less than 20 percent.5 Recognizing that FONAVIPO had experienced
problems in meeting its original September 2002 completion date for
completing its Phase I houses, USAID met with FONAVIPO in November
2002. On the basis of these discussions, USAID approved a revised plan that
established September 2003 as the date when FONAVIPO is to complete its
Phase I houses. The revised plan includes additional financial requirements
and other minor modifications. However, the revised plan does not include



5
 As shown in table 3, as of March 31, 2003, FONAVIPO had still completed fewer than 2,000
houses.




Page 17                             GAO-03-656 Earthquake Recovery Program in El Salvador
                             interim milestones for USAID to benchmark FONAVIPO’s progress in
                             building and completing houses.

                             FONAVIPO did not complete its construction of Phase I houses as initially
                             scheduled for several reasons. Specifically, its housing construction
                             process involved more planning and coordination than did the PVOs’
                             process. Unlike the PVOs, FONAVIPO was required to plan and coordinate
                             its program with a local nongovernmental organization, which involved
                             more time than PVOs needed for similar activities. According to USAID
                             officials, FONAVIPO’s planning and coordination has improved as the
                             program has evolved.

                             USAID’s Regional Inspector General reported that FONAVIPO fell behind
                             schedule because it had inflexible payment procedures that caused
                             liquidity problems for some of its contractors. FONAVIPO initially did not
                             pay its contractors until houses had been inspected by USACE and
                             approved by USAID. As a result, the contractors lacked the resources to
                             continue to work. USAID worked with FONAVIPO to develop a system that
                             provided contractors with incremental payments. In addition, FONAVIPO
                             was slow in assigning supervisors to monitor the performance of its
                             contractors. USACE inspectors identified the problem, and USAID officials
                             immediately discussed the issue with FONAVIPO. The situation improved
                             when FONAVIPO increased supervisors’ accountability by establishing a
                             list of supervisors assigned to each work site.



To Achieve Overall Housing   To achieve USAID’s goal of completing more than 26,400 houses by the end
Goal, USAID Must More        of September 2004, USAID housing implementers will need to complete
                             over 1,000 houses per month. However, for the 1-year period ending in
Than Double Output           February 2003, an average of only about 410 houses per month were
                             completed by all of the housing implementers combined. As previously
                             shown in table 3, FONAVIPO had completed fewer than 2,000 houses after
                             about 15 months of construction, averaging about 130 houses per month.
                             However, FONAVIPO is scheduled to complete nearly 7,000 more houses in
                             the upcoming 1-1/2 year period, an average of nearly 400 houses per month.
                             USAID Mission officials told us they are confident that FONAVIPO can
                             meet its goal as scheduled because they expect the pace of housing
                             construction to increase substantially during 2003 and to continue more
                             quickly throughout the remainder of the program. Nevertheless, it may be
                             difficult for USAID to reach its goal by September 30, 2004, given the
                             limited progress it has made to date. Figure 5 shows a timeline of USAID’s
                             housing program, with the number of houses scheduled and completed.



                             Page 18                     GAO-03-656 Earthquake Recovery Program in El Salvador
Figure 5: Timeline of USAID’s Housing Program and the Number of Houses Scheduled and Completed




Several Factors Have                   USAID housing implementers have experienced difficulties in their housing
Slowed Housing                         construction efforts because of several factors. At the start of the program,
                                       the difficulties included certifying land titles, getting approval for locations
Construction
                                       of building sites, and attracting qualified contractors to build small
                                       numbers of houses in remote communities that were widely dispersed
                                       throughout the earthquake-affected areas. As Phase I neared completion,
                                       USACE found that housing implementers have consistently had problems
                                       constructing houses completely and correctly. Also, implementers have not



                                       Page 19                       GAO-03-656 Earthquake Recovery Program in El Salvador
                                    consistently applied environmental and disaster mitigation measures in the
                                    communities we visited, provided health and sustainability training to
                                    beneficiaries, or ensured that beneficiaries build retaining walls and
                                    perform other environmental and disaster mitigation measures, as
                                    required.

Title Certification Caused Delays   USAID experienced initial delays in its housing program because of its
                                    requirement that houses be built only for beneficiaries with clear title to
                                    their property. Many Salvadorans whose houses were destroyed in the
                                    earthquakes had no legal proof that they owned the property on which their
                                    house had stood. Many other potential beneficiaries who had
                                    documentation provided incomplete or incorrect information to the
                                    Institute for Freedom and Progress (ILP), a Salvadoran government agency
                                    responsible for investigating and certifying land titles and other legal
                                    documents. Further, at the outset of the program, ILP was burdened with a
                                    large number of applications as many implementers tried to start their
                                    programs. Housing starts were delayed because implementers had to wait
                                    weeks for approval to begin construction. As the program moved forward,
                                    USAID, its housing implementers, applicants, and ILP improved their
                                    processes and coordination. According to USAID officials, the processes
                                    for identifying potential beneficiaries, submitting applications, and
                                    approving land titles has improved substantially. USAID officials stated
                                    that, because ILP has expedited its processes, it currently has little or no
                                    backlog.

Establishing a USACE Office in      USAID housing construction activities also did not proceed as quickly as
El Salvador Took Time               USAID had planned because of delays in USACE’s establishing a full-time,
                                    in-country presence and hiring staff. As a result, some implementing
                                    organizations were not able to begin construction as planned because they
                                    had to wait for USACE site inspections and approvals.

                                    USAID officials told us that they had expected USACE to hire a program
                                    manager and at least three staff engineers soon after the two agencies
                                    signed an agreement in July 2001. However, although temporary USACE
                                    personnel visited El Salvador frequently, the permanent manager and staff
                                    were not hired until November 2001, and USACE’s El Salvador office was
                                    not fully staffed until March 2002. USAID officials added that, during the
                                    period when the USACE office was not fully established and staffed, the
                                    backlog of site inspection requests grew. According to USACE officials, an
                                    interim manager temporarily managed USACE’s efforts until the permanent
                                    position was advertised and filled. USACE officials added that the delays in




                                    Page 20                     GAO-03-656 Earthquake Recovery Program in El Salvador
                                 establishing the office and staff resulted from administrative processes
                                 required by the U.S. embassy.

Housing Implementers Have Had    USAID has had difficulty getting housing implementers to ensure that
Difficulty Ensuring Houses Are   contractors build houses correctly and completely. In our review of USACE
Built Completely and Correctly   inspection reports and our periodic visits to housing sites, we found few
                                 indications of major problems with materials used to build USAID houses
                                 (e.g., cracked floors or walls made from poorly manufactured blocks).
                                 However, we frequently found substantial problems, such as roof supports
                                 that were improperly connected to walls, and other problems, such as
                                 metal windows and doors that were not functioning properly. Also, USACE
                                 inspectors have frequently found houses (1) in which some key elements
                                 had not been painted completely; (2) where sinks and latrines had not been
                                 installed; (3) where retaining walls had not been completed; and (4) with
                                 adjacent older damaged buildings that had not been destroyed, as required.
                                 In addition, on follow-up visits, USACE inspectors have repeatedly found
                                 that problems they had previously pointed out to implementers had not
                                 been corrected. During our visits to housing sites, we noted instances in
                                 which the implementer had failed to provide required components, such as
                                 latrines, washbasins, and retaining walls to protect houses from erosion.
                                 We also visited a community in which the housing implementer had sealed
                                 the wastewater collection pits, preventing beneficiaries from adhering to
                                 the requirement that the pits be periodically cleaned to minimize
                                 environmental impact. (USAID did not renew its contract with this
                                 implementer for Phase II housing construction.) Despite such problems,
                                 however, during our site visits, beneficiaries expressed satisfaction with
                                 the new houses and stated that the houses were better than the ones they
                                 lived in prior to the earthquakes.

                                 USAID and USACE officials have taken actions to improve the quality of
                                 houses that implementers are building. During our October 2002 visit to El
                                 Salvador, we raised concerns about USACE’s methodology for selecting
                                 houses for inspection and then submitting them to USAID for final
                                 approval. Following our visit, USAID issued detailed procedures that
                                 USACE and the implementers are required to follow in their work. USAID
                                 also conducted additional quality control training that implementers were
                                 required to attend. USAID officials stated that the training was useful in
                                 reinforcing the principle of “building back better” and that, since this
                                 training was given, the quality of construction by all implementers has
                                 improved.




                                 Page 21                     GAO-03-656 Earthquake Recovery Program in El Salvador
                               USAID’s housing implementing organizations have sometimes neglected
                               their responsibilities to ensure that beneficiaries comply with USAID
                               disaster mitigation guidelines. Beneficiaries of the housing program agree
                               to (1) build retaining walls, if needed, to keep rainwater from causing site
                               erosion and (2) demolish damaged structures near new houses that may
                               present danger in the event of another tremor or earthquake. During our
                               site visits, we found communities in which three PVO housing
                               implementers had not enforced requirements. We discussed this issue with
                               several officials of housing implementing organizations who told us they
                               had informed the beneficiaries of the requirements but that it was the
                               beneficiaries’ responsibility to do the work. Many of the beneficiaries told
                               us that they had not destroyed the damaged structures, particularly ones
                               that were still partially intact, because the structures were useful for
                               storing food, tools, and equipment.

                               Implementers’ training of housing beneficiaries has been inconsistent.
                               Soon after the program started, some beneficiaries told us that the
                               implementers had not provided the required health and sanitation training.
                               Also, during our visits to five different implementers’ housing sites, some
                               beneficiaries told us that they had never cleaned their wastewater
                               collection pits and did not know how often they should do so. In contrast,
                               beneficiaries in numerous other communities told us they had been trained
                               in, and were complying with, all other requirements, such as periodically
                               cleaning the pits. We discussed this issue with USAID officials, who
                               reminded the implementers of their training responsibilities. During our
                               subsequent discussions with housing recipients, we found that the training
                               had improved substantially.

Four Nonhousing Construction   Besides housing, four other construction activities did not start as USAID
Activities Did Not Begin on    had scheduled. These projects, which are budgeted to receive
Schedule                       approximately $29 million, include rebuilding schools, health facilities,
                               municipal buildings, and local markets. Reconstruction for all four of these
                               activities was scheduled to begin from July to November 2002. However, as
                               of March 31, 2003, reconstruction of seven schools had just started and the
                               other three activities had not begun, as shown in table 4.




                               Page 22                     GAO-03-656 Earthquake Recovery Program in El Salvador
Table 4: Status of Other Construction Activities and Key Dates

Construction Scheduled
activity     start date                       Status and comments
35 schools to         July 2002               Status: Started February 2003.
be rebuilt and
reequipped                                    Comments:
                                              • USAID found that some schools not affected by the
                                                earthquakes had been submitted for reconstruction.
                                              • USAID and the government of El Salvador had
                                                differing viewpoints on the designs.
                                              • USACE rejected some proposed designs.
5 public health August 2002                   Status: Not yet started.
facilities to be
rebuilt                                       Comments:
                                              • Four facilities are in the bidding process and one is
                                                being designed.
                                              • USAID and the government of El Salvador had
                                                differing viewpoints on the designs.
5 local               October 2002            Status: Not yet started.
markets to be
rebuilt                                       Comments:
                                              • A bid protest involving one market is currently under
                                                review by the El Salvador Supreme Court.
                                              • Four markets are still being designed.
22 municipal    November                      Status: Not yet started.
buildings to be 2002
rebuilt or                                    Comments:
repaired                                      • USAID originally planned to rebuild 40 municipal
                                                buildings.
                                              • Some municipalities rebuilt the buildings on their own.
                                              • Some funds will be reprogrammed to other activities.
Source: GAO synthesis of USAID information.


USAID’s program to reconstruct and reequip approximately 35 schools,
originally scheduled to begin during late 2002, did not start on schedule.
USAID officials stated that the process for planning and designing school
buildings was more lengthy than anticipated because they had difficulty
reaching agreement with the Salvadoran government’s Ministry of
Education on some of the designs and building specifications. Specifically,
the Ministry submitted some schools for reconstruction that had not
experienced earthquake damage, and its designs for school buildings did
not include the handicap access ramps that USAID required. In contrast,
according to Salvadoran government officials, USAID’s designs did not
include certain recreational and community-oriented facilities that the
government wanted to enhance the schools’ function as a center for




Page 23                                       GAO-03-656 Earthquake Recovery Program in El Salvador
                               community activities. These issues were resolved and in early February
                               2003 school construction started.

                               Construction of health facilities has not begun as scheduled. As previously
                               shown in table 4, USAID planned to begin repairing or rebuilding five
                               clinics in August 2002. The process of designing the facilities and hiring
                               contractors has been lengthy, and, as of March 2003, work had not begun.6

                               As noted in table 4, USAID’s plan to reconstruct five local markets also has
                               not proceeded as planned, in part because of delays resulting from USAID’s
                               preconstruction requirements. The requirements for the markets included
                               hiring supervisory firms; awarding contracts for designs; and soliciting,
                               reviewing, and awarding bids for construction. Construction of one market
                               was delayed because of a bid protest and is currently being reviewed by El
                               Salvador’s Supreme Court.

                               Finally, USAID’s original plan to repair and reconstruct up to 40 municipal
                               buildings, scheduled to begin in November 2002, is behind schedule, and
                               the planned number of buildings has been reduced. Under the original plan,
                               the Salvadoran government was to construct 10 buildings and PVOs were
                               to construct 30 buildings. Several municipalities performed their own
                               reconstruction work, and some buildings were found to have suffered less
                               damage than was initially assessed. Therefore, USAID has scaled back its
                               plans to repair or reconstruct 22 buildings. Eight buildings that suffered
                               more severe damage will be rebuilt by the government, and 14 buildings
                               requiring fewer repairs will be contracted out through local
                               nongovernmental organizations. According to USAID officials, work was
                               expected to begin in March 2003.



USAID Faces Potential          USAID faces challenges regarding the long-term sustainability of two of its
Sustainability Challenges in   recovery activities. In one community where USAID built houses, the
                               residents may experience increased health and security risks because they
Two Projects
                               cannot afford the cost of potable water and electricity. In another area, a
                               health clinic that AmeriCares is building with recovery program funds may
                               not be able to sustain its operations after September 2004, when USAID


                               6
                                The Centers for Disease Control and Prevention (CDC), a U.S. agency, is implementing a
                               nonconstruction health-related activity that also did not start as USAID planned. As of
                               March 2003, CDC’s $2 million project to strengthen the National Health Surveillance System
                               was just getting under way.




                               Page 24                           GAO-03-656 Earthquake Recovery Program in El Salvador
                                funding ends. USAID officials told us that they are aware of these
                                challenges and have been reviewing potential solutions.

Housing Settlement Could Face   The residents of El Guarumal, a newly created resettlement community
Increased Health and Security   comprising 270 houses, may face future health and security problems
Risks                           because of a lack of electricity and water. The houses in this community,
                                built for some of the poorest victims of the earthquakes, have indoor
                                flushing toilets and hookups for electricity and potable water. (Fig. 6 shows
                                USAID-funded houses in El Guarumal.)



                                Figure 6: USAID-Funded Houses in the Community of El Guarumal




                                In January 2003, we found that most of the houses had been completed and
                                that some of the beneficiaries had already moved in. However, according to
                                USAID, only 34 percent of the residents had connected to the electricity
                                and none had connected to the potable water system because the costs of
                                connecting to the electricity and water are roughly $90 and $300 per



                                Page 25                      GAO-03-656 Earthquake Recovery Program in El Salvador
                           household, respectively. These costs are prohibitive for poor families
                           because they had to earn less than $288 per month to qualify for the
                           program. Without electricity, residents face potential safety risks,
                           particularly at night. Without water, residents also face increased health
                           risks due to unsanitary living conditions. We discussed these concerns with
                           USAID officials, who told us that they had contacted government and
                           nongovernment organizations and were currently coordinating with them
                           to find a solution to the problem, including making financing arrangements
                           so that residents could make monthly installments to pay for the
                           connecting costs.

Health Clinic Could Face   USAID provided AmeriCares with $2 million to build a new health clinic in
Sustainability Challenge   the city of Santiago de Maria, provide the clinic with equipment and
                           supplies, and help operate the facility through September 2004. However,
                           after that date, USAID assistance ends. The clinic is currently under
                           construction and scheduled to be completed and equipped by June 2003.
                           USAID and AmeriCares both acknowledged that the clinic is likely to
                           require additional funding to continue operating at its planned level, in
                           large part because the fees it will charge for services are not likely to
                           generate sufficient revenues to cover operating costs. They also stated that
                           raising fees would likely make the facility unaffordable for many of the
                           clients it is intended to serve.

                           USAID recognized the sustainability problem from the project’s outset. As a
                           result, USAID required AmeriCares to include detailed sustainability
                           analyses in its project proposal before the project began. In the analyses,
                           AmeriCares examined various demographic aspects of the community,
                           such as the income level of clients, the existence of other health facilities in
                           the area, and other relevant data. As of March 31, 2003, however, no
                           additional sources of funding had been identified. Without such funding,
                           the clinic will likely face difficulties operating with the planned level of
                           services after September 2004.



USAID Coordinated          USAID coordinated with other international donor organizations at various
                           levels and with various El Salvador government ministries and institutions
with Other Donors and      to assist with disaster preparation, mitigation, and response. USAID
the Government of El       coordinated its program activities in an effort to ensure that it was not
                           duplicating others’ projects. During our periodic visits to El Salvador, we
Salvador                   met with numerous government and nongovernment organizations and




                           Page 26                       GAO-03-656 Earthquake Recovery Program in El Salvador
community members and found no evidence that USAID was duplicating
the efforts of other donors.

USAID participated in the international response and coordination of
earthquake recovery efforts. In March 2001, the international donor
community, including USAID, met in Madrid, Spain, to discuss how to
assist El Salvador in recovering from the estimated $1.7 billion in damages
caused by the two earthquakes. The meeting, chaired by the Inter-American
Development Bank, provided a forum for the government of El Salvador to
present a comprehensive list of damages and estimated recovery costs. At
the meeting, the United States and other bilateral and multilateral donors
pledged $1.3 billion in assistance, consisting of $300 million in funds
redirected from existing programs and $1 billion in pledges of new funds.
Approximately $700 million of the new funds pledged consists of loans and
$300 million consists of donations. Also, USAID periodically meets with
other key donors, including the European Community and Spain. USAID
officials told us that these meetings enhance their understanding of others’
activities and prevent duplication of effort.

In El Salvador, USAID mission officials at various levels have coordinated
with the government of El Salvador and with other donors. USAID has
routinely participated in periodic meetings hosted by the government’s
Ministry of Foreign Affairs, the lead agency for donor coordination. These
meetings provide a forum to discuss ongoing and planned earthquake
recovery projects. In addition to these higher level meetings, USAID staff
routinely meets with leaders and residents of communities and
municipalities to discuss needs and concerns in earthquake-affected areas.

During our periodic visits to El Salvador, we met with numerous
government and nongovernment organizations and community members
and found no evidence that USAID was duplicating the efforts of other
donors. USAID’s recovery program has not duplicated others’ efforts due,
in part, to the overwhelming reconstruction needs of El Salvador, many of
which remain unmet. Following the earthquakes, an assessment
undertaken to determine the extent of damages had found that over
300,000 houses, 1,200 schools, and 150 health facilities were damaged or
destroyed. Prior assessments had shown that, even before the earthquakes,
El Salvador had a serious housing shortage for low-income people. During
our periodic visits to El Salvador, we visited numerous communities where
USAID projects were under way and met with community leaders and
members. During these visits and discussions, we found no evidence that




Page 27                     GAO-03-656 Earthquake Recovery Program in El Salvador
                      USAID was duplicating the recovery efforts of the government of El
                      Salvador or other donors.



Conclusions           Although USAID’s earthquake recovery program in El Salvador has made
                      some progress, several key efforts are currently behind schedule or did not
                      meet their original completion dates. As of the end of March 2003,
                      reconstruction of local markets and municipal buildings had not started, as
                      planned, and school reconstruction had just gotten under way. In addition,
                      housing construction—the largest activity in terms of scope and budget—
                      did not meet its initial target completion dates. Much of the delay in
                      housing construction is with the Salvadoran government housing agency,
                      FONAVIPO, which is responsible for building the largest number of USAID-
                      funded homes. In November 2002, USAID extended the Phase I target
                      completion date for FONAVIPO to September 2003. However, USAID’s
                      revised agreement did not establish interim milestones to benchmark
                      FONAVIPO’s progress in building and completing houses. Over the past 12
                      months, FONAVIPO and the PVO implementers hired to do this work had
                      completed about 400 houses per month. Implementers will have to
                      significantly accelerate the pace of their efforts and complete more than
                      1,000 houses a month if USAID is to meet its overall goal of constructing
                      nearly 26,400 houses by September 30, 2004. Thus, it may be difficult for
                      USAID to complete its recovery program within this time frame, as
                      planned.



Recommendation for    To ensure that USAID achieves its goal of constructing over 26,000 houses
                      by September 30, 2004, we recommend that the USAID Administrator take
Executive Action      action to accelerate construction activities and establish interim
                      milestones to benchmark its progress and determine whether program
                      goals will be met. Also, if warranted and to the extent possible under
                      existing agreements, USAID should consider reducing the number of
                      houses to be built by the government of El Salvador’s housing agency
                      (FONAVIPO) and increasing the number of houses to be built by private
                      voluntary organizations with a proven record of meeting construction
                      goals.



Agency Comments and   USAID provided written comments on a draft of this report (see app. II).
                      USAID concurred with the report’s findings regarding its oversight and
Our Evaluation        accountability measures and its coordination efforts. USAID agreed with



                      Page 28                     GAO-03-656 Earthquake Recovery Program in El Salvador
our recommendation that it take action to accelerate construction
activities and indicated that it has already taken corrective action to
accelerate the pace of FONAVIPO’s housing construction. USAID said that
its current revised plan will permit completion of the housing program
within the overall time frames. In reviewing the November 2002 agreement
between USAID and FONAVIPO, we found that no interim milestones had
been established against which to measure progress. Accordingly, we
modified our recommendation to state that USAID should establish interim
milestones to determine whether FONAVIPO and other housing
implementers are making progress in meeting the overall goal of
constructing 26,400 houses by September 30, 2004. USAID also provided
technical suggestions and clarifications that we have incorporated into this
report where appropriate.

In addition to USAID, we requested comments from the U.S. Army Corps of
Engineers. Although the Corps did not provide written comments, they
provided technical suggestions and clarifications that we have
incorporated into this report as appropriate.


We will send copies of this report to interested congressional committees
as well as the Administrator, USAID; Commander, U.S. Army Corps of
Engineers; and the heads of other agencies participating in the recovery
assistance program in El Salvador. We will also make copies available to
others upon request. In addition, this report will be available at no charge
on the GAO Web site at http://www.gao.gov.




Page 29                      GAO-03-656 Earthquake Recovery Program in El Salvador
If you or your staff have any questions about this report, please contact me
at (202) 512-4268 or at fordj@gao.gov. Other contacts and staff
acknowledgments are listed in appendix III.




Jess T. Ford
Director, International Affairs
  and Trade Issues




Page 30                      GAO-03-656 Earthquake Recovery Program in El Salvador
Appendix I

Scope and Methodology                                                                            AA
                                                                                                  ppp
                                                                                                    ep
                                                                                                     ned
                                                                                                       n
                                                                                                       x
                                                                                                       id
                                                                                                        e
                                                                                                        x
                                                                                                        Iis




             To determine whether the program and projects funded by the U.S. Agency
             for International Development (USAID) and the other U.S. departments
             and agencies addressed the intended purposes of disaster recovery and
             reconstruction, we conducted work at the headquarters offices of USAID
             and the U.S. Army Corps of Engineers (USACE).1 We also made five trips to
             El Salvador between July 2001 and January 2003.

             The specific details of our work and visits are discussed below.

             • In Washington, D.C., we met with officials of USAID’s Bureau for Latin
               America and the Caribbean and with USACE officials to discuss
               program oversight and the status of their activities.

             • In San Salvador, El Salvador, we coordinated with USAID’s Office of the
               Regional Inspector General to minimize duplication of effort and share
               information.

             • In El Salvador, we reviewed USAID’s strategies, work plans, and
               applicable contracts, grants, and cooperative agreements and discussed
               with USAID and other U.S. officials how their respective programs
               addressed reconstruction needs. During our visits, we monitored
               USAID’s activities in all sectors of the earthquake-affected areas. In
               many instances, we visited and photographed sites before the projects
               began, during implementation, and after completion to provide a basis
               for comparison.

             During these trips, we interviewed representatives of contractors,
             nongovernmental organizations, El Salvador government ministries and
             other organizations, and other entities responsible for day-to-day project
             implementation. Our Spanish-speaking staff interviewed the intended
             recipients of U.S. assistance. We asked how their homes, livelihoods, and
             communities had been affected by the earthquakes and how the U.S.-
             funded projects were helping them rebuild their infrastructure, restore
             their livelihoods, and provide basic services.

             We also reviewed USAID’s procedures for oversight and financial controls
             and met regularly with the firms and organizations hired by USAID to
             provide program oversight. We followed up with USAID mission staff and



             1
             USACE’s Mobile, Alabama, office is responsible for programs in Central America.




             Page 31                         GAO-03-656 Earthquake Recovery Program in El Salvador
Appendix I
Scope and Methodology




USACE staff to determine whether concerns raised by us and others were
being addressed.

To determine whether USAID had coordinated with other U.S. departments
and agencies and other international donors, we met with USAID officials
in Washington, D.C., and at its mission in El Salvador to discuss USAID’s
procedures for incorporating the activities of the other agencies into
USAID’s programs and coordinating with multilateral and other bilateral
donors. Finally, we met with host government officials, including mayors
and other local officials, to discuss their procedures for ensuring that
donor activities did not conflict or overlap and their views on donor
coordination.




Page 32                    GAO-03-656 Earthquake Recovery Program in El Salvador
Appendix II

Comments from the U.S. Agency for
International Development                                                              Appendx
                                                                                             Ii




Note: GAO comments
supplementing those in
the report text appear
at the end of this
appendix.




                         Page 33   GAO-03-656 Earthquake Recovery Program in El Salvador
                 Appendix II
                 Comments from the U.S. Agency for
                 International Development




See comment 1.




                 Page 34                         GAO-03-656 Earthquake Recovery Program in El Salvador
                 Appendix II
                 Comments from the U.S. Agency for
                 International Development




See comment 2.




See comment 1.




See comment 3.




See comment 4.



See comment 5.




                 Page 35                         GAO-03-656 Earthquake Recovery Program in El Salvador
                 Appendix II
                 Comments from the U.S. Agency for
                 International Development




See comment 6.




See comment 7.




See comment 8.




                 Page 36                         GAO-03-656 Earthquake Recovery Program in El Salvador
               Appendix II
               Comments from the U.S. Agency for
               International Development




               The following are GAO’s comments on USAID’s letter dated May 1, 2003.



GAO Comments   1. We revised the text on pages 17 and 18 to note that, in November 2002,
                  USAID extended El Salvador’s housing agency (FONAVIPO) Phase I
                  housing construction completion date from the end of September 2002
                  to September 30, 2003. In reviewing the November 2002 agreement
                  between USAID and FONAVIPO, we found that no interim milestones
                  had been established against which to measure progress. Accordingly,
                  we modified our recommendation to state that USAID should establish
                  interim milestones to determine whether FONAVIPO and other housing
                  implementers are making progress in meeting the overall goal of
                  constructing 26,400 houses by September 30, 2004. We also noted that,
                  as of March 31, 2003, FONAVIPO had completed less than 2,000 (about
                  two-thirds) of the nearly 3,000 houses it was scheduled to complete by
                  July 2002.

               2. We added a footnote to table 3 on page 17 indicating that 1,014 houses
                  have been built by private voluntary organizations during Phase II of
                  the housing construction program. We also revised the text on page 15
                  to reflect other updated information.

               3. We modified the text on page 5.

               4. We revised the text on page 6 to reflect that USAID was implementing
                  housing activities in 50 municipalities during Phase I and will expand
                  its work to more than 90 municipalities in Phase II of its construction
                  program.

               5. We modified the text on page 7.

               6. We modified the text on pages 2 and 15.

               7. We modified the text on page 18 to reflect this updated information

               8. We modified the text on pages 22, 23, and 24 to reflect this updated
                  information.




               Page 37                         GAO-03-656 Earthquake Recovery Program in El Salvador
Appendix III

GAO Contacts and Staff Acknowledgments                                                            Appendx
                                                                                                        iI




GAO Contacts      Phillip Herr (202) 512-8509
                  George Taylor (202) 512-9632



Staff             In additional to the above-named individuals, Reid Lowe and Steve
                  Rossman made key contributions to this report. Other contributors
Acknowledgments   included Christian Cabanilla, Lyric Clark, Jeanette Espinola, Daniel Gage,
                  Jeff Goebel, Al Huntington, and Norman Thorpe.




(320064)          Page 38                     GAO-03-656 Earthquake Recovery Program in El Salvador
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