Foreign Assistance: USAID's Earthquake Recovery Program in El	 
Salvador Has Made Progress, but Key Activities Are Behind	 
Schedule (15-MAY-03, GAO-03-656).				 
                                                                 
In early 2001, two major earthquakes struck El Salvador, causing 
more than 1,100 deaths and $1.7 billion in damage to property and
infrastructure. GAO has been periodically monitoring the recovery
program being implemented by the U.S. Agency for International	 
Development (USAID), the lead U.S. agency. The House		 
Appropriations Committee's Subcommittee on Foreign Operations,	 
Export Financing, and Related Programs asked GAO to review	 
USAID's (1) oversight and accountability measures, (2) progress  
and factors affecting progress, and (3) coordination with other  
donors and the government of El Salvador.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-656 					        
    ACCNO:   A06874						        
  TITLE:     Foreign Assistance: USAID's Earthquake Recovery Program  
in El Salvador Has Made Progress, but Key Activities Are Behind  
Schedule							 
     DATE:   05/15/2003 
  SUBJECT:   Disaster relief aid				 
	     Federal aid to foreign countries			 
	     Internal controls					 
	     Strategic planning 				 
	     International economic relations			 
	     Risk management					 
	     El Salvador					 

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GAO-03-656

                                       A

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

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

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

This is a work of the U. S. Government and is not subject to copyright
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Letter

May 15, 2003 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 $159 million for the U. S.
Agency for International Development (USAID) to carry out
earthquakerelated disaster recovery activities*$ 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

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

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.

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

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.

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.

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

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.

Figure 4: Houses under Construction, Being Inspected, and Completed

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

Additional Oversight development programs, the agency established
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
Learned

measures include preaward surveys and audits of prospective awardees,
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 USAIDfunded
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

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 Recovery Program

Mitch, which struck Central America in November 1998. As it had done 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).

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
Spanishlanguage 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).

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.

Tot al $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

Progress in Some recovery program and made progress in implementing a
number of the

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
Are Behind Schedule

schedule, including health facilities, municipal buildings, and local or
Did Not Meet

markets. As of March 31, 2003, USAID had expended about $58 million (36
percent) of its $159 million in earthquake recovery funding. USAID has

Original Target made progress in several earthquake recovery construction
projects,

Completion Dates including housing, potable water systems, and child care
centers. USAID

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

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.

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 Other a 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

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

Progressed as Planned schedule. In particular, by the end of March 2003,
after about 15 months of

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.

Table 3: USAID- Funded Houses to Be Built and Completed during Phase I, as
of March 31, 2003 Phase I houses Houses to be

completed a 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 6,470 b 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.

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 Than
Double Output

over 1,000 houses per month. However, for the 1- year period ending in
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.

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, Construction

the difficulties included 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 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

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

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.

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.

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

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 Two Projects

residents may experience increased health and security risks because they
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.

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

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

with Other Donors and levels and with various El Salvador government
ministries and institutions

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
Salvador

duplicating others* projects. 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 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

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
USAIDfunded

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

Executive Action by September 30, 2004, we recommend that the USAID
Administrator take

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).

Our Evaluation USAID concurred with the report*s findings regarding its
oversight and

accountability measures and its coordination efforts. USAID agreed with

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.

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

Appendi Appendi xes x I

Scope and Methodology 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.

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.

Comments from the U. S. Agency for

Appendi x II

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

See comment 1.

See comment 2. See comment 1. See comment 3. See comment 4. See comment 5.

See comment 6. See comment 7. See comment 8.

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.

Appendi x III

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

In additional to the above- named individuals, Reid Lowe and Steve
Acknowledgments

Rossman made key contributions to this report. Other contributors included
Christian Cabanilla, Lyric Clark, Jeanette Espinola, Daniel Gage, Jeff
Goebel, Al Huntington, and Norman Thorpe.

(320064)

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a

GAO United States General Accounting Office

USAID is implementing a $159 million recovery program to assist El
Salvador in recovering from two earthquakes in 2001. Nearly two- thirds of
the funding is allocated for the construction of approximately 26,000
houses for low- income families who lost homes in the earthquakes.

Because of concern that recovery funding could be susceptible to misuse or
corruption, USAID established oversight measures, such as conducting
concurrent audits of host country expenditures. USAID also applied lessons
learned from its recovery program in Central America following Hurricane
Mitch in 1998, including using implementing organizations with a proven
record in accounting for funds and implementing disaster recovery
activities.

USAID has made progress in implementing the recovery program but some
activities are behind schedule or did not meet original target dates. As
of March 31, 2003, USAID had expended $58 million (36 percent) of its $159
million in program funding and is making progress in implementing some
activities. For example, USAID- funded private voluntary organizations had
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
USAID construction activities, such as repairing and rebuilding schools,
health facilities, municipal buildings, and local markets, are behind
schedule. Also, as of March 31, 2003, El Salvador*s housing agency
(FONAVIPO) had completed less than two- thirds of the nearly 3,000 houses
it was originally scheduled to complete by September 2002. USAID revised
its agreement with FONAVIPO but the new agreement does not establish
milestones to benchmark progress and determine whether housing
construction will be completed as scheduled. At its current pace, it may
be difficult for USAID to complete the recovery program by the end of
September 2004, as planned.

USAID coordinated its earthquake recovery efforts with other donors at the
international, national, and local levels; the government of El Salvador;
and community members. During our review, we found no evidence that USAID
was duplicating other donors* recovery efforts.

USAID*s Earthquake Recovery Program Activities in El Salvador

In early 2001, two major earthquakes struck El Salvador, causing more than
1,100 deaths and $1. 7 billion in damage to property and infrastructure.
GAO has been periodically monitoring the

recovery program being implemented by the U. S. Agency for International
Development

(USAID), the lead U. S. agency. The House Appropriations Committee*s
Subcommittee on Foreign Operations, Export Financing, and Related Programs
asked GAO to review USAID*s (1) oversight and accountability measures, (2)

progress and factors affecting progress, and (3) coordination with other
donors and the government of El Salvador. To ensure that USAID achieves
its

goal of building over 26, 000 houses by September 2004, we recommend that
the USAID Administrator take action to accelerate 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, USAID should consider
reducing the number of houses to be built by FONAVIPO and increasing the
number of houses to be built by private

voluntary organizations with a proven record of meeting 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.
Highlights of GAO- 03- 656, a report to 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

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

Contents

Contents

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Appendix I

Appendix I Scope and Methodology

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Appendix II

Appendix II Comments from the U. S. Agency for International Development

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Appendix II Comments from the U. S. Agency for International Development

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Appendix II Comments from the U. S. Agency for International Development

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Appendix II Comments from the U. S. Agency for International Development

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Appendix III

United States General Accounting Office Washington, D. C. 20548- 0001
Official Business Penalty for Private Use $300 Address Service Requested

Presorted Standard Postage & Fees Paid

GAO Permit No. GI00
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