GAO-02-787, Foreign Assistance: Disaster Recovery Program Addressed Intended Purposes, but USAID Needs Greater Flexibility to Improve Its Response Capability


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Intended Purposes, but USAID Needs Greater Flexibility to Improve Its 
Response Capability' which was released on July 24, 2002.



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Report to Congressional Committees:



July 2002:



Foreign Assistance:



Disaster Recovery Program Addressed Intended Purposes, but USAID Needs 

Greater Flexibility to Improve Its Response Capability:



GAO-02-787:



Contents:



Letter:



Results in Brief:



Background:



Disaster Recovery Program Addressed Intended Purposes:



USAID Coordinated with U.S. Government Entities and International 

Donors:



USAID’s Efforts to Strengthen Host Government Audit Capabilities Were 

Limited:



USAID Had to Overcome Numerous Challenges to Initiate Disaster Recovery 

Assistance:



Conclusions:



Recommendations for Executive Action:



Agency Comments and Our Evaluation:



Appendixes:



Appendix I: Scope and Methodology:



Appendix II: Summary of Disaster Recovery Experiences: USAID Missions:



Program Planning and Implementation:



Staffing:



Accountability:



Coordination:



Lessons Learned:



Appendix III: Summary of Disaster Recovery Experiences: Other U.S. 

Departments and Agencies:



Program Planning and Implementation:



Staffing:



Accountability:



Coordination:



Lessons Learned:



Appendix IV: Disaster Recovery Assistance Budgeted and Expended:



Appendix V: Comments from the U.S. Agency for International 
Development:



Appendix VI: GAO Contacts and Staff Acknowledgements:



GAO Contacts:



Acknowledgments:



Tables:



Table 1: Disaster Recovery Assistance Budgeted and Expended as of 

December 31, 2001:



Table 2: Status of Disaster Recovery Assistance Funds through December 

31, 2001:



Figures:



Figure 1: Map of Central America and the Caribbean Showing the 

Hurricane-Affected Countries Visited by GAO:



Figure 2: Damaged and Permanent Housing in the Dominican Republic:



Figure 3: Guaymon Bridge Constructed in Honduras:



Figure 4: School Under Repair in Honduras:



Figure 5: Temporary Shelters and Permanent Housing at El Pataste, 

Honduras:



Figure 6: Rural Road Near Jinotega, Nicaragua:



Figure 7: Timeline Illustrating USAID’s Disaster Recovery Expenditures 

Funded by the May 21, 1999, Supplemental Appropriation, through 

December 31, 2001:



Abbreviations:



CDC: Centers for Disease Control and Prevention:



DOT: Department of Transportation:



EPA: Environmental Protection Agency:



FEMA: Federal Emergency Management Agency:



GAO: General Accounting Office:



HUD: Department of Housing and Urban Development:



INL: International Narcotics and Law Enforcement Affairs (State 

Department):



NOAA: National Oceanic and Atmospheric Administration:



USAID: U.S. Agency for International Development:



USDA: U.S. Department of Agriculture:



USGS: U.S. Geological Survey:



Letter:



July 24, 2002:



The Honorable Robert C. Byrd, Chairman

The Honorable Ted Stevens, Ranking Member

Committee on Appropriations

United States Senate:



The Honorable C. W. Bill Young, Chairman

The Honorable David R. Obey, Ranking Member

Committee on Appropriations

House of Representatives:



In the fall of 1998, Hurricanes Mitch and Georges struck Central 

America and the Caribbean. The storms left thousands dead and many more 

homeless; damages were estimated at more than $10 billion. The United 

States and other donors initially responded by providing emergency 

relief, such as food, water, medical supplies, and temporary shelter. 

In May 1999, the international donor community pledged $9 billion to 

assist in the recovery and reconstruction of hurricane-affected 

countries in Central America. Also, in May 1999, the Congress passed 

emergency supplemental legislation that, among other things, provided 

$621 million for a disaster recovery and reconstruction fund for the 

affected countries as well as reimbursement funds to U.S. government 

departments and agencies for costs incurred during the immediate relief 

phase.[Footnote 1] The U.S. Agency for International Development 

(USAID) and numerous other U.S. departments and agencies used this 

funding to implement disaster recovery and reconstruction activities. 

In discussions with congressional staff, USAID agreed to complete the 

program and expend the supplemental funds by December 31, 2001.



Congressional staff, concerned about the history of corruption in the 

region and the prior misuse of foreign aid for relief and 

reconstruction, asked us to concurrently monitor the delivery of 

assistance through frequent field visits to assist in their oversight 

responsibilities. The emergency supplemental legislation provided 

$500,000 for us to monitor the assistance provided.[Footnote 2] This 

report is a summary of our monitoring activities since July 1999. Our 

objectives were to determine (1) whether the programs and projects 

funded by USAID and the other U.S. departments and agencies addressed 

the intended purposes of disaster recovery and reconstruction, (2) 

whether USAID coordinated with other U.S. government entities and other 

international donors to avoid duplication, (3) what USAID did to help 

the affected countries strengthen their audit institutions’ 
capabilities 

to resist corruption, and (4) the challenges and obstacles faced by 
USAID

in delivering the assistance.



To address these matters on an ongoing basis, we made numerous trips to 

the region, focusing most of our visits on the three countries that 

received the most U.S. assistance--Honduras ($293.1 million), 

Nicaragua ($94.1 million), and the Dominican Republic ($29 million). We 

also made at least one visit each to four other countries that received 

U.S. assistance as a result of Hurricane Mitch or Georges.[Footnote 3] 

While we addressed all the research questions during our field work, we 

focused most of our efforts on whether the disaster recovery funds were 

spent for intended purposes. On our trips, we visited numerous project 

sites at varying stages of progress. We traveled to some of the most 

remote areas, talked with many of the people seriously affected by the 

hurricanes, and monitored the progress of numerous USAID projects and 

those of the other U.S. departments and agencies across a wide range of 

sectors. We briefed USAID officials on our findings during these trips 

and provided our observations on the progress of the disaster recovery 

activities so that USAID could take corrective action, if needed. (See 

app. I for a more complete description of our scope and methodology.) 

We also asked USAID missions and the other U.S. departments and 

agencies about their experiences in implementing the disaster recovery 

program. Their responses are summarized in appendixes II and III, 

respectively.



Results in Brief:



As of December 31, 2001, USAID and the other U.S. departments and 

agencies had expended about $553.1 million or about 89 percent of the 

disaster recovery funds. The U.S. disaster recovery assistance program 

made significant achievements in helping the affected countries rebuild 

their infrastructure and recover from the damage caused by the 

hurricanes. Although programs varied by country, USAID and the other 

U.S. departments and agencies generally used the disaster recovery 

assistance to bring about economic recovery, improve public health and 

access to education, provide permanent housing for displaced families, 

and improve disaster mitigation and preparedness. To achieve these 

broad objectives, USAID funded infrastructure construction and repair, 

technical assistance and training, loans for farmers and small 

businesses, and some equipment. In addition to its normal controls, 

USAID added some precautions to help ensure that funds were spent for 

intended purposes. For example, USAID channeled much of the assistance 

through organizations and contractors with proven track records, 

contracted with management and financial services firms to handle 

disbursements to vulnerable partners (including host governments), and 

hired contractors to monitor project progress and quality. In addition, 

the USAID Inspector General conducted numerous audits and we monitored 

many projects in process. Although some activities did not go as 

smoothly as planned, the missions and other U.S. government entities 

responded to concerns identified through these oversight measures. For 

example, USAID hired engineers to oversee road repairs, developed a 

system to track services for housing projects, ensured that a rural 

health clinic was staffed and operating, improved irrigation for a 

reforestation project, and installed new latrines at a school 

undergoing classroom repairs. Other U.S. agencies also provided more 

accountability over their funds as a result of increased oversight.



USAID coordinated its activities with 12 other U.S. departments and 

agencies that were allocated about $96 million for disaster recovery 

efforts. Many had little or no previous overseas experience and their 

involvement placed a burden on USAID mission staff at the outset as 

they helped these other U.S. entities plan their activities in 

accordance with the mission’s strategy and provided them administrative 

support. USAID also coordinated with other bilateral and multilateral 

donors through formal consultative group meetings and informal contacts 

among mission staff and other donors. In contrast to most donors, USAID 

concentrated its activities in rural areas and smaller cities reducing 

the likelihood it would duplicate other donor efforts. We found no 

evidence that USAID activities duplicated those of the other U.S. 

departments and agencies or other international donors.



USAID attempted to strengthen the capacity of host government audit 

institutions as a means to resist corruption. For example, it provided:



$1.5 million to the Controller General’s Office in Honduras to continue 

an effort to strengthen the office’s capacity to audit USAID-funded 

activities. In other cases, however, USAID cannot point to much success 

in this area, mostly due to country conditions. For example, in 

Nicaragua, the government diluted the office’s independence by creating 

a panel of five appointees to oversee its activities. USAID 

subsequently terminated its regular program with the Controller 

General’s Office because it declined the advice of USAID’s technical 

advisors. USAID also contributed 

$4.2 million to the Inter-American Development Bank to establish 

financial inspection units, similar to U.S. inspector general offices, 

in Honduras and Nicaragua. According to USAID, the Honduras unit began 

operations in June 2002, and the Nicaragua unit should begin operating 

in September 2002.



Although USAID and its U.S. partners carried out a large-scale disaster 

recovery program, mostly within agreed-upon time frames, USAID faced 

numerous challenges and obstacles that affected the pace of initiating 

the program. As a result, USAID did not begin expending the 

supplemental funds until January 2000, 7 months after the appropriation 

was enacted. Some of the factors that added time included arranging for 

additional program staff and contractor support; ensuring that 

financial controls and other oversight measures were in place; 

coordinating with and planning for the involvement of numerous other 

U.S. departments and agencies; and providing the opportunity for U.S. 

contractors and other organizations to compete for most of the 

contracts, grants, and cooperative agreements that were awarded. 

Moreover, the program was neither short-term emergency relief nor long-

term development assistance--more typical USAID programs. Overall, 

USAID did not have the “surge capacity” to quickly design and initiate 

a large-scale infrastructure and development program with relatively 

short-range deadlines while at the same time providing emergency 

relief, initial reconstruction assistance, and managing its regular 

development program.



The USAID Administrator recently approved several program and 

procedural reform proposals to facilitate planning and implementing 

activities in post-crisis or post-emergency situations. To help ensure 

that USAID has the flexibility to respond more quickly to future 

disaster recovery efforts, we recommend that the Administrator expedite 

implementation of the approved reforms and consider ways to more 

readily augment overseas staff and facilitate coordination with other 

U.S. departments and agencies.



Background:



In late October and early November 1998, Hurricane Mitch struck Central 

America, producing more than 6 feet of rain in less than a week, mostly 

over Honduras. The heavy rainfall caused flooding and landslides that 

killed thousands of people; left tens of thousands homeless; and 

devastated infrastructure, agriculture, and local economies. In 

addition, in September 1998, Hurricane Georges hit several eastern 

Caribbean islands and the island of Hispaniola, which comprises the 

Dominican Republic and Haiti. Hurricane Georges also caused the deaths 

of hundreds of people and severely damaged infrastructure, crops, and 

businesses. See figure 1 for a map of the region and the countries 

affected by Hurricanes Mitch and Georges that we visited.



Figure 1: Map of Central America and the Caribbean Showing the 

Hurricane-Affected Countries Visited by GAO:



[See PDF for image]



Source: GAO.



[End of figure]



U.S. relief efforts began immediately and USAID began providing limited 

reconstruction assistance using redirected program funds and other 

sources. However, the Congress and the administration recognized the 

need for longer-term assistance for recovery and reconstruction. In 

March 1999, President Clinton visited Central America and promised to 

help these countries rebuild their economies and social sectors. At the 

same time, USAID began developing a recovery plan for each hurricane-

affected country, which outlined USAID’s funding estimates and proposed 

programs. In late May 1999, the Congress passed and the President 

signed an emergency supplemental appropriation that provided, among 

other things, $621 million for the countries affected by Hurricanes 

Mitch and Georges. In general, the funds were to be used to rebuild 

infrastructure, reactivate host country economies, and restore basic 

services.



Disaster Recovery Program Addressed Intended Purposes:



USAID was the primary agency responsible for carrying out the U.S. 

disaster recovery program. Of the $621 million authorized, USAID was 

directly responsible for about $587 million, including about $62 

million in agreements with other U.S. departments and agencies, such as 

the U.S. Department of Agriculture and U.S. Geological Survey. The 

remaining $34 million was transferred directly by USAID to other U.S. 

departments and agencies, such as the Departments of Housing and Urban 

Development and State. Based on an informal agreement with 
congressional 

staff, USAID agreed to expend all the funds by December 31, 2001--about 
30 

months from enactment of the supplemental appropriation. As shown in 

table 1, USAID and the other U.S. departments and agencies had 

completed most of their programs by the deadline. Some activities, such 

as a $40 million urban water and sanitation program in Honduras, are 

still being implemented.[Footnote 4] Appendix IV contains further 

details on funding and expenditures for USAID and the other U.S. 

government entities.



Table 1: Disaster Recovery Assistance Budgeted and Expended as of 

December 31, 2001:



[See PDF for image]



[End of table]



USAID and the other U.S. government entities implemented disaster 

recovery activities that helped the hurricane-affected countries 

rebuild their infrastructure and restore economic activity. USAID’s 

overall objectives were to help bring about economic recovery, restore 

and improve basic services, and mitigate the effects of future natural 

disasters. Each country’s program varied based on country conditions 

and the USAID mission’s approach. In general, the funds were used for:



* repairing or rebuilding the infrastructure needed for reactivating 

economies (e.g., roads and bridges), public health infrastructure 

(e.g., potable water systems, sewage and drainage systems, and health 

clinics), housing, and schools;



* providing loans, credits, and technical assistance for small-and 

medium-sized farms and businesses;



* strengthening disaster mitigation efforts such as civil defense, 

early warning and prevention, and watershed management; and:



* strengthening accountability.



In Honduras and Nicaragua, USAID financed the repair of 2,817 

kilometers (about 1,756 miles) of secondary and tertiary roads. In 

Honduras, USAID funded the repair of 62 municipal water and sanitation 

systems and 1,211 rural water systems. In the Dominican Republic, USAID 

funding repaired 1,514 houses and constructed 2,248 new homes (see fig. 

2). The activities of other U.S. agencies ranged from installing stream 

gauges for early flood warning to equipping national public health 

laboratories. These and many other projects resulted in improved 

transportation, agricultural land restored to productive use, improved 

health through potable water and sanitation systems, increased access 

to health care and education, increased employment through credit 

programs, and improved capabilities to mitigate the effects of future 

disasters.



Figure 2: Damaged and Permanent Housing in the Dominican Republic:



[See PDF for image]



Source: GAO.



[End of figure]



USAID attempted to ensure that projects and activities would be 

sustainable after its disaster recovery activities were completed. For 

example, in Honduras, USAID funded training for municipal officials and 

local water boards to provide them with the management and budget 

skills to operate and maintain new water and sanitation systems. Also, 

the Honduran government ministry responsible for road maintenance gave 

USAID-funded roads priority in its 2-year maintenance schedule. 

However, the hurricane-affected countries are poor and in debt and, in 

many instances, plagued by bureaucratic inefficiencies and corruption. 

It is too early to determine if national governments and local 

officials will have the resources or political will to maintain the 

infrastructure rebuilt with USAID funds.



Additional Oversight Measures Established:



Due to widespread concerns that such a large program with a 30-month 

time frame would be susceptible to misuse or corruption, USAID missions 

were cautious from the outset of the program. In addition to its 

regular program and financial controls, USAID set up some additional 

oversight measures, such as hiring accounting firms to oversee a host 

country’s expenditures. In addition, the supplemental legislation 

provided funds for USAID’s Office of the Inspector General and for us 

to monitor the provision of the assistance. This additional oversight 

and monitoring resulted in instances of problems being identified and 

addressed by USAID and other U.S. government departments and agencies 

as activities were under way and changes could still affect the success 

of the program or project. USAID missions generally said that the 

additional oversight measures were useful in enhancing accountability 

but that the time required by staff to comply with numerous auditors 

was burdensome and sometimes affected program implementation.



In Honduras, the major infrastructure construction programs--totaling 

about $135 million--were implemented primarily by the Honduran Social 

Investment Fund, a government agency established to ease the impact of 

structural adjustment policies through employment generation and social 

programs. To help protect the U.S. assistance from potential misuse, 

the mission established a separate oversight unit within the fund for 

its $50 million road and bridge program (see fig. 3). A U.S. project 

manager headed the unit with a U.S. chief engineer and local technical 

and support staff. For both the road and municipal water and sanitation 

system programs, the mission contracted with financial services firms 

to handle disbursements to the fund following approvals by USAID and 

the oversight unit. For the water and sanitation program, USAID relied 

on the U.S. Army Corps of Engineers to provide technical oversight. For 

its school construction program, USAID only reimbursed the fund after 

units were completed and inspected by USAID and its oversight 

contractors (see fig. 4). Finally, in many instances, the Honduran 

mission hired U.S. management services firms and private voluntary 

organizations to oversee other activities implemented by local 

entities.



Figure 3: Guaymon Bridge Constructed in Honduras:



[See PDF for image]



Source: GAO.



[End of figure]



Figure 4: School Under Repair in Honduras:



[See PDF for image]



Source: GAO.



[End of figure]



USAID’s program in Nicaragua was mostly implemented by U.S. and 

international voluntary and local implementing organizations that had a 

proven track record with the mission and whose ongoing cooperative 

agreements were easily amended. For its only program with the 

Nicaraguan government--a $2.1 million municipal infrastructure program 

implemented by the Emergency Social Investment Fund (an entity similar 

to the Honduras fund)--USAID hired a U.S. management services firm to 

provide oversight and technical assistance. USAID also relied on the 

Corps of Engineers and the U.S. Department of Agriculture to review 

municipal infrastructure designs and make recommendations accordingly.



A primary component of oversight is having sufficient staff to monitor 

project activities and spending and identify any problems that may 

occur along the way. As USAID’s direct-hire foreign service staff 

levels have declined over the years, it has turned increasingly to 

using personal services contractors to conduct most of the day-to-day 

oversight of its programs, including the disaster recovery 

program.[Footnote 5] USAID hired numerous personal services contractors 

to help oversee its activities and provide technical and administrative 

support. In Honduras, the program office and technical officers 

throughout the mission shared responsibility for oversight. The mission 

hired 33 additional personal services contractors to oversee its 

program and provide administrative support. In Nicaragua, USAID 

contracted for a reconstruction coordinator and hired 40 additional 

personal services contractors. In the Dominican Republic, the mission 

set up a separate reconstruction team comprised mostly of contract 

staff.



In addition to our monitoring, the Regional Inspector General’s Office 

in El Salvador contracted with the Defense Contract Audit Agency and 

local affiliates of international accounting firms to conduct 

concurrent audits of vulnerable programs and regular audits of many 

other activities. It also hired five full-time personal services 

contractors to oversee its financial audit activity. According to the 

Deputy Regional Inspector General, as of December 31, 2001, its office 

had conducted 165 financial audits covering $218 million in USAID-

managed funds. The Regional Inspector General’s Office also conducted 

14 performance audits in 6 countries and provided fraud awareness 

training in 7 countries to 2,141 participants. The USAID Inspector 

General gave the USAID missions generally high marks for their 

financial management of the disaster recovery program, noting that the 

small amount of questioned costs identified by its audits (about $5 

million, or 2.2 percent as of December 31, 2001) demonstrated the 

effectiveness of ongoing oversight.[Footnote 6]



USAID Took Corrective Action During Implementation:



Through increased oversight of this program, potential or ongoing 

problems were identified as project implementation was under way. In 

many cases, the USAID mission staff responsible for program oversight 

identified problems and took immediate action to keep their programs on 

track. In other instances, our visits, regional inspector general 

audits, and others with technical expertise identified concerns that 

USAID corrected.



Honduras:



During a trip to northern Honduras in October 2000, we traveled a road 

repaired with USAID funds that had been poorly compacted. As a result, 

recent rains had turned the road to mud and it was nearly impossible to 

drive on. This road is an important access route for transporting 

African palm oil to the coast for export and for local commerce. The 

U.S. engineer responsible for technical oversight agreed with our 

concerns and took prompt action to ensure that the road was repaired 

properly. On a subsequent visit, we noted that the road had been 

repaired and was in excellent condition.



In July 2000, during a visit to El Pataste in northern Honduras, we 

observed a housing project with well-constructed houses but no firm 

plans for potable water, despite a contractual obligation to ensure 

that key services were incorporated into housing communities. USAID 

eventually was successful in having the implementing organization 

negotiate a way to provide potable water. To better track and report on 

the progress of its housing program, USAID also developed a matrix for 

each housing project that specified how water and other infrastructure 

were to be provided as well as proof that an environmental assessment 

had been completed (see fig. 5).



Figure 5: Temporary Shelters and Permanent Housing at El Pataste, 

Honduras:



[See PDF for image]



Source: GAO.



[End of figure]



USAID provided $2.5 million to a Honduran agricultural lending 

cooperative for loans for small-and medium-sized farms despite a record 

of concerns about its management problems and financial viability. 

According to USAID, this was the only organization available to provide 

credit for smaller producers. USAID hired a management services firm to 

handle loan disbursements and provide technical assistance for 

implementing management reforms, but the problems persisted. Based on 

USAID’s continuing oversight and our review, USAID strongly encouraged 

the organization’s Board of Directors to accept major restructuring of 

its organizational, management, and financial framework. In January 

2001, the Honduran minister of finance signed a memorandum of 

understanding with the lending organization outlining these changes and 

the likely consequences if the reforms were not made. USAID 

subsequently released $500,000 of the $2.5 million loan fund that it 

had suspended pending the signing of the memorandum.



Nicaragua:



In Nicaragua, we visited numerous sites where four international 

private voluntary organizations were implementing USAID’s cash-for-

work and food-for-work rural road rehabilitation projects. After 

consulting with project engineers and Corps of Engineers staff, we 

pointed out several deficiencies in the quality of the work, including 

roads not properly crowned to prevent standing water, ditches not 

adequately dug to facilitate drainage of water, and roadbed materials 

not suitable for withstanding traffic and weather. Based on these 

observations, the private voluntary organizations hired engineers to 

oversee road activities. We observed a noticeable improvement in 

USAID’s road projects on subsequent visits (see fig. 6).



Figure 6: Rural Road Near Jinotega, Nicaragua:



[See PDF for image]



Source: GAO.



[End of figure]



USAID, in an effort to further improve the quality of road repairs in 

Nicaragua, decided that the four nongovernmental organizations would 

use heavy machinery on the more difficult roads. These cash-for-work 

and food-for-work programs initially emphasized income generation, and 

USAID’s plan was that the nongovernmental organizations would only use 

hand labor. However, USAID and the Corps of Engineers soon realized 

that some roads could not be adequately repaired using only hand labor 

and would not withstand normal weather and traffic. USAID subsequently 

required the organizations to use both heavy equipment and hand labor 

and the road quality improved substantially. In addition, some 

organizations later coordinated their roadwork activities and shared 

equipment, resulting in lower costs.



In October 2000, we visited a health post in rural Nicaragua where a 

private voluntary organization constructed a residence for medical 

personnel and rehabilitated a clinic. USAID had been told that the work 

was completed, the Ministry of Health had assigned medical personnel, 

and the post was in operation. However, when we arrived, the facility 

was vacant and evidently had been so for months. We questioned whether 

USAID should be involved in such a project, given the ministry’s lack 

of support. In January 2001, we returned to the clinic unannounced and 

found that the clinic was operating and a doctor was present and living 

at the residence. He had been assigned following our earlier visit.



Other Affected Countries:



In December 2000, we visited a reforestation and agricultural project 

in El Salvador. With USAID disaster recovery funding, a U.S. 

nongovernmental organization was teaching farmers to grow cashews and 

lemon trees to increase their incomes and provide erosion protection. 

Although a well was nearby, the community leader pointed out to us that 

the farmers needed a pump to irrigate the new plantings during their 

first dry season. We saw that some trees had already died and others 

would soon die without irrigation. In response, USAID committed to 

finance a new pump. In October 2001, we returned to the community and 

observed that the pump had been installed and that the plantings were 

growing.



In May 2000, we visited a school in the Dominican Republic that was 

undergoing repairs with disaster recovery funds. The initial project 

included only classroom repairs. However, the sanitation facilities had 

also been destroyed and we were told that students were using the 

nearby field. After we reported the apparent oversight, USAID responded 

by adding latrines to the project. New latrines were in place when we 

visited in August 2001.



Several USAID officials stated that our oversight and monitoring not 

only encouraged specific improvements, but also provided a continuous 

deterrent effect because contractors, grantees, host government 

officials, and project beneficiaries were actively aware of U.S. 

congressional scrutiny over the program. One mission director added 

that our visits were used to encourage contractors and grantees to stay 

on track and comply with the terms of their agreements. The acting 

mission director at another mission noted that, although the multiple 

layers of auditing were sometimes overwhelming, the audit findings 

helped the mission manage the program and report to the Congress on its 

progress.



Two U.S. Departments Reprogram Funds:



We also monitored the pace of expenditures and the activities of most 

of the other U.S. departments and agencies. In June 2001, we attended 

meetings of the Office of Management and Budget, USAID, and the other 

U.S. departments and agencies. At the time, it was apparent that a few 

departments and agencies were not expending their funds in a timely 

manner and that they likely would not meet the December 31, 2001, 

deadline for completing their activities.



Department of State:



In early September 2001, an official with the State Department’s Bureau 

for International Law Enforcement and Narcotics told us that, of the 

$923,600 the bureau planned to spend in the Dominican Republic, 

$400,000 would be reprogrammed for an assets forfeiture project in the 

Dominican Republic and the remaining $523,600 would be reprogrammed for 

a de-mining program in Central America. However, the necessary 

arrangements to implement those proposals had not been completed. After 

our inquiries, on September 30, 2001, the bureau completed the 

paperwork to reprogram the $400,000. In January 2002, the bureau told 

us that the remaining $523,600 would not be reprogrammed and that it 

had returned $514,242 to the U.S. Treasury.



Department of Housing and Urban Development:



In March 2001, the Department of Housing and Urban Development (HUD) 

canceled a $1.1 million housing micro-credit project in Honduras 

because the in-country organization tasked to implement the project did 

not have the capacity. When we followed up in August 2001, HUD had not 

finalized plans for what it would do with these funds. Subsequent to 

our inquiry, in September 2001, HUD modified the housing finance 

contract to specify how the funds were to be used for two different 

projects in the Dominican Republic and El Salvador. The work in the 

Dominican Republican began soon after the contract was modified. In El 

Salvador, a contract with a private lender to capitalize a revolving 

loan fund for a housing micro-credit program was signed in December 

2001.



USAID Coordinated with U.S. Government Entities and International 

Donors:



USAID worked with the 12 U.S. departments and agencies that implemented 

about $96 million in disaster recovery activities to help plan their 

efforts and provide administrative support. Because many of these 

agencies had little or no experience working in developing countries, 

their involvement in the program was time-consuming and burdensome for 

USAID staff in the beginning stages. USAID officials noted, however, 

that some agencies provided needed technical expertise. The other 

agencies generally acknowledged that it took time to incorporate their 

activities into USAID’s program but added that it had been a positive 

experience overall. USAID also coordinated with other bilateral and 

multilateral donors through formal consultative group meetings and 

informal contacts among mission staff and other donors. In contrast to 

many donors, USAID concentrated its activities in rural areas and 

smaller cities, making duplication with other donor efforts unlikely. 

We found no evidence that USAID activities duplicated those of other 

U.S. departments and agencies or other international donors.



USAID Coordination with Other U.S. Departments and Agencies Was 

Initially Burdensome:



Many of the U.S. government entities involved in the disaster recovery 

program had little or no prior experience in working overseas. At the 

outset, USAID staff spent considerable time incorporating these 

agencies into USAID’s disaster recovery program and helping the 

agencies develop work plans in accordance with USAID’s development 

approach. In addition, the agencies’ administrative requirements, such 

as office space, residences, vehicles, equipment, and supplies, had to 

be coordinated with the respective U.S. embassy’s overall 

administrative services account. According to USAID officials, 

coordinating with numerous other U.S. entities was demanding and time-

consuming for USAID staff, particularly at the outset of the disaster 

recovery program when staff were involved in initial relief and 

reconstruction activities.



Nevertheless, USAID officials generally agreed that many agencies added 

value once the initial coordination problems were resolved. In 

particular, USAID officials most often cited the four agencies with 

scientific, technical, and engineering expertise not available at 

USAID--the Corps of Engineers, the National Oceanic and Atmospheric 

Administration, the U.S. Department of Agriculture, and the U.S. 

Geological Survey--as those that added the most value to the USAID 

recovery program. For example, these agencies provided engineering 

advice on infrastructure projects and carried out a number of 

activities designed to mitigate the effects of future natural 

disasters, such as conducting watershed management studies, installing 

stream gauges to monitor river flooding, and providing technical 

assistance on early warning and prevention systems to host government 

staff.



Officials from the other U.S. departments and agencies expressed 

concerns about the time it took to incorporate a relevant program into 

USAID’s framework and the administrative constraints of operating 

overseas. Officials from some agencies noted that each USAID mission 

and embassy operated a little differently, and some missions asked for 

additional paperwork that may not have been required at another 

mission. One agency official told us that it received varying 

information on the need for country clearances for travel. Another 

noted that the missions and USAID headquarters sometimes provided 

conflicting information on the work plan and reporting requirements. 

One agency reported that it had some difficulty coordinating with the 

missions. However, as summarized in appendix III, most agencies noted 

that working with USAID was a positive experience and that USAID had 

been very helpful in guiding them through the reconstruction program.



USAID Coordination with Other International Donors:



USAID regularly coordinated with international financial institutions, 

multilateral organizations, and other bilateral donors. For the 

Hurricane Mitch countries, the highest level of coordination occurred 

at the international consultative group level. At a consultative group 

meeting held in May 1999 in Stockholm, Sweden, the governments of 

Central America and the international community developed the guiding 

principles and goals for reconstruction, known as the “Stockholm 

Declaration.” The overriding goal of reconstruction, as stated in the 

declaration, was to reduce the social and ecological vulnerability of 

the region. At subsequent meetings, donors and recipient countries, 

including civil society representatives, reviewed the progress toward 

reconstruction. Although no consultative groups were formed to assist 

the Dominican Republic, Haiti, and other Caribbean islands affected by 

Hurricane Georges, USAID similarly coordinated with its counterparts in 

the international donor community.



At Stockholm, the international community pledged $9 billion, including 

the U.S. pledge of $1 billion.[Footnote 7] However, these pledges have 

not been fully paid. According to USAID officials, commitments totaling 

about $5.3 billion are still considered firm as of May 2002. We were 

unable to obtain information on the status of other donors’ actual 

expenditures. Based on discussions with officials of USAID, host 

governments, nongovernmental organizations, and other donors, USAID was 

among the first to expend funds and complete most of its program. In 

Honduras and Nicaragua, we saw evidence of the contributions of other 

bilateral donors, particularly bridges and other infrastructure built 

by the Swedish and Japanese aid agencies.



Coordination among USAID and other donors was evident at the country 

level. In Honduras and Nicaragua, donor representatives met regularly 

to discuss their respective aid programs and emerging issues.[Footnote 

8] In addition, USAID technical staff coordinated with their 

counterparts at the program and project level. For the most part, USAID 

targeted its activities in rural areas where other donors had little or 

no activity. In instances of potential duplication, we found that USAID 

took action to ensure that its activities added value. For example, 

when USAID began public health activities in a remote area of northern 

Nicaragua along the Honduran border, it found that the Organization of 

American States was conducting similar health-related activities in the 

same region. After several meetings and with guidance from the 

Nicaraguan Ministry of Health, USAID and the organization’s 

representatives agreed to target their activities to avoid duplication. 

Specifically, the Organization of American States agreed to continue 

its monthly training with community health agents, and USAID agreed to 

focus its funds on sexual and reproductive health, disaster prevention 

and mitigation, and other activities not covered by the organization’s 

project.



Although coordination existed within the international community, some 

USAID officials stated that coordination with the host governments was 

less than optimal. Each Central American country developed its plan for 

hurricane reconstruction with assistance and support from the donor 

community. However, according to U.S. and other donor officials, in 

practice, some governments generally did not maintain up-to-date 

information on donor activities or prioritize their proposed projects.



USAID’s Efforts to Strengthen Host Government Audit Capabilities Were 

Limited:



The conference report accompanying the legislation for the supplemental 

appropriation directed USAID to help the affected countries develop an 

institutional capacity to resist corruption.[Footnote 9] USAID’s 

efforts to combat corruption through assistance to audit institutions 

had mixed results. In Honduras, USAID provided $1.3 million to the 

Controller General’s Office to strengthen its capacity to audit 

reconstruction programs and promote enhanced awareness of the 

importance of vigilance over public funds. This funding for equipment, 

technical assistance, and training continued institutional 

strengthening efforts initiated before Hurricane Mitch. However, in 

other instances host government realities limited USAID’s overall 

progress in this area.



* The Nicaraguan government diluted the independence of its Controller 

General’s Office by creating a panel of five appointees representing 

two parties to oversee the office’s activities. USAID subsequently 

terminated its regular program with the office 9 months later when it 

became apparent that the panel would not take the advice of USAID-

funded technical advisors. Similarly, USAID terminated its program with 

the Dominican Republic Controller General’s Office because it lacked 

independence.



* USAID also contributed $4.2 million to the Inter-American Development 

Bank to establish independent oversight units within the Honduran and 

Nicaraguan governments.[Footnote 10] These units are intended to 

oversee the operations of government ministries and independent 

government agencies, similar to U.S. government offices of inspectors 

general. In early June 2002, USAID released $1 million to the bank to 

contract for the consulting services for the Honduras unit. According 

to USAID, the unit in Honduras began operating in June 2002 and the 

remaining

$2.2 million should be disbursed by the end of 2002. In Nicaragua, 

according to USAID officials, the implementation of this unit was 

slowed by the bank’s lengthy project approval process, the time needed 

to gain financial support from other donors, and the previous 

government’s lack of commitment. The government elected in November 

2001 supports the project and proposed some modifications to strengthen 

local capacity building rather than merely hiring contractors to 

implement the unit. USAID expects the unit to begin operations in 

September 2002 with USAID’s $1 million covering the initial costs.



USAID Had to Overcome Numerous Challenges to Initiate Disaster Recovery 

Assistance:



USAID faced numerous challenges in initiating this large-scale disaster 

recovery program that affected the pace of implementation in the 

beginning phases. USAID had to balance the competing interests of 

expediting implementation of the program with ensuring that appropriate 

oversight and financial controls were in place and procurement actions 

were open and transparent. Overall, USAID does not have the “surge 

capacity” to quickly design and implement a large-scale infrastructure 

and development program with relatively short-range deadlines. The 

reasons are institutional, systemic, and long-standing and will require 

deliberate and sustained actions if USAID is to improve its ability to 

respond more quickly to such situations in the future.



USAID Did Not Begin Expending Supplemental Funds Until 2000:



With a few exceptions, USAID began expending disaster recovery funds 

from the supplemental appropriation in January 2000, about 7 months 

after the supplemental appropriation of $621 million was 

approved.[Footnote 11] (See fig. 7 for a timeline illustrating USAID’s 

expenditures.) Some of this time was used to notify the Congress about 

how the supplemental funds were to be expended.[Footnote 12] In most 

cases, the funds were available during July and August of 1999. USAID 

then had to complete its contracting processes and ensure that program 

management and oversight were in place.



Figure 7: Timeline Illustrating USAID’s Disaster Recovery Expenditures 

Funded by the May 21, 1999, Supplemental Appropriation, through 

December 31, 2001:



[See PDF for image]



Source: GAO analysis of USAID data.



[End of figure]



During 1999, before the supplemental funds were available for use, 

USAID missions used $189 million in other funds for emergency relief 

and initial reconstruction programs, such as food-for-work activities 

to rebuild infrastructure in hurricane-affected areas.[Footnote 13] 

During this time, USAID missions were also operating with the staff 

resources allocated based on their regular programs, and they also had 

to deal with the rotation of several senior-level staff during the 

summer of 1999.



Start-up Challenges and Obstacles Slowed Program Initiation:



Before Hurricane Mitch, the Honduran and Nicaraguan missions were 

managing annual programs of about $23 million and $30 million, 

respectively. The Honduran mission had recently been considerably 

reduced in size and it took many months to fill the positions needed to 

oversee the disaster recovery program. In particular, the Honduran 

mission did not have a permanent contracts officer--it had been sharing 

one with the Nicaraguan mission--until October 1999, a year after 

Hurricane Mitch. Other missions also shared contracts officers. As 

noted in appendix II, the missions in Honduras, Nicaragua, and the 

Dominican Republic said the absence of full-time contracts officers led 

to delays.



The number of USAID direct-hire staff in general, and contracts 

officers in particular, has declined in recent years and USAID had 

difficulty finding qualified personnel to manage this large-scale 

emergency program on an expedited basis. This problem was compounded by 

some USAID senior-level staff (for example, contracts and 

administrative officers) rotations during the summer of 1999. Although 

USAID’s headquarters office attempted to ease the burden by providing 

temporary staff in the hurricane-affected countries, the missions 

lacked needed continuity, and, according to the Honduran mission, the 

lack of travel funds precluded timely assistance for some activities. 

The Honduran mission emphasized that the need to obtain qualified staff 

more quickly is one of the most important lessons learned from the 

hurricane reconstruction program.[Footnote 14]



USAID also does not have any procedures to expedite the hiring of 

personal services contractors. As a result, acquiring personal services 

contractors with the requisite language and technical skills to manage 

the reconstruction program often took 6 months to more than a year. The 

process involves revisions in position descriptions and scopes of work, 

internal and external position announcements, screenings, interviews, 

and medical and security checks. For example, the Nicaraguan mission 

experienced major delays in security clearances--one person accepted a 

job elsewhere after waiting more than a year for a clearance. The 

hiring and clearance process also precluded the timely arrival of in-

country staff from other U.S. departments and agencies to conduct their 

programs. Because contractor and other U.S. agency staff provided much 

of the day-to-day management of the program, these delays were 

burdensome for the USAID staff on board and slowed the pace of 

implementation.



In addition to building up staffing levels, the missions in some 

countries decided to implement certain accountability measures prior to 

program implementation. For example, before it began its host country 

contracting programs for major infrastructure projects, the USAID 

mission in Honduras advertised for and selected a U.S. engineering and 

project management firm to oversee the technical aspects and a third-

party accounting firm to handle disbursements to the Honduran 

government.



Although USAID missions had the authority to waive full and open 

competition for awarding contracts and grants, it was used sparingly. 

The Honduran mission used the waiver authority to bypass the normal 

requirement to advertise in the Commerce Business Daily, which saved 60 

days in awarding some contracts. In many instances, missions amended 

existing cooperative agreements and contracts to accelerate the 

procurement process. However, although using sole source awards would 

have speeded up the award process, it may have precluded U.S. firms 

from being awarded contracts. The Honduran mission, for example, 

redesigned much of its municipal water and sanitation program to allow 

U.S. firms to compete, resulting in a later start date.



The involvement of numerous other U.S. government departments and 

agencies presented a challenge for which the USAID missions were 

unprepared. Mission staff told us that, at the beginning of the 

program, coordinating with officials from other agencies, helping them 

with their work plans, and facilitating their administrative needs took 

considerable time away from their already busy workload. The burden 

eased as some agencies assigned in-country personnel, but it took 

considerable time for these people to arrive because their positions 

had to be approved by the embassy and they needed security clearances. 

Some U.S. entities did not assign staff in country and USAID had to 

coordinate temporary duty tours for these personnel as well.



Program Observations from USAID and Other U.S. Departments and 

Agencies:



During our review, USAID and the other U.S. government entities 

provided their observations on lessons learned and some ideas for 

improving the delivery of disaster recovery assistance in the future. 

USAID and the other agencies almost unanimously agreed that the 

December 31, 2001, deadline was a major factor in how they planned, 

designed, and implemented their disaster recovery activities, and it 

also affected the extent to which sustainability could be built into 

the program. USAID missions suggested limiting the number of other U.S. 

government entities involved, using umbrella agreements and indefinite 

quantity contracts to hasten the procurement process, avoiding host 

country contracting, and relying on organizations that are already 

working with USAID in the country. Other U.S. government entities noted 

that they had learned much about coordinating an interagency program 

overseas and had come to appreciate the complexities of working in 

developing countries. Some noted the need for a simpler method of 

dealing with administrative costs while in country--one suggestion was 

for USAID to create one account for charging all administrative, 

logistical, financial, and procurement services for future emergency 

programs. (As previously noted, see apps. II and III for more detailed 

summaries of the responses from the USAID missions and other U.S. 

departments and agencies.):



USAID’s Proposals to Improve Response Capability:



USAID officials in the overseas missions and in USAID’s Washington, 

D.C., headquarters generally agreed with our observations on the 

obstacles it faced in getting the disaster recovery program off the 

ground. They emphasized that the lead role that USAID was expected to 

perform in planning and implementing the disaster recovery program was 

a significant challenge.



In mid-2000, USAID’s Bureau for Latin America and the Caribbean drafted 

a “lessons learned” analysis of the disaster recovery program’s start-

up and offered recommendations for the systemic and procedural changes 

needed for a similar response in the future. It suggested options for 

funding flexibility, staff mobilization, program design and planning, 

accountability, and the role of other U.S. government agencies and the 

private sector. The USAID administrator subsequently formed the 

Emergency Response Council to conduct an agencywide review of its 

experiences with international emergencies.



In December 2001, the council proposed several program and procedural 

reforms to provide more flexibility in planning and implementing 

activities in post-crisis or post-emergency situations. In particular, 

the memorandum proposed that USAID:



* missions include in their development strategies and implementation 

instruments (such as contracts, grants, and cooperative agreements) a 

“crisis modifier” clause to provide resources more quickly;



* consider funding alternatives in the absence of supplemental 

appropriations, such as increased borrowing authority to use available 

USAID resources programmed for other activities;



* develop a package of procurement waivers for reconstruction 

activities, allowing, among other things, the purchase of certain 

commodities without regard to source and origin;



* develop strategies for addressing legislative authorities to obtain 

more flexibility in reconstruction programming; and:



* develop a skills database of internal resources available for 

deployment on reconstruction design teams.



In May 2002, the USAID administrator approved the council’s 

recommendations in the areas of strategic planning and programming, 

funding alternatives, and staffing. In addition, also in May 2002, a 

USAID contractor hired to independently assess the agency’s response to 

Hurricanes Mitch and Georges outlined numerous and sometimes detailed 

actions that USAID can take to improve its response to future 

reconstruction programs. These recommendations included options for 

program design, staff mobilization, procurement, interagency 

coordination and administrative support, and accountability.



Conclusions:



USAID and the other U.S. departments and agencies provided disaster 

recovery assistance that helped the affected countries recover from the 

devastating effects of Hurricanes Mitch and Georges. USAID’s programs 

and projects and those of the other U.S. government entities spanned 

all sectors and affected countries, helping to rebuild infrastructure, 

restore economic activity and access to basic services, and mitigate 

the effects of future disasters. Increased oversight of the disaster 

recovery program helped ensure that funds were spent for intended 

purposes and not misused.



However, USAID faced numerous obstacles and challenges. Primarily, 

USAID did not have the flexibility to readily replace key staff--

primarily contracts officers--or the ability to expeditiously hire 

personal services contractors to help plan for and initiate the 

disaster recovery program. Available USAID mission staff were also 

involved in providing emergency relief, initial reconstruction 

assistance, and continuing regular development programs. USAID missions 

in some countries also implemented certain measures to help ensure 

accountability over the assistance funds prior to program 

implementation. In addition, coordinating with and helping the other 

U.S. departments and agencies develop their programs was burdensome and 

time-consuming for the missions. As a result, the initial pace of 

implementation was slowed as USAID took steps to obtain adequate staff, 

incorporate oversight and accountability measures, and coordinate the 

activities of other U.S. government entities.



USAID will likely be called upon to deliver and oversee disaster 

recovery assistance again as natural and man-made disasters continue to 

occur. The proposal for USAID to oversee and implement a rebuilding 

program in Afghanistan after more than two decades of war is the most 

immediate but not the only example.[Footnote 15] USAID’s Emergency 

Response Council and an independent contractor have examined USAID’s 

response to Hurricanes Mitch and Georges and made numerous 

recommendations and proposals for improving the agency’s response to 

disaster recovery programs. Our review further demonstrates that more 

flexible mechanisms and better interagency coordination procedures are 

needed to facilitate initiation of large-scale disaster recovery 

programs and could allow USAID to improve its response time in future 

similar situations while maintaining adequate oversight and 

accountability.



Recommendations for Executive Action:



We recommend that the USAID administrator expedite implementation of 

the Emergency Response Council’s proposals approved in May 2002 to help 

ensure that USAID has the flexibility and resources needed for a timely 

response to future disaster recovery and reconstruction requirements. 

To further improve USAID’s ability to respond in similar situations, we 

recommend that the administrator develop and implement procedures that 

would (1) allow USAID to quickly reassign key personnel, particularly 

contracts officers, in post-emergency and post-crisis situations; (2) 

allow missions to hire personal services contractors to augment staff 

on an expedited basis; and (3) facilitate coordination of efforts with 

other U.S. departments and agencies that may be involved in future 

programs.



Agency Comments and Our Evaluation:



USAID provided written comments on a draft of this report, noting that 

the report is comprehensive and constructive (see app. V). USAID 

concurred with the report’s findings and conclusions on both the 

success of the program and the challenges and impediments faced by 

USAID, particularly in the initial phases. USAID stated that it has 

carefully considered the lessons learned from the reconstruction 

experience in Latin America and will continue to identify changes in 

its structure and functioning to make it more flexible in responding to 

future similar crises.



USAID did not comment on our recommendations. USAID elaborated on 

recent steps taken to address three of the five council recommendations 

in the areas of strategic planning and programming, funding 

alternatives, and staffing. We note, however, that these efforts are 

just beginning and that USAID did not address the other two council 

recommendations on expanded procurement waivers and legislative 

authorities. We further note that these efforts do not address our 

recommendations to develop procedures to (1) expedite the reassignment 

of key direct-hire personnel, such as contracts officers, in post-

emergency situations and (2) facilitate coordination with other U.S. 

departments and agencies. As our report demonstrates, these are 

important issues for future emergency response situations and we urge 

USAID to address these areas.



In addition to USAID, we requested comments from the nine U.S. 

departments and agencies that responded to our questionnaire summarized 

in appendix III. The Centers for Disease Control and Prevention, the 

Department of Agriculture, and the Department of Housing and Urban 

Development suggested minor technical clarifications that we have 

incorporated into the report as appropriate. The other departments and 

agencies had no comments.



We will send copies of this report to interested congressional 

committees as well as the Administrator, USAID; the Director, Office of 

Management and Budget; and the heads of other U.S. departments and 

agencies that participated in the disaster recovery assistance program 

in Latin America. 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) 512-4128 or at FordJ@gao.gov. Other contacts and 

staff acknowledgments are listed in appendix VI.



Jess T. Ford, Director

International Affairs and Trade:



Signed by Jess T. Ford:



[End of section]



Appendixes:



Appendix I Scope and Methodology:



To determine whether the program and projects funded by 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 other U.S. government entities and 

made more than 30 trips to the countries affected by Hurricanes Mitch 

or Georges.[Footnote 16]



* In Washington, D.C., we held frequent meetings with officials of 

USAID’s Bureau for Latin America and the Caribbean to discuss program 

oversight and the status of USAID’s activities. We coordinated with 

USAID’s Office of the Inspector General (and its regional office in El 

Salvador) to minimize duplication of effort and share information. We 

also attended the April 1999 meeting of USAID’s mission directors from 

Mitch-affected countries at which they discussed their respective 

disaster recovery strategies and we reviewed program strategy 

documents. We met with officials from the other U.S. departments and 

agencies to discuss and document how the USAID-provided funds were 

being spent and the status of their programs.[Footnote 17] We 

coordinated with the Office of Management and Budget regarding its 

oversight and attended meetings it held in June 2001 with USAID and 

most of the other U.S. departments and agencies to review the status of 

their activities and the pace of their expenditures as the December 31, 

2001, deadline approached. We also visited the Centers for Disease 

Control and Prevention in Atlanta, Georgia, and the U.S. Army Corps 

of Engineers in Mobile, Alabama, for the same purposes.[Footnote 18]



* To conduct the overseas work, we made 11 trips each to Honduras and 

Nicaragua, 7 trips to the Dominican Republic, 2 trips each to El 

Salvador and Guatemala, and 1 trip each to Costa Rica and Haiti. In 

each country, 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. We monitored USAID’s activities in all 

sectors in all hurricane-affected areas, including the remote Caribbean 

coast regions of Honduras and Nicaragua. We also visited projects 

implemented by other U.S. departments and agencies. 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, 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 hurricanes 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 personal services contractors, 

firms, and organizations hired by USAID to provide program oversight. 

We followed up with USAID mission staff and the other U.S. departments 

and agencies to determine whether concerns raised by us and others were 

being addressed.



To determine whether USAID coordinated with other U.S. departments and 

agencies and other international donors, we met with USAID officials in 

Washington, D.C., and at the overseas missions to discuss their 

procedures for incorporating the activities of the other agencies into 

their programs and coordinating with multilateral and other bilateral 

donors. We also met with officials of the other U.S. agencies involved 

in the program to get their perspectives on agency coordination. 
Through 

documentation provided to us and our field visits, we reviewed the 

activities of all the U.S. departments and agencies to ensure that they 

did not duplicate one another. For the other international donors, we 

attended the consultative group meetings for Honduras in February 2000 

and for Nicaragua in May 2000 and reviewed the documentation from other 

key donor meetings. We met with officials from the Inter-American 

Development Bank and the World Bank and several donor countries. We 

discussed their respective programs and reviewed their documentation. 

Finally, we met with host government officials, including mayors and 

other local officials, to discuss their procedures for ensuring donor 

activities did not conflict or overlap and their views on donor 

coordination.



To determine what USAID did to help the affected countries strengthen 

their institutional capability to resist corruption, we interviewed the 

Controllers General in the Dominican Republic, El Salvador, Guatemala, 

Honduras, and Nicaragua. We discussed the organization and resources of 

their offices and their relationship to other entities in the national 

government. Although USAID also funds other anticorruption and 

financial management efforts at host country institutions, we did not 

include these activities within our scope.[Footnote 19] We also met 

with officials from USAID and the Inter-American Development Bank in 

Honduras and Nicaragua to discuss the status of the financial 

inspection units.



In addition to the above efforts, we sent a “pro forma” set of 

questions to six USAID missions and to the nine U.S. departments and 

agencies that were most closely tied to USAID’s program to obtain their 

views on the lessons learned in planning, implementing, coordinating, 

and overseeing the disaster recovery program.



We conducted our work between April 1999 and May 2002 in accordance 

with generally accepted government auditing standards.



[End of section]



Appendix II: Summary of Disaster Recovery Experiences: USAID Missions:



As the disaster recovery assistance program was coming to a close, we 

asked USAID’s missions for their views on how the program proceeded. To 

help provide a framework for answering our questions, we developed a 

pro forma questionnaire and sent it to the USAID missions in the 

Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, and 

Nicaragua.[Footnote 20] All six replied. We grouped their responses 

into five broad topics: (1) program planning and implementation, (2) 

staffing, (3) accountability, (4) coordination, and (5) lessons learned 

that could be applied in future disaster recovery and reconstruction 

situations. Our analysis of their responses shows that all the missions 

had similar experiences, but the three missions that received the 

largest amounts of funding--Honduras, Nicaragua, and the Dominican 

Republic--encountered some unique problems and issues. The following is 

a summary of their responses.



Program Planning and Implementation:



All six USAID missions reported that they made certain planning and 

implementation decisions based on the December 31, 2001, expenditure 

deadline and took actions to reduce start-up time. These actions 

generally helped ensure that the program would be completed by the 

deadline. However, missions reported that, in some instances, 

nongovernmental organizations and host governments were unprepared to 

meet the demands of the disaster recovery program and its relatively 

short time frame.



* All six missions reached agreements with organizations that were 

already in these countries and with which they had previously worked or 

actively engaged in the mission’s regular development programs. In 

doing so, the missions were confident that projects would be 

implemented by organizations familiar with USAID and with proven 

capabilities and track records. However, the Nicaraguan mission entered 

into some agreements that called for organizations to undertake 

activities they had not done before. This led to some problems. For 

example, one nongovernmental organization agreed to rehabilitate rural 

roads. After some initial work, we and several others pointed out that 

the roads were unlikely to stand up to normal traffic and weather. The 

organization subsequently hired engineers and the quality of the 

rehabilitated roads improved substantially.



* Two missions--Nicaragua and Haiti--reported that they combined 

relatively small activities that could have been awarded separately 

into larger agreements. This helped streamline the start-up process 

because the paperwork was reduced and USAID staff only had to deal with 

one organization rather than several. The mission in Haiti also 

reported that having one grantee enhanced communication, reporting, and 

accountability.



* The Nicaraguan mission transferred $16.6 million--nearly one-fifth of 

its total disaster recovery funding--to USAID’s Bureau for Global 

Programs, Field Support, and Research.[Footnote 21] This allowed the 

mission to bypass the process for soliciting and reviewing proposals 

and negotiating agreements. The mission acknowledged, however, that 

while using such global agreements is faster and the program quality is 

high, the services provided are generally more expensive than 

separately funded agreements.



* The Honduran mission used host country contracting--a mechanism 

whereby USAID transfers funds to the host government, which then enters 

into contracts with implementing organizations--for some large 

infrastructure projects in an attempt to speed up implementation. 

However, USAID regulations for host country contracting required 

numerous approvals and were difficult to mesh with Honduran government 

regulations. The mission also said that some host country counterpart 

ministries were bureaucratic and inefficient.



* The Guatemalan mission noted that, due to the deadline, it limited 

its monitoring and reporting to project outputs during implementation 

and did not seek to measure impact as it would have for a longer-term 

effort. The mission added that, for its watershed rehabilitation 

activities, a period of more than 2 years is required to assess impact.



Staffing:



The three USAID missions that received the largest amounts of 

reconstruction funding--Honduras, Nicaragua, and the Dominican 

Republic--reported staffing problems, primarily the absence of a 

contracts officer at critical times during the disaster recovery 

program. In contrast, the three missions receiving smaller amounts of 

funding--El Salvador, Guatemala, and Haiti--reported no staffing 

problems. Problems noted by the missions included the following.



* The Honduran mission reported that the absence of a permanent 

contracts and grants officer until October 1999 was a serious 

constraint due to the important role that a contracts officer plays 

during the life of a program, particularly during the start-up phases. 

The mission noted that a contracts officer is needed for negotiating 

and signing agreements and providing valuable advice during the design 

process on issues such as the selection of appropriate implementation 

mechanisms and acquisition instruments.



* The Nicaraguan mission reported that the absence of a contracts 

officer was a problem during the closeout phase.[Footnote 22] In 

particular, although temporary-duty contracts officers were sent from 

headquarters, their efforts did not prevent some activities from 

slowing down as the program approached the December 31, 2001, deadline.



* The mission in the Dominican Republic reported that the absence of a 

permanent contracts officer greatly affected its program. Some actions 

were delayed because the local-hire assistant contracts officer was 

also responsible for the mission’s regular program contracts and for 

contracting actions at the USAID mission in Jamaica.



* The mission in the Dominican Republic reported that the majority of 

staff hired for its reconstruction effort had no prior USAID 

experience. As a result, initial implementation slowed as new staff 

learned the USAID management system.



* The Honduran and Nicaraguan missions reported that getting qualified 

staff on board was a lengthy process. The Honduran mission noted that 

the process to hire staff was long and burdensome and that nearly all 

activities had delays or start-up difficulties due to staff shortfalls. 

The Nicaraguan mission reported that it experienced major delays in 

obtaining security clearances for staff it had hired. In one instance, 

the mission selected a person who eventually accepted a job elsewhere 

after waiting more than a year for a security clearance.



* The Honduran mission reported it did not have the flexibility to 

reassign existing mission staff to some reconstruction activities. In 

addition, the mission had difficulties in obtaining temporary staff for 

its education activities because USAID headquarters either did not have 

the staff available or it lacked travel funds.



Accountability:



All USAID missions reported that they took certain actions to ensure 

accountability for disaster recovery assistance funds. Some missions 

cited minimizing the funds provided directly to host governments as an 

example. Missions noted that the extensive audit and oversight coverage 

required a substantial commitment from mission staff already heavily 

involved in planning and implementing reconstruction projects.



* The Dominican Republic mission reported that it limited funds 

provided directly to the Dominican government to speed up the 

implementation process and reduce potential misuse of funds. It noted 

that the host government required more time to plan its budget and 

disburse funds. For example, government-funded potable water and 

sanitation systems for several housing projects were delayed when 

contractors did not receive payment from government institutions.



* The USAID missions in Honduras and Nicaragua hired consulting and 

management firms to handle funds and provide program oversight. The 

Honduras mission used eight organizations to provide oversight and 

technical assistance over various components of its disaster recovery 

program. The Nicaragua mission also hired several firms to provide 

oversight but one firm encountered problems in doing so. Specifically, 

the Nicaragua mission hired a U.S. management and consulting firm to 

oversee about $3.6 million provided to the Nicaraguan government for 

more than 20 small municipal infrastructure projects. However, the 

firm’s lack of engineering expertise and experience led to substantial 

delays in several projects. Ultimately, about half the projects were 

canceled and only $2.1 million was expended. The remaining funds were 

reprogrammed and used for other reconstruction efforts.



Coordination:



USAID missions noted numerous problems resulting from working with the 

other U.S. departments and agencies. They did not cite any problems in 

coordinating with other international donors.



* The missions in the Dominican Republic, Honduras, and Nicaragua 

reported that integrating the programs of the other U.S. entities was 

time-consuming and burdensome for USAID staff. The mission in the 

Dominican Republic further noted that coordination and implementation 

were challenging because the other departments and agencies did not 

have sufficient staff in country and did not spend enough time during 

visits.



* The USAID missions in Honduras and Nicaragua also reported that 

problems arose because some U.S. departments and agencies lacked an 

understanding of the complexities of working in a developing country 

environment and overseas missions--some agencies developed 

reconstruction plans without reference to local conditions. The 

Honduran mission further noted that providing administrative support 

for some agencies was particularly cumbersome and required the 

establishment of a separate mechanism for cost sharing, even though the 

program was relatively short-lived.



Lessons Learned:



All USAID missions reported numerous lessons learned and indicated 

these lessons could be applied in future disaster reconstruction 

situations. Some examples follow.



* The missions in Honduras and the Dominican Republic reported delays 

in getting qualified contractor staff on board and the Nicaraguan 

mission reported major delays in obtaining U.S. and local security 

clearances for its contracted staff. The Dominican Republic mission 

suggested that the ability to hire personal services contractors and 

other staff--and get them to the mission--more quickly would be a great 

help in rapidly designing and implementing future emergency response 

and disaster assistance programs.



* All missions emphasized that a longer implementation period would 

have better ensured project sustainability. In addition, the Honduran 

mission reported that it had avoided activities involving institutional 

development and other complex reforms that would have required more 

time to complete. It also noted that, by paying relatively little 

attention to policy issues and emphasizing construction, it was unable 

to adequately address some of the underlying issues that had prevented 

Honduras from being prepared to respond adequately to disasters. The 

mission in the Dominican Republic acknowledged that it selected some 

types of activities that it knew could be completed by the expenditure 

deadline. It did so despite recognizing that other activities might 

have achieved greater sustainability, especially those with more cost 

sharing with the host government and other implementing organizations.



* Reaching agreements with established organizations with an in-country 

permanent presence with whom USAID had previously worked was a good 

mechanism that generally resulted in expediting program start-up and 

ensuring project quality and financial accountability.



* According to the Honduran mission, host country contracting should be 

used with caution in a disaster recovery program with relatively short 

time frames because these projects generally took longer to be 

completed.



* The Guatemala mission reported that using fixed amount reimbursable 

contracts was a very efficient implementation mechanism through which 

the implementing organization was periodically reimbursed for 

activities it had successfully completed only after the activities were 

inspected and certified by USAID-selected personnel. The mission also 

noted that this mechanism limits the likelihood of corruption and 

increases transparency when concurrent audits are also conducted.



* The missions in Honduras and the Dominican Republic reported that 

certain types of agreements with other U.S. departments and agencies 

worked better than others. The Honduran mission noted that 

participating agency services agreements worked better than interagency 

agreements. Such agreements allowed the mission to define the terms of 

reference, which helped make other U.S. government programs more 

compatible with the broad objectives of USAID’s reconstruction program 

and local conditions. The Dominican Republic mission reported that 

agencies working under participating agency services agreements and 

interagency agreements were more receptive to coordination and teamwork 

than those agencies that had their funds directly transferred to them 

by USAID.



* The mission in Honduras reported that USAID needs to do a better job 

in immediately identifying staff with the skills needed for 

reconstruction activities, rather than relying on staff within the 

mission or region. The mission further suggested including a human 

resources specialist in the first response team who could also assist 

the mission in filling staffing needs.



* The Honduras mission reported that its authority to redirect 

reconstruction funds within its own mission program contributed to 

successful project implementation. The mission noted that, based on 

progress and the changing needs of certain projects, it moved funds 

from some activities into others and strongly stated that all missions 

should retain this flexibility and authority.



[End of section]



Appendix III: Summary of Disaster Recovery Experiences: Other U.S. 

Departments and Agencies:



As we did with USAID’s missions, we asked the other U.S. departments 

and agencies that implemented reconstruction activities for their views 

on how the program proceeded. We provided a pro forma questionnaire to 

nine U.S. departments and agencies.[Footnote 23] All nine replied. We 

grouped the responses into five broad topics: (1) program planning and 

implementation, (2) staffing, (3) accountability, (4) coordination, and 

(5) lessons learned that may apply to future disaster recovery efforts. 

In general, the agencies encountered a variety of problems and issues 

but noted that they gained valuable experience in implementing disaster 

recovery and reconstruction programs overseas. The following is a 

summary of their responses.



Program Planning and Implementation:



The ability of the other U.S. departments and agencies to plan and 

implement their programs was affected by various factors, particularly 

the December 31, 2001, deadline. For some, the deadline had little 

effect on design and planning decisions but they could have used more 

time for training or to reinforce efforts to make their programs more 

sustainable. Other agencies reported that they designed their 

activities around the deadline. Other factors that affected project 

planning and implementation included administrative delays and host 

country conditions.



* NOAA reported that if the deadline had not been in place, it would 

have designed similar activities but would have included more training 

and sustainability-related activities. NOAA further noted that it did 

not have enough time at the beginning of the project to do a complete 

needs assessment to determine and prioritize activities. DOT also 

reported that, while the deadline did not affect the initial planning 

and designing of its program, other uncontrollable local factors, such 

as land acquisition and weather conditions, delayed some phases of 

DOT’s projects. USGS said that it could have used more time for 

additional feedback and to reinforce the methods and concepts of the 

training it provided.



* USDA reported that the deadline affected the design of its program 

technically and administratively. USDA had to identify projects that 

were feasible within the time frame and partners with sufficient 

capacity to successfully undertake the work. In addition, various 

administrative and bureaucratic delays, such as hiring staff to manage 

the program, hindered initial project implementation. HUD also reported 

that it would have designed its disaster mitigation activities somewhat 

differently if the deadline had not been imposed.



Staffing:



Most agencies did not report staffing problems, although USDA reported 

that deploying permanent staff took some time and was a constraint in 

starting up its program. USGS, NOAA, USDA, HUD, and INL reported that 

they had full-time personnel in country, especially in the countries 

where they had larger programs. CDC, EPA, FEMA, and DOT used 

contractors and grantees or permanent staff that traveled on temporary 

duty to carry out their work. USGS had full-time staff in Honduras and 

Guatemala and relied on temporary duty personnel in other countries. 

USDA had full-time personnel in Honduras and Nicaragua--both USDA 

direct-hire staff and personal services contractors. USDA also used 

temporary duty personnel in all countries in which it worked.



Accountability:



USAID’s Bureau for Latin America and the Caribbean and mission staff, 

the Office of Management and Budget, and we conducted most of the 

oversight and review of the other U.S. departments and agencies. DOT 

and FEMA were the only agencies that were audited by their respective 

inspectors general--both reported positive audit outcomes. Staff from 

USAID’s Bureau for Latin America and the Caribbean conducted most of 

the oversight of interagency agreements. In general, agencies reported 

that the oversight and reviews did not adversely affect program 

implementation and were, in fact, helpful.



* Most agencies reported adequate oversight of their programs and added 

that the reviews did not affect program design or the pace of 

implementation. An exception was FEMA, which reported that



responding to inquiries, mostly from its inspector general’s office, 

took time away from project activities.



* Most agencies reported that the oversight and reviews provided 

valuable input. For example, USDA reported that the additional 

oversight by USAID and us was not overly intrusive and was welcomed by 

division management. USGS also noted that meetings and field visits 

allowed its staff to discuss expectations with auditors and comply with 

regulations. However, EPA noted that, although the oversight helped 

ensure accurate recordkeeping, it received little feedback on its 

performance.



Coordination:



Eight of the nine agencies, including the six agencies that had 

interagency agreements with USAID, reported that they designed their 

program to complement and supplement USAID’s program and that USAID had 

provided valuable assistance in helping them formulate their 

strategies. The same agencies reported that they also received a 

significant amount of logistical and administrative support from USAID 

and several noted that their programs would not have been as successful 

without USAID’s programmatic and administrative assistance.[Footnote 

24] However, one agency reported that its contractor encountered some 

problems in coordinating with USAID.



* Most agencies reported that they took into account USAID’s expertise 

and guidance in planning and implementing activities. USGS reported 

that its program was developed in consultation with USAID missions and 

that it had made significant changes in its initial design in response 

to suggestions from USAID. FEMA noted that it would not have been as 

successful without the support and guidance it received from USAID’s 

Bureau for Latin America and the Caribbean. However, CDC’s contractor 

for its laboratory equipment and training project reported that 

sometimes the missions’ priorities differed from those of the health 

ministries or the national laboratories and the contractor had to 

change its approach.



* Several agencies reported that they provided technical expertise that 

complemented USAID’s program. DOT implemented a port damage assessment 

project that focused on the entire transportation network supporting 

international trading ports in Honduras and Nicaragua. According to 

DOT, USAID did not have the capability to deal with transportation 

matters on a regional basis and DOT filled the void.



* Eight of the nine agencies reported that they received in-country 

logistical or program support from USAID missions. However, CDC’s 

laboratory equipment contractor reported that administrative 

coordination with USAID missions was sometimes difficult because each 

mission required different information for issues such as country 

clearances and this created confusion for the contractor.



Lessons Learned:



All nine departments and agencies reported that they learned lessons 

that could be applied in future disaster assistance programs. Most 

noted the constraints imposed by the December 31, 2001, deadline and 

suggested that future efforts include time for follow-on activities, 

such as training, to ensure more sustainability. Several also suggested 

that USAID develop an easier method of charging for administrative 

activities. In addition to working with USAID, several agencies noted 

the importance of good coordination among the various U.S. government 

entities providing disaster recovery assistance.



* Three agencies reported that the limited time for project 

implementation was a constraint, especially for follow-on activities 

and project sustainability efforts. HUD reported that the deadline did 

not allow enough time to complete efforts to train local entities in 

finding other sources of funding for continuing activities in a 

resettlement community in Honduras. According to NOAA, future projects 

should have follow-on activities to assess implementation of the 

technical guidance and training provided. NOAA further noted that more 

time and resources should have been devoted to training host country 

counterpart organizations. CDC had to obtain extensions for two 

training programs beyond the December 31, 2001, deadline to ensure that 

enough epidemiologists were trained and that laboratory equipment would 

be used and maintained properly.



* Three agencies reported that they would have preferred to have a 

different manner of dealing with administrative expenses in 

country.[Footnote 25] Each suggested that USAID create a funding 

citation to charge each agency for all administrative, logistical, 

financial, and procurement services for future emergency programs. CDC 

and USDA recommended that USAID keep a portion of the funding before 

signing interagency agreements and that USAID provide all of the 

logistical and administrative support for the agencies, noting that 

this would allow for greater transparency and less confusion. Also, 

FEMA was not aware that administrative expenses were additional and had 

not budgeted for these costs.



* FEMA and USDA reported that a major constraint in overall planning 

was that the disaster recovery funds were not available prior to 

signing the interagency agreement to fund diagnostic, assessment, and 

planning activities. According to USDA, this led to significant delays 

in start-up activities. USDA suggested that USAID establish a rapid 

assessment fund, which it could use to reimburse other U.S. government 

agencies for their expenses.



* HUD reported that local community members are invaluable in locating 

work sites and then determining appropriate activities. Similarly, EPA 

reported that it learned to identify local partners to assist with 

logistics and technical support.



* EPA, INL, and CDC reported that they learned about working with host 

governments. EPA noted that it was important to get the host country 

governments involved from the very beginning and keep them involved 

throughout the program to help ensure sustainability. Staff responsible 

for INL efforts in El Salvador noted that projects work better if based 

on requests from host governments rather than on ideas developed in 

Washington, D.C. They added that one of INL’s projects in El Salvador, 

which now is on track, might have avoided some initial problems if more 

attention had been given to country conditions. CDC noted the 

importance of ensuring that U.S. agency priorities do not conflict with 

the concerns of host governments.



* USGS and CDC reported that they had learned more about working with 

other U.S. departments and agencies. USGS conducted a multidisciplinary 

program both within its agency and among other U.S. entities. USGS 

found that working with other agencies allowed it to share data among 

projects and programs, leading to more efficient and cost effective use 

of resources. CDC noted that clear coordination and communication from 

the very outset was important because agencies interpreted information 

differently. In addition, EPA suggested that greater efforts be made to 

help U.S. agencies create integrated programs in the same communities.



* HUD reported that it learned techniques and approaches to planning 

construction programs in poor communities that will allow for faster 

and more efficient reconstruction programs in the future.



[End of section]



Appendix IV: Disaster Recovery Assistance Budgeted and Expended:



The emergency supplemental appropriated $621 million to USAID and it 

was the primary agency responsible for carrying out the U.S. disaster 

recovery assistance program. In turn, USAID transferred almost 

$96 million[Footnote 26] to 12 other U.S. departments and agencies 

that, for the most part, planned and implemented their own programs. 

USAID transferred funds in two ways as authorized by section 632 of the 

Foreign Assistance Act of 1961, as amended. Under 632(a), USAID has 

minimal responsibility for approving how the funds will be used, and 

program monitoring and evaluation is the responsibility of the 

receiving department or agency. Under 632(b), USAID and the receiving 

department or agency negotiate and agree on how the funds will be used, 

and USAID is responsible for program monitoring and evaluation; such 

transfers are implemented through interagency agreements. Table 2 shows 

the status of the disaster recovery funds through December 31, 2001, by 

the department or agency implementing the activities.



Table 2: Status of Disaster Recovery Assistance Funds through December 

31, 2001:



[See PDF for image]



[End of section]



Appendix V: Comments from the U.S. Agency for International 
Development:



U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT:



JUN 2 8 2002:



Mr. Jess T. Ford Director International Affairs and Trade U.S. General 

Accounting office 441 G Street, N.W.



Washington, D.C. 20548:



Dear Mr. Ford:



I am pleased to provide the U.S. Agency for International Development’s 

(USAID) formal response on the draft GAO report entitled “Foreign 

Assistance: Disaster Recovery Program Addressed Intended Purposes But 

USAID Needs Greater Flexibility to Improve Its Response Capability” 

(June 2002).



USAID appreciates the comprehensive and constructive nature of this 

report. The positive role which the GAO has played during the course of 

the implementation of the Central American and Caribbean Emergency 

Disaster Recovery Fund (CACEDRF), created by Congress in May of 1999, 

has been very important to the success of this program. The level of 

cooperation and support between the GAO, USAID/Washington and our field 

missions has been exceptional.



The magnitude and scope of the U.S. government’s supplemental 

reconstruction program, and USAID’s leadership of it, were as 

unparalleled as Hurricanes Mitch and Georges themselves. It involved a 

massive job of coordination and decision-making among the international 

donors, twelve other U.S. departments and agencies, nine different 

countries and hundreds of local communities. Overcoming the planning, 

logistical and institutional obstacles was that much more significant 

given the widespread debilitation of country capacity and the 

commitment to “build back better.”:



Moreover, efforts to establish an exceptional number of oversight and 

accountability mechanisms added to the challenge. We appreciate your 

confirmation of the importance of USAID’s critical role in this process 

and that U.S. objectives were achieved.



While USAID is proud of what it accomplished under these difficult 

circumstances, your report correctly observes that over a period of 

years prior to the inception of the CACEDRF reconstruction program, 

USAID had downsized its staff and reduced its “surge capacity” to the 

point where meeting the emergency and post-disaster requirements posed 

by these events involved a near heroic response. This stretched USAID’s 

human resources beyond anything previously encountered. We carefully 

considered the lessons learned from the reconstruction experience and 

have identified and will continue to identify changes in our structure 

and functioning which will make USAID more agile in responding to 

future similar crises. As the report also notes, the critical 

constraints were identified by USAID’s own Hurricane Mitch Working 

Group and Emergency Response Council (ERC). We are pleased to inform 

you that the Council subsequently took the initiative to develop 

funding and staffing options and to put forward key program reforms to 

facilitate reconstruction activities in the future. In May of this 

year, the USAID Administrator approved all of the Council’s 

recommendations for reconstruction activities in the areas of funding 

alternatives, staffing for design and implementation, and strategic 

planning.



On funding, the Administrator approved initiation of discussions within 

the Administration on “bridge financing” mechanisms for reconstruction 

activities. Large-scale infrastructure and other reconstruction 

activities usually require additional, extraordinary funding (which in 

the past has often come from supplemental appropriations). However, the 

time gap between the disaster relief phase and the receipt of the 

additional funds for moving to the reconstruction stage often spans 

several months, and the lengthy uncertainty about funding availability 

tends to hamstring planning and preparations in the interim. We are 

interested in pursuing a mechanism that would bridge this gap with 

assured funding.



To overcome staffing constraints, a USAID working group has identified 

several existing mechanisms that could make human resources more 

readily available for design, implementation, and oversight of 

reconstruction activities. For procuring such services quickly, the 

working group has identified two contracting mechanisms that are 
available 

to operating units throughout the Agency. One is an Indefinite Quantity 

Contract for procuring short-term services. We have used it extensively 

and successfully for emergency activities. The other is an existing GSA 

contract for engaging both short-and long-term human resources. It has 

provided us with flexibility and quick turnaround time in procuring 
these 

services. In addition, to facilitate availability of USAID staff for 

reconstruction activities, we have contracted with a firm to establish 

a skills database of all Agency personnel, who would be available on 

short notice for deployment to the field.



The third area of reform, programming, involves guidance to the field, 

especially in “crisis-prone” countries, on the inclusion of a “crisis 

(or program) modifier” in country strategies. The crisis modifier has 

been used successfully in Eritrea and Ethiopia to avoid lengthy delays 

in revising USAID country plans, notifying the Congress of the changes, 

and negotiating these changes with host governments and other partners. 

The “crisis modifier” approach anticipates the need for redirecting 

USAID resources toward areas most affected by a disaster of either slow 

or rapid onset, and it ensures the necessary approvals long before the 

crisis occurs. The drafting of the guidance, for inclusion in USAID’s 

Automated Directives System, on the use of this mechanism by field 

missions will begin soon.



In sum, this has been an extraordinarily successful reconstruction 

program with positive implications for USAID’s future role in post-

crisis reconstruction. We thank you for the opportunity to respond to 

the GAO draft report and for the courtesies extended by your staff in 

the conduct of this review.



Sincerely,



John Marshall:



Assistant Administrator Bureau for Management:



Signed by John Marshall:



[End of section]



Appendix VI: GAO Contacts and Staff Acknowledgments:



GAO Contacts:



Albert H. Huntington, III (202) 512-4140

Audrey E. Solis (202) 512-3042:



Acknowledgments:



In addition to those named above, David Artadi, Lyric Clark, John 

DeForge, Francisco Enriquez, E. Jeanette Espinola, Phillip Herr, José 

R. Peña, and George Taylor made key contributions to this report. Janey 

Cohen, Martin de Alteriis, Mark Dowling, Kathryn Hartsburg, and Jim 

Michels also provided technical assistance.



FOOTNOTES



[1] Public Law 106-31, enacted May 21, 1999, also provided recovery 

funds for countries affected by other natural disasters, including $10 

million for Colombia in the aftermath of a January 1999 earthquake. In 

addition, USAID allocated $6.1 million for several Caribbean islands 

affected by Hurricanes Floyd and Lenny in the fall of 1999.



[2] The legislation also provided $1.5 million to USAID’s Office of the 

Inspector General for additional audit coverage.



[3] Costa Rica, El Salvador, Guatemala, and Haiti.



[4] USAID extended part of its urban water and sanitation program due 

to a suspension of five contracts in February 2001 while the USAID 

Inspector General investigated how they were awarded. The contracts 

were eventually withdrawn. USAID is negotiating with the Honduran 

government for a new unit to implement the program. The program is 

currently extended through February 2003; USAID plans to request an 

additional extension.



[5] USAID defines its work force as comprising those individuals with 

whom it has an employer-employee relationship. The Federal Acquisition 

Regulations define a personal services contract as one that makes the 

contractor appear as a government employee by the nature of the 

relationship that is established. USAID is authorized by section 

636(a)(3) of the Foreign Assistance Act of 1961, as amended, to 

contract with individuals for personal services abroad. USAID’s 

personal services contractors may be U.S. citizens, host country 

nationals, or third country nationals.



[6] Statement of Everett L. Mosley, Inspector General, and Timothy E. 

Cox, Regional Inspector General, USAID, before the House Committee on 

Appropriations, Subcommittee on Foreign Operations, March 21, 2001.



[7] Besides the $621 million in disaster assistance, the supplemental 

appropriation also reimbursed the Department of Defense and USAID’s 

Office of Foreign Disaster Assistance and Office of Transition 

Initiatives nearly $300 million for assistance provided immediately 

after the hurricanes, such as water, food, shelter, and transportation.



[8] For Honduras, the initial Stockholm Group of 5, formed in May 1999, 

consisted of Canada, Germany, Spain, Sweden, and the United States. It 

expanded to the Group of 15 with the addition of four international 

financial institutions, the European Union, the United Nations 

Development Program, and four bilateral donors. In Nicaragua, the 

bilateral donor group consisted of Canada, France, Japan, Spain, 

Sweden, and the United States; multilateral institutions also 

participated in donor group meetings.



[9] H. Rept. 106-143.



[10] USAID designated $3.2 million for Honduras and $1 million for 

Nicaragua.



[11] According to USAID, about $10 million in supplemental program 

funds had been spent as of December 31, 1999, but had not been 

disbursed.



[12] The supplemental legislation required USAID to notify the Congress 

on how it planned to use the supplemental funds. If the Congress did 

not contact USAID regarding a particular notification within 15 days, 

the funds were available for expenditure.



[13] USAID conducted emergency relief and initial reconstruction 

activities with funds from its Office of Foreign Disaster Assistance 

and its Office of Transition Initiatives. Missions also redirected 

funds from other sources, such as child survival programs.



[14] Having the right people in the right positions at the right time 

has been a continuing concern for USAID. In 1993, we reported that 

USAID had not taken the steps needed to restructure its work force to 

reflect changing responsibilities and priorities. We recommended that 

the USAID administrator develop and implement a comprehensive work 

force planning process and management capability as a systematic, 

agencywide effort. See our report entitled Foreign Assistance: AID 

Strategic Direction and Continued Management Improvements Needed (GAO/

NSIAD-93-106, June 11, 1993).



[15] USAID is implementing a $170 million earthquake recovery 

assistance program in El Salvador after two earthquakes struck the 

country in January and February 2001.



[16] Based on discussions with congressional staff, we did not conduct 

field work to monitor the use of $10 million provided for earthquake 

reconstruction activities in Colombia or the $6.1 million in funding 

redirected for the Bahamas and several Caribbean islands affected by 

Hurricanes Floyd and Lenny in the fall of 1999. However, we did review 

the quarterly reports and tracked the expenditures of these programs to 

determine if they were on schedule to meet the December 31, 2001, 

deadline.



[17] We met with officials from the Departments of Agriculture, Housing 

and Urban Development, State, and Transportation; the Environmental 

Protection Agency; the Federal Emergency Management Agency; the 

National Oceanic and Atmospheric Administration; and the U.S. 

Geological Survey. We did not review the activities of the Peace Corps, 

the Export-Import Bank, or the Overseas Private Investment Corporation 

because their funding amounts were relatively low, their programs were 

independent of USAID, the pace of their programs appeared adequate 

based on their expenditure rates, and they were experienced in overseas 

operations.



[18] The Corps’ Mobile office is responsible for programs in Latin 

America and part of the Caribbean. The Corps’ activities in the 

Antilles (including the Dominican Republic and Haiti), Puerto Rico, and 

the U.S. Virgin Islands are supervised by its Jacksonville, Florida, 

office. In Mobile, we met with the project director for the Corps’ 

programs in the Dominican Republic and Haiti.



[19] For example, see our report entitled Foreign Assistance: U.S. Rule 

of Law Assistance to Five Latin American Countries (GAO/NSIAD-99-195, 

Aug. 4, 1999).



[20] USAID does not have a mission in Costa Rica. USAID’s regional 

office in Guatemala hired a personal services contractor, posted at the 

U.S. embassy in Costa Rica, to oversee the education program financed 

with disaster recovery funds.



[21] The bureau maintains open agreements, called indefinite quantity 

contracts, with numerous organizations worldwide; USAID missions have 

the option of “buying-in” to these agreements where appropriate.



[22] During the start-up phase a permanent contracts officer was at the 

mission. He left in June 2001 and was not replaced.



[23] We sent our questions to the six agencies that had interagency 

agreements with USAID--the Environmental Protection Agency (EPA), the 

Centers for Disease Control and Prevention (CDC), the Federal Emergency 

Management Agency (FEMA), the National Oceanic and Atmospheric 

Administration (NOAA), the U.S. Department of Agriculture (USDA), and 

the U.S. Geological Survey (USGS). We also sent our questions to three 

agencies that received direct transfers from USAID and participated in 

the June 2001 meetings with the Office of Management and Budget--the 

Department of Housing and Urban Development (HUD), the Department of 

Transportation (DOT), and the State Department’s Bureau for 

International Narcotics and Law Enforcement Affairs (INL). We did not 

send the questions to the Export-Import Bank, the Overseas Private 

Investment Corporation, or the Peace Corps. Their programs were 

independent of USAID and they did not participate in the June 2001 

meetings.



[24] Staff responsible for the INL program in El Salvador reported that 

coordination and interagency relationships did not apply to its office. 

INL’s program, which focused mostly on counternarcotics and law 

enforcement efforts, was managed by the embassies’ political affairs 

and/or narcotics affairs sections.



[25] The U.S. government provides and shares the cost of common 

administrative support at overseas posts through the International 

Cooperative Administrative Support Services program. All agencies 

operating overseas are required to participate.



[26] This amount does not include funds paid for participating agency 

service agreements that USAID entered into with the U.S. Army Corps of 

Engineers, USDA, USGS, NOAA, DOT, and the Peace Corps; these funds 

totaled $29 million and are included in USAID’s overall totals.



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