U.S. Of this amount, USAID was  budgeted $496 million for reconstruction, and other U.S. agencies were  budgeted $85 million for various other activities. USAID Reconstruction Programs in Indonesia and Sri Lanka

USAID’s planned reconstruction efforts in Indonesia and Sri Lanka include  its signature projects, such as road and bridge construction; small-scale  infrastructure projects, such as rebuilding schools and clinics; technical  assistance for good governance; and transition assistance to improve  survivors’ livelihoods and, in Indonesia, to build houses. Initial USAID plans call for completing its nonsignature activities in both  countries by September 2007 and its signature projects in Indonesia and Sri  Lanka by September 2009 and March 2008, respectively. USAID Has Obligated about One-third and Expended a Small Percentage of Reconstruction Funds in Indonesia

As of January 31, 2006, USAID had obligated $111 million (32 percent) and  expended $9 million (3 percent) of the $349 million budgeted for its  reconstruction projects in Indonesia (see table 4). 2. Increasing costs for materials and labor will also likely  affect the road construction project’s overall cost. Although USAID is slightly  ahead of schedule, the length of time required to correctly plan and  design the signature bridge project at Arugam Bay may challenge the  agency’s efforts to complete the bridge by March 2008, the projected  deadline. USAID Intends to Strengthen Indonesian and Sri Lankan Audit Capacities

USAID plans to strengthen the capacities of the BPK, the Indonesian  government’s supreme audit institution. USAID Has Taken Steps to Establish Technical Oversight but Has Not Filled Some Needed Positions

To establish technical oversight for its reconstruction programs in  Indonesia and Sri Lanka, USAID has relocated experienced staff, plans to  hire other staff locally, and has acquired additional expertise through  agreements with other U.S. agencies. USAID also plans to hire an additional  engineer locally when construction in Sri Lanka commences. Although USAID hired an engineer to oversee the signature road  construction project in Indonesia, the engineer was not expected to begin  work until May 2006. In addition, USAID had added two of the three  engineers needed to oversee infrastructure construction activities in Sri  Lanka. These include working in regions with long-standing civil  conflicts, coordinating with host governments and NGOs, and ensuring  adequate management of regular programs. To address this challenge, USAID is implementing peace-building initiatives  in Aceh Province. In addition, USAID has  faced coordination problems with NGOs. Recommendation for Executive Action

On the basis of our initial review of USAID’s design and implementation of  its tsunami reconstruction programs in Indonesia and Sri Lanka, especially  regarding its signature road project in Indonesia and bridge project in Sri  Lanka, we recommend that the Secretary of State, in the department’s  required semiannual report to Congress due in June 2006, provide updated  cost estimates and schedules obtained from USAID. In this report, we  review (1) USAID’s progress in providing longer-term reconstruction  assistance in Indonesia and Sri Lanka, (2) the extent to which the U.S.  Agency for International Development (USAID) has established financial  and technical oversight for its tsunami reconstruction programs in those  countries, and (3) any challenges that USAID faces in implementing the  Indonesian and Sri Lankan programs and any steps the agency has taken to  address these challenges. 2.
Why GAO Did This Study

In December 2004, an earthquake off the coast of Indonesia caused a tsunami that left more than 230,000 people killed or missing and presumed dead and an estimated $10 billion in damage in 12 countries. In May 2005, Congress appropriated $908 million for relief and reconstruction. U.S. emergency relief efforts budgeted at $327 million were nearly completed in December 2005. The U.S. Agency for International Development (USAID) plans to spend $496 million on longer-term reconstruction, focusing on Indonesia and Sri Lanka, with the remaining $85 million allocated to other U.S. agencies. GAO has been mandated to monitor USAID's reconstruction efforts. In this report, GAO describes USAID's (1) progress in Indonesia and Sri Lanka, (2) financial and technical oversight measures, and (3) implementation challenges.

What GAO Found

USAID has begun a number of reconstruction activities in Indonesia and Sri Lanka. As of January 31, 2006, approximately 8 months after Congress appropriated funding, USAID had obligated $111 million (32 percent) and expended $9 million (3 percent) of the $349 million budgeted for reconstruction in Indonesia, and it had obligated all and expended $2 million (2 percent) of the $85 million budgeted for reconstruction in Sri Lanka. However, rising prices of materials and labor in both countries may increase costs for many construction efforts, including USAID's "signature" projects, which are intended to generate greater visibility for U.S. assistance. In addition, revisions to initial assessments of site conditions may challenge USAID's ability to finish its signature project in Indonesia--a 150-mile road in Aceh Province--by September 2009, the estimated completion date. In Sri Lanka, the time needed to complete designs and plans may make it difficult to finish one part of USAID's signature project--a bridge at Arugam Bay--by March 2008, although this project is currently slightly ahead of schedule. USAID plans to complete most of its other reconstruction projects, such as building schools and restoring livelihoods, by September 2007. USAID has established financial and technical oversight for its tsunami recovery programs in Indonesia and Sri Lanka. For financial oversight, USAID plans to arrange a concurrent audit of the signature road project in Indonesia and strengthen Indonesian and Sri Lankan audit capacities. For technical oversight, USAID has begun to add staff to oversee its signature construction projects and has acquired additional construction engineering expertise from another U.S. agency. An additional engineer will start work in Indonesia in May 2006. In Sri Lanka, USAID has added two engineers to its staff and plans to hire an additional construction oversight engineer in April 2006, prior to beginning construction. In implementing its Indonesian and Sri Lankan reconstruction programs, USAID faces several broad challenges. These include working in regions with long-standing conflicts, coordinating with host governments and nongovernmental organizations, and ensuring that non-tsunami-related development assistance activities are not neglected. To address these challenges, USAID has taken actions such as engaging in peace-building initiatives, participating in regularly scheduled coordination meetings, and hiring and reassigning staff to assist with increased workloads.