a

GAO

United States Government Accountability Office

Report to Congressional Committees

April 2006 FOREIGN 

ASSISTANCE

USAID Has Begun 

Tsunami 

Reconstruction in 

Indonesia and Sri 

Lanka, but Key 

Projects May Exceed 

Initial Cost and 

Schedule Estimates

GAO-06-488
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

FOREIGN ASSISTANCE

USAID Has Begun Tsunami 

Reconstruction in Indonesia and Sri 

Lanka, but Key Projects May Exceed 

Initial Cost and Schedule Estimates 

Highlights of GAO-06-488, a report to 

congressional committees 

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. 

Tsunami-Damaged Road (left) and USAID-Funded Maintenance Work in Indonesia 

Source: GAO.

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 Recommends

GAO recommends that the 

Secretary of State, in the 

department’s semiannual report 

due to Congress in June 2006, 

provide updated cost estimates and 

schedules. If the updated 

information differs substantially

from initial projections, the report 

should also include alternative 

project scopes and the need for 

additional sources of funding, if 

necessary. The Department of State 

agreed to fully implement this 

recommendation. 

www.gao.gov/cgi-bin/getrpt?GAO-06-488.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact David Gootnick 

at (202) 512-3149 or gootnickd@gao.gov. 
Page i GAO-06-488 USAID Tsunami Reconstruction

Contents

Letter 1

Results in Brief 2

Background 7

USAID Reconstruction Programs in Indonesia and Sri Lanka Have 

Begun, but Some Project Costs and Schedules May Exceed Initial 

Projections 15

USAID Established Financial and Technical Oversight Measures but 

Has Not Filled Some Needed Technical Oversight Positions 26

Several Challenges Confront Indonesian and Sri Lankan 

Reconstruction Programs 29

Conclusions 33

Recommendation for Executive Action 34

Agency Comments and Our Evaluation 34

Appendixes

Appendix I: Objectives, Scope, and Methodology 36

Appendix II: Debt Relief to Indonesia and Sri Lanka 38

Appendix III: USAID’s Three-Phase Signature Road Project in Aceh 

Province, Indonesia 41

Appendix IV: Comments from the Department of State 42

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

Development 44

GAO Comments 48

Appendix VI: GAO Contact and Staff Acknowledgments 49

Tables Table 1: U.S. Tsunami Emergency Relief Funds Budgeted and 

Expended, as of January 2006 12

Table 2: Funding Budgeted to USAID and Other U.S. Departments 

and Agencies for Reconstruction and Other 

Postemergency Activities, as of January 31, 2006 13

Table 3: USAID Funds Budgeted for Tsunami Reconstruction 

Projects in Indonesia and Sri Lanka 14

Table 4: USAID’s Indonesian Reconstruction Activities and 

Funding, as of January 31, 2006 16

Table 5: USAID’s Sri Lankan Reconstruction Activities and 

Funding, as of January 31, 2006 23
Contents

Page ii GAO-06-488 USAID Tsunami Reconstruction

Table 6: Impacts on the Indonesian and Sri Lankan Governments 

from All Bilateral Debt Rescheduling, Fiscal Years 

2005-2009 40

Table 7: Scope and Status of Indonesian Signature Road Project,

as of December 31, 2005 41

Figures Figure 1: Tsunami-Affected Countries; Numbers of Dead, Missing, 

and Displaced Persons; and Estimated Damage, as of 

November 2005. 9

Figure 2: Entities Implementing International Tsunami Relief and 

Reconstruction Assistance 10

Figure 3: Projected Timeline for USAID Tsunami Reconstruction 

Programs in Indonesia and Sri Lanka 15

Figure 4: Approximate Route of Planned USAID Signature Road 

Project in Aceh Province, Indonesia 18

Figure 5: Planned Locations of USAID’s Sri Lankan Signature 

Project 24

Abbreviations

BPK Indonesian Audit Board

BRR Indonesian Rehabilitation and Reconstruction Agency 

DOD U.S. Department of Defense

IG USAID Office of the Inspector General

NGO nongovernmental organization

OFDA USAID Office of U.S. Foreign Disaster Assistance

OTI USAID Office of Transition Initiatives

TAFREN Sri Lankan Task Force for Rebuilding the Nation

USACE U.S. Army Corps of Engineers

USAID U.S. Agency for International Development

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.
Page 1 GAO-06-488 USAID Tsunami Reconstruction

United States Government Accountability Office

Washington, D.C. 20548

A

April 14, 2006 Letr

The Honorable Mitch McConnell

Chairman

The Honorable Patrick J. Leahy

Ranking Minority Member

Subcommittee on State, Foreign Operations, 

 and Related Programs

Committee on Appropriations

United States Senate

The Honorable Jim Kolbe

Chairman

The Honorable Nita M. Lowey

Ranking Minority Member

Subcommittee on Foreign Operations,

 Export Financing, and Related Programs

Committee on Appropriations

House of Representatives

On December 26, 2004, a severe earthquake in the Indian Ocean off the 

coast of Indonesia created a major tsunami that struck 12 countries in Asia 

and East Africa.1

 As a result of the tsunami, more than 230,000 people were 

either killed or are missing and presumed dead, more than 1.7 million 

people were displaced, and an estimated $10 billion in damage was caused 

to infrastructure, houses, and other property. Following initial emergency 

response efforts by the United States and other donors, individuals, 

national governments, and others around the world pledged more than $13 

billion to assist in rebuilding tsunami-affected areas throughout the region.2

In May 2005, Congress appropriated approximately $908 million in 

assistance for tsunami relief, reconstruction, and related programs. Beyond 

$327 million that was budgeted for survivors’ immediate needs for 

medicine, food, and shelter, approximately $496 million is budgeted for 

longer-term reconstruction and related programs to be administered by the 

1

The 12 countries that sustained significant damage from the tsunami are Bangladesh, India, 

Kenya, Indonesia, Malaysia, the Maldives, Myanmar, Seychelles, Somalia, Sri Lanka, 

Tanzania, and Thailand. Several other countries, including Comoros, Madagascar, and 

Mauritius, sustained minimal damage.

2

Although pledges of $13 billion exceed initial damage estimates of $10 billion, escalating 

costs may increase the amount of funding needed for reconstruction.
Page 2 GAO-06-488 USAID Tsunami Reconstruction

U.S. Agency for International Development (USAID). This amount includes 

$349 million for Indonesia and $85 million for Sri Lanka, the two countries 

with the greatest estimated needs, and $62 million for other countries and 

regional programs. The remaining $85 million was budgeted to other U.S. 

agencies. USAID began most of its activities by September 2005, including 

“signature” projects intended to generate greater visibility for overall U.S. 

assistance. 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.

We were directed to monitor the delivery of U.S. assistance to the 

tsunami-affected countries.3

 For this report, we examined (1) USAID’s 

progress in providing longer-term reconstruction assistance in Indonesia 

and Sri Lanka; (2) the extent to which USAID has established financial and 

technical oversight; and (3) any challenges USAID faces and any steps the 

agency has taken to address these challenges.

To address these matters, we reviewed USAID’s expenditures through 

January 2006, and analyzed USAID’s program objectives and oversight. We 

also traveled twice to Indonesia and once to Sri Lanka between July and 

December 2005. On our trips, we visited numerous project sites in the 

tsunami-affected areas, meeting with survivors and monitoring the 

progress of USAID’s portfolio of projects. We determined that USAID’s 

funding and expenditure data were sufficiently reliable for our analysis. In 

addition, we considered previous GAO work on U.S. disaster assistance 

efforts. We conducted our work from May 2005 through March 2006 in 

accordance with generally accepted government auditing standards. (For 

details of our scope and methodology, see app. I.)

Results in Brief USAID has recently initiated reconstruction programs in Indonesia and Sri 

Lanka, but, primarily because of rising costs and scarcity of materials and 

labor, it appears that some projects may exceed USAID’s initial cost and 

schedule estimates.

3

H. Rept. 109-16, p. 49.
Page 3 GAO-06-488 USAID Tsunami Reconstruction

• USAID has started many of its planned reconstruction activities in 

Indonesia.4

 As of January 31, 2006, the agency had obligated $111 million 

(32 percent) and expended $9 million (3 percent) of the $349 million 

budgeted for reconstruction.5

 USAID has awarded contracts for 

preliminary work on a 150-mile signature road construction project in 

Aceh Province, which, at a projected cost of $245 million, represents 

roughly two-thirds of U.S. reconstruction funding in Indonesia. 

However, completing the road within projected cost estimates and time 

frames may be difficult for the following reasons:

• USAID’s initial cost estimate was based on building the new road 

over large portions of undamaged sections of the existing road and 

over the temporary road built by the Indonesian army. Since the 

initial estimate, however, plans for routing the road have changed. 

According to the U.S. Army Corps of Engineers (USACE), large 

segments of the road are now planned along new undeveloped routes 

that require more extensive construction activities than originally 

anticipated and, as a result, higher costs. Because of uncertainty 

about site conditions, USACE included a 20 percent contingency in 

its initial cost estimate. USAID expects to have updated cost 

estimates in June 2006.

• Demand for, and costs of, construction materials and labor have 

increased substantially. For example, according to USAID officials, 

the price of fuel oil in Indonesia had risen by more than 250 percent 

between February and December 2005. In addition, as regional 

reconstruction continues over the next several years, construction 

spending is expected to increase fortyfold from pretsunami levels, 

rising from $50 million to $2 billion annually, and 200,000 additional 

workers will be needed to meet construction demands.

4

The United States has a signed agreement with the government of Indonesia for a total of 

approximately $400 million for all emergency relief, recovery, and reconstruction assistance 

activities.

5

Generally, an obligation is a definite commitment that creates a legal liability of the U.S. 

government for the payment of goods and services ordered or received (GAO-05-734SP, p. 

70). Consistent with 31 U.S.C. 1501 defining when an agency can record an obligation, 

USAID policy is to treat as an obligation the bilateral agreements it makes with other 

countries to deliver assistance. However, for purposes of this report, obligations are defined 

as amounts of orders placed, contracts awarded, services received, and similar transactions 

during a given period that will require payments during the same or future period. USAID 

labels these actions subobligations. Expenditures are defined as the issuance of checks, 

disbursement of cash, or electronic transfer of funds to liquidate a federal obligation.
Page 4 GAO-06-488 USAID Tsunami Reconstruction

• The Indonesian government faces difficulties in acquiring the land 

and establishing the right-of-way needed for the road.

USAID has also initiated several other reconstruction and related projects 

in Indonesia, including

• constructing schools, clinics, and water distribution and port 

facilities;

• providing technical assistance for good governance and supporting 

the Indonesian government’s coordination and audit organizations; 

and

• providing housing and small loans.

However, some of these projects also face increasing costs and potential 

delays. For example, soon after agreeing to build 1,000 houses for $4,500 

per house, a USAID implementing partner informed the agency that 

escalating prices had increased the unit cost to $7,000. According to USAID 

officials, the nongovernmental organization implementing the program will 

reduce its budget for other USAID-funded projects and will attempt to 

solicit private donations to meet its commitment.

USAID has initiated many of the reconstruction activities planned for Sri 

Lanka.6

 As of January 31, 2006, the agency had obligated all $85 million (100 

percent) and expended $2 million (2 percent) of the amount budgeted for 

reconstruction. USAID has begun its signature project, which comprises

• building infrastructure, including a bridge and water treatment 

facility, and repairing damaged fishing facilities;

• providing construction and tourism-related training; and

• constructing new and repairing tsunami-damaged vocational 

education facilities.

6

The United States has a signed agreement with the government of Sri Lanka for a total of 

approximately $134 million for all emergency relief, recovery, and reconstruction assistance 

activities.
Page 5 GAO-06-488 USAID Tsunami Reconstruction

However, as in Indonesia, several factors may limit USAID’s ability to 

complete its signature project activities in Sri Lanka within projected costs 

and schedules.

• Limited availability and rising costs of materials and labor may increase 

the costs and time required to complete some projects. For example, 

one of USAID’s implementing partners reported that, during 2005, the 

cost of brick had doubled and that similar increases had occurred for 

cement and lumber. USAID has acknowledged that, to address increases 

in costs or difficulty in obtaining materials or expertise, the USAID 

mission in Sri Lanka is considering moving funds from other tsunami 

reconstruction activities to complete some construction projects.

• Although currently projected by USAID to be completed in January 

2008, an extended design and planning phase for the signature bridge 

construction project may make it difficult for USAID to finish the 

project by March 2008, the initial projected completion date. 

USAID has begun other projects in Sri Lanka, most of which it expects to 

complete by September 2007, including

• construction of playgrounds and rehabilitation of community markets,

• promoting transparent local governance, and

• providing loans to small businesses and vocational training. 

Although USAID has established financial and technical oversight 

measures for its tsunami reconstruction programs in Indonesia and Sri 

Lanka and hired some staff, it has not staffed several positions that it 

considers critical to essential technical oversight. For financial oversight, 

USAID has implemented its standard financial controls, such as conducting 

preaward surveys of prospective award recipients and establishing a 

schedule of independent financial audits. USAID also plans to establish 

measures that augment these controls, including contracting for an 

additional concurrent audit of the Indonesia signature road project by the 

Defense Contract Audit Agency. USAID’s Office of the Inspector General 

(IG) is currently conducting audits to address concerns about potential 

corruption and misuse of funds and plans to conduct additional audits. For 

technical oversight, USAID added staff in both Indonesia and Sri Lanka 

with expertise to oversee large-scale projects such as roads and bridges 

and it entered into successive interagency agreements with USACE for 
Page 6 GAO-06-488 USAID Tsunami Reconstruction

technical services.7 As of March 2006, USAID transferred three persons 

with engineering and management experience and hired an engineer to 

oversee the signature road construction project in Indonesia, but the 

engineer is not expected to begin working until May 2006. In Sri Lanka, 

USAID added two engineers to its staff in late 2005 to oversee 

infrastructure construction activities, but as of March 2006, one 

engineering-related position has not been filled.

USAID faces three broad challenges in implementing its tsunami recovery 

program in Indonesia and Sri Lanka, but it has taken some steps to address 

them.

• Working in regions with long-standing civil conflicts. Civil conflict 

in both Indonesia and Sri Lanka could affect USAID’s ability to complete 

reconstruction projects within projected time frames. Conflict has 

subsided in Indonesia following the August 2005 signing of a peace 

accord between the Indonesian government and an Indonesian 

separatist group, but in Sri Lanka, USAID’s ability to provide assistance 

in some regions has been limited by recent increases in violent 

incidents. To strengthen the peace process in both countries, USAID 

designed and is implementing some projects, such as building 

infrastructure in Indonesian communities, to facilitate former 

combatants’ participation.

• Coordinating with host governments and nongovernmental 

organizations (NGO). USAID has encountered difficulties in 

coordinating its reconstruction efforts with the governments of 

Indonesia and Sri Lanka and with NGOs operating in those countries. 

Although both governments established entities to coordinate donor 

support following the tsunami, neither entity has been able to fully 

ensure that projects do not overlap. In addition, the Sri Lankan 

government has inconsistently enforced a ban on rebuilding in coastal 

areas since the tsunami, making it difficult for USAID to proceed with 

some nonconstruction projects. Also, USAID has encountered 

challenges in coordinating with NGOs operating in the two countries, 

which in some instances has led to duplication of efforts. To avert 

7

Services provided by USACE in Indonesia and Sri Lanka included identifying large-scale 

infrastructure projects; developing scopes of work, cost estimates, and initial environmental 

reviews; and recommending acquisition strategies for signature infrastructure projects. In 

Indonesia, two USACE engineers are continuing to assist USAID in project management and 

construction oversight. 
Page 7 GAO-06-488 USAID Tsunami Reconstruction

potential future overlap with NGO programs in Sri Lanka, USAID has 

participated in weekly meetings with the Sri Lankan government 

coordinating entity and NGOs, among others, to designate responsibility 

for different geographic areas.

• Ensuring that the tsunami focus does not hamper nontsunami 

development assistance. Recognizing that the urgency to respond to 

the tsunami could hamper the management of some ongoing 

development projects in Indonesia and Sri Lanka, USAID has taken 

several steps. In Indonesia, three key positions were created to provide 

needed oversight in Aceh, and USAID plans to add positions for 

oversight of both regular and tsunami project activities. In Sri Lanka, 

after temporarily suspending some non-tsunami-related community 

development projects, USAID plans to add an additional specialist 

during fiscal year 2006 to ensure coverage of tsunami assistance 

projects.

Based on our review of USAID’s planning and design efforts for its 

reconstruction program, especially with regard to the signature road 

project in Indonesia and bridge project in Sri Lanka, we are recommending 

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. If the updated information differs 

substantially from initial projections, the report should also include 

alternative cost estimates, schedules, project scopes and, if necessary, the 

need for additional funding sources. In commenting on a draft of this 

report, the Department of State agreed to fully implement our 

recommendation and USAID stated that the report’s findings accurately 

describe the tsunami program situation and the potential broad challenges 

for achieving its reconstruction goals. USAID also provided information on 

additional steps the agency intends to take to mitigate the potential for 

increased costs and schedule delays, as well as an explanation of how it 

obligates funds. 

Background Although the tsunami’s effects were concentrated in the countries closest 

to the earthquake’s epicenter in the Indian Ocean, about 100 miles off the 

coast of Sumatra, it also destroyed communities along some coastlines 

thousands of miles away. A year later, in December 2005, more than 40,000 

persons were still listed as missing and tens of thousands remained in 

temporary housing. Figure 1 shows the most-affected countries, the 
Page 8 GAO-06-488 USAID Tsunami Reconstruction

numbers of people dead, missing, and displaced, and the estimated damage 

as a result of the tsunami.
Page 9 GAO-06-488 USAID Tsunami Reconstruction

Figure 1: Tsunami-Affected Countries; Numbers of Dead, Missing, and Displaced Persons; and Estimated Damage, as of 

November 2005

1,000 kilometers

600 miles parallel scale 

at 0 north 0 east

600 miles parallel scale 

at 30 north 0 east

4,000 mi 2,000 mi 3,000 mi 1,000 mi

epicenter

India

Sri

Lanka

Indonesia

Thailand

Myanmar

Indian Ocean

Maldives

Seychelles

Sources: MapArt (map); UN Office of the Special Envoy for Tsunami Recovery (affected countries and data).

Indonesia Sri Lanka

Dead/missing persons

Displaced persons

Estimated damage 

169,000

572,126

$4.5 billion

35,322

516,150

$1.5 billion

27,130

650,000+

$4 billion

Other affected

countries

231,452

1,738,276+

$10 billion

Total

Bangladesh

Malaysia

Somalia

Tanzania

Kenya

30°E 90°E 105°E 120°E

15°S

30°S

30°N

45°E 60°E 75°E

0°N

15°N
Page 10 GAO-06-488 USAID Tsunami Reconstruction

International Funding and 

Implementing Entities for 

Tsunami Relief and 

Reconstruction

Responding to the magnitude of the disaster, the international donor 

community, including the United States, pledged approximately $13.6 

billion to assist with tsunami relief and reconstruction efforts in all of the 

affected countries. National governments and the European Union pledged 

$6.2 billion of this amount (45 percent), private individuals and companies 

pledged $5.1 billion (38 percent), and international financial institutions 

pledged $2.3 billion (17 percent). These funds are being provided to a wide 

range of entities involved in implementing relief and reconstruction efforts 

(see fig. 2). 

Figure 2: Entities Implementing International Tsunami Relief and Reconstruction 

Assistance 

USAID and Military 

Agencies’ Emergency Relief 

Efforts 

USAID and the U.S. Department of Defense (DOD) and its component 

services provided immediate assistance to tsunami survivors and to the 

governments of many of the affected countries, largely completing these

Source: UN Office of the Special Envoy for Tsunami Recovery.

$5.5

$1.4

Nongovernmental organizations and the 

International Federation of Red Cross

and Red Crescent Societies (41%)

United Nations (10%)

Governments of affected 

countries (17%)

$4.4

$2.3

Dollars in billions

Bilateral donors through affected 

governments, contractors, and 

nongovernmental organizations (32%)
Page 11 GAO-06-488 USAID Tsunami Reconstruction

efforts by the end of 2005.8 USAID’s Office of U.S. Foreign Disaster 

Assistance (OFDA), Office of Transition Initiatives (OTI), and other USAID 

offices assisted survivors by providing food, water, temporary shelter, and 

other critical needs. Soon afterward, USAID initiated economic 

reactivation projects, such as paying people to remove debris in many 

affected areas. USAID’s emergency relief budget totaled approximately 

$101 million, including $32 million in Indonesia and $47 million in Sri 

Lanka. 

In addition, several DOD component services, including the U.S. Air Force 

and Navy, provided important emergency relief. For example, the Air Force 

rescued survivors and airlifted supplies, and a Navy hospital ship provided 

medical support. The supplemental tsunami appropriations law provided 

up to $226 million to reimburse DOD for its emergency relief activities. As 

of January 2006, DOD expended approximately $125 million (55 percent), 

including nearly $79 million for airlift and other flying costs and slightly 

more than $7 million for health- and medical-related services. Of the 

remaining $101 million, DOD had not completed a final reconciliation of 

$47 million, $40 million had been reprogrammed to help cover DOD’s costs 

in other disaster assistance efforts, and $14 million had lapsed. Table 1 

shows U.S. tsunami emergency relief funds budgeted and expended.

8

As of January 31, 2006, USAID had not completed a small number of emergency relief 

projects, such as cash-for-work activities to remove debris and rehabilitate small 

infrastructure. However, according to a USAID official, all emergency relief projects will be 

completed and funds expended by the end of 2006. 
Page 12 GAO-06-488 USAID Tsunami Reconstruction

Table 1: U.S. Tsunami Emergency Relief Funds Budgeted and Expended, as of January 2006

Sources: DOD and USAID.

a

DOD data are through January 26, 2006, and USAID data are through January 2006.

U.S. Supplemental Funding 

Budgeted for 

Reconstruction in 

Tsunami-Affected Countries

Of the $908 million appropriated for tsunami relief and reconstruction 

assistance, $581 million, or 64 percent, was budgeted for reconstruction 

and other postemergency relief activities. Of this amount, USAID was 

budgeted $496 million for reconstruction, and other U.S. agencies were 

budgeted $85 million for various other activities. (See table 2.)

Dollars in millions

Purpose

Funds 

budgeted

Funds expended

(percentage of 

funds budgeted) Comments

DOD emergency 

relief effortsa

$226 $125 (55) Of the unexpended $101 million, 

• $47 million was obligated, but because some cost data are not yet 

available, DOD has not determined the amount expended;

• $40 million was reprogrammed for disaster assistance efforts in 

Guatemala and Pakistan; and

• $14 million lapsed.

USAID emergency 

relief effortsa

 101 70 (69) Of the unexpended $31 million, the entire amount was obligated but not 

expended because some projects were intended to purposely transition 

into the reconstruction phase.

Total $327 $195 (60)
Page 13 GAO-06-488 USAID Tsunami Reconstruction

Table 2: Funding Budgeted to USAID and Other U.S. Departments and Agencies for 

Reconstruction and Other Postemergency Activities, as of January 31, 2006

Sources: USAID and P.L. 109-13, May 11, 2005, Title IV, Chap. 1-5.

a

Funds were initially budgeted to USAID; Treasury is involved in oversight.

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. In addition, 

USAID, through a transfer of funds to the Department of the Treasury, is 

funding debt relief to the governments of Indonesia and Sri Lanka; in 

exchange for deferral of a portion of their debt, both governments agreed 

to use the resources freed by debt deferral for relief and 

reconstruction-related programs (see app. II for a more detailed 

Dollars in millions

Department or agency

Funding 

budgeted

USAID reconstruction

Indonesia $349

Sri Lanka 85

Other countries, regional programs, operating costs, and other expenses 62

Subtotal $496

Other U.S. departments and agencies

Centers for Disease Control and Prevention:

 Avian flu prevention and control 15

U.S. Departments of Commerce and the Interior: 

 Regional early warning systems and disaster preparation 25

U.S. Department of the Treasury:a

 Debt relief to the government of Indonesia

 Debt relief to the government of Sri Lanka

20

3

State Department:

 Reconstruction efforts in the Maldives

 Assisting U.S. families in searching for persons, and monitoring

 human trafficking

11

5

U.S. Trade and Development Agency

 Technical assistance and project planning for reconstruction 

6

Subtotal $85

Total $581
Page 14 GAO-06-488 USAID Tsunami Reconstruction

description of this aspect of the program). Table 3 shows the funds 

budgeted for ongoing and planned U.S. reconstruction assistance in 

Indonesia and Sri Lanka.

Table 3: USAID Funds Budgeted for Tsunami Reconstruction Projects in Indonesia 

and Sri Lanka

Source: USAID.

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. Section 4102 of the 

supplemental appropriations act requires that, beginning in December 

2005, the Secretary of State report to Congress every 6 months on 

tsunami-related progress, expenditures, and schedules. The report due in 

December 2005 was provided to Congress on March 22, 2006. Figure 3 

shows USAID’s projected timeline for completing its tsunami 

reconstruction programs in Indonesia and Sri Lanka.

Dollars in millions

Project description Indonesia Sri Lanka

Signature infrastructure $245 $35

Transition assistance 59 17

Small-scale infrastructure 29 15

Technical assistance for good governance 10 8

Other projects and operating expenses 6 10

Total $349 $85
Page 15 GAO-06-488 USAID Tsunami Reconstruction

Figure 3: Projected Timeline for USAID Tsunami Reconstruction Programs in Indonesia and Sri Lanka

USAID Reconstruction 

Programs in Indonesia 

and Sri Lanka Have 

Begun, but Some 

Project Costs and 

Schedules May Exceed 

Initial Projections

USAID has obligated some, and expended small percentages, of its 

reconstruction funding in both countries and has initiated some of its 

planned activities. However, USAID may have difficulty completing its 

reconstruction projects—particularly its large-scale signature 

projects—within initial cost estimates and schedules because of, among 

other factors, increased demand and higher costs for construction 

materials and labor in both Indonesia and Sri Lanka. 

USAID Has Begun 

Reconstruction Efforts in 

Indonesia, but Several 

Factors May Increase Costs 

and Delay Schedules

In Indonesia, USAID has begun many of the reconstruction projects that it 

plans to complete by September 2007. USAID has obligated about 

one-third, and expended a small percentage, of the funding budgeted for 

reconstruction in that country. In addition, USAID has begun to design, and 

performed preliminary site work on, a 3-mile segment of its large-scale 

signature infrastructure project, a 150-mile paved road; however, because 

Source: USAID.

September 2009

Complete signature project

Indonesia

Sri Lanka

Emergency relief Longer-term reconstruction

November 2005

Award contract

for design and 

supervision of

signature project

September 2006

Award contract for

construction of

signature project

September 2005

Award contract for

signature project

June 2006

Begin construction

of signature project 

March 2008

Complete signature project

2005 2006 2007 2008 2009

August 2005

Award contract

for priority road

segment

Dec. 26, 2004

Tsunami 

struck

September 2007

Complete nonsignature

projects

May 11, 2005

Enact emergency 

supplemental legislation 

December 2005

Complete nearly all

emergency relief projects

February/

March 

2005

Assess

conditions

and costs for

signature

project

February/

March 

2005

Assess

conditions

and costs for

signature

project
Page 16 GAO-06-488 USAID Tsunami Reconstruction

of a variety of factors, the overall road construction project may overrun 

cost and time estimates. Similarly, USAID is currently planning and 

designing its small-scale infrastructure projects and has begun its transition 

assistance projects, both of which may also exceed cost and schedule 

projections.

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).9

 These activities include 

the signature road construction, small-scale infrastructure construction, 

technical assistance for good governance, and transition assistance.

Table 4: USAID’s Indonesian Reconstruction Activities and Funding, as of January 31, 2006

Source: GAO analysis of USAID data.

a

Generally, an obligation is a definite commitment that creates a legal liability of the U.S. government 

for the payment of goods and services ordered or received (GAO-05-734SP, p. 70). Consistent with 31 

U.S.C. 1501 defining when an agency can record an obligation, USAID policy is to treat as an 

obligation the bilateral agreements it makes with other countries to deliver assistance. However, for 

purposes of this report, obligations are defined as amounts of orders placed, contracts awarded, 

services received, and similar transactions during a given period that will require payments during the 

same or future period. USAID labels these actions subobligations.

b

Expenditures are defined as the issuance of checks, disbursement of cash, or electronic transfer of 

funds to liquidate a federal obligation.

c

USAID plans to award the signature road construction contract by September 2006 and expects 

construction to take 3 years. As is normal practice in administering construction contracts, funds will be 

expended incrementally over this period as segments of work are completed.

9

USAID funding includes $10 million to the World Bank’s Multidonor Trust Fund, which 

supports the rehabilitation and reconstruction of Aceh Province, Indonesia.

Dollars in millions

Project description

Funds 

budgeted

Funds obligated 

(percentage of funds 

budgeted)a

Funds expended 

(percentage of funds 

budgeted)b Projected completion date

Signature road construction $245 $35 (14) $1c (0) September 2009

Transition assistance 59 49 (83) 6 (10) September 2007

Small-scale infrastructure construction 29 15 (52) 0 (0) September 2007

Technical assistance for good 

governance

10 10 (100) 1 (10) September 2007

Other projects and operating 

expenses

6 2 (33) 1 (17) September 2007

Total $349 $111 (32) $9 (3)
Page 17 GAO-06-488 USAID Tsunami Reconstruction

USAID Has Started Indonesian 

Signature Road Project but May 

Encounter Cost and Time 

Overruns 

USAID awarded an initial contract and began work on a segment of its 

signature road construction project in Indonesia in August 2005, but, owing 

to various factors, the project may overrun initial cost estimates and 

schedules. The proposed project, budgeted at $245 million, consists of 

building a 150-mile paved two-lane road and more than 100 bridges and 

culverts along the western coast of Aceh Province on the island of Sumatra, 

from the provincial capital of Banda Aceh to the city of Meulaboh. The 

tsunami’s impact destroyed or badly damaged much of the original road, a 

vital transportation route for the region. USAID agreed to reconstruct the 

road to support the Indonesian government’s overall reconstruction 

strategy, with the goal of helping to restore the economic strength of the 

area and promoting the redevelopment of the affected communities. 

According to an Indonesian government report, the road is key to 

revitalizing the economy of Aceh Province and to successfully initiating 

other reconstruction efforts. Figure 4 shows the approximate route of the 

planned road and photos of damage caused by the tsunami. 
Page 18 GAO-06-488 USAID Tsunami Reconstruction

Figure 4: Approximate Route of Planned USAID Signature Road Project in Aceh Province, Indonesia

USAID plans to design and construct the signature road in three distinct 

phases, with separate contracts for each phase. USAID also entered into 

Maylasia

Indone s i a

0 500 miles

Medan

Jakarta

Singapore

Sumatra Indian

Ocean

0 10 miles 20 miles

Sources: GAO (photos); USAID (data); MapArt (inset map); and U.S. Army Corps of Engineers (Sumatra, Indonesia, map).

USAID signature road 

project in Indonesia

Construct a 150-mile paved road

Construct 100-plus bridges and culverts

Budgeted cost: $245 million

Estimated completion date: September 2009

Banda Aceh

Lamno Sumatra,

Indonesia

Meulaboh

50-mile planned road segment 

where USAID-funded 

maintenance work is ongoing

100-mile planned road 

segment

Ongoing USAID-funded maintenance work on road near Banda Aceh.

Tsunami-damaged coastal road near Banda Aceh (above photos).
Page 19 GAO-06-488 USAID Tsunami Reconstruction

interagency agreements with USACE for technical support. In early 2005, 

USACE and USAID conducted a preliminary assessment of site conditions 

and prepared the cost estimate that USAID submitted to Congress. The 

three phases for the signature road project are as follows (see app. III for 

more details):

1. Maintain a rehabilitated 50-mile temporary segment and 

construct a short segment. In August 2005, an Indonesian firm began 

maintaining a temporary 50-mile road segment, from Banda Aceh to 

Lamno, and designing and constructing a new 3-mile segment. This 

maintenance work is intended to ensure that the temporary segment, 

recently rehabilitated by the Indonesian army, remains passable until 

permanent construction is completed.

2. Design the signature road and supervise its construction. The 

second contract, for designing most of the 150-mile road and 

supervising construction work, was awarded to a U.S. firm in 

November 2005. The firm will supervise construction of the 3-mile 

segment, develop plans and specifications for the remaining 147 miles, 

and assist USAID in awarding and supervising construction of the 

signature road.

3. Construct the signature road. USAID plans to award a third contract 

by September 2006 to construct the 147-mile segment of the signature 

road.

However, several factors—limited site information, rising materials and 

labor costs, and land acquisition issues—may increase the signature road 

project’s total costs and the difficulties of completing it within the intended 

time frame. 

• Limited site information. A joint USAID-USACE team initially 

assessed conditions and developed a cost estimate for building the 

road.10 The estimate was based on using undamaged sections of the 

existing road and large segments of the temporary road placed by the 

Indonesian Army. A 20 percent contingency was included in the cost 

estimate because much of the road’s planned route was inaccessible, 

resulting in the team approximating site conditions and developing 

10According to a USACE official, about one-third of the road was surveyed on the ground 

and the remainder was surveyed from the air by helicopter.
Page 20 GAO-06-488 USAID Tsunami Reconstruction

plans based on their assumptions.11 However, actual costs may still 

exceed the estimate because plans for routing the road have changed. 

According to USACE, current plans show that large segments of the 

road are now planned to be placed along new undeveloped routes—not 

along existing routes as initially planned. This change is expected to 

result in the need for more earthwork and related construction activities 

than originally anticipated. 

• Rising costs. Increasing costs for materials and labor will also likely 

affect the road construction project’s overall cost. Demand for 

construction labor and materials has risen dramatically in Aceh 

Province and, according to USAID officials, will likely continue to rise. 

For example, a USAID official reported that the price of fuel oil used for 

construction equipment had risen more than 250 percent, from $0.17 per 

liter in February 2005 to $0.60 per liter in December 2005. According to 

the United Nations Development Program, posttsunami construction 

spending in and around Aceh is expected to increase fortyfold from 

pretsunami levels, from $50 million to $2 billion per year, and 200,000 

additional workers will be needed to meet construction demands.12

Because the demand for skilled workers is greater than the number 

available, labor costs for reconstruction projects requiring skilled 

workers may rise.

• Land acquisition. Awarding the signature road construction contract 

by September 2006 may be difficult because of uncertainties regarding 

the road alignment and acquiring the needed right-of-way. The alignment 

of the new road will differ from the former road because, in some 

locations, the former roadbed is either submerged or was rendered 

otherwise inaccessible by the tsunami’s impact. According to a USAID 

official, the design contractor intends to propose a final road alignment 

to Indonesian authorities by mid-May 2006. Once the alignment is 

approved, the Indonesian government must coordinate with multiple 

jurisdictions to obtain land. USAID helped establish a technical steering 

11USACE’s cost estimate is consistent with Construction Industry Institute best practices, 

which suggest that actual costs for projects for which limited information on conditions is 

available, such as the Aceh road construction project, can be expected to range from 20 

percent lower to 30 percent higher than estimated costs. See Construction Industry 

Institute, Improving Early Estimates: Best Practices Guide (Austin, Texas, September 

1998.)

12Peter Reina and Tom Nicholson, “Survivors Still Dealing with Poor Conditions,” 

Engineering News-Record (Jan. 2, 2006), 12-13. 
Page 21 GAO-06-488 USAID Tsunami Reconstruction

committee with Indonesian government entities to facilitate land 

acquisition issues. However, progress depends on the Indonesian 

government’s timeliness in acquiring the land and establishing 

right-of-way.

USAID expects to have more comprehensive cost estimates and schedule 

projections for the signature road project in June 2006. 

Other USAID Reconstruction 

Activities in Indonesia May Also 

Exceed Cost and Schedule 

Projections

USAID has initiated other projects in Indonesia, some of which may exceed 

initial cost and time estimates. These projects encompass small-scale 

infrastructure, technical assistance for good governance, and transitional 

assistance aimed at restoring livelihoods. 

• Small-scale infrastructure. USAID has begun reconstructing schools, 

clinics, water distribution systems, and small port facilities. Other 

projects will assist communities in preparing solid waste management 

plans, helping rebuild business districts, and constructing markets. Two 

planned projects include helping to build a teacher-training facility in 

Banda Aceh and rehabilitate the fishing industry by constructing port 

facilities, fishing vessels, and ice-making facilities. According to the 

USAID official responsible for overseeing the project, the 

teacher-training facility project is unlikely to begin as initially scheduled 

because of the time it has taken to plan and assess site conditions. He 

added that, even if the project does begin on time, the schedule is 

unlikely to be achieved, and because of rapidly escalating costs for 

materials and labor, the project is at risk of exceeding its budget.

• Technical assistance for good governance. USAID technical 

assistance and good governance projects in Indonesia are aimed at 

enhancing reconstruction efforts by facilitating the peace process. The 

projects include paying consultants to work with the Indonesian 

government’s Rehabilitation and Reconstruction Agency (BRR), the 

Audit Board of the Republic of Indonesia (BPK), the supreme audit 

institution, and local communities.

• Transition assistance. USAID has begun its transition assistance, 

including rebuilding shelters and helping restore livelihoods through 

microenterprise support. However, USAID may face difficulties meeting 

its shelter construction cost and schedule estimates. For example, 2 

months after agreeing to build 1,000 houses for $4,500 each, the NGO 

implementing the project informed USAID that, because of escalating 

prices for fuel, building materials, and labor, the unit cost had risen 
Page 22 GAO-06-488 USAID Tsunami Reconstruction

more than 60 percent, to $7,000. The NGO has tentatively agreed to 

reduce its budget for other USAID-funded activities, such as upgrading 

an ice-making facility to assist the fishing industry, and will attempt to 

solicit private donations to meet its housing commitment. 

USAID’s Sri Lankan Construction 

Activities May Face Cost and 

Time Overruns, but Other 

Programs Are on Schedule

USAID has begun many of its longer term reconstruction efforts in Sri 

Lanka. By the end of 2005, the agency had obligated 100 percent of its funds 

and expended approximately 2 percent of reconstruction funding. USAID 

has started its signature project, which includes building a bridge and other 

infrastructure, addressing coastal management issues, and constructing 

vocational education facilities. However, primarily because of shortages of 

labor and materials, the project faces potential cost and schedule overruns 

even though it is currently slightly ahead of schedule. USAID has also 

begun its small-scale infrastructure, governance, and transition assistance 

projects. 

USAID Has Obligated All and 

Expended a Small Percentage of 

Reconstruction Funds in Sri 

Lanka

As of January 31, 2006, USAID had obligated all $85 million (100 percent) 

and expended about $2 million (2 percent) of the funds budgeted for 

longer-term reconstruction efforts in Sri Lanka (see table 5).
Page 23 GAO-06-488 USAID Tsunami Reconstruction

Table 5: USAID’s Sri Lankan Reconstruction Activities and Funding, as of January 31, 2006

Source: GAO analysis of USAID data.

a

Generally, an obligation is a definite commitment that creates a legal liability of the U.S. government 

for the payment of goods and services ordered or received (GAO-05-734SP, p. 70). Consistent with 31 

U.S.C. 1501 defining when an agency can record an obligation, USAID policy is to treat as an 

obligation the bilateral agreements it makes with other countries to deliver assistance. However, for 

purposes of this report, obligations are defined as amounts of orders placed, contracts awarded, 

services received, and similar transactions during a given period that will require payments during the 

same or future period. USAID labels these actions subobligations.

b

Expenditures are defined as the issuance of checks, disbursement of cash, or electronic transfer of 

funds to liquidate a federal obligation.

USAID Has Started Sri Lankan 

Signature Project but Faces 

Rising Costs and Labor 

Shortages

USAID’s signature project in Sri Lanka began in September 2005, when the 

agency signed a contract with a major U.S. design and construction 

management firm. All components of the project—particularly the 

construction of a bridge at Arugam Bay in eastern Sri Lanka, where tourism 

is a vital component of the local economy—are consistent with the 

government of Sri Lanka’s strategic reconstruction plan.13 The signature 

project has three components (see fig. 5 for the planned locations). 

1. Construction of a bridge and other infrastructure. These 

activities, largely focused on the Arugam Bay area of eastern Sri Lanka, 

include rebuilding a bridge spanning the bay and constructing a water 

treatment facility for nearby towns. Three ports in southern Sri Lanka 

will also be rehabilitated.

Dollars in millions

Project description

Funds 

budgeted

Funds obligated 

(percentage of funds 

budgeted)a

Funds expended 

(percentage of funds 

budgeted)b

Projected completion 

date

Signature project $35 $35 (100) $1 (3) March 2008

Small-scale infrastructure 15 15 (100) 1 (7) September 2007

Technical assistance for good 

governance

8 8 (100) 0 (0) September 2007

Transition assistance 17 17 (100) 0 (0) September 2007

Other projects and operating expenses 10 10 (100) 0 (0) September 2007

Total $85 $85 (100) $2 (2)

13USAID’s non-tsunami-related development efforts in the Arugam Bay area also include 

strengthening the tourism sector.
Page 24 GAO-06-488 USAID Tsunami Reconstruction

2. Provision of coastal management training. A management 

organization will provide training in construction and tourism-related 

skills that USAID considers essential to rebuilding and reactivating the 

economy in the Arugam Bay area. As of December 31, 2005, the 

contractor had completed some assessments and plans, but 

construction work had not yet begun.

3. Construction of vocational education facilities. This component 

of the project includes constructing two schools and reconstructing 

approximately eight others.

Figure 5: Planned Locations of USAID’s Sri Lankan Signature Project

As in Indonesia, several factors may hamper the completion of USAID’s 

signature project in Sri Lanka. 

0 50 miles

Sources: USAID and MapArt (map).

Rehabilitate three 

commercial ports

and fishing facilities

Arugam Bay area: 

construct a signature 

bridge and water and 

wastewater systems

Southern and southeastern 

coastal areas: construct or 

reconstruct approximately 10 

vocational schools

India

Sri Lanka

Colombo
Page 25 GAO-06-488 USAID Tsunami Reconstruction

• Limited availability and rising costs of materials and skilled 

labor. During our visit to Sri Lanka in July 2005, we learned that, as in 

Indonesia, the increase in construction had led to limited availability of 

materials and labor and resulted in higher costs. For example, one 

USAID report noted that the cost of a brick had doubled and similar 

increases had occurred for cement and lumber. USAID included $2.2 

million in the project budget to cover possible materials and labor 

increases, but USAID officials acknowledged this extra funding may be 

insufficient to cover costs. 

• Lengthy planning and design of Arugam Bay bridge and other 

infrastructure. Although USAID signed the contract for the planning 

and design of the bridge in September 2005, construction of the bridge is 

not expected to begin until August 2006. 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. Also, construction of a water treatment facility experienced 

delays due to technical issues that arose during the preliminary 

assessment.

Other USAID Tsunami 

Reconstruction Projects in Sri 

Lanka Are Under Way and Most 

Are Currently on Schedule

USAID has made some progress in its other projects in Sri Lanka and 

expects to complete them by September 2007. These projects include 

small-scale infrastructure, technical assistance and good governance, and 

transition assistance aimed at encouraging economic activity. 

• Small-scale infrastructure. USAID has leveraged other donors’ funds 

to increase the scope of some small-scale infrastructure projects, which 

include the following:

• USAID entered into a public-private alliance to build playgrounds, 

some of which include accessibility for the disabled. USAID 

contributed $0.5 million and attracted $1.5 million from two private 

organizations, increasing the number of playgrounds planned from 20 

to 85.

• Another project involves rehabilitating community markets and 

restoring access to potable water. These activities are projected to be 

completed by mid-2006. 

• Technical assistance and good governance. USAID will provide 

technical assistance and promote good governance in Sri Lanka. USAID 
Page 26 GAO-06-488 USAID Tsunami Reconstruction

has also budgeted funds to strengthen the Sri Lankan government’s 

audit capacity. In addition, USAID is providing funds to promote 

accountable local governance in tsunami-affected regions. 

• Transition assistance. USAID is providing assistance to help tsunami 

survivors transition from camps to permanent communities. Activities 

under way include providing businesses with credit and vocational 

training. We visited a vocational school that USAID was rehabilitating 

and equipping with computers and found many students who were 

learning new skills; the principal reported that enrollment had also 

increased dramatically. 

USAID Established 

Financial and 

Technical Oversight 

Measures but Has Not 

Filled Some Needed 

Technical Oversight 

Positions

To establish financial oversight of its reconstruction programs in Indonesia 

and Sri Lanka, USAID has augmented its standard financial controls with 

external and internal audits and efforts to strengthen local accountability. 

To establish technical oversight, USAID has reassigned and hired 

experienced staff, such as engineers, and acquired additional technical 

expertise through interagency agreements. However, USAID has not filled 

some positions that it considers critical to technical oversight.

USAID Has Established 

Financial Oversight 

Mechanisms in Indonesia 

and Sri Lanka

For its reconstruction programs in Indonesia and Sri Lanka, USAID plans 

to augment its standard financial controls for development assistance 

programs through additional internal and external audits. USAID also plans 

to strengthen Indonesia’s and Sri Lanka’s auditing capacities. 

USAID Plans Internal and 

External Audits 

In addition to its required financial controls, which include preaward 

surveys of prospective award recipients and financial audits, USAID plans 

to arrange for additional audits.14 According to agency officials, USAID 

intends to sign an agreement with the Defense Contract Audit Agency to 

concurrently audit funding for USAID’s signature road construction project 

14USAID requires an annual audit of foreign nonprofit organizations expending $300,000 or 

more of USAID funds, and a preaward survey or audit before negotiating a contract of 

$500,000 or more. 
Page 27 GAO-06-488 USAID Tsunami Reconstruction

in Aceh, Indonesia. USAID officials told us the agency is undertaking this 

work because of the additional risk inherent in large construction projects. 

USAID’s IG is also providing oversight of reconstruction programs. The IG 

is currently auditing the signature road construction project in Indonesia 

and plans to conduct three additional audits, two in Indonesia and one in 

Sri Lanka.15 The IG is undertaking this work with funding included in the 

May 2005 emergency supplemental legislation.

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 will provide funding for 

technical assistance and training to the BPK to enhance its ability to audit 

donor funds administered by Indonesian government ministries. 

In Sri Lanka, USAID plans to strengthen the capacities of Sri Lankan 

government organizations. USAID has hired a consulting firm to work with 

the Sri Lankan Office of the Auditor General. USAID will also support Sri 

Lanka’s Commission to Investigate Allegations of Bribery and Corruption. 

This work will focus on training and capacity development and is intended 

to reduce corruption and ensure the proper use of reconstruction funds. 

Also, in April 2005, USAID participated in an international conference in 

Jakarta on the importance of managing tsunami assistance funds. The 

conference, funded by the Asian Development Bank and hosted by the 

BPK, was intended to highlight the importance of accounting for the large 

amounts of tsunami reconstruction funds. The conference was attended by 

representatives of donor countries’ supreme audit institutions, including 

GAO, and representatives of recipient countries, including Indonesia and 

Sri Lanka. 

15The three additional audits were planned to determine whether (1) Indonesia’s livelihood 

assistance activities were on schedule to achieve their planned outputs and objectives, (2) 

tsunami-related activities in Indonesia implemented by Development Alternatives Inc. (DAI) 

were on schedule to be completed as planned and whether USAID properly monitored DAI’s 

activities, and (3) USAID’s infrastructure rebuilding activities in Sri Lanka were on schedule 

to be completed as planned. 
Page 28 GAO-06-488 USAID Tsunami Reconstruction

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. However, it has not filled all needed 

technical oversight positions.

In Indonesia, USAID reassigned two experienced engineers to share 

responsibilities as the cognizant technical officers and an experienced 

project manager to assist with the signature road project. A USAID 

engineer was reassigned and another hired to work in Sri Lanka to oversee 

the signature infrastructure projects. USAID also plans to hire an additional 

engineer locally when construction in Sri Lanka commences.

In addition, USAID has acquired expertise through three interagency 

agreements with USACE, totaling $2.9 million, to provide technical 

assistance for its signature projects, develop scopes of work and cost 

estimates, and conduct environmental reviews in Indonesia and Sri Lanka. 

USACE efforts to date include assembling a team that assessed the existing 

conditions, developed cost estimates, prepared acquisition plans, and 

performed short-term on-site project management in planning the signature 

projects. Under the most recent interagency agreement, USACE is to 

provide technical assistance to USAID in Indonesia through the award of 

the road construction contract, expected in September 2006. 

As of March 2006, USAID had not filled several positions critical to 

implementing its construction activities in Indonesia and Sri Lanka. 

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.16

16These staffing issues are similar to those USAID has previously faced in disaster recovery 

efforts. See GAO, Foreign Assistance, Disaster Recovery Program Addressed Intended 

Purposes, but USAID Needs Greater Flexibility to Improve Its Response Capability, 

GAO-02-787 (Washington, D.C.: July 24, 2002). 
Page 29 GAO-06-488 USAID Tsunami Reconstruction

Several Challenges 

Confront Indonesian 

and Sri Lankan 

Reconstruction 

Programs 

In implementing its tsunami reconstruction programs in Indonesia and Sri 

Lanka, USAID faces several key challenges, some of which it has taken 

steps to address. These include working in regions with long-standing civil 

conflicts, coordinating with host governments and NGOs, and ensuring 

adequate management of regular programs.

Civil Conflicts Threaten 

Reconstruction Efforts 

Long-standing civil conflicts could affect USAID’s ability to complete 

reconstruction projects within projected time frames in Indonesia, despite 

recent advances in a peace process, and have limited USAID’s ability to 

provide assistance in some tsunami-affected regions in Sri Lanka. 

Indonesian Factions Have Signed 

Peace Accord, and Some USAID 

Projects Are Supporting 

Reconciliation

Owing to a 30-year conflict between a separatist group and the Indonesian 

government, the entire province of Aceh, Indonesia, was under a state of 

emergency prior to the tsunami and access by outsiders was limited. 

However, within days of the disaster, the Indonesian government lifted the 

state of emergency to allow access by donors and relief organizations. In 

August 2005, the separatists signed a peace accord, which both sides 

appear committed to honoring. However, an NGO monitoring the accord 

has cautioned that the difficulties of ending the 30-year-old conflict should 

not be underestimated.17

To address this challenge, USAID is implementing peace-building initiatives 

in Aceh Province. For example, according to USAID officials, former 

combatants are working on construction crews rebuilding community 

water systems.18 USAID’s aim is to provide income-generating 

opportunities to former rebel soldiers, thereby strengthening the peace 

accord.

Deteriorating Sri Lankan 

Security May Affect Some 

Programs, but USAID Is Working 

to Promote Reconciliation

A conflict between the Sri Lankan government and a separatist group, 

which began in 1983, has increased since the tsunami and could impact 

implementation of some USAID reconstruction programs. Since the 

tsunami, the number of violent incidents has risen dramatically, primarily 

17International Crisis Group, Aceh: So Far, So Good (Jakarta/Brussels, Dec. 13, 2005).

18USAID’s regular program activities also include projects designed to enhance peace 

building by assisting former combatants. 
Page 30 GAO-06-488 USAID Tsunami Reconstruction

in northern and northeastern Sri Lanka, which are largely under separatist 

control. USAID was not directly implementing development activities in 

these areas prior to the tsunami, and it is not planning any tsunami-related 

projects in these areas at present.19 USAID officials stated that they expect 

little disruption to most of its reconstruction efforts in other parts of the 

country. However, in the eastern Sri Lankan region near the 

separatist-controlled area, several USAID activities involving construction 

of small-scale infrastructure have been delayed because of increased 

violence. USAID officials stated that the signature construction project 

could also experience delays due to the conflict.

As in Indonesia, USAID has incorporated peace-building initiatives into 

some of its Sri Lankan tsunami reconstruction efforts. One such project, 

implemented by USAID’s Office of Transition Initiatives (OTI), promotes 

participation by people of different ethnicities and religions by requiring 

that they work together toward a shared goal, such as rehabilitating a 

school. USAID has also dedicated $2.5 million for a reconciliation program 

in which community members will be trained in mediation skills.

Coordination with 

Governments and 

Nongovernmental 

Organizations Has Been 

Difficult, but USAID Is 

Taking Steps to Improve 

Coordination

USAID has encountered challenges in coordinating its reconstruction 

efforts with the governments of both countries. In addition, USAID has 

faced coordination problems with NGOs. To address these challenges, 

USAID has taken steps to improve coordination, avoid duplication of 

efforts, and minimize gaps in providing assistance to survivors. 

Indonesian Government’s 

Coordination Difficulties Have 

Challenged USAID

USAID has faced challenges coordinating its reconstruction activities with 

the Indonesian government. In April 2005, the Indonesian government 

established the BRR to coordinate the international response to the 

tsunami. Since its creation, BRR has used the Indonesian government’s 

master plan for reconstruction to attempt to control and track 

organizations involved in reconstruction and has created a publicly 

accessible database that, according to USAID, is expected to be fully 

19Since the 1980s, some areas of northern and northeastern Sri Lanka have been under the 

control of the Liberation Tigers of Tamil Eelam. According to the Department of State, this 

is a terrorist organization that has advocated secession of these areas to form a separate 

ethnic Tamil state.
Page 31 GAO-06-488 USAID Tsunami Reconstruction

operational by mid-2006. However, according to USAID officials, BRR lacks 

the capacity for effectively registering donors and coordinating projects. 

The lack of coordination has resulted in the overlapping of USAID projects 

with other donors’ projects and in gaps in aid to survivors. A USAID official 

told us that, in one instance, BRR approved similar water and sanitation 

project proposals submitted by USAID and an international NGO. USAID 

negotiated directly with the NGO over which agency would carry out the 

project and eventually resolved the differences without BRR involvement. 

In addition, a United Nations official told us that many donor organizations 

are providing assistance to communities along the coastal road near the 

capital city of Banda Aceh but that survivors in numerous harder-to-reach 

areas down the coast and on nearby islands have received little or no aid. 

To strengthen BRR’s capacity to coordinate and oversee reconstruction 

efforts, USAID is providing technical assistance and training. However, 

according to USAID officials, until BRR is able to fully develop its 

capacities, USAID and other donor organizations will face difficulty in 

coordinating projects and outreach.

Sri Lanka’s Organizational 

Problems and Policy Changes 

Have Created Challenges for 

USAID

Organizational inefficiency and policy shifts in Sri Lanka have led to 

coordination problems for USAID. In January 2005, the Sri Lankan 

government created a Task Force for Rebuilding the Nation (TAFREN), 

charging it with assessing needs and donor coordination. The organization 

was expected to operate for 3 to 5 years. In its first months of operation, 

TAFREN developed a needs assessment that drew on World Bank, Asian 

Development Bank, and other organizations’ information and analyses. 

TAFREN used the assessment to attempt to avoid duplication but lacked 

the capacity to ensure that donors registered and coordinated with 

TAFREN. In addition, with donor support, TAFREN began work on a 

publicly accessible database to track reconstruction projects that is 

expected to be functional by mid-2006. In November 2005, the newly 

elected Sri Lankan president disbanded TAFREN and announced the 

creation of a new coordination mechanism, further increasing potential 

coordination challenges; however, development of the database is 

continuing. 

When we visited Sri Lanka in July 2005, USAID officials told us that 

TAFREN had taken little action to coordinate donor efforts. They added 

that TAFREN had been slow to react and lacked decision-making authority. 

Nonetheless, USAID moved forward with some projects and kept TAFREN 

aware of its activities. In addition, the Sri Lankan government’s 
Page 32 GAO-06-488 USAID Tsunami Reconstruction

inconsistent policies on rebuilding in coastal areas have affected the 

progress of some USAID reconstruction programs. Soon after the tsunami, 

the President of Sri Lanka announced that the Sri Lankan government 

would begin to enforce a valid, but previously unenforced, law that banned 

construction within a 100- to 200-meter coastal “buffer zone.” This policy 

has affected the progress of some USAID projects, such as rehabilitating 

community markets and building schools. In late 2005, the Sri Lankan 

government began allowing construction in certain coastal areas, but as of 

late 2005, many survivors were still awaiting approval to rebuild their 

homes. 

Poor Coordination with 

Nongovernmental Organizations 

Has Caused Problems

In both Indonesia and Sri Lanka, USAID has encountered challenges in 

coordinating with some of the scores of NGOs operating in the countries 

since the tsunami. After the disaster, many NGOs received large amounts of 

private donations, enabling them to conduct their work without funding 

from bilateral and multilateral organizations. As a result, some NGOs began 

implementing reconstruction projects with minimal coordination with such 

organizations or with the host governments.

In Indonesia, coordination with NGOs was particularly difficult during the 

emergency relief phase but has generally improved since the establishment 

of BRR, which currently permits only approved NGOs to participate in 

reconstruction projects. However, with limited resources, BRR cannot be 

sure it is aware of all NGOs activities. For example, according to UN 

officials, an international NGO constructed new houses and water and 

sanitation systems near the Indonesian coastline without coordinating with 

the Indonesian government or other donors to ensure that the housing 

could be connected to local water and sanitation infrastructure. Because of 

tsunami-altered water tables and topography in some areas, those 

communities’ sanitation systems overflowed during certain tidal 

conditions, inundating the area with untreated sewage. 

Coordination with NGOs in Sri Lanka has also been problematic, despite 

TAFREN’s efforts. For example, several NGOs and private donor 

organizations provided new fishing boats to fishermen. However, according 

to a bilateral donor official, several communities received too many fishing 

boats, and as a result, some coastal areas were depleted of large numbers 

of fish. On the other hand, coordination in southern Sri Lanka has been 

more effective than in other parts of the country. There, USAID, NGOs, and 

other donors agreed that certain organizations would have responsibility 

for different districts or for different types of assistance, such as housing. 
Page 33 GAO-06-488 USAID Tsunami Reconstruction

Coordination meetings are normally held weekly and TAFREN officials 

periodically attended. 

USAID’s Tsunami Response 

Has Created Challenges for 

Non-Tsunami-Related 

Programs

The urgency to quickly plan and implement USAID’s tsunami-related 

program activities in Indonesia and Sri Lanka may affect the management 

of some of non-tsunami-related projects. In Indonesia, USAID officials are 

concerned that the focus on tsunami reconstruction activities in Aceh 

could limit oversight of regular programs, leading them to rely more heavily 

on information provided by implementing partners. To mitigate this 

potential challenge, USAID added two direct-hire U.S. staff to fill two key 

positions in Aceh.

In Sri Lanka, USAID is experiencing similar challenges. For example, a 

USAID activity to reconstruct small-scale infrastructure was suspended so 

that staff could focus on the tsunami relief. Later, the program was 

reactivated, although USAID did not add staff. As a result, USAID’s 

monitoring of some of regular program activities diminished. USAID 

reported that it reduced its efforts to involve the community in the 

program, resulting in repeated additional visits to ensure the program’s 

successful completion. To address this issue, USAID hired additional staff 

to ensure that ongoing programs are not neglected.

Conclusions The U.S. government has played an important role in helping Indonesia and 

Sri Lanka recover from the devastating 2004 tsunami. USAID and other 

agencies provided immediate assistance to survivors and work has begun 

on several high-profile infrastructure projects. However, since USAID 

made its initial projections in the spring of 2005, materials, labor, and fuel 

costs have increased substantially in both countries. In addition, changes to 

project scope and ongoing design work for key construction efforts may 

reveal actual conditions that differ from initial assessments, potentially 

leading to higher than planned costs. This information suggests that the 

cost contingencies included in the initial estimates may be insufficient. 

Congress needs current information on projected costs and schedules to 

provide appropriate oversight.

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 
Page 34 GAO-06-488 USAID Tsunami Reconstruction

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. If the updated 

information differs substantially from initial projections, the report should 

also include alternative cost estimates, schedules, and project scopes and 

the need for additional sources of funding, if necessary.

Agency Comments and 

Our Evaluation 

At our request, USAID and the Department of State provided written 

comments and technical suggestions and clarifications on a draft of this 

report. (See app. IV for State’s written comments and app. V for USAID’s 

written comments.) USAID stated that the report findings accurately 

describe the tsunami program situation and the potential broad challenges 

for achieving its reconstruction goals. USAID also provided information on 

additional steps the agency intends to take to mitigate the potential for 

increased costs and schedule delays, as well as an explanation of how it 

obligates funds, which we incorporated into the report. The Department of 

State agreed to fully implement our recommendation. We have also 

incorporated technical suggestions and clarifications from USAID and 

State, as appropriate.

We also requested comments from the U.S. Army Corps of Engineers and 

the Department of the Treasury. Although neither provided written 

comments, both provided technical suggestions and clarifications that we 

have incorporated, as appropriate.

We are sending copies of this report to interested congressional 

committees as well as the Administrator, USAID; Commander, U.S. Army 

Corps of Engineers; and the Secretaries of State and the Treasury. 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 gootnickd@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 
Page 35 GAO-06-488 USAID Tsunami Reconstruction

of this report. GAO staff who made major contributions to this report are 

listed in appendix VI.

David Gootnick, Director

International Affairs and Trade
Page 36 GAO-06-488 USAID Tsunami Reconstruction

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

We were directed to monitor the delivery of U.S. reconstruction assistance 

to the tsunami-affected countries through periodic visits. 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.

To determine the progress of USAID’s reconstruction programs in 

Indonesia and Sri Lanka, we met with officials of USAID’s Bureau for Asia 

and the Near East and Office of Foreign Disaster Assistance and with the 

U.S. Army Corps of Engineers (USACE). In addition, to examine issues 

involving the U.S. debt relief component of the assistance to Indonesia and 

Sri Lanka, we conducted work at the headquarters offices of U.S. 

Departments of State and the Treasury. We traveled to Indonesia in August 

and December 2005 and Sri Lanka in July 2005. In Jakarta and Banda Aceh, 

Indonesia, and in Colombo, Sri Lanka, we reviewed USAID’s strategies, 

work plans, and applicable contracts, grants, and cooperative agreements 

and discussed with USAID and other U.S. officials how their respective 

programs addressed reconstruction needs. During our visits to Indonesia, 

we reviewed USAID’s activities in tsunami-affected areas, including the 

$245 million, 150-mile signature road construction project in Banda Aceh. 

In many instances, we visited and photographed sites before the projects 

began, at locations where USAID-funded maintenance work was ongoing, 

or where USAID-funded construction had begun. During these trips, we 

interviewed representatives of contractors, nongovernmental 

organizations (NGO), government ministries, and other entities responsible 

for day-to-day project implementation. We also interviewed many of the 

intended recipients of U.S. assistance, asking about the tsunami’s impact 

on their homes, livelihoods, and communities and about the effectiveness 

of U.S.-funded projects in helping them rebuild infrastructure, restore their 

livelihoods, and obtain basic services. Finally, we reviewed prior GAO 

reports on USAID disaster assistance efforts.

To assess USAID’s financial and technical oversight, we reviewed USAID’s 

financial procedures and discussed the procedures with cognizant USAID 

officials. In Indonesia, a licensed GAO professional engineer met with 

USAID and USACE engineers and other technical staff to discuss the level 

of technical oversight and planning. We also coordinated with USAID’s 
Appendix I

Objectives, Scope, and Methodology

Page 37 GAO-06-488 USAID Tsunami Reconstruction

Office of the Inspector General in Washington, D.C., and the Philippines to 

minimize duplication of efforts and to share information. 

To determine the challenges that USAID faces in implementing its program, 

we discussed oversight procedures and financial systems with officials of 

host governments, multilateral and bilateral donors, and NGOs involved in 

reconstruction efforts. We also met with host government officials, 

including national and local officials, to discuss their procedures for 

ensuring that donor activities did not conflict or overlap and their views on 

donor coordination.

We assessed the reliability of funding and expenditure data compiled and 

generated by USAID’s Office of the Controller in Washington, D.C., and by 

the USAID missions in Indonesia and Sri Lanka. We met with USAID 

officials to review the internal controls for the collection and review of 

data, comparing the consolidated reports with mission-specific reports, 

and discussed relevant data reliability issues with cognizant agency 

officials. In addition, we interviewed knowledgeable USAID officials about 

the systems and methodology they use to verify the completeness and 

accuracy of the data. Finally, we reviewed relevant reports from the USAID 

Office of the Inspector General and several GAO reports of USAID disaster 

reconstruction program funding since 1999. None of these sources noted 

any significant discrepancies or concerns about the reliability of USAID’s 

data. Based on our comparison of data generated from different USAID 

sources at USAID headquarters and mission, we found that the sources 

generally corroborated each other, increasing our confidence that the data 

were reliable. We determined that USAID’s funding and expenditure data 

were sufficiently reliable for our analysis. 
Page 38 GAO-06-488 USAID Tsunami Reconstruction

Appendix II

Debt Relief to Indonesia and Sri Lanka ApendxiI

To make resources available for the Indonesian and Sri Lanka governments 

to address humanitarian and reconstruction needs after the tsunami, and at 

the request of these governments, the United States and other international 

donors agreed to defer the payment of some eligible debt the Indonesian 

and Sri Lankan governments were due to pay in 2005.1

 Both countries 

agreed to use the debt relief to help recover from the tsunami’s extensive 

damage, estimated at $4.5 billion in Indonesia and $1.5 billion in Sri Lanka.2

Debt Relief Provided by the 

United States

With funding appropriated in the emergency supplemental legislation 

enacted in May 2005, the United States provided $20.1 million and $3.2 

million to cover the U.S. budget costs of debt deferral for Indonesia and Sri 

Lanka, respectively. Using these funds, the United States rescheduled about 

$190 million in 2005 debt payments from Indonesia and about $40 million in 

2005 debt payments from Sri Lanka. 

The U.S. debt relief agreements with Indonesia and Sri Lanka require 

independent outside evaluations to ensure that the countries comply with 

the terms of the agreements that the resources freed by the Paris Club debt 

consolidation and deferral will benefit directly the people affected by the 

tsunami. According to the Department of the Treasury, the benefit from the 

international debt rescheduling is $236 million for Indonesia and $34 

million for Sri Lanka.3

 According to our analysis, the net benefit of the debt 

rescheduling for Indonesia and Sri Lanka is about 9 percent and 11 percent, 

respectively, of the amount of the debts rescheduled. The United States will 

rely on periodic reports from each country’s regular consultations with the 

1

In Indonesia, the creditors—Australia, Austria, Belgium, Canada, Denmark, Finland, 

France, Germany, Italy, Japan, the Netherlands, Norway, the Republic of Korea (an ad 

hoc—not a permanent—Paris Club member), Spain, Sweden, Switzerland and the United 

Kingdom—are, like the United States, members of the Paris Club, which works to find 

coordinated and sustainable solutions to the payment difficulties experienced by debtor 

nations. In Sri Lanka, the creditors are Australia, Canada, Denmark, France, Germany, Italy, 

Japan, Korea, the Netherlands, and Switzerland. Paris Club creditors agree to reschedule 

debts due to them—that is, to provide a country with debt relief by postponing and, in the 

case of concessional rescheduling, reducing debt service obligations.

2

The damage in Indonesia was estimated at 1.8 percent of gross domestic product (GDP) 

and in Sri Lanka at 4.5 percent of GDP. 

3

The net benefit of the debt rescheduling is the difference between the net present value of 

the debt payment flows before and after the rescheduling. The net benefit is affected by the 

length of the deferment period, frequency of payments, interest rate charged, and the 

discount rate. These figures are net present value.
Appendix II

Debt Relief to Indonesia and Sri Lanka

Page 39 GAO-06-488 USAID Tsunami Reconstruction

International Monetary Fund, the World Bank, and the Asian Development 

Bank to measure compliance with the agreements, according to 

Department of State officials. The officials stated that both countries are 

likely to meet their commitments to use the resources freed by the Paris 

Club debt consolidation and deferral to benefit directly the people affected 

by the tsunami.

Debt Relief Provided by 

International Creditors

The total amounts of bilateral international debt rescheduled in 2005 for 

Indonesia and Sri Lanka were approximately $2.703 billion and $323 

million, respectively.4

 Indonesia did not seek or receive any debt deferral 

from multilateral creditors. Sri Lanka sought a debt deferral from the 

International Monetary Fund, which granted a 1-year extension for debt 

repayments of about $106 million for its repayment expectations due in 

2005. Multilateral debt service in 2005 was $4.3 billion and $294 million, 

accounting for 55 percent and 48 percent of total debt service, before the 

debt reschedulings for Indonesia and Sri Lanka, respectively. 

Rescheduling international debt provided immediate budgetary savings for 

both countries in 2005, but both countries’ debt burden will increase when 

payments restart in 2006. Both countries agreed to repay the rescheduled 

debt in seven equal semiannual installments, starting December 1, 2006, 

and ending December 1, 2009. Table 6 shows the impacts of rescheduling 

all bilateral debt on the budgets of the governments of Indonesia and Sri 

Lanka for fiscal years 2005 through 2009. 

4

The Department of the Treasury noted that the numbers in the bilateral agreement with 

each individual Paris Club country may be slightly different because the data may have been 

updated and revised by the time bilateral agreements are signed, as is often the case in Paris 

Club agreements.
Appendix II

Debt Relief to Indonesia and Sri Lanka

Page 40 GAO-06-488 USAID Tsunami Reconstruction

Table 6: Impacts on the Indonesian and Sri Lankan Governments from All Bilateral Debt Rescheduling, Fiscal Years 2005-2009

Source: GAO analysis of Department of the Treasury data.

Note: Key assumptions: (1) annual interest rate of 4 percent on deferred principal and interest and (2) 

repayment of debt in seven semiannual payments beginning December 1, 2006.

Dollars in millions 

Debt service reduction in 2005 due to 

debt relief provided by bilateral 

creditors Annual repayment schedule

Country 2005 2006 2007 2008 2009 Total repayments

Indonesia $2,703 $418 $835 $835 $835 $2,923

Sri Lanka $323 $50 $100 $100 $100 $350
Page 41 GAO-06-488 USAID Tsunami Reconstruction

Appendix III

USAID’s Three-Phase Signature Road Project 

in Aceh Province, Indonesia ApendxiI

USAID developed plans to implement its signature project in three phases 

(see table 7).

Table 7: Scope and Status of Indonesian Signature Road Project, as of December 31, 2005 

Source: GAO synthesis of USAID information.

Contract Scope Status

Phase 1:

Repair, 

maintenance, and 

priority 

construction

• Repair and maintain existing 50-mile segment from 

Banda Aceh to Lamno.

• Design and construct a short priority (3-mile) 

segment between Banda Aceh and Lamno. 

• Perform the design work on a cost-plus-fixed-fee 

basis.

• Perform the maintenance and construction work on a 

fixed-price basis.

• Contract was awarded to an Indonesian firm (PT Wijaya 

Karya) on August 23, 2005.

• Contract cost is $12.8 million.

• Maintenance and repair work is ongoing; route is 

passable. 

• Design of the new 3-mile road segment is under way.

• Construction of new 3-mile road segment is expected to be 

completed by August 2006.

Phase 2:

Design and 

construction 

supervision

• Design the new road (except for the 3-mile priority 

segment). 

• Supervise construction. 

• Perform services on a cost-plus-fixed-fee basis.

• Contract was awarded to a U.S. firm (Parsons Global 

Services Inc.) on November 10, 2005.

• Estimated contract cost is up to $34.9 million; current 

obligation is $20 million.

• Design work is ongoing and scheduled to be completed in 

June 2006.

• Contractor is required to prepare an updated estimate of 

construction costs.

• Construction management services are being provided on 

the priority road segment and will continue in September 

2006, when the contract for construction of Banda Aceh to 

Meulaboh road is awarded.

Phase 3:

Construction

• Placement of new road along a 150-mile route from 

Banda Aceh to Meulaboh (except for the portion 

covered under the priority segment).

• Construction will be done on a fixed-price basis 

according to the plans and specifications of the 

design prepared under separate contract.

• Construction contract is expected to be awarded in 

September 2006, and construction is to be completed by 

September 2009.
Page 42 GAO-06-488 USAID Tsunami Reconstruction

Appendix IV

Comments from the Department of State ApendxiIV
Appendix IV

Comments from the Department of State

Page 43 GAO-06-488 USAID Tsunami Reconstruction
Page 44 GAO-06-488 USAID Tsunami Reconstruction

Appendix V

Comments from the U.S. Agency for 

International Development ApendxiV

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.
Appendix V

Comments from the U.S. Agency for 

International Development

Page 45 GAO-06-488 USAID Tsunami Reconstruction

See comment 1.
Appendix V

Comments from the U.S. Agency for 

International Development

Page 46 GAO-06-488 USAID Tsunami Reconstruction
Appendix V

Comments from the U.S. Agency for 

International Development

Page 47 GAO-06-488 USAID Tsunami Reconstruction

See comment 2.
Appendix V

Comments from the U.S. Agency for 

International Development

Page 48 GAO-06-488 USAID Tsunami Reconstruction

The following are GAO’s comments on the U.S. Agency for International 

Development’s letter dated March 30, 2006.

GAO Comments 1. USAID states that it intends to use fixed-price contracts because the 

contracts provide the maximum incentive for the contractor to control 

costs and perform effectively in order to complete the work on time. 

We agree that fixed-price contracts can be effective in controlling costs 

by shifting performance risk to the contractor. However, as USAID also 

notes and we point out in the report, costs may increase due to other 

circumstances, such as site conditions being different than expected 

and the potentially lengthy process of acquiring land. As our 

recommendation indicates, it is important that Congress be kept 

informed of cost and expenditure information in order to effectively 

oversee expenditures of U.S. funds. 

2. We modified the text of footnote 5 and added explanatory notes to 

tables 4 and 5 to reflect USAID’s comments regarding obligations and 

expenditures of funds. 
Page 49 GAO-06-488 USAID Tsunami Reconstruction

Appendix VI

GAO Contact and Staff Acknowledgments ApendxiVI

GAO Contact David Gootnick, (202) 512-4128 or gootnickd@gao.gov.

Staff 

Acknowledgments

In additional to the contact named above, Phillip Herr, George Taylor, 

Michael Armes, Ming Chen, Reid Lowe, Michael Maslowski, and Thomas 

Zingale made key contributions to this report. 

(320359)
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