2008
EUROPEAN COURT OF AUDITORSEUROPEAN COMMISSION 
REHABILITATION AID FOLLOWING THE TSUNAMI AND HURRICANE MITCHEUROPEAN 
COURT OF AUDITORS
Special Report  No 6IN THIS REPORT, THE COURT ANALYSES THE EUROPEAN COMMISSION’S 
MANAGEMENT OF REHABILITATION AID AFTER TWO MAJOR NATURAL DISASTERS: HURRICANE MITCH IN 1998 AND THE 2004 TSUNAMI. 
THE COMMISSION’S COMBINED REHABILITATION AID OF 550 MILLION 
EURO AIMED TO RECONSTRUCT BASIC INFRASTRUCTURE AND  PROVIDE A BASIS FOR SUSTAINABLE DEVELOPMENT. THE COURT MAKES RECOMMENDATIONS WHICH COULD HELP THE EUROPEAN COMMISSION TO PROVIDE MORE EFFICIENT AND EFFECTIVE  
REHABILITATION AID IN THE FUTURE.
EN
QJ-AB-08-006-EN-C
ISBN 978-92-95009-39-4
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Special Report No 6 / 2008
European Commission rehabilitation aid following the tsunami and Hurricane Mitch
Luxembourg: Office for Official Publications of the European Communities
2008 — 40 pp. — 21 x 29.7 cm
ISBN 978-92-95009-39-4
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EUROPEAN COMMISSION
REHABILITATION AIDFOLLOWING THE TSUNAMIAND HURRICANE MITCHSpecial Report  No 6   2008
EUROPEAN COURT OF AUDITORS(pursuant to Article 248(4), second subparagraph, EC)
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EUROPEAN COURT OF AUDITORS 
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Special Report  No 6   2008
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Luxembourg : Office for Official Publications of the European Communities, 2008
ISBN 978-92-95009-39-4
© European Communities, 2008
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CONTENTS 
Paragraph
I–VI EXECUTIVE SUMMARY
1–11  CHAPTER 1. – INTRODUCTION
1–6 SECTION 1.1. – CONTEXT OF THE AUDIT
7–11 SECTION 1.2. – REGULATORY FRAMEWORK
12–16  CHAPTER 2 – AUDIT SCOPE AND APPROACH
17–41  CHAPTER 3 – OBSERVATIONS
17–22 SECTION 3.1 – IDENTIFYING REHABILITATION NEEDS AND DESIGNING PROJECTS
18–19 TIMELY REHABILITATION STRATEGY INCORPORATING WIDER ISSUESI
20–22 FASTER DESIGN AND BETTER BENEFICIARY PARTICIPATION FOR TSUNAMI THAN FOR HURRICANE MITCH
23–29 SECTION 3.2 – IMPLEMENTATION OF AID
24–26 FAST IMPLEMENTATION FOR INDONESIA, SLOW FOR SRI-LANKA AND HURRICANE MITCH
27–29 NEED TO REINFORCE SUPERVISORY SYSTEMS TO ENSURE EFFICIENCY
30–41 SECTION 3.3 – ACHIEVEMENT OF RESULTS
31–33 MANY USEFUL OUTPUTS ACHIEVED
34–37 CONTRASTING LINKS WITH PRECEDING HUMANITARIAN AID
38 STRONG LINK WITH LONGER-TERM DEVELOPMENT
39–41 CONCERNS OVER THE SUSTAINABILITY OF PROJECTS
42–45  CHAPTER 4 – CONCLUSIONS AND RECOMMENDATIONS
 THE COMMISSION’S REPLIES 
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I.
Following the Indian Ocean tsunami of  
26 December 2004, which killed over  
200 000 people and caused damage of around 10 billion euro, the Court of Auditors reported 
on the Commission’s immediate humani-
tarian aid response designed to prevent or  
relieve human suffering. The Parliament and  the Council, during their discussions on this  report, requested the Court to report on the  
subsequent longer-term rehabilitation phase to which the Commission contributed some  
300 million euro. The current audit therefore examines rehabilitation aid following the tsu-nami. The scope of the audit was extended to include also the Commission’s 250 million euro 
rehabilitation response to Hurricane Mitch,  
which struck Central America in October 1998 
(see paragraphs 1 to 14).
II.
This audit addresses the following three  questions with the objective of assessing the Commission’s performance in managing reha-
bilitation aid following Hurricane Mitch and  
the tsunami (see paragraphs 15 and 16).
(a) Did the Commission adequately identify the 
rehabilitation needs of those affected by  
disasters?
(b) Do Commission procedures ensure that aid  
is implemented in a timely and efficient  manner?
(c) Have projects achieved their expected results 
including satisfactory links with short-term  
relief and longer-term development?EXECUTIVE 
SUMMARY
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5
V.
Despite the above, many useful outputs have 
been achieved. In Central America projects com-
pleted with Commission funding have included schools, houses, health centres, sewage works 
and drinking water systems. In Indonesia out-
puts have included houses, roads, schools and 
community centres. Price increases following both disasters have reduced the quantity of  
outputs. Projects have generally consisted of 
development rather than rehabilitation activi-
ties and the links with preceding humanitarian aid have been variable. The strong link with  longer-term development enhances the pros-
pects of sustainability, though project designs 
have not sufficiently identified sources of  finance to ensure activities continue to func-
tion when project financing ends (see para-
graphs 30 to 41).
VI.
On the basis of these observations, the Court makes recommendations which could help  the Commission to provide more efficient and 
effective rehabilitation aid (see paragraphs 42 
to 45).III.
Following both Hurricane Mitch and the tsu-
nami, the Commission developed a rehabili-
tation strategy in less than six months which recognised the need not only to reconstruct  
damaged infrastructure, but also to address  
longer-term development and the needs of  
those not directly affected by the disasters.  After Hurricane Mitch, the design process  
which subsequently translated the rehabilita-
tion strategy into specific projects was lengthy 
and lasted until October 2002, four years after the disaster. In contrast, following the tsunami, the design process, carried out by international 
organisations through which the Commission 
channelled its funding, was more rapid, and  designs for major projects were approved  
within eight months of the disaster in Indonesia 
and within 11 months in Sri Lanka. Moreover, 
in order to help ensure real needs were identi-
fied, the Commission response has evolved to 
include better coordination and consultation 
with beneficiary countries at national and local levels (see paragraphs 17 to 22).
IV.
In Central America, following the lengthy  design process after Hurricane Mitch, there  were further delays in implementation due  
to difficulties in finding satisfactory contrac-
tors and identifying suitable land. The imple-
mentation of the Commission’s rehabilitation response has been most rapid in Indonesia,  where many outputs were achieved in the two 
years following the tsunami through the Multi-Donor Trust Fund. In Sri Lanka, in contrast, lit-
tle has so far been achieved largely due to the 
renewal of conflict. The Commission has not  
addressed all key weaknesses in monitoring  
and supervision of the efficiency of rehabilita-tion aid, although it did succeed in improving 
the quality of monitoring information from  
the Multi-Donor Trust Fund in Indonesia. In Sri 
Lanka, adequate monitoring and supervision 
procedures for international organisations have 
not yet been established for all projects. After 
both disasters the Commission did not ensure that clearly quantified output targets were  developed for all projects and that systems  generated sufficient information to monitor  
and demonstrate the efficiency of implementa-
tion (see paragraphs 23 to 29). EXECUTIVE 
SUMMARY
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SECTION 1.1. – CONTEXT OF THE AUDIT
 1.  On 26 December 2004 the Indian Ocean tsunami killed over 200 000 people 
and caused 10 billion euro worth of damage. The Indonesian province of  
Aceh suffered the worst of the devastation with over 160 000 people dead 
or missing and over half a million displaced. In Sri Lanka, the second worst 
affected country, some 35 000 people were dead or missing and half a million displaced.
 2.  The Court of Auditors’ Special Report No 3/20061 examined the Commission’s 
humanitarian aid response to the disaster. The Court was one of the first to 
produce an audit report on the response to the tsunami and at this early  time focused on the Commission’s short-term humanitarian relief. During  
its discussion on this report, the Committee on Budgetary Control of the  
European Parliament expressed the wish for the Court to report on the sub-
sequent longer-term rehabilitation phase
2 and the Council welcomed this  
suggestion3.1 Special Report No 3/2006 
concerning the European Commission 
Humanitarian Aid Response to the 
tsunami (OJ C 170, 21.7.2006, p. 1).
2 Meeting of the Committee 
on Budgetary Control of 19 and 20 June 2006.
3 Council Conclusions on Special 
Report No 3/2006 by the Court of 
Auditors concerning the European 
Commission Humanitarian Aid 
Response to the tsunami adopted by the October 2006 External Relations 
Council.CHAPTER 1
INTRODUCTION
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 3.  It was in this context that the Court decided to carry out an audit of rehabilita-
tion aid following the tsunami, with the objective of assessing the Commis-sion’s performance in managing rehabilitation aid. The scope of the audit  
was extended to include the Commission’s response to Hurricane Mitch in 
Central America which struck Honduras, Nicaragua, El Salvador and Guate-
mala on 30 and 31 October 1998, resulting in the death of over 10 000 people 
and material damage of around 5 billion euro. The combined Commission  contributions of some 550 million euro for rehabilitation following Hurricane 
Mitch and the tsunami represent in the order of 70 % of rehabilitation funding 
following natural disasters since 1998 financed from the general budget. 
 4.  Following Hurricane Mitch, the Commission provided in the order of 250 mil-
lion euro from the rehabilitation budget line for the Regional Programme  
for the Reconstruction of Central America (PRRAC). Most of this funding was channelled through 15 programme management units
4 (PMUs) as shown in 
Table 1.4  Programme management units were 
established following an international 
tendering exercise. Headed by a 
Director, they were responsible for 
the implementation of programmes of 
rehabilitation activities approved by 
the Commission.
PRRAC INTERVENTIONS BY COUNTRY AND PARTNERTABLE 1
 Million euro
CountryLarge projects 
managed by 
15 programme 
management 
units (PMUs)Medium projects 
managed 
by public 
institutions and 
United NationsSmall NGO 
projectsTotal
Honduras 111.0 5.2 3.1 119.3
Nicaragua 72.9 5.1 5.3 83.3
El Salvador 24.5 0.9 3.1 28.5
Guatemala 13.6 2.7 2.3 18.6
Total 222.0 13.9 13.8 249.7
Source : PRRAC annual report 2005.
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EU BUDGET CONTRIBUTIONS TO THE MULTI-DONOR TRUST FUND 
IN INDONESIATABLE 2 5.  After the tsunami, the Commission channelled its aid for Indonesia (some 200 mil-
lion euro) through the World Bank Multi-Donor Trust Fund as shown in Table 2. 
A Steering Committee, co-chaired by the Commission, the World Bank and the 
government agency responsible for coordinating the reconstruction effort5, 
was responsible for setting the priorities, approving the projects and monitor-
ing the progress of the Multi-Donor Trust Fund. Projects were supervised by 
a partner agency, usually the World Bank, and executed by an implementing 
agency, generally a government department6.
 6.  The Commission’s aid for Sri Lanka after the tsunami was channelled through 
international organisations, mainly the Asian Development Bank and the  United Nations (see Table 3).5 The Agency for the Rehabilitation and 
Reconstruction of Aceh-Nias (BRR or 
Badan Rehabilitasi dan Rekonstruksi).
6 The European Commission was 
the largest donor to the Multi-Donor 
Trust Fund, pledging over 200 million 
euros or 40 % of total pledges. The 
next largest contributors were the Netherlands (26 %) the United Kingdom 
(11 %) and the World Bank (4 %).
Million euro
Contribution Source Date agreed Total
Rapid Reaction 
MechanismRapid Reaction 
Mechanism12.08.2005 3.5
First contribution
Cooperation Asia and 
Latin America29.08.2005 29.9
Second contribution 21.09.2005 37.7
Third contribution 16.12.2005 13.9
Fourth contribution Rehabilitation 25.04.2006 117.5
Total 202.5
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SECTION 1.2. – REGULATORY FRAMEWORK
 7.  The rehabilitation regulation7 describes the procedures for the specific budget 
lines for rehabilitation and identifies the place of rehabilitation aid as the second of the following three key phases of assistance following a natural 
disaster:
(a) initial short-term humanitarian relief which aims to save the lives and  
address the immediate needs of individuals affected by a crisis, for  
example by the provision of emergency food aid, water, shelter and  
medicines.
(b) medium-term rehabilitation aid which aims to reconstruct basic infra-
structure, relaunch production and reinforce institutions.
(c) the resumption of longer-term development aid.7 Council Regulation (EC) No 2258/96 
of 22 November 1996 on rehabilitation 
and reconstruction operations in 
developing countries (OJ L 306, 28.11.1996, p. 1).
TABLE 3
PROJECTS FUNDED IN SRI LANKA
Million euro
Decision Budget Partner Title Amount
2005
45 million euroCooperation 
Asia and Latin AmericaUnited Nations 
agencyImmediate liveli-
hood programme5.4
Asian 
Development BankRehabilitation 
Matara-Batticaloa road39.4
2006
50 million euroRehabilitation International 
organisationCommunity 
livelihood development9.9
United Nations 
agencyCommunity access 
roads29.9
United Nations 
agencyEnvironmental 
remediation9.9
Total 94.5
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 8.  The Communication on linking relief, rehabilitation and development (LRRD)8 
emphasises that these three phases should not be addressed in isolation, but 
should be coordinated in order to ensure strong links between them. 
 9.  The regulation for cooperation with Asia and Latin America9 also includes pro-
visions for financing rehabilitation following disasters10. The EuropeAid  
Co-operation Office (EuropeAid) is responsible for the implementation of  
rehabilitation aid financed through both the rehabilitation regulation and 
the regulation for cooperation with Asia and Latin America. 
 10.  The Rapid Reaction Mechanism, set up by Council Regulation (EC) No 381/200111 
and based in The Directorate-General for External Relations, was created to 
respond urgently to the needs of countries suffering from a disaster. It cannot 
finance humanitarian assistance and can only finance actions of six months’ 
duration or less which could not be launched sufficiently quickly under exist-
ing instruments. The procedures of the Rapid Reaction Mechanism enable a fast response because the Commission merely has to inform the Council of 
intended actions without requiring formal adoption.8 COM(96) 153 of 30.4.1996 on Linking 
Relief, Rehabilitation and Development 
(LRRD).
9 Council Regulation (EEC) No 443/92 
of 25 February 1992 on financial and 
technical assistance to, and economic 
cooperation with, the developing 
countries in Asia and Latin America (OJ L 52, 27.2.1992, p. 1).
10 The Rehabilitation Regulation 
allows decisions up to 2 million euro 
to be taken without adoption by the 
Committee of Member States, whilst 
in the Regulation for Cooperation with Asia and Latin America this ceiling is 
1 million euro.
11 OJ L 57, 27.2.2001, p. 5.
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 11.  From 2007, the Development Cooperation Instrument12, to be implemented by 
EuropeAid, and the Stability Instrument13, to be implemented by External  
Relations DG, have replaced the existing regulations. They both include  
streamlined procedures for responding to disasters14. 12 Regulation (EC) No 1905/2006 of the 
European Parliament and of the Council 
of 18 December 2006 establishing a 
financing instrument for development cooperation (OJ L 378, 27.12.2006, 
p. 41).
13 Regulation (EC) No 1717/2006 of the 
European Parliament and of the Council of 15 November 2006 establishing 
an Instrument for Stability (OJ L 327, 
24.11.2006, p. 1).
14 Funding decisions are generally 
taken following the adoption by the 
management committee of Member States. However, in a crisis situation, 
the Stability Instrument provides for 
measures up to 20 million euro to be 
financed without the adoption by the 
management committee of Member States. The Development Cooperation 
Instrument includes a facility for 
providing a rapid response through 
special measures up to 10 million 
euro, in the event of unforeseen 
circumstances such as a natural 
disaster, without the adoption by the management committee of Member 
States.
Waste water treatment plant under construction in Honduras
Source : ECA.
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 12.  This audit examines the Commission’s rehabilitation response to the Indian Ocean 
tsunami of December 2004 and complements this with an examination of the 
Commission’s response to Hurricane Mitch. Although Hurricane Mitch struck 
Central America in 1998, projects were still being finalised in 2007. 
 13.  Humanitarian aid is outside the scope of this audit as it has been examined in the 
Court of Auditors’ Special Report No 3/2006 on the Commission’s humanitar-
ian aid response to the tsunami. However, the audit does examine the link 
between short-term humanitarian relief and longer-term rehabilitation and 
the contribution of the Rapid Reaction Mechanism in this regard.
 14.  Examining the Commission’s response to these two major disasters enables the 
audit to focus on three different implementing mechanisms:
(a) programme management units (PMUs) in Central America.
(b) contributions to a multi-donor trust fund in Indonesia.
(c) contributions to international organisations in Sri Lanka.
 15.  The key questions addressed by this report with the objective of assessing the 
Commission’s performance in managing rehabilitation aid following Hurricane 
Mitch and the tsunami are as follows. 
(a) Did the Commission adequately identify the rehabilitation needs of those 
affected by disasters?
(b) Do Commission procedures ensure that aid is implemented in a timely 
and efficient manner?
(c) Have projects achieved their expected results including satisfactory links 
with short-term relief and longer-term development? 
 16.  The audit was based on an examination of documentation, on interviews and 
on-the-spot visits. The systems for managing, monitoring and controlling aid were assessed and corroborated by visits to partners and projects in Nicara-
gua, Honduras, Indonesia and Sri Lanka. Table 4 shows projects and partners 
visited on the spot. Projects for on-the-spot visits were selected according 
to criteria of sector, location, amount, stage of implementation and type of 
partner in order to obtain a reasonable overall picture.CHAPTER 2
AUDIT SCOPE AND APPROACH
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13
Million euro
Partner Project descriptionCommission 
funding1 
NICARAGUA
PMU Reinforcing education sector (FOSED) 18.7
PMU Integrated project Estelí-Ocotal (PRIESO) 18.9
PMURehabilitation and strengthening of health services in 
Managua (FORSIMA)10.2
PMU Managua periphery integrated project (PROMAPER) 23.9
United Nations Water and sanitation inthe department of León 1.5
Total value of projects visited in Nicaragua 73.2
HONDURAS
PMU Water and sanitation in Tegucigalpa 26.7PMU Health and Education 23.1
PMUSupport to municipal management, housing and 
private sector (local development)23.9
Total value of projects visited in Honduras 73.7
INDONESIA
World Bank Reconstruction of Aceh Land Administration System 8.4
World Bank Kecamatan development project (KDP) 19.0World Bank Urban poverty project (UPP) 5.3
World BankCommunity-based settlement rehabilitation and 
reconstruction project (REKOMPAK)24.9
United Nations tsunami recovery waste management programme 4.2
Total value of projects visited in Indonesia 61.8
SRI LANKA
United Nations Immediate livelihood programme 5.4
Asian Develop-
ment BankRehabilitation of Matara-Battialoa road 39.4
International 
organisationCommunity livelihood development 9.9
United Nations Community access roads 29.9
United Nations Environmental remediation 9.9Total value of projects visited in Sri Lanka 94.5
1 For projects in Indonesia, the amount shown is 40 % of the financing by the Multi Donor Trust Fund 
which receives 40 % of its funding from the Commission.TABLE 4
REHABILITATION PROJECTS VISITED ON THE SPOT
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SECTION 3.1. – IDENTIFYING REHABILITATION 
NEEDS AND DESIGNING PROJECTS
 17.  The audit examined whether, in the wake of Hurricane Mitch and the tsunami, 
during the initial humanitarian relief phase, the Commission developed a  
strategy for the subsequent rehabilitation phase, which focused not only on 
the physical rehabilitation of basic infrastructure but also on wider needs15. 
The audit also examined whether this rehabilitation strategy was then trans-
lated into projects in a timely way, and the extent of beneficiary participation 
to aid sustainability.
TIMELY REHABILITATION STRATEGY INCORPORATING 
WIDER ISSUES 
 18.  Following Hurricane Mitch in October 1998, the Commission developed its reha-
bilitation strategy in less than six months. Its planned rehabilitation response 
was set out in the April 1999 Community action plan for the reconstruc-
tion of Central America16. This document was the basis for establishing the 
regional programme for the reconstruction of Central America (PRRAC). The 
programme focused on education and health, and aimed not only to reha-
bilitate damaged infrastructure but also to improve and transform services 
providing a basis for more sustainable development.
 19.  After the Indian Ocean tsunami of December 2004, the Commission’s planned 
rehabilitation response was also developed in less than six months and was 
set out in the May 2005 tsunami indicative programme17. The programme  
aimed to rebuild roads, houses, schools and hospitals and to restart liveli-hoods. It recognised that the impact of the tsunami went beyond the narrow 
coastal belt actually inundated by the wave and aimed to provide support 
for wider development to the whole population of the districts affected. It 
also recognised the need for sensitivity to long-standing conflicts between the government and separatist organisations in both Aceh and Sri Lanka. In Aceh, a 30-year conflict between the government of Indonesia and the Free 
Aceh Movement (GAM) had claimed 15 000 lives. In Sri Lanka there had been on-and-off civil war between the government and the Liberation Tigers of 
Tamil Eelam (LTTE) since 1983 leaving 60 000 people dead. At the time the 
tsunami struck in December 2004, after three years of ceasefire and the return 
of 400 000 people to their places of origin, there were still an estimated  
400 000 cases of displacement due to the conflict.15 Commission Communication 
COM(2001) 153 of 23.4.2001 on 
Linking Relief, Rehabilitation and 
Development – An assessment and Commission Communication 
COM(2005) 153 of 20.4.2005 on 
Reinforcing EU Disaster and Crisis 
Response in third countries.
16 COM(1999) 201 of 28.4.1999 – 
Communication of the Commission to 
the Council and European Parliament 
relating to a community action plan for 
the reconstruction of Central America. 
17 C(2005) 1490 of 23.5.2005 – tsunami 
Indicative Programme, Indonesia, 
Sri Lanka, Maldives (2005-2006).CHAPTER 3
OBSERVATIONS
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15
FASTER DESIGN AND BETTER BENEFICIARY PARTICIPATION 
FOR TSUNAMI THAN FOR HURRICANE MITCH
 20.  Following Hurricane Mitch, the initial strategy set out in the April 1999 Community 
action plan for the reconstruction of Central America was then translated into 
specific projects by a technical assistance office. This design process began in 
October 1999 and lasted for three years until October 2002, four years after 
Hurricane Mitch struck. Because of the length of this design process, some 
projects had to be redesigned by the programme management units (PMUs) 
responsible for implementation, further lengthening the time before projects 
could begin. Furthermore, opting for 15 programme management units with no national counterparts reduced the link with national authorities during 
the design phase. 
 21.  In contrast, in Indonesia after the tsunami, the design process was more rapid. 
The first Steering Committee meeting of the Multi-Donor Trust Fund in May 2005 endorsed four project concept proposals for a total of some 150 million 
euro and detailed project proposals were then approved for all four projects 
by August 2005. One of the main reasons for the Commission’s decision to 
channel its aid through the Multi-Donor Trust Fund was to enhance coordi-
nation. The Multi-Donor Trust Fund only approved projects which had previ-
ously been screened by the government agency responsible for coordinating 
the reconstruction effort. In addition, projects have frequently incorporated a participatory planning approach in order to ensure that real needs are  
addressed and to enhance the prospects of sustainability of projects.
 22.  Similarly, in Sri Lanka, the design phase was more rapid, and agreements were 
signed by November 2005 for the first tranche of 45 million euro, channelled through international organisations. Also, as in Indonesia, the Commission 
worked through the coordinating mechanisms of the beneficiary country,  
though at district level, which it considered more effective, and projects  
frequently involved a participatory planning approach to aid sustainability. In contrast, there were delays in the design phase for the second tranche of 50 million euro in Sri Lanka due to serious political problems in the country. 
These funds were initially planned to be channelled through the Post tsunami Operational Management Structure (PTOMS) Trust Fund agreed in June 2005
18. 
In December 2005, however, the PTOMS was declared unconstitutional and 
following its failure the delegation started immediately redesigning.18 The Post tsunami Operational 
Management Structure (PTOMS) was 
a mechanism for allocating externally 
financed post-tsunami funds to the North East through a series of 
committees containing representatives 
from the Government (largely 
representing the Sinhalese population) 
the Liberation Tigers of Tamil Eelam (LTTE) and the Muslim community.
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SECTION 3.2. – IMPLEMENTATION OF AID
 23.  The audit examined whether the implementation of rehabilitation aid was suf-
ficiently rapid to meet the needs of those affected by disasters19 and whether 
the systems on which the Commission relied for monitoring efficiency of  
implementation and progress against plans enabled it to ensure sound finan-
cial management of aid20. 
FAST IMPLEMENTATION FOR INDONESIA, SLOW FOR SRI LANKA 
AND HURRICANE MITCH
 24.  After the lengthy project design phase in Central America, there were further 
delays during implementation, frequently linked to difficulties in finding  
satisfactory contractors or identifying suitable land (see Box 1).19 Council Regulation (EC) No 2258/96 
of 22 November 1996 on rehabilitation 
and reconstruction operations in 
developing countries (OJ L 306, 28.11.1996, p. 1).
20 Commission Communication 
COM(2005) 153 of 20.4.2005 on 
Reinforcing EU Disaster and Crisis Response in third countries.
EXAMPLES OF DELAYSBOX 1
In Nicaragua , a sewage works project did not start 
until 2006, i.e. more than seven years aft  er Hurricane 
Mitch, due to the long design phase, the need to 
redesign because of the unsatisfactory initial design 
and the diffi   culties in fi  nding a suitable contractor. 
Deadlines were extended for the programme 
management unit  responsible for the water and 
sanitation project in Honduras  due to diffi   culties 
in identifying suitable land, and for the programme 
management unit responsible for the health and 
education project in Honduras due to the lack of 
capacity of the implementing agency.In Sri Lanka , the Commission channelled 40 million 
euro through the Asian Development Bank  for the 
rehabilitation of national roads. Work on the A2 in 
the south only began in 2007 whilst the tender for 
work on the A4 in the east was still being evaluated 
in September 2007. Th  e completion of the 5 million 
euro project for developing livelihoods, implemented by a 
United Nations agency , was delayed by the 
deteriorating security situation and has been 
extended by one year to September 2008.
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17
 25.  Of the different responses, that of the Multi-Donor Trust Fund in Indonesia was 
the fastest and, despite some delays, many outputs were achieved there in 
the two years following the tsunami. 
 26.  In Sri Lanka, progress has been slow. There have been delays on the rehabilitation 
of national roads funded through the Asian Development Bank. Furthermore, 
as a consequence of the need to redesign (see paragraph 22), work on projects 
implemented by United Nations agencies was only just beginning in the sec-
ond half of 2007. There have been further delays due mainly to difficulties 
in recruiting staff. Consequently, almost three years after the tsunami, work 
was only just beginning on the projects for environmental remediation and community roads implemented by United Nations agencies.
Work in progress on the A2 national road in Sri Lanka 
Source : ECA.
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18
NEED TO REINFORCE SUPERVISORY SYSTEMS 
TO ENSURE EFFICIENCY
 27.  In Central America rehabilitation projects were implemented through programme 
management units, and the delegation generally exercised close monitoring and control of expenditure. However, the Commission did not ensure that 
comparative or standard cost information was available to monitor and dem-
onstrate the efficiency of implementation (see Box 2). Also, for some projects, 
such as water and sewage works, the Commission did not ensure that clearly 
quantified output targets were developed to assess whether planned outputs were achieved. Furthermore, the planned external mid-term evaluation of the 
regional programme for the reconstruction of Central America (PRRAC) was 
not carried out.
The unit costs of comparable activities within the regional programme for the reconstruction of 
Central America  (for example cost per house, per 
cubic metre of water storage, per latrine, per metre 
of sewerage and water piping) are not systematically calculated and compared by the delegation so that significant variations can be followed up, justified 
and explained. This is despite indications of a wide range of unit costs of activities. For example, 
the 
programme management unit  responsible 
for the project for the periphery of Managua 
paid 7 000 euro per house to a United Nations 
agency, whilst the programme management unit responsible for the municipal management project 
in Honduras was able to build houses for just 
2 900 euro each by involving the beneficiaries in 
construction teams.The reports of the 
Multi-Donor Trust Fund  in 
Indonesia do not link project outputs with the 
corresponding costs and consequently provide 
no basis for assessing cost-effectiveness or for 
benchmarking. 
In Sri Lanka  the delegation awarded projects totalling 
some 40 million euro to United Nations agencies . 
On the basis of a broad assessment the delegation 
considered this approach preferable to using private 
contractors or non-governmental organisations. In 
order to demonstrate the effi   ciency of the chosen 
approach, unit costs such as the cost per kilometre of the roads built by the United Nations agency 
through community contracts (taking into account 
local conditions) could be monitored and compared 
with the costs of alternative mechanisms.LACK OF COMPARATIVE OR STANDARD COST INFORMATION BOX 2
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19
 28.  In Indonesia, the Multi-Donor Trust Fund receives 40 % of its funds from the 
Commission and a further 50 % from EU Member States. Most of the projects 
funded by the Multi-Donor Trust Fund are managed by the World Bank which 
did not systematically share with the Steering Committee internal monitor-
ing reports following field visits to projects. The annual published progress reports of the Multi-Donor Trust Fund did not provide a complete and bal-
anced view of the state of implementation of projects, but instead highlighted 
progress whilst not mentioning backlogs. The Commission and other donors 
succeeded in improving the quality of information by obtaining an in-depth 
progress report for the period up to December 2006 and subsequent half  year periods. As was the case following Hurricane Mitch, comparative cost 
information was not available and clearly quantified output targets were not 
developed for some projects, such as the urban poverty project, for which a 
list of total needs was provided which exceeded the funding available.
 29.  In Sri Lanka, for projects implemented by one United Nations agency, the Com-
mission did not ensure that comparative cost information was available to monitor and demonstrate the efficiency of implementation. Similarly, the  
Commission did not ensure that clearly quantified output targets were devel-
oped for projects being implemented by United Nations agencies, to assess 
whether planned outputs have been achieved. Moreover, for these projects, 
the delegation had not yet established procedures for approving the design of planned works and for accepting finished works.
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20
SECTION 3.3. – ACHIEVEMENT OF RESULTS
 30.  The audit examined whether expected outputs were achieved with adequate vis-
ibility and whether projects met the needs not only of those directly affected 
by Hurricane Mitch and the tsunami but also of the wider population. It also examined whether rehabilitation aid formed an effective link between initial 
short-term humanitarian relief on the one hand and longer-term development 
aid on the other
21. The extent of ownership and plans for future funding were 
also examined in order to assess the prospects for sustainability. 21 Regulation (EC) No 2258/96.
The programme management units  which 
implemented the PRRAC in Nicaragua  have, 
among other actions, constructed or rehabilitated 
139 schools, over 1 050 houses, fi  ve health centres, 
a health authority headquarters, drinking water and sewage works including wells, water storage and latrines. In 
Honduras  outputs included drinking water 
and sewage works, 1 280 new and 200 rehabilitated houses, and 336 new or rehabilitated schools and 
health centres. 
By the end of 2006 the Multi-Donor Trust Fund in 
Indonesia had supported the construction or the rehabilitation of 2 100 houses, 1 900 km of village 
roads, 240 schools, 118 community centres, 40 health 
centres and 680 clean water works. However, the 
Commission’s decision to channel its funding through the Multi-Donor Trust Fund reduced 
the EU’s visibility in the eyes of benefi  ciaries and 
donors. 
In 
Sri Lanka , by the second half of 2007, outputs were 
still limited as work was only just commencing on the national and community road projects implemented by the 
Asian Development Bank and a  United 
Nations agency . About 100 livelihood activities 
were underway or completed in the framework of 
the livelihood development projects. Almost half 
of the planned rubble collection had taken place in 
the framework of the environmental remediation programme but the construction of landfill sites 
and recycling centres had not begun due to delays 
in identifying suitable locations.OUTPUTSBOX 3
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21
Water storage in Nicaragua
Source : ECA.MANY USEFUL OUTPUTS ACHIEVED
 31.  Despite the difficulties in comparing achievements with planned targets (see 
paragraphs 27 to 29), projects funded by the Commission have neverthe-
less produced many outputs in Central America and Indonesia (see Box 3). However, the Commission and its partners in some cases did not generate 
sufficient information — such as comparative cost information — to help  
demonstrate whether these outputs represented an efficient use of funds  
(see paragraphs 27 to 29). In Sri Lanka, due largely to the renewed conflict 
(see paragraphs 22 and 26) there were very few outputs by the second half of 2007.
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22
 32.  After both disasters there were significant price increases due to increased 
demand for labour, plant and materials. For projects without clearly quanti-
fied output targets the impact of inflation could not be measured, but where 
clear targets had been set there have been insufficient funds to carry out all 
activities initially intended (see Box 4). 
 33.  The achievement of project results depends not only on producing outputs, but 
also on ensuring that these outputs are useful to beneficiaries. In Indonesia, 
the Commission has recognised the need to enhance the utility of the houses 
funded by the Multi-Donor Trust Fund by providing the necessary supporting infrastructure, particularly for the supply of drinking water. In all three coun-
tries visited, projects did not aim simply to replace damaged infrastructure 
and to assist the directly affected population (see paragraphs 18 and 19).  
Instead, projects consisted largely of development rather than rehabilitation 
activities and beneficiaries included the wider population (see Box 5). 
The programme management unit  responsible 
for improving health services in Nicaragua  had 
insuffi   cient funds to construct the planned health 
centre at San Rafael del Sur. Th  is was due to price 
increases for labour and materials which had more than offset the additional local funding made available from the strengthening of the euro against 
the Nicaraguan córdoba.
Th e 
Multi-Donor Trust Fund  in Indonesia  planned 
to construct up to 10 000 houses and repair a further 
15 000. However, these targets have been reduced 
to 6 000 and 8 400 houses respectively due to price increases.In 
Sri Lanka , due to price increases, funds were 
insuffi   cient to cover all roads and activities initially 
planned in the framework of the road rehabilitation 
project implemented through the Asian Development 
Bank . Consequently, some 8 million euro of 
planned capacity building and road construction activities were dropped and additional funding of 13 million euro was transferred in from another road rehabilitation programme in order to meet 
the higher than expected costs of construction. Th  e 
growing strength of the euro against the Sri Lankan 
rupiah in 2006 and 2007 is expected to off  set the 
impact of any further price increases. IMPACT OF INFLATION ON OUTPUTSBOX 4
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23
BOX 5
PROJECTS NOT SIMPLY REPLACING DAMAGED INFRASTRUCTURE
Th e education project in Nicaragua  and the water 
and sanitation project in Honduras  mainly addressed 
needs which existed prior to Hurricane Mitch. 
None of the health centres built by the programme 
management unit  responsible for the health project 
in Nicaragua were to replace those which had been destroyed or severely damaged by Hurricane Mitch. Similarly most houses constructed through programme management units were not built to 
replace those destroyed by the hurricane. Instead, 
benefi  ciaries were selected on the basis of poverty 
and vulnerability. Th  e old town hall in Sandino had 
not been destroyed by Mitch, but a new town hall was built because the infl  ux of refugees from Mitch put 
greater demands on the municipal administration. In 
Indonesia , the Multi-Donor Trust Fund  fi nanced 
a 50 million euro project to develop sub-districts (the 
Kecamatan Development Project). Out of 221 sub-
districts covered by the project, 134 (over 60 %) were 
not directly aff  ected by the tsunami. 
In Sri Lanka  some 70 million euro was allocated to 
the rehabilitation of national and rural roads through projects managed by the 
Asian Development Bank  
and a United Nations agency . Th ese roads were in 
a poor state of repair before the tsunami. Th  e waste 
management project implemented by a United 
Nations agency covers the whole district of Ampara and not just the directly aff  ected coastal part.
Source : ECA.House in Aceh funded by the Multi-Donor Trust Fund 
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24
CONTRASTING LINKS WITH PRECEDING HUMANITARIAN AID
 34.  There was a weak link between initial humanitarian relief and subsequent reha-
bilitation aid following Hurricane Mitch in 1998 due to the long design process 
and subsequent delays regarding the rehabilitation response (see para-graphs 20 and 24).
 35.  Following the tsunami, the Commission’s response was more sensitive to the link 
between relief and rehabilitation and in Indonesia, in particular, a number 
of factors combined to strengthen this link:
(a) The relatively fast response of the Multi-Donor Trust Fund (see para-
graph 25) enabled some rehabilitation projects to provide a link with  
earlier Directorate-General for Humanitarian Aid (ECHO) humanitarian  
projects. For example ECHO provided temporary shelters whilst the Multi-
Donor Trust Fund then followed up this activity by building permanent 
housing.
(b) The long duration of ECHO’s humanitarian intervention until mid-2007 
helped the link between relief and rehabilitation, particularly as it  
included short-term rehabilitation, such as the construction of boats  
and a wharf at Lampuuk in Aceh. 
(c) The Rapid Reaction Mechanism funded activities which helped link  
relief with rehabilitation, such as the provision of satellite imagery. It  
also financed mediation efforts between the government of Indonesia  
and the Free Aceh Movement (GAM), which led to a peace agreement  
in August 2005, strengthening the foundations for rehabilitation and  
longer term development.
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25
 36.  Nevertheless, the Multi-Donor Trust Fund has addressed with delay the key area 
of restoration of livelihoods lost in the tsunami. It was not until May 2007 
that the Multi-Donor Trust Fund earmarked 50 million euro for economic  
development and livelihoods. Although many people have been employed 
on Multi-Donor Trust Fund projects this has been on a short-term basis only and most skilled workers come from outside Aceh.
ECHO project to restore livelihoods of fishermen in Aceh 
Source : ECA.
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26
 37.  In Sri Lanka, ECHO also stayed until mid-2007 and the Rapid Reaction Mecha-
nism funded a 2 million euro quick recovery project to clear debris and  
improve drainage. However, despite these measures, the link between relief 
and rehabilitation was nevertheless tenuous because ECHO had concentrated 
its humanitarian activities in the north and east which subsequently became largely inaccessible due to the escalation of the conflict. Consequently reha-
bilitation activities could not be implemented in many areas where ECHO  
activities had previously been carried out. Moreover, the Commission chose 
not to follow up the provision of transitional shelters with the construction 
of permanent housing because the tsunami housing sector was comparatively over-funded by other donors.
STRONG LINK WITH LONGER-TERM DEVELOPMENT
 38.  The Commission’s response strategy following both disasters was not simply to 
reconstruct damaged infrastructure and restore livelihoods for those directly affected by the disasters, but also to address longer-term development needs, 
and not simply of those directly affected by the disaster, but of a wider  
population (see paragraphs 18, 19 and 33). This wider development orienta-
tion has been implemented in practice. This approach was consistent with 
national strategies and therefore appreciated by beneficiary governments which emphasised the importance of 'transformation' following Hurricane  
Mitch and 'building back better' following the tsunami. For example, the Sri 
Lankan government’s December 2006 report on post-tsunami recovery com-
mended those partners who targeted whole districts and not just the coastal 
parts directly affected by the tsunami.
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27
CONCERNS OVER THE SUSTAINABILITY OF PROJECTS
 39.  After Hurricane Mitch, the implementation of the Commission’s rehabilitation 
response in Central America through programme management units without 
a national counterpart now appears inconsistent with the emphasis on own-ership in current development policy
22. Consequently there is a risk of low 
sustainability due to lack of involvement of local institutions which some  
projects tried to address by building in local ownership during project imple-
mentation. Nevertheless, beneficiary communities were not directly involved 
in building health centres and schools , and the sustainability of water and 
sewerage projects will depend on the establishment of effective charging  
mechanisms and of national policies in this area.22 The European Consensus on 
Development jointly adopted in 
December 2005 by the Council and Member States, the Commission and 
the Parliament (OJ C 46, 24.2.2006, 
p. 1) states that a common principle 
of development cooperation is the 
ownership of programmes by partner 
countries. The Paris Declaration on 
Aid Effectiveness of March 2005 signed by Ministers of Developed 
and Developing Countries similarly 
affirms a commitment to aligning aid 
with partner countries’ systems and 
procedures and helping to strengthen their capacities. 
Newly constructed school in Honduras 
Source : ECA.
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28
 40.  In contrast, in Indonesia following the tsunami, the national agency responsible 
for coordinating the reconstruction effort screened all project proposals of 
the Multi-Donor Trust Fund and was also co-chair. Furthermore, projects also adopted a participatory planning approach to ensure they met local priori-
ties. Working in this way with the beneficiary population has enhanced the 
prospects of sustainability, particularly given the peace agreement to which 
the Commission contributed by funding mediation efforts. Nevertheless,  
continued government support and sustainable financing remain sensitive 
issues.
 41.  Similarly, in Sri Lanka, there was considerable consultation with the local popu-
lation. Nevertheless, the sustainability of the waste management project,  
implemented by a United Nations agency, will depend on the establishment 
of an effective charging mechanism. The sustainability of national roads,  
implemented through the Asian Development Bank, will depend on the cor-rect functioning of the newly established roads maintenance fund. Regarding 
the sustainability of local roads, implemented by a United Nations agency, 
this will depend on the quality of construction. Whilst Commission financed 
projects provide a concrete framework for the different ethnic communities to 
work together, the continued conflict in Sri Lanka jeopardises all the efforts 
undertaken to ensure the technical and financial sustainability of projects.
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29
Construction of a local road using community labour in Sri Lanka 
Source : ECA.
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CHAPTER 4
CONCLUSIONS AND RECOMMENDATIONS
 42.  The Commission used three different implementing mechanisms to deliver its 
rehabilitation aid response following Hurricane Mitch and the tsunami (pro-
gramme management units in Central America, contributions to a Multi-Donor Trust Fund in Indonesia and contributions to international organisations in Sri 
Lanka). Table 5 shows the Commission’s performance in these three locations 
regarding the three audit questions. The choice of implementing mechanism 
is not the only factor influencing performance as was clearly demonstrated by 
the example of Sri Lanka where the renewal of conflict following the tsunami 
has slowed the pace of rehabilitation and limited its geographical scope.
SUMMARY OF STRENGTHS AND WEAKNESSESTABLE 5
Audit 
questionCriteriaCentral America 
following 
Hurricane MitchIndonesia 
following 
tsunamiSri Lanka 
following 
tsunami
Identifying 
needsTimely strategy incorporating 
wider issues++ +
Timely design with benefi  ciary 
participation– + + – 1
Implement-ing aidTimely implementation
–+ –  1
Monitoring of effi   ciency – 2– 2– 2
Achievement 
of resultsAchieving useful outputs ++ –  1
Link with humanitarian relief –+ –  1
Link with longer-term 
development++ +
Prospects for sustainability –+ –  1
+ = strength; – = weakness
1 Linked to Conflit in the Country
2 Relates principally to the collection of comparative cost information and clearly defined output targets.
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31
Did the Commission adequately identify the rehabilitation needs of those 
affected by disasters?
 43.  Concerning the identification of needs and project design, in the wake of both 
disasters the Commission rapidly developed a strategy which was sensitive 
to the needs of a wider population than those whose assets were damaged or 
destroyed by the disaster. Following the tsunami the Commission designed 
projects more rapidly than after Hurricane Mitch and with greater beneficiary 
participation to aid sustainability (see paragraphs 17 to 22).
RECOMMENDATION 1
The Commission should continue to build on its approach adopted after 
the tsunami which enables the rapid design of rehabilitation projects and 
involves beneficiaries in order to enhance ownership and sustainability.
Do Commission procedures ensure that aid is implemented in a timely and  
efficient way?
 44.  Implementation has been most rapid in Indonesia, whilst in Sri Lanka little has so 
far been achieved largely due to the renewal of conflict. For the tsunami, the 
Commission did not address all key weaknesses in the systems for monitor-
ing and supervising the efficiency of rehabilitation aid already observed in 
the case of Mitch. In particular, it did not ensure for all projects that clearly quantified output targets were developed and that systems generated suf-
ficient information to demonstrate the efficiency of implementation (see  
paragraphs 23 to 29).
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32
RECOMMENDATION 2
In order to improve the supervision of funds, the Commission should con-
tinue its efforts, in full cooperation with other donors, to improve the  transparency of Multi-Donor Trust Fund reporting in Indonesia and should 
establish independent quality review of project designs and acceptance 
of finished works for United Nations organisations managing EU funds in 
Sri Lanka.
RECOMMENDATION 3
The Commission should ensure that comparative cost information is avail-
able to monitor and demonstrate the efficiency of project implementation, 
and that clear project targets are developed in order to be able to assess 
whether planned outputs have been achieved.
Have projects achieved their expected results including satisfactory links 
with short-term relief and longer-term development?
 45.  Concerning the achievement of results, considerable useful outputs have been 
achieved in Central America and in Indonesia although price increases fol-
lowing both disasters have reduced the quantity of outputs. In Indonesia,  
visibility in the eyes of beneficiaries and donors was reduced because funds were channelled through the Multi-Donor Trust Fund. Following both Hur-
ricane Mitch and the tsunami, beneficiaries included not just those directly 
affected by the disaster, but also the wider population. Whilst the link with 
preceding humanitarian aid has been variable, the link with longer-term  
development has been strong which enhances the prospects of sustainabil-
ity. Nevertheless, continued government support and sustainable financing 
remain sensitive issues (see paragraphs 30 to 41).
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33
RECOMMENDATION 4
The Commission should better anticipate significant price increases fol-
lowing natural disasters in order to manage them, for example through increased use of community labour and local resources.
RECOMMENDATION 5
Adequate visibility for the EU should be ensured, particularly when projects 
are implemented through international organisations.
RECOMMENDATION 6
Starting at the design phase of projects, the Commission should take  
appropriate and timely action in order to ensure the sustainability of  
projects
  This report was adopted by the Court of Auditors in Luxembourg at its meeting 
of 12 June 2008.
For the Court of Auditors
Vítor Manuel da Silva Caldeira
President
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THE COMMISSION’S REPLIES 
EXECUTIVE SUMMARY
III. 
The circumstances in the aftermath of Hurri-
cane Mitch and the tsunami were different. As 
regards Hurricane Mitch, a large consultation process took place involving all stakehold-ers, both public and private, in the design as well as in the implementation of the regional 
programme for the reconstruction of Central 
America (PRRAC). Actions following Hurricane Mitch gave rise to substantial involvement of 
civil society. 
Drawing on lessons learned from the consulta-
tion process from Hurricane Mitch, the response 
provided to the tsunami was well coordinated 
at international level, and built quickly on the success of the humanitarian phase and the  
rapid inception of national reconstruction  
plans. In particular, the creation of the Multi-
Donor Trust Fund in Indonesia, led by the EU, 
was instrumental in facilitating donor coordi-nation and pooling of funds, to quickly launch 
the recovery process with sound policies (
1).
IV. 
In Central America, some activities, mainly for smaller actions, were launched in 2001. All  
projects included output estimates and fore-saw periodical reports to monitor progress in 
order to undertake the corresponding correc-tive actions. Monitoring, as well as intermedi-ate and final evaluations, were carried out as planned.
1 The Multi-Donor Trust Fund for the Reconstruction of Aceh 
and Nias (MDTF) is funded by 15 international and bilateral organisations, with 90 % of the funds provided by the EU (the European Commission and Member States).
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35
S 
As regards the tsunami, both in Indonesia  
and Sri Lanka, expected outputs and cost  
assessments are included in appraisal docu-ments for each project and in the contractual 
arrangements with implementing partners. The efficient use of funds is continuously moni-tored by the Commission. Final actual costs  are established at the end of the project as  resulting from a bidding process and other  
needs or adjustments required during project implementation. The Commission will include 
assessments of cost effectiveness for each  
project in mid-term and final evaluations.
In Sri Lanka, further to the visit of the Court, 
the Commission has reinforced independent  
quality control before acceptance of finished works.
V. 
The PRRAC projects were designed and imple-mented following an approach which took  into consideration not only infrastructure  
outputs but also awareness raising and train-
ing activities in order to strengthen national 
and municipal institutions and beneficiary  
organisations. In some cases the PRRAC also  
contributed to reinforcing decentralisation ini-
tiatives by developing management capacities of local actors to overcome regional inequi-
ties (i.e. health and education projects in El  Salvador).
In the case of the tsunami, the Commission  
response was an integral part of overall  
national reconstruction plans. Under the con-
cept of ‘building back better’, maintenance  
and sustainability of reconstruction projects  should be ensured, in the case of housing and livelihood recovery by private beneficiaries,  and in the case of public infrastructures and  
services by commitments in the budgets of  
local and central governments.VI. 
The Commission’s replies to the Court’s spe-
cific recommendations are provided in para-
graphs 42 to 45.
CHAPTER 1. INTRODUCTION
4. 
The regional programme for the reconstruc-
tion of Central America (PRRAC) was the main 
response that the Commission provided follow-
ing Hurricane Mitch and was complemented by 
some reorientations in the bilateral coopera-
tion programmes, increases in allocations to  
NGOs’ cofinancing and additional support in  
the context of food security.
CHAPTER 3. OBSERVATIONS
20. 
The implementation through project manage-
ment units was the result of an ad-hoc agree-
ment with the beneficiary countries, taking  
account of the exceptional circumstances  
and the lack of local capacity to take on the  
tasks involved. The PRRAC has proved that it 
is possible to achieve a high level of participa-tion of national institutions and beneficiaries, 
without having the implementation of the pro-gramme directly or solely managed by them. In the PRRAC, the implementation of projects through programme management units (PMUs) eliminated some of the political tensions and rivalries as well as administrative shortcom-ings which usually hinder projects with large infrastructure components.
24. 
The time required for project design and imple-mentation is explained by the complex nature of a project covering multi-dimensional recov-ery needs. Some activities, mainly for smaller PRRAC actions, were progressively launched  from late 2001. 
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36
26. 
The gradual intensification of the conflict in  
Sri Lanka has provided a very difficult context to operate in, particularly as regards making  
progress in reaching local communities.
Box 1
In spite of the delays mentioned about the  PRRAC in Honduras, the health and education 
projects achieved their goals and, for instance, contributed to improving the official school  
system.
27. 
The Commission notes the usefulness of com-paring unit costs in order to carry out a better 
budget preparation and expected cost-effec-tiveness analysis, but wishes to stress the  
difficulty of applying such a tool in various  
reconstruction contexts and in different coun-
tries with diverse socio-economic patterns. 
Each large PRRAC project has been evaluated. 
While no specific mid-term evaluation of the 
PRRAC was undertaken, a more general evalu-
ation report Evaluation des actions de réha-
bilitation et de reconstruction financées par la  
Communauté Européenne dans les pays ACP/
ALA/MED/TACIS , which covered PRRAC, was  
published in 2003. These evaluations contain recommendations that have been taken into  consideration. 
The final overview of comparative or standard 
cost information will be part of PRRAC evalu-
ation planned to be carried out towards the  
end of 2008.28. 
At the Commission’s and other donors’ request, the World Bank agreed from 2007 to share sys-
tematically with the MDTF Steering Committee 
its internal monitoring reports following field visits.  
For all MDTF projects, the analysis of reasona-
bleness of the proposed output and estimated 
costs are examined by the MDTF Steering  Committee during the appraisal stage. After  
approval, the contractual arrangements with  
implementing partners always include esti-
mates of costs and corresponding outputs/
results. For each financed project, a financial 
report from the implementing agency to the  
trustee enables the trustee to track any devia-tion and take corrective actions, in line with its 
contractual obligations. Some projects, such as 
the urban poverty project, allocate grants to 
communities that should identify and prioritise 
the particular small works to be undertaken,  subject to specific review and acceptance pro-
cedures. Final actual costs of outputs are cal-
culated at the end of the project. 
29. 
Further to the visit of the Court, the Com-mission will include an assessment of cost  effectiveness in the final evaluation. The Com-mission has reinforced independent quality  control before acceptance of finished works  
(i.e. a supervision engineer for access roads  
and community infrastructure).
Box 2
The wide geographical dispersion of interven-tions in the PRRAC and the different socio-eco-nomic conditions made some cost comparisons less relevant, as for example houses in two  
different countries and in rural and urban  
settings. 
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37
In the case of the PRRAC in Ciudad Sandino  
(Managua), it was agreed that each beneficiary 
family should provide one full-time worker for the construction works of its house, as well as 
100 hours of community labour. 
As regards the tsunami, both in Indonesia and 
Sri Lanka, expected outputs and cost assess-ments are included in appraisal documents and in the contractual arrangements with interna-tional organisations and/or implementing part-ner agencies. Final actual costs are established at the end of the project as resulting from a  bidding process and other needs or adjust-ments required during project implementation. The Commission will include assessment on the cost effectiveness in the final evaluation.
31. 
In Central America, the individual intermedi-ate and final evaluations of PRRAC projects  covered the information needed as regards  efficient use of funds. This aspect will also be covered in the foreseen final evaluation of the PRRAC as a whole in 2008. For Indonesia and 
Sri Lanka, the efficient use of funds is being  
continuously monitored and will be a specific 
topic for the mid-term evaluations planned in 
2008.
See also replies to paragraphs 27 to 29 and  
Box 2.Box 3
The Commission in its role of co-chair of the  Steering Committee has enhanced the visibil-ity of the EU in Indonesia through its strategic  
influence  in the MDTF, as well as linking the  
reconstruction to the complementary initia-tives in support of the Aceh peace process,  in full dialogue and as a privileged partner  of Indonesian authorities at the central and  local levels. The Commission considers that its constructive role of coordination, as leading  donor in the Steering Committee, has created very positive visibility and high appreciation with beneficiaries as well as implementing  partners.
Box 4
The Court’s observation on the planned health 
centre at San Rafael del Sur is correct. How-
ever, the community already has a functional 
health centre serving the local population. For 
these reasons, it was concluded that a supple-mentary centre was no longer a priority.
The Commission contributes to the overall  
housing reconstruction plan of the government 
of Indonesia. Since the visit of the Court, the 
revised targets related to housing funded by 
the MDTF have been updated to 8 000 new  houses and 7 000 repaired houses. The shortfall 
of the MDTF housing is covered by government funding.
33. 
In the case of the Hurricane Mitch, the pro-gramme preparation phase took into con-sideration the general situation in Central  America, striking a balance between short to medium-term needs and longer-term develop-ment strategy.
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38
For the tsunami, both in Indonesia and Sri  
Lanka, the Commission support has been an  
integral part of national reconstruction and  development plans to ensure ownership and  
sustainability in ‘building back better’. For  Sri Lanka, the donor community unanimously agreed that the assistance had to be conflict-sensitive and should benefit the most vul-nerable populations in the tsunami-affected  
areas.
Box 5
The MDTF response is consistent with national 
reconstruction plans which covered the whole 
of the Aceh province, due to the large number 
of displaced people, many of whom were trau-
matised and did not want to return to the  coastal area.
34. 
The time required for project design and  implementation following Hurricane Mitch is explained by the complex nature of a project 
covering multi-dimensional recovery needs  
(see replies to paragraphs 20 and 24).
36. 
In Indonesia, the focus was put on reconstruc-tion of infrastructure in a first phase, in accord-ance with the priority of needs as expressed by the national and local authorities. There existed a general consensus that, in order to ensure  
the sustainability of the livelihood recovery  
activities, those needed to be embedded in a locally-owned economic recovery strategy. The 
preparation of such a strategy was contingent 
upon political progress and the establishment 
of a provincial government which only took  place from 2007 onwards (after the Decem-ber 2006 Aceh local elections). On this basis, a project for an Economic Development Finance 
Facility (USD 50 million) was agreed in 2007.39. 
Actions in the health, education, local devel-opment, water and sanitation sectors often  
include an institutional strengthening com-
ponent for the national managing entities  with a view to promoting sustainable policies in these sectors. The first ex-post  evaluation  
reports for two projects in El Salvador and one in Honduras concluded that sustainability was achieved.
40.
Complete financing for Aceh reconstruction  is ensured by the budget of the government  of Indonesia.
CHAPTER 4. CONCLUSIONS 
AND RECOMMENDATIONS
42. 
For the tsunami, both for Indonesia and Sri  
Lanka, the Commission considers that the steps 
undertaken in relation to monitoring efficiency 
have resulted in improvements within the legal 
arrangements concluded with international  
organisations (see replies to paragraphs 27 to 
29 and Box 2). The Commission is continuing 
to work in this sense.
The Commission considers that the Court’s sum-
mary presented in Table 5 of the monitoring of efficiency does not take sufficient account of other criteria than the availability of compara-tive cost information and targets. The Commis-sion considers it to be too early to conclude  definitively on sustainability and will examine this issue in forthcoming evaluations. 
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39
Recommendation 1
The Commission agrees with the Court’s rec-
ommendation, which represents a very positive appreciation of the multi-donor coordinated  
approach followed for the tsunami, and will  endeavour to apply it whenever the precondi-tions exist.
44. 
In general, following a major disaster, there is 
need to strike a balance between providing a 
fast response and the appraisal of very detailed 
needs and unit cost estimates, considering that 
cost efficiency is mainly ensured by competi-
tive procurement. In the case of the tsunami  
response, expected outputs and cost assess-
ments are included in appraisal documents and in the contractual arrangements with imple-
menting partners. For some projects, precise 
works are identified and prioritised by local  
communities during implementation, and  
therefore clearly quantified outputs cannot be determined at the outset of the programmes. 
The efficient use of funds is continuously  
monitored by the Commission. An independ-
ent assessment on the cost-effectiveness for  
each project will be made in the mid-term and 
final evaluations. 
Recommendation 2
The Commission shares the views of the Court regarding transparency of MDTF monitoring  and considers that, in the case of Indonesia,  
it has taken steps, in cooperation with other  donors, to improve transparency (as demon-
strated by the availability of in-depth progress 
reports since December 2006). For Sri Lanka, since November 2007, the Com-
mission has reinforced the independent quality 
control before acceptance of finished works by 
contracting additional services for infrastruc-
ture projects.
Recommendation 3
The Commission notes the usefulness of com-
paring unit costs in order to carry out a better 
budget preparation and expected cost-effec-tiveness analysis, but wishes to stress the  
difficulty of applying such a tool in various  
reconstruction contexts and in different coun-
tries with diverse socio-economic patterns. 
The Commission will continue its efforts to  
specify project targets as clearly as possible.
45. 
In the Multi-Donor Trust Fund, much attention 
was given by the donors’ group to achieving 
visibility focused on results. The Commission considers that its constructive role of coordi-
nation, as co-chair of the Steering Committee, 
has created very positive visibility for the Euro-
pean Union and high appreciation among ben-
eficiaries as well as implementing partners. 
The Commission supports the concept of ‘build-
ing back better’ in reconstruction, that should reinforce ownership and sustainability.
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40
Recommendation 4
The Commission takes note of the recommen-
dation of the Court and will reflect about how 
best to deal with anticipating significant price 
increases following natural disasters, in full  cooperation with other donors and the authori-ties of the beneficiary country.
Recommendation 5
The Commission considers that visibility is a  very important topic which it always tries to  
enhance.
Recommendation 6
The Commission agrees that sustainability  issues should be addressed from the design  
phase. Risks, including sustainability issues,  are generally assessed in the design phase of 
the projects, and the Commission will endeav-
our to reinforce this aspect throughout project 
implementation. 
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COUR DES COMPTES EUROPÉENNEHow to obtain EU publications
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contact details by sending a fax to (352) 29 29-42758.European Court of Auditors
Special Report No 6 / 2008
European Commission rehabilitation aid following the tsunami and Hurricane Mitch
Luxembourg: Office for Official Publications of the European Communities2008 — 40 pp. — 21 x 29.7 cmISBN 978-92-95009-39-4
ed806970cover.indd   2 ed806970cover.indd   2 3/09/08   8:56:06 3/09/08   8:56:06
2008
EUROPEAN COURT OF AUDITORSEUROPEAN COMMISSION 
REHABILITATION AID FOLLOWING THE TSUNAMI AND HURRICANE MITCHEUROPEAN 
COURT OF AUDITORS
Special Report  No 6IN THIS REPORT, THE COURT ANALYSES THE EUROPEAN COMMISSION’S 
MANAGEMENT OF REHABILITATION AID AFTER TWO MAJOR NATURAL DISASTERS: HURRICANE MITCH IN 1998 AND THE 2004 TSUNAMI. 
THE COMMISSION’S COMBINED REHABILITATION AID OF 550 MILLION 
EURO AIMED TO RECONSTRUCT BASIC INFRASTRUCTURE AND  PROVIDE A BASIS FOR SUSTAINABLE DEVELOPMENT. THE COURT MAKES RECOMMENDATIONS WHICH COULD HELP THE EUROPEAN COMMISSION TO PROVIDE MORE EFFICIENT AND EFFECTIVE  
REHABILITATION AID IN THE FUTURE.
EN
QJ-AB-08-006-EN-C
ISBN 978-92-95009-39-4
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