Special Report No 6/2008#European Commission Rehabilitation Aid following the Tsunami and Hurricane Mitch
Date: 2008-06-12
Institutions: European Court of Auditors
Subjects: EU financing, Indian Ocean, Indonesia, Sri Lanka, aid system, aid to disadvantaged groups, economic reconstruction, humanitarian aid, natural disaster, opinion of the Court of Auditors

Q
J
-
A
B
-
0
8
-
0
0
6
-
E
N

-
C

EUROPEAN 
COURT OF AUDITORS

IN 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 

E U R O  A I M E D  TO  R E CO N S T R U C T  B A S I C  I N F R A S T R U C T U R E  A N D  

PROVIDE  A  BASIS  FOR  SUSTAINABLE  DEVELOPMENT. THE  COURT 

MAKES RECOMMENDATIONS WHICH COULD HELP THE EUROPEAN 

C O M M I S S I O N   TO   P R O V I D E   M O R E   E F F I C I E N T   A N D   E F F E C T I V E 

REHABILITATION AID IN THE FUTURE.

8
0
0
2

6
o
N

t
r
o
p
e
R

l

a
i
c
e
p
S

EUROPEAN COURT OF AUDITORS

EUROPEAN COMMISSION 
REHABILITATION AID FOLLOWING 
THE TSUNAMI AND HURRICANE MITCH

ISBN 978-92-95009-39-4

EN

ed806970cover.indd   1
ed806970cover.indd   1

3/09/08   8:56:05
3/09/08   8:56:05

 
 
 
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 Communities

2008 — 40 pp. — 21 x 29.7 cm

ISBN 978-92-95009-39-4

How to obtain EU publications
Our priced publications are available from EU Bookshop (http://bookshop.europa.eu), 
where you can place an order with the sales agent of your choice.

The Publications Offi  ce has a worldwide network of sales agents. You can obtain their 
contact details by sending a fax to (352) 29 29-42758.

ed806970cover.indd   2
ed806970cover.indd   2

3/09/08   8:56:06
3/09/08   8:56:06

Special Report No 6  

 2008

EUROPEAN COMMISSION
REHABILITATION AID
FOLLOWING THE TSUNAMI
AND HURRICANE MITCH

(pursuant to Article 248(4), second subparagraph, EC)

EUROPEAN COURT OF AUDITORS

ed806970inside.indd   1
ed806970inside.indd   1

3/09/08   9:13:23
3/09/08   9:13:23

EUROPEAN COURT OF AUDITORS 
12, rue Alcide De Gasperi
L – 1615 Luxembourg

Tel. : (352) 4398 45410
Fax : (352) 4398 46430
Mail : euraud@eca.europa.eu
Internet: http://www.eca.europa.eu

Special Report No 6  

 2008

A great deal of additional information on the European Union is available on the Internet.

It can be accessed through the europa server (http://europa.eu).

Cataloguing data can be found at the end of this publication.

Luxembourg : Office for Official Publications of the European Communities, 2008

ISBN 978-92-95009-39-4

© European Communities, 2008

Reproduction is authorised provided the source is acknowledged.

Printed in Belgium

ed806970inside.indd   2
ed806970inside.indd   2

3/09/08   9:13:23
3/09/08   9:13:23

CONTENTS 

Paragraph

I–VI 

1–11 

1–6 

7–11 

EXECUTIVE SUMMARY

CHAPTER 1. – INTRODUCTION

SECTION 1.1. – CONTEXT OF THE AUDIT

SECTION 1.2. – REGULATORY FRAMEWORK

12–16 

CHAPTER 2 – AUDIT SCOPE AND APPROACH

17–41 

17–22 
18–19 
20–22 

23–29 
24–26 
27–29 

30–41 
31–33 
34–37 
38 
39–41 

CHAPTER 3 – OBSERVATIONS

SECTION 3.1 – IDENTIFYING REHABILITATION NEEDS AND DESIGNING PROJECTS
TIMELY REHABILITATION STRATEGY INCORPORATING WIDER ISSUESI
FASTER DESIGN AND BETTER BENEFICIARY PARTICIPATION FOR TSUNAMI THAN FOR HURRICANE MITCH

SECTION 3.2 – IMPLEMENTATION OF AID
FAST IMPLEMENTATION FOR INDONESIA, SLOW FOR SRI-LANKA AND HURRICANE MITCH
NEED TO REINFORCE SUPERVISORY SYSTEMS TO ENSURE EFFICIENCY

SECTION 3.3 – ACHIEVEMENT OF RESULTS
MANY USEFUL OUTPUTS ACHIEVED
CONTRASTING LINKS WITH PRECEDING HUMANITARIAN AID
STRONG LINK WITH LONGER-TERM DEVELOPMENT
CONCERNS OVER THE SUSTAINABILITY OF PROJECTS

42–45 

CHAPTER 4 – CONCLUSIONS AND RECOMMENDATIONS

THE COMMISSION’S REPLIES 

ed806970inside.indd   3
ed806970inside.indd   3

3/09/08   9:13:23
3/09/08   9:13:23

 
EXECUTIVE 
SUMMARY

I.
F o l l o w i n g   t h e   I n d i a n   O c e a n   t s u n a m i   o f 
2 6   D e c e m b e r   2 0 0 4 ,   w h i c h   k i l l e d   o v e r 
200 000 people and caused damage of around 
10 billion euro, the Court of Auditors reported 
o n   t h e   C o m m i s s i o n ’ s   i m m e d i a t e   h u m a n i -
t a r i a n   a i d   r e s p o n s e   d e s i g n e d   t o   p r e v e n t   o r 
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 
t o   w h i c h   t h e   C o m m i s s i o n   c o n t r i b u t e d   s o m e 
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 
r e h a b i l i t a t i o n   r e s p o n s e   t o   H u r r i c a n e   M i t c h , 
which struck Central America in October 1998 
(see paragraphs 1 to 14).

II.
T h i s   a u d i t   a d d r e s s e s   t h e   f o l l o w i n g   t h r e e 
questions  with  the  objective  of  assessing  the 
Commission’s performance in managing reha-
b i l i t a t i o n   a i d   f o l l o w i n g   H u r r i c a n e   M i t c h   a n d 
the tsunami (see paragraphs 15 and 16).

(a)  Did  the  Commission  adequately  identify  the 
r e h a b i l i t a t i o n   n e e d s   o f   t h o s e   a f f e c t e d   b y 
disasters?

(b)  Do  Commission  procedures  ensure  that  aid 
i s   i m p l e m e n t e d   i n   a   t i m e l y   a n d   e f f i c i e n t 
manner?

(c)  Have projects achieved their expected results 
including  satisfactory  links  with  short-term 
relief and longer-term development?

ed806970inside.indd   4
ed806970inside.indd   4

3/09/08   9:13:24
3/09/08   9:13:24

5

EXECUTIVE 
SUMMARY

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 
b o t h   d i s a s t e r s   h a v e   r e d u c e d   t h e   q u a n t i t y   o f 
outputs.  Projects  have  generally  consisted  of 
development rather than rehabilitation activi-
ties and the links with preceding humanitarian 
a i d   h a v e   b e e n   v a r i a b l e .   T h e   s t r o n g   l i n k   w i t h 
longer-term  development  enhances  the  pros-
pects of sustainability, though project designs 
h a v e   n o t   s u f f i c i e n t l y   i d e n t i f i e d   s o u r c e s   o f 
finance  to  ensure  activities  continue  to  func-
t i o n   w h e n   p r o j e c t   f i n a n c i n g   e n d s   ( s e e   p a r a -
graphs 30 to 41).

VI.
On  the  basis  of  these  observations,  the  Court 
m a k e s   r e c o m m e n d a t i o n s   w h i c h   c o u l d   h e l p 
the Commission to provide more efficient and 
effective rehabilitation aid (see paragraphs 42 
to 45).

III.
Following  both  Hurricane  Mitch  and  the  tsu-
n a m i ,   t h e   C o m m i s s i o n   d e v e l o p e d   a   r e h a b i l i -
tation  strategy  in  less  than  six  months  which 
recognised  the  need  not  only  to  reconstruct 
d a m a g e d   i n f r a s t r u c t u r e ,   b u t   a l s o   t o   a d d r e s s 
l o n g e r - t e r m   d e v e l o p m e n t   a n d   t h e   n e e d s   o f 
t h o s e   n o t   d i r e c t l y   a f f e c t e d   b y   t h e   d i s a s t e r s . 
A f t e r   H u r r i c a n e   M i t c h ,   t h e   d e s i g n   p r o c e s s 
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 
c h a n n e l l e d   i t s   f u n d i n g ,   w a s   m o r e   r a p i d ,   a n d 
d e s i g n s   f o r   m a j o r   p r o j e c t s   w e r e   a p p r o v e d 
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.
I n   C e n t r a l   A m e r i c a ,   f o l l o w i n g   t h e   l e n g t h y 
d e s i g n   p r o c e s s   a f t e r   H u r r i c a n e   M i t c h ,   t h e r e 
w e r e   f u r t h e r   d e l a y s   i n   i m p l e m e n t a t i o n   d u e 
to  difficulties  in  finding  satisfactory  contrac-
tors  and  identifying  suitable  land.  The  imple-
mentation  of  the  Commission’s  rehabilitation 
r e s p o n s e   h a s   b e e n   m o s t   r a p i d   i n   I n d o n e s i a , 
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 
a d d r e s s e d   a l l   k e y   w e a k n e s s e s   i n   m o n i t o r i n g 
and supervision of the efficiency of rehabilita-
tion aid, although it did succeed in improving 
t h e   q u a l i t y   o f   m o n i t o r i n g   i n f o r m a t i o n   f r o m 
the Multi-Donor Trust Fund in Indonesia. In Sri 
L a n k a ,   a d e q u a t e   m o n i t o r i n g   and  supervision 
procedures for international organisations have 
not yet been established for all projects. After 
both disasters the Commission did not ensure 
t h a t   c l e a r l y   q u a n t i f i e d   o u t p u t   t a r g e t s   w e r e 
d e v e l o p e d   f o r   a l l   p r o j e c t s   a n d   t h a t   s y s t e m s 
g e n e r a t e d   s u f f i c i e n t   i n f o r m a t i o n   t o   m o n i t o r 
and demonstrate the efficiency of implementa-
tion (see paragraphs 23 to 29). 

ed806970inside.indd   5
ed806970inside.indd   5

3/09/08   9:13:24
3/09/08   9:13:24

CHAPTER 1
INTRODUCTION

SECTION 1.1. – CONTEXT OF THE AUDIT

1. 

2. 

On 26 December 2004 the Indian Ocean tsunami killed over 200 000 people 
a n d   c a u s e d   1 0   b i l l i o n   e u r o   w o r t h   o f   d a m a g e .   T h e   I n d o n e s i a n   p r o v i n c e   o f 
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.

The Court of Auditors’ Special Report No 3/2006 1 examined the Commission’s 
humanitarian aid response to the disaster. The Court was one of the first to 
p r o d u c e   a n   a u d i t   r e p o r t   o n   t h e   r e s p o n s e   t o   t h e   t s u n a m i   a n d   a t   t h i s   e a r l y 
time  focused  on  the  Commission’s  short-term  humanitarian  relief.  During 
i t s   d i s c u s s i o n   o n   t h i s   r e p o r t ,   t h e   C o m m i t t e e   o n   B u d g e t a r y   C o n t r o l   o f   t h e 
European Parliament expressed the wish for the Court to report on the sub-
sequent  longer-term  rehabilitation  phase 2  and  the  Council  welcomed  this 
suggestion 3.

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.

ed806970inside.indd   6
ed806970inside.indd   6

3/09/08   9:13:24
3/09/08   9:13:24

 
 
7

3. 

4. 

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. 

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.

T A B L E   1

PRRAC INTERVENTIONS BY COUNTRY AND PARTNER

Large projects 
managed by 
15 programme 
management 
units (PMUs)

Medium projects 
managed 
by public 
institutions and 
United Nations

Million euro

Small NGO 
projects

Total

111.0

72.9

24.5

13.6

222.0

5.2

5.1

0.9

2.7

13.9

3.1

5.3

3.1

2.3

119.3

83.3

28.5

18.6

13.8

249.7

Country

Honduras

Nicaragua

El Salvador

Guatemala

Total

Source: PRRAC annual report 2005.

ed806970inside.indd   7
ed806970inside.indd   7

3/09/08   9:13:24
3/09/08   9:13:24

 
 
 
8

5. 

6. 

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 effort 5, 
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 department 6.

The Commission’s aid for Sri Lanka after the tsunami was channelled through 
i n t e r n a t i o n a l   o r g a n i s a t i o n s ,   m a i n l y   t h e   A s i a n   D e v e l o p m e n t   B a n k   a n d   t h e 
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 %).

T A B L E   2

EU BUDGET CONTRIBUTIONS TO THE MULTI-DONOR TRUST FUND 
IN INDONESIA

Contribution

Source

Date agreed

Total

Million euro

Rapid Reaction 
Mechanism

Rapid Reaction 
Mechanism

First contribution

Second contribution

Third contribution

Cooperation Asia and 
Latin America

Fourth contribution

Rehabilitation

Total

12.08.2005

29.08.2005

21.09.2005

16.12.2005

25.04.2006

3.5

29.9

37.7

13.9

117.5

202.5

ed806970inside.indd   8
ed806970inside.indd   8

3/09/08   9:13:24
3/09/08   9:13:24

 
 
9

SECTION 1.2. – REGULATORY FRAMEWORK

7. 

The rehabilitation regulation 7 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:

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).

(a)  initial  short-term  humanitarian  relief  which  aims  to  save  the  lives  and 
a d d r e s s   t h e   i m m e d i a t e   n e e d s   o f   i n d i v i d u a l s   a f f e c t e d   b y   a   c r i s i s ,   f o r 
e x a m p l e   b y   t h e   p r o v i s i o n   o f   e m e r g e n c y   f o o d   a i d ,   w a t e r ,   s h e l t e r   a n d 
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.

T A B L E   3

PROJECTS FUNDED IN SRI LANKA

Decision

Budget

Partner

Title

2005
45 million 
euro

Cooperation 
Asia and 
Latin America

United Nations 
agency

Immediate liveli-
hood programme

Asian 
Development Bank

Rehabilitation 
Matara-Batticaloa 
road

2006
50 million 
euro

Rehabilitation

International 
organisation

Community 
livelihood 
development

United Nations 
agency

United Nations 
agency

Community access 
roads

Environmental 
remediation

Total

Million euro

Amount

5.4

39.4

9.9

29.9

9.9

94.5

ed806970inside.indd   9
ed806970inside.indd   9

3/09/08   9:13:24
3/09/08   9:13:24

 
10

8. 

9. 

10. 

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. 

8  COM(96) 153 of 30.4.1996 on Linking 

Relief, Rehabilitation and Development 

(LRRD).

The regulation for cooperation with Asia and Latin America 9 also includes pro-
v i s i o n s   f o r   f i n a n c i n g   r e h a b i l i t a t i o n   f o l l o w i n g   d i s a s t e r s 1 0.   T h e   E u r o p e A i d 
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. 

The Rapid Reaction Mechanism, set up by Council Regulation (EC) No 381/2001 11 
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.

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.

ed806970inside.indd   10
ed806970inside.indd   10

3/09/08   9:13:24
3/09/08   9:13:24

 
 
 
11

11. 

From 2007, the Development Cooperation Instrument 12, to be implemented by 
EuropeAid,  and  the  Stability  Instrument 13,  to  be  implemented  by  External 
R e l a t i o n s   D G ,   h a v e   r e p l a c e d   t h e   e x i s t i n g   r e g u l a t i o n s .   T h e y   b o t h   i n c l u d e 
streamlined procedures for responding to disasters 14. 

Waste water treatment plant under construction in Honduras

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.

Source: ECA.

ed806970inside.indd   11
ed806970inside.indd   11

3/09/08   9:13:25
3/09/08   9:13:25

 
CHAPTER 2
AUDIT SCOPE AND APPROACH

12. 

13. 

14. 

15. 

16. 

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. 

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.

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.

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? 

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.

ed806970inside.indd   12
ed806970inside.indd   12

3/09/08   9:13:27
3/09/08   9:13:27

 
 
 
 
 
13

Million euro

Commission 
funding1 

18.7

18.9

10.2

23.9

1.5

73.2

26.7

23.1

23.9

73.7

8.4

19.0

5.3

24.9

4.2

61.8

5.4

39.4

9.9

29.9

9.9

94.5

T A B L E   4

REHABILITATION PROJECTS VISITED ON THE SPOT

Partner

Project description

PMU

PMU

PMU

PMU

NICARAGUA

Reinforcing education sector (FOSED)

Integrated project Estelí-Ocotal (PRIESO)

Rehabilitation and strengthening of health services in 
Managua (FORSIMA)

Managua periphery integrated project (PROMAPER)

United Nations

Water and sanitation inthe department of León

Total value of projects visited in Nicaragua

PMU

PMU

PMU

HONDURAS

Water and sanitation in Tegucigalpa

Health and Education

Support to municipal management, housing and 
private sector (local development)

Total value of projects visited in Honduras

INDONESIA

World Bank

Reconstruction of Aceh Land Administration System

World Bank

Kecamatan development project (KDP)

World Bank

Urban poverty project (UPP)

World Bank

Community-based settlement rehabilitation and 
reconstruction project (REKOMPAK)

United Nations

tsunami recovery waste management programme

Total value of projects visited in Indonesia

SRI LANKA

United Nations

Immediate livelihood programme

Asian Develop-
ment Bank

International 
organisation

Rehabilitation of Matara-Battialoa road

Community livelihood development

United Nations

Community access roads

United Nations

Environmental remediation

Total value of projects visited in Sri Lanka

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.

ed806970inside.indd   13
ed806970inside.indd   13

3/09/08   9:13:27
3/09/08   9:13:27

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

17. 

18. 

19. 

SECTION 3.1. – IDENTIFYING REHABILITATION 
NEEDS AND DESIGNING PROJECTS

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 needs 15. 
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 

Following Hurricane Mitch in October 1998, the Commission developed its reha-
bilitation strategy in less than six months. Its planned rehabilitation response 
w a s   s e t   o u t   i n   t h e   A p r i l   1 9 9 9   C o m m u n i t y   a c t i o n   p l a n   f o r   t h e   r e c o n s t r u c -
tion  of  Central  America 16.  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.

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  programme 17.  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 
o f   4 0 0   0 0 0   p e o p l e   t o   t h e i r   p l a c e s   o f   o r i g i n ,   t h e r e   w e r e   s t i l l   a n   e s t i m a t e d 
400 000 cases of displacement due to the conflict.

ed806970inside.indd   14
ed806970inside.indd   14

3/09/08   9:13:27
3/09/08   9:13:27

 
 
 
15

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.

20. 

21. 

22. 

FASTER DESIGN AND BETTER BENEFICIARY PARTICIPATION 
FOR TSUNAMI THAN FOR HURRICANE MITCH

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. 

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   p a r t i c i p a t o r y   p l a n n i n g   a p p r o a c h   i n   o r d e r   t o   e n s u r e   t h a t   r e a l   n e e d s   a r e 
addressed and to enhance the prospects of sustainability of projects.

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, 
t h o u g h   a t   d i s t r i c t   l e v e l ,   w h i c h   i t   c o n s i d e r e d   m o r e   e f f e c t i v e ,   a n d   p r o j e c t s 
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.

ed806970inside.indd   15
ed806970inside.indd   15

3/09/08   9:13:28
3/09/08   9:13:28

 
 
 
16

23. 

24. 

SECTION 3.2. – IMPLEMENTATION OF AID

The audit examined whether the implementation of rehabilitation aid was suf-
ficiently rapid to meet the needs of those affected by disasters 19 and whether 
t h e   s y s t e m s   o n   w h i c h   t h e   C o m m i s s i o n   r e l i e d   f o r   m o n i t o r i n g   e f f i c i e n c y   o f 
implementation and progress against plans enabled it to ensure sound finan-
cial management of aid 20. 

FAST IMPLEMENTATION FOR INDONESIA, SLOW FOR SRI LANKA 
AND HURRICANE MITCH

After the lengthy project design phase in Central America, there were further 
d e l a y s   d u r i n g   i m p l e m e n t a t i o n ,   f r e q u e n t l y   l i n k e d   t o   d i f f i c u l t i e s   i n   f i n d i n g 
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.

B O X   1

EXAMPLES OF DELAYS

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.

ed806970inside.indd   16
ed806970inside.indd   16

3/09/08   9:13:28
3/09/08   9:13:28

 
 
17

25. 

26. 

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. 

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.

ed806970inside.indd   17
ed806970inside.indd   17

3/09/08   9:13:28
3/09/08   9:13:28

 
 
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.

B O X   2

LACK OF COMPARATIVE OR STANDARD COST INFORMATION 

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.

ed806970inside.indd   18
ed806970inside.indd   18

3/09/08   9:13:32
3/09/08   9:13:32

 
19

28. 

29. 

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.

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.

ed806970inside.indd   19
ed806970inside.indd   19

3/09/08   9:13:32
3/09/08   9:13:32

 
 
20

SECTION 3.3. – ACHIEVEMENT OF RESULTS

21 Regulation (EC) No 2258/96.

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. 

B O X   3

OUTPUTS

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.

ed806970inside.indd   20
ed806970inside.indd   20

3/09/08   9:13:32
3/09/08   9:13:32

 
21

MANY USEFUL OUTPUTS ACHIEVED

31. 

Despite the difficulties in comparing achievements with planned targets (see 
p a r a g r a p h s   2 7   t o   2 9 ) ,   p r o j e c t s   f u n d e d   b y   t h e   C o m m i s s i o n   h a v e   n e v e r t h e -
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.

Water storage in Nicaragua

Source: ECA.

ed806970inside.indd   21
ed806970inside.indd   21

3/09/08   9:13:32
3/09/08   9:13:32

 
22

32. 

33. 

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). 

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). 

B O X   4

IMPACT OF INFLATION ON OUTPUTS

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. 

ed806970inside.indd   22
ed806970inside.indd   22

3/09/08   9:13:35
3/09/08   9:13:35

 
 
House in Aceh funded by the Multi-Donor Trust Fund 

23

Source: ECA.

B O X   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.

ed806970inside.indd   23
ed806970inside.indd   23

3/09/08   9:13:35
3/09/08   9:13:35

24

34. 

35. 

CONTRASTING LINKS WITH PRECEDING HUMANITARIAN AID

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 
a n d   s u b s e q u e n t   d e l a y s   r e g a r d i n g   t h e   r e h a b i l i t a t i o n   r e s p o n s e   ( s e e   p a r a -
graphs 20 and 24).

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)  T h e   r e l a t i v e l y   f a s t   r e s p o n s e   o f   t h e   M u l t i - D o n o r   T r u s t   F u n d   ( s e e   p a r a -
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 
h e l p e d   t h e   l i n k   b e t w e e n   r e l i e f   a n d   r e h a b i l i t a t i o n ,   p a r t i c u l a r l y   a s   i t 
i n c l u d e d   s h o r t - t e r m   r e h a b i l i t a t i o n ,   s u c h   a s   t h e   c o n s t r u c t i o n   o f   b o a t s 
and a wharf at Lampuuk in Aceh. 

(c)  T h e   R a p i d   R e a c t i o n   M e c h a n i s m   f u n d e d   a c t i v i t i e s   w h i c h   h e l p e d   l i n k 
relief  with  rehabilitation,  such  as  the  provision  of  satellite  imagery.  It 
also  financed  mediation  efforts  between  the  government  of  Indonesia 
a n d   t h e   F r e e   A c e h   M o v e m e n t   ( G A M ) ,   w h i c h   l e d   t o   a   p e a c e   a g r e e m e n t 
i n   A u g u s t   2 0 0 5 ,   s t r e n g t h e n i n g   t h e   f o u n d a t i o n s   f o r   r e h a b i l i t a t i o n   a n d 
longer term development.

ed806970inside.indd   24
ed806970inside.indd   24

3/09/08   9:13:37
3/09/08   9:13:37

 
 
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 
t h a t   t h e   M u l t i - D o n o r   T r u s t   F u n d   e a r m a r k e d   5 0   m i l l i o n   e u r o   f o r   e c o n o m i c 
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.

ed806970inside.indd   25
ed806970inside.indd   25

3/09/08   9:13:37
3/09/08   9:13:37

 
26

37. 

38. 

In Sri Lanka, ECHO also stayed until mid-2007 and the Rapid Reaction Mecha-
n i s m   f u n d e d   a   2   m i l l i o n   e u r o   q u i c k   r e c o v e r y   p r o j e c t   t o   c l e a r   d e b r i s   a n d 
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

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, 
a n d   n o t   s i m p l y   o f   t h o s e   d i r e c t l y   a f f e c t e d   b y   t h e   d i s a s t e r ,   b u t   o f   a   w i d e r 
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.

ed806970inside.indd   26
ed806970inside.indd   26

3/09/08   9:13:40
3/09/08   9:13:40

 
 
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.

ed806970inside.indd   27
ed806970inside.indd   27

3/09/08   9:13:40
3/09/08   9:13:40

 
28

40. 

41. 

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 
t h e   C o m m i s s i o n   c o n t r i b u t e d   b y   f u n d i n g   m e d i a t i o n   e f f o r t s .   N e v e r t h e l e s s , 
continued  government  support  and  sustainable  financing  remain  sensitive 
issues.

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 
o f   a n   e f f e c t i v e   c h a r g i n g   m e c h a n i s m .   T h e   s u s t a i n a b i l i t y   o f   n a t i o n a l   r o a d s , 
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.

ed806970inside.indd   28
ed806970inside.indd   28

3/09/08   9:13:42
3/09/08   9:13:42

 
 
29

Construction of a local road using community labour in Sri Lanka 

Source: ECA.

ed806970inside.indd   29
ed806970inside.indd   29

3/09/08   9:13:42
3/09/08   9:13:42

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.

T A B L E   5

SUMMARY OF STRENGTHS AND WEAKNESSES

Criteria

Central America 
following 
Hurricane Mitch

Indonesia 
following 
tsunami

Sri Lanka 
following 
tsunami

Audit 
question

Identifying 
needs

Timely strategy incorporating 
wider issues

Timely design with benefi ciary 
participation

Implement-
ing aid

Timely implementation

Monitoring of effi  ciency

Achievement 
of results

Achieving useful outputs

Link with humanitarian relief

Link with longer-term 
development

Prospects for sustainability

+ = strength; – = weakness

+

–

–

– 2

+

–

+

–

+

+

+

– 2

+

+

+

+

+

+ – 1

– 1

– 2

– 1

– 1

+

– 1

1  Linked to Conflit in the Country
2  Relates principally to the collection of comparative cost information and clearly defined output targets.

ed806970inside.indd   30
ed806970inside.indd   30

3/09/08   9:13:46
3/09/08   9:13:46

 
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).

R E C O M M E N D A T I O N   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.

D o   C o m m i s s i o n   p r o c e d u r e s   e n s u r e   t h a t   a i d   i s   i m p l e m e n t e d   i n   a   t i m e l y   a n d 
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-
f i c i e n t   i n f o r m a t i o n   t o   d e m o n s t r a t e   t h e   e f f i c i e n c y   o f   i m p l e m e n t a t i o n   ( s e e 
paragraphs 23 to 29).

ed806970inside.indd   31
ed806970inside.indd   31

3/09/08   9:13:47
3/09/08   9:13:47

 
 
32

R E C O M M E N D A T I O N   2

In order to improve the supervision of funds, the Commission should con-
t i n u e   i t s   e f f o r t s ,   i n   f u l l   c o o p e r a t i o n   w i t h   o t h e r   d o n o r s ,   t o   i m p r o v e   t h e 
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.

R E C O M M E N D A T I O N   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.

45. 

Have projects achieved their expected results including satisfactory links 
with short-term relief and longer-term development?

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 
p r e c e d i n g   h u m a n i t a r i a n   a i d   h a s   b e e n   v a r i a b l e ,   t h e   l i n k   w i t h   l o n g e r - t e r m 
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).

ed806970inside.indd   32
ed806970inside.indd   32

3/09/08   9:13:47
3/09/08   9:13:47

 
33

R E C O M M E N D A T I O N   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.

R E C O M M E N D A T I O N   5

Adequate visibility for the EU should be ensured, particularly when projects 
are implemented through international organisations.

R E C O M M E N D A T I O N   6

S t a r t i n g   a t   t h e   d e s i g n   p h a s e   o f   p r o j e c t s ,   t h e   C o m m i s s i o n   s h o u l d   t a k e 
a p p r o p r i a t e   a n d   t i m e l y   a c t i o n   i n   o r d e r   t o   e n s u r e   t h e   s u s t a i n a b i l i t y   o f 
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

ed806970inside.indd   33
ed806970inside.indd   33

3/09/08   9:13:47
3/09/08   9:13:47

 
 
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 
p r o c e s s   t o o k   p l a c e   i n v o l v i n g   a l l   s t a k e h o l d -
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 
s u c c e s s   o f   t h e   h u m a n i t a r i a n   p h a s e   a n d   t h e 
r a p i d   i n c e p t i o n   o f   n a t i o n a l   r e c o n s t r u c t i o n 
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 
s m a l l e r   a c t i o n s ,   w e r e   l a u n c h e d   i n   2 0 0 1 .   A l l 
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).

ed806970inside.indd   34
ed806970inside.indd   34

3/09/08   9:13:47
3/09/08   9:13:47

S 

35

A s   r e g a r d s   t h e   t s u n a m i ,   b o t h   i n   I n d o n e s i a 
a n d   S r i   L a n k a ,   e x p e c t e d   o u t p u t s   a n d   c o s t 
a s s e s s m e n t s   a r e   i n c l u d e d   i n   a p p r a i s a l   d o c u -
ments for each project and in the contractual 
arrangements with implementing partners. The 
e f f i c i e n t   u s e   o f   f u n d s   i s   c o n t i n u o u s l y   m o n i -
t o r e d   b y   t h e   C o m m i s s i o n .   F i n a l   a c t u a l   c o s t s 
a r e   e s t a b l i s h e d   a t   t h e   e n d   o f   t h e   p r o j e c t   a s 
r e s u l t i n g   f r o m   a   b i d d i n g   p r o c e s s   a n d   o t h e r 
needs or adjustments required during project 
implementation. The Commission will include 
a s s e s s m e n t s   o f   c o s t   e f f e c t i v e n e s s   f o r   e a c h 
project in mid-term and final evaluations.

In  Sri  Lanka,  further  to  the  visit  of  the  Court, 
t h e   C o m m i s s i o n   h a s   r e i n f o r c e d   i n d e p e n d e n t 
quality  control  before  acceptance  of  finished 
works.

V. 
The PRRAC projects were designed and imple-
m e n t e d   f o l l o w i n g   a n   a p p r o a c h   w h i c h   t o o k 
i n t o   c o n s i d e r a t i o n   n o t   o n l y   i n f r a s t r u c t u r e 
outputs  but  also  awareness  raising  and  train-
ing  activities  in  order  to  strengthen  national 
a n d   m u n i c i p a l   i n s t i t u t i o n s   a n d   b e n e f i c i a r y 
organisations.  In  some  cases  the  PRRAC  also 
contributed to reinforcing decentralisation ini-
tiatives by developing management capacities 
o f   l o c a l   a c t o r s   t o   o v e r c o m e   r e g i o n a l   i n e q u i -
t i e s   ( i . e .   h e a l t h   a n d   e d u c a t i o n   p r o j e c t s   i n   E l 
Salvador).

I n   t h e   c a s e   o f   t h e   t s u n a m i ,   t h e   C o m m i s s i o n 
r e s p o n s e   w a s   a n   i n t e g r a l   p a r t   o f   o v e r a l l 
national reconstruction plans. Under the con-
c e p t   o f   ‘ b u i l d i n g   b a c k   b e t t e r ’ ,   m a i n t e n a n c e 
and  sustainability  of  reconstruction  projects 
should be ensured, in the case of housing and 
l i v e l i h o o d   r e c o v e r y   b y   p r i v a t e   b e n e f i c i a r i e s , 
and  in  the  case  of  public  infrastructures  and 
s e r v i c e s   b y   c o m m i t m e n t s   i n   t h e   b u d g e t s   o f 
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. 
T h e   r e g i o n a l   p r o g r a m m e   f o r   t h e   r e c o n s t r u c -
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-
m e n t   w i t h   t h e   b e n e f i c i a r y   c o u n t r i e s ,   t a k i n g 
a c c o u n t   o f   t h e   e x c e p t i o n a l   c i r c u m s t a n c e s 
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 
r i v a l r i e s   a s   w e l l   a s   a d m i n i s t r a t i v e   s h o r t c o m -
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 
P R R A C   a c t i o n s ,   w e r e   p r o g r e s s i v e l y   l a u n c h e d 
from late 2001. 

ed806970inside.indd   35
ed806970inside.indd   35

3/09/08   9:13:47
3/09/08   9:13:47

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
I n   s p i t e   o f   t h e   d e l a y s   m e n t i o n e d   a b o u t   t h e 
PRRAC in Honduras, the health and education 
projects achieved their goals and, for instance, 
c o n t r i b u t e d   t o   i m p r o v i n g   t h e   o f f i c i a l   s c h o o l 
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-
t i v e n e s s   a n a l y s i s ,   b u t   w i s h e s   t o   s t r e s s   t h e 
d i f f i c u l t y   o f   a p p l y i n g   s u c h   a   t o o l   i n   v a r i o u s 
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-
a t i o n   r e p o r t   E v a l u a t i o n   d e s   a c t i o n s   d e   r é h a -
bilitation  et  de  reconstruction  financées  par  la 
C o m m u n a u t é   E u r o p é e n n e   d a n s   l e s   p a y s   A C P /
A L A / M E D / T A C I S ,   w h i c h   c o v e r e d   P R R A C ,   w a s 
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-
a t i o n   p l a n n e d   t o   b e   c a r r i e d   o u t   t o w a r d s   t h e 
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 
c o s t s   a r e   e x a m i n e d   b y   t h e   M D T F   S t e e r i n g 
C o m m i t t e e   d u r i n g   t h e   a p p r a i s a l   s t a g e .   A f t e r 
approval,  the  contractual  arrangements  with 
i m p l e m e n t i n g   p a r t n e r s   a l w a y s   i n c l u d e   e s t i -
m a t e s   o f   c o s t s   a n d   c o r r e s p o n d i n g   o u t p u t s /
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. 
F u r t h e r   t o   t h e   v i s i t   o f   t h e   C o u r t ,   t h e   C o m -
m i s s i o n   w i l l   i n c l u d e   a n   a s s e s s m e n t   o f   c o s t 
effectiveness in the final evaluation. The Com-
m i s s i o n   h a s   r e i n f o r c e d   i n d e p e n d e n t   q u a l i t y 
c o n t r o l   b e f o r e   a c c e p t a n c e   o f   f i n i s h e d   w o r k s 
( i . e .   a   s u p e r v i s i o n   e n g i n e e r   f o r   a c c e s s   r o a d s 
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 
l e s s   r e l e v a n t ,   a s   f o r   e x a m p l e   h o u s e s   i n   t w o 
d i f f e r e n t   c o u n t r i e s   a n d   i n   r u r a l   a n d   u r b a n 
settings. 

ed806970inside.indd   36
ed806970inside.indd   36

3/09/08   9:13:47
3/09/08   9:13:47

37

I n   t h e   c a s e   o f   t h e   P R R A C   i n   C i u d a d   S a n d i n o 
(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 
b i d d i n g   p r o c e s s   a n d   o t h e r   n e e d s   o r   a d j u s t -
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-
a t e   a n d   f i n a l   e v a l u a t i o n s   o f   P R R A C   p r o j e c t s 
c o v e r e d   t h e   i n f o r m a t i o n   n e e d e d   a s   r e g a r d s 
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.

S e e   a l s o   r e p l i e s   t o   p a r a g r a p h s   2 7   t o   2 9   a n d 
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  i n   t h e   M D T F ,   a s   w e l l   a s   l i n k i n g   t h e 
r e c o n s t r u c t i o n   t o   t h e   c o m p l e m e n t a r y   i n i t i a -
t i v e s   i n   s u p p o r t   o f   t h e   A c e h   p e a c e   p r o c e s s , 
i n   f u l l   d i a l o g u e   a n d   a s   a   p r i v i l e g e d   p a r t n e r 
o f   I n d o n e s i a n   a u t h o r i t i e s   a t   t h e   c e n t r a l   a n d 
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 
w i t h   b e n e f i c i a r i e s   a s   w e l l   a s   i m p l e m e n t i n g 
partners.

Box 4
The Court’s observation on the planned health 
c e n t r e   a t   S a n   R a f a e l   d e l   S u r   i s   c o r r e c t .   H o w -
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.

T h e   C o m m i s s i o n   c o n t r i b u t e s   t o   t h e   o v e r a l l 
housing reconstruction plan of the government 
of  Indonesia.  Since  the  visit  of  the  Court,  the 
revised  targets  related  to  housing  funded  by 
t h e   M D T F   h a v e   b e e n   u p d a t e d   t o   8   0 0 0   n e w 
houses and 7 000 repaired houses. The shortfall 
of the MDTF housing is covered by government 
funding.

33. 
I n   t h e   c a s e   o f   t h e   H u r r i c a n e   M i t c h ,   t h e   p r o -
g r a m m e   p r e p a r a t i o n   p h a s e   t o o k   i n t o   c o n -
s i d e r a t i o n   t h e   g e n e r a l   s i t u a t i o n   i n   C e n t r a l 
America,  striking  a  balance  between  short  to 
medium-term needs and longer-term develop-
ment strategy.

ed806970inside.indd   37
ed806970inside.indd   37

3/09/08   9:13:48
3/09/08   9:13:48

38

F o r   t h e   t s u n a m i ,   b o t h   i n   I n d o n e s i a   a n d   S r i 
L a n k a ,   t h e   C o m m i s s i o n   s u p p o r t   h a s   b e e n   a n 
i n t e g r a l   p a r t   o f   n a t i o n a l   r e c o n s t r u c t i o n   a n d 
development  plans  to  ensure  ownership  and 
s u s t a i n a b i l i t y   i n   ‘ b u i l d i n g   b a c k   b e t t e r ’ .   F o r 
Sri  Lanka,  the  donor  community  unanimously 
agreed that the assistance had to be conflict-
s e n s i t i v e   a n d   s h o u l d   b e n e f i t   t h e   m o s t   v u l -
n e r a b l e   p o p u l a t i o n s   i n   t h e   t s u n a m i - a f f e c t e d 
areas.

39. 
Actions  in  the  health,  education,  local  devel-
o p m e n t ,   w a t e r   a n d   s a n i t a t i o n   s e c t o r s   o f t e n 
i n c l u d e   a n   i n s t i t u t i o n a l   s t r e n g t h e n i n g   c o m -
p o n e n t   f o r   t h e   n a t i o n a l   m a n a g i n g   e n t i t i e s 
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.

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-
m a t i s e d   a n d   d i d   n o t   w a n t   t o   r e t u r n   t o   t h e 
coastal area.

34. 
T h e   t i m e   r e q u i r e d   f o r   p r o j e c t   d e s i g n   a n d 
implementation  following  Hurricane  Mitch  is 
explained  by  the  complex  nature  of  a  project 
c o v e r i n g   m u l t i - d i m e n s i o n a l   r e c o v e r y   n e e d s 
(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 
t h e   s u s t a i n a b i l i t y   o f   t h e   l i v e l i h o o d   r e c o v e r y 
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 
o f   a   p r o v i n c i a l   g o v e r n m e n t   w h i c h   o n l y   t o o k 
p l a c e   f r o m   2 0 0 7   o n w a r d s   ( a f t e r   t h e   D e c e m -
ber 2006 Aceh local elections). On this basis, a 
project for an Economic Development Finance 
Facility (USD 50 million) was agreed in 2007.

40.
C o m p l e t e   f i n a n c i n g   f o r   A c e h   r e c o n s t r u c t i o n 
is  ensured  by  the  budget  of  the  government 
of Indonesia.

CHAPTER 4. CONCLUSIONS 
AND RECOMMENDATIONS

42. 
F o r   t h e   t s u n a m i ,   b o t h   f o r   I n d o n e s i a   a n d   S r i 
Lanka, the Commission considers that the steps 
undertaken in relation to monitoring efficiency 
have resulted in improvements within the legal 
a r r a n g e m e n t s   c o n c l u d e d   w i t h   i n t e r n a t i o n a l 
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. 

ed806970inside.indd   38
ed806970inside.indd   38

3/09/08   9:13:48
3/09/08   9:13:48

39

Recommendation 1
The  Commission  agrees  with  the  Court’s  rec-
ommendation, which represents a very positive 
appreciation  of  the  multi-donor  coordinated 
a p p r o a c h   f o l l o w e d   f o r   t h e   t s u n a m i ,   a n d   w i l l 
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 
w o r k s   a r e   i d e n t i f i e d   a n d   p r i o r i t i s e d   b y   l o c a l 
c o m m u n i t i e s   d u r i n g   i m p l e m e n t a t i o n ,   a n d 
therefore clearly quantified outputs cannot be 
determined  at  the  outset  of  the  programmes. 
T h e   e f f i c i e n t   u s e   o f   f u n d s   i s   c o n t i n u o u s l y 
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 
r e g a r d i n g   t r a n s p a r e n c y   o f   M D T F   m o n i t o r i n g 
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-
t i v e n e s s   a n a l y s i s ,   b u t   w i s h e s   t o   s t r e s s   t h e 
d i f f i c u l t y   o f   a p p l y i n g   s u c h   a   t o o l   i n   v a r i o u s 
reconstruction contexts and in different coun-
tries with diverse socio-economic patterns. 

T h e   C o m m i s s i o n   w i l l   c o n t i n u e   i t s   e f f o r t s   t o 
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.

ed806970inside.indd   39
ed806970inside.indd   39

3/09/08   9:13:48
3/09/08   9:13:48

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 
i n c r e a s e s   f o l l o w i n g   n a t u r a l   d i s a s t e r s ,   i n   f u l l 
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
T h e   C o m m i s s i o n   a g r e e s   t h a t   s u s t a i n a b i l i t y 
i s s u e s   s h o u l d   b e   a d d r e s s e d   f r o m   t h e   d e s i g n 
p h a s e .   R i s k s ,   i n c l u d i n g   s u s t a i n a b i l i t y   i s s u e s , 
are  generally  assessed  in  the  design  phase  of 
the projects, and the Commission will endeav-
our to reinforce this aspect throughout project 
implementation. 

ed806970inside.indd   40
ed806970inside.indd   40

3/09/08   9:13:48
3/09/08   9:13:48

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 Communities

2008 — 40 pp. — 21 x 29.7 cm

ISBN 978-92-95009-39-4

How to obtain EU publications
Our priced publications are available from EU Bookshop (http://bookshop.europa.eu), 
where you can place an order with the sales agent of your choice.

The Publications Offi  ce has a worldwide network of sales agents. You can obtain their 
contact details by sending a fax to (352) 29 29-42758.

COUR DES COMPTES EUROPÉENNE

ed806970cover.indd   2
ed806970cover.indd   2

3/09/08   8:56:06
3/09/08   8:56:06

Q
J
-
A
B
-
0
8
-
0
0
6
-
E
N

-
C

EUROPEAN 
COURT OF AUDITORS

IN 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 

E U R O  A I M E D  TO  R E CO N S T R U C T  B A S I C  I N F R A S T R U C T U R E  A N D  

PROVIDE  A  BASIS  FOR  SUSTAINABLE  DEVELOPMENT. THE  COURT 

MAKES RECOMMENDATIONS WHICH COULD HELP THE EUROPEAN 

C O M M I S S I O N   TO   P R O V I D E   M O R E   E F F I C I E N T   A N D   E F F E C T I V E 

REHABILITATION AID IN THE FUTURE.

8
0
0
2

6
o
N

t
r
o
p
e
R

l

a
i
c
e
p
S

EUROPEAN COURT OF AUDITORS

EUROPEAN COMMISSION 
REHABILITATION AID FOLLOWING 
THE TSUNAMI AND HURRICANE MITCH

ISBN 978-92-95009-39-4

EN

ed806970cover.indd   1
ed806970cover.indd   1

3/09/08   8:56:05
3/09/08   8:56:05