Time-Critical Aid:

Questionable Use of Disaster Assistance Funds for Peru

NSIAD-86-203: Published: Sep 30, 1986. Publicly Released: Sep 30, 1986.

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GAO reviewed U.S. disaster reconstruction assistance the Agency for International Development (AID) provided to Peru in response to the effects of the weather phenomenon called El Nino in 1982 and 1983.

Prior to the disaster, AID expressed concerns about Peru's worsening economic condition and proposed a balance-of-payments loan from the Economic Support Fund to establish working capital within Peru. The Executive Branch did not approve the proposal because of a lack of funds. In 1983, Congress granted AID a supplemental appropriation, which gave it authority to reobligate certain funds for relief, rehabilitation, and reconstruction activities in the Andean region. In preparing for the reobligation, AID amended the proposed $60-million balance-of-payments loan to justify the use of international disaster assistance funds to finance the economic support loan. GAO found that: (1) the loan represented a departure from past practices, since AID had never used disaster assistance funds to finance a balance-of-payments type of economic support assistance; (2) Congress intended that international disaster funds meet individual disaster victims' needs, not the general economic needs of a country; (3) balance-of-payments assistance was traditionally funded from the Economic Support Fund; and (4) it was questionable whether the $60 million in funds that Congress intended for relief, rehabilitation, and reconstruction activities was an appropriate funding source for the balance-of-payments loan.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The AID response continues to assert the legality and appropriateness of its use of disaster assistance funds for balance-of-payments support. Despite GAO views to the contrary, AID displays no intention of responding to this recommendation against future use of this type of funding for such purposes. In view of the AID response, GAO sees no benefit in keeping this recommendation open.

    Recommendation: The Administrator, AID, should seek clarification from Congress as to whether international disaster assistance funds may be used for programs, such as balance-of-payments support, normally financed from the Economic Support Fund.

    Agency Affected: United States Agency for International Development


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