The UP Health System Development Project (UPHSDP), an externally aided project, aimed at bringing about structural and qualitative changes in the health sector so as to transform it into a modern, responsive and accountable system to provide high quality, affordable and integrated health service. The project is to be implemented during December 2000 to December 2005 at a cost of Rs. 478.07 crore (reimbursable Rs.411.11 crore and State share Rs.66.96 crore). Audit scrutiny revealed that the implementation of the project was unsatisfactory as even after half of the period prescribed for implementation was over, physical and financial progress in many critical areas were lagging behind the target. The monitoring mechanism was not effective. Indications were towards time overruns and resultant cost overrun culminating into delays/ denial of the benefits envisaged in the project to the targeted beneficiaries.