JAN. 30, 2014
KABUL, Afghanistan — With billions of dollars in American aid increasingly flowing straight into Afghan government coffers, the United States hired two global auditing firms three years ago to determine whether Afghanistan could be trusted to safeguard the money.
The findings were so dire that American officials fought to keep them private. But the money has continued to flow, despite warnings from the auditors that none of the 16 Afghan ministries could be counted on to keep the funds from being stolen or wasted.
The problems unearthed by the auditors are detailed in a report to be published Thursday by the Special Inspector General for Afghanistan Reconstruction, an American government watchdog. The findings raise new questions about the efficacy and wisdom of giving huge amounts of aid directly to a government known for corruption.
The inspector general’s report is likely to increase tensions with President Hamid Karzai, who has bristled for years at what he says is an orchestrated campaign by President Obama’s administration to undermine his government with embarrassing revelations and leaks.
American officials have little affection for Mr. Karzai these days, and the deteriorating relationship between the countries has already affected the flow of aid. Congress cut the budget for development aid in Afghanistan roughly in half, to about $1.12 billion, in the current fiscal year. That step was in part a rebuke of Mr. Karzai’s increasingly vitriolic statements about the United States, and his refusal to sign a long-term security agreement that American and Afghan negotiators put together last fall.
Aid from Western countries pays most of the Afghan government’s expenses. The United States’ contribution is by far the largest, and Washington has pushed in recent years to route more of it directly to the Afghan government and less through programs managed by American officials. The direct assistance, which now accounts for about half of all American aid to the government, was a centerpiece of the Obama administration’s strategy to build a credible national government that could capitalize on the battlefield gains made by the surge of American forces in 2009 and 2010.
Just as the surge yielded military gains against the Taliban that have proved to be transient, the efforts to transform the Afghan government have been undercut by the corruption that pervades Mr. Karzai’s administration, as illustrated in the audits and the internal American risk assessments they engendered.
For instance, $236.5 million earmarked for the Afghan Ministry of Public Health was in danger of misappropriation “arising from payment of salaries in cash,” according to a United States Agency for International Development risk assessment cited by the inspector general. The Afghan Mines Ministry could be “paying higher prices for commodities and services to finance kickbacks and bribes,” another assessment based on the audits said.
John F. Sopko, the special inspector general, who is known for his blunt and prosecutorial style, called the strategy of delivering more direct assistance “the biggest gamble with taxpayer money that U.S.A.I.D. has ever made.”
His report, provided to The New York Times ahead of its public release, acknowledged that the aid agency was simply following a policy set by senior officials in the Obama administration, and that direct aid payments to the Afghan government would probably continue no matter what problems were found. His chief recommendation was that the agency apply more pressure on Afghan ministries to clean up their operations.
The agency, which has grown accustomed to harsh reports on its work in Afghanistan from the inspector general, characterized the latest report as one with lots of smoke but no fire. The agency said that despite all the warnings about risks, the report outlined no specific instances of fraud.
“As this audit does not examine the implementation of U.S.A.I.D. direct assistance programs, we do not believe this report has any basis on which to question whether the identified vulnerabilities have been addressed prior to funds being made available,” Donald L. Sampler Jr., the assistant to the administrator for Afghanistan and Pakistan at the agency, wrote in a letter responding to the report.
The agency also said it had taken steps to forestall fraud and would continue to do so. As an example, it cited the routing of money to each ministry’s separate account at the Afghan central bank. With the American aid funds isolated from each ministry’s general account, American officials can keep closer tabs on how the money is spent.
American officials have earmarked $896 million in assistance to date that they want to deliver directly to Afghan ministries. But because of the waste and corruption issues, they have disbursed only $201.7 million of that.
“We didn’t say, ‘We’ll give you 50 percent, come hell or high water,’ ” said S. Ken Yamashita, a U.S.A.I.D. veteran who coordinates aid spending at the American Embassy in Kabul. “We never said, ‘We will give you 50 percent even if you don’t have the right systems in place.’ We said we will work towards that, in a way that is reasonable.”
American officials are displeased with the release of the inspector general’s report, saying it is likely to infuriate the Afghan officials who allowed the auditors from the two auditing firms, KPMG and Ernst & Young, to examine their operations.
The release will probably lead to “reduced cooperation from the Afghan government, and could undermine our ability to conduct proper oversight of direct assistance programs in the future,” the aid agency warned the inspector general in a letter. It implored the inspector general to “not make this sensitive material available to the public.” The inspector general disagreed, arguing that the public’s right to know outweighed the need for secrecy.
The report accuses the agency and the State Department of not being forthright with Congress, saying the most dire assessments in the audits, which started in 2011, were withheld from lawmakers, including assessments that American officials had taken less than 10 percent of the measures they could have taken to reduce the risk that aid money would be lost to Afghan mismanagement or corruption.
Since becoming inspector general in 2012, Mr. Sopko has often argued that the public’s right to know about problems with American spending in Afghanistan, actual or potential, is paramount, and that it trumps the need for confidentiality except in cases involving classified information.
It is a line of argument that has won him few friends among the American officials who deal with Afghanistan, many of whom believe that his work is now undermining their own. They say that the inspector general’s team rarely takes into account all of the facts, and that some of the audits are more concerned with the potential for waste or fraud than with documenting actual instances of either.
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