U.S. agency rejects internal warnings about potential waste in Afghanistan aid program

USAID commissioned two reports that raised red flags about aid to Afghanistan’s Ministry of Health but decided to keep spending millions anyway

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The U.S. Agency for International Development is propping up Afghanistan’s national health care system with millions of dollars in direct assistance even though its effort lacks the sort of controls and oversight needed to prevent waste, fraud and abuse, according to the U.S. government’s chief auditor of financial assistance to the country.

The funds are being disbursed to Afghanistan’s Ministry of Public Health for doctor’s salaries, immunizations, prenatal care, hospitals, rural health care facilities and other urgent medical needs. They constitute a small but critical portion of the more than $90 billion Washington has pumped into the country since 2001, the lion’s share of which has gone to direct assistance for the Afghan military and police forces.

USAID officials say their health care investments have decreased maternal mortality and helped boost the average life expectancy for Afghanis by twelve years. But two reports prepared at the U.S. agency’s request in 2012 and 2013 — described in general terms in a Sept. 5 audit by John F. Sopko, the Special Inspector General for Afghanistan Reconstruction — have warned agency officials that the aid was at risk of being misused or stolen through corruption.

One of the reports found 55 deficiencies in the ministry’s handling of aid and specifically asserted that the flow of cash should be turned off until new internal controls are in place, according to the audit and a copy of the report. And yet the spigot has remained open.

Among the shortcomings: no regular or carefully-planned internal auditing, poor budgeting procedures, an absence of regular reporting on construction progress as funds are spent, monitors who work for provincial officials instead of independent authorities, and a lack of clear procurement procedures. Portions of the report, written for USAID by the accounting firm Ernst and Young in April 2012, were obtained by the Center for Public Integrity.

The report cited a long long list of suggested reforms that it said “need to be made prior to disbursement of funds.” That advice was not taken by USAID officials, however, and Sopko, in his audit, said they had told his investigators that “due to lack of personnel, they have not verified” whether the ministry implemented any of the recommendations.

Sopko cited the warnings as the basis for his conclusion that the agency has “little assurance that the MoPH [Ministry of Public Health] is using those funds as intended.” He noted that USAID’s own policies require strict controls on direct financial assistance programs and said USAID had proceeded improperly, without a proper assessment of the risks.

In addition, he complained that one of the agency’s officers had insisted in a conversation with his audit team that the agency had no responsibility to “address the deficiencies identified or to verify any corrective actions” that the ministry may have taken.

“In our view, this is a reckless disregard toward the management of U.S. taxpayer dollars,” Sopko said in the report, without naming the official who made the provocative statement. “Strong evidence exists that funds provided to MoPH are at risk of misuse,” enough to warrant an immediate cutoff of U.S. assistance until the program's budget is checked and future payments are tied to reform milestones, he added.

USAID officials rejected that conclusion and emphasized that Sopko’s report did not describe actual misspending — just the risk of it. USAID Mission Director William Hammink said in a letter to Sopko last month that the agency “is proud of the achievements realized for the health sector” under its assistance program, currently budgeted at $236 million over a nine-year period ending in Oct. 2014.

In a telephone interview, Larry Sampler, a military veteran who is the assistant to the administrator in the agency's office of Afghanistan and Pakistan affairs, acknowledged that the health ministry “does not have capacity to receive U.S. taxpayer dollars and account for them in ways that we would be comfortable with.” But he said the agency had decided that it “needed to give them money before the assessments said they were ready” to spend it properly — that it was “important to life and limb and eyesight issues in Afghanistan” to get funds “flowing.”

To avoid making the payments directly to the ministry, Sampler said, USAID has sent its funds to a group the agency has financed within the ministry, called the “Grants and Contracts Management Unit,” which he described as an “oversight body” that signs checks to the ministry itself. Sampler said he was uncertain “exactly who is in it,” but emphasized that its personnel have special access to the ministry, which USAID officials cannot visit every week due to what he called “vehicle availability” and other challenges for the U.S. diplomatic corps there.

Sampler also noted that the ministry had reported correcting many of the 55 deficiencies identified in 2012. A spokesman for the agency, Benjamin Edwards, elaborated in an email that the grants management unit “reviews and validates vouchers” submitted by the ministry requesting payment for services, ensuring that “all payment conditions have been met.”

But Sopko’s report makes clear that the unit was already in place when the 2012 assessment privately called for halting further aid, and also when a follow-up report containing similar criticisms was completed in January.

That second report, a review made in anticipation of additional U.S. financial assistance to the ministry beyond 2014, “concluded that the MOPH’s financial management and accounting system, internal controls, and procurement management units did not have sufficient systems and management capacity to implement activities and manage donors’ funds,” according to Sopko’s summary of it. The second report also specifically highlighted the risk of corruption. USAID officials declined to provide a copy of the report to the Center for Public Integrity.

Sopko’s broad warning comes five months after he sounded a separate alarm that USAID had poorly managed the design of two hospitals under construction in Afghanistan’s Paktiya province. One, in Gardez, is 12 times the size of the hospital it is replacing and has a generator that may consume up to $3.2 million worth of fuel annually, an amount that appears impractically large. While USAID officials said the ministry had twice approved the hospitals, “Ministry officials told us that [those] … statements were not based on detailed analyses of operation and maintenance costs but on general assumptions.” One official told his investigators that the local populace did “not need such a large hospital,” according to the report.

Sampler said he did not know which USAID official told Sopko’s team that it had no obligation to address shortcomings in the ministry or verify they had been corrected, describing this as “flagrantly contrary to agency policy.” But he added that he believes USAID’s principal failing has been that it “hasn’t done a good enough job of explaining” how its aid payments go to the special unit within the ministry rather than to the ministry itself.