Comparing outcomes is, in addition to being good practice for managers and part of the job for inspectors general, the subject of formal guidance for Executive Branch departments and agencies. In May 2012, the Office of Management and Budget issued a memorandum on “Use of Evidence and Evaluation in the 2014 Budget." That document said, in part:

Agencies are encouraged to include measurement of costs and costs per outcome as part of the routine reporting of funded programs to allow for useful comparison of costeffectiveness across programs. … Once evidence-based programs have been identified, such a [return-on-investment] analysis can improve agency resource allocation and inform public understanding. … OMB invites agencies to identify areas where research provides strong evidence regarding the comparative cost-effectiveness of agency investments. [Emphasis added.]

I recognize that applying cost-effectiveness and comparative analysis to programs and projects in a contingency-operation zone like Afghanistan, where benefits may include “soft” outcomes like public opinion, and where multiple programs support similar goals, can be difficult. But the importance of the mission and the billions of dollars supporting it demand that comparisons be made as best we can. That consideration—and the well-documented flaws and disappointments in many U.S.-funded initiatives—was the motive for my March 25 letter to you. I have the responses to that letter submitted by your designees. Mr. Daniel Feldman, Deputy Special Representative for Afghanistan and Pakistan, and Mr. J. Alexander Thier, Assistant to the Administrator for Afghanistan and Pakistan, supplied a joint State/USAID response dated May 9, 2013. Mr. Mike Dumont, Deputy Assistant Secretary of Defense for Asian and Pacific Affairs, submitted a response dated June 18, 2013.

Download Entire Letter-pdf.→

SIGAR  also sent USAID an "Alert Letter" concerning a financial audit of Chemonics International, Inc. that identified significant concerns about the firm meeting its responsibilities under a federal contract.  The financial audit identified more than $13.5 million in questionable costs ($6.7 million in ineligible costs and $6.7 million in unsupported costs).

In the Letter SIGAR states:

On June 6, 2013, I sent you the results of an audit of Chemonics International, Inc. (Chemonics), which identified significant concerns about the firm meeting its responsibilities under a federal contract.1 SIGAR contracted with the audit firm of Crowe Horwath to perform a financial audit of costs incurred by Chemonics under USAID’s contract supporting the Alternative Livelihoods Program–Southern Region. Crowe Horwath issued a disclaimer of opinion on the contract’s special purpose financial statement because of the following matters:

• Chemonics refused to provide support necessary to demonstrate that the indirect costs charged to the contract were accurate;
• Crowe Horwath observed instances of noncompliance with the terms and conditions of the contract and applicable regulations that have a direct and material effect on amounts presented in the special-purpose financial statement; and
• Chemonics management was unwilling to represent to certain financial and compliance matters that are required components of management’s responsibilities under generally accepted government auditing standards

I take such lack of cooperation with a federal audit and the findings reported by Crowe Horwath very seriously. I am consulting with my General Counsel and my Assistant Inspector General for Investigations about its implications as I plan additional audits and, potentially, investigations involving Chemonics. Similarly, I urge you to consider appropriate actions for USAID to take. Specifically, I suggest that you take special care in reviewing the $13,555,998 in questioned costs, the two material weaknesses, and six significant deficiencies reported; remind Chemonics about its responsibility to fully cooperate with federal audits as well as the criminal penalties for obstructing a federal audit,2 and consider the matters identified above in evaluating future awards and award modifications involving Chemonics

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Download Letter Sent to Chemonics International-pdf.→

The third report is an audit that reviewed the extent to which the Department of State (DOS) conducted financial audits.  The report found State’s assistance awards for Afghanistan reconstruction activities are largely unaudited.

This report discusses the results of our review that examined the extent to which financial audits were conducted for State-funded grants and cooperative agreements, each valued at $1 million or more, for Afghanistan reconstruction from 2002 to 2011. We are making four recommendations to the Secretary of State to help strengthen the department’s accountability over such funds.In its written comments on a draft of the report, State generally agreed with our recommendations. Its comments are reprinted in appendix VI. We conducted this performance audit under the authority of Public Law No. 110-181, as amended, and the Inspector General Act of 1978, as amended, in accordance with generally accepted government auditing standards.

Download Entire Report-pdf.→

History of Special Inspector General for Afghanistan Reconstruction (SIGAR)

Special Inspector General for Afghanistan Reconstruction (SIGAR) is the U.S. Government’s leading oversight authority on Afghanistan reconstruction. Congress created the Office of the Special Inspector General for Afghanistan Reconstruction to provide independent and objective oversight of the Afghanistan Reconstruction funds. Under the authority of Section 1229 of the National Defense Authorization Act for Fiscal Year 2008, SIGAR conducts audit, inspections, and investigations to promote efficiency and effectiveness of reconstruction programs, and to detect and prevent waste, fraud, and abuse of taxpayer dollars. SIGAR also has a hotline that allows individuals to report suspected fraud.

“There is a serious problem in Afghanistan related to disputes regarding the payment of Afghan subcontractors by prime contractors,” John F. Sopko, the inspector general, wrote in a letter accompanying the report, which was sent to numerous senior officials this week, including Secretary of State John F. Kerry and Defense Secretary Chuck Hagel. “SIGAR has received testimonial and documentary evidence from credible sources alleging death threats, work stoppages, and strikes.”

With tens of billions of U.S. tax dollars flowing into Afghanistan since the war began in 2001, government contracting has proved highly lucrative for thousands of U.S. and foreign companies. But many projects also rely heavily on subcontractors, about 90 percent of whom are based in Afghanistan.

In recent years, SIGAR and other government agencies have received a flood of complaints about prime contractors — about 40 percent of whom are U.S.-based — not living up to contractual agreements. According to the report, SIGAR’s hotline received 183 complaints about nonpayment from 2009 through October. Fifty-two investigations are underway into complaints involving a total $69 million.

“While a subcontractor may always face the risk of nonpayment,” the report says, “Afghan subcontractors may be particularly at risk due to a lack of adequate legal protections and limitations placed on the U.S. government’s ability to intervene on their behalf.”

Meanwhile, a growing number of Afghan subcontractors are threatening street justice.

IGAR has documented threats to “blow up a compound of U.S. contractors and government agencies,” detonate suicide bombs, pull weapons on employers or damage property to try to collect money.

“Investigators have found that the prime contractor’s failure to pay is often viewed by the Afghan subcontractor as a failure on the part of the U.S. government,” the report says.

In February, a subcontractor told SIGAR representatives he planned to ignite himself in front of the U.S. Embassy, saying he had not been paid for work on an Army Corps of Engineers project in Helmand province. There is no evidence he followed through on his threat.

The report notes that failure to pay subcontractors also can lead to serious hardship for Afghan workers, many of whom earn only a few hundred dollars a month.

In addition, some Afghan employees have walked off the job amid allegations of nonpayment, threatening the pace of multimillion-dollar U.S.-financed reconstruction projects.

But the inspector general also notes that prime contractors have faced “extortion” following false claims of nonpayment made to Afghan police and courts.

In some cases, the prime contractors or their employees have had their passports seized by Afghan authorities or have been put on the no-fly list at Kabul’s airport so they cannot leave the country until a payment dispute is resolved. Afghan police have also issued arrest warrants for prime contractors accused by Afghan employees of nonpayment.

U.S. authorities are often powerless to intervene, even when it appears the allegation of nonpayment is unfounded.

“We have identified a range of potential risks associated with subcontractor nonpayment,” the report states.

David Snepp, a spokesman for the U.S. Embassy, said State Department officials would review the report.

Sopko recommends that U.S. agencies, including the Defense Department, more aggressively monitor payments to contractors and step in to suspend or revoke contractors’ licenses when payments are not made.

He also recommends more aggressive enforcement through the False Claims Act when it is proved that prime contractors have not made justifiable payments to subcontractors. www.washington post