By Sunday Forum
I worked in Afghanistan as an auditor for six months last year and spent another seven months at the Washington, D.C., headquarters of the special inspector general for Afghanistan reconstruction, charged with monitoring aid from the U.S. Agency for International Development, the State and Defense departments and others.
Washington has appropriated nearly $73 billion for reconstruction and development in Afghanistan since 9/11, according to SIGAR's October 2011 quarterly report, up $17 billion in each of the past two years. That's a lot of money for our indebted nation.
Our leaders ought to have good reasons for giving this aid. Maybe they do. Taxpayers, however, whether they support our efforts or not, still deserve answers to basic questions: Where has all this money gone? Has anyone verified it went where it was supposed to go? Is it cost effective to run aid programs in a war zone?
The answer is no. The money isn't going where we think it is -- and $73 billion is a ton of treasure to waste.
Essentially, all U.S. aid programs are contracted out to nongovernmental organizations, which means that our agencies are really huge contract management centers. NGOs take out administrative costs and the rest goes to aid.
At USAID, for example, NGOs' administrative costs at most programs are about 30 percent. This means, for every dollar from USAID, 70 cents goes to recipients on the ground and the NGO keeps 30 cents to cover overhead.
Thirty percent in administrative costs may sound high, but in Afghanistan, USAID has struggled to keep NGO overhead costs below 70 percent -- more than double the norm. Costs can escalate when organizations operate in a war zone. But a mere 30 cents out of every dollar for Afghanistan goes to aid.
It gets worse.
Of that 30 cents, frequently only half reaches the intended recipient. The remainder is lost, stolen or misappropriated by Afghan workers and officials. Many projects don't even attain their own internal goals, according to reports from inspectors general and the Commission on Wartime Contracting. The June 2011 Senate Foreign Relations Committee report concluded that few, if any, of these aid programs are sustainable in the long term.
Add in the cost of the USAID's bureaucratic superstructure -- including $500,000 annually for each U.S. employee in Kabul, and the supporting staffs in Washington -- and sometimes less than 10 cents of every dollar actually goes to aiding Afghans.
I'm not the only one "on to" this problem of high costs. To make USAID's administrative cost ratios look better on paper, the agency has been pushing its contractor organizations to distribute aid faster and monitoring the NGOs' "burn rate."
Consequently, Afghans are drinking from a fire hose of U.S. reconstruction aid money, inevitably leading to waste, fraud and abuse -- and few tangible aid results on the ground.
To find out where the money went, SIGAR's auditors rely principally on NGO management reports and on summary financial data from USAID's financial system. But the NGO's raw accounting data is unaudited and unverified. That means the U.S. reconstruction effort is ultimately flying blind.
Wrapping our arms around the size and scope of the problem will require a few simple steps.
First, SIGAR, USAID and State and Defense departments' inspectors general charged with overseeing the spending must audit and report on the amount of money spent by NGOs that does not go directly to measureable aid projects. Then, add in the cost of maintaining the administrative superstructure in Washington and Kabul, and that can quantify the U.S. "return on investment."
It is low, maybe less than 30 percent. For some programs, it may be less than 20 percent.
Second, the inspectors general should unleash their forensic auditors to analyze the accounting records at all the NGOs, where the detailed cash transaction data is. The data in USAID's system is too cleansed and summarized to be of much use. Forensic auditors are adept at using sophisticated software algorithms to evaluate huge amounts of computerized accounting data. They can shake the tree and examine what falls out, so we can answer the $73 billion question: "Where did the money go?"
The national debate about whether to engage in Afghanistan and for how long is likely to continue in Washington. But everyone can agree that, with a staggering $15 trillion national debt and facing budget austerity, U.S. taxpayers have a right to know where the money is going in Afghanistan. And to turn off the spigot if necessary.
Alarmingly, it appears that those charged with policing the cookie jar and those who spent $73 billion of our money have failed us.
James R. Petersen served as senior auditor for the special inspector general for Afghanistan reconstruction. He previously served as senior vice president of mergers and acquisitions at CDI Corp. He wrote this article for Politico.