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Combined Security Transition Command-Afghanistan Improved Controls Over U.S.-Funded Ministry of Defense Fuel Contracts, but Further Improvements are Needed (Redacted)

DODIG-2017-041

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Objective

We determined whether the Combined Security Transition Command–Afghanistan (CSTC-A) and the Afghanistan Ministry of Defense (MoD) established effective controls for the oversight of MoD fuel contracts.

In 2011, the Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer authorized CSTC-A to provide Afghanistan Security Forces Fund (ASFF) resources directly to the Afghanistan MoD to sustain the Afghanistan National Defense and Security Forces.

CSTC-A is the DoD command that provides oversight and ensures adequate fiscal controls are in place to safeguard ASFF direct contributions provided to the Afghanistan ministries.

CSTC-A and MoD sign annual Bilateral Financial Commitment Letters (commitment letters) that commit CSTC-A to fund specified portions of the MoD budget.  The commitment letters serve as bilateral agreements between CSTC-A and Government of the Islamic Republic of Afghanistan (GIRoA) and are intended to assist the GIRoA in implementing the necessary oversight and controls to satisfy auditors and the international community.

We audited CSTC-A controls of two MoD-awarded, ASFF-funded contracts that provide vehicle and generator fuel to the Afghanistan National Army (ANA).  The contracts, awarded in January 2016, have an aggregate ceiling value of $174.7 million.  

Finding

CSTC-A and MoD initiated several measures to improve the oversight of the U.S. direct assistance–funded MoD fuel contracts.  Specifically, CSTC-A:

  • established regular Logistics Executive Steering Committee meetings to increase the internal coordination among Essential Function (EF)-2 (CSTC-A transparency, oversight, and accountability advisors), EF-5 (CSTC-A logistics advisors), and the MoD;
  • began assessing financial penalties on specific ANA corps for insufficient commitment letter compliance; and
  • validated MoD’s annual fuel requirements.

However, CSTC-A and MoD need to implement additional controls to improve the verification of fuel data.  Specifically, CSTC-A and MoD cannot ensure the accuracy of fuel delivery reports and fuel consumption reports provided by vendors and ANA corps, respectively.  This occurred because CSTC-A did not require the MoD to conduct physical inspections of fuel points or assess the ANA’s process for reporting consumption data.  As a result, U.S. direct assistance continues to be vulnerable to fraud, waste, and abuse.  Specifically, CSTC-A does not have reasonable assurance that fuel purchased on two U.S. direct assistance–funded contracts, valued at $174.7 million, will be used to support ANA requirements.

Recommendation

We recommend the Commanding General, Combined Security Transition Command–Afghanistan:

  1. require future MoD fuel contracts to include provisions for periodic, unannounced inspections to validate fuel deliveries; and
  2. direct the EF-1 Audit division to conduct an assessment of the current ANA Office of the General Staff, Inspector General (GSIG) and Office of the General Staff, Chief of Logistics (GSG4) consumption report verification processes to determine its adequacy.

Management Actions Taken

During the audit, we advised the CSTC-A Chief of Staff and officials from EF-1, EF-2, and EF-5, that deficiencies existed within the controls of the U.S. direct assistance–funded MoD fuel contracts. Specifically, the reliance on vendors and ANA corps to provide fuel delivery and consumption reports, respectively, without any independent verification.

These officials agreed with our observations and confirmed they were planning actions to address weaknesses within the oversight of fuel contracts. Specifically, CSTC-A said it was developing a bulk fuel contract, expected to be awarded in August 2017, that will be fully administered by the U.S. government.  After the bulk fuel contract is awarded, CSTC-A will conduct physical inspections of the fuel deliveries.  According to CSTC-A, Petroleum Teams comprising U.S. military personnel will be positioned at several coalition bases throughout Afghanistan.  The Petroleum Teams will arrive at delivery locations and verify the amount of fuel delivered and test the fuel quality.  CSTC-A’s plan to conduct inspections of fuel deliveries addresses of our concern of relying on vendor-provided delivery data.

According to CSTC-A, consumption reporting requirements will not change when the U.S.-administered fuel contract is in place.  The EF-5 will continue to monitor each ANA’s Corps’ consumption reports and will continue to assess penalties for violation of commitment letter conditions.  In addition, CSTC-A agreed to direct its Audit division to conduct an assessment of the GSG4 and GSIG processes of consumption report collection and verification.

CSTC-A management actions taken during the audit addressed the recommendation; therefore, no further comments are required.  However, we will monitor progress in implementing the corrective actions to address the recommendation.