Report | Dec. 1, 2016

The Combined Security Transition Command-Afghanistan Needs to Strengthen the Controls Over U.S. Direct Assistance Funding DODIG-2017-027

Objective

We determined whether the Combined Security Transition Command–Afghanistan (CSTC-A) and the Government of Islamic Republic of Afghanistan’s (GIRoA’s) Ministries of Defense and Interior (MoD and MoI) have established and implemented effective controls over the contract management process.

This is one in a series of DoD Office of Inspector General audits and evaluations of controls over U.S. direct assistance provided to GIRoA in support of the Afghan National Defense and Security Forces.  We initiated the series of audits in response to the FY 2015 National Defense Authorization Act, which required that the DoD Office of the Inspector General conduct a comprehensive assessment of the financial management capacity and risks within the Afghanistan MoD and MoI.  Previous audits focused on CSTC-A and GIRoA controls over the contract management process and GIRoA’s controls to effectively manage asset accountability for vehicles; while an ongoing audit is currently focused on CSTC-A and GIRoA’s oversight of large fuel contracts.

Finding

GIRoA and CSTC-A initiated several measures to strengthen the controls over the contract management process.  Specifically, GIRoA established the National Procurement Authority and National Procurement Commission to scrutinize contracting actions and CSTC-A created a process to review new project requirements packages.  These initiatives improved GIRoA’s capacity to independently identify and develop requirements.  In addition, CSTC-A has begun imposing limited penalties for failure to comply with the FY 13951  Bilateral Financial Commitment Letter (commitment letter) requirements.

However, GIRoA and CSTC-A need to implement additional controls to improve continuing shortfalls in GIRoA’s contracting process.  Provincial leaders entered into informal agreements with contractors to provide goods and services without the authority to obligate the ministry, which put the contractors at risk of not being paid for goods and services provided.  This occurred because the MoI’s decentralized procurement process allowed provincial leaders the ability to interfere with the procurement process without repercussions.  GIRoA also has not identified areas of high risk within the procurement process because GIRoA has not fully implemented a Ministerial Internal Control Program.  In addition, CSTC-A did not consistently penalize commitment letter violations or have a formal process in place to determine and enforce penalties for violations.

As a result, U.S. direct assistance funding continues to be vulnerable to fraud waste, and abuse. In addition, GIRoA may not be able to fulfill integral requirements reliably. For example, in April 2016, GIRoA submitted a requirement for 195,000 Afghan National Defense and Security Forces uniforms to be funded through an on-budget2  contract. CSTC-A’s Requirements Approval Board identified shortfalls with the development of contract requirements packages, including the lack of clear and measurable evaluation criteria; not including experts in clothing fabrication; and the ministry’s Acquisition Agency not conducting a bidder’s conference.  As a result, the Requirements Approval Board recommended restarting the contract process.

Recommendation

We recommend that the Commander, Combined Security Transition Command–Afghanistan:

  • assist the MoI with centralizing its procurement process to eliminate provincial leaders’ ability to enter into informal agreement with contractors.
  • include in the FY 1396 commitment letter the requirement for the ministry Inspectors General to conduct risk-based audits that identify high-risk areas in the procurement and contracting processes of the ministries.
  • formalize and document policies and procedures in the FY 1396 commitment letter regarding the roles and responsibilities for determination and enforcement of commitment letter penalties.

Management Actions Taken

During the audit, we advised the Commander, CSTC-A, that deficiencies existed in the controls over the contract management process.  Specifically, MoI contractors performed work without formal contracts, ministry Inspectors General did not perform high-risk assessments, and CSTC-A did not consistently enforce penalties for violating the commitment letter.  We discussed with CSTC-A officials several suggestions to address these issues and improve the contract management process.

The Commander agreed with our observations and initiated steps to implement corrective actions.  First, CSTC-A officials stated that they would monitor the effectiveness of the new Minister of Interior Affairs decree to determine whether it eliminates provincial leaders from entering into agreements with contractors for goods and services without a formal contract.  With respect to the lack of high-risk assessments within the contract management process, CSTC-A officials stated that a requirement will be included in the FY 1396 commitment letter requiring the ministry Inspectors General to conduct risk-based audits.  CSTC-A officials stated that they will include in the FY 1396 committee letters formal procedures designed to consistently enforce penalties for violating the commitment letter.

The CSTC-A management actions taken during the audit addressed the recommendation; therefore, we are not making any additional recommendations in this report.


1    The Afghanistan fiscal year is December 21 through December 20; therefore, FY 1395 is from December 21, 2015, through December 20, 2016.

2    According to CSTC-A, on-budget contracts are U.S. direct assistance-funded contracts, awarded and managed by GIRoA.

This report is a result of Project No. D2016-D000JB-0089.000.