Cicero Magazine, October 15, 2014

A 200 Million USD Corruption Scandal In Afghanistan Shows UN Mismanagement

UN agency mismanaged the trust fund, known as LOTFA, allowing the Afghan interior ministry to milk 200 million USD in “deductions.”

By Katrin Park

The correspondence between the chief of the US watchdog on Afghanistan reconstruction and the administrator of the UN’s development agency over a trust fund bankrolling the Afghan police force is an entertaining read.

In a series of letters, John Sopko, special inspector general, alleged that the UN agency mismanaged the trust fund, known as LOTFA, allowing the Afghan interior ministry to milk $200 million in “deductions.” Since 2002, the trust fund has channeled $3.17 billion in salaries and operating costs. The US has paid $1.2 billion of it.

The UN development program’s Helen Clark dispatched a three-pronged response in ambiguous UN-ese.

First, she writes, this is Afghanistan, so it’s impossible to completely eliminate “risk.” Second, the UN found a deduction and stopped it. Third, the UN doesn’t have oversight of the other deductions the Afghan government makes.

It’s another sorry chapter in the book of blunders chronicling the seemingly impossible task of building an Afghan nation.

It’s a story where everyone comes out a loser.

UN Trust-Funders

As early as 2009, UN employees in Afghanistan had flagged to the donors – the EU and Japan being the other major contributors – that the trust fund was paying the salaries of police officers who didn't exist and that the fund’s managers were creating high-paying positions for well-connected Afghans.

The theory is that the US sends the money for the payroll, and officials are able to pluck out the money for people who aren’t real, and therefore won’t miss their paychecks, keeping them for themselves.
The CTSC confirmed the problem was likely real in a memo, saying that they discovered “discrepancies” in their records that included some 54,000 “erroneous” identification numbers. SIGAR warned that not only was paying imaginary police a waste on money, but that the US is making policy decisions based on ANP personnel numbers, and if a lot of those personnel don’t exist, it could skew US planning., Mar. 19, 2014

In 2012, after The Wall Street Journal reported the suspected scheme, the UN launched an investigation and fired some staffers. An internal review in 2013 confirmed an ongoing procurement fraud.

This is not the first UN misdemeanor in Afghanistan. A 2008 USAID investigation report, for example, revealed that after signing a $25 million contract to build small-scale infrastructure projects, the UN development agency subcontracted it out to the UN project office, which then subcontracted it out to local contractors.

The final and incomplete works included “life-threatening oversights” on building projects. The UN project office also had a $365 million road construction grant from USAID, $10 million of which it freely used to finance projects in Sudan, Haiti, Sri Lanka and Dubai without USAID knowledge or consent.

The UN has broad legal immunity. Internally, the fear of speaking up to superiors is a culprit and signs of an organizational culture that needs to change. It’s why investigators get a wall of silence treatment when they request documents or face-to-face meetings from UN officials.

Generally, the UN does better at starting new projects to big fanfare than it is at seeing them through. Combined with weak management and high staff turnover, poor communication in a crisis country environment can easily spawn such malfeasance.

To be fair, the UN is hardly the only player that screwed up.

Afghanistan doesn’t want for aid groups and private companies that benefited from the open spigot of nation-building funds. Donors continued to pour money in, even as reports of fraud grew.

A few years after 9/11, I worked in Kabul for a Geneva-based intergovernmental organization that had multiple contracts with USAID. Most of the contracts were awarded in a one-year span, and, being short-staffed, we quickly lost track of expenditures.

This was made worse by the need to “burn” money in order to get more money. We built schools and clinics indiscriminately. When the office in Herat in western Afghanistan burned down in a riot, the program manager celebrated it by opening a can of beer at his desk, because we no longer had to account for which contract had paid for which land cruiser or computer.

UN, Police Thyself

So what to do?

Pointing fingers will not make things better. The UN should own up to its failures – and then up its self-policing efforts.

In the aftermath of the Iraq oil-for-food scandal that sullied the UN's reputation, the UN set up a special anti-corruption unit that did excellent work. The procurement task force aggressively looked into corruption, uncovering a score of schemes involving more than $1 billion in contracts.

Unfortunately, starting in 2009, the UN cut back on internal investigations. The special task force was dismantled under pressure from governments, notably Russia and Singapore, resulting in the shutdown of ongoing cases in Afghanistan, Iraq and throughout Africa.

The global institution needs to revive this type of rigorous internal control, not just the paperwork of filling vacant oversight posts. Offices and units with a mandate to investigate misconduct or corruption should be given full financial and operational independence.

The new Afghan government immediately signed the bilateral security agreement. And America and its allies will continue to pay for Afghanistan’s reconstruction.

But unconditional spending has to end. All agencies in charge of giving money must put in stronger measures to ensure that funds are used for their intended purposes. Any report of mismanagement should instantly result in the cutoff of funding. The taxpayers and the Afghan people deserve this.

In her letter, the head of the UN development program was right to emphasize the Afghan government’s ownership of its finances. But national ownership is not an excuse to overlook what the agency was tasked to administer, especially given the country’s track record of bilking aid.

The UN’s largest agency can do better than that. The alternative is to let the “process of decaying” take over and be reduced to irrelevance.

Katrin Park, a former United Nations staff member in New York and Asia, until recently worked for a London-based international organization.

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