The U.S. Agency for International Development’s Office of the Inspector General has seen a recent uptick in three kinds of aid-related criminal activity in Afghanistan.
So-called “ghost projects,” fake sub-contractors, million dollar cash transfers, bribery, and other perils of aid implementation can plague delivery in a country that already entails great risks — especially security — for any development implementer.
Devex spoke with special agent Daniel Altman, in charge of Europe and Asia, about what he considers to be the three biggest trends in criminal activity for development projects in the country, and what implementers can do about them. He gave his recommendations on how to avoid increasingly prevalent pitfalls as Afghanistan’s transition towards greater independence enters its final year.
Altman’s office is responsible for responding to hotline tips and allegations and conducting investigations of criminal activity on USAID contracts.
Here are what he considers three areas of criminal activity on the rise, and tips for how to avoid them:
1. Fraudulent financial transactions
The OIG has seen increasing instances of implementers’ employees embezzling funds while performing their jobs. For example, a member of the finance staff might handle a check for $5,000, add a zero to the end of it, cash the check and vanish. Or an employee of an implementing company might get a local bank to create a fake company with a name very similar to one of the projects’ vendors, then come up with a half million dollar negotiable instrument, cash it, and both people disappear.
“What we’re focused on is the importance of having solid controls over the financial transactions, and that means looking at things like putting a two person rule in place,” said Altman, describing a system that requires two employees to be present when financial transactions take place, not unlike the U.S. National Security Agency’s new two-person policy for transmitting sensitive information.
He also suggested implementers require people involved in financial transactions to quickly provide documentas showing the transaction took place as directed, citing instances where cash tax payments never reached the intended recipient.
These examples, Altman explained, point to the risks involved in operating in countries like Afghanistan, with primarily cash-based economies.
The vast majority of investigations USAID’s OIG conducts, Altman said, relate to procurement — the processes implementers use to purchase services and materials and to subcontract with local businesses. He highlighted collusion between procurement staff at the implementing organization and one or more parties who are involved in bribery or kickback schemes.
Altman recommended establishing a system of robust independent monitoring of the process, so that someone without any connection to the procurement can look through the paperwork and make sure procurement policies are being followed.
He stressed the importance of independently verifying both the competitive bidders and the entities that are awarded subcontracts to make sure they all actually exist. The official also suggested a special focus on losing parties in the procurement bidding competition, to find out how the process worked and whether it was fair and open or not.
3. “Ghost Projects”
With a smaller number of U.S. troops and a shrinking funding pool for reconstruction and development efforts, implementers are overseeing increasingly geographically distributed projects of a wide variety of types, from infrastructure to agricultural projects to grants. That kind of distribution, both in terms of space and variety, requires new, more creative approaches to monitoring progress on projects.
“We see a lot of “ghost projects” or projects where data is being exaggerated,” said Altman. He suggests using third-party monitors — often as simple as sending someone in an SUV to the field site — to provide unannounced “spot-checks” in remote or difficult locations expat aid workers might not be able to access.
Altman added that rapid developments in technology mean something as simple as an iPhone can now capture data and images that would have required three or four different devices and intensive training not long ago.
Particularly useful are “geotagged images,” time-stamped photos that also contain geographic coordinates. While not the same as sending trained monitoring and evaluation teams into the field, this kind of creativity can provide some degree of “comfort the thing is where it’s supposed to be, when it’s supposed to be there,” he said.
“They say an ounce of prevention is worth a pound of cure,” added Altman, noting that his office would rather help implementers prevent criminal activity than to come in the middle of an ongoing project and conduct an investigation or an in-depth forensic audit.
We’ll continue to cover oversight and accountability in Afghanistan this week with insight and analysis from around the development community.