Is 90% of US aid to Afghanistan wasted?

Men and kids wait for humanitarian supplies at a refugee camp in Afghanistan. Photo by: Tania Reid / isadmedia / CC BY

How much of U.S. aid really reaches Afghans? The question has prompted much debate lately as lawmakers try to eradicate waste and improve value for money.

It can go low as 10 cents for every dollar, if you take away NGO overhead, U.S. bureaucratic costs and funding misuse of Afghan workers and officials, according to one former senior auditor for the Office of the Special Inspector General for Afghanistan Reconstruction.

In a controversial op-ed for Politico, James R. Petersen notes that the biggest chunk of U.S. aid goes to NGO overhead, eating up 70 cents for every dollar. That’s more than twice the average (30 cents) for U.S. Agency for International Development projects in general.

“Essentially, all U.S. aid programs are contracted out to nongovernmental organizations, which means that our agencies are really huge contract management centers,” says Petersen, who worked for six weeks in Afghanistan in 2011 and for seven months at the SIGAR headquarters in Washington, D.C.

And according to him, “U.S. reconstruction effort is ultimately flying blind,” since SIGAR’s auditors rely on USAID’s summary financial data and NGOs’ management reports, which involve accounting data that are unaudited and unverified.

To solve that, he recommends two steps:

  • SIGAR, USAID and the inspectors general of the State and Defense departments should audit and report on the money spent by NGOs that does not go directly to measurable aid activities. 

  • Inspectors general should “unleash their forensic auditors” to evaluate the accounting records at all NGOs, especially the cash transaction data. Petersen notes the data with USAID are “too cleansed and summarized to be of much use.”

While Petersen focuses on NGOs, U.S. aid projects in Afghanistan also involves private companies. In fact, in its final report, the independent U.S. Commission on Wartime Contracting in Iraq and Afghanistan said the problem of waste in both countries is partly attributed to overreliance on contractors.

That said, USAID implementing partners will no doubt disagree with Petersen’s calculation. But in tough budgeting time, Petersen’s argument will surely cause ripples.

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About the author

  • Eliza Villarino

    Eliza Villarino currently manages one of today’s leading publications on humanitarian aid, global health and international development, the weekly GDB. At Devex, she has helped grow a global newsroom, with talented journalists from major development hubs such as Washington, D.C, London and Brussels. She regularly writes about innovations in global development.