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Who really “overreached” on paying the Afghan police?

Foreign Policy, February 2, 2015
The New York Times editorial board recently argued that Afghan President Ashraf Ghani “overreached” in his attempt to reform the management of international funding for the Afghan National Police (ANP). In December 2014, Ghani had proposed taking this function away from the United Nations Development Programme (UNDP), which has exercised this responsibility since 2002, and making the Afghan government responsible for paying its own police force — though still with donor funds and with additional outside oversight. The Times defended UNDP, saying it had done a “reasonably good job” managing the hundreds of millions of dollars in international assistance that have come through the Law and Order Trust Fund of Afghanistan (LOTFA) each year, primarily to pay the Afghan police. 
But the Times’ editorial board has not done its homework. The reality is that UNDP’s management of LOTFA has long been plagued by waste and a lack of oversight. A recent report by the U.S. Special Inspector General for Afghanistan Reconstruction (SIGAR) pointed out numerous problems, including lack of controls over and monitoring of police attendance; multiple separate, unconnected, and inconsistent data points on police employment and payments; and around 300,000 ANP identification cards reportedly in circulation — nearly twice the ANP’s authorized strength of 157,000 –leading to difficulties in distinguishing between active, inactive, and deceased police personnel. The report concluded that “UNDP and its Monitoring Agent’s efforts to verify LOTFA expenditures are unsound and not sufficiently documented.” 
UNDP itself has commissioned critical evaluations and reports on LOTFA, both internal and external. An audit review by UNDP’s Office of Audit and Investigations in October 2014 found the Afghanistan country office’s oversight of the LOTFA monitoring agent “unsatisfactory.” Moreover, there have been serious issues of financial irregularities in LOTFA, as well as allegations of corruption, more specifically procurement fraud stretching over a number of years. This resulted in the dismissal or transfer of several senior UNDP and LOFTA staff members. 
An earlier external management review commissioned by UNDP and dated December 2012 pointed out major problems with procurement, payroll, reimbursement, and oversight practices, concluding that “it was a failure of UNDP management that created the conditions for LOTFA mismanagement and procurement fraud.” The report also criticized UNDP for failing to take responsibility for supporting key functions in the face of capacity and governance weaknesses within the Afghan Ministry of Interior. Surprisingly, at the time there was no clear process for not paying costs that were not properly documented and therefore did not meet LOTFA’s eligibility criteria, which was often the case with expenditures on food for police. 
The Times’ editorial also ignores the fact that LOTFA has been a cash cow for UNDP. In the 2012 management review, UNDP variously described LOTFA as “80 [percent] of UNDP’s Afghanistan portfolio,” “the largest UNDP project in the world,” and “18 [percent] of UNDP’s portfolio worldwide.” Yet despite this importance, it was not given the resources, attention, or oversight that such size and visibility would warrant. 
Even though management problems were pointed out for years by SIGAR and UNDP’s own audits, they were never effectively addressed. “The issues and fraud that came to light in the second quarter of 2012 were to a large degree the product of multiple years of management failure,” the 2012 review observed. It seems as if UNDP has taken this program for granted, banking on the generous fee it receives for “general management support” (variously reported at 4 percent and 7 percent) — a significant amount given the billions of dollars cumulatively channeled through LOTFA — but not investing most of this windfall in actually managing the fund or providing necessary technical support. 
While Afghanistan is certainly a challenging environment for monitoring and accounting for aid spending, there are examples of how this has been done much better. The Afghanistan Reconstruction Trust Fund (ARTF) is administered by the World Bank (which is prohibited from funding the security sector, hence the need for LOTFA) and pays for part of Afghan civilian government salaries, other recurrent costs, and development programs. It has a good reputation among donors, in part because it has taken its fiduciary duties more seriously. From the moment of its inception in 2002, it has used a financial firm as a Monitoring Agent. LOTFA, on the other hand, did not do so until many years after its creation. And even when the Monitoring Agent was in place, the opportunities it provided to enhance oversight were not effectively utilized by UNDP. 
Ghani’s concerns about UNDP’s management and oversight of LOTFA are well-founded and widely corroborated, and his frustration over years of poor management and wasteful spending of these valuable aid dollars is justified. Furthermore, international partners who have been contributing funds to LOTFA recognize that change is needed. 
The real questions in this debate — which the Times dodges — relate to when and how, not whether, to change the management of Afghan police funding. The Afghan government has engaged a highly competent former senior official from the Ministry of Finance to design a transition plan, and has already presented a credible draft to donors as a basis for further discussions. The Ministry of Interior, which oversees the police, remains a relatively weak and unreformed ministry, so capacity building, oversight, and reforms are urgently needed. Arguably, much more progress should have been made over the past 13 years supported by UNDP’s management of LOTFA. Credible financial management and oversight will be needed to provide donors greater confidence that their funds will be effectively spent for the purposes intended. The financial management arrangements of the ARTF may provide some useful models and lessons.