USAID OIG Afghanistan and Pakistan Oversight Report, April-June ...

Financial AuditsIn addition to organization-wide audits of U.S.-based firms operating in Afghanistan, OIG hasoverseen 48 financial audits of Afghanistan-based programs and activities since FY 2003. Thesefinancial audits have covered more than $1.168 billion in funds and identified approximately$150.1 million in questioned costs. Of this total, USAID had sustained more than $34.7 million inquestioned costs by the end of the reporting period.OIG works with private accounting firms to conduct financial audits in Afghanistan. Before usingany private accounting firms for this type of work, OIG assesses their capability to perform thework. As of June 30, 2012, USAID OIG had a roster of 14 eligible audit firms to call on inAfghanistan.In addition to required audits of local recipients and U.S.-based nongovernmental organizations(NGOs) and for-profit entities operating in Afghanistan, USAID funds audits of all locally incurredcosts to enhance accountability for its programs.From April 1 to June 30, 2012, OIG issued one financial audit in Afghanistan:Financial Audit of Local Costs Incurred by International Relief and Development Inc.Under the Strategic Provincial Roads—Southern and Eastern Afghanistan Program,Cooperative Agreement No. 306-A-00-08-00509-00, for the Period October 1, 2009, toSeptember 30, 2010 (Report No. F-306-12-006-N). This audit covered approximately$96 million in local costs incurred under a program designed to rehabilitate roads in southernand eastern Afghanistan. Auditors did not question any program costs, but faced significantimpairments in their work. They were unable to physically verify road rehabilitation activitiesor compliance with terms and conditions of relevant agreements because security conditionsprevented them from making planned visits to work sites. The auditors noted, however, thatan independent evaluation of the program found that International Relief and Development’squality assurance system—a key control that the firm relied on in paying its subcontractors—was weak. The evaluation also concluded that USAID did not receive value for its money giventhe number of kilometers of road completed under the program. In light of this conclusion andthe scope impairments faced by auditors in assessing the reasonableness of costs charged bysubcontractors, OIG recommended that USAID determine whether costs incurred werereasonable in relation to program goals and objectives.As of June 30, 2012, 12 financial audits of USAID funds were in progress in Afghanistan:Concurrent Financial Audit of the Costs Incurred in the United States by Louis BergerGroup Inc. Under the Afghanistan Infrastructure Rehabilitation Program, USAID ContractNo. 306-P-00-10-00505-00, for the Period August 25, 2006, to September 30, 2008.USAID OIG Afghanistan and Pakistan Oversight Report 11