SIGAR

SIGAR OVERSIGHT ACTIVITIES
Financial Audit 17-23-FA: Department of State’s Strengthening
Afghan Governance and Alternative Livelihoods Program
Audit of Costs Incurred by the Aga Khan Foundation USA
On July 17, 2014, the Department of State (State) awarded an $11,884,816
grant to the Aga Khan Foundation USA (AKF) to support the Strengthening
Afghan Governance and Alternative Livelihoods program. Its purpose was
to improve alternative livelihoods for vulnerable populations in Afghanistan
and to complement similar past and current programming funded by the
U.S. government. According to AKF’s website, the activities were designed
to “strengthen farmers’ capacity to improve their livelihoods with better
inputs (seeds, fertilizers, and access to extension services), training on new
technology, and mechanisms that connect farmers with markets to increase
sales of their crops.” The award was active from July 21, 2014, through
January 20, 2016, with total obligated funding of $11,078,002. SIGAR’s
financial audit, performed by Crowe Horwath LLP (Crowe), reviewed
$11,078,002 in expenditures charged to the grant from July 21, 2014, through
January 20, 2016.
Crowe identified two material weaknesses and one significant deficiency
in AKF’s internal controls. In addition, Crowe found three instances of
noncompliance. The first instance deals with the terms and conditions of
the grant; AKF did not meet the cost-sharing requirement and did not make
the required in-kind contributions. As result, Crowe questioned $928,370
because of the cost sharing, and AKF was eligible to receive only 85.4% of
the funds the U.S. government authorized for the program.
In the second instance, Crowe found that AKF did not have a policy that
explained the foundation’s responsibilities in monitoring and classifying its
subgrantees which resulted in $133,155 questioned costs. The last instance
involved charging unallowable laundry expenses.
In addition, AKF’s foreign-currency conversion process did not follow
U.S. generally accepted accounting principles, which require the exchange
rate to be recorded when a transaction occurs. AKF instead recorded its
currency-exchange transactions at the beginning of the month.
As a result of these internal-control deficiencies and instances of noncompliance,
Crowe identified $1,061,510 in total questioned costs, all of
which were unsupported costs. Crowe did not identify any ineligible costs.
Crowe identified three previous audit reports that could have a material
impact on the Special Purpose Financial Statement (SPFS). However, after
review, Crowe concluded that there were no applicable findings and therefore
no follow-up action was required.
Crowe issued a modified opinion on AKF’s SFPS due to the amount of
material questioned costs related to the cost-share requirement not being
met and inadequate subrecipient monitoring procedures and classification.
Based on the results of the audit, SIGAR recommends that the responsible
agreement officer at State:
28
SPECIAL INSPECTOR GENERAL I AFGHANISTAN RECONSTRUCTION