type: other

jurisdiction: US

text: b'SIGAR\n Final Special\tInspector\tGeneral\tfor\t\n Afghanistan\tReconstruction\t\n\n\n\n\n SIGAR Audit 13-16\n\n\n\n\n Stability in Key Areas (SIKA) Programs: After 16 Months\n and $47 Million Spent, USAID Had Not Met Essential\n Program Objectives\n\n\n\n\n JULY\n 2013\nSIGAR Audit 13-16/Stability in Key Areas\n\x0c July 2013\n\n\nSIGAR\nSpecial\tInspector\tGeneral\tfor\t\n Stability in Key Areas (SIKA) Program: After 16 Months and $47 Million\n Spent, USAID Had Not Met Essential Program Objectives\n\n SIGAR AUDIT 13-16\nAfghanistan\tReconstruction\t\n\nWHAT SIGAR REVIEWED WHAT SIGAR FOUND\nOver the past decade, the U.S. According to the SIKA contracts, contractors would award grants to communities\nAgency for International for projects that address sources of instability identified by the community. In\nDevelopment (USAID) has September 2012, USAID and the Afghan government agreed that each of the SIKA\noverseen a series of stabilization programs would be a \xe2\x80\x9cquick delivery program,\xe2\x80\x9d in which projects identified by the\nprograms throughout community were initiated quickly but would achieve long-term results. Such\nAfghanistan aimed at improving projects could include road gravelling, culvert construction, or canal lining. The\nsecurity and extending the reach contracts also state that grants are the \xe2\x80\x9cessential\xe2\x80\x9d component to the program and\nand legitimacy of the Afghan shall be provided to communities. Although USAID had disbursed approximately\ngovernment. USAID currently $47 million for the four SIKA contracts as of March 31, 2013, none of the funds\nadministers the Stability in Key had gone to grants that fund community projects, such as those that are \xe2\x80\x9clabor-\nAreas (SIKA) programs intensive or productive infrastructure projects,\xe2\x80\x9d as called for in the SIKA contracts\nthroughout Afghanistan. USAID to address sources of instability.\ncreated the four regional SIKA Although contractors had not completed any grants to address sources of\nprograms\xe2\x80\x94East, West, South, instability, all four reported some progress in developing proposals and obtaining\nand North\xe2\x80\x94through separate approval for various grant projects. For example, all four reported achievements in\ncontracts with a total value of (1) identifying sources of instability and potential solutions, (2) increasing\nover $203 million. AECOM awareness of Afghan government line departments and nongovernmental\nInternational Development, Inc. organizations delivering services to the community, and (3) improving\n(AECOM) received the contracts communication between provincial and district entities.\nfor SIKA East, SIKA West, and\nSIKA South, and Development The SIKA contracts also identified the importance of the programs being viewed as\nAlternatives, Inc. (DAI) received extensions of the Afghan government, with the programs working with and through\nthe contract for SIKA North. Each government partners. However, USAID did not secure a formal agreement with key\nof the contracts has an 18- Afghan government partners until 9 months after it signed the first SIKA contract.\nmonth base period of Contractors for the four regional SIKA programs cited the lack of an agreement\nperformance with the possibility with the Afghan government as the reason for significant delays in program\nof additional 18-month option implementation. The delay led USAID to extend the performance periods for three\nperiods. of the contracts and sign a new contract for the fourth, even though the\n contractors had not executed any grants. The overall delay in awarding grants\nThis audit focuses on the status appears to have created participant dissatisfaction with the programs. For\nof SIKA expenditures and example, according to one of USAID\xe2\x80\x99s contractors, participants in one of the\nprogram execution. Specifically, regional programs are experiencing \xe2\x80\x9cfatigue\xe2\x80\x9d with the many planning workshops\nour objectives were to they have attended. Such disappointment may actually result in further\n(1) describe USAID\xe2\x80\x99s progress in destabilization and disaffection toward the Afghan government.\nexpending funds under the four\nregional SIKA programs, and Finally, although the contracts require SIKA to follow the Kandahar Model of\n(2) examine the challenges community contracting\xe2\x80\x94in which the community is responsible for grant project\nUSAID experienced in expending conception, implementation, and financial management\xe2\x80\x94a lack of clarity in\nfunds and implementing the USAID\xe2\x80\x99s presentation of the model and inconsistencies in contractors\xe2\x80\x99 application\nSIKA programs. of it undercut SIKA\xe2\x80\x99s objectives and further delayed project implementation. For\n example, one of the regional programs plans to use in-kind grants through\nSIGAR conducted this work in nongovernmental organizations and commercial companies to implement projects\nWashington, DC from February for the communities, a practice that would not meet a key requirement of SIKA\xe2\x80\x94\nthrough July 2013. having Afghan district entities directly responsible for project implementation.\n\n\n\n For more information, contact SIGAR Public Affairs at (703) 545-5974 or sigar.pentagon.ccr.mbx.public-affairs@mail.mil.\n\x0cWHAT SIGAR RECOMMENDS\nSIGAR recommends that the USAID Mission Director for Afghanistan (1) issue guidance requiring documentation of\nAfghan government agreement for future USAID programs that align with Afghan government initiatives prior to the\nstart of the program. To help ensure that the SIKA programs achieve identified strategic and program objectives,\nSIGAR also recommends that the USAID Mission Director for Afghanistan (2) instruct the USAID Mission Afghanistan\xe2\x80\x99s\nOffice of Acquisition and Assistance and Stabilization Unit to modify the SIKA contracts to clearly articulate a\nconsistent plan for community contracting and implementing the Kandahar Model, and (3) instruct the contracting\nofficer\xe2\x80\x99s representatives for each of the contracts to ensure that this approach is applied in the regional SIKA\nprograms.\nUSAID provided written comments to a draft of this report.\nWith regard to the first recommendation, USAID stated that its guidance\xe2\x80\x94Mission Order Number 201.03, Project\nDesign and Approval Process\xe2\x80\x94already calls for reaching concurrence with the applicable ministry and the Ministry of\nFinance during the design stage of a program. Thus, USAID believes that the recommendation has been met and\nshould be removed. However, SIGAR determined that the intent of the recommendation has not been addressed\nbecause the guidance does not explicitly require documentation of the Afghan government agreement. Therefore,\nSIGAR retained the recommendation in the report.\nUSAID partially concurred with the second recommendation. It stated that each of the SIKA programs already uses the\nKandahar Model, albeit in slightly different ways. However, USAID agreed that it inadvertently omitted reference to the\nKandahar Model from the contract for the SIKA West program. USAID plans to modify the SIKA West contract to\ninclude explicit reference to the Kandahar Model. Although including explicit language in the SIKA West contract will\nensure that all four contracts contain the same references to the Kandahar Model, it does not meet the intent of the\nrecommendation to articulate a consistent plan for community contracting and implementing the model by identifying\nkey steps that should be integrated into the identification of projects and the execution and management of grants.\nUSAID did not concur with the third recommendation to instruct the contracting officer\xe2\x80\x99s representatives for each of\nthe SIKA contracts to ensure that the Kandahar Model is applied in the regional programs because it considered the\nrecommendation redundant to processes already in place. However, inconsistencies in the application of the model\ndemonstrate that the existing processes are not sufficient to ensure consistent application in each of the SIKA\nprograms.\n\nWe address these and other USAID comments in the Agency Comments section of the report. USAID\xe2\x80\x99s comments are\nreproduced in appendix II.\n\n\n SIKA Program\n Area and District\n Rollout Locations\n\n\n\n\n Source: SIGAR\n analysis of USAID\n data, as of March\n 31, 2013.\n\n For more information, contact SIGAR Public Affairs at (703) 545-5974 or sigar.pentagon.ccr.mbx.public-affairs@mail.mil.\n\x0cJuly 29, 2013\n\n\nThe Honorable John Kerry\nSecretary of State\nDr. Rajiv Shah\nAdministrator, U.S. Agency for International Development\nMr. William Hammink\nUSAID Mission Director for Afghanistan\n\n\nThis report discusses the results of SIGAR\xe2\x80\x99s audit of the U.S. Agency for International\nDevelopment\xe2\x80\x99s (USAID) Stability in Key Areas (SIKA) programs. We initially planned to assess\nUSAID\xe2\x80\x99s planning, implementation, and oversight of SIKA grant projects. However, it was not\npossible to conduct our original audit as designed because, as of March 31, 2013, none of the\nSIKA programs had implemented any community grants. As a result, we focused on USAID\xe2\x80\x99s\nprogress in expending funds under the four SIKA programs and examined the challenges\nUSAID experienced in implementing the SIKA programs. This report makes three\nrecommendations to strengthen execution, management, and oversight of SIKA programs.\nIn commenting on a draft of this report, USAID disagreed with a number of our findings and\nconclusions. In addition, USAID requested that the first recommendation be removed, partially\nconcurred with the second, and did not concur with the third. We maintain that the evidence\nwe obtained provides a reasonable basis for the findings, conclusions, and recommendations\nin our report, and we discuss agency comments and our response to them in more detail on\npage 15 of this report. USAID\xe2\x80\x99s comments and our responses to them are also presented in\nappendix II.\nSIGAR conducted this work under the authority of Public Law 110\xe2\x80\x90181, as amended, and the\nInspector General Act of 1978, as amended; and in accordance with generally accepted\ngovernment auditing standards.\n\n\n\n\nJohn F. Sopko\nSpecial Inspector General\n for Afghanistan Reconstruction\n\x0c TABLE OF CONTENTS\n\nBackground .................................................................................................................................................................. 1\xc2\xa0\n\nUSAID Has Paid AECOM and DAI Nearly $47 Million, but the Contractors Have Not Completed Any Community-\nImplemented Grant Projects ....................................................................................................................................... 5\xc2\xa0\nLack of an Agreement with the Afghan Government and USAID\xe2\x80\x99s Failure to Communicate Key Program\nConcepts Contributed to Delayed Grants Execution ................................................................................................. 7\xc2\xa0\n\nConclusion.................................................................................................................................................................. 12\xc2\xa0\nRecommendations .................................................................................................................................................... 12\xc2\xa0\n\nAgency Comments ..................................................................................................................................................... 13\xc2\xa0\nAppendix I - Scope and Methodology ....................................................................................................................... 15\xc2\xa0\nAppendix II - Comments from the U.S. Agency for International Development ...................................................... 16\xc2\xa0\n\nAppendix III - Acknowledgments ............................................................................................................................... 29\xc2\xa0\n\n\nTABLES\n\nTable 1 - District Entities Identified in SIKA Contracts .............................................................................................. 4\xc2\xa0\nTable 2 - USAID SIKA Base Award and Disbursed Amounts as of March 31, 2013 ................................................ 5\xc2\xa0\n\n\nFIGURES\n\nFigure 1 - SIKA Regional Program, District, and Office Locations ............................................................................. 2\xc2\xa0\nFigure 2 - Amount of Time Between Requests for Proposal and Implementation of SIKA Programs..................... 8\xc2\xa0\n\nFigure 3 - Kandahar Model of Community Contracting ............................................................................................. 9\xc2\xa0\nFigure 4 - Process Comparison of Kandahar Model Community Contracting and SIKA Non-Competitive Grants to\nDistrict Entities ........................................................................................................................................................... 10\xc2\xa0\n\n\nABBREVIATIONS\n\n CDC Community Development Council\n\n DDA District Development Assembly\n\n MRRD Ministry of Rural Rehabilitation and Development\n\n NABDP National Area-Based Development Program\n\n SIKA Stability in Key Areas\n\n USAID U.S. Agency for International Development\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page ii\n\x0cOver the past decade, the U.S. Agency for International Development (USAID) oversaw a series of stabilization\nprograms throughout Afghanistan aimed at improving security and extending the reach and legitimacy of the\nAfghan government.1 In June 2011, a congressional report on U.S. foreign assistance to Afghanistan\nrecommended that U.S. government agencies \xe2\x80\x9cchallenge the assumption that our stabilization programs in\ntheir current form necessarily contribute to stability,\xe2\x80\x9d calling for continued assessment of the effectiveness of\nAfghanistan stabilization programs and, as necessary, the reallocation of funds.2 In April 2012, we highlighted\nseveral deficiencies with USAID\xe2\x80\x99s management of a prior stabilization program\xe2\x80\x94the Local Governance and\nCommunity Development program. Our report showed that USAID increased funding and extended the life of\nthe program despite high contractor operating costs, difficulty setting and measuring program outcomes, and\nmixed program results. USAID currently administers four regional Stability in Key Areas (SIKA) programs as\nfollow-on programs to the Local Governance and Community Development program.\nThe objectives of this audit were to (1) describe USAID\xe2\x80\x99s progress in expending funds under the four regional\nSIKA programs, and (2) examine the challenges USAID experienced in expending funds and implementing the\nSIKA programs.\nTo accomplish these objectives, we reviewed USAID\xe2\x80\x99s contracts, modifications, and related program guidance\nfor the four regional SIKA programs, including grants manuals, work plans, and performance management\nplans, to determine overall strategic and program objectives and approaches to program implementation. We\nanalyzed monthly and quarterly reports, financial reports, and grant project data from each of the SIKA\nprograms to ascertain USAID and contractor progress in implementing the programs. Additionally, we\ninterviewed the contractors (chief of party or deputy chief of party) and USAID oversight officials (contracting\nofficer\xe2\x80\x99s representatives or alternate contracting officer\xe2\x80\x99s representatives) responsible for each of the SIKA\nprograms and USAID staff from the Stabilization Unit and the Office of Acquisition and Assistance. We\nconducted our work from February 2013 through July 2013 in accordance with generally accepted government\nauditing standards. Appendix I contains a more detailed discussion of our scope and methodology.\n\n\nBACKGROUND\n\nIn fiscal year 2006, USAID established the Local Governance and Community Development program to\npromote and establish linkages between provincial governments and local communities in priority districts.3\nThrough this program, USAID sought to address causes of instability at the community level and assist the local\ncitizenry in developing institutions, processes, and projects to create a stable environment for long-term\npolitical, economic, and social development. At the conclusion of the program, USAID found that instability was\nstill a problem at the district level. USAID identified two main causes: the lack of development and lack of good\ngovernance. To address these weaknesses, USAID designed the SIKA programs to deliver community-\nimplemented projects in partnership with the Afghan government to build confidence in the Afghan\ngovernment and increase stability.\n\n\n1 USAID supports Afghanistan in addressing the drivers of instability and establishing an environment for sustained social\n\nand economic development by (1) engaging/supporting at-risk populations, (2) extending the reach of the government to\nunstable areas, (3) providing social and economic assistance and income-generation opportunities, (4) building trust\nbetween citizens and their government, and (5) encouraging local populations to take an active role in their development.\nUSAID\xe2\x80\x99s stabilization programs in Afghanistan include the Quick Impact Projects, which concluded in 2006; the Local\nGovernance and Community Development program, which concluded in 2011; the Community Based Stabilization Grants\nProgram and Afghanistan Stabilization Initiative, which concluded in 2012; and the Community Development Programs,\nscheduled to conclude in 2013.\n2 United States Senate Committee on Foreign Relations, Evaluating U.S. Foreign Assistance to Afghanistan: A Majority Staff\n\nReport, Washington, D.C., June 8, 2011.\n3Priority districts are the districts within Afghanistan that USAID Field Program Officers, local Provincial Reconstruction\nTeams, and their Afghan government counterparts identified for implementation of the Local Governance and Community\nDevelopment program.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 1\n\x0cUSAID created the four regional SIKA programs\xe2\x80\x94East, West, South, and North\xe2\x80\x94as separate cost-plus-fixed-fee\nterm contracts with a total value of over $203 million.4 AECOM International Development, Inc. (AECOM)\nreceived the contracts for SIKA East ($88,680,279 awarded December 7, 2011), SIKA West ($32,005,753\nawarded January 29, 2012), and SIKA South ($58,784,676 initially awarded April 10, 2012).5 Development\nAlternatives, Inc. (DAI) received the contract for SIKA North ($23,708,930 awarded March 14, 2012). Each\ncontract has an 18-month base period of performance with the possibility of additional 18-month option\nperiods. USAID extended the periods of performance for SIKA East, West, and North before the 18-month base\nperiods expired,6 and signed a new contract for SIKA South with a new 18-month base period in March 2013.\nThe SIKA programs are currently active in 43 districts. Figure 1 shows the rollout of the SIKA programs,\nincluding the initial pilot districts and subsequent expansion districts as of March 31, 2013.\n\nFigure 1 - SIKA Regional Program, District, and Office Locations\n\n\n\n\nSource: SIGAR analysis of USAID data, as of March 31, 2013.\n\n\n\nUSAID required the four programs to advance the same strategic and program objectives and intermediate\nresults. SIKA\xe2\x80\x99s strategic objective is for Afghans to have increased confidence in their district government,\nleading to the expansion of Afghan provincial government authority and legitimacy. As a secondary program\n\n4 A cost-plus-fixed-fee contract is a cost-reimbursement contract that provides for payment to the contractor of a negotiated\n\nfee that is fixed at the inception of the contract. The fixed fee does not vary with actual cost, but may be adjusted as a\nresult of changes in the work to be performed. A cost-plus-fixed-fee contract may take one of two basic forms\xe2\x80\x94completion\nor term. The \xe2\x80\x9cterm\xe2\x80\x9d form describes the scope of work in general terms and obligates the contractor to devote a specified\nlevel of effort for a stated time period. Under this form, if the performance is considered satisfactory by the government, the\nfixed fee is payable at the expiration of the agreed-upon period, upon contractor statement that the level of effort specified\nin the contract has been expended in performing the contract work.\n5According to the SIKA South Contracting Officer\xe2\x80\x99s Representative, following a bid protest, USAID issued a new contract for\nSIKA South to AECOM in March 2013 in the amount of $60,241,053.\n6In January 2013, USAID extended SIKA West\xe2\x80\x99s initial period of performance by 7 months, from July 2013 to February\n2014. In March 2013, USAID extended SIKA East\xe2\x80\x99s initial period of performance by 9 months, from June 2013 to March\n2014. In May 2013, SIKA North received a 4-month extension from September 2013 to January 2014.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 2\n\x0cobjective, SIKA aims to assist district and provincial level Afghan government officials in responding to the local\npopulation\xe2\x80\x99s development and governance concerns, instilling confidence, and building stability. In each\ncontract, USAID identified four intermediate results required to achieve these objectives:7\n 1. Provincial and district entities increasingly address sources of instability and take measures to\n respond to the population\xe2\x80\x99s development and governance concerns.\n 2. Provincial and district entities understand what organizations and provincial line departments work\n within their geographic areas, what kind of services they provide, and how the population can access\n those services.\n 3. Provincial authorities improve their ability to communicate with district entities to help them better\n understand their population\xe2\x80\x99s needs and prioritize basic service delivery interventions.\n 4. Provincial authorities are able to improve basic service delivery by using the Afghan government,\n Community Development Councils (CDCs), District Development Assemblies (DDAs), Afghanistan\n Social Outreach Program District Community Councils, which gain capacity to plan, design, implement\n and monitor projects, with a focus on labor-intensive projects or productive infrastructure.\nIn September 2012, 9 months after USAID awarded the first SIKA contract to AECOM, the USAID Mission\nDirector for Afghanistan, the Director General of the Afghan Independent Directorate for Local Governance, and\nthe Afghan Ministers of Finance and Rural Rehabilitation and Development signed an implementation letter\ncovering all four SIKA programs.8 The implementation letter documented agreement on the programs\xe2\x80\x99\nobjectives and outlined the roles and responsibilities of each of the parties. USAID agreed to implement the\nSIKA programs as Afghan government programs that worked within Afghan structures. The agreement stated\nthat activities advancing intermediate result 4 were intended to make each SIKA a \xe2\x80\x9cquick delivery program,\xe2\x80\x9d in\nwhich projects identified by the community\xe2\x80\x94such as local infrastructure projects\xe2\x80\x94were initiated quickly but\nwould achieve long-term results. Additionally, the implementation letter reiterated the SIKA contract\nrequirement that projects be executed with community-led development.\n\n\nNational Area Based Development Program and the Kandahar Model\nThe SIKA contracts require AECOM and DAI to work within the existing framework and methodology of the\nNational Area Based Development Program (NABDP) and the Kandahar Model.9 Developed in 2002, the\nNABDP is a joint initiative of the Ministry of Rural Rehabilitation and Development (MRRD) and the United\nNations Development Programme. The goal of NABDP is to contribute to a sustainable reduction of poverty and\nimprove livelihoods in rural Afghanistan.10 In 2007, MRRD developed a variant of the NABDP called the\nKandahar Model. The Kandahar Model features \xe2\x80\x9cdecentralisation of procurement and financial procedures\ncoupled with community contracting,\xe2\x80\x9d along with \xe2\x80\x9crapid decision making, [and] reduction of red tape.\xe2\x80\x9d In each\nof the four SIKA contracts, USAID states that the Kandahar Model generally uses community contracting\n\xe2\x80\x9cwithout the involvement of external commercial companies or [nongovernmental organizations, and] has led\nto rapid implementation of district level projects.\xe2\x80\x9d\n\n\n\n\n7 In its comments on a draft of this report, USAID also referred to the four intermediate results as project components.\n8U.S. Agency for International Development Afghanistan, Implementation Letter Number 20-01 Stabilization in Key Areas,\nSeptember 3, 2012.\n9 AECOM and DAI must work within the existing framework of the NABDP and the Kandahar Model in districts with DDAs.\nNABDP established DDAs to be the primary, elected, district-level institution representing local populations in community-\nled development processes. According to the NABDP Second Quarter 2012 Progress Report\xe2\x80\x94the latest available\xe2\x80\x94there are\na total of 388 DDAs, which represents 96 percent of districts in Afghanistan.\n10Because of the close relationship with the NABDP, USAID officials consider SIKA to be aligned with two National Priority\nPrograms, which advances their commitment to 80 percent alignment with National Priority Programs.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 3\n\x0cCommunity Grants\nThe four SIKA contracts state that \xe2\x80\x9cthe grants program is considered essential to the activities of the\nContractor in achieving the overall strategy and expected results of the program.\xe2\x80\x9d Grants that fund the\ncommunity-identified and -managed projects are the mechanisms by which the SIKA programs address the\nlack of development and lack of good governance that USAID identified as overarching sources of instability. As\nsuch, USAID set aside $46.5 million in the SIKA programs for \xe2\x80\x9cgrants under contract,\xe2\x80\x9d and required AECOM\nand DAI to provide grants to designated district entities for community projects as shown in table 1 below.11\nGrants under contract are grants that a USAID contractor is allowed to execute with nongovernmental\norganizations (nonprofits or for-profits). These grants can take different formats, including standard, simplified,\nor fixed obligation grants. In the case of fixed obligation grants, payments are based on the achievement of\nverifiable milestones, rather than the actual costs incurred by the recipient.12 According to USAID officials, for\nthe SIKA programs, grants under contract, specifically fixed obligation grants, are considered to be the same as\nthe Kandahar Model\xe2\x80\x99s method of community contracting. In this report, we refer to grants under contract as\ncommunity grants. Examples of community-implemented projects through NABDP include road gravelling;\nretaining wall, small diversion dam, well, or culvert construction; and canal lining.\nUnder the SIKA programs, only nongovernmental district entities are eligible to receive grants. District\nGovernors, or any Afghan government entity or official, are not eligible to receive SIKA grants. Table 1 identifies\nthe various district entities involved in implementing SIKA grants.\n\nTable 1 - District Entities Identified in SIKA Contracts\n\n\n\n\nSource: SIGAR analysis of USAID data.\n\n11 The SIKA contracts define district entities as including nongovernmental and governmental entities and officials.\n12 See USAID, ADS Chapter 303, Grants and Cooperative Agreements to Nongovernmental Organizations, partially revised\nJuly 3, 2012.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 4\n\x0cUSAID HAS PAID AECOM AND DAI NEARLY $47 MILLION, BUT THE\nCONTRACTORS HAVE NOT COMPLETED ANY COMMUNITY-IMPLEMENTED\nGRANT PROJECTS\n\nAs of March 31, 2013, USAID had disbursed approximately $47 million for the four SIKA contracts.13 However,\nnone of the disbursements were used to execute community grants under contract \xe2\x80\x9cwith a focus on labor-\nintensive projects or productive infrastructure,\xe2\x80\x9d as called for under intermediate result 4 of the SIKA contracts.\nAll four SIKA contracts explicitly state that \xe2\x80\x9cthe grants program is considered essential to the activities of the\nContractor in achieving the overall strategy and expected results of the program,\xe2\x80\x9d and grants execution is the\nonly program component identified as \xe2\x80\x9cessential\xe2\x80\x9d in the contracts. Table 2 shows the total awards and\namounts set aside for grants in the base period, along with funds disbursed as of March 31, 2013.\n\nTable 2 - USAID SIKA Base Award and Disbursed Amounts as of March 31, 2013\n\n\n\n\nSource: SIGAR analysis of USAID, DAI and AECOM data.\nNotes:\naFor SIKA West, the total for estimated costs and fixed fee includes $157,500 budgeted for grants handling costs.\nbForSIKA South, the total for estimated costs and fixed fee is based on the original contract signed in April 2012. The most\nrecent contract signed in March 2013 included estimated costs and fixed fees of $46,241,053.\n\nEven in a few districts designated as pilot districts, AECOM and DAI did not complete a full project cycle\xe2\x80\x94from\nidentifying sources of instability through implementing community grant projects. Furthermore, as of March 31,\n2013, neither AECOM nor DAI had awarded grants to eligible district entities either in the pilot districts or\nexpansion areas even though they had 8 to 10 months to do so. An independent management review\ncommissioned by the United Nations Development Programme in 2010 noted that NABDP projects took\nbetween 45 days and 6 months from receipt of district petition to contract award depending on the complexity\nof the project.14 None of the four SIKAs met this timeframe, even in the pilot districts.\nSIKA East, West, and South failed to meet their targeted goals for completed community grant activities\xe2\x80\x94a key\nperformance indicator. According to the programs\xe2\x80\x99 Performance Monitoring Plans, the first year target for\nnumber of completed grants activities was 40 for SIKA East, 72 for SIKA West, and 60 for SIKA South.15 In its\ncomments on a draft of this report, USAID stated that, because the agreement with the Afghan government on\nthe SIKA programs was required to be in place before any grants could be implemented, the lack of an\nagreement between USAID and the Afghan government prior to September 2012, and the resulting delay in the\nimplementation of grants, affected the targets set in the Performance Monitoring Plans. Nevertheless, AECOM\n\n13In June 2013, USAID provided updated funding data and reported that, as of June 18, 2013, USAID had disbursed\nalmost $57 million for the four SIKA contracts.\n14United Nations Development Programme. Independent Management Review National Area Based Development\nProgramme (NABDP) III Afghanistan. Kabul, Afghanistan, December 14, 2010. In its comments on a draft of this report,\nUSAID stated that an MRRD official told them that NABDP projects typically take 6 to 9 months.\n15\xe2\x80\x9cGrants activities\xe2\x80\x9d refers to all the activities in a district\xe2\x80\x99s prioritized list of projects that qualified for funding to address\n\nsources of instability. An activity is any task within a grant with a timeline milestone and budget line that are independent of\nother aspects of the grant. Grants may include one activity, or several. The latest SIKA East Quarterly Report shows the first\nyear target as 24 completed grants activities. SIKA North\xe2\x80\x99s Performance Monitoring Plan did not have an indicator for the\ntarget number of grants activities.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 5\n\x0cand DAI failed to complete any community grants, even in the pilot districts where they were instructed to begin\nprojects while the parties negotiated the agreement.\nHowever, all four SIKA programs reported some progress in developing proposals and obtaining approval for\nvarious grant projects. For example, as of March 31, 2013, SIKA East reported submitting seven grant\napplications to USAID for approval and receiving 30 completed grant application packages; an additional 87\ngrant applications were under development at that time. SIKA West reported that it gained USAID approval on\n20 grant projects.16 SIKA South reported 63 project \xe2\x80\x9cconcept notes\xe2\x80\x9d for potential grant projects in various\nstages of review.17 Finally, SIKA North reported \xe2\x80\x9c\xe2\x80\xa6moving to awarding grants in the pilot district\xe2\x80\x9d in its most\nrecent quarterly report in March 2013, but DAI officials did not provide specific numbers or any further\ninformation.\nIn its comments on a draft of this report, USAID reported that, as of July 1, 2013, the four SIKA programs had\nmade \xe2\x80\x9csignificant progress\xe2\x80\x9d in awarding grants. According to USAID, SIKA East currently has 41 grants\nunderway and $164,868 in disbursements for grants. SIKA West has 29 grants underway and $109,927 in\ndisbursements. SIKA North has 49 grants underway and $10,399 in disbursements. USAID also reported that\nSIKA South has still not made any disbursements for grants. Despite this recent progress, the $285,194 in\ncumulative disbursements for grants represents only 0.6 percent of the $46.5 million designated for grants\nexecution between the four contracts.\n\n\nSIKA Funds Have Been Spent Primarily on Operational Expenses and Community\nWorkshops and Training Sessions, Rather than Grants\nSixteen months after signing the first contract, the SIKA programs reported that cumulative disbursements\nprimarily consisted of operational expenses, such as subcontracts, security, labor, and indirect costs, and\nresulted in community workshops, meetings, and training sessions. In other words, as of March 31, 2013, the\n$47 million disbursed by USAID was primarily spent to support (1) identifying sources of instability and\npotential solutions, (2) increasing awareness of Afghan government line departments and nongovernmental\norganizations delivering services to the community, and (3) improving communication between provincial and\ndistrict entities, primarily through community workshops and training sessions.18\n \xef\x82\xb7 Since March 2012, SIKA North reported providing 83 training sessions for 1,776 participants on the\n use of the Stability Analysis Mechanism tool to identify sources of instability, and then create a local\n stability plan, in which community members propose solutions to the identified sources of instability.\n \xef\x82\xb7 Since December 2011, SIKA East reported holding 16 service provider catalog training workshops for\n 606 district entity participants to help them understand what organizations and departments work in\n their geographic area.\n \xef\x82\xb7 Since January 2012, SIKA West reported conducting 47 communications training sessions for\n provincial authorities and district entities that focused on building communications skills, outlining the\n importance of communications in the daily work of the district government, and designing\n communications plans. For example, in Pusht-e-Rod district, 26 farmers received a communications\n needs assessment and training on developing a communications plan.\n\n\n\n16 While SIKA West\xe2\x80\x99s official report to USAID showed no funds spent for the grants under contract line item as of March 31,\n\n2013, in documentation provided to SIGAR, AECOM reported disbursing approximately $27,000 from the grants under\ncontract budget to communities as reimbursements for participation in administrative training on project and financial\nmanagement.\n17 Project concept notes are project proposals that district entities submit to USAID for concurrence prior to developing a\n\nfull grant application for the project. The concept notes include basic information such as the sources of instability the\nproject addresses, location, and estimated activity budget.\n18 Some activities in support of intermediate result 4 include administrative grant process training for program\n\nstakeholders and technical surveys conducted by district engineers for infrastructure projects.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 6\n\x0c \xef\x82\xb7 In the quarter ending March 31, 2013, SIKA South reported undertaking a capacity assessment of\n district and provincial government entities\xe2\x80\x99 strengths and weaknesses.\n In September 2012, USAID and the Afghan government agreed that each of the SIKA programs would be a\n\xe2\x80\x9cquick delivery program,\xe2\x80\x9d in which projects identified by intermediate result 1 activities\xe2\x80\x94such as community\ninfrastructure projects\xe2\x80\x94were to be initiated quickly but would achieve long-term results. Our findings\ndemonstrate that the SIKA programs failed to achieve this objective. Nevertheless, nearly 16 months after\nsigning the first SIKA contract, USAID extended three of the SIKA contracts and signed a new contract for the\nfourth program.\n\n\nLACK OF AN AGREEMENT WITH THE AFGHAN GOVERNMENT AND USAID\xe2\x80\x99S\nFAILURE TO COMMUNICATE KEY PROGRAM CONCEPTS CONTRIBUTED TO\nDELAYED GRANTS EXECUTION\n\nUSAID\xe2\x80\x99s SIKA Activity Approval Memo, its requests for proposal, and contracts all call for SIKA to be\nimplemented jointly with the Afghan government. The contracts specifically state that the SIKA programs must\n\xe2\x80\x9cbe seen as an extension of the [Afghan government], not as increased foreign presence and must work within\nAfghan structures.\xe2\x80\x9d Moreover, the contracts require AECOM and DAI to work within the existing Kandahar\nModel framework and methodology to ensure that service delivery does not result in parallel institutions or\nprocesses.19 Despite the requirement that SIKA be seen as Afghan government programs, USAID did not\nsecure a formal agreement with key Afghan government partners until 9 months after awarding the first SIKA\ncontract to AECOM and almost 22 months after issuing the first requests for proposal. The delay in signing an\nagreement meant that USAID could not be assured of Afghan government participation in SIKA\nimplementation. Figure 2 shows key dates associated with SIKA contracting and implementation.\n\n\n\n\n19 In July 2010, international donors agreed to progressively align their development assistance behind the Afghan\ngovernment National Priority Programs with the goal of achieving 80 percent of alignment within the next 2 years. USAID\nofficials stated that the four SIKA programs are aligned under the Agriculture and Rural Development Cluster with National\nPriority Program-4, Strengthening Local Institutions and under the Governance Cluster, Local Governance.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 7\n\x0cFigure 2 - Amount of Time Between Requests for Proposal and Implementation of SIKA Programs\n\n\n\n\nSource: SIGAR analysis of USAID, DAI and AECOM data.\n\n\nAECOM and DAI stated that the initial absence of an agreement with the Afghan government caused the\nsignificant delays in program implementation.20 USAID officials told us that, in their opinion, the delays caused\nby the lack of an agreement with the Afghan government were excusable. However, the overall delay in\nawarding grants appears to have created participant dissatisfaction with the programs. For example, AECOM\nreported that the delay in awarding grants and implementing projects in SIKA East \xe2\x80\x9chas caused some district\nstakeholders to begin losing patience with the program.\xe2\x80\x9d Further, AECOM reported that some district\nstakeholders have accused SIKA East staff members of \xe2\x80\x9cincompetence or even deception.\xe2\x80\x9d Similarly, AECOM\nreported that participants in two districts in SIKA South are experiencing \xe2\x80\x9cfatigue\xe2\x80\x9d with the many planning\nworkshops they have attended. AECOM also reported that its facilitators and district staff in SIKA South are\nworried that the lengthy processes of project development and approval could expose them to physical risk\nfrom angry local representatives or constituents. According to a USAID third party monitor reviewing the SIKA\nprograms, expectation management is a significant issue, particularly in instances where the process could\n\n\n\n\n20 According to USAID officials, the USAID Regional Legal Office recommended that the agreement with the Afghan\ngovernment be through an implementation letter rather than a memorandum of understanding due to the complexity of the\npartnership with the Afghan government. USAID officials further stated that the Afghan government indicated comfort with\neither a memorandum of understanding or implementation letter outlining the roles and responsibilities regarding the SIKA\nprograms and were not concerned with the format of the agreement.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 8\n\x0craise expectations and disappoint the community if projects are continuously delayed or not executed.21 Such\ndisappointment may actually result in further destabilization and disaffection toward the Afghan government.\n\n\nLack of Clarity and Understanding of Key Program Concepts Undercut Program\nObjectives\nIn addition to delays caused by the absence of an agreement with key Afghan government partners, a lack of\nclarity in USAID\xe2\x80\x99s presentation of the Kandahar Model in the SIKA contracts and inconsistencies in AECOM and\nDAI\xe2\x80\x99s application of it has undercut SIKA\xe2\x80\x99s strategic and program objectives and further delayed grant-funded\nproject implementation. The SIKA contracts require AECOM and DAI to use the Kandahar Model community\ncontracting methodology to implement grant-funded community projects.22 Community contracting ensures\nthat CDCs and DDAs gain hands-on experience in project planning, execution, and management of finances.\nAccording to NABDP, there are three types of projects characterized by their level of technical complexity (see\nfigure 3). Of these, two types of projects\xe2\x80\x94semi-complicated and simple\xe2\x80\x94are managed by CDCs or DDAs. Figure\n3 shows the key features of the Kandahar Model, including the community contracting methodology.\n\n\nFigure 3 - Kandahar Model of Community Contracting\n\n\n\n\nSource: SIGAR analysis of MRRD, United Nations Development Programme, and USAID data.\n\n\nWhile USAID required AECOM and DAI to use the Kandahar Model for SIKA implementation, the agency did not\nprovide the contractors with details of what the framework entailed or ensure consistent application of that\nframework across the four SIKA programs. For example, during the request for proposal process, a potential\nofferor asked USAID to provide additional detail on the Kandahar Model of community contracting, but USAID\n\n\n\n\n21 Caerus Associates, LLC. Community Outreach and Engagement for Stabilization Activity Planning and Implementation:\n\nAn Evaluation of Best Practices. Washington, DC, March 16, 2013.\n22 The four contracts use the term \xe2\x80\x9ccommunity contracting\xe2\x80\x9d interchangeably with SIKA grants under contract.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 9\n\x0cdeclined to provide additional details to all potential offerors.23 Similarly, when we initially requested\nclarification on the Kandahar Model in March 2013, the documentation USAID provided did not clearly\ndemonstrate how the SIKA contractors were to implement the model. For example, USAID provided a four-page\nbrochure from the MRRD that touted the benefits of the Kandahar Model, but did not explain how the SIKA\nprograms were to implement the model.\nAt the end of June 2013, USAID provided us a two-page document on the Kandahar Model, which included a\ncomparison of USAID\xe2\x80\x99s understanding of the NABDP version of the Kandahar Model with the SIKA variation of\nthe model. However, the USAID document did not contain citations to indicate how it identified the key steps in\nits interpretation of NABDP\xe2\x80\x99s Kandahar Model, and these steps did not align with the process we identified\nthrough our own analysis of primary documentation from MRRD and NABDP. Additionally, the document was\nnot dated and USAID provided no evidence that it had provided the document to either AECOM or DAI.\nWe found that, in the absence of guidance from USAID, each of the four SIKA programs differs in its application\nof the Kandahar Model and approach to conceptualizing projects and awarding grants. This contradicts\nUSAID\xe2\x80\x99s SIKA variation of the Kandahar Model, which presents the model as a single, clearly delineated\nprocess. Figure 4 shows that each of the four SIKA programs established a different approach for project\ndevelopment, approval, and award, despite the contractual requirement that they follow the Kandahar Model\nand community contracting method.\n\n\nFigure 4 - Process Comparison of Kandahar Model Community Contracting and SIKA Non-Competitive\nGrants to District Entities\n\n\n\n\nSource: SIGAR analysis of MRRD, USAID, DAI and AECOM data.\n\n\nSeveral senior USAID and contractor staff stated that the SIKA implementation process is as important\xe2\x80\x94if not\nmore important\xe2\x80\x94than the final service delivery in achieving the program and strategic objectives. However, we\nfound several instances where the process developed in each SIKA region deviated from the contractually\nrequired Kandahar Model of community contracting. Below are examples of how the different SIKA programs\nadopted varying approaches and the effects of the changes thus far.\n\n\n23 During the request for proposal process, USAID allowed potential SIKA offerors the opportunity to ask questions and gain\n\nclarification. Any information USAID provided in response to one offeror is then made available to all offerors as an\namendment to the solicitation.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 10\n\x0cAdditional Entities in Grant Process\nAs shown in figure 4, the Kandahar Model requires participation from only three entities\xe2\x80\x94the DDA, MRRD, and\nthe Ministry of Finance\xe2\x80\x94in the entire process. However, figure 4 also shows that each of the SIKA programs\ninserted additional entities throughout the grant process. For example, SIKA South introduced additional\nentities for grant concept review at the provincial level, which resulted in more delays beyond those caused by\nthe lack of the implementation letter. The SIKA South contracting officer\xe2\x80\x99s representative stated that review of\nproject ideas at the provincial level by the inter-ministerial Sector Working Group and Provincial Development\nCommittee (which is chaired by the provincial governor) is \xe2\x80\x9chow things are supposed to work,\xe2\x80\x9d but admitted\nthat it is not clear if these steps are a requirement of the Kandahar Model.24 The lack of clear guidance and\nunderstanding of how the model has worked in Kandahar allowed the provincial governor to delay SIKA South\noperations by directing district government officials not to attend SIKA workshops and by personally reviewing\neach grant project. SIKA South reports that the uncertain schedule of Kandahar provincial Sector Working\nGroups and the intervention of the provincial governor delayed project approval.\n\nDefinition, Structure, and Composition of District Entities\nSIKA East, SIKA West, and SIKA South modified the district entities with which they were required to work. As\nshown in figure 4, the Kandahar Model places responsibility for project concept and contract development on\nDDAs. According to NABDP documents, to keep the size of the DDA manageable, the membership of a DDA\nshould not exceed 30 individuals. SIKA East, however, uses the DDA Plus, which includes DDAs, District\nCommunity Councils, and others. According to SIKA East program documentation, the DDA Plus has a\nmaximum size of 62 members, but in one case, the DDA Plus grew to 103 members. In SIKA West, AECOM is\nusing what it calls a \xe2\x80\x9cDistrict Stabilization Committee,\xe2\x80\x9d though the term is not defined in the work plan and\ndoes not exist in the contract as an entity eligible to receive community grants. In the case of SIKA South, the\ncontracting officer\xe2\x80\x99s representative stated that the existing DDA in the pilot district was not elected and were\n\xe2\x80\x9cnot the right guys.\xe2\x80\x9d The contracting officer\xe2\x80\x99s representative further stated that, as a result, SIKA South and the\ncontracting officer\xe2\x80\x99s representative had to force the MRRD provincial representative to hold new DDA elections\nin the pilot district, which caused further delays.25\n\nGrants for Communities\nAccording to the SIKA contracts, a benefit of the Kandahar Model is that it does not generally involve external\ncommercial companies or nongovernmental organizations. Instead, the Kandahar Model of community\ncontracting places responsibility on the community itself for project conception, implementation, and financial\nmanagement. However, the SIKA North chief of party and the USAID contracting officer\xe2\x80\x99s representative both\nstated that they prefer having services provided to communities rather than by the communities. The SIKA\nNorth contracting officer\xe2\x80\x99s representative further stated he did not see a problem with having contractors act\nas intermediaries between the Afghan government and the district entity. These officials stated that SIKA North\nintends to provide in-kind grants through nongovernmental organizations and commercial companies to\nimplement projects for the community.26 This use of in-kind grants does not meet a key requirement of the\nSIKA programs of having Afghan district entities directly responsible for project implementation. According to\n\n24 Provincial Development Committees were established to coordinate the activities of the Afghan government line\nministries, prepare Provincial Development Plans, improve donor coordination, monitor the implementation of development\nprojects, and enhance the capacity of the provincial administration for public administration and public service delivery.\nCommittee roles, functions, and membership vary by province. Sector Working Groups serve as functional subcommittees\nfor the Provincial Development Committee.\n25 In its comments on a draft of this report, USAID stated that it was MRRD that required the NABDP to conduct new\n\nelections to assure the legitimacy of DDAs as there had not been elections in over 3 years.\n26 The SIKA grants manuals define in-kind grants as when the SIKA contractor procures supplies or services on behalf of\n\nthe grantee (district entity). With an in-kind grant, the district entity does not receive or manage grant funds. USAID does\nnot define in-kind grants in ADS 303 Grants and Cooperative Agreements to Nongovernmental Organizations but does\ninclude language regarding in-kind grants in ADS Chapter 308 Awards to Public International Organizations.\n\nSIGAR Audit 13-16/Stability in Key Areas Page 11\n\x0cthe USAID\xe2\x80\x99s National Coordinator for the SIKA programs, the MRRD considers the use of in-kind grants a part\nof community contracting within the Kandahar Model because the community generates project ideas. In its\nJune 2013 Kandahar Model document, USAID stated that \xe2\x80\x9c[p]rojects proposed should also be done directly, by\nthe people of the CDCs and DDAs without external subcontractors [as this] builds confidence among the local\npopulation and a sense of responsibility among local community members.\xe2\x80\x9d The use of in-kind grants does not\nmeet a key requirement of the SIKA programs, namely, that Afghan district entities are directly responsible for\nproject implementation. This approach shows different interpretations that do not fit community contracting\nthrough the Kandahar Model.\n\n\nCONCLUSION\n\nIn November 2010, USAID issued requests for proposals for SIKA programs in four regions of Afghanistan with\nthe intent of supporting and strengthening the Afghan government at the district and provincial level to\nimplement community-led development and governance initiatives, which would build confidence in the Afghan\ngovernment and therefore increase stability. As of March 31, 2013\xe2\x80\x9416 months after USAID signed the first\ncontract\xe2\x80\x94the four SIKA programs had disbursed almost $47 million of the $203 million in total contract value,\nlargely for community workshops and training sessions. Yet none of the four programs had awarded grants to\ncommunities to address sources of instability. USAID officials cited the delay in finalizing the implementation\nletter with key Afghan government partners as the main cause for the lack of progress in providing grants to\ncommunities. However, given that the SIKA programs were intended to be seen as an extension of the Afghan\ngovernment and work within Afghan structures, it is disconcerting that USAID did not secure the agreement of\nkey government partners prior to issuing the requests for proposal or, at the very least, before awarding\ncontracts. Additionally, the variation in the approaches of the regional SIKA programs demonstrates that USAID\ndid not provide contractors with a clear understanding or application of the model or enforce contractual\nrequirements to use the Kandahar Model. USAID has offered little assurance that key USAID and contractor\nstaff have a shared vision of the Kandahar Model or community contracting. This, along with delays in\nimplementation, has resulted in community dissatisfaction with the lack of progress in implementing\ncommunity grants and potentially jeopardized the achievement of strategic and program objectives. To date,\nwhile the four programs conducted several meetings and training sessions, the value of these events\xe2\x80\x94and\nultimately the overall effectiveness of SIKA itself\xe2\x80\x94cannot be established without grants execution, which USAID\nidentified as essential in achieving the overall strategy and expected results of the contracts.\n\n\nRECOMMENDATIONS\n\nTo help ensure that future USAID programs do not face unnecessary delays in implementation, SIGAR\nrecommends that the USAID Mission Director for Afghanistan:\n 1. Issue guidance requiring documentation of Afghan government agreement for future USAID programs\n that align with Afghan government initiatives. This agreement should be structured in a manner similar\n to the SIKA agreement that outlines the roles and responsibilities of each signatory in relation to the\n particular USAID program. Further, USAID should finalize such agreements prior to the start of the\n USAID program.\nTo help ensure that SIKA programs achieve identified strategic and program objectives (increased confidence\nin district government, leading to the expansion of Afghan provincial government authority and legitimacy\nthrough government officials responding to the local population\xe2\x80\x99s development and governance concerns), we\nrecommend that the USAID Mission Director for Afghanistan instruct the USAID Mission Afghanistan\xe2\x80\x99s Office of\nAcquisition and Assistance and Stabilization Unit to:\n 2. Modify each of the SIKA contracts to clearly articulate a consistent plan for community contracting and\n implementing the Kandahar Model under the NABDP, including the roles of specific government\n\nSIGAR Audit 13-16/Stability in Key Areas Page 12\n\x0c and/or community entities and the processes to be followed in developing, approving, implementing,\n and monitoring community projects in support of SIKA program goals.\n 3. Instruct the contracting officer\xe2\x80\x99s representatives for each of the contracts to ensure that this plan for\n community contracting and implementing the Kandahar Model under the NABDP is applied in the\n regional SIKA programs.\n\n\nAGENCY COMMENTS\nWe received written comments on a draft of this report from the Acting USAID Mission Director for Afghanistan.\nUSAID disagreed with several of our findings, but did not offer sound, fact-based reasoning for its concerns. For\nexample, USAID stated that our report illustrates a \xe2\x80\x9cfundamental misunderstanding of SlKA\xe2\x80\x99s purpose in that\nthe implementation of grants is portrayed as the most important element of the program.\xe2\x80\x9d However, we\nemphasized the importance of grants in the report only because USAID explicitly stated (in all four of its SIKA\ncontracts) that \xe2\x80\x9cthe grants program is considered essential to the activities of the Contractor in achieving the\noverall strategy and expected results of the program.\xe2\x80\x9d Our analysis of the contracts showed that grants are the\nonly program component identified as \xe2\x80\x9cessential.\xe2\x80\x9d USAID\xe2\x80\x99s comment regarding our lack of understanding of\nSIKA\xe2\x80\x99s purpose misrepresents the critical importance of grant execution in achieving the intended outcomes of\nthe SIKA programs. The objective of the SIKA programs is \xe2\x80\x9cto promote stabilization in key areas by supporting\nthe [Afghan government\xe2\x80\xa6] to implement community led development and governance initiatives that respond\nto the population\xe2\x80\x99s needs and concerns in order to build confidence, stability, and increase the provision of\nbasic services,\xe2\x80\x9d and, according to the SIKA contracts, grants are vital tools in accomplishing this objective.\n\nAdditionally, throughout its comments, USAID stated that the variation in AECOM\xe2\x80\x99s and DAI\xe2\x80\x99s application of the\nKandahar Model across the four SIKA programs is acceptable and encouraged. However, by allowing such\nvarying approaches, USAID is ignoring identical contractual requirements that the Kandahar Model be used.\nMoreover, in June 2013, when USAID provided us with its understanding of the Kandahar Model, USAID\npresented a single SIKA variant of the model, which made no mention of flexibility across regional programs.\nNevertheless, USAID continued to cite the programs\xe2\x80\x99 \xe2\x80\x9cflexibility\xe2\x80\x9d to adapt the Kandahar Model in ways suitable\nto local conditions as a key reason for developing four regional programs instead of a single, nationwide\nprogram. Further, when AECOM and DAI took different approaches to implement SIKA, USAID failed to provide\ndocumentation explaining the reasons for the differing approaches.\n\nUSAID requested that our first recommendation be removed because, in USAID\xe2\x80\x99s opinion, it already has\nsufficient guidance. However, after reviewing the guidance cited by USAID in its comments\xe2\x80\x94Mission Order\nNumber 201.03, Project Design and Approval Process\xe2\x94\x80we determined that it does not meet the intent of our\nrecommendation because it does not call for written documentation of agreement by essential Afghan\ngovernment partners prior to the start of a USAID program. Requiring the formal documentation of agreement\nis particularly critical for USAID programs, like SIKA, to ensure that they align with Afghan government\ninitiatives and work within Afghan structures.\n\nUSAID partially concurred with our second recommendation. USAID committed to modifying the SIKA West\ncontract to add language on NABDP and the Kandahar Model consistent with the language used in the other\nSIKA contracts, and it set a target date of September 2013 to do so. We appreciate USAID\xe2\x80\x99s intent in changing\nthe language of the SIKA West contract to match the other three SIKA contracts. However, USAID already made\nthis change through a modification to the SIKA West contract in September 2012. Furthermore, the point of\nour recommendation was that the current references to the Kandahar Model in the SIKA contracts do not\nensure the consistent implementation of community contracting and the Kandahar Model across the SIKA\nprograms because it does not specifically identify key steps that should be integrated into the identification of\nprojects and the execution and management of grants.\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 13\n\x0cUSAID did not concur with our third recommendation because it believes that providing instructions to\ncontracting officer\xe2\x80\x99s representatives on consistent application of community contracting and the Kandahar\nModel under NABDP would be redundant to processes already in place. We disagree and maintain that the\nvariation in the approaches of the regional SIKA programs outlined in the report demonstrate that the\ncontracting officer\xe2\x80\x99s representatives are not ensuring that AECOM and DAI apply community contracting and\nthe Kandahar Model in the four regional SIKA programs.\n\nUSAID also provided technical comments, which we incorporated into our report, as appropriate. USAID\xe2\x80\x99s\ncomments and our responses to them are presented in appendix II.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 14\n\x0cAPPENDIX I - SCOPE AND METHODOLOGY\n\nIn February 2013, the Special Inspector General for Afghanistan Reconstruction (SIGAR) initiated an audit of\nthe U.S. Agency for International Development\xe2\x80\x99s (USAID) Stability in Key Areas (SIKA) Programs\xe2\x80\x94SIKA East,\nSIKA West, SIKA South, and SIKA North. We initially planned to assess USAID\xe2\x80\x99s implementation, management,\nand oversight of SIKA grants under contract. However, it was not possible to conduct our original audit as\nplanned because none of the SIKA programs had implemented grants under contract. This report (1) describes\nUSAID\xe2\x80\x99s progress in expending funds under the four SIKA programs, and (2) examines the challenges USAID\nexperienced in expending funds and implementing the SIKA programs.\nTo describe USAID\xe2\x80\x99s progress in expending funds under the four SIKA programs, we reviewed contract\ndocumentation and SIKA funding data from USAID, Quarterly Reports, and Quarterly Financials and Workdays\nReports from the contractors covering the period between December 2011 and March 2013. We performed\ndata reliability tests to determine the accuracy and completeness of the computer-processed data in the report\nby comparing SIKA funding data provided by USAID to contractor-reported data in the Quarterly Financials. We\nalso compared USAID and contractor disbursement and obligation data with SIKA contract and modification\ndocumentation. We determined that the data were sufficiently reliable for the purposes of the audit objectives.\nTo examine the challenges USAID experienced in expending funds and implementing the SIKA programs, we\nreviewed contract documentation, and deliverables such as Quarterly Reports, Monthly Reports, Grants\nManuals, Work Plans, and Performance Management Plans. Additionally, we reviewed the SIKA\nImplementation Letter between the USAID Mission Director for Afghanistan, the Director General of the Afghan\nIndependent Directorate for Local Governance, and the Afghan Ministers of Finance and Rural Rehabilitation\nand Development. Finally, because the process for the Kandahar Model for community contracting was not\nclearly articulated in a single SIKA document, we analyzed documents from the United Nations Development\nProgramme, including a 2010 Independent Management Review of the NABDP, and 2009 and 2010 versions\nof a brochure on the Kandahar Model from the Afghan Ministry of Rural Rehabilitation and Development to\ndetermine both the theory and practice of NABDP. We then compared our understanding of the Kandahar\nModel approach to the processes for grants under contract in the four SIKA programs.\nFor both objectives, we interviewed officials at the USAID Mission Afghanistan\xe2\x80\x99s Stabilization Unit and Office of\nAcquisition and Assistance, and the contracting officer\xe2\x80\x99s representatives or alternate contracting officer\xe2\x80\x99s\nrepresentatives for the four contracts. We also interviewed the chiefs of party or deputy chiefs of party for the\nfour contracts.\nWe considered the impact of compliance with laws and fraud risk. With respect to assessing internal controls,\nwe reviewed compliance with requirements of the SIKA contracts. The results of our assessment are included\nin the body of this report.\nWe conducted work in Washington, DC from February 2013 through July 2013, in accordance with generally\naccepted government auditing standards. These standards require that we plan and perform the audit to\nobtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on\nour audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and\nconclusions based on our audit objectives. SIGAR conducted this audit under the authority of Pub. L. No. 110-\n181, as amended, and the Inspector General Act of 1978, as amended.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 15\n\x0cAPPENDIX II - COMMENTS FROM THE U.S. AGENCY FOR INTERNATIONAL\nDEVELOPMENT\n\n\n\n us\n FROM THE AMERICAN PEOPLE\n\n\n MEMORANDUM Ju ly HI. 20 13\n\n TO: Joh n F. Sopko\n Special lnsr cctor Genera l lor Alg hnnistan Reconstruction\n (S IGA R)\n s a..o...<Jt ~;11.0 >\n FROM: Sarah Wines. Acting Mission Director\n\n SUBJECT: Drali SIGA R Report. \xc2\xb7\xc2\xb7Stability in Key Areas (S IKA)\n Programs: 16 Months alil:r USA ID A\\\\"ardecl thc First\n Contract. Its Contractors I lave Not Executed Any\n Community- lmrlcmcnted Gran t Projects\xc2\xb7\xc2\xb7\n (S IGA R Auditl 3-16)\n\n REF: SIGAR Transmittal email dated 06/29/20 13\n\n Thank you lo r providing USA ID with the opportunity to review the\n subject clran aud it report. Discussed below arc our comments.\n\n GENERA L COMMENTS\n\n The title o i" SIGAR"s report. \xc2\xb7\xc2\xb7siOhilizr in Key Areas (S/K, I) Programs:\n 16 Months after USAID A 11\xc2\xb7rmled the Firs/ Con/rae/. lis Conlmc/Ors\n /lave No! Executed Any Conull/lllity-lnlplementerl Gran/ Pr(y\xc2\xb7ects \xc2\xb7\xc2\xb7.\n suggests a l"undnmenta lmisundcrstanding oi"S II0\\"s purpose in that the\n implementation nl" grants is portrayed as the most important element or\n the program. SIG/\\ R makes only a hricl"rncntion of the other three\n components o r the project on pag~.:s 6 and 9 and litils to ackno\\\\"lcdge\n their imrortancc or that they arc intended to take place bcl(>re grants arc\n implemented. Addi tionally. as or .lui) I. 201 3. s ignilicant progress has\n been made in cx~.:cuting comm unity- implemented grant projects. Overal l.\n the pnce or impkmcnwtion has been accdcrating with major progress in\n the lirst three components or the program. We bel ieve this necessitates\n sIGA R rc-examin ing the approp riat cn~.:ss or the I itle or the audit report.\n It is mis leading to usc the phrase \xc2\xb7\xc2\xb7t(J 111onths r!fter USA /I) Oll\'orrlerlthe\n .first COllimel\xc2\xb7\xc2\xb7 both in the title and throughout the report. While Sl KA- SIGAR\n East was a\\\\\xc2\xb7artlcd in l)eccmher 20 I I. Sl KA -Snuth \'\'as not awarded unt iI Comment 2\n li ve months later. in April ~ 01 ~ . While SICi AR notes this on page 6. this\n\n lt\xe2\x80\xa2l ~0? 210 li?8111 (170(1 1()8 001\n US Agency for ln1crnat10md Dt\\vclop1nent lm.111 ~nhtllus,l1rtllllnrmi\xe2\x80\xa2hon@t\xe2\x80\xa2sru<1.nov\n Great Massoud Road ht1pii.1Ultlllnt!\\l~lfl \\JS.tiii.Jlnv\n Kabul Afghanistan\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 16\n\x0c 2\n\n\n\n is not made consistently clear in the report. Each SIKA contract has its\n own timeline for implementation, and to suggest otherwise is misleading\n to the reader.\n\n COMMENTS ON SIGAR\'s FINDINGS\n\n A. Community Grants (Pages 7 -10)\n\n SIGAR states on page 7, paragraph I that "the four SIKA contracts\n identify grants execution as essential to achieving the overall strategy\n and expected results ofSfKA ".\n\n USAID Response: As earlier noted, the title misconstrues the objectives\n and approach of the four SIKA contracts. The work accomplished under\n three of the four project components and the quality of the engagements\n with communities and district entities are lar more important than the\n total number of grants awarded.\n SIGAR\n Indeed, a major challenge for SIKA has been to make clear that this is not Comment 3\n a grants program where USAID provides discretionary funds for\n communities to simply fund locally-identified projects. This is why the\n contract contains four project components, only one of which is for\n grants. In some cases, as a result of the work accomplished in the other\n three components of the prqject, SIKA identifies a more appropriate\n funding solution from an alternate source to address the identified source\n of instability, as opposed to SIKA simply carrying out the project.\n\n As of July I, 2013, significant progress has been made in awarding grants\n which we request is renected in the report :\n SIGAIR\n SIKA-East: 54 grants approved lor $2, 164,458 and a pipeline of Comment 4\n 157 grants for approval for $4,942,76H. 4 I grants arc currently\n underway and $164.868 has been dishurscd.\n\n Sl KA-North: 82 grants approved IC.>r $1 .745,187 and a pipeline of\n live grants lor approval for $112.941. 49 grants arc currently\n underway and $1 0.3 99 has been d isburscd.\n\n SIKA-Wcst: 48 grants approved f(x $953,924 and a pipeline of 195\n grants for approval lor $3.798.285. 29 grants arc currently\n undenvay and $109.927 has been dishursed.\n\n SIKA-South: Pipeline of40 grants l(>r approval f(>r $1.558,443.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 17\n\x0c B. Lack of an Agreement with the Afghan Government and USAID\'s\n Failure to Communicate Key Program Concepts Contributed to\n Delayed Grants Execution (pages 9- II)\n On pages 9 - I 0 of the report, SIGAR states that "USA/D did not secure a\n formal agreement with key Afghan government partners until 9 months\n after awarding the first SIKA contract to AECOM and almost 22 months\n after issuing the first requests for proposal. The delay in signing the\n agreement meant that USAID could not be assured of Afghan government\n participation in SIKA implementation."\n\n USAID RESPONSE: While we agree that the lack of an agreement with\n the AJghan Government contributed to delays, th is is an\n oversimplification. The Ministry of Rural R,ehabi litation and S liGAR\n Development (MRRD), our primary partner on SIKA was involved in Comment 5\n every stage of the design and award ofthc program. Unfortunately, a\n change in leadership at MRRD around the time of the SIKA awards\n necessitated a further rev iew of the program to ensure it aligned with the\n new leadership team\'s vision for the Ministry. This is standard practice\n in USAID\'s work worldwide which emphasizes host-country ownership\n over speed.\n\n Furthermore, SIGAR states on page I0 that "the overall delay in\n awarding grants appears to have created participant dissatisfaction with\n the programs. " We believe that is a broad generalization not supported\n by lacts in the report. It is not substantiated beyond one vague example.\n There is no evidence presented in the report or d iscussed in the\n methodology to indicate that any sort of participant survey was\n SIGAR\n conducted. Comment 6\n\n Additionally, the report states on page ll that ..such disappointment may\n actual(v result in further destabilization and disqffection towards the\n Afghan government. " This claim is not supported by evidence and fails\n to look at SIKA \xc2\xb7s work beyond grants execution. There is insufficient\n acknowledgement of the significant efforts made in the first three\n intermediate results, many of which have been very successful and valued\n by the participants.\n\n C. Lack of Clarity and Understanding of Key Program Concepts\n Undercut Program Objectives (pages II -14)\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 18\n\x0c 4\n\n\n\n SIGAR states on page II, paragraph 1 that "In addition to delays caused\n by the absence of an agreement with key Afghan government partners, a\n lack of clarity in USAID \'s presentation ofthe Kandahar Model in the\n SIKA contracts and inconsistencies in AECOM and DA/\'s application of\n it has undercut SIKA \'s strategic and program objectives and further\n delayed grant-funded project implementation. "\n\n USAID RESPONSE: W,e believe there is suHicient clarity in both\n USAID\'s and our implementing partners\' understanding of the Kandahar\n Model. The Kandahar Model is a wel l-known component of the National\n Area-Based Development Program (NABDP), and a public document on\n the model drafted in 2009 is posted on MRRD\'s website. Additionally, SIGAR\n the application of the Kandahar Model is detailed extensively in the Comment 7\n grants manuals for each of the regional SI KA programs. For example,\n the Kandahar Model is specifically referenced at least nine times in the\n SIKA-West grants manual, including a fu ll three pages (pages 63-65). It\n is also discussed frequently with implementing partners and MRRD at\n both the national and regional levels and has been documented in minutes\n of meetings between USAlD, MRRD, and SIKA implementing partners.\n\n It is appropriate that regional S IKA programs have the nexibHity to adapt\n the Kandahar Model in ways suitable to local conditions; in fact this was SIGAR\n a key reason in deve loping four regional programs instead of a single Comment 8\n nationwide program. In addition, the SIKA Unit based at MRRD\n headquarters provides guidance and oversight from the national level.\n The model ultimately promotes flexibility, which supports the inclusion\n of provincial entities in the process - reflecting how sub-national\n government policy is supposed to work. lfSIKA implemented the\n Kandahar Model without regard to provincial considerations, it would be\n circumventing established systems and cause confusion. For example,\n page 15 ofthe SIKA-South contract states that "The focus ofSIKA-South\n is therefore to assist district level government (through coordination at the\n provincial level) in responding to the population\'s needs and concerns to\n better instill confidence and build stability." The structures at the\n provincial level provide a necessary linkage between the district and the\n Afghan government line ministries.\n\n We do not agree that SIKA \xc2\xb7s usc of the Kandahar Model delayed project SIGAR\n implementation. The dc.lays in pn~j1 cct implementation were primarily Comment 9\n caused by the lack of an implementation letter with the Afghan\n government due to a change in MRRD\'s leadership. \'l11c Minister of\n MRRD was replaced in March. 20 12 and the new Minister and Deputy\n Minister put the implementation ofS IKA on hold whi le they re-evaluated\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 19\n\x0c 5\n\n\n SIKA in terms of different MRRD priorities. The resulting changes were\n incorporated in the implementation letter signed on September 3, 2003.\n\n There are other factors that also slowed implementation. In some cases,\n weak community and government structures necessitated a lengthier\n engagement process. These structures need to function effectively for\n SIKA to deconflict projects with other programs and to reinforce existing\n systems. A key premise ofSIKA is to take the extra time when needed SIGAR\n and increase local capacity, a process that can increase the time needed Comment 10\n for project implementation. As community and government capacity\n increases, we expect the implementation of grants to accelerate.\n\n Furthennoie, on page 13, SlGAR states that "the use of in-kind grants\n does no/meet a key requirement ofthe SIKA programs, namely, that\n Afghan district entities are directly responsible for project\n implementation. This approach shows different interpretations that do not\n fit community contracting through the Kandahar Model. "\n\n USAID Response: SIGAR is incorrect that the use of in-kind grants by\n SIKA-North do not meet a key requirement ofSIKA or that in-kind SIGAR\n grants are inconsistent with the Kandahar Model. In-kind grants are Comment 11\n allowed under the SIKA contracts and SIGAR\'s own depiction (Figure 3\n on page 11) shows that complicated projects requiring a private\n contractor are one type of activity under the Kandahar Model . In-kind\n and fixed-obligation grants both require a bottom-up approach involving\n communities, Community Development Councils (CDCs,) District\n Development Assemblies (DDAs), and District Governors in identifying\n sources of instability (SOls) and designing activities that mitigate the\n SOl.\n\n For a simple grant to a CDC or DDA, SIKA-North provides the grant\n resources for the district entities to implement and monitor the project.\n For an in-kind grant, SIKA-North negotiates with a supplier or service\n provider for the inputs the community uses in their project. An example\n would be for a road project that runs through multiple CDCs. In one\n case, SIKA-North negotiated a 33% reduction in the price of gravel for a\n cost savings that individual CDCs would have been unable to achieve.\n The CDCs still work with the community to select workers tor the project\n and monitor the implementation. This is clearly stated in SIKA-North\'s\n grants manual.\n\n COMMENTS ON SIGAR\'S RECOMMENDATIONS\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 20\n\x0c 6\n\n\n\n To help ensure that future USAID programs do not face unnecessary\n delays in implementation, SJGAR recommends that the USAID Mission\n Director/or Afghanistan:\n\n 1. Issue guidance requiring documentation of Afghan government\n agreement for future USAJD program(s) that align with Afghan\n government initiatives. This agreement should be structured in a manner\n similar to the SJKA agreement that outlines the roles and responsibilities\n of each signaiOIJ\' in relation to the particular USAID program. Further,\n USAID should finalize such agreements prior to the start of the USA/D\n program.\n\n USAI D COMMENTS: USAID believes this recommendation has\n already been met and should be deleted.\n\n Subsequent to the creation of the SIKA programs, USAID/Afghanistan\n Mission Order Number 201.03 (Attachment 1) was issued on July 15,\n SIGAR\n 2012, to establish uniform procedures and requirements for the approval\n Comment 12\n of all Mission-f-unded activities, regardless of implementation approach\n and/or mechanism. The Mission Order already calls for reaching\n concurrence with the applicable ministry and the Minisll)\' of Finance\n during the design stage of the program. The Mission Order states on page\n 7 that ""all negotiations between the Mission and GIRoA, inclush,,e of\n initial Conditions Precedent and Covenants, as well as other outstanding\n issues are to be resolved during the design of the Project Appraisal\n Document (PAD)."\n\n As previously noted, a change in leadership at MRRD around the time of\n the SIKA awards necessitated a further review ofthc program to ensure it\n aligned with the new MRRD leadership team\'s vision for the Ministry. SIGAR\n Thus, even if an agreement had already been reached prior to award, it is Comment 5\n likely program changes would have been necessary to align with the new\n leadership\xc2\xb7s vision and would have resulted in the same delays. This is\n an inherent risk that any USAID program faces worldwide and can result\n in delays to program implementation despite the best efforts ofUSAID\n and the host country partner.\n\n To help ensure that SIKA programs achieve identified strategic and\n program objectives, we recommend that the USA/D Mission Directorfor\n Afghanistan instruct USAID A1ission Afghanistan\'s Office of Acquisition\n and Assistance and Stabili=alion Unit to:\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 21\n\x0c 2. Modify each ofthe S/KA contracts to clearly articulate a consistent\n plan for community contracting and implementing the Kandahar Model\n under the NABDP, including the roles ofspecific government and/or\n community entities and the processes to be followed in developing,\n approving, implemenling, and monitoring community projects in support\n ofSIKA program goals.\n\n USAID COMMENTS: The Mission partially concurs with this\n recommendation.\n\n The SIKA-West contract does not explicitly require the use ofthe\n Kandahar Model but the model was included in the Request for Proposal S IGAR\n and is currently utilized, as SIGAR notes on page 12 Figure 4. We agree Comment 13\n that the inadvertent omission referencing the Kandahar Model from the\n contract should be rectified and included in the award via a modification.\n\n Each of the SIKA programs uses the Kandahar Model in slightly different\n ways. A bottom-up, community-based approach combined with ,...,S-IG..,....A-\n IR --....,\n flexibility at the local level is the essence of the Kandahar Model and ,Comment 14\n mandating a strict adherence to any one particular approach would be\n contradictol)\' to the model and inhibit progress in developing grants. The\n Kandahar Model does not preclude the inclusion of additional entities or\n processes, and we believe the Kandahar Model has been appropriately\n tailored to account for local conditions at the regional level. To require\n uniformity in the implementation of the Kandahar Model beyond what is\n already included in the awards would reduce its effectiveness by limiting\n the flexibility it is based on.\n\n Each regional SIKA program has a grants manual, all of which =s-:-:IG~A:-::R::-----,\n incorporate the Kandahar Model and discuss the roles of government and Comment 7\n community entities and the processes for developing) approving,\n implementing and monitoring community projects.\n\n Finally, the Stabilization Unit\'s Monitoring and Evaluation program\n (Measuring the Impact of StabiliL\'.ation Initiatives- MISTI) is in the SliGAR\n process of developing best practices for a unifi,ed engagement model that Comment 15\n will include the Kandahar Model. This approach has the support of\n MRRD and the Independent Directorate of Local Governance (IDLG)\n and will lead to a more consistent usc of the model across the regional\n SIKA programs. It is important to note, however, that the regional\n programs must retain the flexibility to adapt the Kandahar Model to\n ensure it is appropriate to local conditions.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 22\n\x0cSIGAR Audit 13-16/Stability in Key Areas Page 23\n\x0c SIGAR Response to U.S. Agency for International Development Comments\n1. USAID\xe2\x80\x99s comment that the provision of grants is only one of four components of the SIKA programs\n misrepresents the critical importance of grant execution in achieving the intended outcomes of the SIKA\n programs. As our draft report noted, the programs\xe2\x80\x99 strategic objective is for Afghans to have increased\n confidence in their district government, with a secondary objective to assist district and provincial level\n Afghan government officials in responding to the local population\xe2\x80\x99s development and governance\n concerns. To achieve these objectives, USAID identified four \xe2\x80\x9ccomponents\xe2\x80\x9d\xe2\x80\x94which our draft report and\n USAID\xe2\x80\x99s contracts refer to as \xe2\x80\x9cintermediate results\xe2\x80\x9d that are required to achieve these objectives. These\n components are (1) provincial and district entities increasingly address sources of instability and take\n measures to respond to the population\xe2\x80\x99s development and governance concerns; (2) provincial and district\n entities understand what organizations and provincial line departments work within their geographic areas,\n what kind of services they provide, and how the population can access those services; (3) provincial\n authorities improve their ability to communicate with district entities to help them better understand their\n population\xe2\x80\x99s needs and prioritize basic service delivery interventions; and (4) provincial authorities are\n able to improve basic service delivery by using the Afghan government, Community Development Councils,\n District Development Assemblies, Afghanistan Social Outreach Program District Community Councils,\n which gain capacity to plan, design, implement and monitor projects, with a focus on labor-intensive\n projects or productive infrastructure.\n Component number four on improving basic service delivery is achieved through the provision of grants\n and is the only component referred to in all four SIKA contracts as \xe2\x80\x9cessential to the activities of the\n Contractor in achieving the overall strategy and expected results of the program.\xe2\x80\x9d Moreover, USAID\n modified three of the four contracts (for SIKA East, West, and North) to remove the requirement for the\n first three components to be completed prior to submission of the district project portfolios of grants\n applications for approval. As a result, we believe it is appropriate to refer to the grants component as the\n most important element of the program.\n2. While we recognize that each of the SIKA programs has its own timeline for implementation (as\n demonstrated in figure 2 in the report), we determined it was appropriate to use 16 months as our\n benchmark because the first contract was awarded in December 2011. Further, even if we were to use the\n later date of April 2012, our concerns regarding the lack of progress in executing community grants and\n the lack of clarity in USAID\xe2\x80\x99s requirement for community contracting using the Kandahar Model would still\n be valid.\n3. See SIGAR Comment 1. Additionally, because the SIKA programs are \xe2\x80\x9crequired to work within the existing\n framework and methodology of [the National Area Based Development Program (NABDP)] and the\n Kandahar Model,\xe2\x80\x9d the most appropriate funding solution from an alternate source would be the NABDP.\n However, USAID\xe2\x80\x99s Ministry of Rural Rehabilitation and Development (MRRD) assessment from February\n 2013 indicated that NABDP had been suspended from actual development work since at least April 2012\n due to a lack of funding. Further, even if alternate funding sources were available for some projects, all\n four contracts still require the use of grants and none of the three SIKA programs with first-year targets for\n completing an established number of grants activities (East, West, and South) reported any progress\n toward meetings these targets as of March 31, 2013.\n4. We modified the report to include USAID\xe2\x80\x99s data on its progress awarding grants. However, we note that the\n $285,194 in cumulative disbursements for grants represents only 0.6 percent of the $46.5 million\n designated for grants execution between the four contracts. Accordingly, we question whether this\n represents \xe2\x80\x9csignificant progress\xe2\x80\x9d as USAID states in its comments.\n5. In our view, USAID overstates the importance of the change in leadership at the MRRD. According to the\n SIKA program implementation letter, the formal agreement reached between USAID and key Afghan\n government partners, 9 months after awarding the first SIKA contract, documented the \xe2\x80\x9cunderstandings\n and agreement of the Government of the Islamic Republic of Afghanistan (the Government), as\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 24\n\x0c represented by the Ministry of Finance (MoF), the Ministry of Rural Rehabilitation and Development\n (MRRD) and the Independent Directorate of Local Governance (IDLG), and the United States Agency for\n International Development (USAID).\xe2\x80\x9d Because the agreement was between USAID, the ministries, and the\n IDLG, rather than between individual ministers or the IDLG\xe2\x80\x99s director general, a change in leadership\n within any of the three Afghan government parties would not automatically invalidate the agreement. In\n our view, the effect of the change in leadership at MRRD was relatively minor as the new minister had\n previously served as the Deputy Minister of Programs at MRRD since 2008. In any case, even if the\n change in leadership at MRRD necessitated further review of the SIKA programs, we would have expected\n to see the award and implementation of community-led grants in the five pilot districts where USAID\xe2\x80\x99s\n contractors were instructed to work while USAID and the Afghan government parties negotiated the\n agreement.\n6. Our statement that the overall delay in awarding grants has created participant dissatisfaction with the\n programs was based directly on information reported in the SIKA East and SIKA South quarterly reports to\n USAID, which we cite in the report. In addition, April 2013 mission reports from the recently hired MRRD\n regional coordinator for SIKA East noted, that in Logar, Wardak, and Paktya provinces, community\n members expressed doubt and suspicion about SIKA because they have not seen any \xe2\x80\x9ctangible output\xe2\x80\x9d or\n \xe2\x80\x9cphysical projects\xe2\x80\x9d from the program.\n7. USAID\xe2\x80\x99s comments indicate that it believes sufficient clarity and an adequate understanding of the\n Kandahar Model is based simply on the number of times the phrase is used in its grants manuals and in\n meetings between USAID, MRRD, and its contractors. We disagree. References to the Kandahar Model\n cited in USAID\xe2\x80\x99s comments did not specifically identify how key steps in the model were integrated into the\n identification of projects and the execution and management of grants. Rather, the SIKA West grants\n manual merely copied language verbatim from a 2009 four-page Kandahar Model brochure produced by\n MRRD.\n In our view, a sufficient understanding of the appropriate application of the Kandahar Model requires an\n understanding beyond that provided by a four-page brochure. For example, we reviewed the following\n documents that could serve as additional resources for identifying key steps in the model, identifying\n projects, and guiding the awarding and execution of grants:\n \xef\x82\xb7 Ministry of Rural Rehabilitation and Development of Afghanistan, National Area Based Development\n Program (NABDP) Model (Brief), Afghanistan, February 2013.\n \xef\x82\xb7 Ministry of Rural Rehabilitation and Development of Afghanistan, National Area Based Development\n Program (NABDP) Operational Guidelines for Implementation of Community Projects, August 2011.\n \xef\x82\xb7 United Nations Development Programme, Independent Management Review National Area Based\n Development Programme (NABDP) III Afghanistan, December 2010.\n \xef\x82\xb7 Ministry of Rural Rehabilitation and Development of Afghanistan, Baseline Assessment of PRRD\n Capacity, Kandahar, October 2010.\n \xef\x82\xb7 Ministry of Rural Rehabilitation and Development of Afghanistan, The Kandahar Model, 2010.\n \xef\x82\xb7 Ministry of Rural Rehabilitation and Development of Afghanistan, National Area Based Development\n Program (NABDP) Operational Guidelines for Implementation of Community Projects, June 2008.\n These documents either discussed MRRD practices in Kandahar province specifically or how those\n practices applied to NABDP as a whole. We determined how each of the four regional programs planned to\n identify projects and execute and manage grants through detailed analysis of each program\xe2\x80\x99s grants\n manual and work plan and through interviews with key USAID and contractor personnel. Although USAID\n stated that the Kandahar Model \xe2\x80\x9cis detailed extensively in the grants manuals for each of the regional\n SIKA programs,\xe2\x80\x9d our review of the four programs\xe2\x80\x99 grants manuals found only references to the Kandahar\n Model rather than extensive detail on how the model functioned.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 25\n\x0c8. While we agree that flexibility to account for local conditions across the four SIKA regions is important,\n USAID only provided us a single SIKA variant of the Kandahar Model in response to our requests for\n information and this variant made no mention of flexibility across regional programs. In addition, the\n reason for the different approaches taken by each of the SIKA programs was not explained in any of the\n documentation provided by USAID over the course of our audit. Furthermore, USAID\xe2\x80\x99s statement that\n providing the SIKA programs flexibility to adapt the model in ways suitable to local conditions is\n contradicted by the fact that the language referencing the Kandahar Model in all four SIKA contracts is\n identical.\n9. Contrary to USAID\xe2\x80\x99s assertion, we do not believe that the use of the Kandahar Model itself delayed project\n implementation. Rather, it was the lack of clarity in USAID\xe2\x80\x99s presentation of the model, and the resulting\n inconsistencies in its contractors\xe2\x80\x99 application of the model, that contributed to delays. As we described in\n the draft report, a clear example of this inconsistency is in SIKA South with the integration of Sector\n Working Groups and the Provincial Development Committee in the process of grant review. In its April\n 2013 quarterly report, USAID\xe2\x80\x99s contractor AECOM reported that the uncertain schedule of Kandahar\n provincial Sector Working Groups and the intervention of the provincial governor delayed project approval.\n In addition, the SIKA South contracting officer\xe2\x80\x99s representative told us that the main bottleneck in grant\n execution occurred at the provincial level, making specific reference to the Sector Working Groups. In our\n review of NABDP documentation and the grants manuals and work plans for the other three SIKA\n programs, we could not find references to required participation by either Sector Working Groups or the\n Provincial Development Committee in the grant process.\n10. We recognize that extra time may be needed to ensure that program implementation is adequate and\n effective. Accordingly, it would have been appropriate for USAID, AECOM and DAI to treat operations in the\n pilot districts, where the contractors were instructed to work while USAID and the Afghan government\n parties negotiated the implementation letter, as true pilots to ensure the program worked properly by\n completing a full project cycle\xe2\x80\x94from identifying sources of instability through implementing community\n grant projects\xe2\x80\x94before expanding implementation to other districts. Further, according to USAID\xe2\x80\x99s\n presentation of the Kandahar Model in the four SIKA contracts, the model has been successfully\n implemented by MRRD since 2007, meaning that structures, systems, and local capacity should have\n existed to enable project implementation following community contracting through the Kandahar Model.\n11. USAID commented that in-kind grants are allowed under the SIKA contracts and consistent with the\n Kandahar Model. However, according to the four SIKA contracts, \xe2\x80\x9cSIKA will provide grants under contract\n (also known by MRRD as community contracting) for community projects that are not available through\n other funding mechanisms.\xe2\x80\x9d In the report, we point out that in-kind grants are grants of goods and services\n procured for the community by the SIKA contractors rather than by the community. Because in such a\n scenario, the community is not responsible for directly managing the funds itself, we do not agree that in-\n kind grants of goods and services for the community are the same as community contracting following the\n Kandahar Model. As we presented in figure 3, there are three types of projects contained within the\n Kandahar Model. However, only two of these project types (semi-complicated and simple) are contracted\n directly with and managed by Community Development Councils and District Development Assemblies.\n Community contracting under the Kandahar Model places responsibility on community leaders to directly\n manage grant finances and budgets, which is not the case with in-kind grants. In its June 2013 Kandahar\n Model document, USAID stated that \xe2\x80\x9c[p]rojects proposed should also be done directly, by the people of the\n [Community Development Councils] and [District Development Assemblies] without external\n subcontractors [as this] builds confidence among the local population and a sense of responsibility among\n local community members.\xe2\x80\x9d All these factors lead us to believe that community contracting only refers to\n those projects directly managed by the community, and that this is the broader intent of the grants under\n contract component of the four SIKA programs. Although figure 3 acknowledges that complicated projects\n exist within the Kandahar Model, they do not constitute community contracting.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 26\n\x0c While we applaud SIKA North\xe2\x80\x99s interest in cost savings, bearing in mind that, as of March 31, 2013, it had\n not disbursed any of the $4.5 million set aside for grants under contract in its budget, a cost-savings on\n bulk gravel seems to be a misplaced concern given SIKA\xe2\x80\x99s overall focus on community contracting.\n Additionally, road graveling projects are listed in NABDP documents as being semi-complicated and simple\n projects that are the very type of project that would be managed directly by the community. Further, there\n is a qualitative difference between grants implemented by the community and grants provided to the\n community, which, as we cited above, USAID acknowledged in its June 2013 Kandahar Model document.\n Further, while all four grants manuals refer to in-kind grants, the term is not included in USAID\xe2\x80\x99s ADS\n Chapter 303, Grants and Cooperative Agreements to Nongovernmental Organizations, so it is not clear on\n what basis in-kind grants are justified in the grants manuals. In its section on in-kind grants, the SIKA\n North grants manual references ADS Chapter 308, Awards to Public International Organizations, as the\n basis for its justification of the use of in-kind grants. It not clear, however, how ADS Chapter 308 applies to\n grants to communities or how this meets the larger intent of community contracting in the SIKA contracts.\n12. Although USAID provided Mission Order Number 201.03, Project Design and Approval Process as\n evidence that the agency had already taken actions to address our recommendation to obtain\n documentation of the Afghan government\xe2\x80\x99s agreement on projects, after a review of the Order, we\n determined that it does not meet the intent of our recommendation. Specifically, the Mission Order does\n not call for written documentation of agreement by essential Afghan government partners prior to the start\n of the USAID program. The Mission Order explicitly references the role of Afghan government entities twice.\n First, when identifying the process for review of project concept papers, it states that the Project\n Development Officer will circulate project concept papers to interested donors, the Afghan Ministry of\n Finance, and any concerned line ministries, inviting these entities to identify issues for discussion. Second,\n when identifying the process for development and approval of the Project Appraisal Document, it states\n that all negotiations between the Mission and the Afghan government, as well as other outstanding issues\n are to be resolved during Project Appraisal Document design. Soliciting feedback from and conducting\n negotiations with the Afghan government is not the same as formally documenting the commitment of the\n Afghan government.\n Having a written agreement laying out the roles and responsibilities of each signatory is particularly\n important to document buy-in from critical Afghan partners for programs that are to be seen as an\n extension of the Afghan government and work within Afghan structures. Even if the head of the Afghan\n ministry that signed the agreement leaves prior to or during program implementation, such a formal,\n signed agreement would serve as precedent for the Ministry\xe2\x80\x99s (not the individual Minister\xe2\x80\x99s) support for the\n program, and could be used as justification by USAID to secure continued support from the new Afghan\n leadership.\n13. We do not believe that USAID needs to modify the SIKA West contract in the manner described in its\n comments. Modification 2 of the SIKA West contract, signed September 5, 2012, replaced Section C of the\n contract with the same language on the Kandahar Model and the requirement to work within the existing\n framework and methodology of NABDP and the Kandahar Model that the other three SIKA contracts\n contain.\n Additionally, we disagree with USAID\xe2\x80\x99s statement that figure 4 shows that SIKA West is currently using the\n Kandahar Model. The sentence introducing figure 4 states that \xe2\x80\x9ceach of the four SIKA programs\n established a different approach for project development, approval, and award, despite the contractual\n requirement that they follow the Kandahar Model and community contracting method.\xe2\x80\x9d Additionally, in\n figure 4, the actual steps and participants in the SIKA West model do not match the steps and participants\n identified in the NABDP Kandahar Model. For example, figure 4 demonstrates that SIKA West is using a\n \xe2\x80\x9cDistrict Stabilization Committee,\xe2\x80\x9d although the term is not defined in the work plan and does not exist in\n the contract as an entity eligible to receive community grants.\n14. We agree that the \xe2\x80\x9cessence\xe2\x80\x9d of the Kandahar Model is bottom-up and community based. It is, though, still\n a model that contains defined actors and processes. Further, the language referencing the Kandahar\n\nSIGAR Audit 13-16/Stability in Key Areas Page 27\n\x0c Model in each of the contracts (and relevant subsequent modification) is identical. None of the\n documentation on the Kandahar Model provided by USAID states that the Kandahar Model is to be\n tailored by the SIKA contractors to local/regional conditions. Given that USAID\xe2\x80\x99s June 2013 Kandahar\n Model document presents the MRRD/NABDP Kandahar Model and only one SIKA variant of the Kandahar\n Model, it is not clear where this flexibility exists in the Kandahar Model or in the SIKA contracts.\n15. We welcome USAID\xe2\x80\x99s report that the Measuring the Impact of Stabilization Initiatives program is in the\n process of developing best practices for a unified engagement model that will include the Kandahar\n Model, as this should help address the needs that we identified in our report. If the \xe2\x80\x9cMeasuring the Impact\n of Stabilization Initiatives\xe2\x80\x9d program results in clearly identified key steps in the development, approval, and\n award of grants within the framework and methodologies of community contracting and the Kandahar\n Model, this should satisfy the intent of our recommendation.\n16. USAID stated in its response that the contracting officer\xe2\x80\x99s representatives\xe2\x80\x99 responsibilities are "to monitor\n the contractor\'s performance and verify that it conforms to the technical requirements and quality\n standards agreed to in the terms and conditions of the contract." However, because USAID has not clearly\n articulated the specific entities and steps involved in developing, approving, implementing, and monitoring\n community grant projects using community contracting and the Kandahar Model, USAID\xe2\x80\x99s contracting\n officer\xe2\x80\x99s representatives have allowed AECOM and DAI to proceed with approaches that, as our analysis\n demonstrated, do not fit within the basic tenets of the model.\n We maintain that the recommendation remains valid and important, given USAID\xe2\x80\x99s continued confusion\n regarding such critical terms as the \xe2\x80\x9cKandahar Model\xe2\x80\x9d and \xe2\x80\x9ccommunity contracting,\xe2\x80\x9d as reflected in\n USAID\xe2\x80\x99s comments to our report. Throughout the audit process and, again, in its comments to our draft\n report, USAID has not provided a consistent, single variant of the model, has indicated that the model is\n simultaneously flexible and uniform, and has not presented assurances that deviations from the\n contractually mandated model are carefully weighed against the overarching objectives of the program.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 28\n\x0cAPPENDIX III - ACKNOWLEDGMENTS\n\nMatthew Dove, Senior Audit Manager\nJulie E. Silvers, Senior Program Analyst\nDaniel Weggeland, Senior Program Analyst\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 29\n\x0c This audit report was conducted\n under project code SIGAR-076A.\n\n\n\n\nSIGAR Audit 13-16/Stability in Key Areas Page 30\n\x0c The mission of the Special Inspector General for Afghanistan\n SIGAR\xe2\x80\x99s Mission Reconstruction (SIGAR) is to enhance oversight of programs for the\n reconstruction of Afghanistan by conducting independent and\n objective audits, inspections, and investigations on the use of\n taxpayer dollars and related funds. SIGAR works to provide accurate\n and balanced information, evaluations, analysis, and\n recommendations to help the U.S. Congress, U.S. agencies, and\n other decision-makers to make informed oversight, policy, and\n funding decisions to:\n \xef\x82\xb7 improve effectiveness of the overall reconstruction\n strategy and its component programs;\n \xef\x82\xb7 improve management and accountability over funds\n administered by U.S. and Afghan agencies and their\n contractors;\n \xef\x82\xb7 improve contracting and contract management\n processes;\n \xef\x82\xb7 prevent fraud, waste, and abuse; and\n \xef\x82\xb7 advance U.S. interests in reconstructing Afghanistan.\n\n\n Obtaining Copies of SIGAR To obtain copies of SIGAR documents at no cost, go to SIGAR\xe2\x80\x99s Web\n site (www.sigar.mil). SIGAR posts all publically released reports,\n Reports and Testimonies testimonies, and correspondence on its Web site.\n\n\n\n\n To help prevent fraud, waste, and abuse by reporting allegations of\nTo Report Fraud, Waste, and fraud, waste, abuse, mismanagement, and reprisal, contact SIGAR\xe2\x80\x99s\n Abuse in Afghanistan hotline:\n Reconstruction Programs \xef\x82\xb7 Web: www.sigar.mil/fraud\n \xef\x82\xb7 Email: sigar.pentagon.inv.mbx.hotline@mail.mil\n \xef\x82\xb7 Phone Afghanistan: +93 (0) 700-10-7300\n \xef\x82\xb7 Phone DSN Afghanistan: 318-237-3912 ext. 7303\n \xef\x82\xb7 Phone International: +1-866-329-8893\n \xef\x82\xb7 Phone DSN International: 312-664-0378\n \xef\x82\xb7 U.S. fax: +1-703-601-4065\n\n\n\n Public Affairs Officer\n Public Affairs\n \xef\x82\xb7 Phone: 703-545-5974\n \xef\x82\xb7 Email: sigar.pentagon.ccr.mbx.public-affairs@mail.mil\n \xef\x82\xb7 Mail: SIGAR Public Affairs\n 2530 Crystal Drive\n Arlington, VA 22202\n\x0c'