SIGAR

Good afternoon. Alan, thank you for the very kind introduction.

I want to thank the professional services council for inviting me to speak today.

I also want to especially thank my old colleague from Senator Nunn’s staff, Alan Chvotkin, for sharing with me the specific concerns of PSC member companies. He is a skilled and dedicated advocate on your behalf as well as a real patriot.

I value our dialogue with PSC over the last 18 months and look forward to continuing our discussions.   I believe they will be even more critical in the future.   For while the U.S. combat mission in Afghanistan will end this December, the reconstruction effort will continue for the foreseeable future.

In fact, reconstruction will be even more important post 2014 from a national security perspective since it will be our nation’s primary means of ensuring Afghanistan never becomes a haven for terrorists out to cause us harm.

Likewise, SIGAR’s oversight mission will also continue post-2014 and become even more critical to our efforts in Afghanistan.

If your company has done or is doing reconstruction work in Afghanistan, chances are you have heard of SIGAR. For those of you who may not be familiar with our agency, let me tell you a few things about us before going forward.

As background, since 2002, U.S. taxpayers have made a historic investment in the rebuilding of Afghanistan.  As of January 2014, Congress has appropriated more than $100 billion for Afghanistan reconstruction, making it the most costly effort to rebuild a single nation in U.S. history.   Afghanistan receives twice as much reconstruction funds than the next three countries – Pakistan, Egypt and Israel – combined.

Recognizing the need for greater oversight of U.S. reconstruction efforts in Afghanistan, Congress created SIGAR in 2008 and empowered it with cross-agency jurisdiction to conduct oversight of all U.S.-funded reconstruction programs in Afghanistan.

As a Special Inspector General, SIGAR is an independent and free-standing agency, unlike other IGs that are components of Executive Branch agencies.

It is the job of SIGAR’s nearly 200 auditors, investigators and other dedicated staff, both here in Washington and on the ground in Afghanistan, to protect the massive U.S. investment in Afghanistan reconstruction from waste, fraud, and abuse.

With more than 50 staff located in various locations throughout Afghanistan, SIGAR has the largest presence in the country of any U.S. government oversight agency.

SIGAR is also a temporary agency. Our mandate will expire when the amount of unexpended reconstruction funds for Afghanistan dips below $250 million.

Since over $20 billion in appropriated funding for reconstruction remains unspent, SIGAR still has important work to do and will for some time to come.

The good news for you is this also means that many of your companies are likely to continue operations in Afghanistan for the foreseeable future.

As many of you know, I spent about a quarter century working for Senator Sam Nunn and Congressman John Dingell, among others.  From them I learned the important role military and civilian contractors have played in our history – whether in building the atomic bomb, the Grand Coulee Dam, or supplying the troops with food and munitions at Valley Forge and Gettysburg. 

As a student of history, I appreciate that the U.S. government has a tradition of relying on the skills and expertise of the private sector to provide goods and services during wartime – so to some extent the popular refrain about the “outsourcing” of the government in Iraq and Afghanistan has to be viewed in the context of warfighting going back to the beginning of our republic, if not before.   

I and my agency fully appreciate that in Afghanistan, conducting military operations and carrying out reconstruction is tremendously dangerous and challenging.  We likewise fully appreciate that despite those obstacles, contractors have made significant contributions, such as giving logistical support to U.S. forces in the field, providing security for U.S. government personnel, building infrastructure across Afghanistan and developing the institutional capacity of the Afghan government, to name just a few examples.

Two specific examples from my own agency’s experience highlight contractor contributions to our mission in Afghanistan.

As some of you may recall, last September insurgents attacked the U.S. consulate in Herat, Afghanistan.   In the early morning hours on September 13, insurgents detonated a large truck bomb in front of the consulate’s front gate.  The blast killed several Afghan guards, injured several third-country-national guards and inflicted significant damage to the external perimeter wall and gated entry to the consulate.

Shortly after the truck bomb exploded, another team of insurgents launched an assault on the consulate.  What has not been mentioned in the press but which was reported to me by one of my agents stationed at Herat was  that it was International Development Solutions security personnel, alongside State Department Diplomatic Security agents and third-country-national guards, who engaged the insurgents in a fierce firefight for more than a half-hour, until reinforcements could arrive.

My agent also reported that without a doubt, the IDS personnel, who were among the first to engage the insurgents in the firefight, saved lives and prevented the insurgents from penetrating deeper onto the consulate grounds.

Just like our men and women in uniform serving in Afghanistan, contractors working shoulder-to-shoulder with U.S. military and civilian personnel make significant sacrifices and put themselves at great risk.

Sadly, many have made the ultimate sacrifice.  Just last week, two American contractors working for ISAF were killed in a suicide bombing in Kabul.   Their deaths and last September’s attack on the Herat consulate remind us of the dangers contractor personnel face each day in Afghanistan.

The second example does not involve security but is equally important to our government’s mission – namely, auditing.

Last month, SIGAR issued an audit report that favorably noted the rigorous public financial management assessments that Ernst & Young and KPMG conducted for USAID that concluded that none of the 16 assessed Afghan ministries were able to manage and account for direct assistance from the United States unless they implemented recommendations included in the assessment reports. The auditing firms made nearly 700 recommendations for corrective action, rating 41 percent as either “critical” or “high risk.”

These assessments reinforced growing concerns about providing direct assistance to Afghan ministries.   Despite what some have said, SIGAR is not opposed to direct assistance.   We recognize its potential benefits, such as capacity building.

That said, in SIGAR’s view, steps must be taken by USAID and DOD and the international community to reduce the risk of theft or misuse of U.S. taxpayer funds provided through direct assistance.

I believe the issue of direct assistance will continue to be extremely important to you in the contracting community for a host of reasons.

The two most important being that some of you will be called upon to assist the donor community in assessing and developing strict safeguards to protect these funds, and secondly that without such safeguards in place, many of you may face competitive disadvantages where Afghan ministries hire unqualified contractors based upon cronyism or corruption with U.S. taxpayer dollars.

The release of our audit on direct assistance highlights another difference with my agency’s approach to oversight, which is a bit different than most other inspectors general.

In part, this difference is due to the unique mission of SIGAR.  When the President appointed me to this job in July 2012, the message from the White House was succinct and clear: Start producing good work and do it quickly.

The White House was also well aware of my views on oversight and the role of inspectors general – views shaped by over a quarter century on the Hill working with the great heroes of congressional oversight – Senators Sam Nunn and Carl Levin as well as Representatives John Dingell and Henry Waxman, to name a few.

Those views were summed up in an op-ed I had written for The Washington Times, where I had encouraged the newly elected President Obama to take a page from the Gipper’s playbook and consider firing the current lot of inspectors general to send the message that there was a new sheriff in town committed to a new way of doing business.

As a temporary agency, SIGAR has a limited amount of time to make a difference with its oversight work.  In addition, oversight access in Afghanistan is becoming more restrictive and challenging as the U.S. military and civilian presence draws down. Although it is difficult to predict the future of the U.S. presence in Afghanistan, it is likely that no more than 20 percent of Afghanistan will be accessible to U.S. government oversight personnel by the end of the transition ---  a nearly 50 percent decrease since 2009.

As a result, SIGAR is motivated by a sense of urgency to do as much as possible in the little time we may have left.  For example, we issued nearly 30 audits, inspections, alert letters and other oversight products in the previous three months.  When I started last year, my predecessor’s output was only four products per quarter on average.

Many of you have noticed that SIGAR uses the press and social media to publicize its work, which also is not a common practice of most IGs.  This too is intentional.

My 30 years of experience in Washington have taught me that oversight is most effective when it is public.   No matter how good an IG audit, GAO report or commission finding may be, if it falls into the black hole of Washington background noise and goes unnoticed, it is not useful to anyone and has no impact.

I did not leave my law firm, nor did my senior staff give up better paying jobs in the government or private sector, to join SIGAR just to kill some trees.  We believe in SIGAR’s mission statement.

And, in order to meet that mission and to have an impact on fraud, waste and abuse, SIGAR informs the press of our work to keep policymakers, Congress, and, most importantly, the American people fully aware of the issues we identify through our oversight efforts.

Press attention spurs agency officials and Congress to take corrective action.  It can also have the added benefit of increasing the number of tips and other information streaming in through our agency hotline.

My work on the Hill as well as my experience practicing law have also affected my philosophy on oversight in another fashion –namely, my deep interest and desire in listening to, and where appropriate, working with the contracting community to improve the operations of our government.  I do not believe the government has a monopoly on knowledge or best practices, nor do we at SIGAR.

That is one of the reasons I am here today and why I meet with Alan and others in the contracting community on a regular basis.

For example, in 2012, the contracting community brought its concerns to us about the Afghan government illegally taxing their operations in Afghanistan—and we listened.

I personally raised the issue with the U.S. embassy in Kabul and the Office of the Special Representative for Afghanistan and Pakistan. And I can tell you that they and others in the Kabul Embassy did not want to hear our message.  They initially said there was no problem.

Despite these protestations, during my quarterly visit to Afghanistan last spring, I visited the Hairatan border crossing between Uzbekistan and Afghanistan and met with a group of contractors about the taxation problems they were facing with the Afghan government.  At the time, the Afghan Ministry of Finance would not release the rail cars containing supplies for U.S. and Coalition forces from the border crossing because of a taxation dispute.

In May 2013, SIGAR issued an audit report that found that since 2008, the Afghan Ministry of Finance had levied more than $921 million in business taxes and associated penalties on 43 contractors supporting U.S. government efforts in Afghanistan.

We also found that the ministry was taxing business receipts and annual corporate income that both the U.S. and Afghan governments had agreed should be exempt from taxation. I can assure you, I am not well-liked by the finance minister or many ministers as a result of work such as this.

However, my client is not the Afghan Finance Ministry or even the Afghan government – my clients are the American taxpayers and their duly elected officials.

Accordingly, SIGAR recommended that the U.S. government develop a consistent position on appropriate taxation of contractors supporting U.S. government efforts in Afghanistan. We also urged Congress to seek reimbursement from the Afghan government for taxes levied in violation of its agreements with U.S. agencies.

Congress listened, too. As you may know, Congress used SIGAR’s audit report as a basis for Fiscal Year 2014 legislation to address this problem. Specifically, the National Defense Authorization Act requires the Defense Department to withhold assistance for Afghanistan in an amount equal to the total of all taxes assessed by the Afghan government on assistance provided by the Defense Department.

The recently passed Consolidated Appropriations Act requires that bilateral agreements between the United States and foreign nations for foreign assistance include provisions stating that U.S. assistance shall be exempt from taxation, or reimbursed, by foreign governments. The bill further requires that future foreign assistance funds be withheld from any foreign government that has not reimbursed the United States for total taxes assessed on assistance funds.

This is an example of how SIGAR and the contracting community have worked together successfully on government oversight issues. Other matters of common concern on which we can work together may emerge in the near future, such as safeguarding direct assistance funds to ensure they do not go to undeserving friends and cronies of the Afghan government, and conducting remote monitoring and management of reconstruction projects in Afghanistan.

However, in the near term, I am asking you to help SIGAR collect lessons learned from your experience in Afghanistan that can be applied to future contingency operations and reconstruction efforts.

As you well know, some—especially agency officials—have criticized SIGAR for focusing on failures and mistakes instead of successes and accomplishments.

I find such criticism spurious at best.  SIGAR is a watchdog agency. Cheerleading is not our mission. We are the umpire on the field, calling balls and strikes. You can also think of us as the highway patrolman with the radar gun that keeps you looking in your rear view mirror and driving the speed limit.

However, this does not mean we are not interested in successes in Afghanistan.  We actually are extremely interested in developing our lessons learned reports from what has both worked and failed to work there.

Accordingly, last spring, I sent letters to the secretaries of State and Defense and the USAID administrator, asking them to provide their top 10 most successful and bottom 10 least successful reconstruction programs and projects, in addition to the criteria they used to rate them.

Their responses were shocking. None of the agencies could provide the information I asked for. While they could highlight broad outcomes in certain sectors -- for example, better health and education for Afghans -- none of the agencies were able to point to a specific program that was successful or otherwise draw a direct causal link between a U.S.-funded program or project and the outcome they listed as a success.

Needless to say, this was very alarming to me.   After more than a decade of reconstruction and over $100 billion of appropriations, the agencies could neither rack nor stack their programs and projects.

As an American taxpayer, and someone who has represented numerous Fortune 100 firms who could tell you their most profitable lines of business down to the dime, I was extremely disappointed that our government managers confessed a basic lack of understanding concerning their operational impact in Afghanistan.

Last fall, I turned to the NGO community and asked for their help. As you know, many NGOs are implementing reconstruction projects in Afghanistan. Many of them have been operating there for decades, long before the United States toppled the Taliban in 2001 after 9/11.

In a letter to more than 60 of the largest NGOs and their associations, I asked for their assessments of what has worked and not worked.

Realizing that public acts of candor can jeopardize relationships with funding sources, and to encourage frank responses, we promised to use their comments on a not-for-attribution basis unless they told us otherwise. We have received responses and are currently analyzing them for lessons we can learn.

Today, I would like to extend a similar offer to you.  I’m asking you to help SIGAR in its effort to identify lessons learned.

In particular, we’re interested to learn about your successes, in-country challenges, impediments and suggested improvements for future reconstruction efforts.

In the coming weeks, we would like to work with the PSC and any of you on how best to collect such information.

Now, in my prior life I represented a number of government contractors, so I can fully understand the reluctance of some of you to respond to such a request from an inspector general – especially this IG.

Accordingly, we will be happy to work with you and your associations and even your attorneys in crafting such a request. Like our letter to the NGO community, I would be receptive to receiving not-for-attribution comments or otherwise protecting the confidentiality of its source.

Again, my goal here is not to play “gotcha” and find problems – we are pretty good at finding problems on our own.  Rather, we need to learn from those who have been on the ground about what works or doesn’t work in reconstruction in Afghanistan in order to ultimately develop a valid body of lessons learned so that the next time we do something like this – and I am sure we will – we do it better and at less cost to the American taxpayer.

In conclusion, the United States has made a tremendous investment in both blood and treasure in Afghanistan. As Americans, we share a common purpose and responsibility to ensure that this historic investment does not go to waste.

Again, thank you for inviting me to join you today. I look forward to your questions.

Tuesday, February 18, 2014