Remarks Prepared for Delivery by Special Inspector General John F. Sopko at Carnegie Endowment for International Peace, Washington, D.C.

Good morning. Thank you, Sarah Chayes, for that kind introduction.

As the Special Inspector General for Afghanistan Reconstruction, I speak at a wide variety of venues, but speaking to the Carnegie Endowment is special. Carnegie does good work in many fields, and that work reminds IGs like me that our mission in Afghanistan is about more than promoting program efficiency, saving money, and identifying miscreants and criminals. It is also about helping to achieve—as you at Carnegie seek to do—a broader set of goals that include peace, stability, and respect for human rights.

This month is an especially interesting time at SIGAR, and it has nothing to do with the holiday party. After 13 years of armed struggle and more than 104 billion dollars appropriated for reconstruction assistance, America's role in Afghanistan is undergoing a fundamental change. On Monday, after 13 years, the U.S./NATO International Security Assistance Force Joint Command lowered its flag for the last time.^[1] Three weeks from today, U.S. combat operations in Afghanistan will have officially ended. More than 10,000 U.S. military personnel will remain, but in a training and support role, and at a small fraction of the earlier deployments in America's longest war. At the same time, a new national unity government in Kabul will lead Afghanistan into what is envisioned as a “Decade of Transformation.”

This major shift in conditions on the ground was the focus of delegates from dozens of countries at the London Conference co-hosted by Prime Minister Cameron and President Ghani just a few days ago.

I'll say a few words about that conference, then explain how one of the issues addressed there ties directly to a major new product SIGAR is releasing today, and how it shapes the challenge of reconstruction in the years ahead. And there are years ahead. Even if Congress appropriated no more aid for Afghanistan, there is more than 14 billion dollars in previously appropriated but still undisbursed funding “in the pipeline.” Applying those funds will keep many U.S. agencies and employees—not to mention oversight folks like me—busy for some time to come.

In his remarks to the London Conference last Thursday, Secretary of State Kerry expressed “considerable confidence” for Afghanistan's future. He noted the Afghan National Security Forces' taking the lead in security, the “incredible” peaceful transition in leadership, progress in women's rights, and other advances. “Never before,” he said, “has the prospect of a more fully independent and sustainable Afghanistan been more clear than it is at this moment.” Speaking of President Ghani and CEO Abdullah, Secretary Kerry said, “During their short time in office, they’ve taken steps to combat money laundering and corruption, improve the country’s fiscal situation, and foster better relations with their neighbors.” And, he pledged continuing U.S. assistance for years to come.^[2]

In a similar vein, Prime Minister Cameron told the Afghan delegation, “We will be with you every step of the way.”^[3] But the British prime minister also addressed the corruption issue. He pointed out that Afghanistan must take strong steps against corruption, warning that without strong, accountable institutions, Afghanistan will have difficulty attracting business investment.^[4]

The prime minister is surely right, and the consequences of Afghanistan ignoring his warning could be dire. As we all know, the Afghan economy is already under strain and will likely weaken further as more foreign troops and aid workers leave the country. The managing director of the World Bank told the conference that Afghan economic growth has dropped to 1.5 percent this year, versus 9 percent annually during the previous decade. Meanwhile, the London Conference produced no new pledges of increased aid, so the drop in domestic revenues to 8.7 percent of gross domestic product, down from a peak of 11.6 percent in 2011, leaves Afghanistan with a severe and growing fiscal gap.^[5]

As SIGAR has noted in its reports to Congress, even if Afghanistan devoted its entire domestic revenue to its security forces, it could cover barely half those costs, leaving nothing for civil servants' salaries, infrastructure investment, health care, education, and other public goods. Corruption, whether as a tradition of small tips and bribes or as major-league theft and influence peddling, adds to and aggravates such financial afflictions by diverting revenues, distorting decisions, and eroding the perceived legitimacy of the government.

As the Carnegie Endowment's own Sarah Chayes has recently observed after many years of direct observation and research, “There is increasing reason to believe that acute corruption contributes to international instability” by creating grievances, spurring indignation, and generating support for anti-government militants.^[6] As usual, I agree with Sarah's diagnosis. We at SIGAR have benefited greatly from her insights into the corrosive effects of corruption as a way of life for criminal networks and political kleptocracies. We took special interest in her June report that singled out Afghanistan as an example of a state where governing systems have been bent to benefit one or a very few private networks. According to the report, former President Karzai regularly called his attorney general to influence court cases or to personally order the release of suspects from pre-trial detention, quashing the cases against them.

I may be particularly receptive to Sarah's message because of my personal background. I got my professional start fighting organized crime as a trial attorney with the Department of Justice’s Organized Crime and Racketeering Section, a qualification that I think President Obama recognized when he chose me for this job two and a half years ago. 

We are, of course, not the only ones who have noticed the threat of corruption. ^[7]

The U.S. military has pointed out corruption's threat to the international mission in Afghanistan. Last year, General John Allen, outgoing commander of the International Security Assistance Force (ISAF), told President Obama “Corruption is the existential, strategic threat to Afghanistan.” This year, he told the U.S. Senate that the Taliban are “an annoyance compared to the scope and magnitude of corruption” in Afghanistan.

Also this year, a study remarkable for its candor and self-criticism was initiated by the ISAF commander General Joseph Dunford. It declared, “Corruption directly threatens the viability and legitimacy of the Afghan state.” The Dunford report admitted that the initial U.S. strategy in Afghanistan not only failed to recognize the significance of corruption, but also may even have fostered a political climate conducive to corruption.

Obviously, these perceptions of corruption are important for matters like government legitimacy, rule of law, and donor good will. But corruption can also exact a toll in blood. I believe Sarah Chayes was prescient in warning about corruption’s impact on national security when last month the Washington Post reported that an investigation had revealed that the Iraqi army had at least 50,000 absent or fictional “ghost soldiers” on its payroll, with the officers who carry them on the books collecting their salaries. Even worse, the Post said, “Widespread corruption has been blamed for contributing to the collapse of four of the army's 14 divisions” during the June offensive by Islamic State extremists, despite the Iraqi army and police having absorbed some $25 billion from the United States for training and equipment.^[8]

Afghanistan’s National Security Forces have received more than twice that amount from the United States, yet a similarly toxic dose of corruption could also produce a disaster in Afghanistan. A security collapse would pull down most of our hard-won gains in rule of law, health care, education, women's rights, and economic development.

That would be a tragedy for the people of Afghanistan—and for the American taxpayer. By the end of this year, the U.S. Congress will have provided more than $104 billion in reconstruction assistance to build Afghan security forces, establish governing institutions and foster economic development there. That is more money, adjusted for inflation, than we spent on the entire Marshall plan that helped rebuild Western Europe after World War Two. Meanwhile, more than 2,000 U.S. military and civilian personnel have died in Afghanistan, while tens of thousands more have suffered physical or psychological wounds.

These considerations of the dismal costs and disastrous potential of endemic, entrenched corruption persuaded us to make it the lead topic in a new SIGAR report I am pleased to release today.

The SIGAR High-Risk List

 As you may know, since SIGAR's creation by Congress in 2008, we have issued more than 150 audits, inspections, alert letters, inquiry letters, and special projects. All of them are posted at our website, www.sigar.mil. More products will be appearing there as our recently created lessons-learned unit begins publishing systematic examinations of what went right and what went wrong in discrete areas of the reconstruction mission.

Driven by our statutory mandate, our work has included details of U.S.-funded clinics without staff or medicine, schools that can collapse, contracts that weren't performed right or at all, aircraft that the Afghans can't fly or even maintain, troop rosters that can't be verified, cash assistance that can't be traced, and many other outrages.

The mountains of details in our many products are valuable, but their granularity needed to be complemented with a higher-level view of the areas in which reconstruction is at risk.

It is for this purpose that we have created the SIGAR High-Risk List. Its role is to call attention to program areas and elements of the U.S.-funded reconstruction effort in Afghanistan that are especially vulnerable to significant waste, fraud, and abuse. We hope the SIGAR High-Risk List will help us as well as others like the new Afghan government to focus attention and corrective/preventive efforts on systemic rather than idiosyncratic problems facing reconstruction efforts. The list will also highlight program areas in which SIGAR believes implementing agencies are failing to mitigate risks in their areas of operation, and will help us generate actionable and substantive recommendations for executive agencies, Congress and the new Afghan government.

You will note that I spoke of mitigating, not preventing them or eliminating them entirely. Even in countries at peace, there is no such thing as a risk-free project. But in the conflict zone that is Afghanistan, the risks of waste, fraud, and abuse multiply. The problem is that American taxpayer dollars and our strategic and humanitarian interests in Afghanistan are being placed at unnecessarily high levels of risk by widespread failure to track results, anticipate problems, and implement prudent countermeasures.  And, unlike countries at peace, those problems can lead to lives lost and our national security objectives hindered or denied.

To be fair, I will tell you that the SIGAR High-Risk List was inspired by the Government Accountability Office's similarly named project that calls attention to federal programs that are at risk of waste, fraud, abuse or mismanagement. Like the GAO list, SIGAR's will be a work in progress, with issue areas and agency assessments changing over time—or staying constant, if no improvements occur. Department of Defense contract management, for example, has been on GAO's list since 1992.

Our topic-selection criteria also resemble GAO's. We do not want to encourage devoting scarce human and technical resources to low value-added or non-mission-critical areas. We therefore developed our list of high-risk areas by focusing on those that are:

1. essential to the success of the reconstruction effort;
2. at risk of significant and large-scale failure due to waste, fraud, or abuse;
3. part of ongoing or planned reconstruction efforts; and
4. subject to the control or influence of the U.S. government.

Applying that screening protocol gave us a list of seven high-risk areas:

1. Corruption/Rule of Law
2. Sustainability
3. Afghan National Security Forces (ANSF) Capacity and Capabilities
4. On-Budget Support
5. Counternarcotics
6. Contract Management and Oversight Access
7. Strategy and Planning

Each of the seven discussions in the SIGAR High-Risk List cites numerous points from SIGAR and other agencies' work to illustrate the nature and severity of the risk. Each of the seven risk areas is a potent threat to the reconstruction mission. But because corruption is so pervasive and so destructive in every area of Afghan life, it leads our list of high-risk areas.

We also discuss the sources of risk, often a critical factor in deciding how to address the threat. The SIGAR High-Risk List notes that sources of risk for the reconstruction effort in Afghanistan include:

• limited institutional and human-capital capacity in Afghan institutions
• operational demands and constraints imposed by an active insurgency
• widespread corruption in Afghan society and government entities
• Afghan reluctance or inability to impose accountability, especially on the wealthy or well connected
• poor record keeping and data retention by U.S. agencies and Afghan entities
• frequent personnel turnover and loss of U.S. agencies’ in-country institutional memory
• U.S. oversight personnel’s noncompliance with existing rules and regulations
• lack of adequate, coordinated, context-sensitive planning to guide program conduct
• failure to give due weight to sustainability in considering projects for Afghan control
• limited visibility into Afghan records

These points of failure give you some idea of the vast amount of work that an oversight agency like SIGAR faces in Afghanistan. And the challenge is growing. The drawdown of U.S. troops and the consequent reduction in security, transportation assets, and access has led other federal oversight agencies to reduce or remove their employee strength in Afghanistan.

But SIGAR will stay. Afghanistan is our job--it is our only job-- at least, until the amount of unexpended reconstruction funds falls below 250 million dollars. So we have nearly 200 people at work stateside and in Afghanistan itself. At any given time, about three dozen of our staff, including auditors, inspectors, and investigative agents with powers of arrest, are deployed in Afghanistan. That makes us the largest U.S. oversight presence in the country, and the one with the most independence and the broadest reach.

When Congress created SIGAR in 2008 via Public Law 110-181, it made us a fully independent inspector-general body. We are not part of any other federal agency. Congress also gave SIGAR a mandate to oversee all aspects of U.S. reconstruction efforts in Afghanistan, regardless of which agency, NGO, or international organization might be using U.S. funds in a program or project. Our reports such as the High-Risk List may therefore focus on DOD, State, USAID, Treasury, Agriculture, or anyone else administering U.S. reconstruction funds in Afghanistan.

From the number and frequency of our reports, one could feel SIGAR enjoys beating up on the government agencies running our reconstruction efforts in Afghanistan. That's not our intention. Overall, the agencies are trying their best in a very difficult situation.  But the sheer size of our reconstruction effort combined with our authorizing statute that mandates that we keep the Secretary of Defense, the Secretary of State, and the Congress “fully and currently informed about problems and deficiencies relating to the administration of... [reconstruction] programs and operations,” obviously highlight what tends not to work.  Remember, we're watchdogs, not cheerleaders. But we are always ready to report when an agency has made progress.

In carrying out our mission, we cooperate with other federal IGs and with other U.S., international, and Afghan law-enforcement bodies. Despite some problems we have reported with the Afghan justice system, our cooperation has extended to the point that a SIGAR agent provided testimony for prosecutors in an Afghan criminal trial.

But we rely on more than official cooperation.

Unlike most IG’s SIGAR pursues publicity and transparency. We publish virtually everything we do, unless it involves classified information, is a security risk or otherwise prohibited by law. We believe we are most effective when we go public, and that publicity supports some important public-policy goals such as bringing problems to the attention of senior leaders, deterring fraud, supporting reformers and whistleblowers and letting the American people—.and congressional appropriators—know that someone appointed by the President of the United States is looking out for their tax dollars.  In addition, I also believe such publicity helps those in the Afghan government and civil society community reform their own government by giving them ammunition and support for their efforts. To paraphrase Teddy Roosevelt, we provide our Afghan colleagues the “big stick” so they can speak “softly” about corruption and needed reforms.

So, we willingly use publicity in the fight to reform reconstruction in Afghanistan.  But it's not just SIGAR's battle, or the U.S. government's battle. Afghanistan must do its part, and not just to placate international donors.

President Ghani has made encouraging statements about his intention to fight corruption and reform his government.  Likewise, he has taken some actions, such as ordering reactivation of the case against the powerful people who stole nearly a billion dollars from the Kabul Bank and nearly destroyed the country's financial system. At the London Conference, he promised that the new government was “determined to do business differently.”

We at SIGAR welcome his fresh approach and hope he can use our High-Risk List as he looks to improve his government’s operations. But Afghanistan needs more than just activity at the top. It needs a fully staffed, truly independent, and effective system of prosecutors and courts. It needs a culture of transparency and even-handed public administration. It needs a free and independent press, including both institutions and individual voices. It needs continued and intensified work by independent bodies including Integrity Watch Afghanistan and the Independent Joint Anti-Corruption Monitoring and Evaluation Committee, the “MEC.” It needs more active civic organizations that can communicate with the public and channel their concerns to people who make decisions. Afghanistan needs a lot, and the sooner, the better.

With a newly elected Congress about to convene in a setting of war-weariness, rising national debt, and pressing domestic concerns, there could be a temptation to put Afghanistan out of mind.

That would be a mistake. The United States can and should take some steps to improve the reconstruction-oversight process, and to motivate the Afghans to greater efforts. The United States has, as I mentioned, more than 14 billion dollars in appropriated funds awaiting disbursement, and Secretary Kerry pledged in London that support would continue. Further, the United States and other international donors have pledged to deliver increasing amounts of reconstruction assistance “on-budget,” meaning that more funds will pass directly or through trust funds into Afghan control. The goal of that pledge is to avoid building parallel institutions to the Afghan government and instead to help Afghan government planning and build institutional capacity.

From the standpoint of Congress, oversight agencies, and taxpayers, however, increasing the level of on-budget assistance to Afghan agencies comes with some risks. They include often-inadequate documentation, imperfect reporting systems, and unverifiable data. Congress could help mitigate those concerns while honoring our national commitments by insisting on realistic conditionality for future reconstruction assistance.

For example, future aid could be linked, in whole or part, to Afghanistan's commitment to allow U.S. auditors to be stationed at ministries receiving substantial aid, allowing spot checks of records, and achieving benchmarks for improved institutional capacity. In conjunction with the forthcoming revisions to the Tokyo Mutual Accountability Framework, such measures could make substantial gains against the threats SIGAR has laid out in the High-Risk List.

Remember, international assistance should not be seen as a blank check.  There must be strings attached to ensure it meets donor objectives and conditions.  Moreover, such conditionality is not “all or nothing” – conditions should be measured and tailored to discrete achievable actions.

 SIGAR shares the Carnegie Endowment's concern for bringing about a more peaceful, prosperous, and just future for the people of Afghanistan. Although our oversight efforts and our High-Risk List are driven by U.S. statutory mandates, I truly believe that much of our work can be mutually supportive toward that end. Again, I thank the Endowment, and especially Sarah Chayes, for all the wise counsel you have given SIGAR, and for your leadership on the issue of corruption and national security and also for the opportunity to talk with you today.