Some media stories mention a different underlying problem: off budget funds. The BBC pointed out that “Kabul has meanwhile said that international partners should shoulder some of the blame for failing to provide oversight for contracts.” That sounds a bit like the government making excuses. The original WSJ article is more detailed:
Officials believe some of the cash, if not most, is siphoned from Western aid projects and U.S., European and NATO contracts to provide security, supplies and reconstruction work for coalition forces in Afghanistan.
Foreign aid includes on-budget and off-budget funds. On-budget funds are executed by the government through the public financial management system. Off-budget funds are executed by 3rd parties, such as NGOs and contractors, or government ministries who do not use the public financial management system.
Why does the government suspect that the majority of this money comes from off-budget aid? On-budget aid is more difficult to siphon off because of strong automated “budget execution and fiduciary controls…with the implementation of the centralized and computerized Afghanistan Financial Management Information Systems (AFMIS)” according to a 2008 reportabout financial management in Afghanistan. A story in June of 2010 fromOutlook Afghanistan pointed out the following:
officials in the MoF believe that projects like AFMIS and VPP are very helpful in fighting corruption in Afghanistan. The beneficiaries of manual financial system in Afghanistan were the corrupt officials. But that system is no more in use and as result there is no chance of corruption in government financial transactions. Efficient financial system and proper accountability can not only improve the trust of Afghans but also increase the confidence of the donors on the government of Afghanistan.
It is clear that automated financial management systems with built-in controls make it difficult to siphon funds for personal gain. Not impossible – but difficult. And, the audit trail enables governments to identify corruption after the fact. And, improve processes to make corruption even more difficult in the future. Great – except it’s not going to help prevent corruption in off-budget funds.
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