Bottom-line: USAID projects undermine the Afghan government. Quote:
...our resources can inadvertently raise local tensions, cause infighting among local groups, and exacerbate rent-seeking behavior among corrupt actors.
UPDATE: USAID has issued a pathetic response, here:
Corruption and A3: Corruption is of course a real concern for both on budget and off budget assistance. I launched the Accountable Assistance for Afghanistan (A3) initiative in the fall of 2010 to help ensure that the Agency is taking the necessary steps to limit the likelihood of assistance directly or inadvertently supporting malign groups or being diverted from their development purpose by extortion or corruption. As a result, USAID is implementing safeguards in four areas, two of which strengthen our pre-award processes and two that strengthen our post-award implementation.
A number of changes have been made that significantly improve contractor oversight. First, USAIDIAfghanistan now includes a subcontractor clause in new awards that permits USAID to restrict the number of subcontract tiers, requires the prime contractor to perform a certain percentage of the work, and prohibits subcontract "brokering" or "flipping", which is when a subcontractor passes the work to someone else and increases the risk for corruption.
Second, we are increasing our financial controls through a joint program with the USAID Inspector General to audit all locally incurred costs of program-funded implementing partners. Audits will be performed by internationally-accredited regionally based audit firms and checked by the Inspector General. Third, USAIDIAfghanistan is also increasing its Project Oversight through the establishment of On-Site Monitors (OSMs) in USAID field offices for project monitoring. Each USAID project will be assigned an OSM that will provide real time data to contract staff in Kabul on project performance and accountability.
Kabul Bank: USAID takes oversight of its awards seriously - at all levels. With regard to the well-documented crisis at Kabul Bank, USAID has terminated this part of the Deloitte contract in Afghanistan to ensure that our technical assistance is as effective as possible in light of changed and difficult conditions. Nevertheless, we do not believe that Deloitte, or USAID could have stopped the massive fraud that occurred at Kabul Bank. Deloitte, with USAID funds supported the Afghan Central Bank by providing trainers and experts to build the capacity of its Bank Supervision Unit. Oversight of the Afghan financial sector is conducted by Afghan authorities, and actual bank supervision is a sovereign function of the Afghan government. The fraud committed by Kabul Bank officers was a criminal act, deliberately concealed by major shareholders and senior bank management. While there was private speculation about possible financial difficulties at Kabul Bank based in part on the crash of the Dubai real estate market, all donors were essentially caught by surprise at the Kabul Bank collapse. Kabul Bank's shareholder/officers alleged frauds and self-dealing caused these massive losses and hid them from Central Bank examiners through fake documentation and obfuscating accounting techniques to hide this from the Central Bank and other authorities. The initial outline of this fraud and revelation of the unprecedented level of loss did not occur until the Chairman of the Board of Kabul Bank began talking with Central Bank Authorities in the summer of 201O.