Public Financial Management Roadmap to Improve Afghan Government Capacity

In July 2010, the Afghan government published a plan, called the Public  Financial Management Roadmap, to strengthen the Afghan government’s  performance in three key areas at the national and provincial level:  budget formulation, budget execution, and accountability and  transparency of financial management. Various U.S. Agency Efforts Support Afghanistan’s PFM Capacity-Building Goals

USAID, Treasury, and DOD support the Roadmap goals through various  activities such as (1) USAID projects that provide technical assistance  and training to Afghan civil servants, (2) Treasury advisers’ assistance to  MOF, and (3) DOD’s mentoring and coaching assistance through CSTC- A to MOD and MOI. USAID provides training and technical assistance  mainly through two contractor-implemented projects. Treasury provides  technical assistance through 6 advisers in MOF, who work with senior  officials on issues such as budget execution. Through CSTC-A, DOD has  22 advisers at MOD and MOI, who advise officials on developing their  budgets and strengthening the payroll system to improve accuracy. USAID Provides Technical Assistance and Training to Afghan Civilian Ministries

USAID is funding several projects that provide training, mentoring and  coaching, and technical assistance that address Roadmap goals. Results of U.S. Efforts to Improve Afghanistan’s PFM Capacity Cannot Be Fully Determined

The overall results of U.S. efforts cannot be fully determined because (1)  U.S. agencies providing PFM capacity assistance to the Afghan  government have reported mixed results of their efforts, and (2)  weaknesses in USAID’s performance management plans and  frameworks, such as lack of performance targets and data, prevent  reliable assessments of USAID’s results. USAID’s evaluations of its two  primary PFM projects indicate that some activities were successfully  completed, while others were terminated because their usefulness was  questionable. Additionally, CSTC-A reported that while MOD has  progressed to being able to perform critical financial-management  functions with minimal coalition support, MOI continues to rely on coalition  support for these functions. It provided training in five core subjects,  including financial management and procurement. For the period October 2009  to September 2010, Treasury advisers assessed that although their  assistance related to budget and financial management at MOF had a  positive effect, the results were less than what they were trying to  accomplish. The time frames for MOI to reach interim and final goals have also been  revised. For example, one of the indicators, “Percent increase in  standardized Public Financial Management assessment scores,” relies on  baseline data for Afghan civilian ministries that is not yet available. The performance management  frameworks for PFM capacity-building projects did not meet USAID  guidance because of deficiencies such as a lack of baselines, targets,  and performance data. Recommendations for Executive Action

We recommend that for public financial management (PFM) efforts, the  USAID Administrator take the following three actions: (1) establish  targets, as required, for each PFM-related performance indicator in its  Mission Performance Management Plan for Afghanistan, (2) take steps to  ensure that the USAID-approved performance management plan for each  implementing partner includes baseline data and targets for each  indicator, and (3) ensure that implementing partners report performance  data at the frequency established in the performance management plan. USAID concurred with all three recommendations and noted that it has  started taking steps to address these. Appendix I: Objectives, Scope, and Methodology

This report examines (1) U.S. efforts to improve the Afghan government’s  public financial management (PFM) capacity, including the extent to  which these efforts aligned with the PFM goals identified by the Afghan  government and the international community; and (2) the extent to which  U.S. efforts have helped to improve the Afghan government’s PFM  capacity. Departments of Defense (DOD), State (State), and  the Treasury (Treasury), and the U.S. Agency for International  Development (USAID). Additionally, in Kabul, we interviewed officials from  other international donors providing PFM assistance, such as the World  Bank and the United Kingdom, as well as Afghan government officials  from organizations including the Ministry of Finance (MOF), Ministry of  Defense (MOD), Ministry of Public Health, and the Independent  Administrative Reform and Civil Service Commission. Appendix IV: CSTC-A Process to Assess Ministry Capacity

The Combined Security Transition Command–Afghanistan (CSTC-A) has  established a process to regularly assess and rate the capability of  Ministries of Defense (MOD) and Interior (MOI) in various areas including  finance and budget.
Why GAO Did This Study

The United States has allocated over $72 billion to Afghanistan since 2002. With other international donors, it is focused on transitioning leadership to the Afghan government and has pledged to provide at least 50 percent of its development aid through the Afghan government budget. Improving Afghanistan's public financial management capacity is critical to this transition. In 2010, the Afghan government, consulting with donors, issued a Public Financial Management Roadmap (Roadmap), which outlines goals to improve Afghanistan's capacity to develop a national budget and expend funds. GAO reviewed (1) U.S. efforts to improve the Afghan government's public financial management capacity, including the extent to which they support Roadmap goals, and (2) the extent to which U.S. efforts have improved the government's capacity. GAO reviewed documents and interviewed officials from the U.S. Agency for International Development (USAID); Departments of State, Defense (DOD), and the Treasury (Treasury); World Bank; and Afghan government in Washington, D.C., and Kabul, Afghanistan.

What GAO Found

USAID, Treasury, and DOD support the Public Financial Management Roadmap (Roadmap) goals through various activities such as (1) USAID projects that provide technical assistance and training to Afghan civil servants, (2) Treasury advisers' assistance to the Ministry of Finance (MOF), and (3) DOD's Combined Security Transition Command-Afghanistan (CSTC-A) that provides support to the Ministries of Defense (MOD) and Interior (MOI). GAO found that these efforts are aligned with the Roadmap goals. USAID provides training and technical assistance mainly through two contractor-implemented projects. One USAID project provides technical assistance to 37 civilian ministries to develop their annual budgets, while another USAID project provides training in areas such as financial management and procurement to Afghan civil servants. Treasury provides technical assistance through 6 advisers in MOF, who work with senior officials on issues such as budget execution. Through CSTC-A, DOD has 22 advisers at MOD and MOI, who advise officials on developing their budgets and strengthening the payroll system to improve accuracy. The overall extent to which U.S. efforts have improved the public financial management capacity of the Afghan government cannot be fully determined because (1) U.S. agencies have reported mixed results, and (2) weaknesses in USAID's performance management frameworks, such as lack of performance targets and data, prevent reliable assessments of its results. USAID's evaluations of its two public financial management projects indicate that some activities were successfully completed, while others were terminated because these activities were not deemed useful. Treasury advisers assessed that although their assistance at MOF had a positive effect, some results had limitations. For example, advisers assessed that their efforts to design reports for improved communication of financial information were not as successful as they had expected. Additionally, CSTC-A assessed that while MOD has made progress since 2008 and can perform critical financial management functions with minimal international support, MOI still needs significant international support for such operations. In early 2010, CSTC-A projected that MOD would transition to needing no coalition support for finance and budget functions by January 2012, and MOI would reach a similar goal by March 2012. However, in early 2011, CSTC-A extended time frames for meeting its benchmarks for MOD and MOI to March 2012 and November 2012, respectively. Regarding deficiencies in USAID's performance management framework, both the USAID Mission performance management plan and project-specific plans lack performance targets as required for each indicator related to public financial management. Additionally, implementing partners, such as contractors, have not consistently reported performance data for all indicators. Moreover, baselines for public financial management capacity of civilian ministries have not yet been established. In the absence of baselines, performance targets, and data, it is difficult to assess the extent to which USAID efforts have increased the public financial management capacity of Afghan ministries.

What GAO Recommends

GAO recommends that the USAID Administrator take steps to (1) establish performance targets in its Mission Performance Management Plan (PMP); (2) ensure implementing partners' PMPs include baselines and approved targets; and (3) ensure implementing partners routinely report performance data. USAID concurred with GAO recommendations and is taking steps to address them.