Cash for Landmine Survivors Disappeared in Afghanistan

Clear Path International is a non-governmental organization working in some of the world’s worst war-torn regions. The organization helps landmine and IED survivors by providing “physical rehabilitation, social inclusion, psychological care, peer support, economic reintegration, physical accessibility, awareness raising and local capacity building.”

Which sounds great. The U.S. State Department thought so to, and between 2010 and 2014 awarded close to $13 million in grants to CPI. The organization would help out survivors in Afghanistan and then bill the U.S. government for the costs.

A few months ago, John Sopko — the Special Inspector General for Afghanistan Reconstruction — hired independent auditor Crowe Horwath to investigate CPI’s paperwork. Auditing federal grants is typical and routine. CPI’s accounting practices were not.

The accounts were bad enough that CPI’s current chief financial officer wouldn’t sign off on his company’s financial history. It’s routine for an auditor to get a signed letter from a company’s management, “which attests to the accuracy of a company’s financial statements and disclose any illegal act(s) that happen during the scope of the audit,” SIGAR noted in its financial audit of the program.

But Crowe Horwath didn’t the letter from CPI. The CFO “was not an employee of CPI when the bulk of this project took place. Therefore, he was uncomfortable signing the management representation letter.”

There’s more — the auditors uncovered almost $6 million in irregularities.

Some of the questioned funds — about $1 million worth — are easily explained. More than $300,000 worth of billing didn’t have documentation to back it up, more than $100,000 came from equipment CPI didn’t have clearance to dispose of and Crowe Horwath chalked up a little less than $100,000 to CPI not shopping around when it ordered supplies and services.

That leaves just under $5 million in questioned costs that the auditor put down as “cash management.” That’s a rather innocuous sounding term with a very specific meaning in the world of banking.

According to the Royal Bank of Scotland, “cash management may be defined as a management tool to ensure that sufficient cash is available to meet current and future liabilities, with any surplus being safely invested to generate the maximum income.”

Crowe Horwath identified “$4,882,164 in questioned costs that resulted from a lack of supporting documentation for invoices submitted to [State] for reimbursement,” SIGAR explained. “Because no documentation was available to assign the unsupported costs by category the amount was taken against Total Costs Incurred on the statement.”

That sounds a lot like CPI just didn’t have the paperwork for almost $5 million in taxpayer funds it had billed the U.S. government.

“Crowe requested eleven invoices produced by CPI requesting reimbursement from [State],” the audit explained. “CPI was unable to provide any of the eleven invoices or the supporting documentation. Because these invoices were not provided, we could not determine if costs were incurred prior to reimbursement or if indirect costs were properly calculated, making the costs associated with these invoices unallowable.”

Wait … so CPI just straight up didn’t keep the paperwork regarding almost half the money it had billed to State?

“CPI did not have a policy requiring the retention of invoices or the supporting documentation related to the invoicing,” the auditor explained.

That’s unforgivable. Does the organization have anything to say for itself? CPI claims it has robust standards, but that those standards got lost in the shuffle that is Afghanistan.

“Over the course of its history,” CPI wrote in a formal response, “CPI has grown from a small single program entity, to a multi‐program NGO operating in several different countries and geographic regions. During this growth period, CPI employed part‐time, nonprofessional and volunteer staff, along with its professional managers, who didn’t fully appreciate the significantly increased administrative burden of a multi‐program funded entity adhering to federal regulations.”

“In 2013, all NGOs operating in Afghanistan were designated as ‘high risk’ … a fact which only increased this burden. CPI staff turnover and hiring errors during this period compounded the training and oversight difficulties of a relatively small administrative and finance staff.”

The auditing irregularities, it explained, occurred during this turbulent time period. Then it made sure the auditors knew that the people in charge now are not the same people who didn’t file paperwork on million-dollar invoices.

“The current board and management staff of CPI were not part of the company during the review period of this audit and consequently could make no representation to Crowe Horwath regarding the condition of the financial records other than what was produced for the audit. Further, current management could not provide a historical perspective of the records or evidence of undocumented process or procedure which may have mitigated some of the findings included in this document.”