SIGAR Audit-11-14 Development and Governance/ARTF

OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

The World Bank and the Afghan Government Have 

Established Mechanisms to Monitor and Account for 

Funds Contributed to the Afghanistan Reconstruction 

Trust Fund, but Some Limitations and Challenges Should 

Be Addressed

July 22, 2011
SIGAR Audit-11-14 Development and Governance/ARTF Page i

OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

July 22, 2011

The Honorable Hillary Rodham Clinton

Secretary of State

Dr. Rajiv Shah

Administrator

U.S. Agency for International Development

The Honorable James B. Cunningham

Charge d’Affaires, U.S. Embassy Afghanistan

Dr. S. Ken Yamashita

USAID Mission Director to Afghanistan

This report discusses the results of an audit of World Bank and Afghan government mechanisms to

independently monitor and account for U.S. and donor funds contributed to the Afghanistan 

Reconstruction Trust Fund (ARTF), and the Afghan government’s capacity to monitor and account for 

these funds. This report includes three recommendations to improve oversight and reporting on the use 

of U.S. and donor contributions to the ARTF, and to enhance the Afghan government’s capacity to 

manage and account for ARTF funds.

A summary of this report is on page ii. When preparing the final report, we considered comments from 

the U.S. Embassy in Kabul and the World Bank. These comments are reproduced in appendices VI and 

VII, respectively. SIGAR conducted this performance audit under the authority of Public Law No. 110-

181, as amended, the Inspector General Act of 1978, and the Inspector General Reform Act of 2008.

Herbert Richardson

Acting Special Inspector General

for Afghanistan Reconstruction
SIGAR Audit-11-14 Development and Governance/ARTF Page ii

SIGAR

Special Inspector General for Afghanistan Reconstruction

SIGAR Audit-11-14 July 2011

The World Bank and the Afghan Government Have Established 

Mechanisms to Monitor and Account for Funds Contributed to 

the Afghanistan Reconstruction Trust Fund, but Some 

Limitations and Challenges Should Be Addressed

What SIGAR Reviewed

In 2010, the United States and other donors pledged to channel at least 50 percent of development assistance through 

Afghanistan’s national budget within the next 2 years. Created in 2002, the multi-donor Afghanistan Reconstruction 

Trust Fund (ARTF) was originally intended to serve as a short-term source of direct assistance to finance Afghanistan’s 

non-security related operating budget. It is now expected to close in 2020 and is increasingly funding development 

projects. As of April 2011, 32 donors had contributed $4.29 billion to the ARTF; the United States has contributed 

almost $972 million. This report assesses the extent to which (1) the World Bank and the Afghan government have 

established and implemented mechanisms to independently monitor and account for donor contributions to ARTF, and 

(2) the Afghan government has developed the capacity to monitor and account for ARTF funds. SIGAR conducted this 

performance audit in Kabul, Afghanistan, and Washington, D.C., from November 2010 to July 2011, in accordance with 

generally accepted government auditing standards. 

What SIGAR Found

Donors rely on the World Bank, as the ARTF’s administrator, to oversee and report on the uses and results of donor

funding. The World Bank, a monitoring agent hired by the World Bank, and Afghanistan’s Control and Audit Office 

(CAO) provide oversight of ARTF funds. The World Bank monitors, evaluates, and reports on development project 

results and uses of ARTF funds. The monitoring agent is responsible for monitoring the Afghan government’s operating 

expenses. CAO audits Afghan government accounts and records, including accounts funded by ARTF. However, SIGAR 

found some limitations in these mechanisms. First, the monitoring agent’s and CAO’s reviews of ARTF funding for the 

Afghan government’s operating budget are limited to financial reviews and financial audits, respectively, rather than 

performance audits that would allow them to examine and report on the efficiency and effectiveness of ARTF funding. 

Second, the monitoring agent has not conducted site visits outside of Kabul to monitor funds since March 2009, and 

World Bank and CAO monitoring outside of Kabul is limited. Thus, there has been little independent validation of ARTF 

spending outside of Kabul. For example, during its audit of Afghan government operating expenditures between March 

2008 and March 2009, CAO auditors only visited 11 out of 34 provinces. Thus, the office did not audit about 

$238 million, or 28 percent, of the Afghan government’s $845 million in total non-security operating expenditures to 

determine eligibility for ARTF reimbursement. Additional site visits outside Kabul would provide donors with more 

assurance that ARTF funds are being used in accordance with the fund’s requirements. Third, the World Bank could 

improve its dissemination of reporting on the results and outcomes of ARTF-funded development projects. While some 

ARTF donors may receive detailed reporting on certain projects, others may not.

SIGAR found that Afghan ministries have generally increased their ability to manage and account for government 

finances, including ARTF funds. For example, ministries have established dedicated units to implement ARTF-funded 

development projects. Nevertheless, the Afghan government faces challenges developing and maintaining the civil 

service expertise needed to manage and account for ARTF funds. As a result of the capacity constraints, ministries

continue to rely on Afghan contractors and international firms, which are paid using a portion of ARTF project funds. For 

example, CAO utilizes an international firm to provide technical assistance on ARTF-related audits. Due to difficulties 

developing the capacity of the civil service, the Afghan government may continue relying on non-civil service personnel

to provide support in implementing ARTF-funded projects, which could slow progress in developing long-term civil 

service capacity.

What SIGAR Recommends

SIGAR is making two recommendations to the U.S. Ambassador to Afghanistan to urge the World Bank to take steps to

(1) ensure that site visits to the provinces are conducted, on a sample basis, to verify the eligibility of the Afghan 

government’s operating expenditures, and (2) enhance reporting to donors on ARTF-funded project results. In addition, 

SIGAR is making a third recommendation to the U.S. Ambassador to Afghanistan to continue efforts to enhance the 

Afghan government’s ability to attract and retain qualified civil service staff to manage and account for development 

funding, including ARTF funds. In commenting on a draft of this report, the U.S. Embassy in Kabul and the World Bank 

noted steps that they will take to address these recommendations. 

For more information contact: SIGAR Public Affairs at (703) 602-8742 or PublicAffairs@sigar.mil
SIGAR Audit-11-14 Development and Governance/ARTF Page iii

TABLE OF CONTENTS

Background ...................................................................................................................................................2

Mechanisms Established to Independently Monitor and Account for ARTF Funds 

Have Some Limitations...........................................................................................................................4

Afghan Government Has Increased Its Capacity to Manage and Account for ARTF 

Funds, but Challenges to Developing and Sustaining This Capacity Within the 

Civil Service Remain................................................................................................................................9

Conclusion...................................................................................................................................................11

Recommendations......................................................................................................................................11

Comments...................................................................................................................................................12

Appendix I: Scope and Methodology.........................................................................................................13

Appendix II: U.S. and Other Donor Contributions to ARTF ........................................................................15

Appendix III: ARTF Recurrent Cost Window and Incentive Program.........................................................18

Appendix IV: ARTF Investment Window....................................................................................................21

Appendix V: ARTF Oversight Mechanisms.................................................................................................26

Appendix VI: Comments from U.S. Embassy Kabul ...................................................................................27

Appendix VII: Comments from The World Bank........................................................................................31

TABLES

Table I: Top 10 ARTF Donors, as of April 20, 2011.....................................................................................15

Table II: U.S. Contributions to the ARTF from March 2002 to April 2011, as of 

April 20, 2011 .......................................................................................................................................16

Table III: ARTF Recurrent Cost Window Disbursements from March 2002 to 

April 2011, as of April 20, 2011 ............................................................................................................18

Table IV: ARTF Baseline Recurrent Cost Funding, Actual Incentive Program 

Allocations as of May 2011, and Potential Incentive Program Allocations..........................................19

Table V: Total ARTF Investment Window Commitments and Disbursements 

from March 2002 to April 2011, as of April 20, 2011...........................................................................21

Table VI: Ongoing ARTF Investment Window-funded Development Projects, as 

of April 20, 2011 ...................................................................................................................................22

Table VII: Closed ARTF Investment Window-funded Development Projects, as of 

April 20, 2011 .......................................................................................................................................24

FIGURES AND PHOTOS

Figure I: Actual and Projected ARTF Recurrent Cost Window Funding as a 

Percentage of Afghanistan’s Operating Budget from 2003 to 2016....................................................20
SIGAR Audit-11-14 Development and Governance/ARTF Page iv

Figure II: Actual and Projected ARTF Investment Window Funding as a 

Percentage of Afghanistan’s Development Budget from 2003 to 2016 ..............................................25

Figure III: Oversight Mechanisms for the ARTF Recurrent Cost and Investment 

Windows...............................................................................................................................................26

ACRONYMS

ARTF Afghanistan Reconstruction Trust Fund

CAO Control and Audit Office

EQUIP Education Quality Improvement Program

MoE Ministry of Education

MoF Ministry of Finance

MoPW Ministry of Public Works

MRRD Ministry of Rural Rehabilitation and Development

NERAP National Emergency Rural Access Project

NSP National Solidarity Program

PAM Performance Assessment Matrix

PwC PricewaterhouseCoopers-Netherlands

SIGAR Special Inspector General for Afghanistan Reconstruction

USAID U.S. Agency for International Development
SIGAR Audit-11-14 Development and Governance/ARTF Page 1

The World Bank and the Afghan Government Have Established Mechanisms to 

Monitor and Account for Funds Contributed to the Afghanistan Reconstruction 

Trust Fund, but Some Limitations and Challenges Should Be Addressed

In 2010, the United States and other donors pledged to provide at least 50 percent of their development 

assistance through the Afghan government’s national budget within the next 2 years. Many donors view 

the Afghanistan Reconstruction Trust Fund (ARTF) as the key mechanism for providing this direct

assistance to Afghanistan. ARTF, created in March 2002, facilitates multi-donor direct assistance to 

support Afghanistan’s financial and reconstruction needs in line with Afghan priorities. As of April 20, 

2011, ARTF had received $4.29 billion in contributions from 32 donors, with the United States

contributing almost $972 million—nearly 23 percent—of the total amount.1

The United States and other donors rely on the World Bank, as the ARTF administrator, to oversee and 

report on the uses and results of ARTF funding, and to provide oversight of Afghan ministries receiving 

ARTF funds. However, U.S. and other officials have expressed concerns about ARTF oversight 

mechanisms, and the capacity of the World Bank and the Afghan government to oversee additional 

funds.

This report assesses the extent to which (1) the World Bank and the Afghan government have 

established and implemented mechanisms to independently monitor and account for donor 

contributions to ARTF, and (2) the Afghan government has developed the capacity to monitor and 

account for ARTF funds.

To accomplish these objectives, we reviewed and analyzed the U.S. Agency for International 

Development (USAID) grant agreement with the World Bank and data detailing U.S. contributions to the 

fund.

2

 1 The World Bank transferred a $2.4 million contribution from the United Nations Development Program to a separate fund for 

the Afghan Interim Authority. Total contributions also include a $21.6 million contribution to the Law and Order Trust Fund for 

Afghanistan.

In addition, we analyzed World Bank quarterly ARTF reports to donors and monthly 

administrator’s reports. We also examined the World Bank’s ARTF grant agreement with the Afghan 

government, policies and procedures for project oversight, development project documents, contracts

for a monitoring agent, and annual and quarterly monitoring reports. We also reviewed Afghanistan’s 

national budgets and development project documents. In addition, we interviewed relevant U.S. officials 

at Embassy Kabul, World Bank and monitoring agent representatives, Afghan government officials, and 

Kabul-based representatives of 11 ARTF donors. We conducted our work in Kabul, Afghanistan, and

Washington, D.C., from November 2010 to July 2011, in accordance with generally accepted 

government auditing standards. A discussion of our scope and methodology is in appendix I.

2 The United States provides contributions to ARTF through a grant from USAID to the World Bank.
SIGAR Audit-11-14 Development and Governance/ARTF Page 2

BACKGROUND

The World Bank formally established ARTF in March 2002 in response to requests from the interim 

Afghan government and international donors for a multi-donor mechanism to support the Afghan 

government following the fall of the Taliban regime. With an initial closing date of June 30, 2006, the 

fund was originally intended to serve as the major, short-term source of direct assistance for financing 

Afghanistan’s non-security related operating budget until the Afghan government could raise revenues 

to cover its own operating costs.3

• position the Afghan government budget as the key vehicle to align international reconstruction 

assistance with Afghan development objectives;

However, since its inception, ARTF has increasingly funded 

development projects aligned with Afghan reconstruction priorities defined in the Afghanistan National 

Development Strategy. As a result, donors first agreed to extend the fund’s closing date to June 30, 

2010, and then later to June 30, 2020. ARTF’s four main objectives are to:

• promote transparency and accountability of reconstruction assistance;

• reduce the burden on an Afghan government with limited capacity while simultaneously

promoting Afghan capacity building over time; and 

• enhance donor coordination.

As of April 20, 2011, 32 donors have contributed approximately $4.29 billion to ARTF.4

ARTF has two main funding types, or windows: Recurrent Cost and Investment.

Of these donors, 

around 15 contribute regularly to the fund. The top five donors—the United States, United Kingdom, 

Canada, the Netherlands, and the European Union—account for over $3 billion, or about 72 percent, of 

total contributions. As the largest donor, the United States has contributed approximately $972 million 

to ARTF. Appendix II provides a breakdown of U.S. and donor contributions to ARTF, as well as a 

breakdown of U.S. contributions by funding purpose. 

5

 3 International donors have largely funded Afghanistan’s security-related budget, which includes military and police expenses, 

bilaterally and via the Law and Order Trust Fund for Afghanistan.

The Recurrent Cost 

Window finances the Afghan government’s non-security related operating budget, which largely consists 

of payroll costs for Afghan civil servants, as well as some operations and maintenance expenditures. The 

Recurrent Cost Window funds these costs on a reimbursable basis up to a pre-determined funding cap. 

For the Afghan government to receive reimbursement for its operating expenditures, the expenditures 

must meet eligibility criteria defined in the ARTF grant agreement between the World Bank and the 

Afghan government. As of April 20, 2011, the Recurrent Cost Window had disbursed a total of about 

$2.22 billion, of which approximately $1.7 billion funded Afghanistan’s payroll and $532 million funded

operations and maintenance expenditures. In December 2008, the World Bank, the Afghan government, 

and donors agreed to establish the Incentive Program within the Recurrent Cost Window. The Incentive 

Program provides the Afghan government with funding if it meets pre-defined benchmarks in such areas 

as revenue generation, public sector governance, and private sector development. For more information 

on the Recurrent Cost Window and Incentive Program, see appendix III.

4 This includes a $2.4 million contribution from the United Nations Development Program for the Afghan Interim Authority

fund, and approximately $21.6 million in pass-through funding to the Law and Order Trust Fund for Afghanistan. 5 When ARTF was first established, there were separate sub-funds for debt repayment, a pass-through to the Law and Order 

Trust Fund for Afghanistan, and the Afghan Expatriate Program and Lateral Entry Programs. These sub-funds are now closed, 

and the expatriate and lateral entry programs have been merged into a capacity building program under the Investment 

Window.
SIGAR Audit-11-14 Development and Governance/ARTF Page 3

The ARTF Investment Window provides grant funding for development projects that support the 

national priority programs defined in Afghanistan’s development budget.6 To date, the Investment 

Window has disbursed a total of about $1.31 billion to fund 34 development projects, 19 of which were

ongoing as of April 20, 2011.

7 The largest ongoing projects are the National Solidarity Program (NSP) III,8

the Education Quality Improvement Program (EQUIP) II, and the National Emergency Rural Access 

Project (NERAP). Appendix IV includes more information on the Investment Window and ARTF-funded 

development projects. From March 2009 to March 2010,9 the most recent year for which complete data 

are available, ARTF funded approximately 15 percent of the Afghan government’s core operating and 

development expenditures.10

ARTF has a three-tier governance structure. The Steering Committee, which consists of all ARTF donors, 

the World Bank, and the Afghan Ministry of Finance (MoF), is the main decision-making body for the 

fund. The Steering Committee meets quarterly to set ARTF policy and financing strategy, provide

guidance to the ARTF Management Committee on fund allocation strategies, and review progress on 

ARTF activities.

11 The Management Committee meets monthly and is responsible for reviewing and 

approving funding allocations in line with the ARTF financing strategy, and reporting to donors on 

operations and activities financed by ARTF, as well as on decisions made by the committee.

12 The World 

Bank administers ARTF and is responsible for day-to-day fiduciary oversight and management of the 

fund, and for the supervision of development projects.13

Like other ARTF donors, the United States relies on the World Bank, as the fund’s administrator, to 

oversee the use of funds. Neither USAID nor other sections at U.S. Embassy Kabul independently 

oversee the use of U.S. funds contributed to ARTF. Further, per the agency’s grant agreement with the 

World Bank, USAID has limited rights to audit U.S. contributions to the fund. However, to track ongoing 

ARTF activities and developments, USAID has assigned three agency personnel at the U.S. Embassy in 

This includes providing oversight of the Afghan

ministries implementing ARTF-funded projects.

 6

To prioritize the initiatives contained in the Afghanistan National Development Strategy, the Afghan government is developing

22 National Priority Programs. These programs represent Afghanistan’s priority areas in different sectors that need greater 

investment from 2010 to 2013. These programs seek to create jobs, connect markets, and increase the social and economic 

well-being of the people. They also aim to strengthen security in different parts of the country and ensure a smooth transition 

of security from international partners to Afghan National Security Forces. 7 The 34 total ARTF-funded development projects include two police projects funded via a pass-through of ARTF funds to the 

United Nations Development Program-administered Law and Order Trust Fund for Afghanistan. In addition, some projects, such 

as NSP and EQUIP, have multiple phases, each of which is counted as a separate project.

8 See SIGAR Audit-11-8, Afghanistan's National Solidarity Program Has Reached Thousands of Afghan Communities, but Faces 

Challenges that Could Limit Outcomes, March 22, 2011. 9 The Afghan government’s fiscal year is the solar year. Solar year 1388 began on March 21, 2009 and ended on March 20, 

2010. The current fiscal year, solar year 1390, began on March 21, 2011 and will end on approximately March 20, 2012. 10 The Afghan government’s budget is divided into the core and external budgets. The core budget tracks funds that flow 

through the Afghan treasury while the external budget includes expenditures directly expended by donors outside the treasury 

system. From March 21, 2009 to March 20, 2010, Afghanistan’s solar year 1388, the core budget expenditures amounted to 

about $2.66 billion. Of this, Afghanistan’s revenue covered about 48 percent of expenditures while donor grants, including 

ARTF, funded about 51 percent of expenditures. This resulted in a fiscal deficit of $41 million for the year. 11 Two smaller donor working groups, the Strategy Group and the Incentive Program Working Group, engage with the World 

Bank and the Afghan government on more technical issues. 12 The Management Committee consists of representatives from the World Bank, Asian Development Bank, Islamic 

Development Bank, United Nations Assistance Mission in Afghanistan, United Nations Development Program, and the MoF. 13 The World Bank receives an administrator’s fee of 1.5 percent of ARTF contributions to fund its oversight of the fund. From 

the creation of ARTF in March 2002 through March 20, 2011, the World Bank had received a total of $64.4 million in fees. In 

late 2010, donors endorsed increasing the fee to 2 percent, and in February 2011, the World Bank Board of Executive Directors 

approved the increase. World Bank officials expect this fee increase to take effect in July 2011.
SIGAR Audit-11-14 Development and Governance/ARTF Page 4

Kabul to monitor the fund. In addition, the Office of the Coordinating Director for Development and 

Economic Affairs and the Treasury Attaché at the embassy have personnel who follow the fund.14

MECHANISMS ESTABLISHED TO INDEPENDENTLY MONITOR AND ACCOUNT FOR ARTF FUNDS

HAVE SOME LIMITATIONS

The World Bank and the Afghan government have established mechanisms to independently monitor 

and account for ARTF funds; however, these mechanisms have some limitations. Oversight of ARTF 

funds consists of a combination of standard World Bank procedures for supervising World Bank-funded 

projects, a contracted monitoring agent for funds covering Afghanistan’s non-security operating costs, 

and mandatory audits by Afghanistan’s Control and Audit Office (CAO). However, monitoring of nonsecurity operating costs is limited to financial reviews and audits. In addition, there is limited

independent validation of ARTF spending outside of Kabul. Furthermore, the World Bank does not 

disseminate reports on the results and outcomes of ARTF-funded development projects to all ARTF 

donors.

World Bank and CAO Provide Independent Oversight of ARTF Funds

Standard World Bank policies and the ARTF grant agreement between the World Bank and the Afghan 

government both detail the procedures the World Bank must follow to administer and oversee ARTF 

funds, as well as requirements for the Afghan government to expend these funds. World Bank policies 

address overall requirements for trust fund administration, fund disbursement, financial management, 

procurement, supervision, and access to information, as well as other issues.

15

The grant agreement between the World Bank and the Afghan government requires the World Bank to 

obtain an independent monitoring agent to monitor all operating expenditures financed by ARTF funds. 

In June 2002, the World Bank contracted with PricewaterhouseCoopers-Netherlands (PwC) to serve as 

the monitoring agent for the Recurrent Cost Window.

The grant agreement 

requires the Afghan government to, among other things, follow standard World Bank procurement 

policies when expending ARTF funds. Further, the grant agreement and the World Bank’s legal 

agreement with USAID state that an independent monitoring agent will review all ARTF expenditures.

16 The monitoring agent determines whether the 

Afghan government’s operating cost expenditures are eligible for reimbursement from ARTF.

17

 14 These personnel regularly communicate with World Bank staff on ARTF issues, attend quarterly Steering Committee 

meetings, and participate in donor working groups. In addition, USAID personnel have participated in World Bank supervision 

missions for ARTF-funded projects. Other sections at the U.S. Embassy in Kabul tangentially follow ARTF.

The 

monitoring agent screens MoF’s requests for reimbursement to verify that expenditures are eligible 

before submitting the requests to the World Bank. To provide oversight of ARTF Investment Windowfunded development projects, the World Bank assigns World Bank staff to task teams for each project. 

These teams consist of a team leader, financial management and procurement specialists, technical 

experts, and other personnel, depending on the project’s needs. Task teams are responsible for 

overseeing the implementing Afghan ministries’ use of ARTF funds and ensuring that these funds are 

used in accordance with project grant agreements signed between the World Bank and the Afghan 

15 World Bank’s complete operational manual, including these and other policies, is available on the World Bank’s Web site. 16 Following an open competition for the contract, the World Bank re-awarded the monitoring contract to PwC in 2005 and 

2008, the latter of which is still in effect.

17 Under the contract, the monitoring agent is required to review the Afghan government’s requests for ARTF reimbursement to 

ensure that funds are (1) disbursed only for the purposes provided for in the ARTF grant agreement between the World Bank 

and the Afghan government, and (2) used in accordance with World Bank procurement procedures and acceptable financial 

and auditing standards.
SIGAR Audit-11-14 Development and Governance/ARTF Page 5

government.

18

As Afghanistan’s supreme audit institution, CAO is responsible for assessing ministries’ financial 

reporting to ensure that they are in compliance with laws and regulations.

To accomplish this, task teams conduct supervision missions of projects at least twice a 

year. In addition, these task teams conduct mid-term reviews and final reviews when projects are 

completed. Throughout this process, the task teams produce reports for the World Bank on the status of 

ARTF-funded projects. In addition, the World Bank requires Afghan ministries to report to the World 

Bank on project implementation. The World Bank includes summary implementation status updates 

based on these reports in its quarterly reports to ARTF donors.

19 In addition, CAO 

independently oversees the Afghan government’s use of ARTF funds. CAO certifies the government’s 

financial statements and conducts annual audits of the Afghan government’s operating account and of 

accounts for projects funded by the World Bank and ARTF under the development budget. According to

the ARTF grant agreement between the World Bank and the Afghan government and to CAO’s mandate, 

the office is to audit records and accounts of all ARTF expenditures for both operating costs and 

development projects, and submit these audit reports to the World Bank no later than 6 months after 

the close of the fiscal year. In conducting these audits, CAO examines whether Afghan government

expenditures are eligible for ARTF funding. Per its agreement with the World Bank, the Afghan 

government must refund any ineligible ARTF expenditures to the trust fund.20

Officials at the U.S. Embassy in Kabul told us that ARTF is one of the better mechanisms for providing 

direct assistance to the Afghan government due to the World Bank’s established and standardized

oversight procedures. However, these officials expressed concerns about the extent to which the World 

Bank is implementing its procedures to provide sufficient oversight of ARTF funds. Other donor officials

indicated that the World Bank’s long-established oversight procedures were key reasons why they chose

to support the Afghan government via the ARTF rather than using other mechanisms. Donors also stated 

that in addition to providing direct assistance to the Afghan government, ARTF provides benefits such as 

facilitating donor coordination, serving as a platform for discussions of national policy and reform, and 

enabling smaller donors to be involved in decision making.

CAO receives technical 

assistance from the international auditing firm PKF International to plan and conduct ARTF audits. 

Appendix V provides a summary of ARTF oversight mechanisms.

Monitoring of Recurrent Cost Window Consists Primarily of Financial Reviews and Audits

Neither the monitoring agent nor the CAO conducts performance audits to examine the efficiency and 

effectiveness of funding expended under the ARTF Recurrent Cost Window. Under its contract with the 

World Bank, the monitoring agent conducts financial reviews of Afghan government expenditures to 

determine whether they are eligible for reimbursement from the Recurrent Cost Window. The 

monitoring agent’s quarterly and annual reports covering the period from March 2009 to December 

2010 indicate that these procedures do not constitute an audit. PwC’s contract with the World Bank 

does not require it to perform financial or performance audits of ARTF Recurrent Cost Window 

 18 The World Bank’s supervision policy requires staff to (1) determine whether funds are being used to achieve development 

objectives, (2) identify problems and recommend solutions, and (3) highlight project risks.

19 The 1981 Afghan Control and Audit Law gives CAO, as Afghanistan’s supreme audit institution, audit authority over state 

entities within the central and provincial governments as well as of public enterprises. The office’s objectives include 

1) protecting public funds and taking action against errors, irregularities, and misuse of public property; 2) preventing illegal 

expenditures; 3) reviewing the systems of control over government receipts and payments; and 4) guaranteeing the accuracy of 

aid and grants provided by donor countries.

20 Since the March 2006 to March 2007 fiscal year, the Afghan government’s operating costs have exceeded the maximum 

amount of funding available for reimbursement under the Recurrent Cost Window. As a result, CAO’s findings have resulted in a 

substitution of the ineligible expenditures for an equal amount of eligible expenditures, rather than the Afghan government

reimbursing these funds back to ARTF.
SIGAR Audit-11-14 Development and Governance/ARTF Page 6

expenditures. Rather, PwC’s monitoring activities are based on procedures defined in the terms of 

reference to its contract with the World Bank. The terms of reference require PwC to monitor all ARTF 

recurrent cost expenditures, monitor the Afghan government’s procurements of goods and services, and 

review MoF’s requests for ARTF reimbursement.

In accordance with its mandate, CAO, with the assistance of PKF International, conducts financial audits 

of all Afghan government accounts and financial statements, including the operating account, which is 

partially financed by ARTF Recurrent Cost Window funds. We previously reported that CAO does not 

conduct performance audits because it lacks the capacity to do so.21

To monitor the performance of Afghanistan’s core operating budget expenditures and establish a results 

framework for the Recurrent Cost Window, the World Bank introduced the ARTF Performance 

Assessment Matrix (PAM) in 2006 and began including it in quarterly donor reports in March 2008. PAM 

is intended to provide an assessment of the Afghan government’s effectiveness by tracking trends in 

Afghan and donor performance across selected areas. PAM tracks the Afghan government’s 

performance in the areas of public financial management, aid effectiveness, public administration 

reform, education, and health. In addition, PAM provides a platform for dialogue between donors and 

the Afghan government on core policy areas, and complements the ARTF Incentive Program.

While CAO has started performing 

some limited performance auditing, the office does not conduct performance audits of ARTF-funded 

accounts.

Monitoring Agent, World Bank, and CAO Monitoring of ARTF Funds Expended Outside of 

Kabul Is Limited

Since March 2009, the monitoring agent for the ARTF Recurrent Cost Window has not conducted any 

site visits to the provinces. As a result, the agent has not verified first-hand approximately $790 million

of the Afghan government’s non-security related payroll and operations and maintenance funds 

expended in the provinces. This amounted to about half of the government’s total non-security related 

payroll and operations and maintenance expenditures from March 2009 to December 2010. The 

monitoring agent’s contract with the World Bank specifies that the agent is expected to hire 

subcontractors, if necessary, to undertake specific site visits when such visits cannot be conducted by 

the monitoring agent.

22

 21 See SIGAR Audit-10-8, Afghanistan’s Control and Audit Office Requires Operational and Budgetary Independence, Enhanced 

Authority, and Focused International Assistance to Effectively Prevent and Detect Corruption, April 9, 2010.

A senior PwC official stated that security concerns had prevented them from 

conducting visits to provincial government offices. In lieu of visiting provincial offices, he stated that PwC 

requested that ministries transfer files and supporting documents from the provinces to Kabul for 

review. However, during this time, CAO found that the World Bank had disbursed ARTF funds to the 

Afghan government for expenditures that did not comply with the grant agreement. Although World 

Bank officials stated that they informed ARTF donors as early as spring 2009 that the monitoring agent 

would not be conducting site visits outside of Kabul, donor officials we spoke to expressed concern 

about the monitoring agent’s continued lack of provincial visits. Further, Afghan ministry officials told us 

that provincial and district offices have less capacity to oversee expenditures than the ministries in 

Kabul. Although the World Bank and PwC have taken steps to ensure that ARTF Recurrent Cost Window 

funds are being expended in accordance with the grant agreement between the World Bank and the 

Afghan government, provincial site visits may provide donors with additional assurance that these funds 

are being used appropriately.

22 The monitoring agent’s contract also includes a clause that states that if the agent is unable to fulfill its obligations in the 

event of specific circumstances, such as war, civil disorder, and natural disasters, this would not be considered a breach of 

contract.
SIGAR Audit-11-14 Development and Governance/ARTF Page 7

Despite the lack of site visits since March 2009, the World Bank did not curtail its contract with PwC nor 

require PwC to obtain a subcontractor to conduct provincial site visits during this time. Instead, in a 

modification to PwC’s most recent contact signed in 2008, the World Bank nearly tripled the cumulative 

costs allowed to provide security from about $700,000 to $1.9 million.23

With respect to the ARTF Investment Window, we found that World Bank task teams conducted limited 

visits outside of Kabul during supervision missions for Investment Window-funded projects. World Bank 

policies require World Bank staff to monitor trust fund expenditures by evaluating results and 

systematically and objectively assessing ongoing or completed projects. We reviewed 14 World Bank 

project reports from 2008 to the present for the three largest ARTF-funded development projects—NSP, 

EQUIP II, and NERAP. In five cases, we noted that the teams only visited one or two provincial sites, 

while in six other cases the teams did not visit any provinces. In the three remaining cases, it was 

unclear whether teams conducted provincial visits. The extent to which World Bank task teams 

conducted site visits varied by project. For example, the NSP team visited four confirmed provincial 

sites. In contrast, the NERAP task team did not visit any provinces during its supervision mission and 

mid-term review conducted in late 2009 and mid-2010, respectively. The NERAP reports cited security 

concerns as the main reason for not visiting project sites in the provinces. In the absence of site visits, 

the NERAP task team had to obtain information on the status of projects from the implementing Afghan

ministries and subcontractors, and did not independently verify this information. The World Bank’s 

supervision policy does not require task teams to conduct site visits outside of Kabul during supervision 

missions because the goal of such missions is to engage with implementing ministries to ensure that 

proper project administration and monitoring mechanisms are in place. However, World Bank guidance

indicates that task teams should conduct periodic visits to project sites and facilities to review progress, 

as appropriate. Furthermore, World Bank officials acknowledged that increased independent 

verification of project implementation status through provincial site visits would be beneficial.

World Bank officials told us that 

they revised the monitoring agent’s terms of reference to more explicitly require site visits to the 

provinces, and they have yet to extend the agent’s current contract for an optional third year. In May 

2011, PwC told the World Bank that it does not intend to renew its current contract as the ARTF 

Recurrent Cost Window monitoring agent for a third year because of its concerns about security. PwC 

will let its contract expire in September 2011 after completing monitoring of expenditures between 

March 2010 and March 2011. Per its revised terms of reference, the World Bank is requiring that PwC, 

or its subcontractor, conduct site visits in at least 12 provinces to monitor and verify these expenditures.

The World Bank has started the process of obtaining a new monitoring agent for the Recurrent Cost

Window and expects the new agent to be in place by the time PwC’s contract ends.

According to World Bank officials, their task teams traveled more frequently to the provinces to 

independently monitor ARTF Investment Window-funded projects prior to 2009. Since then, insecurity 

and logistics challenges have reduced their ability to conduct visits to some provinces. World Bank 

officials told us that task teams based in Kabul conduct regular site visits in addition to those conducted

during supervision missions. For example, although the NERAP task team’s supervision missions in late 

2009 and 2010 did not include provincial site visits, according to World Bank officials, the team did 

conduct site visits to seven locations outside of Kabul during 2010. 

Although the ARTF grant agreement between the World Bank and the Afghan government and the ARTF 

donor framework agreement indicate that a monitoring agent was to monitor all ARTF expenditures, the 

World Bank only obtained a monitoring agent for the Recurrent Cost Window given the high number of 

transactions and level of risk, and the World Bank’s existing development project supervision 

 23 The actual security costs allowed in the monitoring agent’s contract were 475,000 euros, which later increased to 1.35 million 

euros.
SIGAR Audit-11-14 Development and Governance/ARTF Page 8

procedures. However, in June 2010, the World Bank began the process of obtaining a monitoring agent 

to expand its oversight of ARTF Investment Window-funded development projects, particularly in 

locations outside of Kabul. The World Bank will require the new monitoring agent to conduct site visits 

in all 34 provinces in Afghanistan. World Bank officials told us that they expect to award the monitoring 

agent contract in mid-July 2011. According to the World Bank, the contract will require the monitoring 

agent to focus its efforts on the three largest ARTF-funded projects—NSP III, EQUIP II, and NERAP—

during the first year, with other projects added in subsequent years. Hiring a monitoring agent for the 

Investment Window and increasing the number of provincial site visits conducted by World Bank task 

teams may provide ARTF donors with further assurance that the Afghan government is using these 

funds as called for by ARTF grant agreements and project requirements. This is important given the 

continued shift in ARTF funding from operating budget support under the Recurrent Cost Window to 

more support for development projects funded by the Investment Window.

CAO conducted some site visits outside of Kabul while performing audits of ARTF Recurrent Cost and 

Investment Window expenditures. During its audit of Afghan government operating expenditures 

between March 2008 and March 2009, CAO auditors visited 11 out of 34 provinces, which meant that 

the office did not audit about $238 million, or 28 percent, of the Afghan government’s total non-security 

operating expenditures of $845 million to determine eligibility for ARTF reimbursement. Similarly, due 

to security concerns, CAO auditors visited six provinces while conducting the audit of expenditures from 

March 2007 to March 2008. Because of this, CAO could not provide assurance as to the accuracy, 

completeness, and eligibility of transactions in the unvisited provinces. Furthermore, CAO did not 

independently evaluate approximately $163 million, or 40.8 percent, of the almost $400 million of the 

Afghan government’s submitted operating expenditures. Moreover, in some cases, CAO auditors 

reviewing ARTF expenditures on NSP visited few locations outside of provincial capitals to review project 

expenditures. Given CAO’s role as Afghanistan’s supreme audit institution, increasing provincial site 

visits conducted during annual ARTF-related audits may provide donors with additional assurance that 

ARTF funds are being expended for their intended purpose.

World Bank Dissemination of Reporting on the Results and Outcomes of ARTF-Funded 

Development Projects Is Limited

The World Bank does not regularly disseminate reporting on the results and outcomes of ARTF-funded 

development projects to all ARTF donors. ARTF agreements between the World Bank and donors 

require the World Bank to report quarterly to donors on the status of ARTF funds. In addition, World 

Bank policies require the World Bank to report on whether a project’s development objectives are being 

achieved and whether funds are being used in conformity with donor agreements. Although the World 

Bank reports quarterly to donors as required, these reports tend to provide more detail on the financial 

status of active ARTF-funded projects rather than information on project results and outcomes. We also 

found that while the World Bank makes a variety of ARTF-funded project reports available to the public, 

reports for closed projects are not consistently available. Given that ARTF projects tend to build upon 

other projects in the same sector, there is value in making information on closed projects, particularly 

the results and outcomes of these projects, publically available. Furthermore, although the World Bank 

has regularly distributed task team supervision reports to ARTF donors within the sector since July 2010, 

other donors outside of the sector may benefit from having this information as they make funding 

decisions.

Several donor officials we spoke to also stated that the World Bank generally provides project 

documentation too late to allow them to sufficiently analyze the information before the quarterly 

Steering Committee meetings. For example, a senior official at the U.S. Embassy in Kabul told us that he 

received ARTF documentation only a few days prior to the quarterly meeting held in London in January 
SIGAR Audit-11-14 Development and Governance/ARTF Page 9

2010. As a result, he did not have time to thoroughly review the documents or obtain technical feedback 

from subject matter experts at Embassy Kabul before the meeting. 

To enhance reporting on the results of ARTF-funded development projects, the World Bank recently 

developed a draft framework for monitoring the results of ARTF-funded development projects with the 

goal of helping ARTF donors and other stakeholders track the results of these projects. The proposed 

Investment Window results framework would aggregate project results across five sectors—rural 

development, agriculture, infrastructure, human development, and public sector reform—as well as 

cross-cutting issues of gender and connectivity. The draft framework, which the World Bank plans to 

update annually, will include first year, current, and target values for each indicator.

AFGHAN GOVERNMENT HAS INCREASED ITS CAPACITY TO MANAGE AND ACCOUNT FOR ARTF 

FUNDS, BUT CHALLENGES TO DEVELOPING AND SUSTAINING THIS CAPACITY WITHIN THE 

CIVIL SERVICE REMAIN

Afghan ministries receiving ARTF funds have taken steps to improve their ability to manage and account 

for these funds, including developing financial management and personnel tracking systems to monitor 

operating cost expenditures. Despite these efforts, ministries face challenges developing and sustaining 

capacity within the Afghan civil service. The most qualified Afghans tend to work in positions outside of 

the civil service. As a result, ministries continue to rely on non-civil service personnel, such as Afghan 

contractors and personnel employed by international firms, to manage and account for ARTF funds, 

particularly funding for development projects.

Afghan Ministries Have Enhanced Their Capacities to Manage and Account for ARTF Funds

The Afghan government has taken steps in key ministries to increase its capacity to manage and account 

for government finances, including ARTF and other direct assistance funding from donors. The MoF now 

tracks all Afghan government financial transactions, such as revenues, expenditures, fund 

disbursements, and cash transfers, through the Afghanistan Financial Management Information System, 

which is operational in all line ministries and in the provinces. Furthermore, the MoF has reduced the 

risk of fraud and corruption by using electronic funds transfers to pay many Afghan civil servant

salaries.

24 As of March 2010, approximately 207,000, or 53 percent, of the Afghan government’s

approximately 390,000 non-security employees received their salaries via electronic funds transfer. The 

Ministry of Education (MoE) has created an employee registration database to verify the identities of, 

monitor, and track all ministry-employed teachers in Kabul and the provinces.25

 24 See SIGAR Audit-11-10, Despite Improvements in MoI’s Personnel Systems, Additional Actions Are Needed to Completely 

Verify ANP Payroll Costs and Workforce Strength, April 25, 2011.

Teachers must be 

entered in the database in order to receive their salaries. In addition, as a result of capacity building 

efforts, MoE civil service personnel manage all project implementation responsibilities for EQUIP II using 

the ministry’s financial management, procurement, and oversight mechanisms. Other ministries

implementing ARTF-funded projects, such as the Ministries of Rural Rehabilitation and Development

(MRRD) and Public Works (MoPW), have established program implementation units responsible for

administering and managing these projects. The World Bank funds training for these program

25 Between March 2009 and March 2010, MoE accounted for 38 percent of non-security spending and was the largest 

beneficiary of ARTF Recurrent Cost Window funds. These costs were mainly for teachers’ salaries as teachers account for 

almost half of all Afghan civil servants. MoE combined with the Ministries of Martyrs, Disabled and Social Affairs, Administrative 

Affairs, Public Health, Higher Education, and Foreign Affairs accounted for about 68 percent of ARTF disbursements during this 

same period.
SIGAR Audit-11-14 Development and Governance/ARTF Page 10

implementation units and other ministry project staff in order to build Afghan capacity to manage ARTF 

funds in accordance with World Bank requirements.

Challenges in Developing and Sustaining Capacity within the Civil Service Result in

Afghanistan’s Continued Reliance on Non-Civil Service Personnel

Although the Afghan government has taken steps to increase its capacity to oversee ARTF funds, much 

of this capacity resides outside of the Afghan civil service. The World Bank considers various risks when

proposing and implementing new ARTF-funded projects. This includes assessing the implementing 

agency’s capacity and, if necessary, plans for enhancing this capacity. Due to the lack of capacity in many 

Afghan ministries, the World Bank has incorporated capacity building in ARTF-funded projects to help 

address this weakness. In addition, the World Bank allows ministries to use a portion of ARTF 

development project funds to obtain staff outside of the Afghan civil service, such as Afghan contractors 

or international implementation consultants. These staff provide additional expertise to manage ARTF 

funds and projects. For example, the international firm Deloitte Consulting Overseas Projects provides 

the MRRD’s NSP program implementation unit with financial management assistance, and the United 

Nations Office for Project Services handles financial management for NERAP, which the MRRD and the 

MoPW implement jointly. The responsibilities of the consultants and contractors vary based on the 

capacity of the implementing ministry. Depending on the needs of the project, the capacity building 

element, which includes costs to obtain outside staff, ranges from 8 to 13 percent of total development

project funding, thus decreasing the amount of ARTF funds Afghan ministries spend directly on project 

implementation.

26

In addition to relying on contractor and international staff outside of the civil service, civil servants in 

many ministries receive salary supplements from donors to augment their civil service salaries. These 

supplements come in the form of incentive payments, allowances, overtime premiums, and extra 

payments incurred during the performance of regular duties or during regular office hours. As we 

previously reported, as of February 2010, the United States and the World Bank had provided an 

estimated $26.4 million, or 59 percent, of the approximately $45 million in donor salary support 

reported to the MoF.

In addition, CAO utilizes the international firm PKF International to provide technical 

assistance on ARTF-related audits. Thus, while the capacity of Afghan staff to manage ARTF-funded 

projects is increasing, this increase is not entirely within the Afghan civil service, and the Afghan 

government is not developing long-term, sustainable civil service capacity. 

27

Afghan government officials stated that pay disparities between Afghan civil service positions and 

Afghans paid as contractors or consultants have made it difficult for the Afghan government to attract 

and retain qualified Afghan staff in the civil service. Moreover, educated and trained civil servants are 

likely to leave the civil service for better paying jobs as contractors or with international firms once they 

gain expertise. Furthermore, Afghan personnel employed by international consulting firms are not likely 

to seek civil service positions. A MoE official told us that many of his former colleagues in the ministry’s 

Finance and Accounting Department left for better paying jobs with more seniority. He added that the

department could fill only 122 of 257 authorized positions due to low pay and a lack of applicants with 

even basic qualifications.

Officials in the MoF told us that many personnel continue to receive salary 

support from the international community. One senior MoE official told us that he would not be able to 

remain in his current civil service position without salary support.

 26 These figures do not include projects that are specifically designed to build Afghan capacity. 27 See SIGAR Audit-11-5, Actions Needed to Mitigate Inconsistencies in and Lack of Safeguards over U.S. Salary Support to 

Afghan Government Employees and Technical Advisors, October 29, 2010.
SIGAR Audit-11-14 Development and Governance/ARTF Page 11

Both the Afghan government and the World Bank are taking steps to decrease the government’s

reliance on contractors and international firms. For example, the MRRD is developing a plan to transition 

completely from contractors and international staff to civil service staff in the next 5 years. In addition, 

the Afghan government is continuing with efforts to implement pay and grade reform across the 

government with the goal of increasing civil service salaries. However, to date, these salaries remain 

inadequate to attract personnel with the needed skills or to compete with higher paying positions as 

civil servants receiving salary support, contractor positions, and positions with international consultants. 

In addition, during the most recent round of the ARTF Incentive Program, the World Bank included a 

benchmark requiring the Afghan government to report on the status of implementing pay and grade 

reform. Despite these efforts, World Bank and ministry officials stated that salary disparities remain a 

challenge to building the Afghan government’s capacity in the long-term.

CONCLUSION

The United States and other donors have pledged to provide a substantial portion of development 

assistance through the Afghan government budget. ARTF is the main mechanism by which donors can 

provide direct assistance to the Afghan government. By contributing to ARTF, donors rely on the World 

Bank, the fund’s administrator, to monitor and account for the use of contributions to the fund. This 

includes providing oversight of Afghan ministries receiving funds. The World Bank and the Afghan 

government have established several mechanisms to independently monitor and account for ARTF 

funds. However, opportunities exist to strengthen these mechanisms and enhance oversight of ARTF 

funds. The World Bank’s new monitoring agents for both the Recurrent Cost and Investment Windows 

provide the World Bank with an opportunity to ensure that oversight of ARTF funds includes site visits to 

the provinces, as well as, to ministries in Kabul, and to enhance its reporting to donors on the results 

and outcomes of ARTF-funded development projects. Although the Afghan government has increasingly 

taken on more responsibility for managing and accounting for ARTF funds, ministries continue to face 

challenges in developing and sustaining the civil service expertise needed to manage and account for

these funds. In the absence of sufficient and qualified civil service personnel, ministries have had to 

obtain the required expertise from civil servants receiving salary supplements and from non-civil service 

personnel. Furthermore, Afghan personnel employed outside of the civil service may be unlikely to seek 

permanent civil service positions. This could hinder the Afghan government’s ability to further develop

and sustain the long-term, civil service capacity needed to manage and account for development 

funding, including ARTF funds and other direct assistance.

RECOMMENDATIONS

To strengthen and enhance oversight of ARTF funds, we recommend that the U.S. Ambassador to 

Afghanistan, in coordination with other ARTF donors, urge the World Bank to:

1. Include explicit language in the new Recurrent Cost Window monitoring agent’s contract and 

terms of reference to require the agent to make necessary arrangements to conduct site visits in 

both Kabul and the provinces, on a sample basis, to verify the eligibility of the Afghan 

government’s operating expenditures.

2. Enhance reporting to all donors on development project results and outcomes by regularly 

including this information in its quarterly reports to donors or by systematically distributing 

supervision mission reports to all ARTF donors.
SIGAR Audit-11-14 Development and Governance/ARTF Page 12

To ensure that Afghan ministries further develop and sustain the staff expertise needed to manage and 

account for development funding, including ARTF funds, we recommend that the U.S. Ambassador to 

Afghanistan, in coordination with the World Bank and other donors:

3. Assist the Afghan government with capacity building efforts, such as developing plans to 

completely transition to Afghan civil service staff and completing pay and grade reform, which

would enhance the Afghan government’s ability to attract and retain qualified staff.

COMMENTS

The U.S. Embassy in Kabul and the World Bank provided written comments on a draft of this report. 

These comments are reproduced in appendices VI and VII, respectively. The World Bank also provided 

technical comments, which we have incorporated as appropriate.

In its response, the U.S. Embassy in Kabul noted steps that the World Bank is taking to respond to our

first two recommendations. The U.S. Embassy described several ongoing efforts to address our third 

recommendation to enhance the Afghan government’s capacity to manage and account for 

development funding. For example, USAID has begun working with the Afghan Civil Service Commission 

to transfer contracted staff under the Afghanistan Civil Service Support program to civil service positions 

within the commission. 

In its response, the World Bank discussed steps it is taking to respond to our three recommendations. 

Regarding our first recommendation, the World Bank indicated that it plans to ensure that explicit 

language is included in the new Recurrent Cost Window monitoring agent’s contract and terms of 

reference to require provincial site visits. If accomplished, this will provide an additional layer of 

oversight of these funds. With respect to our second recommendation, the World Bank described 

reporting mechanisms that are already in place, such as online and paper distribution of its quarterly 

reports to donors and online posting of biannual project implementation status reports, and steps that it 

is taking to enhance reporting. The World Bank commented that we incorrectly stated that it does not 

regularly disseminate reporting on the results and outcomes of ARTF-funded development projects to all 

ARTF donors. Although we agree that the quarterly reports are available and disseminated to all donors, 

these reports do not include detailed information on development project results and outcomes. We 

discuss in the report and agree that a series of World Bank reports, such as supervisory mission reports 

and implementation status reports, provide valuable information on the results and outcomes of 

specific projects. However, we disagree that these reports are readily available to all donors. For 

example, supervision mission reports are routinely provided only to donors funding a particular ARTF 

sector and implementation status reports are generally available only for ongoing projects. We believe 

that it would be valuable to make information on project results and outcomes more readily available to 

all ARTF donors. Finally, with regard to our third recommendation, the World Bank noted the 

importance of building the capacity of the Afghan government. The World Bank commented that the 

ARTF is well placed to provide a common vehicle for capacity building and bringing salary scales in line 

with long-term sustainability, and discussed current plans for an ARTF-financed initiative to develop the 

capacity of the Afghan government. 
SIGAR Audit-11-14 Development and Governance/ARTF Page 13

APPENDIX I: SCOPE AND METHODOLOGY

This report provides the results of the Office of the Special Inspector General for Afghanistan 

Reconstruction’s (SIGAR) review of the use of and accountability for U.S. funds contributed to the 

Afghanistan Reconstruction Trust Fund (ARTF). This report assesses the extent to which (1) the World 

Bank and the Afghan government have established and implemented mechanisms to independently 

monitor and account for donor contributions to ARTF, and (2) the Afghan government has developed 

the capacity to monitor and account for ARTF funds. While the ARTF has been in place since 2002, we 

largely limited our review to developments and oversight activities that took place from 2008 to 2011

because total U.S. contributions to ARTF from 2008 to 2011 are almost double total U.S. contributions 

from 2002 to 2007. With respect to ARTF-funded development projects, we focused primarily on the 

National Solidarity Program (NSP), the Education Quality Improvement Program (EQUIP), and the 

National Emergency Rural Access Project (NERAP). These are the largest ongoing projects in terms of 

committed ARTF funding. In addition, these projects have received 97 percent of the approximately 

$542 million in U.S. contributions to the fund that have been designated for development projects. This 

report is one in a series of SIGAR performance audits examining U.S. and other donor assistance 

provided to enhance the Afghan government’s oversight capacity and prevent corruption.

To assess the extent to which the World Bank and Afghan government have established and 

implemented mechanisms to monitor and account for donor contributions to the ARTF, we reviewed

and analyzed a U.S. Agency for International Development (USAID) grant agreement, and associated 

modifications, with the World Bank; data detailing contributions to the fund; and U.S. foreign affairs 

appropriations laws and requested funding. We also reviewed various U.S. Embassy cables addressing 

ARTF developments and issues. In addition, we analyzed World Bank quarterly reports to donors and 

monthly Administrator’s reports. We also examined the World Bank’s ARTF grant agreement with the 

Afghan government; policies and procedures for financial management, procurement, and project 

oversight; and development project documents, including project proposals and supervision reports. We 

analyzed World Bank project supervision documents for NSP, EQUIP, and NERAP. We reviewed the ARTF 

monitoring agent’s contracts with the World Bank, annual and quarterly reports from 2009 to 2010, and 

World Bank evaluations of the monitoring agent’s performance. In February 2011, we observed two

bank project oversight missions for NSP and the Kabul Urban Rehabilitation Project II, and attended a 

monthly ARTF Management Committee meeting. With respect to the Afghan government, we reviewed 

annual national budgets, development project documents, and results of the Control and Audit Office’s 

(CAO) ARTF-related audits. We also reviewed external evaluations of the ARTF, as well as prior SIGAR 

audit reports on CAO28 and NSP.29

 28 See SIGAR Audit-10-8, Afghanistan’s Control and Audit Office Requires Operational and Budgetary Independence, Enhanced 

Authority, and Focused International Assistance to Effectively Prevent and Detect Corruption, April 9, 2010.

In addition, we interviewed U.S. officials at the embassy in Kabul 

representing the Office of the Coordination Director of Development and Economic Affairs, USAID, 

Department of the Treasury, and Rule of Law. We also interviewed officials of the World Bank, including 

the World Bank’s Kabul-based financial management and procurement teams and task team leaders for 

EQUIP and NERAP, and the monitoring agent, PricewaterhouseCoopers-Netherlands. In addition, we 

interviewed ARTF Management Committee representatives from the Asian Development Bank, Islamic 

Development Bank, United Nations Assistance Mission in Afghanistan, United Nations Development 

Program, and the Afghan Ministry of Finance (MoF). In addition to MoF, we interviewed officials in the 

Afghan Ministries of Rural Rehabilitation and Development (MRRD), Public Works (MoPW), and 

Education (MoE), and CAO. We also interviewed Kabul-based representatives from 11 of the 32 ARTF 

donors, specifically Australia, Belgium, European Union, Finland, France, Germany, India, Italy, the 

29See SIGAR Audit-11-8, SIGAR released an audit report on the NSP entitled Afghanistan's National Solidarity Program Has 

Reached Thousands of Afghan Communities, but Faces Challenges that Could Limit Outcomes, March 22, 2011.
SIGAR Audit-11-14 Development and Governance/ARTF Page 14

Netherlands, Norway, and the United Kingdom. As of April 20, 2011, these 11 donors and the United 

States accounted for almost 78 percent of ARTF contributions. 

To assess the extent to which the Afghan government has developed the capacity to oversee and 

account for ARTF funds, we analyzed World Bank project supervision documents for NSP, EQUIP, and 

NERAP, and observed two bank project oversight missions for NSP and the Kabul Urban Rehabilitation 

Project II. We also reviewed Afghanistan’s national budget, management, and development project 

documents. We also reviewed prior SIGAR performance audit reports on CAO,30 NSP,

31 and salary 

support to Afghan officials.

32

We conducted work in Kabul, Afghanistan, and Washington, D.C., from November 2010 to July 2011, in 

accordance with generally accepted government auditing standards. These standards require that we 

plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a 

reasonable basis for our findings and conclusions based on our audit objectives. The audit was 

conducted by the Office of the Special Inspector General for Afghanistan Reconstruction in accordance 

with GAGAS and under the authority of Public Law No. 110-181, as amended, the Inspector General Act 

of 1978, and the Inspector General Reform Act of 2008.

In addition, we interviewed officials of the World Bank, including financial 

management and procurement personnel and EQUIP and NERAP task team leaders. We also 

interviewed Afghan government officials in the MoF, the MRRD, the MoPW, the MoE, and CAO.

 30 See SIGAR Audit-10-8. 31 See SIGAR Audit-11-8. 32 See SIGAR Audit-11-5, Actions Needed to Mitigate Inconsistencies in and Lack of Safeguards over U.S. Salary Support to 

Afghan Government Employees and Technical Advisors, October 29, 2010.
SIGAR Audit-11-14 Development and Governance/ARTF Page 15

APPENDIX II: U.S. AND OTHER DONOR CONTRIBUTIONS TO ARTF 

As of April 20, 2011, 32 donors have contributed approximately $4.29 billion to ARTF.33

Table I: Top 10 ARTF Donors, as of April 20, 2011

Table I shows 

the top 10 ARTF donors since the fund’s creation. 

Donor

Paid-in contributions 

(US$ million)

Percent of total 

ARTF contributions

United States $972 22.6%

United Kingdom $862 20.1%

Canada $531 12.4%

Netherlands $355 8.3%

European Union/European Commission $352 8.2%

Germany $305 7.1%

Norway $241 5.6%

Sweden $159 3.7%

Australia $99 2.3%

Spain $85 2.0%

Total $3,961 92.3%

Source: World Bank ARTF Administrator’s Report on Financial Status as of April 20, 2011.

As the largest donor, the United States has contributed approximately $972 million to ARTF. About 

$430 million of this has been unpreferenced while the remaining $542 million has been preferenced for 

development projects.34 About $490 million, or 90 percent, of U.S.-preferenced funds have gone to the 

National Solidarity Program (NSP), which aims to build local governance by setting up community 

development councils and training them to manage small-scale projects funded by block grants, and 

Community Recovery under the NSP.

35

 33 This includes a $2.4 million contribution from the United Nations Development Program for the Afghan Interim Authority

fund, and approximately $21.6 million in pass-through funding to the Law and Order Trust Fund for Afghanistan.

Table II shows a breakdown of U.S. contributions to ARTF by 

funding type—preferenced versus non-preferenced—and development project.

34 A preference is a formal recognition by the World Bank of a donor’s decision to allocate up to 50 percent of its annual ARTF 

contribution to specific Investment Window-funded development projects. While the World Bank has honored all preferences 

to date, they are not guaranteed. The Recurrent Cost Window has priority for unpreferenced ARTF funds. 35 On March 22, 2011, SIGAR released an audit report on the NSP entitled Afghanistan's National Solidarity Program Has 

Reached Thousands of Afghan Communities, but Faces Challenges that Could Limit Outcomes (SIGAR Audit-11-8).
SIGAR Audit-11-14 Development and Governance/ARTF Page 16

Table II: U.S. Contributions to the ARTF from March 2002 to April 2011, as of April 20, 2011

Type of funding

Contributions (US$ million)

March 

2002-

March 

2003

March 

2003-

March 

2004

March 

2004-

March 

2005

March 

2005-

March 

2006

March 

2006-

March 

2007

March 

2007-

March 

2008

March 

2008-

March 

2009

March 

2009-

March 

2010

March 

2010-

March 

2011

March 

2011-

March

2012 Total

Unpreferenced $38.0 $20.0 $68.8 $60.0 $48.9 $0.0 $57.0 $102.5 $35.0 $0.0 $430.2

Preferenced $0.0 $0.0 $20.8 $2.0 $25.0 $0.0 $102.5 $161.5 $230.0 $0.0 $541.8

 National Solidarity Program $10.0 $25.0 $65.0 $160.0 $180.0 $440.0

 Community Recovery under 

 NSP $50.0 $50.0

 National Emergency Rural 

 Access Project $2.0 $21.0 $23.0

 Education Quality 

 Improvement Program $12.0 $12.0

 Microfinance for Poverty 

 Reduction $5.0 $5.0

 Civil Service Capacity Building $4.3 $4.3

 Skills Development Project $3.0 $3.0

 Justice Sector Reform Project $1.5 $1.5

 Technical Assistance Feasibility 

 Studies $1.5 $1.5

 Management Capacity 

 Program $1.0 $1.0

 Rural Water Supply and 

 Sanitation $0.5 $0.5

Total ARTF Contributions $38.0 $20.0 $89.6 $62.0 $73.9 $0.0 $159.5 $264.0 $265.0 $0.0 $972.0

Source: SIGAR analysis of World Bank ARTF Administrator’s Report on Financial Status as of April 20, 2011.

Note: Contriutions are based on the Afghan fiscal year, which is the solar year. The solar year begins in late March and ends late 

March the subsequent year. For example, solar year 1389 began on March 21, 2010, and ended on March 20, 2011.

The United States has expressed its intention to channel at least 50 percent of development funds 

through Afghanistan’s core budget and to align 80 percent of development assistance with Afghanistan’s 

development priorities by 2012. ARTF supports U.S. efforts to meet these objectives by funding 

development projects in key sectors—agriculture, governance, rule of law, and Afghan-led 

reintegration—that the United States has identified as critical to the Afghanistan reconstruction effort. 

The United States provides contributions to ARTF through a grant from USAID to the World Bank. In 

fiscal year 2010, the United States pledged an additional $650 million in funding to ARTF, of which 

$250 million36 has been contributed as of May 2011.37

 36 Of the $250 million the United Stated has contributed for fiscal year 2010, USAID contributed $200 million while the 

Department of Defense contributed the remaining $50 through its Commander’s Emergency Response Program.

USAID requested another $650 million in its fiscal 

37 Per fiscal year 2010 supplemental appropriations law, Pub. L. No. 111-212, §1002 and §1004(c), and accompanying Senate 

report 111-188, Congress is withholding the remaining $400 million in fiscal year 2010 ARTF funds pending a Department of 

State report determining whether the Afghan government is: a) cooperating with United States reconstruction and reform 

efforts; b) demonstrating a commitment to accountability by removing corrupt officials, implementing fiscal transparency and 
SIGAR Audit-11-14 Development and Governance/ARTF Page 17

year 2011 budget request and plans to request $600 million more for fiscal year 2012. This would 

increase total U.S. contributions to about $2.6 billion through fiscal year 2012. However, final funding 

levels will depend on Congressional approval.38

 

other necessary reforms of government institutions, and facilitating active public engagement in governance and oversight of 

public resources; and c) respecting the internationally recognized human rights of Afghan women. 38 The Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 112-10, §2122(c), includes a 

provision that requires the Secretary of State to suspend funding for ARTF if the department determines and reports to 

Congress that the World Bank monitoring agent for ARTF is unable to conduct its financial control and audit responsibilities due 

to restrictions on security personnel by the Afghan government.
SIGAR Audit-11-14 Development and Governance/ARTF Page 18

APPENDIX III: ARTF RECURRENT COST WINDOW AND INCENTIVE PROGRAM 

The Afghanistan Reconstruction Trust Fund (ARTF) Recurrent Cost Window finances the Afghan 

government’s non-security related operating budget. This largely consists of payroll costs for Afghan civil 

servants as well as some expenditures for operations and maintenance, pension, and non payroll-based 

items.39

Table III: ARTF Recurrent Cost Window Disbursements from March 2002 to April 2011, as of April 20, 

2011

The Recurrent Cost Window funds these costs on a reimbursable basis up to a pre-determined 

funding cap. In order for the Afghan government to receive reimbursement for its operating 

expenditures, the expenditures must meet eligibility criteria defined in the ARTF grant agreement 

between the World Bank and the Afghan government. As of April 20, 2011, the Recurrent Cost Window 

had disbursed a total of about $1.7 billion to fund payroll and $532 million to fund operations and 

maintenance expenditures (see table III).

Operating Cost 

Category

Disbursements (US$ million)

March 

2002-

March 

2003

March 

2003-

March 

2004

March 

2004-

March 

2005

March 

2005-

March 

2006

March 

2006-

March 

2007

March 

2007-

March 

2008

March 

2008-

March 

2009

March 

2009-

March 

2010

March 

2010-

March 

2011

March 

2011-

April 

2011 Total

Payroll $40.95 $145.77 $179.32 $174.21 $216.20 $203.00 $276.74 $148.31 $281.90 $24.57 $1,690.97

Operations and 

maintenance $13.65 $51.16 $55.28 $79.04 $84.01 $87.55 $33.32 $73.11 $54.78 $0.00 $531.91

Total $54.60 $196.93 $234.60 $253.25 $300.21 $290.55 $310.06 $221.42 $336.68 $24.57 $2,222.88

Source: SIGAR analysis of World Bank ARTF Administrator’s Report on Financial Status as of April 20, 2011.

Note: Disbursements are based on the Afghan fiscal year, which is the solar year. The solar year begins in late March and ends 

late March the subsequent year. For example, solar year 1389 began on March 21, 2010, and ended on March 20, 2011.

In December 2008, the World Bank, the Afghan government, and ARTF donors agreed to the 

establishment of the Incentive Program within the Recurrent Cost Window. The objective of the 

Incentive Program is to support Afghan government-led reforms and the government’s progress toward 

achieving fiscal sustainability. With the implementation of the program, baseline funding for 

Afghanistan’s operating budget provided through the Recurrent Cost Window began to decrease by 

$25 million per year beginning in March 2009. At this rate, the Recurrent Cost Window will ultimately 

reach zero in 2019. The Incentive Program helps to offset this decrease by providing the Afghan 

government with additional funds for meeting pre-defined benchmarks in such areas as revenue 

generation, public sector governance, and private sector development. Thus, the program places 

conditionality on ARTF funding. While the World Bank disburses Incentive Program funds from the 

Recurrent Cost Window, the Afghan government uses these funds to finance programs under its 

development budget.

The Incentive Program is entering its fourth round. Negotiations on new program benchmarks began in 

February 2011 and are expected to conclude by summer 2011. During the third round, which ended 

December 2010, the program offered the Afghan government up to $70 million in incentive funds.

These funds will be available for disbursement to the Afghan government from March 2011 through 

 39 Non-payroll based expenditures are similar to operations and maintenance expenditures but directly support personnel. Such 

expenditures include food allowances and transportation.
SIGAR Audit-11-14 Development and Governance/ARTF Page 19

March 2012. Table IV shows the amount funding for the Incentive Program from March 2008 to March 

2012 as well as baseline recurrent cost funding. 

Table IV: ARTF Baseline Recurrent Cost Funding, Actual Incentive Program Allocations as of May 

2011, and Potential Incentive Program Allocations

Program Year (US$ million)

March 2008-

March 2009

March 2009-

March 2010

March 2010-

March 2011

March 2011-

March 2012

March 2012-

March 2013

Baseline Recurrent Cost Funding $276 $250 $225 $200 $175

Incentive Program $0 $40 $63.8 $70 $70

Total Recurrent Cost Window Funding $276 $290 $288.8 $270 $245

Source: ARTF Incentive Program SY1389 (2010/11) Memorandum of Understanding (July 28, 2009) and World Bank 

responses to SIGAR questions (May 2011).

Notes: Funding for the Incentive Program is disbursed the year following when program benchmarks are to be met. For 

instance, World Bank disbursed funds between March 2008 and March 2009 to the Afghan government for meeting 

benchmarks the previous year.

Disbursements are based on the Afghan fiscal year, which is the solar year. The solar year begins in late March and ends 

late March the subsequent year. For example, solar year 1389 began on March 21, 2010, and ended on March 20, 2011.

The Incentive Program has been positively received by the World Bank, many ARTF donors, and the 

Afghan government. Officials noted that the program provides a platform for discussing reforms within 

the Afghan government. The World Bank and donors are currently examining ways to reform and 

strengthen the program, including increasing the length of program rounds from one to three years with 

multi-year, rather than single-year, benchmarks. However, the lack of an International Monetary Fund 

Extended Credit Facility program in Afghanistan may affect the ability of the World Bank to disburse 

funds from the Incentive Program and may have a broader impact on donor funding in Afghanistan.40

Since 2004, the amount of Recurrent Cost Window funding as a percentage of Afghanistan’s core 

operating budget has decreased steadily. From March 2011 to March 2012, the ARTF is expected to fund 

approximately 5.9 percent of Afghanistan’s total operating budget (see figure I).

 40 The IMF Extended Credit Facility program in Afghanistan, which ended on September 25, 2010, aimed at continuing the 

process of rebuilding key economic institutions, putting public finances on a sustainable path, and laying the foundation for 

economic stability and low inflation, growth, and poverty reduction. IMF did not immediately renew the program due to fallout

from the Kabul Bank crisis, and is currently in negotiations with the Afghan government on a new Extended Credit Facility 

program. Some donors have indicated that the lack of an IMF program will make it difficult for them to continue providing 

development assistance to Afghanistan. To date, U.S. officials have not indicated that this will affect its funding to the ARTF in 

the short-term, though they are discussing the potential long-term impact on U.S. funding. Unlike other donor countries, the 

U.S. is not legally prohibited from providing assistance to Afghanistan without there being an ECF program in place.
SIGAR Audit-11-14 Development and Governance/ARTF Page 20

Figure I: Actual and Projected ARTF Recurrent Cost Window 

Funding as a Percentage of Afghanistan’s Operating Budget from 

2003 to 2016 

Source: SIGAR analysis of World Bank Afghanistan Reconstruction Trust Fund 

Quarterly report: September 22, 2010 to December 21, 2010, and the Afghan 

government’s 1389 National Budget Statement.

Note: ARTF funding as a percentage of Afghanistan’s operating budget for the 

Afghan fiscal year ending in March 2012 and beyond is based on projected 

expenditures while prior years are based on actual expenditures. 

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Percentage of GIRoA Budget Funded by ARTF
SIGAR Audit-11-14 Development and Governance/ARTF Page 21

APPENDIX IV: ARTF INVESTMENT WINDOW

The ARTF Investment Window provides grant funding for development projects that support the 

national priority programs defined in Afghanistan’s development budget. To date, the Investment 

Window has disbursed a total of about $1.31 billion to fund 34 development projects, 19 of which were 

ongoing as of April 20, 2011.41

Table V: Total ARTF Investment Window Commitments and Disbursements from March 2002 to 

April 2011, as of April 20, 2011

With respect to overall funding commitments, the largest ongoing 

projects are the National Solidarity Program III, the Education Quality Improvement Program II, and the 

National Emergency Rural Access Project (see table V). These projects focus primarily on development in 

rural areas.

Investment project

Total committed

(US$ million)

Disbursements

(US$ million)

Percent of committed 

funds disbursed

Ongoing (19) $793.15 $346.31 43.7%

 National Solidarity Program III $250.00 $44.50 17.8%

 Education Quality Improvement Program II $85.00 $84.78 99.7%

 National Emergency Rural Access Project $80.00 $35.16 44.0%

 Other projects (16) $378.15 $181.87 48.1%

Closed (15) $962.03 $962.03 100%

Total $1,755.18 $1,308.34

Source: SIGAR analysis of World Bank ARTF Administrator’s Report on Financial Status as of April 20, 2011.

Table VI shows information on the 19 ongoing ARTF-funded development projects. The United States 

has provided funding to six of these projects: the Management Capacity Program, Justice Sector Reform 

Project, Skills Development Project, Education Quality Improvement Program II, National Emergency 

Rural Access Project, and National Emergency Solidarity Program III.

 41 The 34 total ARTF-funded development projects include two police projects funded via a pass-through of ARTF funds to the 

United Nations Development Program-administered Law and Order Trust Fund for Afghanistan. In addition, some projects, such 

as NSP and EQUIP, have multiple phases, each of which is counted as a separate project.
SIGAR Audit-11-14 Development and Governance/ARTF Page 22

Table VI: Ongoing ARTF Investment Window-funded Development Projects, as of April 20, 2011

Project Objective

Planned 

closing 

date

Funds 

committed 

(US$ million)

Funds 

disbursed (U$ 

million)

Percentage of 

funds disbursed

Rehabilitation of Naghlu 

Hydropower Plant

Improve reliability of the power 

supply in Kabul

 

September 

2012 $20.00 $12.43 62%

Urban Water Supply and 

Sanitation

Provide urban areas with 

sustainable, improved water 

supply and sanitation services

December 

2010 $41.00 $40.86 100%

Management Capacity Program

Improve the capacity of key 

government departments

December

2011 $15.00 $8.00 53%

Kabul-Aybak/Mazar-e-Sharif 

Power Project

Provide more reliable and higher 

quality power to Kabul, Aybak, and 

Mazar-e-Sharif cities

September

2011 $57.00 $36.71 64%

Horticulture and Livestock 

Program

Adopt improved practices to 

increase horticulture and livestock 

productivity

December 

2011 $34.30 $20.40 59%

Kabul Urban Reconstruction 

Project

Improve delivery of basic urban 

services in vulnerable communities 

in Kabul through upgrading urban 

infrastructure and enhancing the 

capacity of Ministry of Urban 

Development and Kabul 

Municipality

December 

2011 $5.60 $2.53 45%

Justice Sector Reform Project

Strengthen the state justice 

system and increase access to 

justice June 2011 $27.75 $9.50 34%

Strengthening Higher Education 

Project

Restore basic operational 

performance at core universities in 

Afghanistan

 

December 

2012 $5.00 $2.44 49%

Power System Development 

Project

Increase access to power grid and 

quantity of power to Pul-i-Khumri, 

Charikar, Gulbahar, and Jabul-Seraj 

urban centers July 2012 $60.00 $7.89 13%

Kabul Urban Roads 

Improvement Project

Improve traffic flow on priority 

corridors of Kabul's urban roads

December 

2011 $18.00 $9.69 54%

Water Resources Development 

Technical Assistance Project

Build capacity to undertake 

strategic basin planning and 

improve project preparation for 

water resources development

March 

2011 $5.50 $1.09 20%

Skills Development Project

Increase access to high-quality 

vocational education and training 

in management, administration, 

and ICT

February 

2013 $9.00 $7.55 84%

Second Education Quality 

Improvement Program

Increase access to basic education

 

September 

2012 $85.00 $84.78 100%

National Emergency Rural 

Access Project

Increase access to services in rural 

areas with secondary and tertiary 

roads

December 

2013 $80.00 $35.16 44%

Strengthening Health Activities 

for the Rural Poor

Improve the health and nutritional 

status of Afghans, with a greater 

focus on women and children and 

under-served parts of the country

 

September

2013 $22.00 $21.77 99%
SIGAR Audit-11-14 Development and Governance/ARTF Page 23

Project Objective

Planned 

closing 

date

Funds 

committed 

(US$ million)

Funds 

disbursed (U$ 

million)

Percentage of 

funds disbursed

On Farm Water Management 

Project (preparation)

Preparation grant to design project 

to assist farmers in adopting 

improved farm practices to 

increase agricultural production by 

enhancing water efficiency June 2011 $1.00 $0.61 61%

Afghanistan Rural Enterprise 

Development Project $16.00 $0.40 3%

Third Emergency National 

Solidarity Program

Improve local governance, 

reconstruct rural infrastructure

NSP II: 

September 

2011

NSP III: 

September

2015 $250.00 $44.50 18%

On Farm Water Management 

Project $41.00 $0.00 0%

Total $793.15 $346.31 44%

Source: SIGAR analysis of World Bank ARTF Administrator’s Report on Financial Status as of April 20, 2011.

Note: Projects highlighted in blue represent projects that received preferenced funding from the United States.

Table VII displays 13 ARTF-funded development projects that had closed as of April 20, 2011. The United 

States has funded six of these projects: Technical Assistance Feasibility Studies, National Solidarity 

Program I and II, Education Quality Improvement Program, Rural Water Supply and Sanitation, 

Microfinance for Poverty Reduction, and Civil Service Capacity Building.
SIGAR Audit-11-14 Development and Governance/ARTF Page 24

Table VII: Closed ARTF Investment Window-funded Development Projects, as of April 20, 2011

Project Objective

Funds 

committed 

(US$ million)

Funds 

disbursed 

(US$ million)

Percentage 

of funds 

disbursed

United Nations Development 

Program Police Project 1 and 2

Not managed by the World Bank, funds passed to 

UNDP $4.84 $4.84 100%

Technical Assistance Feasibility 

Studies

Build capacity of government by providing 

expertise to line ministries $16.97 $16.97 100%

National Emergency Employment 

Program

Provide employment in rural areas at minimum 

wage $52.82 $52.82 100%

United Nations Development 

Program Police Project 3

Not managed by the World Bank, funds passed to 

UNDP $16.80 $16.80 100%

Telecom and Microwave Link 

Rehabilitate the Ministry of Communications' 

communications facilities, improve revenue 

collection, and speed progress toward private 

sector telecommunications services $6.01 $6.01 100%

Kabul Roads and Drainage System $2.80 $2.80 100%

Kabul Power Supply

Improve availability and reliability of power supply 

in Kabul $7.43 $7.43 100%

Strengthening Financial Capacity of 

the Government

Improve financial management capacities of the 

Ministry of Finance and select industries $4.06 $4.06 100%

National Solidarity Program I and II

Improve local governance, reconstruct rural 

infrastructure $618.19 $618.19 100%

Education Quality Improvement 

Program Increase access to basic education $44.00 $44.00 100%

Rural Water Supply and Sanitation

Improve rural health through provision of safe 

drinking water and sanitation services $6.23 $6.23 100%

Microfinance for Poverty Reduction

Improve livelihoods by supporting entrepreneurial 

spirit and skills $168.94 $168.94 100%

Civil Service Capacity Building

Meet the short-term capacity needs of the Afghan 

civil service $12.95 $12.95 100%

Total $962.04 $962.04 

Source: SIGAR analysis of World Bank ARTF Administrator’s Report on Financial Status as of April 20, 2011.

Note: Projects highlighted in blue represent projects that received preferenced funding from the United States. National 

Solidarity Program and Microfinance for Povery Reduction funding totals combine two project phases.

Since 2003, the amount of ARTF Investment Window funding as a percentage of Afghanistan’s 

development budget has fluctuated. From March 2011 to March 2012, the ARTF is expected to fund 

approximately 15.9 percent of Afghanistan’s development budget (see figure II).
SIGAR Audit-11-14 Development and Governance/ARTF Page 25

Figure II: Actual and Projected ARTF Investment Window Funding 

as a Percentage of Afghanistan’s Development Budget from 2003 to 

2016

Source: SIGAR analysis of World Bank Afghanistan Reconstruction Trust Fund 

Quarterly report: September 22, 2010 to December 21, 2010, and the Afghan 

government’s 1389 National Budget Statement.

Notes: The Afghan government did not have development expenditures during its 

solar year ending in 2003. As a result, ARTF Investment Window funding was zero.

ARTF funding as a percentage of the Afghanistan’s development budget for the 

Afghan fiscal year ending in March 2012 and beyond is based on projected 

expenditures while prior years are based on actual expenditures. 

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Percentage of GIRoA Budget Funded by ARTF
SIGAR Audit-11-14 Development and Governance/ARTF Page 26

APPENDIX V: ARTF OVERSIGHT MECHANISMS

Figure III summarizes ARTF oversight mechanisms for the Recurrent Cost and Investment Windows. 

Figure III: Oversight Mechanisms for the ARTF Recurrent Cost and Investment Windows

Source: SIGAR analysis of World Bank and Afghan government data.

a Some projects, such as NSP and EQUIP, have multiple phases, each of which is counted as a separate project.

Recurrent Cost Window

Supports the Afghan government’s

non-security operating costs (i.e., payroll and 

operations and maintenance expenses)

Disbursements: $2.22 billion in disbursements 

for wages and operations and maintenance 

costs as of April 20, 2011

Oversight

1. Monitoring agent contracted by World 

Bank – financial reviews Afghan government 

operating expenditures to determine 

eligibility for ARTF reimbursement

2. Control and Audit Office – conducts 

financial audits of the Afghan government's 

operating account and financial statements

Investment Window

Provides grant funding for projects that 

support the Afghan government's

development priorities

Disbursements: $1.31 billion as of April 20, 

2011

Number of projects funded: 34 total/19 

ongoing as of April 20, 2011a

Oversight

1. World Bank task teams – conduct 

regular supervision missions to determine 

project implementation status, risks, and 

weakness, if any, in Afghan government 

project management and oversight

2. Control and Audit Office – conducts 

financial audits of all Afghan government 

ARTF-funded project accounts and 

financial statements
SIGAR Audit-11-14 Development and Governance/ARTF Page 27

APPENDIX VI: COMMENTS FROM U.S. EMBASSY KABUL
SIGAR Audit-11-14 Development and Governance/ARTF Page 28
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SIGAR Audit-11-14 Development and Governance/ARTF Page 31

APPENDIX VII: COMMENTS FROM THE WORLD BANK
SIGAR Audit-11-14 Development and Governance/ARTF Page 32
SIGAR Audit-11-14 Development and Governance/ARTF Page 33
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SIGAR Audit-11-14 Development and Governance/ARTF Page 35
SIGAR Audit-11-14 Development and Governance/ARTF Page 36

(This report was conducted under the audit project code SIGAR-037A).
SIGAR’s Mission The mission of the Special Inspector General for 

Afghanistan Reconstruction (SIGAR) is to enhance 

oversight of programs for the reconstruction of 

Afghanistan by conducting independent and objective 

audits, inspections, and investigations on the use of 

taxpayer dollars and related funds. SIGAR works to 

provide accurate and balanced information, evaluations, 

analysis, and recommendations to help the U.S. Congress, 

U.S. agencies, and other decision-makers to make 

informed oversight, policy, and funding decisions to:

• improve effectiveness of the overall reconstruction 

strategy and its component programs;

• improve management and accountability over funds 

administered by U.S. and Afghan agencies and their 

contractors;

• improve contracting and contract management 

processes;

• prevent fraud, waste, and abuse; and

• advance U.S. interests in reconstructing 

Afghanistan.

Obtaining Copies of SIGAR 

Reports and Testimonies

To obtain copies of SIGAR documents at no cost, go to 

SIGAR’s Web site (www.sigar.mil). SIGAR posts all 

released reports, testimonies, and correspondence on its 

Web site.

To Report Fraud, Waste, and 

Abuse in Afghanistan 

Reconstruction Programs

To help prevent fraud, waste, and abuse by reporting 

allegations of fraud, waste, abuse, mismanagement, and 

reprisal contact SIGAR’s hotline:

• Web: www.sigar.mil/fraud

• Email: hotline@sigar.mil

• Phone Afghanistan: +93 (0) 700-10-7300

• Phone DSN Afghanistan 318-237-2575

• Phone International: +1-866-329-8893

• Phone DSN International: 312-664-0378

• U.S. fax: +1-703-604-0983

Public Affairs Public Affairs Officer

• Phone: 703-602-8742 

• Email: PublicAffairs@sigar.mil

• Mail: SIGAR Public Affairs

400 Army Navy Drive

Arlington, VA 22202