SIGAR Audit-12-8 Development / Local Governance and Community Development

OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

USAID Spent Almost $400 Million on an Afghan 

Stabilization Project despite Uncertain Results, but 

Has Taken Steps to Better Assess Similar Efforts 

April 25, 2012
SIGAR

Special Inspector General for Afghanistan Reconstruction

SIGAR Audit-12-8 April 2012 

USAID Spent Almost $400 Million on an Afghan 

Stabilization Project despite Uncertain Results, but Has 

Taken Steps to Better Assess Similar Efforts

What SIGAR Reviewed

In October 2006, the U.S. Agency for International Development (USAID) awarded two task orders to Development Alternatives, 

Inc. (DAI) and Associates in Rural Development (ARD) to implement the Local Governance and Community Development (LGCD) 

project in Afghanistan. Although LGCD changed over time, it was designed to contribute to the creation of a stable environment for 

medium- and long-term political, economic, and social development. Since September 2003, USAID has obligated more than 

$1.1 billion for 20 major contracts or grants that covered stabilization efforts. As of September 2011, USAID had expended about 

$373 million for the LGCD project. Although LGCD has ended, USAID is continuing its stabilization efforts, including awarding two

contracts totaling $151 million for a program called Stabilization in Key Areas (SIKA). This report assesses (1) the cost and 

outcomes of the LGCD project and (2) USAID oversight of the project. In conducting our work, we reviewed and analyzed USAID 

and contractor documents; met with USAID officials at USAID headquarters in Washington, D.C., and at the USAID Mission in

Kabul, Afghanistan, and with senior representatives from both contractors at their respective headquarters in Bethesda, Maryland, and 

Burlington, Vermont; and visited seven LGCD subprojects in two Afghanistan provinces. We conducted our work from January 

2011 through March 2012 in accordance with generally accepted government auditing standards. 

What SIGAR Found

USAID increased LGCD’s funding and extended the life of the program, despite delays, unexpectedly high contractor operating costs, 

difficulty setting and measuring program outcomes, and indications that, at best, the program had mixed results. LGCD was initially 

approved with a funding ceiling of no more than $150 million and was to last 3 years. However, USAID increased funding for the 

program to almost $400 million and extended the project by almost 2 years. LGCD presented a number of challenges for USAID. 

For example, less than half of all LGCD funds were spent on subproject activity, even though the original task orders called for the 

majority of funds to be spent for that purpose. USAID also had difficulty determining whether LGCD was effective and changed its 

expectations over time of what it could achieve through the program. Available evaluations of the program indicate that it had mixed 

results. For example, an independent evaluation conducted at USAID’s request found that, although the project had pockets of 

success, it had not met its overarching goal of extending the legitimacy of the Afghan government and had not brought the 

government closer to the people or fostered stability. 

We found that USAID was hindered in its ability to monitor LGCD contract performance, a problem that USAID has reported 

regarding its other programs in Afghanistan for almost a decade. USAID has several methods for monitoring contract performance, 

such as field visits and third party monitoring, but these efforts are often hampered by travel and security restrictions. The U.S. 

government accepts a certain amount of risk in undertaking programs like LGCD. This makes obtaining supporting data from 

contractors for their invoices and conducting financial audits of the contractors particularly important. However, we found that the 

LGCD task orders and related contracts did not require contractors to submit supporting documentation for their invoices. In 

addition, USAID only recently committed to contract for a financial audit of the LGCD project, which is planned to occur in 2012.

What SIGAR Recommends

To strengthen USAID’s oversight of contractor costs and allow it to link invoiced costs to the goods and services to be provided, 

SIGAR recommends that the Mission Director, USAID/Afghanistan, direct contracting officers to ensure that the SIKA contracts and 

others, as appropriate, require contractors to provide complete supporting detail with invoices. In commenting on a draft of this 

report, USAID stated that that its current policy guidance already addresses our concern about strengthening oversight of contractor 

costs. However, USAID’s policy guidance depends on annual audits of contractors’ costs to provide reasonable assurance that 

contractors are only claiming eligible, supported costs for reimbursement. Because USAID has a significant backlog of incurred cost 

audits, relying on this policy is not sufficient to address our concerns. In programs like LGCD, the risk that the U.S. government 

accepts is particularly high, and additional cost verification measures are necessary. USAID further stated that if we retained the 

recommendation it should be addressed to the USAID Administrator because it pertains to the entire agency. Although our 

recommendation may have broader applicability, we addressed this recommendation at the Mission level given the unique risks posed 

by stabilization programs in Afghanistan. Therefore, we kept the recommendation addressed to the Mission Director. If USAID 

believes that the recommendation has broader applicability, we welcome its efforts to apply it throughout the agency. 

For more information contact: SIGAR Public Affairs at (703) 545-5974 or sigar.pentagon.ccr.mbx.public-affairs@mail.mil
SIGAR Audit-12-8 Development / Local Governance and Community Development Page i 

OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

April 25, 2012 

The Honorable Hillary Rodham Clinton 

Secretary of State

The Honorable Ryan C. Crocker

U.S. Ambassador to Afghanistan 

Dr. Rajiv Shah 

Administrator, U.S. Agency for International Development 

Dr. S. Ken Yamashita

USAID Mission Director for Afghanistan

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

Reconstruction’s (SIGAR) audit of the U.S. Agency for International Development’s (USAID) Local 

Governance and Community Development project. This report includes one recommendation to the 

USAID Mission Director to Afghanistan to direct contracting officers to include a contract provision in 

future stabilization program contracts requiring contractors to provide complete supporting detail with 

their invoices. This measure would better allow contracting officer representatives, who are responsible 

for reviewing invoices, to link costs to the goods and services provided. 

When preparing the final report, we considered comments from USAID. USAID commented that it has 

developed best practices and lessons learned from its stabilization efforts, including LGCD. USAID took 

exception to the recommendation and several findings. We chose to retain our recommendation. We 

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. USAID’s comments are 

reproduced in appendix VI. 

Steven J Trent 

Acting Special Inspector General 

for Afghanistan Reconstruction 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page ii

TABLE OF CONTENTS

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

.................................... 4

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 ........................................................................................................ 19

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........................................................................................... 22

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....................................................... 29

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.................................. 6

.................................. 9

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..

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................................................................................................................................................. 17

USAID Increased LGCD’s Size, Despite Numerous Challenges and Little

Evidence of Success ....................................................................................

USAID Was Limited In Its Ability To Monitor LGCD Activities....................

Conclusion ..

Recommendation 

Comments ..

Appendix I: Scope and Methodology

Appendix II: ARD’s Contract Modifications .

Appendix III: DAI’s Contract Modifications ..

Appendix IV: Extent To Which DAI Met Performance Indicators in Fiscal Years 

2009, 2010, AND 2011 ............................................................................................

Appendix V: Study Summaries on the Impact of Development on Stability .

Appendix VI: Comments From The U.S. Agency For International

Development ...............................................................................

 

..

TABLES

Table 1: Status of LGCD Funds as of September 30, 2011(dollars in millions)

Table 2: Proportion of LGCD Contractors’ Costs by Category .

Table 3: Summary of Contractor Performance in Meeting LGCD Program 

Targets, Fiscal Years 2008-2011 .............................................................

Table I: Modifications to IQC DFD I-00-05-00248, Task Order 02

Table II: Modifications to IQC DFD I-02-05-00250, Task Order 02 ......................

Table III: DAI-Reported Success in Meeting Performance Targets in Fiscal Year 

2009 ....................................................................................................................

Table IV: DAI-Reported Success in Meeting Performance Targets in Fiscal Year

2010 ....................................................................................................................

Table V: DAI-Reported Success in Meeting Performance Targets in Fical Year 

2011 ....................................................................................................................
SIGAR Audit-12-8 Development / Local Governance and Community Development Page iii

ABBREVIATIONS AND ACRONYMS 

ADS Automated Directives System

ARD Associates in Rural Development, Inc. 

Checchi Checchi and Company Consulting, Inc. 

COIN counterinsurgency

COR Contracting Officer’s Representative

DAI Development Alternatives, Inc. 

DCAA Defense Contract Audit Agency

DSF District Stabilization Framework

GAO Government Accountability Office 

GIRoA Government of the Islamic Republic of Afghanistan

LGCD Local Governance and Community Development 

OIG Office of Inspector General

PMP Performance Management Plan

PRT Provincial Reconstruction Team

RFTOP Request for Task Order Proposal

SIGAR Special Inspector General for Afghanistan Reconstruction 

SIKA Stabilization in Key Areas

USAID U.S. Agency for International Development
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 1 

USAID Spent Almost $400 Million on an Afghan Stabilization Project 

despite Uncertain Results, but Has Taken Steps to 

Better Assess Similar Efforts 

The U.S. Agency for International Development (USAID) has implemented a broad spectrum of 

development programs throughout Afghanistan. The country’s insecure environment, however, has also 

required robust stabilization programming to work in partnership with the Government of the Islamic 

Republic of Afghanistan (GIRoA), coalition forces, and development partners, often in the country’s most 

remote and challenging regions. Although the U.S. government has varying definitions of stabilization, 

USAID has defined the term as the process by which underlying tensions that might lead to resurgence in 

violence and a breakdown in law and order are managed and reduced, while efforts are made to support 

successful long-term development.1

1

This definition appeared in USAID’s LGCD task order, which in turn referenced the U.S. Army’s 2008 Field 

Manual, entitled Stability Operations.

 Since September 2003, USAID/Afghanistan has obligated more than 

$1.1 billion for 20 major contracts or grants that covered stabilization efforts. Two of the 20 awards were 

for the Local Governance and Community Development (LGCD) project with obligations of more than 

$328 million and $70 million, respectively. 

To implement LGCD, which was overseen by a series of USAID Contracting Officer’s Representatives 

(COR),2

2

The CORs were called Cognizant Technical Officers until January 26, 2009, when the designation was changed to 

the Contracting Officer’s Technical Representative. In February 2012, USAID stated that the Contracting Officer’s 

Technical Representative designation had been changed to Contracting Officer’s Representative.

 USAID competitively awarded cost-reimbursable task orders to two contractors in 

October 2006. 3

3

USAID used two of its Indefinite Quantity Contracts to award the LGCD task orders. The contracts adhere to 

Federal Acquisition Regulation Subpart 16.5, which provides for a definite quantity of specific supplies or services 

for a fixed period, with deliveries or performance to be scheduled at designated locations upon order. The task 

orders were awarded on a cost-plus-fixed fee basis under which USAID reimburses the contractors for all allowable 

costs plus a fixed fee.

The task order for LGCD work in the northern and western provinces of Afghanistan was 

awarded to Associates in Rural Development, Inc. (ARD), and the task order for work in the southern and 

eastern provinces was awarded to Development Alternatives, Inc. (DAI). USAID relied on the 

contractors to propose, implement, monitor, and evaluate subprojects. In implementing subprojects, the 

contractors procured commodities, provided training, undertook small-scale development and 

rehabilitation, and provided subject matter experts in fields such as conflict mapping and analysis. The 

two contractors completed 2,9384

4

DAI completed 2,451 projects and ARD completed 487 projects.

work activities (subprojects) covering districts and villages in all 34 of 

Afghanistan’s provinces. USAID terminated ARD’s original task order for convenience, effective 

June 30, 2009. The LGCD project ended on August 28, 2011, with the closure of DAI’s project office in 

Kandahar, Afghanistan. 

This report assesses (1) the cost and outcomes of the LGCD project and (2) USAID oversight of the 

project. To accomplish these objectives, we reviewed and analyzed USAID and contractor documents. 

These included the original LGCD approval document; associated contracts, task orders, and 

modifications; USAID LGCD contract files; contractor plans and reports reviewed and approved by 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 2 

USAID; and records on selected subprojects performed between 2006 and 2011. In addition, we 

examined contractor invoices, USAID payments of those invoices, and the contractors’ financial records. 

We also reviewed USAID Office of Inspector General (OIG) reports and a USAID-contracted assessment 

of LGCD project outcomes, as well as Afghanistan violence data maintained by the Defense Intelligence 

Agency. We reviewed reports from U.S. government and nongovernmental sources with substantial 

experience in Afghan reconstruction on the effectiveness of aid programs in promoting stability in 

Afghanistan. We interviewed USAID officials at USAID headquarters in Washington, D.C., and at its 

Mission in Kabul, Afghanistan, and senior representatives from both contractors. With the assistance of 

the U.S. military and USAID officials on provincial reconstruction teams (PRT), we visited seven LGCD 

subprojects in two Afghanistan provinces. We conducted our work from January 2011 through March

2012 in accordance with generally accepted government auditing standards. Appendix I contains a more 

detailed discussion of our scope and methodology. 

BACKGROUND

Although stability was consistently a core component and focus of LGCD, the program also evolved to 

reflect and conform to the changing U.S. strategy in Afghanistan. When the program was first approved 

in 2006, its primary expected outcome was to stabilize unstable areas through projects that help the 

GIRoA extend its reach into remote districts, encourage local communities to take an active role in their 

own development, and create incentives for stability in critical border provinces. The statement of work 

for the LGCD task orders, also issued in 2006, described LGCD’s principal goal as helping the GIRoA 

and local citizens develop the institutions, processes, and practices that will create a stable environment

for long-term political, economic, and social development. The task orders contained four broad areas of 

work to be undertaken by the contractors, each with an expected outcome. 

• Support to local public administration and governance. The expected outcome was improved 

provincial and municipal capacity to deliver services and address citizen needs. Examples of 

projects undertaken were leadership and management training and technical assistance in disaster 

management. 

• Community mobilization and development. The expected outcome was greater community 

participation in the selection and implementation of small scale development projects and 

stronger ties between these communities and local government bodies that are responsible for 

provincial development. Examples of projects undertaken were information technology 

equipment purchases and furniture repair. 

• Local stability initiatives. The expected outcome was improved stability in targeted districts and 

provinces. Examples of projects undertaken were canal cleaning, bridge repairs, and vocational 

training.

• Sector expertise. The expected outcome was to provide subject matter expertise to assist PRTs by 

identifying a pool of experts in subjects such as agriculture, local governance, conflict 

management, infrastructure, and community mobilization. Examples of projects undertaken were 

a water use survey, health facility assessment, and an alternative energy survey.

The task orders also identified which of USAID/Afghanistan’s overall strategic objectives LGCD would 

support. First, LGCD was to improve stability by extending the reach of the central government, working 

to address the needs of isolated and under-served communities, and using development projects to address 

underlying causes of instability and support for insurgency in Afghanistan's outlying provinces. Second, 

LGCD was intended to reinforce other USAID programs by complementing training to provincial 

governments under the Mission's democracy and governance projects and cross-cutting capacity building 

programs.
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 3 

In 2009, the project was redesigned to align more closely with the U.S. government’s counterinsurgency 

(COIN) strategy, with USAID labeling LGCD its “flagship counterinsurgency program.” The first work 

component, support to local public administration and governance, was eliminated from LGCD and 

moved to USAID/Afghanistan’s capacity building program. The remaining three work components were 

aligned with the first three phases of the four-step COIN strategy—assess, clear, hold, and build. 

Specifically, the fourth work component, sector expertise, was aligned with the “assess” phase; the third 

work component, local stability initiatives, was aligned with the “clear” phase; and the second work 

component, community mobilization and development, was aligned with the “hold” phase. Other 

significant changes in 2009 included further decentralizing authority and responsibilities to the managers 

of regional and provincial offices, extending the reach of the program from 16 to 22 districts, and 

allowing for further expansion to provinces in the north and west, security permitting. 

Under this new configuration, the stated primary goal of LGCD was to assist in creating a stable 

environment for long-term political, economic, and social development in partnership with the GIRoA. 

The stated objectives of the program were to (1) assist the GIRoA to extend its reach into unstable areas 

and engage at-risk populations by building the capacity of provincial and local government officials to 

deliver services and address citizen needs, (2) create an environment that encourages local communities 

to take an active role in their own development, and (3) promote stability by addressing the underlying 

causes of violence and support for insurgency. 

In March 2010, LGCD was expanded nationwide in concert with the civilian uplift5

5

In 2009, President Obama announced the expansion of civilian-led efforts to build Afghan governing capacity at all 

levels, improve the rule of law, and initiate sustainable economic growth. This effort has been supported by a 

significant increase, or “uplift,” in U.S. civilian employees deployed to Afghanistan, from 320 personnel in 

January 2009 to over 1,200 authorized positions as of May 31, 2011. For additional information on the civilian 

uplift, see SIGAR Audit-11-2, U.S. Civilian Uplift in Afghanistan is Progressing, Some Key Issues Merit Further 

Examination as Implementation Continues (Oct. 26, 2010) and SIGAR Audit-11-17 and Department of State OIG 

AUD/SI-11-45, The U.S. Civilian Uplift in Afghanistan Has Cost Nearly $2 Billion, and State Should Continue to 

Strengthen Its Management and Oversight of the Funds Transferred to Other Agencies (Sept. 8, 2011) 

 announced by 

President Obama in December 2009. The program ended in August 2011. 

LGCD Established Monitoring and Evaluation Requirements for Contractors

Under LGCD, each contractor was required to establish and maintain a performance-based monitoring 

and evaluation system capable of tracking and documenting the status of implementation of all work 

components' activities for the task order, the provision of deliverables, and the progress toward achieving 

targets and results.

The LGCD task orders did not prescribe performance indicators or targets, but rather directed that the 

contractors establish and maintain a performance-based monitoring system that, at a minimum, was to 

include several elements, including reporting of deliverables against work plan targets. The specific 

indicators and targets were established through Performance Management Plans (PMP) in a collaborative 

process, with the contractors proposing and USAID approving the indicators and performance targets. 

Specifically, the task orders required the contractors to provide the following: 

• A work plan describing the task order-level outputs that the contractor expected to achieve during 

the planning period, linked to contract-level performance indicators and targets in the Mission's 

PMP and set forth in the task order performance monitoring and evaluation plan. The work plan 

was to include an explanation of how those task-level outputs were expected to contribute to

USAID’s strategic objectives and intermediate results and a budget. 

• Annual reports that included the results the contractor had recorded from the application of the 

agreed-upon results monitoring plan. In addition, the contractor was to provide thorough 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 4 

monitoring data by the end of October of each year of the task order, when the USAID Mission 

begins drafting its annual performance report to USAID Washington. 

• A final report to include a summary of accomplishments achieved under the task order, 

discussion of problems encountered where objectives were not achieved, and lessons learned.

USAID Has Continued Stabilization Activities

Although LGCD has ended, USAID is continuing its stabilization efforts. It has awarded contracts for a 

new program, called “Stabilization in Key Areas” or SIKA, which has similarities to LGCD. As 

described in USAID’s request for proposals, SIKA has some programmatic, methodological, and 

administrative similarities to LGCD, including the main objective of stabilization. For example, LGCD 

and SIKA focus on activities with relatively short-term results that connect populations to more 

responsive local governments that meet their citizens’ needs. On the other hand, in the request for 

proposals, promoting reconciliation and peace negotiations and emphasizing greater district-level GIRoA 

control over the selection and implementation of projects are larger elements of SIKA than they were for 

LGCD. USAID received bids from a number of contractors and in December 2011, awarded an 

18-month contract for the eastern part of Afghanistan valued at $88 million; in January 2012, USAID 

awarded an 18-month contract for the western part of Afghanistan valued at about $63 million. Over the 

next 3 years, USAID plans to spend between $400 and $466 million on SIKA. 

USAID INCREASED LGCD’S SIZE, DESPITE NUMEROUS CHALLENGES AND 

LITTLE EVIDENCE OF SUCCESS 

USAID increased LGCD’s funding and extended the life of the program, despite delays, unexpectedly 

high contractor operating costs, difficulty setting and measuring program outcomes, and indications that, 

at best, the program had mixed results. LGCD was initially approved with a funding ceiling of no more 

than $150 million and a completion date of October 2009. By the time the program ended, USAID had 

spent almost $373 million and extended the program by almost 2 years. USAID made these funding and 

schedule decisions despite facing a number of challenges. For example, the program experienced 

substantial delays in its first 2 years, and less than half of all LGCD funds were spent on subproject 

activity, even though the original task orders envisioned that the majority of funds would be spent for that 

purpose. Our review of contract documents, program evaluations, and interviews with USAID officials 

also shows that USAID had difficulty determining whether LGCD was effective and changed its 

expectations over time of what it could achieve through the program. Furthermore, those efforts that 

USAID and others made to evaluate the program indicated that results were mixed.

USAID Expanded LGCD beyond Originally Planned Size and Scope

Through a series of contract modifications, USAID both increased LGCD’s funding and extended its 

project life. The original LGCD task orders were awarded for a 3-year period, which ended October 

2009. LGCD’s project approval action memorandum, issued in March 2006, stated that up to about 

$93 million over 3 years was planned. It also noted that, should additional resources become available in 

the second 2 years of the program (fiscal years 2007 and 2008), a total cumulative ceiling of $150 million 

would be authorized.

However, by the end of fiscal year 2008, USAID had obligated almost $226.5 million for the program 

through a series of modifications to the two task orders and had extended DAI’s task order completion 

date from December 1, 2009 to September 30, 2010.6 

6

As noted earlier, USAID terminated ARD’s contract for convenience effective June 2009.

Later modifications to DAI’s task order further 

increased the ceiling price and extended the completion date. (See appendices II and III for additional 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 5 

details of each task order’s modifications.) As noted earlier in this report, some of the expansions were 

driven by an increasing emphasis on LGCD’s role in supporting the counterinsurgency effort nationwide 

and by the civilian uplift that took effect at the beginning of 2009. In total, as shown in table 1, USAID 

had allocated a total of $430 million for LGCD, obligated $398 million, and expended $373, as of 

September 30, 2011. 

Table 1: Status of LGCD Funds as of 

September 30, 2011(dollars in millions)

ARD DAI Total

Allocated $ 81 $ 349 $ 430

Obligated $ 70 $ 328 $ 398

Spent $ 56 $ 317 $373

Source: SIGAR analysis of USAID data.

USAID expects to de-obligate remaining unexpended amounts once DAI’s final billings have been 

settled.

LGCD Posed a Number of Challenges

USAID experienced a number of challenges related to LGCD. First, both contractors experienced 

substantial delays at the beginning of the project. Second, USAID spent more on contractor operating 

expenses, such as security and labor, and less on actual subproject activity than originally planned. Third, 

USAID struggled to determine what LGCD could and would achieve. Fourth, USAID had difficulty 

measuring the impact of LGCD.

LGCD Experienced Initial Delays

In 2009, in what were to be end of program evaluations, USAID’s OIG and Checchi and Company 

Consulting, Inc. (Checchi)7 each reported significant delays with project implementation in the first 2 

7

The Checchi review was conducted at USAID/Afghanistan’s request.

years of the LGCD project.8 

8

See USAID OIG Audit of USAID/Afghanistan’s Local Governance and Community Development Project in 

Southern and Eastern Regions of Afghanistan (Report No. 5-306-09-003-P; May 11, 2009); and Checchi and 

Company Consulting, Inc., Final Report, Local Governance and Community Development Program (LGCD), 

Evaluation, January 2009. The OIG report covered DAI’s performance from 2006 through 2008 but did not 

evaluate ARD’s performance under its task order.

The OIG found that the project suffered from delays in three of the four 

initial program components and reported that the project had been hindered, in part, by the need for 

refinements in the Mission’s operational plan indicators and timely Mission approval of DAI’s annual 

work plans. According to the Checchi report, both contractors experienced delays due to the need to 

decentralize operations and comply with the long-term process for approving an operational plan by 

which the task orders could be achieved. In addition, Checchi reported that the contractors needed time to 

integrate LGCD within the context of national Afghanistan development strategies and coordinate 

implementation with affected national ministries, policy bodies, and structures. 

USAID’s OIG made 12 recommendations to assist USAID/Afghanistan in improving its implementation 

and monitoring. USAID reported that it took steps to improve the program, and USAID OIG agreed with 

these steps. These steps included, among others, providing training for USAID personnel on their LGCD 

roles and responsibilities and developing standard procedures for contractor data collection and retention. 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 6 

From September 2009 through the end of the LGCD project in 2011, the subproject selection process, 

which had driven some of the delays, became better organized. To keep a sustainable number of 

subprojects in the pipeline, USAID Mission officials planned a “tranche” allocation about every 

4 months. According to a former USAID official, a tranche supported anywhere from 15 to 25 

subprojects per province on a wide array of activities designed to support the provincial LGCD project. 

Furthermore, with the experiences gained in the LGCD’s early years, USAID improved its subproject 

approval process. This included identifying subproject types that should not be funded by LGCD, such as 

agriculture, water resource, and large infrastructure interventions. 

Less than Half of LGCD Funds Were Spent on Subproject Activity

Over the life of the program, USAID reduced the amount of funds that it expected would be spent on 

subproject activity. The LGCD task orders contained ceiling prices and, within these ceilings, budget line 

items for various types of costs. The ceiling prices for ARD and DAI’s task orders included budget line 

items for workdays ordered by USAID under the task orders, security, and life support (including housing 

and other living expenses). The ceiling prices also included budget line items for subgrants, commodities, 

and infrastructure programs—the line items most directly related to individual LGCD subprojects and, 

therefore, most likely to reach subproject beneficiaries. The original task orders envisioned that the 

majority of contractor costs would be for these three line items. However, in subsequent modifications, 

USAID reduced the proportion of these costs to less than half of the total LGCD ceiling price. 

We determined that 36 percent and 42 percent of expenditures under the contracts for DAI and ARD, 

respectively, were for subproject activity.

9

 

9

For ARD, the invoiced budget line items most closely aligned with subproject activity were the subgrant program, 

the commodities program, and the infrastructure program. For DAI, they were the program activities and grants 

budget lines items. 

Taken together, ARD’s and DAI’s labor costs and all other 

costs (except security)

10

10Because ARD and DAI invoiced costs differently, we grouped all remaining costs, except security, together and 

labeled them “all other costs.” These costs included other direct costs, travel, allowances, and general and 

administrative costs.

constituted the largest percentage, at 50 percent for both ARD and DAI. Security 

costs comprised 8 percent of ARD’s costs and 14 percent of DAI’s costs. (See table 2.) 

Table 2: Proportion of LGCD Contractors’ 

Costs by Category

Category ARD DAI

Subproject Activity 42% 36% 

Labor costs 26% 21%

Security Costs 8% 14% 

All other costs 23% 29% 

Source: SIGAR analysis of ARD and DAI cost data.

Note: Totals affected by rounding. 

USAID Struggled to Define Stabilization and Expected Outcomes of LGCD 

Our review of LGCD contract documents, interviews with contract and USAID personnel, and 

independent evaluations of the program shows that defining stabilization programming and assessing 

what it could realistically achieve posed a significant challenge. For example, a representative for one of 

the LGCD contractors told us that because USAID, the PRTs, and the contractors had little experience in 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 7 

the area of stabilization, and because LGCD was essentially an “experimental program,” it was difficult 

for everyone to agree on outputs and outcomes. 

The Checchi report also found that the contractors, USAID, and often the PRT commanders lacked a 

common understanding of the stabilization component of the program. The report noted two different 

concepts of local stability initiatives in Afghanistan: (1) community development work in non-secure 

areas or (2) counterinsurgency work, using community development principles. Checchi advised that 

stabilization initiatives needed to be precisely defined and needed to include a realistic explanation of the 

Afghan context, with examples of what local stability initiatives are and what contractors are expected to 

deliver. The report also noted that, given the inherent risk of stabilization programming, a common 

understanding of local stability initiatives shared by USAID and contractors was essential. 

As noted above, USAID stated in 2006 that the primary expected outcome of LGCD was to stabilize 

unstable areas. Similarly, the Checchi report stated that the immediate focus and goals of LGCD’s local 

stability initiatives should be to bring a modicum of stability to volatile areas. However, in September 

2009, when LGCD was reconfigured to align it with the U.S. COIN strategy, USAID reached a 

conclusion that LGCD required “more realistic objectives and results.” Furthermore, in the March 2010 

modification of LGCD, USAID noted that many factors outside of LGCD’s control contribute to 

instability, and that a linear shift from instability to stability does not always occur. As a result, USAID 

adopted three new intermediary results for the program: (1) root causes of instability are identified and 

local solutions enabled, (2) GIRoA officials provide leadership to strengthen stability and development in 

target communities, and (3) communities become principal stakeholders in creating stability and 

development alternatives to insurgent paradigms. 

A comparison of USAID documents from 2011 with earlier documents on LGCD further demonstrates 

the extent to which USAID’s conception of stabilization changed over time. The original LGCD task 

orders emphasized the importance of development and employment projects in achieving success with 

stabilization activities. For example, they stated that short-term stabilization involves identifying and 

engaging populations that are vulnerable to recruitment into militant groups, such as alienated, 

uneducated, and unemployed youth, and that violence linked to a lack of development had created an 

environment of generalized instability. The task orders offered examples of activities that the contractors 

could undertake to promote stability, including using development projects as an incentive for different 

groups or tribes to negotiate truces or ceasefires and employment activities for at-risk young people. 

A 2011 USAID presentation, however, appears to call into question the value of these activities in 

contributing to stability. Specifically, the presentation states that the idea that “economic development 

and modernization foster stability” and that “more jobs means less support for insurgents” are “myths.”

USAID Had Difficulty Measuring Program Results

In addition to struggling to clearly define LGCD and its expected outcomes, USAID faced challenges 

developing and implementing an accurate and robust method for measuring the program’s effectiveness. 

As noted earlier, LGCD performance indicators and targets were established in PMPs agreed upon by 

both the contractors and USAID through a collaborative process. The first PMP, jointly developed by 

DAI and ARD, was approved by USAID in May 2007.11

11The task orders for both contractors were awarded in October 2006, 7 months earlier.

 It contained seven indicators that were aimed at 

measuring results across a broad area of LGCD project activity. However, in December 2008, USAID 

instituted a “wholesale revision” of the LGCD PMP for DAI, noting that the PMP initially approved in 

May 2007 did not adequately capture and measure ongoing LGCD activities in the south and east of 

Afghanistan. USAID also acknowledged that the initial attempt to define indicators common to activities 

in both the south/east regions of Afghanistan and the north/west regions “proved inadequate” because the 

two programs operated in different security and development environments, resulting in varying 

approaches to program implementation. The revised PMP contained 16 performance indicators and 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 8 

targets linked to the task order work components, which according to USAID were more appropriate for 

the LGCD project.

The concerns that USAID identified in the 2008 PMP were also addressed in the 2009 USAID OIG 

report. For example, the OIG reported that DAI’s performance targets did not realistically reflect what 

the Mission intended to achieve under LGCD and that the results also did not represent the activities for 

which a significant amount of funding was disbursed. The OIG concluded that these issues weakened the 

link between funding, activities, and desired results and could ultimately impair decision making at the 

stakeholder level. 

In December 2009, USAID approved a third LGCD PMP for DAI. It was designed to reflect the 

program’s new alignment with the COIN strategy and clarify how LGCD measured the outputs and 

outcomes of its activities. It contained 15 indicators—6 linked to specific task order work components,

2 to the overall assistance objective, and 7 common indicators. It also announced that the program would 

partner with a third-party research institution in Afghanistan to administer perception surveys to targeted 

communities. These surveys were conducted in 2010 and, aside from a few PMP indicators related to 

levels of stability, constituted USAID’s first serious effort to measure the effect of LGCD on stability.

12 

12Examples of LGCD stability measures, aside from the perception surveys, included the number of people trained 

in conflict mitigation/resolution and the percent of LGCD priority districts with follow-on build (that is,

development) activities. 

The surveys gauged the opinions of 5,411 Afghans in 123 villages across 64 districts regarding their 

perceptions of stability. Villages were chosen randomly and all were located within one kilometer of 

LGCD projects that had been implemented within 3 months of the survey. However, due to security 

issues, over a quarter (33) of the originally selected villages had to be replaced with more secure villages. 

As a result, DAI concluded that the inability to extract data from areas that were heavily controlled by the 

insurgency had “introduced a systemic bias” in the sample. 

Beginning in 2010, the USAID Mission and the Counterinsurgency Training Center-Afghanistan 

developed the District Stabilization Framework (DSF) to identify root causes of instability at the local 

level; develop activities that specifically addressed these sources of instability; and measure the impact of 

programming, as well as overall stability trends, in areas where activities were being implemented. DSF 

was promoted through a USAID Mission order, guidance from the Commander of the International 

Security Assistant Forces, Secretary of Defense guidance, and a fragmentary order issued by the Regional 

Command-East.

However, in 2011, USAID acknowledged that the degree to which the DSF was being used and to what

effect remained in question. It issued a Request for Task Order Proposal (RFTOP)13

13RFTOP-SOL-306-12-000001 was issued on December 1, 2011.

 for an independent 

contractor to measure the impact of stabilization initiatives. The RFTOP stated that, while past efforts to 

provide quantified and scientifically rigorous measures of stabilization impact had met with some success, 

a more data-rich and geographically detailed approach was necessary to systematize an understanding of 

stabilization in the context of Afghanistan. For example, according to the RFTOP, the PMP for 

USAID/Afghanistan’s Stabilization Unit (which oversaw LGCD, among other programs) was outputoriented and lacked a clearly articulated theory of change consistent with the underlying logic of 

individual unit programs. The RFTOP called for, among other things, a review of previous or ongoing 

efforts to measure stabilization impacts and trends in Afghanistan, including the DSF and monitoring and 

evaluation efforts associated with LGCD.

A senior official we met with from USAID’s Stabilization Unit in July 2011 described similar concerns to 

those outlined in the RFTOP. This official told us that USAID needed to invest in a broader monitoring 

and evaluation effort for LGCD and similar programs, noting a tendency to report on outputs rather than 

outcomes. He also said that stabilization efforts and project implementation in an active combat 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 9 

environment were new for USAID in Afghanistan, and that these programs were in need of an evaluation 

to determine the extent to which they were meeting the intended objectives. 

Evaluations Indicate that LGCD Had Mixed Success 

Although USAID had difficulty measuring program outcomes, some evaluations of LGCD are available. 

These evaluations indicate that the program produced mixed results. As explained above, the contractors 

were required to report their progress in meeting performance indicators and targets contained in the 

PMPs. These indicators were largely output-oriented. Examples of indicators were the number of target 

institutions (i.e., local Afghan development groups) reporting publicly on service delivery performance 

improvements, the number of institutions equipped with information technology or internet connection, 

the number of key facilities or other infrastructure rehabilitated, and the number of government officials 

trained. As shown in table 3, the contractors’ ability to meet their targets varied over time. Appendix IV 

contains more detail on LGCD performance indicators and the extent to which they were met in 2009, 

2010, and 2011. 

Table 3: Summary of Contractor Performance in Meeting 

LGCD Program Targets, Fiscal Years 2008-2011

Contractor Fiscal 

yeara

Targets

met

Targets

not met

Success rate

(percent)

ARD 2008 4 2 67

ARD 2009 12 12 50 

DAI 2008 13 1 93

DAI 2009 12 3 80 

DAI 2010 7 8 47 

DAI 2011b 12 3 80 

Source: SIGAR analysis of contractors’ annual reports to USAID. 

Notes:

a

Reporting did not fully measure success in achieving targets in 2007.

b

First 3 quarters of fiscal year 2011; the project ended in August 2011.

Independent evaluations of the program also pointed to mixed results. For example, USAID OIG 

reported that the project achieved a number of planned results, such as on-the-job training for government 

staff, assistance to ministries in developing requests for donor funds, and construction of a school in 

Nangarhar Province that brought two competing tribes together for a common project. However, the OIG 

also reported that the project’s overall success seemed highly questionable. 

Checchi reported that LGCD had a minimal impact on improving stability and mixed results in achieving 

task order goals. Specifically, the report stated that “the program (LGCD) has not met its overarching 

goal of extending the legitimacy of the Afghan government nor has it brought government closer to the 

people or fostered stability.” Checchi also reported on progress against the four original task order 

components. It found that while the project did not meet its overarching objectives or outcomes, the 

evaluation team reported pockets of success by both contractors within each of the four program 

components’ outputs. In Checchi’s assessment, the first component—supporting local public 

administration and governance—had the most success. Checchi found that a multi-faceted package of 

initiatives raised the capacity of provincial and district government officials. The second component—

promoting community mobilization and development—had intermittent success. While several 

subprojects helped foster links between community and government, Checchi also reported that a 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 10

significant number of community development subprojects had neither achieved their intended objectives 

nor furthered the LGCD’s ultimate goals of bringing communities closer to government and introducing 

stability. The third and fourth components regarding local stability initiatives and assistance to PRTs also 

had a mixed record of success. Checchi reported that ARD and DAI admitted to poor implementation of 

local stability initiatives over most of the program period that it reviewed.

The perception surveys of villagers, which started in 2010, similarly pointed to mixed results. Of the 

110 originally selected villages with complete results, 59 were seen as “wins” for improvements in 

stability, 24 were “stalemates,” and 27 were viewed as “losses.” However, as noted above, these results 

were somewhat biased because 33 of the originally selected villages had to be replaced with more secure 

villages. DAI missed its target in 2010, but surpassed it in 2011. Specifically, in fiscal year 2010, the 

target was for 40 percent of respondents to view that stability in their community had improved, but only 

35 percent of respondents said that stability had improved. In fiscal year 2011, USAID reduced the target 

to 35 percent, and 42 percent of respondents said stability had improved. According to DAI, stability 

improvement responses should be approached with some caution because the trend was in line with the 

reduction in violence during the winter months when insurgents typically reduce violent engagement. 

DAI also noted that perceptions of improved stability may thus be due to factors outside of LGCD’s 

control such as a surge in military forces. However, DAI stated that the improvement in stability 

perceptions in 2011 showed a positive trend in the success of the program. 

DAI used a regression analysis with the results of the survey to determine which types of LGCD activities 

were highly correlated to improvements in stability perceptions. The results pointed to the GIRoA’s 

ability to provide security, improvements in GIRoA’s service delivery, access to food, and GIRoA’s 

responsiveness as the four conditions most connected to stability improvements. Activities that did not 

have a high correlation with improvements in stability included improved health, increased work 

opportunities, rises in monthly income, and land ownership. The survey concluded that while most of 

LGCD focused on short-term cash-for-work projects, long-term employment generated by improved 

conditions for agriculture is more effective in improving stability and should be the greater focus for 

counterinsurgency and development efforts. 

In June 2011, USAID issued a fact sheet on LGCD, which stated that the project had many successes, 

including the 

• completion of more than 2,500 community stabilization projects, representing an investment of 

$109 million; 

• generation of immediate short-term employment totaling 1.5 million employment days through 

cash-for-work activities; and 

• completion of significant and lasting improvements in rural infrastructure, including gravel roads, 

footbridges, and irrigation systems. 

USAID also provided success stories showing that individual subprojects benefitted local villages and 

sometimes resulted in their rejection of the Taliban. For example, in Uruzgan province, LGCD helped 

villagers returning to homes damaged in heavy fighting to rebuild, plant crops, and restart their lives. In 

Kapisa province, an LGCD project to clear snow from 11 kilometers of a major commerce route provided 

short-term employment. The snow clearing provided the men a source of winter income and created an 

opportunity for the community to meet and discuss future development initiatives with their local 

government representatives. A few weeks after the completion of the project, the villagers announced 

that they would no longer tolerate a Taliban presence in the valley and would fight to protect future 

reconstruction and development efforts. 

Because USAID and DAI assessments of LGCD’s effect on stability were principally based on the 

perception surveys, we sought to ascertain what broader data indicated regarding stability in the locations 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 11

where LGCD focused its activities. Although the effect of LGCD on security levels cannot be isolated, 

violence data can be used as one indicator of stability. We looked at the level of violence as measured by 

enemy-initiated attacks, incident reports, and other studies that discussed the effect of development 

activities on security. In the absence of quantitative data at the village level and because the task orders 

envisioned improved stability at the district and province level, we looked at data at those levels. 

Our analysis of Defense Intelligence Agency data showed that each of the eight provinces with the most 

LGCD activity experienced increases in the level of violence between 2006 and 2010, ranging from 

almost two to twenty times. In these eight provinces, enemy-initiated attacks increased by 50 percent 

between 2006 and 2010, a higher increase than throughout the country for the same period. 

We also obtained and reviewed unclassified coalition data on violent incidents at the district level. The 

data included violent, criminal, and coercive events, such as kidnapping, improvised explosive devices 

detection and explosion, and small arms fire. We focused on the eight provinces that had the most LGCD 

activity and, within those provinces, the eight districts with the largest concentration of LGCD activity. 

Our review showed significant increases in reported incidents from 2006 through 2010. For example, 

249 percent more incidents were reported in those eight districts in 2010 than in 2006. 

When we discussed this violence data with USAID officials, they stated that attack data is one area to 

consider in assessing stabilization efforts, but it is difficult to associate this information with a specific 

stabilization program or to determine if the impact is low or high. They also noted that stability trends at 

the province level were not an accurate reflection of LGCD effectiveness because the project did not have 

activities in every district of a province.

Independent studies of other development programs aimed at stabilization in Afghanistan also raise 

questions about the extent to which these types of programs can lead to positive results. We reviewed a 

number of studies undertaken by the Senate Foreign Relations Committee, the U.S. Army, and a variety 

of nongovernmental entities, including Tufts University and the Massachusetts Institute of Technology. 

The studies found little evidence that development programs aimed at promoting stability have been 

successful. Appendix V contains summaries of the studies.

USAID WAS LIMITED IN ITS ABILITY TO MONITOR LGCD ACTIVITIES

USAID’s ability to monitor LGCD was hampered by a number of factors. USAID monitored subprojects 

through a combination of COR field visits, reports from its field offices, and third-party monitoring. In 

programs like LGCD the U.S. government accepts a certain amount of risk because its ability to assure 

that contractor costs are appropriate is limited by the difficulty in getting to subproject sites. This makes 

obtaining complete supporting documentation from contractors for their invoices and conducting financial 

audits of contractor costs on a timely basis particularly important. However, we found that the LGCD 

task orders did not require contractors to submit supporting documentation for their invoices. 

Furthermore, the Defense Contract Audit Agency (DCAA), which USAID uses to audit the LGCD 

contractors’ incurred costs, is more than a decade behind in auditing DAI’s costs and has not completed 

reports on ARD’s costs past fiscal year 2006, when LGCD began. USAID only recently committed to 

contract for a financial audit of the LGCD project in 2012. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 12

USAID Staff Used a Variety of Techniques to Monitor Projects, Including Reports and Limited 

Field Visits 

USAID guidance for administering contracts assigns the bulk of contract administration to the COR, 

including monitoring performance, coordinating with the contracting officer, and problem resolution. 

USAID’s supplement to the Federal Acquisition Regulation stipulates that monitoring performance is a 

function of contract administration.14

USAID Acquisition Regulation 742.1170-1 

 Performance monitoring requires that USAID personnel, 

particularly the COR, maintain adequate knowledge of contractor activities and progress in order to 

ensure that USAID's objectives, as stated in the statement of work, are achieved. 

USAID has reported limitations in its ability to monitor contractor performance in Afghanistan for almost 

a decade. In its 2011 corrective action plan, required by the Federal Managers’ Financial Integrity Act,15

15To comply with the Federal Managers’ Financial Integrity Act of 1982, USAID requires its missions to annually 

report on significant internal control deficiencies and the action plan to correct the noted deficiencies. 

USAID reported that, as early as 2003, restrictions on travel outside the U.S. embassy compound, 

resulting from Afghanistan’s security situation, limited USAID CORs from “adequately monitoring the 

quality and timeliness of outputs produced by contractors and others.” Several CORs with whom we met 

confirmed this limitation.

16Two and five CORs covered the work of ARD and DAI, respectively, over the life of the LGCD project. 

 Although the LGCD project started in October 2006, one COR reported that 16

it was not until June 2008 that he received approval to travel to LGCD contractors’ offices located outside 

the U.S. Embassy compound and PRT locations. Another COR, who served between 2008 and 2010, 

indicated that some provinces were too violent for USAID and its contractors to monitor LGCD activities. 

A third COR, serving in 2011, explained that he could only travel outside the embassy compound 6 to 

9 days a month, due to security restrictions. 

To help address the monitoring limitations noted in the internal control reports, USAID authorized 

alternative monitoring methods to keep Mission personnel safe while satisfying the need to visit project 

sites and meet with beneficiaries of development assistance. These methods included photographic 

evidence requirements; the use of local and/or third-party monitoring; engagement with other U.S. 

government agencies (that is, regional security officers or U.S. military); the use of other technology for 

consultation or oversight; the establishment of flexible targets, results, and approval timelines; and 

cooperation with other donors.17

17USAID’s Automated Directives System (ADS) 202.3.6.4 contains a complete list of approved alternative 

monitoring methods in high-threat environments. 

USAID’s Contracting Officers typically designate CORs to assist in administering contracts.18

1848 C.F.R. § 2901.603-71 authorizes the Contracting Officer to designate a COR to assist with fulfilling contractual 

responsibilities.

According 

to the Contracting Officer’s designation letter for the LGCD project, the COR’s performance monitoring 

responsibilities included the approval of monitoring plans to ensure consistency with contract terms and 

conditions. Within limits, the COR can use other USAID and external parties to assist in contract 

monitoring. For example, other parties can conduct fact-finding, provide analyses or interpretations of 

technical requirements, or make recommendations for the COR. We found that the CORs not only 

conducted their own visits, where possible, but took advantage of the alternative methods described above 

by relying on other USAID personnel, the contractors, and independent third parties to help monitor 

LGCD activities.

In March 2010, USAID modified DAI’s task order to advise DAI that USAID was appointing activity 

managers to assist the COR with monitoring work under the task order and, where possible, inspecting all 

 

14
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 13

deliverables prior to handover to the final beneficiary.19 

19In October 2010, USAID had 40 activity managers for the LGCD project. ADS 202.3.4.3 authorizes USAID to 

appoint activity managers to perform a wide range of project management, oversight, and coordination tasks. 

Activity managers can be foreign service nationals, personal service contractors, third-country nationals, or other 

USAID staff.

These representatives were considered the “eyes 

and ears” of USAID in the field. They took pictures of LGCD subprojects; conducted site visits or 

directed local staff to visit sites, where possible; met with the LGCD contractor in their areas of 

responsibility at least weekly; and provided monitoring reports of field visits by email or phone. To 

better understand the activity manager’s role, we reviewed three subproject monitoring reports—each 

from a different province—and found consistency in coverage and format. The reports, which were 

documented on a standard form, covered a ceremonial handover of furniture to local government officials 

and members of a local woman’s association, a graduation ceremony of women trained in fruit and 

vegetable processing and kitchen hygiene, and a progress report on an infrastructure subproject. All three 

reports included a narrative and photographs of the day’s events. The narrative for the infrastructure 

subproject also included the subproject’s background, objectives, and expected outcome, as well as 

findings, testimonials from beneficiaries, and recommendations. 

CORs also used LGCD contractor data to help monitor project activities. In addition to periodic reports, 

USAID had access to the contractors’ project databases. DAI’s database played a central role in program 

monitoring by providing CORs and activity managers with electronic access to information on LGCD 

subprojects. Although useful, the quality of the available data depended on contractor personnel and had 

limitations. DAI informed us about possible differences between its database and its paper files, which 

DAI deemed as the official file for subproject activity. DAI’s database showed that it had visited 885 of 

its 2,714 subprojects.

20

20DAI undertook 2,714 subprojects, of which 2,451 were completed and the others were cancelled or terminated.

DAI said that not all site visits were recorded in its database, but did not provide 

the number of visits that were recorded elsewhere. Furthermore, DAI reported “allegations of gross 

employee misconduct that included the falsification of monitoring and site visit reports.”21

21DAI reported this in its final report on LGCD, encompassing October 2006 through August 2011.

When conducting site visits to selected LGCD subprojects to assess their status, we relied upon 

contractor-provided data to locate the sites. Our LGCD subproject visits took place in Logar and 

Nangahar Provinces.

• In Logar Province, three subprojects provided furniture and/or computer equipment, and we 

verified that the items were at the sites and in use. A fourth subproject was rehabilitation of a 

boundary wall, which appeared to be well maintained and in good condition. 

• In Nangahar Province, we attempted to visit three LGCD subproject sites, but could not locate 

two of them based on the information in DAI’s project files. One subproject, a boundary wall, 

was not at the global positioning coordinates identified in the contractor’s reports. In the other 

instance, although we observed a canal at the identified coordinates, it did not match the 

information in the subproject file. DAI officials subsequently told us that that the coordinates in 

the project files have been corrected. They also subsequently visited the two sites and provided us 

with information showing that the subprojects at those sites were completed. The third site we 

visited, a gravel road and associated culverts and bridges, had been completed, but had degraded 

in places.

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 14

USAID’s Ability to Verify Contractor Requests for Payment was Limited

USAID’s CORs for LGCD took several steps to verify the LGCD contractors’ requests for payment (i.e., 

invoices),2

22A “contractor request for payment” is also considered a “voucher” or an “invoice submission.”

2

 but were hindered by limited information and difficulties visiting project sites. 

According to USAID guidance, the COR should perform several financial management functions to 

determine (1) if goods or services USAID received conform to those specifically requested; (2) if the

services USAID requested have been rendered as described in the billing, or if the contractor has 

delivered goods in an acceptable condition; and (3) that the payment is in order. 23

23ADS Chapter 630. 

 The guidance also 

requires the COR to submit a completed administrative approval form to USAID’s paying office within 

5 workdays of the dated form.24

24The Prompt Payment Act, 31 U.S.C. Chapter 39, requires agencies to pay commercial obligations within certain 

time periods and to pay interest penalties when payments are late. 

 Among other things, this form contains boxes for the COR to

acknowledge that he or she visited project sites and confirm that goods and/or services had been received.

For the LGCD project, CORs were assigned to review each invoice. However, the CORs’ ability to do so 

was hindered because neither the contractors’ task orders for LGCD nor the overall contract under which 

the task orders were issued required DAI to submit documentation in support of invoices. USAID policy 

is to request only the documentation that the payment clause in the contract requires.

25

DAI submitted 75 invoices between December 2006 and July 2011, ranging from under $1 million to 

more than $12 million. Our assessment of the supporting data for three of these invoices (processed in 

2009, 2010, and 2011) demonstrates the difficulty that CORs can face reviewing invoices when the 

supporting documentation is incomplete. Although the task order did not require the submission of 

supporting documentation, the contractor did submit support with each invoice. However, this support 

was incomplete. As a result, we could not match over $1 million in the invoices for subproject activity 

with their underlying support. Our analysis of each of the three invoices, which is illustrative and not a 

representative sample, follows.

• Of the $7.5 million requested for services provided in March 2009 and contained in DAI’s 

April 19, 2009 invoice, over $4.9 million was billed for grants, commodities, infrastructure 

activities, local service agreements, and special initiatives. The supporting documentation

provided sufficient details to support billings for about $3.4 million of the $3.8 million 

categorized under commodities, infrastructure, local service agreements, and special initiatives, 

and $1.1 million in grant activities. However, the remaining $400,000 could not be directly 

attributed to any subproject activity within these categories. The invoice was accompanied by 

USAID’s administrative approval form and checklist. Dated April 19, 2009, it showed that over 

the past 3 months the COR had made 6 field visits to project sites, visited the main office of the 

implementing agency 7 times and discussed project implementation, and met with counterparts 

12 times regarding contractor performance and/or commodity deliveries. 

• DAI’s invoice for services provided in August 2010 amounted to just over $10 million, of which 

$3.1 million was billed for program activities and grants. The supporting data provided sufficient 

details to attribute $2,039,434 and $510,142 to program activities and grants associated with 

LGCD subprojects covered by the invoice. However, we could not attribute attribute $595,530 

invoiced for program activities to any subproject activity. The September 16, 2010, 

administrative approval form and checklist accompanying the invoice showed that over 3 months 

the COR had made 3 field visits to project sites and observed project implementation, had visited 

 

25ADS Chapter 630.3.2.3
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 15

the main office of the implementing agency 12 times and discussed project implementation, and 

met with his counterparts 20 times regarding contractor level performance and/or commodity 

deliveries. 

Of the $6.4 million invoiced by DAI for services provided in March 2011, $186,394 was 

attributable to program activities and $171,067 to grants. Although the supporting documentation 

provided sufficient details for the grant activity, only $179,950 of the program activities costs 

could be directly attributed to the subproject activities covered by the invoice. The remaining 

$6,444 could not be linked to subproject activity. The April 13, 2011, administrative approval 

form and checklist2

26USAID revised the checklist in March 2011, which replaced the CTO reference with “AOTR/COTR” or the 

Agreement/Contracting Officer’s Technical Representative. 

6

 accompanying the invoice showed that over 3 months the COR had made 

2 field visits to project sites and observed project implementation, had visited the main office of 

the implementing agency 12 times and discussed project implementation, and met with 

counterparts 12 times regarding contractor level performance and/or commodity deliveries. 

USAID faced additional challenges assessing the invoices. Although CORs are required to assure that 

goods and services are received as part of the invoice approval process, the large number of LGCD 

subprojects covered by the invoices, coupled with just one COR at any time and the challenges of travel 

in Afghanistan, made it impossible to visit all subprojects within the periods covered by the invoice. For 

example, the administrative checklist for approving DAI’s August 2010 invoice potentially covered up to 

214 subprojects, and DAI overall was actively working on 608 LGCD subprojects in 22 provinces. 

When we asked two former CORs about their process for reviewing invoices, they stated that given the 

5 workdays available to them, they reviewed the invoices’ support against the summary data and mostly 

relied on their understanding of contractor activity to attest that goods and services were received by 

USAID. This understanding was derived from the CORs’ access to data in DAI’s project management 

system, the approval process for LGCD subproject activity, and the many meetings, telephone 

conversations, and reports received from USAID field personnel and from PRTs, contractors, and other 

representatives. 

In discussing our analysis with USAID officials, they noted that they complied with USAID invoice 

review procedures applicable throughout USAID. Furthermore, one LGCD COR noted that the COR 

review is not an analytical review of subproject costs. On an invoice for this type of contract, the COR 

provides administrative approval that goods and/or services specified in the invoice were received and 

conform to the requirements of the agreement between the vendor and USAID. USAID’s policy also 

relies on annual audits of contractors to obtain reasonable assurance that they are claiming only eligible, 

supported costs. 

Financial Audit of LGCD Planned for 2012

We found that USAID delayed arranging a financial audit of LGCD. DCAA audits are intended to be a 

key control to help ensure that prices paid by the government for needed goods and services are fair and 

reasonable and that contractors are charging the government in accordance with applicable laws, the 

Federal Acquisition Regulation, Cost Accounting Standards, and contract terms. The Federal Acquisition 

Regulation states that normally, for contractors other than educational institutions and nonprofit 

organizations, DCAA is the responsible Government audit agency.27

27Federal Acquisition Regulation 42.101 (b).

 USAID has a memorandum of 

understanding with DCAA that states that DCAA will audit U.S. for-profit firms for which DCAA is 

cognizant. When DCAA cannot be responsive to USAID’s needs for an audit, USAID’s directives state 

•

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 16

that the USAID OIG must contract with a non-Federal public accountant or use its own audit staff to 

perform the audit.28 

28ADS, Chapter 591, “Financial Audits of USAID Contractors, Recipients, and Host Government Entities,” 

591.3.1.2.

Although DCAA is more than a decade behind in its incurred cost audits of DAI and 5 years behind in 

such audits for ARD, USAID until recently had not made other arrangements to obtain incurred cost 

audits as allowed by its directives. The most current USAID-requested audit of DAI incurred costs was 

for the years 1999 through 2001, a period that does not cover LGCD activities. DCAA had agreed to 

provide USAID with a report covering DAI’s costs for 1999 by January 30, 2012, and for 2000 and 2001 

by March 30, 2012. The most current DCAA audits of ARD incurred costs are for fiscal years 2005 and 

2006 and were issued on August 29, 2008, and September 24, 2008, respectively. USAID informed us in 

November 2011 that DCAA had yet to start incurred cost audits of ARD for fiscal years 2007 and 

beyond.29

29DCAA is behind in conducting numerous financial audits for USAID. We have a separate audit underway of the 

status of financial audits of USAID’s contractors. 

Another tool to assure that incurred costs are appropriate is contract close-out audits, which are done after 

contracts are completed. A critical step to closing out contracts is to determine how to allocate a 

contractor’s general administrative and overhead costs to each of its contracts. This step cannot be 

completed until the indirect cost rate for the contractor’s general administrative and overhead costs for the 

final year of contract performance is settled and the final price of the contract is determined. USAID 

policy states that an incurred cost audit of a contractor would satisfy the close-out audit requirement. 

Contract close out has not begun for the LGCD contracts and could take years to complete. 

A December 2011 USAID OIG report challenging $6.6 million in DAI incurred costs, mostly involving 

deficient procurement practices, underscored the importance of incurred cost audits.3

30USAID OIG, Review of Responses to Internal Audit Findings on the Local Governance and Community 

Development Project (Report Number F-306-12-001-S, December 26, 2011). 

0

 The OIG reported 

that in March 2011, it received a copy of a DAI internal audit report, dated September 23, 2009, detailing 

financial and internal control problems occurring from August 2008 through August 2009. DAI had not 

provided this report to USAID or returned any funds to USAID related to questioned expenditures 

identified in the report. OIG conducted its review to assess selected problems raised in the internal audit 

report and to determine whether DAI incurred questionable costs on the project. The OIG recommended 

that USAID/Afghanistan determine the allowability of and, as appropriate, recover the questioned costs 

from DAI. USAID/Afghanistan agreed to review the allowability of the questioned costs and initiate 

recovery of any unallowable costs with a February 28, 2012, target date for final action. The OIG also 

recommended and USAID/Afghanistan agreed to contract for a financial audit of DAI’s LGCD project to 

determine whether all the costs charged to USAID were reasonable, allowable, and allocable. In addition, 

USAID/Afghanistan indicated that it would include a closeout financial audit of the Local Governance 

and Community Development Project in its fiscal year 2012 audit management plan. The target date for 

final action is May 31, 2012. 

USAID has taken broader steps through its Accountable Assistance for Afghanistan initiative. One step 

is to increase financial controls through a joint program with the USAID OIG to audit all locally incurred 

costs of program-funded contractors. Audits will be performed by internationally-accredited regionally 

based audit firms and checked by USAID’s OIG. USAID/Afghanistan in another step is also increasing 

its project oversight through the establishment of on-site monitors in USAID field offices for project 

monitoring. Each USAID project will be assigned an on-site monitor who will provide real-time data to 

contract staff in Kabul on project performance and accountability. 

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 17

CONCLUSION

Although LGCD has ended, its implementation raises important questions about USAID’s significant 

investment in stabilization efforts in Afghanistan. We identified a number of challenges that the program 

faced, including implementation delays; higher contractor operating costs than anticipated; and, perhaps 

most notably, difficulties defining and measuring outcomes. Furthermore, evaluations conducted by both 

the contractors and independent entities indicate that LGCD had, at best, mixed results. Notwithstanding 

these challenges and little clear evidence of success, USAID chose to significantly increase funding for 

the program and extend its life. This decision raises concerns about SIKA, a stabilization program on 

which USAID expects to spend at least $400 million in coming years. 

In programs like LGCD, the U.S. government accepts a certain amount of risk because its ability to assure 

that contractor costs are appropriate is typically limited by the size and geographic scope of the program, 

coupled with logistical and security challenges that limit travel. Given this risk, the absence of a 

requirement in the LGCD task orders for contractors to submit support for invoices is problematic. 

Unless USAID institutes stronger requirements, it will continue to hamper CORs’ ability to conduct 

thorough oversight of ongoing and future contracts. 

RECOMMENDATION

SIGAR remains concerned about the extent to which USAID will successfully define and measure 

outcomes for its stabilization activities, particularly SIKA. However, because USAID has issued an 

RFTOP to, among other things, measure the impact of stabilization initiatives and review previous and 

ongoing stabilization efforts, we are not making a recommendation related to this issue at this time. 

To strengthen the CORs’ oversight of contractor costs and allow CORs to link invoiced costs to the goods 

and services to be provided, SIGAR recommends that the Mission Director, USAID/Afghanistan, take the 

following action: 

1. Direct contracting officers to ensure the SIKA contracts and others, as appropriate, require

contractors to provide complete supporting detail with invoices. 

COMMENTS

In commenting on a draft of this report, USAID discussed the challenges of undertaking stabilization 

activities, took exception to several findings, and expressed the view that our recommendation is 

unnecessary (see appendix VI). USAID stated that stabilization is a different development approach and 

that its stabilization efforts in Afghanistan and experiences in other similar environments led to the 

USAID Administrator’s January 2011 Stabilization Guidance. USAID also said that, in light of the 

nature of stabilization programming, our highlighting of “mixed results” is understandable and that our

findings provide USAID/Afghanistan with additional insights as the Mission continues to adapt and refine 

its approach for supporting critical U.S. national security interests. We agree that stabilization efforts in 

Afghanistan are challenging and commend USAID for taking steps to improve them. 

Regarding our recommendation, USAID stated that its current policy guidance already addresses our 

concern about strengthening oversight of contractor costs. However, USAID’s policy guidance depends 

on annual audits of contractors’ costs to provide reasonable assurance that contractors are only claiming 

eligible, supported costs for reimbursement. Because USAID has a significant backlog of incurred cost 

audits, relying on this policy is not sufficient to address our concerns. In programs like LGCD, the risk 

the U.S. government accepts is particularly high, and additional cost verification measures are necessary. 

USAID further stated that, if we retained the recommendation, it should be addressed to the USAID 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 18

Administrator because it pertains to the entire agency. Although our recommendation may have broader 

applicability, we addressed this recommendation at the Mission level given the unique risks posed by 

stabilization programs in Afghanistan. Therefore, we kept the recommendation addressed to the Mission 

Director. If USAID believes that the recommendation has broader applicability, we welcome its efforts to 

apply it throughout the agency. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 19

APPENDIX I: SCOPE AND METHODOLOGY

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

Reconstruction’s review of the U.S. Agency for International Development’s (USAID) Local Governance 

and Community Development (LGCD) project. LGCD, which USAID has described as its flagship 

stability program, was approved in March 2006 with the principal goal of stabilizing unstable areas 

throughout Afghanistan and ended in August 2011. To implement LGCD, USAID competitively 

awarded cost reimbursable task orders to two contractors in October 2006. The task order for LGCD 

work in the northern and western provinces of Afghanistan was awarded to Associates in Rural 

Development, Inc. (ARD), while the task order for work in the southern and eastern provinces was 

awarded to Development Alternatives, Inc. (DAI). This report assesses (1) the cost and outcomes of the 

LGCD project and (2) USAID oversight of the project. 

To examine cost and outcomes of the LGCD project, we met with officials from USAID headquarters in 

Washington, D.C.; USAID/Afghanistan in Kabul, Afghanistan; and the two construction contractors, 

ARD and DAI. We reviewed the task order documentation for the period October 2006 through August 

2011, including the original LGCD approval document; associated contracts and task orders and 

modifications to them, including the statements of work; USAID LGCD contract files; contractor 

performance management plans (PMP) and quarterly, annual, and final reports reviewed and approved by 

USAID; and reports on LGCD prepared by USAID’s Office of Inspector General and a third party 

assessment contracted by USAID. The contractor conducting that assessment, Checchi and Company, 

Consulting, stated that it held more than 250 interviews with various stakeholders, beneficiaries, 

contractors, and Provincial Reconstruction Team offices and conducted more than 50 site visits. We also 

reviewed ARD and DAI invoice and accounting data containing detailed cost breakdowns. To further 

assess whether LGCD was achieving its principal objective of improving stability, we sought to ascertain 

whether broader data indicated LGCD’s success. This included assessing reporting by a variety of 

governmental and non-governmental organizations, including the Senate Foreign Relations Committee, 

U.S. Government Accountability Office, the U.S. Army National Ground Intelligence Center, and a series 

of studies undertaken by Tufts University Feinstein International Center. We identified reports through 

our ongoing review of literature involving activities in Afghanistan and discussion with individuals 

involved in studying aid programs in Afghanistan. These reports discussed the effectiveness of aid 

programs in general and in promoting stability in Afghanistan. We also examined Defense Intelligence 

Agency data on enemy-initiated attacks in Afghanistan. According to Defense Intelligence Agency 

officials, the data they report on enemy-initiated attacks represent a reliable and consistent source of 

information that can be used to identify trends in enemy activity and the overall security situation in 

Afghanistan. Senior DOD officials have used enemy-initiated attack levels as an indicator of the security 

situation in overseas contingency environments on several occasions. We used data on the number of 

subprojects maintained by the LGCD contractors. 

To examine USAID oversight of LGCD, we reviewed USAID policies and procedures detailing oversight 

responsibilities and its Federal Managers Financial Integrity Act reporting; examined USAID contract 

files; and analyzed USAID/Afghanistan supplied examples that typified activity manager monitoring 

reports and several examples of one contractor’s requests for payment or invoices. In addition, we met 

with the contractors at their respective offices not only to discuss the LGCD project, but to review the 

contractors’ LGCD financial records covering selected LGCD costs and requests for payment. We used 

contractor-provided data extracts from their project management systems to quantify the number, value, 

and status of LGCD subprojects and to perform other analyses. We determined that the computerprocessed data was sufficiently reliable for purposes of the audit objectives. 

We assessed internal controls over contract oversight and oversight procedures through interviews with 

contracting officials and reviews of relevant contract files. The results of our assessment are included in 

the body of this report. We also visited selected LGCD subprojects in Logar and Nangahar Provinces. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 20

We conducted work at USAID headquarters in Washington, D.C.; USAID/Afghanistan in Kabul, 

Afghanistan; ARD’s headquarters in Burlington, Vermont; DAI’s headquarters in Bethesda, Maryland; 

and in Nangahar and Logar Provinces, Afghanistan, from January 2011 to March 2012. The review was 

conducted in accordance with generally accepted government auditing standards. Those 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 that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives. This audit

was conducted by the Special Inspector General for Afghanistan Reconstruction under the authority of

 Pub. L. No. 110-181, as amended; the Inspector General Act of 1978; and the Inspector General Reform 

Act of 2008, Pub. L. No. 110-409. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 21

APPENDIX II: ARD’S CONTRACT MODIFICATIONS

The following table summarizes the modifications to Associates in Rural Development, 

Incorporated’s contract for the Local Government and Community Development project. 

Table I: Modifications to IQC DFD I-00-05-00248, Task Order 02 

Award Date Purpose Cost/schedule change

LGCD task order 

award Oct. 8, 2006 Outlined the statement of work, reporting 

requirements, ceiling price, etc., for LGCD TO. 

$9 million obligated and 

completion date set for 

Oct. 8, 2009. 

Modification 

(Mod) 1 Dec. 21, 2006 Increased task order obligation by $3.5 million. 

Task order obligation 

increased from $9 million 

to $12.5 million. 

Mod 2 Oct. 11, 2007

Restructured level of effort and workdays 

ordered, incorporated “procedural mechanism” 

into task order, and fixed typographical error. 

None

Mod 3 Dec. 3, 2007 Increased task order obligation by $2.9 million.

Task order obligation 

increased from $12.5 

million to $15.4 million. 

Mod 4 Mar. 28, 2008 Revised statement of work and added 

supplemental budget. None

Mod 5 Jun. 02, 2008

Increased task order obligation by $40 million. 

ARD directed to establish an accounting and 

management system for supplemental funds.

Task order obligation 

increased from $15.4 

million to $55.4 million. 

Mod 6 Jul. 14, 2008

Restructured level of effort and workdays 

ordered. Revised “Approved Procedures 

Mechanism,” statement of work, and Section 

A.4 dealing with reports. Realigned budget.

None

Mod 7 Nov. 30, 2008 Incrementally increased funding for the task 

order by $15 million. 

Task order obligation 

increased from $55.4 

million to $70.4 million. 

Mod 8 Jan. 28, 2009 Realigned the core and supplemental budgets. 

Made changes to parts of task order narrative. None

Mod 9 Jun. 02, 2009 Terminated task order for convenience and 

deobligated $13 million. 

Task order obligation 

reduced from $70.4 

million to $57.4 million. 

Source: SIGAR’s analysis of the modifications to IQC DFD I-00-05-00248, Task Order 02.

 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 22

APPENDIX III: DAI’S CONTRACT MODIFICATIONS 

The following table summarizes the modifications to Development Alternatives, Inc.’s contract for the 

Local Government and Community Development project. 

Table II: Modifications to IQC DFD I-02-05-00250, Task Order 02 

Award Date Purpose Cost/schedule change

$18 million obligated and task LGCD task order Outlined the statement of work, reporting Oct. 2, 2006 order completion date set for award requirements, ceiling price, etc. October 01, 2009. 

Modification Task order obligation increased Dec. 12, 2006 Increased task order obligation by $6.9 million. (Mod) 1 from $18 million to $24.9 million. 

Task order obligation increased 

Mod 2 Nov. 30, 2007 Increased task order obligation by $2.5 million, from $24.9 million to $27.4 

million. 

Increased task order obligation by $68.8 million. Task order obligation increased 

Mod 3 Nov. 30, 2007 Revised statement of work. Realigned budget from $27.4 million to $96.2 

data. Added “procedure mechanism.” million.

Task order obligation increased 

Mod 4 Feb. 6, 2008 Increased task order obligation by $5.5 million. from $96.2 million to $101.7 

million.

Modified statement of work regarding work Mod 5 Apr. 29, 2008 None locations. 

Task order obligation increased 

Mod 6 May 14, 2008 Increased task order obligation by $17.7 million. from $101.7 million to $119.4 

million.

Restructured the level of effort and workdays. 

Mod 7 Jul. 15, 2008 Changed approval procedure mechanism. None

Realigned budget.

Task order obligation increased 

Mod 8 Nov. 30, 2008 Increased task order obligation by $28.4 million. from $119.4 million to $147.7 

million.

Earmarked $5 million for Nangarhar Province. 

Increased task order obligation by $5 million. TO obligation increased from Mod 9 Dec. 30, 2008 Realigned budget. Clarified in-kind support $147.7 million to $152.7 million. requirements. Corrected administrative error 

from Mod 7. 

Realigned budget based on actual incurred costs 

and updated the level of effort table to reflect Mod 10 May 10, 2009 None personnel approvals. Adjusted budget to allow 

more funds for sub-grants and commodities.

Increased task order obligation by $16.3 million. Task order obligation increased 

Scope of Work changed to align LGCD with from $152.7 million to $169.1 

Mod 11 Sep. 16, 2009 U.S. government counterinsurgency strategy, million. Task order completion 

remove component 1 from LGCD, and expand date extended from December 1, 

geographic scope from 16 to 22 provinces. 2009 to September 30, 2010. 

Task order obligation increased 

Mod 12 Oct. 19, 2009 Increased task order obligation by $63 million. from $169.1 million to $232.1 

million. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 23

Award Date Purpose Cost/schedule change

Increased task order obligation by $34 million. 

Increased period of performance and geographic Task order obligation increased 

scope to include key districts in the north. from $232.1 millionto $266.1 

Mod 13 Mar. 31, 2010 Realigned budget. Added three intermediate million. Task order completion 

results to the scope of work. Increased workdays tade extended from September 30, 

ordered. Revised reporting schedule. Revised 2010 to April 30, 2011.

approval procedures. 

Increased task order obligation by $50 million. Task order obligation increased Increased maximum grant amounts in Kandahar Mod 14 Aug. 1, 2010 from $266.1 million to $316.1 to $25,000. Added Federal Acquisition million. Regulation changes and AAPD 10-04. 

Mod 15 Nov. 1, 2010 Adjusted task order obligation amounts. None

Required use of the Synchronized 

Predeployment and Operational Tracker for 

contractors supporting a diplomatic or consular 

Mod 16 Feb. 1, 2011 Mission outside the United States. Required None

contractors to report serious incidents (gun fire, 

deaths, etc.). Provided information on gender 

integration requirements.

Incrementally funded the contract to Task order completion date 

$328.1 million. Realigned budget, removed key extended from April 30, 2011 to 

Mod 17 Feb. 11, 2011 northern districts from the project, revised scope August 2011. Increased TO 

of work, modified approval procedures, and obligation from $316.1 million to 

fixed typographical error. $328.1 million.

Source: SIGAR analysis of the modifications to IQC DFD I-02-05-00250, Task Order 02.
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 24

APPENDIX IV: EXTENT TO WHICH DAI MET PERFORMANCE INDICATORS IN 

FISCAL YEARS 2009, 2010, AND 2011

Tables III-V summarize Development Alternatives, Inc.’s (DAI) reported success in meeting 

performance targets in fiscal years 2009, 2010, and 2011, respectively.

Table III: DAI-Reported Success in Meeting Performance Targets in Fiscal Year 2009

Indicator 

number Indicator name Target Achievement Target met

1 

Target institutions, such as Office of the Provincial Governor, 

Provincial Development Committee, and selected 

Provincial Line Ministry Departments, implementing 

service delivery performance mechanisms

60 116 Yes

2 

Target institutions reporting publicly on service delivery 

performance improvements 60 75 Yes

3 

Provincial Development Committees demonstrating improved 

performance toward operational guidelines as measured by 

Quarterly Service Delivery Performance reports

12 15 Yes

4 

Office of Provincial Governor demonstrating improved 

performance toward Operational Guidelines as measured 

by Quarterly Service Delivery Performance Reports

12 13 Yes

5 Government officials trained 2,500 6,287 Yes

6 Number of institutions equipped with IT or internet connection 54 196 Yes

7 Number of provincial and district institutions rehabilitated 32 15 No

8 

Percent of subprojects involving government officials in

project identification, implementation, and monitoring and 

evaluation

80 71% No

9 Number of citizens directly benefiting from subproject

employment opportunities 10,250 17,723 Yes

10 Number of citizens directly benefiting from subproject training 

opportunities 30,000 36,849 Yes

11

Percent of Component 3 (Local Stability Initiatives) areas of 

intervention with follow on Component 1 (Local 

Governance) and Component 2 (Community Mobilization 

and Development) activities

70% 35% No

12 Number of community-based reconciliation projects

completed with U.S. government assistance 41 127 Yes

13

Number of people trained in conflict mitigation/resolution 

skills with U.S. government assistance 1,780 2,036 Yes

14 Number of service sector assessments 20 28 Yes

15

Number of rapid institutional capacity assessments of

government agencies 60 99 Yes

Source: DAI annual reports on the Local Governance and Community Development project. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 25

Table IV: DAI-Reported Success in Meeting Performance Targets in Fiscal Year 2010 

Indicator 

number Indicator name Target Achievement

Target

met/ye

or no 

1 Percent of insecure target communities with 

follow-on build activities

15% of LGCD 

districts 21.60% Yes

Number of community requests for activities to 2 62 64 Yes GIRoA 

Percent of community members who respond that 

3 GIRoA’s ability to provide the community with 43% 33% No

basic services increased

Percent of community members who respond that 4 40% 35% No stability in their community improved

5 Percent of activities with community contributions 80% 77% Yesa

Percent of LGCD community members who 

6 respond that their ability to meet their basic 49% 42% No

needs increased

7 Number of assessments conducted 41 11 No

Percent of assessments used to inform COIN 8 80% 64% No activities

Number of organizations and institutions equipped 9 220 296 Yes through LGCD

10 Number of key infrastructure rehabilitated 713 705 Yesa

Percent of activities involving government officials 

11 in project planning, implementation, and/or 60% 66% Yes

evaluation

Number of community-based reconciliation 

12 projects completed with U.S. government 140 222 Yes

assistance 

13 Person days of training 200,000 115,302 No

14 Person days of employment 475,000 205,546 No

Number of district areas of clear activities with 15 49 39 No follow on hold activities

Source: DAI annual reports on Local Governance and Community Development project.

a

DAI reported that if achievements were within 10 percent of the target it was considered a success. Although 

performance did not meet the target for this indicator, it was within 10 percent and as such we have characterized it as 

meeting the target.

s 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 26

Table V: DAI-Reported Success in Meeting Performance Targets in Fical Year 2011 

Indicator 

Number Indicator Name Target Achievement Target met 

1 

Number of community requests for activities to 

GIRoA 136 286 Yes

Percent of community members who respond that 2 36% 40% Yes GIRoA’s ability to provide services increased

Percent of community members who respond that 

stability in their community improved

3 35% 42% Yes

Percent of activities with community contributions

4 93% 96% Yes 

Percent of community members who respond that 5 40% 41% Yes their ability to meet needs increased

Number of assessments conducted

6 16 15 Yesa

 

Percent of assessments used to inform stability 7 80% 25% No activities

Number of organizations and institutions equipped 8 355 670 Yes through LGCD

Number of key infrastructure rehabilitated

9 582 992 Yes

Percent of activities involving government officials 

10 in project planning, implementation, and/or 75% 85% Yes

evaluation

Number of community-based reconciliation 

11 projects completed with USG assistance 272 619 Yes

Person days of training

12 144,123 126,723 No

13 Person days of employment 295,600 235,362 No

Number of district areas of clear activities with 14 1 3 Yes follow on hold activities

Number of technical advisors assigned to GIRoA 15 4 7 Yes

Source: DAI annual reports on Local Governance and Community Development project.

a

DAI reported that if achievements were within 10 percent of the target it was considered a success. Although 

performance did not meet the target for this indicator it was within 10 percent and as such we have characterized it as 

meeting the target.
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 27

APPENDIX V: STUDY SUMMARIES ON THE IMPACT OF DEVELOPMENT ON 

STABILITY

We identified and reviewed a number of studies on the impact of stabilization and development programs 

on stability in Afghanistan through our ongoing review of literature involving activities in Afghanistan 

and discussion with individuals involved in studying aid programs there. These studies were undertaken 

by the U.S. Government Accountability Office (GAO), the U.S. Army, and a variety of non-governmental 

entities. Following are short summaries of the studies.

•

•

•

•

•

Committee on Foreign Relations, United States Senate, Majority Staff Report, Evaluating U.S. 

Foreign Assistance to Afghanistan, Senate Report 112-21, June 8, 2011. In its June 2011 report 

assessing the impact of U.S. aid in Afghanistan, the U.S. Senate Foreign Relations Committee 

stated: “The evidence that stabilization programs promote stability in Afghanistan is limited. 

Some research suggests the opposite and development best practices question the efficacy of 

using aid as a stabilization tool over the long run.” 

Tufts University Feinstein International Center, Winning Hearts and Minds? Examining the 

Relationship between Aid and Security in Afghanistan’s Balkh Province, November 2010;

Winning Hearts and Minds? Examining the Relationship between Aid and Security in 

Afghanistan’s Faryab Province, January 2011; Winning Hearts and Minds? Examining the 

Relationship between Aid and Security in Afghanistan’s Helmand Province, April 2011. A series 

of studies undertaken by Tufts University Feinstein International Center examined the 

relationship between aid and security in three provinces (Helmand, Balkh, and Faryab provinces). 

Each of the reports questioned the effectiveness of using aid as an instrument of security policy. 

According to the Faryab study, there was “no evidence that aid projects contribute to stabilization 

in the short-term.”

International Crisis Group, Aid and Conflict in Afghanistan, Asia Report Number 210, August 4, 

2011. This study concluded that after a decade of major security, development and humanitarian 

assistance, the international community has failed to achieve a politically stable and economically 

viable Afghanistan. The study further concluded that various assessments of aid have found that 

even with timely disbursement and project completion, the impact on lives remains uncertain, 

particularly when assistance is shaped by stabilization goals rather than the needs, priorities and 

input of the recipients. The study specifically mentioned the Local Governance and Community 

Development project. 

U.S. Army National Ground Intelligence Center, Afghanistan: The Effectiveness of Development 

as a Component of Counterinsurgency Strategy, NGIC-1584-8127-11, November 7, 2011. This

assessment evaluated whether social and economic development projects in Afghanistan over the 

period 2002-2010 influenced stability conditions. The Center’s report concluded that 

development projects exerted too varied and weak an influence upon stability in Afghanistan for 

development to deserve serious consideration as a means of countering or addressing that 

country’s insurgency. In nearly all cases, development (road, road feature, education, 

governance, public health, and infrastructure projects) either negatively affected security 

indicators (incidents of violence against international coalition forces and nongovernmental 

organizations, incidents of coercion of locals, and incidents of locals turning in weapons and 

weapons components to international coalition forces) or positively impacted those indicators by 

negligible amounts. 

Massachusetts Institute of Technology, Political Science Department, Winning Hearts and 

Minds? Evidence from a Field Experiement in Afghanistan, Working Paper No. 2011-14, 2011. 

This study focused on the ability of the National Solidarity Program to improve stability found 

that while that program helped increase perceptions of the level of security of villagers in 

program’s areas, there was no evidence that the level of security actually had improved.
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 28

•

•

GAO, Afghanistan’s Security Environment (GAO-10-178R, November 5, 2009, and GAO-10-

613R, May 5, 2010). In May 2010, GAO reported that the Department of State January 2010 

Afghanistan and Pakistan Regional Stabilization Strategy cited reconstruction and development 

as key elements of the overall effort to stabilize Afghanistan and reduce the strength of the 

insurgency. However, the strategy acknowledges that the success of such civilian programs in 

Afghanistan is contingent on improved security. In November 2009, GAO reported that, 

although U.S. and international development projects in Afghanistan had made some progress, 

deteriorating security complicated such efforts to stabilize and rebuild the country. 

Wilton Park in partnership with Tufts University Feinstein International Center, Winning ‘Hearts 

and Minds’ in Afghanistan: Assessing the Effectiveness of Development Aid in COIN Operations, 

Report on Wilton Park Conference 1022, March 2010. This was a report on a March 2010 

conference held in Wilton Park, England, with support from the Australian Agency for 

International Development, the British Foreign and Commonwealth Office and others. It 

concluded that given the centrality of development aid to current COIN doctrine and strategy, 

there is still a surprisingly weak evidence base for the effectiveness of aid in promoting 

stabilization and security objectives. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 29

APPENDIX VI: COMMENTS FROM THE U.S. AGENCY FOR INTERNATIONAL 

DEVELOPMENT
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 30

See SIGAR 

comment 1. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 31
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 32

See SIGAR 

comment 2. 

See SIGAR 

comment 3. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 33

See SIGAR 

comment 4. 

See SIGAR 

comment 5. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 34

See SIGAR 

comment 6. 

See SIGAR 

comment 7. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 35

See SIGAR 

comment 8. 
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 36

The following are SIGAR comments on USAID’s letter date April 8, 2012: 

1. We stated in the draft report and this final report that, although the effect of LGCD on security 

levels cannot be isolated, violence data can be used as one indicator of stability. This statement is 

consistent with USAID’s own efforts to measure the success of stabilization programs, including 

LGCD. Specifically, USAID’s Request for Task Order Proposal for an independent contractor to 

measure the impact of stabilization initiatives stated that 

“The platform must be capable of using advanced statistical methods in spatial analysis to 

quantify space-time interaction dependence between incidents of violence, perceptions of 

stability, and USAID interventions. That is, the analysis shall reveal where USAID 

interventions decrease the likelihood of violence, and identify stabilization trends at local, 

district, provincial, and other geographic scales. Working at first with existing geolocated data on stabilization interventions, violent incidents, and local perceptions, the 

platform shall be built to analyze which past interventions were most effective at 

reducing the incidence of violence and improving perceptions of stability, security, and 

government legitimacy.”

2. We stated in the draft report and this final report that the original task orders envisioned that the 

majority of contractor costs would be for subgrants, commodities, and infrastructure programs—

the line items most directly related to individual LGCD subprojects and, therefore, most likely to 

reach subproject beneficiaries. However, in subsequent contract modifications, USAID reduced 

the proportion of these costs to less than half of the total LGCD ceiling price. We highlighted 

this reduction as one of many indicators of the challenging environment in which LGCD 

operated. 

3. We clarified the report, accordingly. 

4. We recognize that DCAA has a large backlog of incurred cost audits. The concern we expressed 

was that, although DCAA is more than a decade behind in its incurred cost audits of DAI and 5 

years behind in such audits for ARD, USAID had not made other arrangements until recently to 

obtain incurred cost audits, as allowed by its directives. USAID did so in response to a USAID 

OIG recommendation. 

5. We stated that the USAID OIG had challenged some of DAI's costs and recommended that 

USAID/Afghanistan determine the allowability of and, as appropriate, recover the questioned 

costs from DAI. USAID agreed to do so. We recognize that contracting officers decide if costs 

are allowable. 

6. We added this information to appendix IV. 

7. In programs like LGCD, the risk the U.S. government accepts is particularly high. Therefore, it is 

not only appropriate, but necessary, that the USAID/Afghanistan Mission Director go beyond the 

agency’s general policy by instituting additional requirements that will give the Mission greater 

assurance that contractors and recipients are claiming for reimbursement only eligible, supported 

costs. 

8. While our recommendation may have broader applicability, we addressed this recommendation at 

the Mission level given the unique risks posed by stabilization programs in Afghanistan. 

Therefore, we kept the recommendation addressed to the Mission Director. If USAID believes 

that the recommendation has broader applicability, we welcome its efforts to apply it throughout 

the agency.
SIGAR Audit-12-8 Development / Local Governance and Community Development Page 37

(This report was conducted under the audit project code SIGAR-041A).
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 To obtain copies of SIGAR documents at no cost, go to 

Reports and Testimonies SIGAR’s web site (www.sigar.mil). SIGAR posts all 

released reports, testimonies, and correspondence on its 

web site.

To Report Fraud, Waste, and To help prevent fraud, waste, and abuse by reporting 

Abuse in Afghanistan allegations of fraud, waste, abuse, mismanagement, and 

Reconstruction Programs reprisal contact SIGAR’s hotline:

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Web: www.sigar.mil/fraud

Email: sigar.pentagon.inv.mbx.hotline@mail.mil

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

Phone DSN Afghanistan 318-912, ext. 7303 

Phone International: +1-866-329-8893 

Phone DSN International: 312-664-0378 

U.S. fax: +1-703-601-4065 

Public Affairs Public Affairs Officer

Phone: 703-545-5974 

Email: sigar.pentagon.ccr.mbx.public-affairs@mail.mil

Mail: SIGAR Public Affairs

2530 Crystal Drive 

Arlington, VA 22202