SIGAR Audit-11-8 Economic and Social Development / NSP

OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

Afghanistan’s National Solidarity Program Has Reached 

Thousands of Afghan Communities, but Faces 

Challenges that Could Limit Outcomes 

March 22, 2011
SIGAR Audit-11-8 Economic and Social Development / NSP Page i

OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION

March 22, 2011

The Honorable Hillary Rodham Clinton

Secretary of State

The Honorable Karl W. Eikenberry

U.S. Ambassador to Afghanistan

The Honorable Rajiv Shah

Administrator

U.S. Agency for International Development 

Mr. Earl Gast

USAID Mission Director to Afghanistan 

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

Reconstruction’s (SIGAR) review of Afghanistan’s National Solidarity Program (NSP). The report includes 

six recommendations to help ensure that U.S. and other donor contributions to NSP are used as 

intended and that the program addresses challenges that could limit outcomes.

A summary of this report is on page ii. SIGAR conducted this performance audit under the authority of 

Public Law No. 110-181, the Inspector General Act of 1978, as amended, and the Inspector General 

Reform Act of 2008. When preparing the final report, we considered comments from the U.S. Embassy 

Kabul, the World Bank, and the Afghan government’s Ministry of Rural Rehabilitation and Development. 

These comments are reproduced in appendices V-VII.

Herbert Richardson

Acting Special Inspector General

 for Afghanistan Reconstruction
SIGAR Audit-11-8 Economic and Social Development / NSP Page ii

SIGAR

Special Inspector General for Afghanistan Reconstruction

SIGAR Audit-11-8 March 2011

Afghanistan’s National Solidarity Program Has Reached

Thousands of Afghan Communities, but Faces Challenges 

that Could Limit Outcomes

What SIGAR Reviewed

SIGAR reviewed the multi-billion dollar National Solidarity Program (NSP) to assess the Afghan government’s ability to 

manage and account for direct assistance from the United States and other international donors. This report addresses 

(1) the extent and use of U.S. and other donor assistance to the NSP, (2) the level of oversight and internal controls over 

donor funds, (3) whether NSP is achieving its intended results, and (4) key challenges facing NSP as it enters its third 

phase. To accomplish these objectives, we collected and analyzed documents, data, contracts, and agreements from 

NSP, MRRD, the World Bank, NSP facilitating partners, rural Afghan community development councils, Afghanistan’s 

Control and Audit Office, USAID, and other NSP donors, including Denmark, Italy, and the United Kingdom. We 

conducted our work in Washington, D.C., and in Kabul and Parwan provinces in Afghanistan, from April 2010 to January

2011, in accordance with generally accepted government auditing standards. 

What SIGAR Found

International donors provided nearly all of the $1.5 billion that the NSP received in funding from June 2002 to 

September 2010. The United States, the single largest donor to NSP, contributed $528 million (35 percent) of that 

amount. Most NSP contributions have been made through the multilateral Afghanistan Reconstruction Trust Fund 

(ARTF), which is administered by the World Bank. The majority of NSP funds (72 percent) have been used as block 

grants to finance small-scale community development projects. Of the remaining 28 percent, about 19 percent has 

gone to pay facilitating partners to oversee the election and training of community development council (CDC) 

members, and about 9 percent has covered administrative costs.

Donor funds provided to NSP are subject to numerous oversight and internal controls implemented by the World Bank, 

the Afghan government, and members of rural Afghan communities. We found that these controls provided reasonable 

assurance that NSP funds would be used as intended. However, in one case, as reported by MRRD/NSP to Afghan 

authorities and donors, about $2.8 million in NSP block grants were retained by a hawalla dealer and not delivered to 

the intended communities in one province. MRRD, NSP, and the World Bank have taken actions to address this issue, 

but it remains unresolved.

While NSP has reported meeting or exceeding most of its quantitative targets, it lacks data and reporting on one of its 

primary objectives—improving local governance. Without regularly measuring improvements in this area, it is difficult 

to determine the extent to which NSP has or will achieve this objective. Further, the future role of the Community 

Development Councils (CDCs) as official local governance bodies remains uncertain. As the NSP enters its third phase, 

the program faces several operational challenges, including delayed receipts of block grants, late payments to 

facilitating partners, and expansion to insecure areas of Afghanistan. 

What SIGAR Recommends

SIGAR is making 6 recommendations to help ensure that U.S. and other donor contributions to NSP are used as 

intended and that the program addresses challenges that could limit outcomes. Specifically, SIGAR recommends that 

the U.S. Ambassador to Afghanistan urge the Afghan government to take action to ensure that NSP funds retained by a 

hawalla dealer in Paktika Province are recovered and refunded to the ARTF, strengthen the monitoring system to 

measure and report on improvements in local governance, determine whether NSP-funded CDCs should become village 

councils, address the challenges of delayed payments for block grants and facilitating partners, and monitor expansion 

into insecure areas. In commenting on a draft of this report, the Embassy generally concurred with the report’s findings 

and provided some additional information regarding the recommendations. SIGAR also considered comments from the 

World Bank and MRRD. Finally, SIGAR is also conducting a broader audit of the ARTF, which is currently the principal 

mechanism for providing direct assistance to Afghanistan.

For more information contact: SIGAR Public Affairs at (703) 602-8742 or PublicAffairs@sigar.mil
SIGAR Audit-11-8 Economic and Social Development / NSP Page iii

TABLE OF CONTENTS

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

NSP Has Been Funded Almost Entirely by International Donors, of Which the 

United States Is the Largest Contributor................................................................................................4

NSP Funds Are Subject to A Wide Range of Oversight Mechanisms and Internal 

Controls, but Use of A Hawalla Dealer Led to Diversion of Funds in One 

Province..................................................................................................................................................8

NSP Reports Meeting Quantitative Targets, but Measurement of Changes in 

Local Governance Needs Strengthening and the Future of CDCs Is Uncertain....................................15

NSP Faces Implementation Challenges that Could Limit Outcomes...........................................................19

Conclusion...................................................................................................................................................23

Recommendations......................................................................................................................................23

Comments...................................................................................................................................................24

Appendix I: Scope and Methodology.........................................................................................................26

Appendix II: NSP Reported Outputs Against Targets, 2002 - 2007............................................................29

Appendix III: NSP Facilitating Partners.......................................................................................................31

Appendix IV: NSP Organizational Structure ...............................................................................................33

Appendix V: Comments From U.S. Embassy Kabul....................................................................................34

Appendix VI: Comments From the World Bank.........................................................................................37

Appendix VII: Comments From Afghanistan’s Ministry of Rural Rehabilitation 

and Development/National Solidarity Program...................................................................................39

TABLES

Table 1: NSP Contributions by Donor Category, 2002 to 2010....................................................................4

Table 2: Total U.S. Contributions to NSP Since 2002 ...................................................................................5

Table 3: NSP Costs by Expenditure Category...............................................................................................7

Table 4: NSP Annual Expenditures, SY1383-1388........................................................................................7

Table I: NSP Reported Outputs Against Targets, 2002 – 2007...................................................................29

Table II: NSP Facilitating Partners, as of August 2010 ................................................................................31

FIGURES

Figure 1: NSP Funding Flows and Programmatic Linkages ..........................................................................3
SIGAR Audit-11-8 Economic and Social Development / NSP Page iv

Figure 2: Sectoral Allocation of NSP I and NSP II Block Grant Funding.........................................................6

Figure 3: Map of Afghanistan, Showing NSP Coverage by District ............................................................16

Figure I: NSP Organizational Structure, as of August 2010.........................................................................33

ACRONYMS

ANDS Afghanistan National Development Strategy 

ARTF Afghanistan Reconstruction Trust Fund

CAO Control and Audit Office

CDC Community Development Council

CDP Community Development Plan

DAB Da Afghanistan Bank 

FCPRTF Food Crisis Policy Response Trust Fund

FMA Financial Management Agent 

IDA International Development Association

IDLG Independent Directorate of Local Governance

JSDF Japanese Social Development Fund

MoF Ministry of Finance

MRRD Ministry of Rural Rehabilitation and Development

NGO Non-governmental organization

NSP National Solidarity Program

SIGAR Special Inspector General for Afghanistan Reconstruction

USAID U.S. Agency for International Development
SIGAR Audit-11-8 Economic and Social Development / NSP Page 1

Afghanistan’s National Solidarity Program Has Reached thousands of Afghan 

Communities, but Faces Challenges that Could Limit Outcomes

The National Solidarity Program (NSP), identified in Afghanistan’s National Development Strategy as the 

government’s principal community development program, is a multi-billion dollar community 

development and local governance program managed by the Afghan Ministry of Rural Rehabilitation 

and Development (MRRD). It is funded primarily through the multilateral Afghanistan Reconstruction 

Trust Fund (ARTF) which is administered by the World Bank.

1

This report includes the results of SIGAR’s audit to (1) identify the extent and use of U.S. and other 

donor assistance to the NSP, (2) assess the level of oversight and internal controls over donor funds, 

(3) determine whether NSP is meeting its targets, and (4) highlight key challenges facing NSP as it begins

its third phase. This report is part of a series of audits by SIGAR to address U.S. efforts to build Afghan 

capacity for enhancing accountability and preventing corruption. To accomplish these objectives, we

collected and analyzed documents, data, contracts, and agreements from NSP, MRRD, the World Bank, 

NSP facilitating partners, community development councils, and Afghanistan’s Control and Audit Office

(CAO).

From June 2002 to September 2010, U.S.

contributions to the NSP totaled about $528 million, making the United States the single largest donor. 

ARTF contributions flow through the Afghan national budget and provide a means by which the United 

States and other donors can channel development assistance directly through the Afghan government. 

During the 2010 donor conferences in London and Kabul, the U.S. government, along with other 

members of the international donor community, committed to channeling at least 50 percent of 

development assistance through the national budget of the Afghan government. Achieving this goal will 

depend to a large degree on whether the Afghan government is able to manage and account for the 

donor funds it receives for programs such as the NSP. We are also conducting a broader audit of the 

ARTF, which is currently the principal mechanism for providing direct assistance to Afghanistan.

2

 1 The ARTF was established in 2002 to provide a vehicle for international donors to pool resources and coordinate 

their support for the reconstruction of Afghanistan. Donor contributions enable the ARTF to finance both the 

essential operating costs of the Afghan government (recurrent cost window) and key national programs (such as 

NSP) under the Afghan National Development Strategy (investment window). The ARTF is governed by a 

management committee, consisting of representatives of the Asian Development Bank, Islamic Development Bank, 

UNDP, Afghanistan’s Ministry of Finance, and the World Bank, with day-to-day administration of the fund 

performed by the World Bank. A monitoring agent has been appointed by the World Bank to ensure proper 

fiduciary management. A donor committee is regularly convened to discuss the management and administration 

of ARTF and to provide policy guidance.

We reviewed a random sample of NSP files maintained at NSP headquarters in Kabul to verify 

that implementation procedures were followed, and reviewed independent evaluations of the NSP and 

facilitating partners. We also interviewed officials from the U.S. Agency for International Development 

2 As Afghanistan’s Supreme Audit Institution, the CAO is responsible for auditing the financial matters of the 

government, including international donor funds channeled through the Afghan government.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 2

(USAID), the U.S. Embassy in Kabul, the World Bank, the Asian Development Bank, and the United 

Nations Assistance Mission in Afghanistan. In addition, we met with officials representing other donors 

to the NSP, including Denmark, Italy, and the United Kingdom. Further, we met with Afghan 

government officials who manage the program, as well as with officials from 9 of NSP’s 28 facilitating 

partners. We conducted our work in Washington, D.C., and in Kabul and Parwan provinces in

Afghanistan, from April 2010 to January 2011 in accordance with generally accepted government 

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

BACKGROUND

In 2003, the Afghan government launched the NSP to lay the foundation for a sustainable form of 

inclusive local governance, rural reconstruction, and poverty alleviation. The primary objectives of the 

NSP are to build local governance by setting up community development councils (CDCs) and training 

them to manage small-scale projects funded by block grants. NSP activities are grouped under four

program elements:

1. Governance: assisting communities in establishing inclusive governance through democratic 

elections, reaching consensus on priorities and corresponding activities, and developing 

projects.

2. Capacity building: building the capacities of community members and community development 

councils in consensus building, financial management, operations and maintenance, and 

monitoring.

3. Community block grants: providing block grants to communities to fund NSP-approved projects.

4. Linkages and service provision: linking CDCs to government agencies, non-governmental 

organizations, and donors to improve access to services and resources.

The NSP is being implemented in 351 of Afghanistan’s 398 districts and is located in all 34 provinces. 

The NSP contracts with facilitating partners (international and local non-governmental organizations) to 

work in specific districts. These partners are responsible for mobilizing communities to undertake 

development activities and promoting community adherence to NSP guidelines. Patterned after an 

earlier community empowerment and public works project3

Managed by MRRD, the NSP employs over 800 Afghan staff members at its headquarters in Kabul and in 

provincial offices throughout Afghanistan. NSP management oversight is provided by an intermanaged by MRRD, the NSP has been 

implemented in phases: NSP I, from May 2003 to March 2007; NSP II, from April 2007 to September 

2011; and NSP III, from September 2010 to September 2015. Expected funding for all three phases will

total about $2.7 billion, excluding community contributions. Community contributions, mandated as 

part of NSP implementation, must equal at least 10 percent of project costs. Contributions can be in 

cash, labor, or in-kind.

 3 The Emergency Community Empowerment and Public Works Project, which began in 2002, formed the 

foundation of what would later become NSP.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 3

ministerial project steering committee chaired by Afghanistan’s second vice-president, and is subject to 

requirements tied to international funding sources.

NSP activities are implemented by 28 facilitating partners,4 made up of 26 non-governmental 

organizations (6 Afghan and 20 international), a U.N. agency, and a U.S. for-profit company. NSP staff 

members supervise the work of the facilitating partners, which are responsible for program facilitation 

at the village level. Elected members of CDCs manage block grants and implement community 

development projects, which are based on community development plans. The block grants are

provided from NSP contributions transferred to CDCs by the Ministry of Finance (MoF) principally 

through Afghanistan’s central bank (Da Afghanistan Bank), but occasionally through traditional hawalla5

Figure 1: NSP Funding Flows and Programmatic Linkages

dealers (see figure 1).

Bilateral Funds World Bank

Da Afghanistan Bank 

(float accounts 

managed by financial 

management agent)

CDCs Facilitating 

Partners

Hawalla

Dealers

Ministry of 

Finance MRRD/NSP

Funds 

Programmatic 

Linkages

Project Steering 

Committee

Operational 

Expenses

As of January 31, 2011, the NSP reported the following achievements:

• 26,110 communities mobilized;

• 53,610 project proposals funded; and

• $793 million in block grants disbursed to CDCs.

In its third phase, the NSP is slated to reach an additional 15,800 communities, many of which are in 

insecure areas not covered by the two earlier phases. There are also plans to provide 11,900 of the 

CDCs already mobilized under the first two phases with a second round of block grants.

 4 This represents the number of facilitating partners at the time of our audit. The number has increased over time 

and can expand or contract according to need and performance. See appendix III for a complete list of NSP 

facilitating partners.

5 Hawalla dealers are individuals engaged in an informal money transfer system common in the Middle East and 

South Asia. 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 4

NSP HAS BEEN FUNDED ALMOST ENTIRELY BY INTERNATIONAL DONORS, OF WHICH THE 

UNITED STATES IS THE LARGEST CONTRIBUTOR

All NSP funding, with the exception of community contributions,

6 has been provided by international 

donors. As of September 2010, international donor contributions to NSP totaled more than $1.5 billion. 

As shown in table 1, most NSP contributions were made through the ARTF, a multilateral trust fund

administered by the World Bank. Another major source of NSP funding has been the World Bank’s

International Development Association (IDA).

7

Table 1: NSP Contributions by Donor Category, 

2002 to 2010

In addition to multilateral trust funds and grants, 

international donors have provided about $100 million in bilateral contributions directly to NSP. 

Funding Source

As of 

September 2010

(USD millions)

ARTF (administered by World Bank) $940

IDA (World Bank) $436

Bilateral Donors $100

Japanese Social Development Fund 

(administered by World Bank)

$42

Food Price Crisis Response Trust Fund 

(administered by World Bank)

$8

Total $1,526

Source: SIGAR analysis of ARTF Monthly Report for September 22, 

2010.

The United States Is the Largest Donor of NSP Funds

The United States has contributed over one-third of all NSP international donor funding, making it the 

largest donor.

8 As of September 2010, the United States had provided about $528 million to the NSP 

through direct and indirect funding (see table 2). This represents about 35 percent of total international 

donor contributions to NSP. The majority of U.S. funding for the NSP has been through the ARTF. U.S. 

contributions to the ARTF are made through a grant agreement9

 6 According to World Bank officials, community contributions to NSP projects were supposed to be 10 percent, 

though they have averaged 17 percent. 

between USAID and the World Bank. 

7 IDA is the part of the World Bank that helps the world’s poorest countries. IDA complements the World Bank’s 

other lending arm—the International Bank for Reconstruction and Development, which provides middle-income 

countries with capital investment and advisory services.

8 Canada is currently the second largest donor, providing contributions of $148.5 million--$147.4 million through 

the ARTF for NSP and $1.1 million bilaterally. 

9 USAID Grant Agreement No. EEE-G-00-02-00025-00, dated June 20, 2002.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 5

The grant agreement, signed in 2002, provided an initial $5 million in support of the ARTF. As of 

September 2010, the agreement had been modified 35 times, raising the total amount of U.S. 

contributions to $972 million. Of that amount, $490 million was provided to the NSP based on 

preferencing language in the grant modifications. Donors use preferencing language to designate the 

specific ARTF-funded investment programs they wish to support. Although the World Bank does not 

guarantee that these preferences will be honored, USAID officials confirmed World Bank statements 

that showed all U.S. preferences for NSP have been honored by the ARTF. 

Table 2: Total U.S. Contributions to NSP Since 2002

Type of Funding

Total U.S. 

Contributions to NSP 

(USD millions)

U.S. Preferences to NSP through ARTF $490

U.S. Portion of IDA Grants to NSP $37

Bilateral U.S. Funding to NSP $1

Total $528

Source: SIGAR analysis of USAID and World Bank data as of September 23, 

2010.

U.S. funding for the ARTF and the NSP has been provided, for the most part, from Economic Support 

Fund appropriations based on congressional directives. For example, the 2009 Supplemental 

Appropriations Act10 directed that not less than $70 million of Economic Support Funds be made 

available for NSP. The 2010 Consolidated Appropriations Act11

In addition to USAID contributions to the ARTF, we estimate that the United States has contributed 

another $36.7 million to NSP through its contribution to the World Bank’s IDA. Although the World 

Bank does not track assistance by donor to specific IDA-funded programs, we developed a methodology 

with the Office of the U.S. Executive Director at the World Bank for estimating U.S. IDA contributions to 

NSP.

directed that another $175 million of 

Economic Support Funds be made available to NSP. USAID met these directives by providing $140 

million and $175 million in Economic Support Funds for fiscal years 2009 and 2010, respectively. In 

addition, the 2010 National Defense Authorization Act authorized the U.S. Secretary of Defense to 

transfer up to $50 million of Commander’s Emergency Response Program funds to the U.S. Secretary of 

State for NSP. This brought the total U.S. contribution for fiscal year 2010 to $225 million. 

12

 10 Public Law 111-32, Supplemental Appropriations Act, 2009.

In addition to its contributions through the World Bank-administered ARTF and IDA, the United 

States also provided about $1.1 million in direct funding for NSP programming in Kandahar province. 

These funds were provided bilaterally, rather than through the ARTF, as the ARTF does not accept funds 

designated for specific geographic areas.

11 Public Law 111-117, Consolidated Appropriations Act, 2010.

12 According to the Office of U.S. Executive Director to the World Bank, the estimated U.S. portion of the IDA grants 

provided to NSP was approximately 8.4 percent of the total amount of $436 million of IDA grants provided from 

2002 to 2010. Thus, the U.S. portion was calculated to be about $36.7 million. 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 6

NSP Funds Are Primarily Used for Community Block Grants

The majority of NSP funds (about 72 percent) are used for community block grants. Community block 

grants finance small development projects managed by CDCs. Projects are typically for infrastructure 

development in areas such as transportation (e.g., tertiary roads), water supply and sanitation, smallscale electric power, and irrigation (see figure 2). Block grant amounts, limited to $60,000 per 

community, are determined by the number of families in a given community (up to 300 families, 

multiplied by $200 per family). 

Figure 2: Sectoral Allocation of NSP I and NSP II Block Grant Funding

Source: SIGAR analysis of World Bank data as of January 2011.

Note: “Other” category includes projects in agriculture, health, livelihoods, public building, 

and emergency response.

Approximately 19 percent of NSP funds pay for facilitating partner costs, which include overseeing the 

election and training of CDC members, providing assistance to draft community development plans, and 

implementing projects. The remaining 9 percent covers the administrative costs of NSP staff, including 

salaries, offices, benefits, travel, and general operating expenses (see table 3). 

Other, 9%

Transport, 

25%

Education, 

11%

Power, 13%

Water Supply 

and 

Sanitation, 

24%

Irrigation, 

18%
SIGAR Audit-11-8 Economic and Social Development / NSP Page 7

Table 3: NSP Costs by Expenditure Category

Expenditure Category

NSP I & II

(percentage)

Community Block Grants 72

Facilitating Partner Costs 19

NSP Administration 9

Total 100

Source: SIGAR analysis of NSP Finance Department 

data.

Since 2005, the NSP’s financial statements have been audited on an annual basis by Afghanistan’s

supreme audit agency, the Control and Audit Office (CAO). The audited statements show that, as of 

March 20, 2010, the NSP had expended a total of $789 million. See table 4 for reported annual 

expenditures. 

Table 4: NSP Annual Expenditures, SY1383-1388

Annual Expenditures

Year USD millions

SY 1383 $26

SY 1384 $48

SY 1385 $123

SY 1386 $239

SY 1387 $196

SY 1388 $157

Total $789

Source: SIGAR analysis of annual NSP financial statements 

audited by CAO.

Note: The Afghan solar year (SY) typically ends on March 20. 

The period in Table 4, SY1383-1388, equates to March 20, 

2004 – March 20, 2010. All expenditures in the table 

occurred during NSP I and NSP II.

According to NSP III documentation, the proposed budget for the final phase of the program from 

September 2010 to September 2015 is about $1.5 billion, or about $300 million per year. This 

represents a substantial increase in planned expenditures over prior years and provides additional 

funding opportunities for donors.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 8

NSP FUNDS ARE SUBJECT TO A WIDE RANGE OF OVERSIGHT MECHANISMS AND INTERNAL 

CONTROLS, BUT USE OF A HAWALLA DEALER LED TO DIVERSION OF FUNDS IN ONE PROVINCE

The NSP operates under a series of oversight mechanisms and internal controls that are detailed in its 

implementing documentation, contracts, agreements, and operational manual. International standards 

for internal control and auditing help organizations provide reasonable assurance that objectives 

relating to effectiveness, accountability, compliance, and safeguarding of resources are being 

achieved.13

World Bank Agreements and Policies Mandate Oversight of NSP

However, those same standards also indicate that an effective internal control system, no 

matter how well conceived and operated, can provide only reasonable – not absolute – assurance to 

management about the achievement of an entity's objectives. World Bank mechanisms provide one 

level of oversight through management committees, supervision missions, and regular reporting. 

Because NSP funds are channeled through the Afghan national budget, they are subject to governmentwide controls, including annual financial audits. Further, MRRD/NSP officials manage facilitating 

partners and activities that must follow the NSP operational manual. Communities provide oversight of 

NSP activities by participating in CDC elections, following NSP spending information posted on 

signboards, and social audits. We found that these controls provided reasonable assurance that NSP 

funds were used as intended. While our tests for compliance with documentation requirements were

positive, MRRD/NSP identified fraudulent activity involving about $2.8 million in NSP funds that 

occurred in a particular Afghan province even though all the required paperwork had been submitted 

and filed.

The NSP is subject to a wide range of internal control mechanisms mandated by the World Bank in grant 

agreements and its own policies to monitor and account for donor funds. For example, donor funds 

provided to the NSP through contributions to the ARTF are subject to several oversight mechanisms 

applied to those trust funds by the Afghan government and the World Bank. Afghan public expenditures 

are subject to government-wide controls that are periodically assessed by the World Bank.

14

 13 According to the International Organization of Supreme Audit Institutions’ Guidelines for Internal Control 

Standards for the Public Sector, internal controls are defined as an integral process that is affected by an entity’s 

management and personnel and are designed to address risks and provide reasonable assurance that, in pursuit of 

the entity’s mission, objectives relating to effectiveness, accountability, compliance, and safeguarding of resources 

are achieved.

ARTF funds, 

which are a sub-set of on-budget funds, are subject to additional fiduciary oversight by the World Bank 

and its agents. These additional oversight mechanisms include management and donor committees, 

periodic mid-term reviews, preparation and supervision missions conducted by the World Bank, and 

14 According to the World Bank, these controls comprise a framework whereby public funds in the Afghan 

government are controlled through a single budget that is prepared in an orderly and transparent manner, 

approved by Parliament, and under which all uses are permitted only against due approvals of the appropriation 

holder. Accounting and payments for all transactions under the budget is concentrated in the Treasury 

Department of the Ministry of Finance, which has contributed to sound financial reporting. This reporting is 

subject to oversight by the Parliament and the external auditor. See “Afghanistan: Public Financial Management 

Performance Assessment” (World Bank and United Kingdom’s Department for International Development, June 

2008). 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 9

specific financial and procurement requirements included in the grant agreements between the World 

Bank and the Afghan government that call for periodic financial reporting, including annual financial 

audits of NSP expenditures.

The World Bank’s governance and fiduciary framework for the ARTF, including NSP, indicates that 

separate donor agreements set out the fiduciary and management responsibilities of the World Bank in 

its role as administrator of the fund.15 The World Bank is responsible for tracking contributions and 

maintaining records and accounts of the trust fund. The ARTF management committee, consisting of 

representatives of the Asian Development Bank, the Islamic Development Bank, the UN Development 

Program, the World Bank, and the Afghan Ministry of Finance (MoF)16

The ARTF management committee meets monthly to discuss ARTF issues, including NSP problems and 

solutions. For example, minutes from a September 2010 management committee meeting reported 

that members raised concerns about the low disbursement rate for NSP II and whether the program 

could absorb an increase in funding; the accessibility of 10,000 communities not yet reached by the 

program; the costs of CDC capacity building; the impact and sustainability of the investment; and links 

with other national programs. Based on these discussions, the management committee approved in 

principle the provision of $250 million for NSP. However, the chair noted that the World Bank would 

not sign the agreement until after a supervision mission to ensure that outstanding issues were 

addressed to the satisfaction of the World Bank.

meets monthly to make resource 

allocations and report to donors on the use of funds. Also, an ARTF donor committee is responsible for 

meeting quarterly, reviewing ARTF progress, and guiding the management committee on ARTF 

allocation strategies.

A committee of ARTF donors also provides oversight to help ensure that NSP funds are used for 

intended purposes. For example, minutes of a November 2009 ARTF donor committee meeting 

indicated that the NSP director presented the findings of an MRRD investigation into media allegations 

that 40 percent of NSP funds in Farah province were going to the Taliban. According to the minutes, the 

donors welcomed the findings of the investigation, which concluded that the allegations were baseless. 

U.S. oversight on this committee is provided by a USAID staff member assigned as the Grant Officer’s 

Technical Representative for the ARTF cooperative agreement. The official monitors U.S. funds 

contributed to ARTF, including those for NSP. The USAID official reported attending ARTF donor 

committee meetings and reviewing ARTF reports. USAID’s active participation in the committee was 

confirmed by the World Bank. 

As a condition of accepting World Bank funds, the Afghan government agreed to periodic reviews of the 

use of those funds. The World Bank conducted a completion review of NSP I in 2007 and undertook a 

mid-term review of NSP II in 2008 to determine the status of the program and identify areas of focus for 

an interim supervision mission scheduled for September of that year. The review resulted in two 

principal recommendations—to improve the quantity and quality of NSP services, as well as their cost 

 15 The World Bank produces quarterly and annual reports for ARTF that provide financial and program updates on 

NSP for ARTF donors and discuss implementation challenges.

16 The MoF attended the ARTF management committee as an observer until January 2011 when it became a full 

member.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 10

effectiveness. In addition, the review made 30 specific recommendations. In response to the review, 

NSP officials formed working groups that developed plans to address the recommendations. The 

reviews are available on the World Bank’s public web site.

The World Bank also conducts supervision missions to periodically assess progress in meeting 

development objectives. For example, a mission in April 2009 to Bamyan Province found that NSP was 

likely to achieve its development objectives, but identified issues, including the lack of timely payments 

to facilitating partners and block grants to communities, that required attention. Another mission, in

November 2009, was to take place in Badakhshan Province, but ended up going to Kandahar, a less 

secure area, as suggested by USAID. A third mission took place between December 2009 and February 

2010 in Kabul. The objective of the Kabul mission was to outline key strategic decisions, explore new 

implementation methods, and continue formal project preparation of NSP III. The mission included 

broad participation of various stakeholders, including community development councils, NSP facilitating 

partners, and donors. The mission resulted in the documentation of key agreements and key tasks and 

dates to be completed by NSP management.

Afghan Government Provides Oversight as Management of NSP Is Increasingly Undertaken by 

Afghan Officials 

Until September 2006, management of the NSP was primarily in the hands of an international oversight 

consultant contracted by MRRD. After that date, management began shifting to Afghan nationals who 

now fill all senior NSP positions, with the exception of the finance department whose leadership is 

outsourced to an international consulting firm. According to the ARTF governance and fiduciary 

framework, monitoring and evaluation is the responsibility of the implementing partner, the Afghan 

government. The grant agreement between the Afghan government and World Bank for NSP II requires 

MRRD to monitor and evaluate the program, submit quarterly progress reports and ensure that a 

financial management system produces quarterly financial statements that are audited annually. The 

agreement also includes provisions requiring MRRD to be responsible for policy and strategy 

development and application, coordinating with other ministries, managing relations with facilitating 

partners, approving and ensuring the quality of community projects, capacity development, and 

financial management with the assistance of an external management consultant firm. Among other 

things, the agreement also requires the Afghan government to maintain an inter-ministerial steering 

committee to provide strategic and managerial guidance to the MRRD. Further, the agreement requires 

the MRRD to carry out program activities in accordance with operational and financial management 

manuals that cannot be amended or waived without World Bank approval. Finally, the agreement 

places limitations on the MRRD’s procurement of goods and services, as well as its withdrawal of grant 

funds, and requires the Afghan government to conduct a survey of institutional and social indicators, 

impact evaluations, and evaluations of facilitating partners.

According to facilitating partners, the transfer of NSP management from international oversight 

consultants to Afghan nationals is a positive development for the NSP. Afghans now hold all senior 

management positions, with the exception of those in the finance department. This “Afghanization” is 

in line with the reaffirmation of Afghan leadership called for by participants at the 2010 conferences in 

London and Kabul. In both conferences, participants expressed support for Afghan leadership to

improve Afghanistan’s security, development, and governance.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 11

Since the MRRD lacked capacity and experience with community-driven development programs when

the NSP was initially designed, a management structure that included an international management 

consultant that would work with NGO and UN facilitating partners was created. Once the NSP was 

officially launched as a nationwide program in 2003, the first management consultant contracted was 

GTZ-IS, German Technical Cooperation International Services (September 2003 to March 2007), with 17 

international positions. Consulting firm Maxwell Stamp followed (April 2007 to March 2010), with 10 

international positions. However, the number of NSP management positions filled by non-Afghans has 

decreased significantly since then. In March 2010, the MRRD contracted with Deloitte Consulting 

Overseas Projects to manage NSP’s Finance Department, but Deloitte employs only two international 

personnel in that department. Afghans have been appointed to leadership roles for all other NSP units. 

Facilitating partners reported satisfaction with the Afghan-led management. For example, facilitating 

partners interviewed by SIGAR praised NSP management’s for both its responsiveness to issues they

raised and for the increased services provided to assist them. The increased services included the 

establishment of a facilitating partner management department, monthly coordination meetings, and a 

working group to discuss facilitating partner contract issues. A member of the ARTF management 

committee stated that “MRRD is a government within a government and the only ministry with 

functioning provincial offices and a developed core of expertise.” NSP staff in particular have developed 

and carried their capacity to other ministries. The official added that higher salaries attract better 

qualified people. MRRD/NSP employees are contractors, not civil servants. As such, they are paid about 

five times that of civil servants.17

Program management also includes an NSP monitoring and evaluation department to oversee project 

implementation. This department is responsible for coordinating the collection and reporting of data 

relating to program performance indicators defined in the results framework in the NSP operational 

manual. According to the head of the department, each NSP Provincial Management Unit had a 

2-person team to monitor and evaluate NSP projects within their province. The information collected by 

these teams is fed into the NSP management information system, which uses the information to report 

on community project progress and problems.

Their salaries are paid entirely from donor contributions to NSP. 

NSP Expenditures Are Audited Annually, although Prior Audit Reports Were Not Completed in 

a Timely Manner

NSP donors rely on financial audits of NSP funds to provide assurance that those funds are properly 

used. The financing agreement between the World Bank and the Afghan government requires the CAO 

to conduct annual financial audits of NSP financial statements. According to a prior SIGAR audit report, 

the CAO relies on international consultants and advisors to conduct audits in accordance with

international auditing standards.18

 17 The example cited was that MRRD/NSP staff would earn about $1,000 for a month, where a civil servant would 

make about $200 per month.

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

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

2010.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 12

The CAO has audited NSP financial statements annually since 2005. Those audits, conducted in 

accordance with standards issued by the International Organization of Supreme Audit Institutions, have 

identified numerous issues that have been addressed and resolved by NSP management. However, the 

CAO has not always issued its NSP audit reports in a timely manner. International Organization of 

Supreme Audit Institutions audit standards on timeliness indicate that the audit opinion or report should 

be available promptly to be of greatest use to readers and users, particularly those who have to take 

necessary action. The terms of the financial agreement between the Afghan government and the World 

Bank, signed on April 24, 2006, states that NSP financial statements would be audited annually and that 

audited financial statements would be provided to the World Bank as soon as available, but in no case 

later than 6 months after the end of the fiscal year. The CAO’s audit report for the year ending March 

19, 2008 (SY 1386), was due by September 19, 2008, but was not issued until June 30, 2009, over 

9 months late. Similarly, the CAO’s audit report for the year ending March 20, 2009 (SY 1387) was 

issued on January 21, 2010, over 4 months later than the date stipulated by the same agreement. 

According to NSP records, the audits were delayed due to the late preparation of consolidated financial 

statements and the unusually long time it took to find an international public accounting firm acceptable 

to the World Bank to help the CAO audit the NSP’s financial statements. 

The effect of these delays was that the MRRD was unable to take timely action on audit findings that 

included millions of dollars of questionable and potentially ineligible costs identified during both audits. 

For example, the audit report for SY 1386 included a qualified opinion due to $6.3 million in potentially 

ineligible or unsupported costs. The audit report for SY 1387 also included a qualified opinion due to 

$3.6 million in questioned costs. Further, the report for SY 1387 disclosed that more than 

1,900 completed projects with approximately $25.7 million of advance payments made since 2004 took 

more than one year to complete. Both audits questioned payments to the MRRD for staff members 

who did not work directly for the NSP. A senior MRRD official stated that the MRRD had resolved this 

issue by obtaining approval from the World Bank to pay a portion of contracted MRRD staff costs from 

NSP funds. The amount allocated was $187,665 per month. 

Subsequent to our audit fieldwork, SIGAR received a copy of the NSP’s audit report for SY 1388, the 

annual period ending March 20, 2010. That report included an unqualified opinion and was submitted 

by the CAO within the 6-month period required by the World Bank financing agreement. Consequently, 

SIGAR is not including a recommendation to improve the timeliness of NSP financial audit reports.

Implementation of NSP Has Been Enhanced by Experienced Facilitating Partners

According to MRRD, NSP, and ARTF management committee members, the use of facilitating partners 

with prior experience in Afghanistan provides a number of advantages: 

• Gives the MRRD/NSP’s an ability to “buy” ready implementation capacity from organizations 

with decades-long presence in Afghanistan, established community linkages, and specific 

expertise. 

• Provides the NSP with a continuous presence by co-locating non-NSP activities with NSP 

activities, which provides de facto additional NSP resources and allows the NSP work to continue 

during periods when facilitation payments to facilitating partners are delayed.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 13

• Builds upon the facilitating partners willingness to go to great lengths to implement the NSP, 

including traveling to remote areas on foot or by donkey, and risking their lives by working in 

insecure environments. 

Facilitating partners provided the NSP with immediate capacity, outreach, and a measure of trust in the 

early days of the program. The NSP management structure, on the other hand, had to be created. 

Facilitating partners also provided a deeper reach into communities as they had offices in districts, 

whereas the MRRD/NSP established its offices in provincial capitals and Kabul, urban areas where NSP is 

not normally implemented. 

Facilitating partners receive payments of fixed amounts from the NSP as compensation for facilitation 

work according to specific milestones outlined in their contracts. NSP officials have conducted two 

evaluations of facilitating partners. The results of the evaluations indicated that facilitating partners 

with long-term experience in Afghanistan were able to become leaders in NSP facilitation because they 

built upon their local experience with rural development. Moreover, they added value to a range of NSP 

activities, including social mobilization. 

Community Members Oversee Block Grant Spending

Communities also provide oversight of NSP funds spent in their villages through community 

participatory monitoring of the use of block grants funds. During project implementation, public notice 

boards announce NSP projects and funding amounts. Signboards are often posted at local mosques 

where community members gather regularly. Following project completion, members of some 

communities, assisted by facilitating partners, form a committee to audit NSP development projects, 

explain their findings to the rest of the community, and hold CDC members to account for their 

spending. While these “social” audits will be more widely introduced under NSP III, facilitating partners 

reported that such audits under NSP I and II identified instances of fraud when reviewing project 

receipts, including those for travel and meals of CDC members. 

The high level of community involvement in NSP activities—CDC elections, social audits, and community 

contributions—has resulted in a degree of local ownership of NSP-funded projects which helps

safeguard assets. Facilitating partners reported that, in some cases, community members intervened 

and recovered money when block grant funds were stolen by thieves or embezzled by CDC members. 

According to one facilitating partner, the Taliban are less likely to burn NSP schools because 

communities defend them.

NSP Files Show Evidence of General Compliance with Operational Manual 

Many of the NSP’s internal controls over implementation are detailed in its operational manual. The 

operational manual guides NSP communities, CDCs, NSP facilitating partners, and NSP management in 

their day-to-day implementation of the program. Mentioned specifically in the Afghan government’s 

grant agreement with the World Bank, the operational manual is a legally binding document. The 

manual details the program’s objectives and provides guidelines, forms, and a timeline for all 

implementation processes and procedures. The operational manual is revised periodically to 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 14

incorporate lessons learned and the program’s changing dynamics.19

To assess NSP compliance with the operational manual, we randomly selected a sample of 62 projects, 

drawn from a universe of 664 projects initiated after September 1, 2009,

The World Bank must approve any 

changes to the operational manual.

20

Additionally, we randomly selected 10 projects from the 62 sampled projects to conduct a more detailed 

review of project documentation. We found that all of the required project completion forms for the 

ten projects had been completed. Due to security concerns, we were unable to visit any of the selected

project sites, but NSP officials provided us with copies of site inspection reports and photographic 

evidence for nine of the projects to show that they had been completed as planned. 

and completed by July 29, 

2010. (See appendix I for details on our scope and methodology.) For each of the 62 projects, we 

reviewed administrative, accounting, and procurement files located at NSP headquarters in Kabul, 

Afghanistan. We tested the files for existence and completeness, including appropriate approvals, 

stamps, and signatures. We found that required forms for the sampled projects were in place and 

complete more than 90 percent of the time. 

About $2.8 Million in NSP Block Grants Did Not Reach Intended Beneficiaries 

According to a World Bank report of a supervision mission that occurred during October-November 

2009, the NSP reported that a diversion of block grant funds had occurred. According to NSP records, in 

June 2009, program officials became aware that approximately $2.8 million21 in NSP funds for 295 

communities in Paktika Province were retained by a hawalla dealer and not transferred to the CDCs for 

whom they were intended. Despite investigations by NSP officials and interventions on the part of the 

Afghan Attorney General’s Office, the hawalla dealer continues to retain the majority of these funds and 

refuses to deliver them to the intended communities.22

NSP records indicate that, contrary to the standard practice of distributing NSP block grants to 

participating communities through a provincial branch of Da Afghanistan Bank, the NSP’s Finance 

Department23

 19 Version V, which became effective on August 15, 2009, is the current version of the operational manual. 

agreed to make disbursements to certain communities in Paktika Province using a hawalla 

dealer. This decision was based on requests from community members who found it difficult and 

dangerous to retrieve cash from the bank, which was located in the provincial capital. In September 

2005, a contract was finalized between the NSP Finance Department and a hawalla dealer to provide 

20 We selected projects that started after September 1, 2009, to ensure that they were implemented after the 

current version of the operational manual (version V) became effective.

21 The actual amount misappropriated was in Afghan currency (Afghanis). Fluctuations in the U.S. dollar/Afghani 

exchange rate over the last three years resulted in the amount varying from $2.8 to $3.2 million. 

22 Due to its urgent nature, SIGAR informed the U.S. Ambassador to Afghanistan of this issue in December 2010 

through a separate letter prior to completing this audit report.

23 During this period, the NSP Finance Department was managed by Maxwell Stamp PLC (a British company which 

was then serving as the NSP Management Support Consultant, and to whom the NSP Finance Department was 

entirely outsourced at the time of the incident).
SIGAR Audit-11-8 Economic and Social Development / NSP Page 15

block grants to those communities. The contract authorized the hawalla dealer to be paid a transfer fee 

of 2 to 3 percent of the amount of block grants delivered. 

According to an NSP investigative report, after verifying that the hawalla dealer was retaining the funds, 

the NSP pressured him to sign a detailed agreement on how he would reimburse the undelivered 

money. NSP documents indicate that, under this agreement, he made initial payments equivalent to 

about $122,000, but that he refused to repay the remaining amount. Additional NSP documentation 

shows that the hawalla dealer received the equivalent of $84,648 in transfer fees related to the $2.8 

million in undelivered block grants. According to the NSP, the MRRD has hired lawyers to follow up on 

this case and to recover the funds.

NSP investigating officials concluded that although the hawalla dealer didn’t transfer the funds as 

agreed, provincial government officials, private facilitating partners, and the respective community 

development councils also circumvented internal controls. Although the MRRD, the NSP, and the World 

Bank have taken actions to address this issue, it remains unresolved. Because NSP does not typically use 

hawalla dealers to transfer block grant funds, we note that this situation appears to be an isolated case.

NSP REPORTS MEETING QUANTITATIVE TARGETS, BUT MEASUREMENT OF CHANGES IN

LOCAL GOVERNANCE NEEDS STRENGTHENING AND THE FUTURE OF CDCS IS UNCERTAIN

At the conclusion of its first phase, the NSP reported meeting or exceeding the majority of its 

quantitative targets, such as the numbers of communities mobilized and projects implemented; 

however, the NSP has not effectively measured progress toward its qualitative objective of improving

local governance in Afghanistan. Without obtaining data on specific indicators to track changes in local 

governance, it is difficult to determine whether the NSP is making progress toward achieving its desired 

outcome in this area. Additionally, it is difficult to know whether CDCs are best placed to assume the 

duties of not-yet-elected local government bodies known as village councils. 

NSP Reports Meeting or Exceeding Its Quantitative Targets

The NSP reported achieving, and sometimes exceeding, the majority of its quantitative targets, such as 

the number of communities mobilized and projects funded, during its first phase of program 

implementation. A report issued by the World Bank at the conclusion of NSP I showed that the program 

had exceeded 4 important project development objectives.24

 24 Implementation Completion and Results Report on a Grant to the Islamic Government of Afghanistan for an 

Emergency National Solidarity Program (Report No: ICR0000524), October 24, 2007, The World Bank.

According to the report, as of March 2007, 

NSP I had resulted in the election of 10,321 CDCs compared to a target of 8,334−achieving 124 percent 

of that goal. The report stated that NSP I assisted 10,082 villages prepare community development 

plans, achieving 126 percent of the target of 8,000 villages. Against a goal of having 40 percent of 

women participate in CDC elections, NSP I reported achieving a rate of more than 50 percent. Finally, 

the target of having 90 percent of NSP I communities contributing 10 percent of project costs was 

exceeded when 100 percent of communities met that mark with contributions averaging about 

14.5 percent of project costs. (See appendix II for a more complete list of NSP I accomplishments.) 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 16

By January 2011, NSP management reported that the program had resulted in a total of 44,972 projects 

completed, 25,875 villages with elected CDCs, and $793 million in block grants disbursed to CDCs. 

However, final achievements against NSP II targets will not be known until the completion of NSP II 

activities in September 2011.

The NSP has “mobilized,” or begun working with, communities in all 34 provinces of Afghanistan. The 

NSP has projects in 361 (91 percent) of the country’s 398 districts and provincial centers. Figure 3

illustrates the extent to which the NSP has been implemented throughout the country. As indicated by 

the uncolored portions of the map, NSP has not yet reached a number of districts in insecure areas. 

However, NSP III is aiming for nationwide coverage by establishing CDCs in 15,800 new communities, 

many of which are located in these insecure districts. 

Figure 3: Map of Afghanistan, Showing NSP Coverage by District

Source: MRRD/NSP website: www.nspafghanistan.org

Note: Uncolored districts indicate the lack of CDCs. As can be seen, most of these districts are in the southern (less-secure) 

areas of the country.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 17

Monitoring of Progress Toward Achieving NSP’s Governance Objective Needs Strengthening

In its “Performance Monitoring Indicators Handbook,” the World Bank defines performance indicators 

as measures of impacts, outcomes, outputs, and inputs that are monitored during project 

implementation to assess progress toward project objectives. According to the handbook, performance 

indicators are used to evaluate a project’s success and should be integrated with the monitoring and 

evaluation procedures used by the World Bank and its clients. However, the NSP has only recently 

begun measuring progress toward achieving one of its primary objectives, the improvement of local 

governance due to NSP activities, and relies on external evaluations for a full assessment of the 

program’s impact in that area.

The results framework for NSP III proposes using assessments, surveys, and samples, conducted at 

regular intervals, to measure changes in community-level governance. However, many of these

methods were not used during the earlier phases of the program. Although the NSP has been 

implemented for more than seven years, the following program performance indicators were not 

established until 2010:

• Percentage of communities that recognize CDCs as legitimate bodies;

• Percentage of CDCs able to perform their functional mandates in community development, 

project implementation, and conflict resolution;

• Percentage of women representatives on CDCs involved in decision making; and

• Number of CDCs that attempt to form linkages with government or non-government actors.

The NSP’s monitoring and evaluation department produces implementation and post implementation 

monitoring reports, but it does not routinely collect data and report on progress toward targets 

established for these indicators. Instead, the NSP relies on external evaluators to measure the impact 

the NSP is making with regard to these and other performance indicators.

A mid-term evaluation of NSP I undertaken for the MRRD in 2005-06 by the University of York25

The World Bank is funding research to study changes in local governance as a result of the NSP, but this 

has been outside the NSP’s regular data collection and reporting systems. In 2007, the World Bank 

commissioned a multi-year study to undertake an assessment of the NSP’s economic, institutional, and 

social impacts.

found 

that, while their composition and functions varied between communities, CDCs were emerging as 

legitimate local governance institutions. However, this conclusion was based on case studies of only 18 

CDCs. 

26

 25 Mid-term Evaluation of the National Solidarity Programme (NSP), Afghanistan, May 2006 by the Post-War 

Reconstruction & Development Unit, University of York.

While preliminary research shows that the NSP created functional village councils, 

improved villagers’ access to services, and increased the engagement of women in several aspects of 

community life, the indicators used to obtain these findings have not been included in the NSP’s weekly 

26 Information pertaining to this study, being conducted by researchers from Harvard University and the 

Massachusetts Institute of Technology, can be obtained from the evaluation website at http://www.nsp-ie.org.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 18

and monthly reporting. Furthermore, the NSP does not routinely collect data or report on some 

indicators that could be used to track progress toward the important objective of improving local 

governance. For the example, the NSP does not report on the number of signboards posted and social 

audits undertaken. Nor does it report on the number of CDCs that have received and managed funds 

from other government ministries, nongovernmental organizations, or other sources, although 

facilitating partners report that this is occurring. 

As a result of the NSP not establishing baseline indicators early in the program, and not measuring 

progress under newly established indicators through regular data collection and reporting on changes in 

local governance, it is difficult to determine the degree to which NSP activities have or will result in

improvements in local governance in rural Afghan communities. Moreover, while the capability of CDCs 

to assume increased responsibilities in the role of village councils has reportedly improved, the body of 

data to support their increased capacity does not exist. 

CDCs Are Expected to Fill the Role of Village Councils, but Have Not Yet Received Authority to

Do So on a Permanent Basis

Although the MRRD, the MoF, and international donors support the conversion of CDCs to village 

councils, the local government bodies described in the Afghan constitution, a new Afghan government 

sub-national governance policy does not envision CDCs filling that role and proposes holding elections 

for 38,000 local government bodies. The lack of available reporting on changes in local governance, as a 

result of CDC creation, means the MRRD and the international community lack data to strengthen their 

argument that such a conversion has merit. Moreover, if CDCs are not converted to local government 

bodies, then the investment in the establishment and capacity building of CDCs was primarily for the 

purposes of implementing small projects rather than to improve local governance, which was an original 

objective of the NSP. 

Although the Afghanistan National Development Strategy states that the role between proposed village 

councils and the CDCs established under NSP would be clarified, the legal status and post-NSP future of 

CDCs has never been fully clarified or finalized by the Afghan government. CDCs are not specifically

addressed in the Afghan constitution and they have no political history since they were created out of a 

development project. Early NSP I language laying out the vision of CDCs described them as future 

advocates for and monitors of services from sub-national government bodies. They were not described 

as future governance bodies or long-term conduits of funds for services at the local level. However,

when NSP II was being planned in late 2006, the language was changed to reflect the MRRD’s vision that 

CDCs would be recognized as the “lowest form of local governance, institutionalized at the village level, 

in line with the Constitution.” The MRRD also proposed that CDCs be recognized as legal bodies to 

harness development resources from other ministries and sources. 

In 2007, CDCs were provided a basic legal framework through the Community Development Council ByLaw of SY 1385 (2007) that was approved by Presidential Order 3138. The CDC By-Law described the 

purpose and working procedures of CDCs. According to the By-Law, CDC objectives were to work within 

communities to improve and strengthen local governance, promote community welfare, and strengthen 

a sense of solidarity. However, the By-Law did not grant CDCs the status of village council, one of the 

local governing bodies specified in article 140 of the Afghan constitution. Article 140 calls for the 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 19

establishment and election of local governing bodies, but does not specify a timeframe by which this is 

to occur for Afghan villages, numbering about 38,000. 

The MRRD, the NSP, and facilitating partners have considered CDCs organizations suited to assuming the 

role of village councils. World Bank NSP III documentation noted that MRRD; the Ministry of Finance; 

the Ministry of Agriculture, Irrigation and Livestock; and the Independent Directorate of Local 

Governance (IDLG) agreed that a sustainable role for CDCs with respect to rural development would be 

promoted. According to the documentation, a transformation of CDCs into village councils was 

envisioned. However, the IDLG appears to have another vision for the establishment of village councils. 

The 2010 Sub-national Governance Policy developed by IDLG calls for elections in 2011 for village 

councils. The policy notes that village councils will, among a long list of responsibilities, design and 

implement development plans, manage funds, and coordinate with line ministries, tasks similar to those 

performed by CDCs. However, the policy does not call for the conversion of CDCs into village councils, 

nor does it establish procedures for training elected village council members in the responsibilities for

which they will be tasked, a process that has taken about 6 months per CDC under NSP I and II. The 

policy suggests that after 2011, CDCs may continue as civil society organizations, although no mention is 

made of how these organizations would raise funds. Since NSP III is scheduled to run through 

September 2015, it is also unclear whether village councils—if elected—would assume the functions of 

NSP CDCs.

During the July 2010 Kabul Conference Communiqué, the Afghan government pledged to implement the 

Sub-national Governance Policy within 12 months. However, as of October 2010, no date for village 

council elections had been set, and no funding had been identified for such elections. A July 2010 

Afghan Presidential Decree tasked an inter-ministerial committee, under the chairmanship of the IDLG, 

to study existing councils at the district and village level and recommend a strategy for establishing subnational governance structures. In January 2011, the committee sent a letter to the Afghan President 

proposing that CDCs be recognized officially as village councils, but only until formal elections take place. 

Consequently, although it is clear that most stakeholders envision CDCs as filling the role of village 

councils, they have not yet been provided authority to do so on a permanent basis.

NSP FACES IMPLEMENTATION CHALLENGES THAT COULD LIMIT OUTCOMES

The NSP faces implementation challenges from unresolved issues that were evident during the first two 

phases of the NSP, as well as new challenges from program modifications under NSP III. Although 

improvements have been made, delays in the receipt of block grants by CDCs and payments to 

facilitating partners, continue to result in increased implementation time and costs. A new challenge for 

NSP III is a plan to achieve full nationwide coverage by focusing on implementing the NSP in insecure 

areas that have not yet been reached by the program. 

Difficulties in Ensuring the Timely Receipt of Block Grant Funds Have Not Been Fully Resolved

According to an NSP implementation monitoring report issued in January 2011, almost 10 percent of 

projects were experiencing delays due primarily to late disbursement of block grants. Facilitating 

partners and senior MRRD/NSP officials confirmed that, although improvements have been made,
SIGAR Audit-11-8 Economic and Social Development / NSP Page 20

delays in CDCs receiving community block grant funds are a continuing problem for the NSP. Such

delays increase the cost and time required for implementing the NSP.

Block grant transfers to communities from the MoF are normally made through Afghanistan’s central 

bank, Da Afghanistan Bank (DAB). Although the DAB has expanded to all of Afghanistan’s provinces, in 

part due to demand arising from the NSP, the Afghan government has not been able to guarantee that 

communities will be able to access funds promptly and during a season when project implementation 

can occur. Delays have resulted for several reasons. Contributions to NSP prior to 2007 were 

sometimes insufficient to meet the needs of the program. Consequently, insufficient funds were 

available during that period.27

Facilitating partners and NSP officials reported recent improvements in and steps taken to address some 

of the causes of delay. A shortage of donor funding is no longer an issue. As the Afghan government’s 

“flagship” program, the NSP has been able to attract increased donor contributions. The MRRD/NSP has 

reportedly streamlined its requirements to decrease block grant processing to 3 days, though this is still 

followed by additional processing by the MRRD and the MoF before block grant funds are transferred. 

According to the World Bank, the MoF has also instituted a procedure whereby ministries can seek 

approval to carry forward their unutilized budget amounts to the next year. With this approval, 

ministries can continue to make payments for activities at the beginning of a new fiscal year (which is 

when the working season starts) from that carry forward budget until the new fiscal year's budget is 

approved by the Parliament.

Also, several facilitating partners indicated that the MRRD/NSP and the 

MoF developed cumbersome bureaucratic procedures for the release of block grants. Furthermore, the

DAB did not always have enough cash on hand, particularly during the summer months when work 

could take place, in branches in remote and insecure areas. 

Despite these improvements, MRRD/NSP officials stated that “more improvements are required,” since 

processing can still take 2 months in “exceptional” circumstances. Another problem is the unavailability 

of Afghani bank notes in DAB provincial branches. Facilitating partners and MRRD/NSP officials stated 

that branches of DAB in remote and insecure areas receive fewer airlifts of bank notes. This leaves 

branches with insufficient cash for withdrawals, even when accounts have been credited with block 

grant funds. 

Due to delays experienced during NSP I and II in implementing projects in some parts of Afghanistan, 

MRRD contracts in 2010 provide an additional $700 and $252 respectively, per community, to 

facilitating partners working in areas affected by seasonality and remoteness. The inability to ensure 

that communities can access funds during the months in which work can be undertaken, such as 

communities in areas that receive snowfall, leads to delays in project implementation. This is 

recognized by the MRRD/NSP as a problem requiring resolution. The MRRD/NSP stated that they were 

considering piloting the use of a commercial bank, instead of the central bank, for block grant transfers 

in remote Uruzgan province. 

 27 To help ensure that sufficient funds were readily available, NSP has implemented the use of a “float” account, 

managed by its financial management agent (Deloitte), to maintain a balance of $80 million in pre-positioned block 

grant funds.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 21

Delays in Payments to Facilitating Partners Have Not Been Fully Resolved

According to NSP records, between March 2009 and January 2011, about 14 percent of payments to 

facilitating partners occurred after they were due. Facilitating partner contracts with the NSP require 

that they receive payment within 60 days of submitting an invoice, provided that the milestone against 

which payment has been requested has been achieved and verified. Facilitating partners stated that the 

problems with lengthy bureaucratic procedures were being addressed by the MRRD/NSP, but the 

partners expressed concern about ongoing payment issues, including the difficulty in receiving payment 

for their work in less secure areas where MRRD/NSP staff refuses to travel to verify the completion of 

contractual milestones. Delayed payments to facilitating partners led to delays in implementing NSP 

projects and financial distress for some facilitating partners.

An NSP report that tracks payments to facilitating partners showed that 266 individual payments,

totaling $35.3 million, were made during the period March 2009 to January 2011. Of those 266 

payments, 37, worth $5.3 million, were paid 61-151 days after submission of an invoice.

Facilitating partners provided several reasons for the slow payments and their dissatisfaction with 

facilitating partner payment management. Facilitating partners blamed the NSP generally for slow 

payment processing, although some cited specific reasons for the delays: the MoF payment processing 

system was slow, donors contributed to the NSP late, and, on one occasion, long-awaited funds were 

transferred to the wrong account. Many facilitating partners stated that they address the problem by 

using funding from other programs to remain engaged with NSP communities and keep the NSP running 

while waiting for facilitation payments. One facilitating partner stated that in 2008 it was owed a total 

of $2 million by the NSP and this shortfall “nearly destroyed the organization.” An Afghan facilitating 

partner stated in August 2010 that the NSP owed them $600,000, which they depended on to pay their 

staff. 

Facilitating partner contracts further require the payment of interest for payments made 60 days later 

than the original due date. An international facilitating partner reported asking the NSP to pay interest, 

as required by the contractual obligation, on late facilitation payments. At the time of our audit, the 

facilitating partner reported not receiving any interest payments and still being owed $1 million. The 

2009 facilitating partner evaluation conducted by the NSP calculated that facilitating partners were 

using up to $26 million of their own funds or those of other donors while waiting for the NSP to pay 

their facilitation fees. Consequently, delayed payments to NSP facilitating partners can negatively affect 

the implementation of other development programs, as well as engender poor working relations 

between the facilitating partners and MRRD/NSP management.

Expansion of NSP into Insecure Areas Increases Risk, Implementation Time, and Costs

Although NSP I and NSP II were implemented in some high risk areas of Afghanistan, increasing 

insecurity and the desire to expand NSP to all rural communities resulted in the development of an 

insecure areas strategy, now annex G of NSP Operational Manual V. This strategy provides flexibility to 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 22

facilitating partners and NSP management in implementing NSP in insecure areas28

Under the strategy, facilitating partners as well as MRRD and NSP officials are expected to have less 

oversight of activities. Facilitating partners have the option of subcontracting their work to a local 

nongovernmental organization or having community members serve as facilitators, rather than

requiring facilitating partners to travel to rural villages. Since facilitating partners state that long-term 

engagement in communities is a key ingredient for successfully facilitating the NSP, distance facilitation 

may reduce the effectiveness of NSP activities. 

of Afghanistan. NSP 

III targets 15,800 new communities, many of which are in insecure areas. The new strategy allows 

facilitating partners and the MRRD flexibility in implementing certain requirements in the NSP 

operational manual, including those pertaining to CDC elections, women’s participation, engineering 

review, and block grant transfer. 

The insecure areas strategy also permits the use of hawalla dealers in areas where it is too difficult or 

dangerous for CDC members to travel to DAB branches in the provincial capitals. The use of hawalla 

dealers for delivery of block grants is a matter of concern because block grant funds misappropriated 

through this mechanism are difficult to recover, as demonstrated by the problem NSP has had in 

recovering about $2.8 million from a hawalla dealer in Paktika Province. According to NSP III 

documentation, CDCs may, depending on the security situation, choose to use hawalla dealers to 

transfer NSP funds on an exceptional basis. However, the hawalla dealers must be chosen from a list of 

pre-qualified and registered hawalla dealers. Further, hawalla contracts must include risk mitigating 

measures such as multiple layers of confirmation and verification of receipt of funds by the designated 

representatives of the communities. To further mitigate the increased program risks in insecure areas, 

NSP’s strategy introduces some new measures such as reducing the size of block grants, limiting the 

types of projects, and using third-party monitors. To help offset the additional risk of working in 

insecure areas, the NSP has agreed to compensate facilitating partners who agree to work in such areas 

by paying them an additional $800 to $1,500 per community, depending on the level of insecurity. 

However, it has been difficult to recruit facilitating partners for these areas and work proceeds slower 

than in more secure areas. The insecure areas strategy was piloted through a facilitating partner in 

Kandahar province in 2009-10, but work progressed slowly. Since the facilitating partner could not 

monitor project progress in all districts, they set up alternate mechanisms that included a verification 

committee outside the CDC and secret monitors who reported back on project progress. According to 

the facilitating partner, these sources reported serious issues in three of the five districts where they 

worked, including murder, kidnapping, Taliban intimidation of CDC members, and the cessation of all 

work due to the lack of security. 

The lack of access by oversight bodies in insecure areas also increases risk. For example, due to security 

considerations the ARTF external auditors visited fewer than 20 percent of Afghan provinces in each of 

the last 2 years. While alternative means may be used to monitor operations, there is no real substitute 

for on-site review. The NSP’s planned expansion into insecure areas increases risk to personnel and 

 28 NSP’s Insecure Areas Strategy defines “insecure areas” as districts where a considerable number of villages 

cannot be accessed consistently by NSP provincial management unit and facilitating partner personnel due to 

threats from, or the presence of, hostile insurgent groups or other types of armed actors.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 23

resources, and will likely increase the time and cost of implementing NSP activities. These risk factors 

could contribute to a failure to achieve program objectives in those areas. 

CONCLUSION

The NSP is an Afghan national priority development program funded almost entirely by international 

donors. The United States, as the single largest provider of NSP funding, has a vested interest in the 

successful implementation of the program. Having confidence in the NSP becomes particularly 

important as the United States looks for ways to increase direct assistance to the Afghan government. 

The proposed increase in funding under NSP III provides an opportunity for the United States and other 

international donors to use the NSP as a vehicle to meet their direct assistance goals. Numerous 

international and Afghan oversight mechanisms and internal controls help provide reasonable assurance 

that donated funds will be used as intended. While some NSP funds were fraudulently withheld by a

hawalla dealer, this appears to be an isolated event.

The program has made progress in providing local governance training and development funding to 

thousands of rural communities in the more secure districts of Afghanistan. Less certain is how well the 

program will work in insecure areas. Expansion into less secure areas of the country increases the level 

of risk associated with NSP activities and could limit or dilute the NSP’s ability to achieve intended 

outcomes. 

We identified specific areas for operational improvements, such as ensuring the timely receipt of block 

grants and payments to facilitating partners, and strengthening the measuring and reporting of 

performance indicators to measure improvements in local governance. Documenting such changes 

could help in determining the future role of community development councils. 

RECOMMENDATIONS

To help ensure that about $2.8 million of NSP funds retained by a hawalla dealer in Paktika Province, 

and $84,648 in unearned transfer fees paid to the same hawalla dealer, are used for their intended 

purposes, we recommend that the U.S. Ambassador to Afghanistan:

1. Urge the Afghan government to continue its efforts to recover those funds from the hawalla 

dealer and either reprogram the recovered funds for NSP activities or return the funds to the 

ARTF.

To improve internal controls associated with monitoring and accounting for donor funds and help 

mitigate the potential effects of future challenges to NSP identified in this report, SIGAR recommends 

that the U.S. Ambassador to Afghanistan encourage the NSP, the MRRD, and the World Bank to:

2. Strengthen the existing monitoring system within the program and improve the quality of the 

internal monitoring reports to measure progress toward established performance indicators to 

show improvements in local governance and linkages over time between local communities and 

the Afghan government as a result of NSP activities.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 24

3. Seek final determination by the Afghan government as to whether community development 

councils established by NSP should become village councils.

4. Continue to improve the block grant transfer system to ensure that community development 

councils receive and have access to funds in a timely and consistent manner—particularly during 

the seasons in which they can implement approved projects.

5. Strengthen and streamline the system for paying facilitating partners in accordance with NSP 

contractual obligations. 

6. Closely monitor and evaluate NSP activities in insecure areas to determine whether the greater 

flexibility in applying internal controls results in losses of NSP funds or the failure to achieve 

program objectives. 

COMMENTS

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

See appendices V through VII. Both the World Bank and the MRRD also provided technical comments, 

which we have incorporated, as appropriate.

In its response to a draft of this report, the Embassy generally concurred with the report’s findings and 

provided some additional information regarding several of the recommendations as well as some 

technical changes that we have incorporated. (The Embassy did not specifically comment on 

recommendations four and five.) Regarding our recommendation to collect the NSP funds from the 

hawalla dealer, it noted that a number of efforts are underway, including measures taken by the NSP 

before our audit. We concur and have clarified the report section addressing the hawalla dealer to 

better highlight the sequence of events and reworded the recommendation. The Embassy also noted 

that steps have already been taken to strengthen the monitoring of NSP’s progress towards its 

governance objective, and that the government of Afghanistan has begun taking action to recognize 

CDCs as interim village councils. We welcome these actions and believe that, if the Afghan government 

takes the steps it says it is going to take, they will substantially address our recommendations. Finally, 

the Embassy agreed that monitoring and evaluating NSP activities in more insecure areas will present a 

challenge, but questioned our assertion that “internal controls will be reduced.” As we note in the 

report, MRRD and NSP officials are providing greater “flexibility” in implementing certain internal 

controls because of the difficulty in operating in more insecure areas. We characterized this as 

“reduced” in the draft report. We reworded the recommendation to reflect this. 

The World Bank generally concurred with the report’s findings, but noted with regard to the payment of 

block grants that during SY1389 (March 2010-March 2011) there were no delays in the release of 

payments. However, according to the MRRD’s NSP implementation monitoring report (dated January 

2011) for the quarter ending June 2010, 10 percent of the projects reviewed faced delays with the main 

cause being late disbursement of block grants. Further, the World Bank stated that standard procedures 

allow up to two months to process block grant payments and that the NSP maintains an $80 million float 

account to ensure that adequate funds are available. We acknowledge improvements in the timeliness 

of block grant payments over time and that the majority of block grants are received in a timely manner. 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 25

However, the lack of cash in some remote branches of Da Afghanistan Bank, particularly during the 

summer months, has not been resolved.

The MRRD stated that the report will be an important document to influence stakeholder opinions of 

the program and potential future funding to the NSP. Nevertheless, MRRD expressed concern that 

various documents and related clarifications provided to us were not taken into account. In its 

comments, the MRRD provides specific explanations corresponding to each of our recommendations. 

Several comments were similar to the Embassy’s and we have addressed them. Overall, however, we 

believe we have accurately reflected the matters the MRRD raises. Nevertheless, the MRRD’s 

comments are reproduced in full in appendix VII.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 26

APPENDIX I: SCOPE AND METHODOLOGY

In this review of the National Solidarity Program (NSP), we assessed (1) the extent and use of U.S. and 

other donor assistance to the NSP, (2) the level of oversight and internal controls over donor funds, 

(3) whether NSP was meeting its targets, and (4) key challenges facing NSP in its third and final phase.

To determine the extent and use of U.S. and other donor assistance to the NSP, we obtained funding 

data and documentation from Afghanistan’s Ministry of Rural Rehabilitation and Development (MRRD), 

U.S. Agency for International Development (USAID), the World Bank, and other international donors. In 

particular, we reviewed the original award and 35 subsequent modifications to the Afghanistan 

Reconstruction Trust Fund (ARTF) grant agreement (EEE-G-00-02-0002S-00) between USAID and the 

World Bank. We also reviewed U.S. congressional appropriations containing language and earmarks 

pertaining specifically to NSP. We conducted interviews with officials from various organizations to 

verify the funding data and to determine how funds were used and compared funding data to annual 

audit reports of NSP’s financial statements. We also reviewed a prior SIGAR audit of Afghanistan’s 

Control and Audit Office and met with officials of that office who were responsible for conducting the 

annual financial audits of NSP.

To assess the level of oversight and internal controls over NSP donor funds, we obtained documentation 

and interviewed representatives from the World Bank, MRRD, NSP, facilitating partners, and other 

donors. We obtained an understanding of the fiduciary oversight mechanisms provided by the ARTF 

administrator by reviewing minutes of the ARTF management committee, as well as reports of World 

Bank-funded program evaluations and supervision missions. We also reviewed ARTF quarterly and 

annual reports to donors, and reports issued by the ARTF donor committee. We obtained an 

understanding of financial and programmatic internal controls over NSP activities by reviewing the NSP 

operational manual. To determine the level of compliance with those internal controls, we conducted a 

review of NSP files for 62 randomly selected NSP projects initiated after September 1, 2009 (the 

implementation date for the latest version of the operational manual) and completed prior to July 29, 

2010 (to ensure that the projects had ended). The sample projects were randomly selected from a 

universe of 664 projects meeting the pre-selection criteria. The universe data were provided in an Excel 

spreadsheet by the head of NSP’s Management Information System Department. We verified the 

accuracy of the data by reviewing scanned copies of the randomly selected project files and comparing 

the data to those files. The sample selection was drawn using the Excel random number generator after 

determining that a sample size of 62 projects was sufficient to obtain a 90-percent confidence level with 

an error rate of plus or minus 10 percent drawn from a universe of 664 projects. For each of the 62 

projects, we reviewed administrative, accounting, and procurement files, located at NSP headquarters in 

Kabul, Afghanistan. We tested the files for existence and completeness, including appropriate 

approvals, stamps, and signatures. We interviewed the facilitating partners responsible for the 62

randomly selected projects. In all, we met with 9 separate facilitating partners covering NSP 

communities in 195 districts and 14,404 villages in 26 of Afghanistan’s 34 provinces. Due to security 

reasons, the audit team was unable to visit any CDCs or inspect any NSP project sites, although we 

obtained completion and site visit reports for 10 randomly selected projects from NSP’s Monitoring and 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 27

Evaluation Department. We were also unable to review any books and records at the village level, with 

the exception of files for 5 of the randomly selected projects which we reviewed in NSP Provincial 

Management Units in Kabul and Parwan provinces. 

To determine whether NSP was achieving its intended results, we reviewed the program objectives 

included in NSP program documentation and compared them with results included in progress reports 

from NSP, MRRD, and the World Bank. We verified the comparative information by interviewing 

officials from those and other organizations, including USAID, and other international donors, including 

the Danish Embassy, the United Kingdom’s Department for International Development, the Asian 

Development Bank, the Italian Cooperation Office, and the United Nations Assistance Mission to 

Afghanistan (UNAMA), as well as nine separate NSP facilitating partners. These facilitating partners 

included the Afghanistan Rehabilitation and Education Program, Bangladesh Rural Advancement 

Committee, Coordination of Humanitarian Assistance, Aga Khan Foundation, International Rescue 

Committee, Sanayee Development Organization, Mission d’Aide au Développement des Economies 

Rurales Programme Afghanistan, UN-Habitat, and Danish Committee for Aid to Afghan Refugees. We 

also reviewed program evaluations conducted by the World Bank, Harvard University, University of York, 

Integrity Watch Afghanistan, and the UN Development Programme.

To highlight key challenges facing NSP in its third and final phase, we interviewed key implementers and 

stakeholders of NSP, including the Minister of MRRD; the Deputy Minister, Programmes, MRRD; NSP 

Executive Director; and department heads of NSP’s Finance, Operations, Management Information 

System, Monitoring and Evaluation, and Engineering Departments. We also met with the USAID official 

designated to oversee USAID’s ARTF grant agreement with the World Bank and officials from the Danish 

Embassy, United Kingdom’s Department for International Development, the Asian Development Bank, 

the Italian Cooperation Office, and UNAMA, as well as nine NSP facilitating partners. These facilitating 

partners included Afghanistan Rehabilitation and Education Program, Bangladesh Rural Advancement 

Committee, Coordination of Humanitarian Assistance, Aga Khan Foundation, International Rescue 

Committee, Sanayee Development Organization, Mission d’Aide au Développement des Economies 

Rurales Programme Afghanistan, UN-Habitat, and Danish Committee for Aid to Afghan Refugees. We 

also reviewed program evaluations conducted by the Work Bank, Harvard University, University of York, 

and UNDP.

We relied on performance data reported by NSP’s management information system. To verify the 

reliability of that data, we utilized the random sampling of individual projects that were reported to 

have been recently completed and matched the computerized data to documentation in NSP’s paper 

files. We found hardcopy evidence for all 62 of the randomly selected projects. Since we could not visit 

the project sites, we randomly selected 10 of the 62 projects for a more thorough review and found 

documentary evidence that all 10 projects had received monitoring site visits by NSP staff and had been 

completed as intended.

Where possible, we traced reported funding data to at least two sources to confirm its reliability. We 

verified expenditure data with annual financial audit reports issued by Afghanistan’s Control and Audit 
SIGAR Audit-11-8 Economic and Social Development / NSP Page 28

Office, after confirming that those audits were conducted in accordance with international auditing 

standards promulgated by the International Organization of Supreme Audit Institutions.

We conducted work in Kabul and Parwan provinces in Afghanistan and in Washington, D.C., from April 

2010 to January 2011 in accordance with generally accepted government auditing standards. These 

standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to 

provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe 

the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit 

objectives. The audit was conducted by the Office of the Special Inspector General for Afghanistan 

Reconstruction 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.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 29

APPENDIX II: NSP REPORTED OUTPUTS AGAINST TARGETS, 2002 - 2007

Table I: NSP Reported Outputs Against Targets, 2002 – 2007

Output Indicators

ECEPWPa

outputs Dec

31, 2004

NSP I 

Targets

NSP I 

Outputs by 

Mar 31, 

2007

Total 

Outputs by 

Mar 31, 

2007

Community Block Grants

Sub-projects meeting appraisal criteria and 

receiving funds

5,962 15,116 16,496 22,458b

Sub-projects completed 53 10,539 10,357 10,410

Block grant disbursement (in millions of dollars) $59.3 $210.0 $224.4 $283.7

Block grant commitment (in millions of dollars) $120.0 $304.8 $183.7 $313.7 

Percentage of communities contributing at least 

10% of project cost

100% 90% 100% 100%

Number of beneficiary families (in communities 

that receive block grant funds)

496,833 1,260,000 1,720,084 2,216,917

Labor days created from NSP projects 3,827,604 9,700,000 10,590,432 14,418,036

Community Facilitation and Project Preparation

Villages with elected CDCs 6,181 10,254 10,321 16,502

Villages with community development plans 6,181 9,432 10,082 16,263

Sub-project proposals submitted 7,472 16,000 20,083 27,555

Percentage of women voting in CDC elections 40-80% >40% >40% >40%

Communities with representation of women in 

CDCs (joint or separate)

>90% >40% 95% 95%

Districts 101 178 178 279

Provinces 33 34 34 34

Number of facilitating partners 21 NA 24 24

Capacity Building and Implementation Support

Project Management Consultant 1 1 1 1

Community members trained in either 

procurement, financial management, or 

operations and maintenance

27,350 393,000 408,171 472,234

Facilitating partner field staff trained 2,607 5,000 1,811c 4,418

MRRD staff trained 714 850 263 950

External Monitoring and Evaluation

Assessment of facilitating partners 1 NA NA 1

External project evaluation NA 1 1 1
SIGAR Audit-11-8 Economic and Social Development / NSP Page 30

Output Indicators

ECEPWPa

outputs Dec

31, 2004

NSP I 

Targets

NSP I 

Outputs by 

Mar 31, 

2007

Total 

Outputs by 

Mar 31, 

2007

Source: World Bank.

Notes:

a Emergency Community Empowerment and Public Works Project, 2002-2004 (the foundation of NSP).

b The 22,458 projects were implemented by 12,270 communities (1.8 projects per community).

c Figures on facilitating partner and MRRD staff trained do not include staff that also attended training in the previous 

period.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 31

APPENDIX III: NSP FACILITATING PARTNERS

Table II: NSP Facilitating Partners, as of August 2010 

NSP Facilitating Partners

Facilitating Partner Provinces in which Facilitating Partners 

Conducted NSP Activities in 2010

Interviewed 

by SIGAR

Agency for Technical Cooperation and 

Development 

Baghlan, Badakhshan, Faryab, Kunduz, Takhar

ActionAid International Afghanistan Jawezjan, Kabul

Afghan Aid Badakshan, Ghor, Nuristan, Samangan

Aga Khan Foundation Badakshan, Baghlan, Bamyan, Parwan, Takhar X

Afghanistan National Re-Construction Coordination Uruzgan

Afghanistan Rehabilitation and Education 

Program

Paktika X

Bangladesh Rural Advancement Committee

BRAC

Nangarhar, Hilmand, Paktika, Badghis, 

Samangan, Takhar

X

CARE Baghlan, Balkh, Ghazni, Paktia, Parwan, Wardak

Coordination for Humanitarian Assistance Balkh, Faryab, Ghor, Herat X

Concern Worldwide Badakshan, Takhar

Danish Committee for Aid to Afghan 

Refugees 

Badghis, Faryab, Ghazni, Herat, Laghman, Paktia, 

Parwan

X

Future Generation Ghazni, Nangarhar

Flag International Ghazni , Badakhshan

German Agro –Action Faryab, Jawzjan, Nangarhar

Ghazni Rural Support Programe Baghlan, Kunduz

Interco Operation Herat - Chishti Sharif district

International Rescue Committee Herat, Khost, Logar, Nangarhar X

Mission d’Aide au Développement des 

Economies Rurales Programme Afghanistan 

Ghor, Kunar, Laghman, Nuristan X

Norwegian Project Office /Rural 

Rehanilitation Assosiation for Afghanisntan

Badghis, Herat, Nangarhar, Kunar

Oxford Committee for Famine Relief Dai Kundi

People in Need Baghlan, Balkh, Nangarhar, Paktia

Partners for Social Development Dai Kundi 

Relief International Kunar, Nimroz

Swedish Committee for Afghanistan Wardak

Sanayee Development Organization Kabul X

Solidarites, Aide Humanitaire d'Urgence Samangan
SIGAR Audit-11-8 Economic and Social Development / NSP Page 32

United Nations Human Settlements Program

(UN-Habitat)

Balkh, Bamyan, Farah, Herat, Kandahar, Kapisa, 

Nangahar, Panjshir, Parwan

X

Refugee Care for Afghnanistan Jawzjan , Saripul

Source: NSP Facilitating Partner Management Department data.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 33

APPENDIX IV: NSP ORGANIZATIONAL STRUCTURE

Figure I: NSP Organizational Structure, as of August 2010

Source: NSP data.
SIGAR Audit-11-8 Economic and Social Development / NSP Page 34

APPENDIX V: COMMENTS FROM U.S. EMBASSY
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SIGAR Audit-11-8 Economic and Social Development / NSP Page 37

APPENDIX VI: COMMENTS FROM THE WORLD BANK
SIGAR Audit-11-8 Economic and Social Development / NSP Page 38
SIGAR Audit-11-8 Economic and Social Development / NSP Page 39

APPENDIX VII: COMMENTS FROM MINISTRY OF RURAL REHABILITATION AND 

DEVELOPMENT/NATIONAL SOLIDARITY PROGRAM
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SIGAR Audit-11-8 Economic and Social Development / NSP Page 42
SIGAR Audit-11-8 Economic and Social Development / NSP Page 43

(This report was conducted under the audit project code SIGAR-023A).
SIGAR’s Mission The mission of the Special Inspector General for Afghanistan 

Reconstruction (SIGAR) is to enhance oversight of programs for 

the reconstruction of Afghanistan by conducting independent 

and objective audits, inspections, and investigations on the use 

of taxpayer dollars and related funds. SIGAR works to provide 

accurate and balanced information, evaluations, analysis, and 

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

other decision-makers to make informed oversight, policy, and 

funding decisions to:

• improve effectiveness of the overall reconstruction 

strategy and its component programs;

• improve management and accountability over funds 

administered by U.S. and Afghan agencies and their 

contractors;

• improve contracting and contract management 

processes;

• prevent fraud, waste, and abuse; and

• advance U.S. interests in reconstructing Afghanistan.

Obtaining Copies of SIGAR Reports 

and Testimonies

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

Web site (www.sigar.mil). SIGAR posts all released reports, 

testimonies, and correspondence on its Web site.

To Report Fraud, Waste, and 

Abuse in Afghanistan 

Reconstruction Programs

To help prevent fraud, waste, and abuse by reporting 

allegations of fraud, waste, abuse, mismanagement, and 

reprisal contact SIGAR’s hotline:

• Web: www.sigar.mil/fraud

• Email: hotline@sigar.mil

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

• Phone DSN Afghanistan 318-237-2575

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

• Phone DSN International: 312-664-0378

• U.S. fax: +1-703-604-0983

Public Affairs Public Affairs Officer

• Phone: 703-602-8742 

• Email: PublicAffairs@sigar.mil

• Mail: SIGAR Public Affairs

400 Army Navy Drive

Arlington, VA 22202