Over at Informed Consent, Juan Cole writes:
The [Kerry-Lugar Pakistan] aid bill is also controversial in Washington, where a US AID official has complained about the plan to funnel it through Pakistani contractors rather than through American ones. The Agency for International Development official maintained that Pakistani organizations cannot be monitored effectively by the US, raising the possibility that the money will be embezzled…
I understand the difficulty of auditing NGOs in dangerous places like the FATA tribal areas. But it seems to me that it must be possible to audit the Pakistani pass-through organizations elsewhere regularly, and that the shell game of Congress giving foreign aid to a country in a way that actually just benefits US corporations and contractors is counter-productive.
The original complaint came in the form of a “sensitive but unclassified” internal memo from US AID Development Economist C. Stuart Callison, Ph.D., criticizing the U.S. State Department’s shifts in the routing of Pakistan aid:
Directing an immediate shift away from U.S. contractors already on the ground to local implementers without an appropriate transition period will seriously compromise the more important requirements for quick counterinsurgency and economic impacts…Based on past experience in Pakistan, very few Pakistani firms and NGOs can currently satisfy the stringent financial management audit requirements for USAID project funding.
The original USA Today article offers additional context:
USAID has long relied mainly on large U.S. firms to deliver aid. Secretary Clinton and Holbrooke have said they want to reduce the reliance on those American firms because, in their view, too much of the money spent that way is lost to overhead, security and expatriate salaries.
A report in March by the aid group Oxfam said the multibillion U.S. aid effort in Afghanistan had been ineffective in part because of an overreliance on contractors. In a series of audits, USAID’s inspector general found that many contractor-run aid programs in the region have not been working as intended.