More than $100 million in State Department grants to foreign organizations for reconstruction work in Afghanistan has never been audited because the department lacks guidance and, in some cases, doesn't require an audit at all.
As a result, U.S. tax dollars awarded to foreign organizations have been spent without financial oversight, according to a report by the Special Inspector General for Afghan Reconstruction.
Fifty-three grants to foreign organizations working in Afghanistan between 2002 and 2011, totaling $109.6 million, were never audited, according to the report.
Three of those grants, totaling $6.6 million, went to public international organizations, which are not subject to federal regulations, leaving audits up to the recipient. None of the three requested an audit.
"State generally relies on public international organizations to audit contributions in accordance with their own policies and procedures," according to the report.
Fifty of the 65 grants awarded to foreign nongovernmental organizations also went unaudited, because State has no department-wide audit policy for foreign NGOs.
"Individual bureaus have established their own policies, leading to inconsistent audit requirements within the agency," the SIGAR wrote.
The State Department also gave dozens of awards to U.S. organizations doing reconstruction work in Afghanistan.
Including the awards to foreign organizations, the State Department handed out a total of 140 grants worth more than $1 million each for reconstruction work between 2002 and 2011. Ninety-nine of those awards, totaling $191 million, has never been audited.
"Although financial audits were not necessarily required for many of these 99 awards, the use of financial auditing could have better ensured State's proper stewardship of the $191 million disbursed through these awards," the SIGAR wrote in a report released July 8.
More than $136 million of the funds awarded went to U.S. nonprofits, many of which received multiple grants. The department is required by federal policy to audit awards to nonprofits worth more than $500,000. But the guidelines are vague, allowing the department to request certain federal programs be audited as "major programs" in lieu of arranging for separate audits of each award.
As a result, even though most of the nonprofits that received awards had an audit of at least one of their awards, $75.3 million went unaudited because it wasn't considered part of a "major program." This decision was made simply because the amount of money was small compared to the amount the organization received from other federal sources, according to the report.
The guidelines given to recipients are also vague, leaving some struggling to figure out audit requirements on their own.
"For example, rather than include audit provisions directly in award agreements, State refers recipient organizations to its website for guidance," the SIGAR wrote.
The website is vague about how organizations determine their requirements, according to the report, leading recipients to follow the wrong policy or none at all.
The department's lack of oversight could be wasting taxpayer money, the SIGAR said.
"Although financial audits were not necessarily required for most of these awards, State had the discretion to do so and would have significantly strengthened its oversight of these awards had it exercised that discretion," the report said.
In response, the department said it would develop a risk-based audit policy for foreign organizations receiving U.S. tax dollars, according to the report. The department also said it would clarify its guidance for recipients.
The department also told the SIGAR it is coordinating audit work with other organizations that have awarded contracts in Afghanistan.