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GAO-11-948R:
United States Government Accountability Office:
Washington, DC 20548:
September 20, 2011:
Congressional Addressees:
Subject: Afghanistan's Donor Dependence:
The United States has allocated over $72 billion to secure, stabilize,
and rebuild Afghanistan since 2002, and the President requested over
$18 billion for these purposes for fiscal year 2012. GAO has on
numerous occasions raised doubts about the Government of the Islamic
Republic of Afghanistan's (GIRoA) ability to fund its public
expenditures--funds spent to provide public services to the Afghan
population, such as security, infrastructure projects, and government
salaries. In 2005, we reported that Afghanistan had limited resources
and recommended that the Secretaries of State and Defense develop
plans for funding the Afghan national security forces (ANSF).[Footnote
1] In 2007 and 2008, we reported that it was essential to develop
future funding requirements for the ANSF and a strategy for
transitioning these responsibilities to GIRoA.[Footnote 2] In 2008,
Congress also mandated that the Department of Defense provide a long-
term plan for sustaining the ANSF, including future funding
requirements. The Department of Defense, however, has yet to provide
the Congress an estimate of the cost to sustain the Afghanistan
National Security Forces.[Footnote 3] In 2011, we again recommended
that the U.S. and international partners develop estimates of the
future funding needed to grow the Afghan National Army.[Footnote 4] We
have also raised concerns about Afghanistan's inability to fund
planned government expenditures without foreign assistance and raised
questions about the sustainability of U.S.-funded efforts to build and
enhance Afghanistan's road, agriculture, and water infrastructures.
[Footnote 5] In a recent report, we also reviewed U.S. efforts to
strengthen Afghanistan's public financial management, a critical
capability for Afghanistan's fiscal sustainability.[Footnote 6]
The international community, including about 50 donor countries and
international entities such as the World Bank and the United Nations,
has also provided significant support to help stabilize and rebuild
Afghanistan. At international conferences in London (January 2010) and
Kabul (July 2010), officials from these countries and organizations
committed to supporting Afghanistan but also raised issues about
Afghanistan's donor dependence.
Because of the wide range of interest in this topic, we conducted a
review of issues related to Afghanistan's donor dependence, including
U.S. funding for Afghanistan, under the authority of the Comptroller
General to undertake work on his own initiative. In September 2011, we
briefed the staff of the Senate Committees on Armed Services and
Foreign Relations and House Committees on Armed Services and Foreign
Affairs on the interim results of our work. This report provides
preliminary observations based on our analysis of U.S. agencies and
others' reports on (1) Afghanistan's estimated total public
expenditures; (2) estimated public expenditures funded by donors,
including the United States; and (3) Afghanistan's domestic revenues.
(See enclosure I for the briefing slides.) This report does not
include conclusions or recommendations.
To estimate Afghanistan's total public expenditures and the amounts
funded by donors, we reviewed and obtained expenditure data from the
GIRoA budget and U.S. agencies and publicly available data from the
International Monetary Fund (IMF), World Bank, Organization for
Economic Cooperation and Development (OECD), other donors, and
international trust funds for Afghanistan. We estimated total public
expenditures (on and off-budget) disaggregated by security and non-
security. We define off-budget amounts as public expenditures that are
100 percent donor funded and are not channeled through the Afghan
budget, but are expended for public goods and services such as
government wages and salaries, infrastructure projects and equipment.
Expenditures to support U.S. and NATO troops are not Afghanistan
public expenditures. We use expenditures to refer to funds disbursed.
To provide information on Afghanistan's donor dependence, we reviewed
publicly available documents and analyses from GIRoA, IMF, World Bank,
and other sources. We also interviewed U.S., other donor, and Afghan
officials to clarify information collected. Data from some of the
sources were preliminary as of August 31, 2011. We plan to continue to
update this information when final estimates become available. Past
funding and expenditure data report historical information and do not
imply that these trends will continue in the future. We made necessary
assumptions in certain cases such as in converting data from calendar
and U.S. fiscal years to Afghan fiscal and solar years.[Footnote 7] We
performed checks, including consistency with prior GAO reports, to
ensure that the data we used were sufficiently reliable for our
analyses. See enclosure II for more detailed information on our scope
and methodology and data sources.
We conducted this performance audit from June 2011 to September 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Summary:
* Afghanistan's estimated total public expenditures.[Footnote 8]
Afghanistan's estimated total public expenditures more than doubled
from solar year (SY) 2006 to 2010, growing from $5.5 billion to $14.3
billion, an increase of 160 percent. Over this 5-year period, about 79
percent of Afghanistan's estimated total public expenditures of $54
billion were off budget. (See enclosure I, slides 7-10 for further
information.)
* Donor funding. The United States and other donors funded about 90
percent of Afghanistan's estimated total public expenditures from
SY2006 to 2010. In particular, donors funded on average 57 percent of
on-budget expenditures and 100 percent of off-budget expenditures.
Over this period, the United States provided 62 percent of estimated
total public expenditures, while other donors provided 28 percent. The
United States funded an estimated 90 percent of Afghanistan's total
security expenditures during this time period. The United States
funded an estimated 39 percent of Afghanistan's total non-security
expenditures during SY2006 to 2010. (See enclosure I, slides 11-14 for
further information.)
* Afghanistan's domestic revenues. The domestic revenues of GIRoA grew
by an average annual rate of 30 percent from SY2006 to 2010,
increasing from an estimated total of $0.62 billion to $1.66 billion.
Customs duties and taxes such as income and property taxes provided
the largest share of domestic revenues. However, domestic revenues
funded only about 9 percent of Afghanistan's estimated total public
expenditures from SY2006 to 2010. (See enclosure I, slides 16-18 for
further information.)
We obtained oral comments on a draft of this product from the
Departments of Treasury, State, and Defense and incorporated the
comments into the report as appropriate.
Upon releasing the report, we will send copies of this report to
interested congressional committees and to the Secretary of Defense,
the Secretary of State, the Administrator of the U.S. Agency for
International Development., and the Secretary of Treasury. We will
also make copies of this report available to others upon request. We
will also make copies available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-7331 or johnsoncm@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made major
contributions to this report are listed in enclosure.
Signed by:
Charles Michael Johnson Jr.
Director, International Affairs and Trade:
Enclosures:
List of Congressional Addressees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable John Kerry:
Chairman:
The Honorable Richard Lugar:
Ranking Member:
Committee on Foreign Relations:
United States Senate:
The Honorable Buck McKeon:
Chairman:
The Honorable Adam Smith:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable Ileana Ros-Lehtinen:
Chairman:
The Honorable Howard L. Berman:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
[End of section]
Enclosure: Briefing of Congressional Committees:
Afghanistan’s Donor Dependence:
September, 2011:
Contents:
* Background;
* Objectives;
* Key Terms;
* Observations;
* Scope and Methodology (Enclosure II).
Background:
* The U.S. has allocated over $72 billion for security, governance, and
development in Afghanistan since 2002, and the Government of the
Islamic Republic of Afghanistan (GIRoA) has relied on donors to fund
its operating and development expenditures.
* GAO has previously raised concerns about Afghanistan’s donor
dependence, including the lack of cost estimates for developing and
sustaining Afghan national security forces. Donors are also
concerned about GIRoA’s ability to fund its operating expenditures
and to sustain foreign investment in the country. [See note]
* Past funding and expenditure data report historical information and
do not imply that these trends will continue in the future. [See note]
Note: The Department of Defense commented that it is working with the
Afghan Ministries of Defense and Interior to develop cost-effective and
requirement-based estimates for future Afghanistan National Security
Forces (ANSF) sustainment costs. DOD further commented that it
anticipates reduced future costs to sustain the ANSF. GAO is reviewing
these issues and will report on them in 2012.
Objectives:
As part of a body of work focusing on Afghanistan’s governance,
including a review of its donor dependence, we collected and analyzed
data from U.S. agencies and others’ reports on:
1. Afghanistan’s estimated total public expenditures during Afghan
solar years (SY) 2006 to 2010. [See note]
2. Amount U.S. and other donors funded toward Afghanistan’s total
public expenditures.
3. Afghanistan’s domestic revenues.
Note: Afghanistan’s budget cycle is organized around solar years. For
example, solar year 2010/11 begins on March 21, 2010 and ends
on March 20, 2011. See enclosure II for details on our data sources,
definitions, and methodology.
Key Terms for Objectives 1 and 2:
* Total Public Expenditures – funds spent to provide public services
to the Afghan population; the sum of on-budget and off-budget
public expenditures. We based our analysis on reported expenditures,
not on budget estimates.
- On-Budget (Core) Expenditures – public expenditures that are
in GIRoA’s budget funded by domestic revenue and donor
contributions, such as donor contributions for wages and
salaries of government employees.
- Off-Budget (External) Expenditures – public expenditures that
are outside of GIRoA’s budget and are 100 percent donor
funded, such as infrastructure projects.
Note: See enclosure II for details on our data sources, definitions,
and methodology.
* Security expenditures — on and off budget public expenditures
provided to pay, train, equip and build infrastructure for the Afghan
National Security Forces. (Expenditures to support U.S. and NATO
troops are not Afghanistan public expenditures.)
- On-budget security expenditures — total expenditures by the
Ministry of Interior (M01) and the Ministry of Defense (MOD).
- Off-budget security expenditures — security expenditures that are
outside of MOI and MOD budget.
* Non-security expenditures — on and off budget public expenditures
such infrastructure development projects, and teacher salaries.
Generally excludes funds to pay, train, and equip and build
infrastructure for the Afghan National Security Forces.
Objective 1: Total Public Expenditures:
Afghanistan's Estimated Total Public Expenditures (SY2006-SY2010):
Afghanistan's estimated total public expenditures more than
doubled, growing from $5.5 billion in SY2006 to $14.3 billion
in SY2010, an increase of 160 percent. (slide 8)
About 79 percent of Afghanistan's estimated total public
expenditures of about $54 billion were off budget during
SY2006 to 2010. (slide 9)
* About 55 percent were non-security related. (slide 10)
* About 45 percent were security related. (slide 10)
Objective 1: Total Public Expenditures:
Figure: Afghanistan's Estimated Total Public Expenditures More than
Doubled (SY2006-SY2010):
[Refer to PDF for image: vertical bar graph]
Solar year: 2006;
Total Public Expenditures: $5.521 billion;
Solar year: 2007;
Total Public Expenditures: $9.803 billion;
Annual growth: 78%.
Solar year: 2008;
Total Public Expenditures: $11.583 billion;
Annual growth: 18%.
Solar year: 2009;
Total Public Expenditures: $13.180 billion;
Annual growth: 14%.
Solar year: 2010;
Total Public Expenditures: $14.327 billion;
Annual growth: 9%.
Total Public Expenditures: $54.415 billion.
Note: For SY 2010 expenditures derived from OECD Development
Assistance Committee (OECD/DAC) data, last quarter estimates are based
on last quarter actuals in SY 2009. See enclosure II.
Source: GAO analysis of data from Afghanistan Financial Management
Information System, Afghanistan Security Forces Fund (includes
contributions from Afghan National Army Trust Fund, including in-kind
contributions), Law and Order Trust Fund for Afghanistan, OECD
Development Assistance Committee (includes data for Commander's
Emergency Relief Program and Provincial Reconstruction Teams), India
Development Assistance, and U.S. Department of State (State)
International Military Equipment and Training (IMET). See Enclosure II
for further information.
[End of figure]
Figure: About 79 Percent of Afghanistan Public Expenditures Were Off-
Budget (SY2006-SY2010):
[Refer to PDF for image: vertical bar graph]
Solar year: 2006;
On-budget: $1.570 billion;
Off-budget: $3.951 billion;
Total: $5.521 billion.
Solar year: 2007;
On-budget: $1.877 billion;
Off-budget: $7.926 billion;
Total: $9.803 billion.
Solar year: 2008;
On-budget: $2.252 billion;
Off-budget: $9.333 billion;
Total: $11.585 billion.
Solar year: 2009;
On-budget: $2.771 billion;
Off-budget: $10.409 billion;
Total: $13.180 billion.
Solar year: 2010;
On-budget: $3.176 billion;
Off-budget: $11.151 billion;
Total: $14.327 billion.
Total:
On-budget: $11.645 billion (21%);
Off-budget: $42.770 billion (79%);
Total: $54.415 billion.
Note: For SY 2010 expenditures derived from OECD Development
Assistance Committee (OECD/DAC) data, last quarter estimates are based
on last quarter actuals in SY 2009. See enclosure II.
Source: GAO analysis of data from Afghanistan Financial Management
Information System, Afghanistan Security Forces Fund (includes
contributions from Afghan National Army Trust Fund, including in-kind
contributions), Law and Order Trust Fund for Afghanistan, OECD
Development Assistance Committee (includes data for Commander's
Emergency Relief Program and Provincial Reconstruction Teams), India
Development Assistance, and U.S. Department of State (State)
International Military Equipment and Training (IMET). See Enclosure II
for further information.
[End of figure]
Figure: Afghanistan Non-Security Expenditures Were 55 Percent of Total
Public Expenditures (SY2006-SY2010):
[Refer to PDF for image: vertical bar graph]
Solar year: 2006;
Total non-security expenditures: $3.732 billion;
Total security expenditures: $1.789 billion;
Total expenditures: $5.521 billion.
Solar year: 2007;
Total non-security expenditures: $4.741 billion;
Total security expenditures: $5.062 billion;
Total expenditures: $9.803 billion.
Solar year: 2008;
Total non-security expenditures: $6.084 billion;
Total security expenditures: $5.502 billion;
Total expenditures: $11.585 billion.
Solar year: 2009;
Total non-security expenditures: $7.323 billion;
Total security expenditures: $5.857 billion;
Total expenditures: $13.180 billion.
Solar year: 2010;
Total non-security expenditures: $7.794 billion;
Total security expenditures: $6.533 billion;
Total expenditures: $14.327 billion.
Total:
Total non-security expenditures: $29.673 billion (45%);
Total security expenditures: $24.742 billion (55%);
Total expenditures: $54.415 billion.
Note: For SY 2010 expenditures derived from OECD Development
Assistance Committee (OECD/DAC) data, last quarter estimates are based
on last quarter actuals in SY 2009. See enclosure II.
Source: GAO analysis of data from Afghanistan Financial Management
Information System, Afghanistan Security Forces Fund (includes
contributions from Afghan National Army Trust Fund including in-kind
contributions), Law and Order Trust Fund for Afghanistan, OECD
Development Assistance Committee (includes data for Commander's
Emergency Relief Program and Provincial Reconstruction Teams), India
Development Assistance, and U.S. Department of State (State)
International Military Equipment and Training (IMET). See Enclosure II
for further information.
[End of figure]
Objective 2: Donor Funding:
Afghanistan's Estimated Total Public Expenditures Funded by Donors
(SY2006-SY2010):
The United States and other donors funded about 90 percent of
Afghanistan's estimated total public expenditures. The United States
provided 62 percent, while other donors provided 28 percent. (slide 12)
The United States funded an estimated 90 percent of Afghanistan's total
security expenditures, while other donors provided about 4 percent and
Afghanistan provided 6 percent. (slide 13)
The United States funded an estimated 39 percent of Afghanistan's total
non-security expenditures, while other donors provided about 47 percent
and Afghanistan provided 14 percent. (slide 14)
Figure: U.S., Other Donors Funded about 90 Percent of Afghanistan's
Total Public Expenditures (SY2006-SY2010):
[Refer to PDF for image: vertical bar graph]
Solar year: 2006;
GIRoA funded expenditures: $0.847 billion;
U.S. funded expenditures: $2.884 billion;
Other donor funded expenditures: $1.790 billion;
Total public expenditures: $5.521 billion.
Solar year: 2007;
GIRoA funded expenditures: $0.710 billion;
U.S. funded expenditures: $6.318 billion;
Other donor funded expenditures: $2.775 billion;
Total public expenditures: $9.803 billion.
Solar year: 2008;
GIRoA funded expenditures: $1.155 billion;
U.S. funded expenditures: $7.407 billion;
Other donor funded expenditures: $3.024 billion;
Total public expenditures: $11.585 billion.
Solar year: 2009;
GIRoA funded expenditures: $1.404 billion;
U.S. funded expenditures: $8.200 billion;
Other donor funded expenditures: $3.576 billion;
Total public expenditures: $13.180 billion.
Solar year: 2010;
GIRoA funded expenditures: $1.467 billion;
U.S. funded expenditures: $8.990 billion;
Other donor funded expenditures: $3.870 billion;
Total public expenditures: $14.327 billion.
Totals:
GIRoA funded expenditures: $5.584 billion (10%);
U.S. funded expenditures: $33.797 billion (62%);
Other donor funded expenditures: $15.034 billion (28%);
Total public expenditures: $54.415 billion.
Note: For SY 2010 expenditures derived from OECD Development
Assistance Committee (OECD/DAC) data, last quarter estimates are based
on last quarter actuals in SY 2009. See enclosure II.
Source: GAO analysis of data from Afghanistan Financial Management
Information System, Afghanistan Security Forces Fund (includes
contributions from Afghan National Army Trust Fund including in-kind
contributions), Law and Order Trust Fund for Afghanistan, OECD
Development Assistance Committee (includes data for Commander's
Emergency Relief Program and Provincial Reconstruction Teams), India
Development Assistance, and U.S. Department of State (State)
International Military Equipment and Training (IMET). See Enclosure II
for further information.
[End of figure]
Figure: U.S. Funded about 90 Percent of Afghanistan Total Security
Expenditures (SY2006-SY2010):
[Refer to PDF for image: vertical bar graph]
Solar year: 2006;
GIRoA funded security expenditures: $0.284 billion;
U.S. funded security expenditures: $1.452 billion;
Other donor funded security expenditures: $0.053 billion;
Total security: $1.789 billion.
Solar year: 2007;
GIRoA funded security expenditures: $0.234 billion;
U.S. funded security expenditures: $4.653 billion;
Other donor security funded expenditures: $0.175 billion;
Total security: $5.062 billion.
Solar year: 2008;
GIRoA funded security expenditures: $0.280 billion;
U.S. funded security expenditures: $5.073 billion;
Other donor funded security expenditures: $0.318 billion;
Total security: $5.857 billion.
Solar year: 2009;
GIRoA funded security expenditures: $0.361 billion;
U.S. funded security expenditures: $5.177 billion;
Other donor funded security expenditures: $0.318 billion;
Total security: $5.857 billion.
Solar year: 2010;
GIRoA funded security expenditures: $0.354 billion;
U.S. funded security expenditures: $5.840 billion;
Other donor security funded expenditures: $0.399 billion;
Total security: $6.533 billion.
Totals:
GIRoA funded security expenditures: $1.513 billion (6%);
U.S. funded security expenditures: $22.195 billion (90%);
Other donor security funded expenditures: $1.034 billion (4%);
Total security: $24.742 billion.
Source: GAO analysis of data from Afghanistan Financial Management
Information System, Afghanistan Security Forces Fund (includes
contributions from Afghan National Army Trust Fund, including in-kind
contributions), Law and Order Trust Fund for Afghanistan, and U.S.
Department of State (State) International Military Equipment and
Training (IMET). See Enclosure II for further information.
[End of figure]
Figure: U.S. Funded about 39 Percent of Afghanistan's Total Non-
Security Expenditures (SY2006-SY2010):
[Refer to PDF for image: vertical bar graph]
Solar year: 2006;
GIRoA funded non-security expenditures: $0.563 billion;
U.S. funded non-security expenditures: $1.431 billion;
Other donor funded non-security expenditures: $1.737 billion;
Total non-security: $3.732 billion.
Solar year: 2007;
GIRoA funded non-security expenditures: $0.476 billion;
U.S. funded non-security expenditures: $1.665 billion;
Other donor funded non-security expenditures: $2.600 billion;
Total non-security: $4.741 billion.
Solar year: 2008;
GIRoA funded non-security expenditures: $0.875 billion;
U.S. funded non-security expenditures: $2.333 billion;
Other donor funded non-security expenditures: $2.875 billion;
Total non-security: $6.084 billion.
Solar year: 2009;
GIRoA funded non-security expenditures: $1.043 billion;
U.S. funded non-security expenditures: $3.022 billion;
Other donor funded non-security expenditures: $3.257 billion;
Total non-security: $7.323 billion.
Solar year: 2010;
GIRoA funded non-security expenditures: $1.113 billion;
U.S. funded non-security expenditures: $3.150 billion;
Other donor funded non-security expenditures: $3.531 billion;
Total non-security: $7.794 billion.
Totals:
GIRoA funded non-security expenditures: $4.071 billion (14%);
U.S. funded non-security expenditures: $11.602 billion (39%);
Other donor funded non-security expenditures: $14.000 billion (47%);
Total non-security: $24.742 billion.
Note: For SY 2010 expenditures derived from OECD Development
Assistance Committee (OECD/DAC) data, last quarter estimates are based
on last quarter actuals in SY 2009. See enclosure II.
Source: GAO analysis of data from Afghanistan Financial Management
Information System (AFMIS), OECD Development Assistance Committee
(OECD/DAC), which includes data for Commander's Emergency Relief
Program and Provincial Reconstruction Teams, Afghanistan
Reconstruction Trust Fund (ARTF), and India Development Assistance.
[End of figure]
Key Terms for Objective 3:
* Total On-Budget Expenditures — public expenditures that are in GIRoA's
budget funded by domestic revenue and donor contributions, such as donor
contributions for salary support for government employees. These
expenditures are broken out into two categories:
- Operating Expenditures — government wages and salaries, goods and
services, social security benefits, and equipment.
- Development Expenditures — GIRoA development project expenditures
including contracts, goods and services, and capital expenditures
(such as infrastructure and equipment).
* Total Off-Budget (External) Expenditures — public expenditures that
are outside of GIRoA's budget and are 100 percent donor funded, such as
donor-funded infrastructure projects.
Note: See enclosure II for details on our data sources, definitions,
and methodology.
Objective 3: Domestic Revenues:
Afghanistan's Domestic Revenues (SY2006-SY2010):
* Domestic revenues increased from an estimated total of $0.62 billion
to $1.66 billion from SY2006 to 2010. (slide 17)
* Domestic revenues from SY 2006 to 2010 have covered an average of:
(slide 18)
1. 70 percent of on-budget operating expenditures.
2. 43 percent of on-budget expenditures, including operating
and development project expenditures.
3. 9 percent of total public expenditures, including on- and off-
budget expenditures.
Note: See enclosure II for details on our data sources, definitions,
and methodology.
Figure: Domestic Revenues Grew by Average Annual Rate of 30 Percent
(SY2006-2010):
[Refer to PDF for image: vertical bar graph]
Solar year: 2006.
Customs duties: $26.4 billion;
Income and property taxes: $15.9 billion;
Sales and excise taxes: $0 billion;
Administrative fees: $12.0 billion;
Other revenue: $7 billion;
Other taxes: $0 billion;
Total: $0.62 billion.
Solar year: 2007;
Customs duties: $25.9 billion;
Income and property taxes: $9.6 billion;
Sales and excise taxes: $12.8 billion;
Administrative fees: $9.2 billion;
Other revenue: $7.8 billion;
Other taxes: $1.7 billion;
Total: $0.66 billion.
Solar year: 2008;
Customs duties: $25.1 billion;
Income and property taxes: $16.2 billion;
Sales and excise taxes: $12.3 billion;
Administrative fees: $11.7 billion;
Other revenue: $21.2 billion;
Other taxes: $2.8 billion;
Total: $0.89 billion.
Solar year: 2009;
Customs duties: $44.9 billion;
Income and property taxes: $32.5 billion;
Sales and excise taxes: $25.4 billion;
Administrative fees: $12.3 billion;
Other revenue: $12.9 billion;
Other taxes: $3.4 billion;
Total: $1.31 billion.
Solar year: 2010;
Customs duties: $57.1 billion;
Income and property taxes: $40.4 billion;
Sales and excise taxes: $33.6 billion;
Administrative fees: $13.0 billion;
Other revenue: $16.1 billion;
Other taxes: $5.7 billion;
Total: $1.66 billion.
Note: Administrative fees include overflight fees and passport fees.
Other revenues include retirement contributions and sale of land and
buildings.
Source: GAO analysis of data from Afghanistan Financial Management
Information System (AFMIS).
[End of figure]
Figure: Afghan Domestic Revenues Fund Varying Percentage of Public
Expenditures (SY2006-2010):
[Refer to PDF for image: line graph]
Solar year: 2006;
Domestic revenue as a percentage of on-budget operating expenditures:
72%;
Domestic revenue as a percentage total on-budget expenditures: 40%;
Domestic revenue as a percentage of total public expenditures: 11%.
Solar year: 2007;
Domestic revenue as a percentage of on-budget operating expenditures:
66%;
Domestic revenue as a percentage total on-budget expenditures: 35%;
Domestic revenue as a percentage of total public expenditures: 7%.
Solar year: 2008;
Domestic revenue as a percentage of on-budget operating expenditures:
65%;
Domestic revenue as a percentage total on-budget expenditures: 40%;
Domestic revenue as a percentage of total public expenditures: 8%.
Solar year: 2009;
Domestic revenue as a percentage of on-budget operating expenditures:
72%;
Domestic revenue as a percentage total on-budget expenditures: 47%;
Domestic revenue as a percentage of total public expenditures: 10%.
Solar year: 2010;
Domestic revenue as a percentage of on-budget operating expenditures:
73%;
Domestic revenue as a percentage total on-budget expenditures: 52%;
Domestic revenue as a percentage of total public expenditures: 12%.
Average:
Domestic revenue as a percentage of on-budget operating expenditures:
70%;
Domestic revenue as a percentage total on-budget expenditures: 43%;
Domestic revenue as a percentage of total public expenditures: 9%.
Note: For SY 2010 expenditures derived from OECD Development
Assistance Committee (OECD/DAC) data, last quarter estimates are based
on last quarter actuals in SY 2009. See enclosure II.
Source: GAO analysis of data from Afghanistan Financial Management
Information System, Afghanistan Security Forces Fund (includes
contributions from Afghan National Army Trust Fund including in-kind
contributions), Law and Order Trust Fund for Afghanistan, OECD
Development Assistance Committee (includes data for Commander's
Emergency Relief Program and Provincial Reconstruction Teams), India
Development Assistance, and U.S. Department of State (State)
International Military Equipment and Training (IMET). See Enclosure II
for further information.
[End of enclosure]
Enclosure II: Scope and Methodology:
This enclosure provides additional details about our scope and
methodology, including additional information on data sources,
definitions, data analysis, and assumptions and limitations.
Scope and Methodology:
To estimate Afghanistan’s total public expenditures, we reviewed GIRoA’
s budget (revenues, expenditures, and donor contributions) and
expenditure data from DOD and State in addition to publicly available
expenditure data from the IMF, the World Bank, and international trust
funds for Afghanistan. Based on our analysis of these documents, we
estimated Afghanistan’s total public expenditures, on and off budget,
disaggregated by security and non-security expenditures. Our estimates
are based on reported expenditures, not budget estimates. See the “
Definitions” section below for the definitions that we used for total
public expenditures, on-budget expenditures, off-budget expenditures,
and other key terms.
To estimate donor dependence for Afghanistan, we reviewed publicly
available documents and analyses from the Afghan government, the IMF,
the World Bank, and other relevant sources. We also interviewed U.S.,
other donor, and Afghan officials to clarify information collected and
analyzed about Afghanistan’s donor dependence.
We conducted this performance audit from June 2011 to September 2011 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Data Sources:
* Afghanistan Financial Management Information System (AFMIS) provides
information on on-budget Afghan expenditures.
* Afghanistan Security Forces Fund (ASFF) is a U.S. and NATO fund
created by the U.S. Congress primarily to fund the training,
equipping, and building up of the Afghan National Army (ANA) and
Afghan National Police (ANP). The U.S. Department of Defense (DOD)
provided us with ASFF financial data, including expenditures. DOD
allocates funds to three budget activity groups within the ASFF:
- Defense Forces (ANA);
- Interior Forces (ANP);
- Related Activities (primarily Detainee Operations).
Some ASFF expenditures are made on budget and some are made off
budget. The North Atlantic Treaty Organization Training Mission –
Afghanistan (NTM-A) and Combined Security Transition Command -
Afghanistan (CSTC-A) are responsible for managing the use of ASFF
funds.
* Afghanistan National Army Trust Fund (ANATF) is a multi-donor NATO-
managed trust fund that provides funding for the ANA. Funds are
transferred to the ASFF and managed by NTM-A/CSTC-A.
* NTM-A-CSTC-A. Equipment donated to the ANA--estimated amounts
delivered from SY 2006 to 2009. After this time, ANA funds were
reported in the ASFF.
* Afghanistan Reconstruction Trust Fund (ARTF) is a multi-donor trust
fund managed by the World Bank that provides funding for development
and reconstruction activities.
* India provided development assistance for the reconstruction of
Afghanistan; based on India's detailed budget information, we included
the amount of funding India provided.
* Law and Order Trust Fund for Afghanistan (LOTFA) is a multi-donor
trust fund that provides funding to the ANP and is managed by the UN
Development Program (UNDP).
* Organization for Economic Cooperation and Development
(OECD)/Development Assistance Committee (DAC) Official Development
Assistance (ODA) database includes information on donor development
assistance provided to Afghanistan.
* U.S. Department of State (State) provided budget data on its
International Military Equipment and Training account. (See final
section of this enclosure, "Assumptions and Limitations of Analysis.")
Definitions:
Total Public Expenditures: funds spent to provide public goods,
services, and capital investments to the Afghan population; includes
spending by both GIRoA and international donors for development
projects and procurement of non-financial assets (such as
infrastructure and equipment), as well as GIRoA recurrent operational
costs (such as wages and supplies for government workers, including
security forces). We used reported expenditures, not budget estimates.
On-Budget Expenditures: public sector expenditures within GIRoA's
fiscal control, including donor contributions that are included in the
AFMIS.
Off-Budget (External) Expenditures: public expenditures not channeled
through the GIRoA's budget process. These are donor expenditures that
are not included in the national budget that would generally be
expended by the government. We assume that these expenditures would
fund public goods and services. Off-budget expenditures are calculated
by summing the total off-budget security plus off-budget non-security
expenditures.
Total Security Expenditures: the sum of on-budget security
expenditures and off-budget security expenditures.
On-Budget Security Expenditures: spending by the Ministry of Interior
(M01) and the Ministry of Defense (MOD).[Footnote 9] The Afghan
government defines security more broadly, to include also the Ministry
of Foreign Affairs, the General Directorate of National Security, and
the Presidential Protective Services. We define the security sector to
be limited to spending in MOI and MOD as there is transparency from
donor contributions, which are reimbursements provided to security
ministries. Also, the MOI and MOD account for more than 90 percent of
the security budget reported in AFMIS.
U.S. government on-budget security expenditures go towards LOTFA and
NTM-A/CSTC-A, which are responsible for managing the use of funds from
the ASFF and the ANATF. There are also on-budget expenditures made by
other donors via LOTFA that do not come from ASFF.
Off-Budget Security Expenditures: Spending that is not identified in the
Afghanistan on-budget security expenditures. We estimated these
expenditures by adding up U.S. government and NATO off-budget security
expenditures. These expenditures provide the Afghan National Security
Forces (ANSF) with equipment, supplies, services, and training, as
well as facility and infrastructure repair, renovation, and
construction. The primary organization responsible for building the
ANSF is the North Atlantic Treaty Organization (NATO).
We calculated U.S. government off-budget security expenditures as ASFF
minus LOTFA (U.S.) minus CSTC-A (U.S.), which comprise the U.S.
government on-budget security expenditures. NATO expenditures are
reported in the ASFF as a separate line item. The source of NATO
disbursements is the ANATF. We assume that all NATO expenditures that
have accrued in 2010/11 (approximately $22.5 million) are off budget
because these expenditures are not reported in the Afghan budget.
Total Non-Security Expenditures: the sum of on-budget non-security
expenditures and off-budget non-security expenditures.
On-Budget Non-Security Expenditures: total on-budget expenditures
minus on-budget security (MOD and M01). These amounts include
reimbursements as well as direct assistance provided to non-security
ministries. An example of these expenditures would be the ARTF,
donations that are used toward operating costs and reconstruction
programs.
Off-Budget Non-Security Expenditures: non-security spending not
identified in the Afghanistan on-budget non-security expenditures. GAO
is estimating off-budget non-security spending as donor disbursements
from OECD/DAC Official Development Assistance. OECD/DAC ODA excludes
all security expenditures (defined by OECD/DAC as military
expenditures). We identified and subtracted from ODA disbursements all
LOTFA disbursements reported by several countries to prevent double
counting of LOTFA disbursements.
Domestic Revenues: Domestic revenues are revenues collected by GIRoA
such as customs duties, income, property, sales, excise and other
taxes. GIRoA, World Bank, IMF, and international donors use domestic
revenues as a percentage of on-budget operating expenditures as a
measure of fiscal sustainability for Afghanistan. This excludes on-
budget development expenditures and off-budget expenditures. In our
analysis, we present data for 2006/07 to 2010/11 showing (1) domestic
revenues as a percentage of on-budget operating expenditures, (2)
domestic revenues as a percentage of total on-budget expenditures, and
(3) domestic revenues as a percentage of total public expenditures.
Data Analysis:
We analyzed actual GIRoA expenditure and revenue data reported monthly
by the Ministry of Finance through AFMIS. The data were available in
digital form, which minimized entry errors. To verify and validate the
data, we spot checked them using the Ministry of Finance's quarterly
and annual budget reports.
The budget of GIRoA uses the solar year for measuring their fiscal
year. A solar year generally begins on March 21 and ends on March 20
of the following year. We analyzed data for the 5 solar years from
1385 to 1389. The table below presents the comparison between the
solar year and U.S. calendar-year equivalents running from March 21 to
March 20:
Afghan fiscal/solar year: U.S. calendar year, March 21 to March 20;
1385: 2006/07;
1386: 2007/08;
1387: 2008/09;
1388: 2009/10;
1389: 2010/11.
[End of table]
Assumptions and Limitations of Analysis:
2010 Non-Security Expenditures: OECD DAC sent us preliminary data for
2010. The data provided were only for bilateral donors; multilaterals
were not included, except for the European Union. We estimated 2010
expenditures for other multilaterals based on prior year percentage
expenditures and added this to the preliminary 2010 data provided. We
confirmed the expenditures on U.S. government 2010 assistance with
USAID officials responsible for providing U.S. assistance data to the
OECD/DAC.
OECD/DAC data covers the calendar year. We estimated solar year data
by summing three-quarters of amount for year t and one-quarter for
year (t+1). For example, Afghan solar year 2006/7 is the sum of three-
quarters of U.S. calendar year 2006 plus one-quarter of year 2007.
Lacking any data for calendar year 2011, we used the 2010 calendar
year data for 2010/11.
We used OECD/DAC's list for donors providing help to Afghanistan.
[Footnote 10] However, there might be other non-developed countries
offering help.[Footnote 11] For example, we were able to identify
India as one such country.
We obtained data for State's International Military Education and
Training (IMET) account covering the period from fiscal year 2006
through U.S. fiscal year 2010. In the absence of more information, we
divided the total amount by the number of years to estimate the yearly
expenditures during solar years 2006/07 to 2010/11.
U.S. government-contributed portion of LOTFA and ARTF funds: AFMIS
reports the total expenditures by the trust funds. In order to isolate
the U.S. proportion, we used the U.S. contributions as reported by
UNDP from publicly available documents and applied that share to the
trust fund expenditures as reported as AFMIS.
[End of enclosure]
Enclosure III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Charles M. Johnson Jr., (202) 512-7331 or johnsoncm@gao.gov.
Staff Acknowledgments:
In addition to the contact named above, Tetsuo Miyabara (Assistant
Director), Bruce Kutnick, Gergana Danailova-Trainor, Pedro Almoguera,
Farahnaaz Khakoo, Nina Pfeiffer, Jordan Holt, David Dayton, and Etana
Finkler made key contributions to this report.
[End of section]
Footnotes:
[1] GAO, Afghanistan Security: Efforts to Establish Police and Army
Have Made Progress, but Future Plans Need to be Better Defined,
[hyperlink, http://www.gao.gov/products/GAO-05-575] (Washington, DC:
June 30, 2005).
[2] GAO, Securing, Stabilizing, and Reconstructing Afghanistan: Key
Issues for Congressional Oversight, [hyperlink,
http://www.gao.gov/products/GAO-07-801SP] (Washington, DC: May 24, 2007);
Afghanistan Security: Further Congressional Action May Be Needed to
Ensure Completion of a Detailed Plan to Develop and Sustain Capable
Afghan National Security Forces, [hyperlink,
http://www.gao.gov/products/GAO-08-661] (Washington, D.C.: June 18,
2008); Afghanistan, Key Issues for Congressional Oversight, [hyperlink,
http://www.gao.gov/products/GAO-09-473SP] (Washington, D.C.: April 21, 2009).
[3] According to the Department of Defense, it is currently working
with the Afghan Ministries of Defense and Interior to develop cost-
effective and requirement-based estimates for future Afghanistan
National Security Forces (ANSF) sustainment costs.
[4] GAO, Afghanistan Security: Afghan Army Growing, but Additional
Trainers Needed; Long-term Costs Not Determined, [hyperlink,
http://www.gao.gov/products/GAO-11-66] (Washington, D.C.: Jan. 27, 2011).
[5] GAO, Afghanistan Reconstruction: Progress Made in Constructing
Roads, but Assessments for Determining Impact and a Sustainable
Maintenance Program Are Needed, [hyperlink,
http://www.gao.gov/products/GAO-08-689] (Washington, D.C.: July 8, 2008);
Afghanistan Development: Enhancements to Performance Management and
Evaluation Efforts Could Improve USAID's Agricultural Programs,
[hyperlink, http://www.gao.gov/products/GAO-10-368] (Washington, D.C.:
July 14, 2010); Afghanistan Development: U.S. Efforts to Support
Afghan Water Sector Increasing, but Improvements Needed in Planning
and Coordination, [hyperlink, http://www.gao.gov/products/GAO-11-138]
(Washington, D.C.: Nov. 14, 2010); GAO, The Strategic Framework for
U.S. Efforts in Afghanistan, [hyperlink,
http://www.gao.gov/products/GAO-10-655R] (Washington, DC, Jun. 15,
2010).
[6] GAO, Afghanistan Governance: Performance Data Gaps Hinder Overall
Assessment of U.S. Efforts to Build Financial Management Capacity,
[hyperlink, http://www.gao.gov/products/GAO-11-907] (Washington, D.C.:
Sept. 20, 2011).
[7] Afghanistan's budget cycle is organized around solar years. For
example, solar year 2010/11 begins on March 21, 2010 and ends on March
20, 2011. See enclosure II for details on our data sources,
definitions, and methodology.
[8] All expenditures are reported in U.S. nominal dollars for
Afghanistan's solar year. The budget of GIRoA uses the Afghan solar
year for its fiscal year. The Afghan solar year generally begins on
March 21 and ends on March 20 of the following year. For the purposes
of this work, we collected data on public expenditures in Afghanistan
during the 5 solar years March 2006 through March 2011.
[9] Ministry of Interior manages the Law and Order Trust Fund for
Afghanistan (LOTFA), which funds the Afghan National Police, while the
Ministry of Defense funds the Afghan National Army.
[10] Based on data for 2006 to 2010 from the OECD/DAC database,
Afghanistan has received donor assistance from more than 49 official
donors including at least 33 countries and at least 16 multilateral
entities. The following DAC member-countries have disbursed funds to
Afghanistan: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Greece, Ireland, Italy, Japan, Korea, Luxemburg, the
Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, the United Kingdom and the United States. In addition,
the following non-DAC member-countries have also provided assistance
that is included in the OECD/DAC database: the Czech Republic,
Hungary, Iceland, Poland, the Slovak Republic, Slovenia, Thailand,
Turkey, the United Arab Emirates, and other countries not specifically
identified in the database. The multilateral entities which have
disbursed funds to Afghanistan and are included in the OECD/DAC
database are: European Union institutions; Arab agencies; the Asian
Development Fund; the International Monetary Fund through the
Structural Adjustment Facility, the Enhanced Structural Adjustment
Facility, and the Poverty Reduction and Growth Facility; the Global
Environment Facility; the Global Alliance for Vaccination and
Immunization; the Global Fund; the International Atomic Energy Agency;
the International Development Association; the International Fund for
Agricultural Development; the United Nations Development Program; the
United Nations Population Fund; the United Nations High Commissioner
for Refugees; the United Nations Children's Fund; United Nations
agencies that have provided technical assistance; and the United
Nations World Food Program.
[11] The Government of Afghanistan has developed a Donor Assistance
Database (DAD), which includes donor reported foreign assistance to
Afghanistan from other countries. However, the database is incomplete.
It also contains data on assistance to Afghanistan from countries that
are not included in the OECD/DAC data such as China, Iran, Pakistan,
the Russian Federation, and Saudi Arabia. We could not check the data
against an official source from those countries and, therefore, did
not include in our estimates data from those countries.
[End of section]
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