The harsh realities and contradictions of providing aid and development in conflict zones were in the spotlight after the U.S. Agency for International Development (USAID) published an Inspector General Report on Sept. 29, 2010 that said Afghan subcontractors working on a project funded by USAID were likely paying a “protection tax” to the Taliban.

The report determined that Maryland-based Development Alternatives, Inc. (DAI), which had a $349 million contract from USAID for development projects in Afghanistan, failed to adequately monitor subcontractors for projects where “insurgents may have extorted protection payments.” It also found “pervasive fraud” and corruption by subcontractors at DAI’s offices in Jalalabad City.  GlobalPost reports DAI President and CEO James Boomgard issued an internal memo critical of the USAID report as “largely circumstantial, speculative, and unsubstantiated.” Allegations about similar payments to the Taliban were the subject of a June Congressional report, but both reports stopped short of calling the payments to the designated terrorist group material support of terrorism, although the Afghan Taliban is on the Treasury Department’s list of proscribed organizations.

According to the report, DAI allowed local subcontractors to negotiate the security arrangements for their development projects, sometimes directly with insurgents. The Taliban would extort as much as 20 percent of the project’s cost as a fee in exchange for providing “security guards for the activity site and a promise not to attack the subcontractor’s personnel and equipment.” The subcontractors allegedly billed the cost to DAI, which then charged USAID for payment. The report estimates $5.2 million of USAID funds may have fallen “into the hands of insurgents.”

The report found DAI had failed to anticipate or properly address the risk that USAID funds could be funneled to the Taliban. Part of this failure was the widespread lack of legitimate monitoring on project spending and progress by USAID and DAI officials. The report found:

“Most USAID officials and DAI personnel we interviewed believed that neither USAID nor DAI could provide reasonable assurance of preventing USAID funds from going to the Taliban or others in exchange for protection while trying to implement community development projects in a war zone and in insurgency stronghold areas where little or no monitoring can be conducted.”

Despite suspending or cancelling 27 projects in 2009 because of security concerns, the report said DAI continued to support projects in “unstable, remote areas” where payments for protection were almost mandatory and monitoring nonexistent.  DAI also did not permit any visits from USG officials to their office in Jalalabad City because of concerns the “office would become a target for insurgent attacks.” The report recommended USAID conduct risk assessments to determine if proposed development project areas are secure enough “to allow civilian implementation and monitoring,” but it did not identify specific criteria or standards.

DIA’s Boomgard also echoed what many in the humanitarian aid and development sector have said about the complexities of providing urgent assistance to people living in areas controlled by a terrorist group. “The question for our critics and for anyone serious about executing U.S. policy in Afghanistan is whether it would be worth giving up on all such projects just because we cannot provide assurance — to an auditor’s satisfaction — that not a penny of U.S. funds is reaching undesirable elements,” he said.

The report also alleged Afghan employees at the DAI office in Jalalalbad City received kickbacks from Afghan companies in return for awarding the winning the rights to valuable subcontracts. Additionally, the report determined the same employees were submitting falsified reports to USAID, including “bogus photographs” about the progress being made at hard to monitor project sites.

Aid Workers Killed

Linda Norgrove, DAI’s regional director for an aid project in the eastern town of Jalalabad was killed by her captors during a botched attempt to rescue her on Oct. 9. 5 other DAI employees in Afghanistan were also killed in July. More information about these aid workers and others is available here.