U.N. Report Flags Afghanistan Fraud

By NATHAN HODGE

KABUL—The United Nations agency that administers a trust fund bankrolling Afghanistan's police allowed procurement fraud to flourish for several years, according to an internal U.N. report seen by The Wall Street Journal.
The report, which hasn't been made public, casts new light on possible mismanagement at a U.N. office that has channeled billions of dollars into the country since 2002. It also raises new questions about the international community's role in Afghanistan at a delicate moment: U.S. and international troops are departing next year, just as the country is bracing for a high-stakes election to pick President Hamid Karzai's successor.
At issue is the Law and Order Trust Fund for Afghanistan, or Lotfa, a fund administered by the U.N. Development Program that covers payroll and benefits for the Afghan National Police. Started in 2002, Lotfa has overseen the delivery of around $2.5 billion to help bankroll and build the Afghan police force.
Last year, international monitors raised concerns about suspected fraud at the fund, allegations first reported by The Wall Street Journal. The reports caused a major credibility problem for the U.N. in Afghanistan: Lotfa had been touted as a model for international assistance. At the time, the European Union put tens of millions of dollars in anticipated donations to Lotfa on hold amid the investigation.
Late last year, the UNDP sent a high-level team to review the management of the program. The review, concluded in mid-December, confirmed procurement fraud, saying some Lotfa staff colluded with suppliers to inflate the cost of contracts. More important, it pointed to wider problems with the management of the UNDP country office.
"The fact that procurement fraud occurred and continued undetected for so long was only possible due to the failure of UNDP management, in particular the country office, to provide the necessary oversight, guidance, support and quality assurance to the Lotfa project and staff," the management report states.
The UNDP initially denied the allegations, but then launched an internal investigation of the fund, dismissing some staffers and putting others on leave.
UNDP spokesman Satinder Bindra described the review as "very helpful in repositioning our work on Lotfa and was endorsed by UNDP's senior management and partners. The recommendations are currently under implementation."