oversight

SIGAR 20-16-FA

Published by the Office of the Special Inspector General for Afghanistan Reconstruction on 2020-01-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

SIGAR                                                       Special	Inspector	General	for	
                                                             Afghanistan	Reconstruction	




                                                                               SIGAR 20-16 Financial Audit




         USAID’s Afghan Women in the Economy Project:
         Audit of Costs Incurred by DAI Global LLC




                 In accordance with legal requirements, SIGAR has redacted certain information deemed
                                   proprietary or otherwise sensitive from this report.




                                                                                           JANUARY
                                                                                                2020
SIGAR 20-16-FA/WIE
                                                         January 2020




SIGAR
                                                         USAID’s Afghan Women in the Economy: Audit of Costs Incurred by DAI
                                                         Global LLC

                                                          SIGAR 20-16-FA

Special	Inspector	General	for	                            WHAT SIGAR FOUND
Afghanistan	Reconstruction	                               Williams Adley identified one material weakness and one deficiency in
                                                          DAI’s internal controls, and two instances of noncompliance with the
WHAT THE AUDIT REVIEWED                                   terms of the task order. The auditors determined that DAI did not provide
On July 1, 2015, the U.S. Agency for International        evidence that the contracting officer approved a fixed-fee invoice, which
Development (USAID) awarded a 5-year, cost-               violated the terms of the task order. This resulted in $403,009 in
plus-fixed-fee task order for $15,000,000 to              unsupported questioned costs.
Development Alternatives Inc. to support the              Williams Adley found that DAI was using a general and administration
Afghan Women’s Leadership in the Economy                  rate that exceeded the rate set in the task order. As result, the auditors
project. The project’s goals were to improve              questioned $1,412 in ineligible indirect costs. However, the auditors
employment opportunities for educated Afghan              later removed the questioned costs because DAI provided evidence from
women between ages of 18 and 30, and                      a subsequent period showing that it adjusted its indirect cost rate in
increase income and viability for women-owned             order to match USAID’s approved rate.
businesses in Afghanistan. In 2016, the project’s
name changed to Afghan Women in the                       Because of these internal control deficiencies and instances of
Economy. After five modifications, the task               noncompliance, Williams Adley identified $403,009 in total questioned
order’s total funding increased to $44,598,984,           costs, entirely consisting of unsupported costs—costs not supported with
and the period of performance changed from                adequate documentation or that did not have required prior approval.
June 30, 2020, to June 30, 2019. In January               Williams Adley did not identify any ineligible costs—costs prohibited by
2016, Development Alternatives Inc. was                   the contract, applicable laws, or regulations.
renamed DAI Global LLC (DAI). 
                                                                                                                   Total Questioned
SIGAR’s financial audit, performed by Williams            Category                  Ineligible    Unsupported
                                                                                                                              Costs
Adley & Company-DC LLP (Williams Adley),
                                                          Fixed Fee                        $0        $403,009            $403,009
reviewed $33,616,783 in costs charged to the
task order from July 1, 2015, through June 30,            Total Costs                      $0        $403,009            $403,009
2018. The objectives of the audit were to
(1) identify and report on material weaknesses or         Williams Adley identified three prior audit reports that were relevant to
significant deficiencies in DAI’s internal controls       DAI’s activities under the task order. The reports had 19 findings, 9 of
related to the task order; (2) identify and report        which may have a material effect on the SPFS. Williams Adley conducted
on instances of material noncompliance with the           follow-up procedures and concluded that DAI had taken adequate
terms of the task order and applicable laws and           corrective action on all findings.
regulations, including any potential fraud or             Williams Adley issued a modified opinion on the DAI’s SPFS because of
abuse; (3) determine and report on whether DAI            material questioned costs identified during this audit.
has taken corrective action on prior findings and
recommendations; and (4) express an opinion on
the fair presentation of DAI’s Special Purpose
Financial Statement (SPFS). See Williams Adley’s
report for the precise audit objectives.

In contracting with an independent audit firm and         WHAT SIGAR RECOMMENDS
drawing from the results of the audit, auditing           Based on the results of the audit, SIGAR recommends that the responsible
standards require SIGAR to review the audit work          contracting officer at USAID:
performed. Accordingly, SIGAR oversaw the audit
and reviewed its results. Our review disclosed no             1.   Determine the allowability of and recover, as appropriate,
                                                                   $403,009 in questioned costs identified in the report.
instances where Williams Adley did not comply, in
all material respects, with U.S. generally                    2.   Advise DAI to address the report’s two internal control findings.
accepted government auditing standards.                       3.   Advise DAI address the report’s two noncompliance findings.



       For more information, contact SIGAR Public Affairs at (703) 545-5974 or sigar.pentagon.ccr.mbx.public-affairs@mail.mil.
January 9, 2020


The Honorable Mark Green
Administrator, U.S. Agency for International Development


Mr. Peter Natiello
USAID Mission Director for Afghanistan


We contracted with Williams Adley & Company-DC LLP (Williams Adley) to audit the costs incurred by
Development Alternatives Inc. (now known as DAI Global LLC or “DAI”) under a task order from the U.S. Agency
for International Development (USAID) to support to Afghan Women in the Economy project.1 The project’s goals
were to improve employment opportunities for educated Afghan women between ages of 18 and 30, and
increase income and viability for women-owned businesses in Afghanistan. Williams Adley reviewed
$33,616,783 in costs charged to the task order from July 1, 2015, through June 30, 2018. Our contract with
Williams Adley required that the audit be performed in accordance with generally accepted government auditing
standards issued by the Comptroller General of the United States.
Based on the results of the audit, SIGAR recommends that the responsible contracting officer at USAID:
      1. Determine the allowability of and recover, as appropriate, $403,009 in questioned costs identified in
         the report.
      2. Advise the DAI to address the report’s two internal control findings.
      3. Advise the DAI to address the report’s two noncompliance findings.
The results of Williams Adley’s audit are discussed in detail in the attached report. We reviewed Williams Adley’s
report and related documentation. Our review, as differentiated from an audit in accordance with U.S. generally
accepted government auditing standards, was not intended to enable us to express, and we do not express, an
opinion on DAI’s Special Purpose Financial Statement. We also express no opinion on the effectiveness of DAI’s
internal control or compliance with the task order, laws, and regulations. Williams Adley is responsible for the
attached auditor’s report and the conclusions expressed in it. However, our review disclosed no instances in
which Williams Adley did not comply, in all material respects, with generally accepted government auditing
standards issued by the Comptroller General of the United States.




John F. Sopko
Special Inspector General
   for Afghanistan Reconstruction




(F-148)




1   The task order number is AID-306-T0-15-00062.
           OFFICE OF THE
SPECIAL INSPECTOR GENERAL FOR
AFGHANISTAN RECONSTRUCTION
               Audit F-148


     Financial Audit of Costs Incurred
                     by
           DAI Global, LLC
                  Under
 Task Order Number AID-306-T0-15-00062
              For the Period
    July 1, 2015 through June 30, 2018




               Submitted by

  ~ ~ ~ ~ 11  WILLIAMS
  ll !    ~ 1 ADLEY
SIGAR                    Special Purpose Financial Statement Audit Report F-148                                                                               DAI




Table of Contents
Transmittal Letter ............... ............................................................................................................................ i

Summary ....................................................................................................................................................... 1

    Background ............................................ ....................................... ................ .................................. .. ......... 1

    Work Performed ........................................................................................................................................ 2

   Objectives .. .................................. ......................................................................................... ..................... 2

   Scope ......................................................................................................................................................... 3

    Methodology .. ....................................................................................................................................... .... 3

   Summary of Results ................................................................................................................................... 4

   Summary of Management's Comments ................................................. ........................................ .......... 6

Ind ependent Auditor's Report on the Special Purpose Financial Statement ............................................... 8

Special Purpose Financial Statement ............................ .................................... .. .......... .............................. 10

Notes to the Special Purpose Financial Statement ..................................................................................... 11

Notes to the Questioned Costs Presented on the Special Purpose Financial Statement.. .........................13

Independent Auditor's Report on Internal Control ............................................ ......................................... 14

Independent Auditor's Report on Compliance ............................ ............................................................... 16

Schedu le of Findings and Questioned Costs ................................................................... ............................ 18

       Finding 2019-01: Missing Fixed Fee Invoice Pre-Approval .................................................................. 18

       Finding 2019-02: Incorrect G&A Indirect Cost Rate Used ................................................................... 20

Status of Prior Audit Report Findings and Recommendations ...... ............................ .................................. 22

Appendix A - Management's Response to the Findings and Recommendations ...................................... 26

Append ix 8 - Auditor's Response to Management Comments ..... ............................................................. 30




WILLIAMS ADLEY                                                   September 13, 2019
SIGAR           Special Purpose Financial Statement Audit Report F-148                                       DAI


                    WILLIAMS
                    ADLEY

Transmittal Letter

September 18, 2019

President and Chief Executive Officer and Board of Managers
DAI Global, LLC (DAI)
7600 Wisconsin Avenue, Suite 200
Bethesda, MD 20614

Office of the Special Inspector General for Afghanistan Reconstruction (SIGAR)
2530 Crystal Drive
Arlington, VA 22202

We hereby provide to you our final report, which reflects results from the procedures we
completed during our audit of the Development Alternatives Inc. task order number AID-
306-T0-15-00062 under Indefinite Delivery, Indefinite Quantity (IDIQ) number AID-306-1-
14-00013 to support the United States Agency for International Development (USAID)
Afghan Women's Leadership in the Economy (AWLE) project, which was renamed
Women in the Economy (WIE).

Within the pages that follow, we provide a summary of the work performed. Following the
summary, we provide our Report on the Special Purpose Financial Statement, Report on
Internal Control, and Report on Compliance. We do not express an opinion on the
summary, Report on Internal Control or Report on Compliance.

When preparing our reports , we considered comments, feedback and interpretations
provided by DAI and SIGAR, in writing and orally, throughout the audit. DAi's responses
to the audit reports and our corresponding auditor analysis are incorporated herein
following our audit reports.

Thank you for providing us the opportunity to work with you and to conduct the audit of
this DAI contract task order.

Sincerely,



                 PA




                                  WILLIAMS, ADLEY & COMPANY-DC, LLP
                            Certified Public Accountants I Management Consultants
      1030 151h Street, N.W., Suite 350 West • Washington, DC 20005 • (202) 371-1397 • Fax: (202) 371-9161
                                            www.williamsadley.com
SIGAR              Special Purpose Financial Statement Audit Report F-148                                     DAI


Summary
Background
On July 1, 2015, the United States Agency for International Development/Afghanistan
(USAID) awarded a five-year, cost plus fixed-fee task order number AID-306-T0-15-
00062 under IDIQ number AID-306-1-14-00013 to Development Alternatives Inc. (DAl)1
for the Afghan Women's Leadership in the Economy (AWLE) activity to increase Afghan
women's employment, advancement, and leadership in the mainstream economy. Initial
funding for the task order was set at $15 million. Under the contract DAI, through
submission and approval of the annual work plan , was required to design and implement
an integrated program of activities and interventions that enable Afghan women to
increase their participation in the mainstream, formal economy by securing employment
with advancement potential and by helping women-owned businesses grow. The
activities are geographically specific to the five Hubs or Regional Economic Zones that
promote IDIQ activities in the surrounding provinces. The five zones included Kabul,
Mazar-i-Sharif, Jalalabad, Kandahar and Herat. Activities were also required to engage
with women and their male stakeholders/champions from rural and semi-urban areas.

AWLE established two objectives to meet its goal: (1) new or improved employment
opportunities for educated women between the ages of 18 and 30; and (2) increased
income growth and viability for women-owned businesses and businesses with a
workforce composed of at least ten percent women. After five modifications, the task
order funding increased to $44.5 million, the name of the activity was changed from AWLE
to Women in the Economy (WIE) and the period of performance end date was shortened
from June 30, 2020 to June 30, 2019.

Our audit procedures under this audit covered $33,616,783 in expenditures for the period
from July 1, 2015 through June 30, 2018. The projected end date for this task order is
June 30, 2019.

Table 1: DAI Contract Task Order with Modifications
                                     -          -    - -             -   -



      Task Order Activity I              Date                                Purpose
        Initial Task order         7/1/2015            Award for 5-year base period
                                                       Increase total obligated amount by $15 million, re-
          Modification 1           2/24/2016           named program from AWLE to WIE, and change
                                                       period of performance from 5 years to 4 years
          Modification 2            9/5/2017           Designate COR role and CO role



1   Development Alternatives Inc. was converted to a limited liability co mpany in January 2016 and renamed DAI
Global, LLC




W ILLIAMS ADLEY                                     September 13, 2019                                            1
SIGAR        Special Purpose Financial Statement Audit Report F-148                            DAI

                         -~        - -       ~-             -   --        -   ~   --   -   -



  TaskOrder Activity I      Date                                Purpose
                                        Increase the total obligation amount and update
     Modification 3      10/18/2017
                                        kev oersonnel
                                        Remove the age restrictions for educational
     Modification 4      12/5/2017      attainment levels for all applicants and update key
                                        personnel
     Modification 5       5/8/2018      Increase total obligated amount



Work Performed
The Office of the Special Inspector General for Afghanistan Reconstruction (SIGAR)
contracted Williams , Adley & Company-DC, LLP (Williams Adley) to conduct a financial
audit of revenues, costs incurred, items directly procured by the United States
Government and the balances for the period audited per task order number AID-306-T0-
15-00062 under IDIQ number AID-306-1-14-00013 and associated modifications awarded
to DAI for the period from July 1, 2015 through June 30, 2018.

Objectives
The following are the objectives of the audit defined by SIGAR:

Audit Obiective 1 - Special Purpose Financial Statement (SPFS}
Express an opinion on whether the Special Purpose Financial Statement for the DAI task
order award presents fairly, in all material respects, revenues received, costs incurred,
items directly procured by the U.S. Government, and balance for the period audited in
conformity with the terms of the award and generally accepted accounting principles or
other comprehensive basis of accounting.

Audit Objective 2 - Internal Controls
Evaluate and obtain a sufficient understanding of DAi's internal controls related to the
award ; assess control risk; and identify and report on significant deficiencies including
material internal control weaknesses.

Audit Objective 3 - Compliance
Perform tests to determine whether DAI complied, in all material respects, with the award
requirements and applicable laws and regulations ; and identify and report on instances
of material noncompliance with terms of the award and applicable laws and regulations,
including potential fraud or abuse that may have occurred.

Audit Objective 4 - Corrective Action on Prior Findings and Recommendations
Determine and report on whether DAI has taken adequate corrective action to address
findings and recommendations from previous engagements that could have a material
effect on the SPFS or other financial data significant to the audit objectives.




WILLIAMS ADLEY                       September 13, 2019                                          2
SIGAR           Special Purpose Financial Statement Audit Report F-148                DAI


Scope
The audit scope included the USAID task order AID-306-T0-15-00062 under IDIQ
number AID-306-1 -14-00013 and related modifications executed for revenues applied to
and costs incurred during the period between July 1, 2015 and June 30, 2018 as reported
on the SPFS. The audit was limited to those matters pertinent to the task order that have
a direct and material effect on the SPFS and included an evaluation of the presentation,
content and records supporting the SPFS. The following areas were included within the
audit program for detailed evaluation:
     i.    Administrative Procedures and Fraud Risk Assessment
    ii.    Budget Management
   iii.    Cash Management
   iv.     Disbursement and Financial Reporting
    v.     Procurement and Inventory Management

Our audit was conducted to form an opinion on the SPFS in accordance with the
Statement presentation requirements in Note 2. Therefore:

   •      The Transmittal Letter to SIGAR and the information presented in the Table of
          Contents and Summary are presented for informational and organizational content
          purposes and are not required parts of the SPFS. Such information has not been
          subject to the auditing procedures applied in the audit of the SPFS, and
          accordingly, we do not express an opinion or provide any assurance on it.

    •     The scope of our audit does not include procedures to verify the efficacy of the
          USAID funded program, and accordingly, we do not express an opinion or provide
          any assurance on it.

Methodology
We conducted our audit in accordance with generally accepted auditing standards, and
generally accepted government auditing standards as published in the Government
Accountability Office's Government Auditing Standards. Those standards require that we
plan and perform our audit to obtain reasonable assurance about whether the Statement
of the costs incurred under the award are free of material misstatement. An audit includes:

    •     Obtaining an understanding of DAi's internal controls related to the award,
          assessing control risk, and determining the extent of audit testing needed based
          on the control risk assessment.

    •     Examining , on a test basis, evidence supporting the amounts and disclosures
          presented in the Statement.

To meet the audit objectives, we prepared an audit plan for the engagement.




WILLIAMS ADLEY                       September 13, 2019                                  3
SIGAR         Special Purpose Financial Statement Audit Report F-148                     DAI


For audit objective 1, we reviewed transactions for the period from July 1, 2015 through
June 30, 2018 and subsequent events and information that may have a significant impact
on the SPFS for the audit period. We used both statistical and judgmental sampling
techniques to select direct labor, subcontractor agreement/consultant costs, travel, and
other direct cost samples to test for allowability of incurred costs, and reviewed
procurement records to determine cost reasonableness. The scope of our audit reflects
our assessment of control risk and includes tests of incurred costs to provide a reasonable
basis for our opinion .

For audit objective 2, we reviewed applicable background materials, including cooperative
agreements, contracts, auditee financial progress reports, USAID regulations, SIGAR's
Afghanistan alert letters, audit reports and special program reports, and auditee single
audits, performance audits and/or financial statement audits as made available and
provided. We conducted our review to gain a thorough understanding of the control
environment. We interviewed management and reviewed business processes to
determine if critical internal controls were in place that mirrored best practices such as
sufficient management oversight of business processes, prop~r segregation of duties,
documented policies and procedures, robust financial management systems, and
sufficient monitoring of controls to ensure effective implementation thereof. We assessed
the control risk for sampling and testing purposes.

For audit objective 3, we performed compliance testing including, but not limited to:
determination of allowable costs under Federal Acquisition Regulation (FAR) and Agency
for International Development Acquisition Regulations (AIDAR) cost principles; validation
of indirect cost calculations pursuant to a provisional or final negotiated indirect cost rate
agreement; testing cash management for funding to ensure it does not exceed the
program's immediate cash needs requirements and confirm excess cash has been
returned to the US Government; verify incurred cost eligibility; confirm equipment and real
property management and disposal in accordance with an approved disposition plan;
ensure expenditures comply with the period of availability of the Federal funds; ensure
that procurement activities comply with full and open competition standards or provide
justification for noncompetitive bids when applicable, and that suspension and debarment
of the subcontractor or subrecipient was considered in the award decision; program
income is reported and accounted for separately from donor funds ; and financial reporting
is accurate, timely and complete. In addition, we performed testing to assess and
determine any potential fraud , abuse and illegal acts.

For audit objective 4, if prior audits indicated a need for corrective action to be taken by
DAI, we ensured through inquiry, observation and testing whether the necessary steps
were taken to adequately address those findings and recommendations that could have
material effect on the SPFS or other financial data significant to the audit objectives.

Summary of Results
Our audit of the costs incurred by DAI identified the following matters.




WILLIAMS ADLEY                       September 13, 2019                                     4
SIGAR         Special Purpose Financial Statement Audit Report F-148                                DAI


We issued a modified opinion on DAi's Special Purpose Financial Statement due to
material questioned costs we identified during this audit.

We identified $403,009 in total questioned costs because they were either ineligible or
unsupported . Ineligible costs are explicitly questioned because they are unreasonable,
prohibited by the audited task order or applicable laws and regulations, or not award
related. Unsupported costs are not supported with adequate documentation or did not
have required prior approvals or authorizations.

As part of obtaining reasonable assurance about whether the SPFS is free from material
misstatement, we considered DAi's internal control overfinancial reporting and performed
tests of those controls. We also performed tests of DAi's compliance with certain
provisions of the task order and other laws and regulations , noncompliance with which
could have a direct and material effect on the determination of the SPFS. The results of
our tests disclosed one material weakness in internal control, one internal control
deficiency and two instances of noncompliance under this audit. Where internal control
and noncompliance findings pertained to the same matter, they were consolidated within
a single finding . Please see the Independent Auditor's Report on Internal Control on page
14 and the Independent Auditor's Report on Compliance on page 16.

Summary of Findings and Questioned Costs
                                                         . .                             Cumulative
  . d"             . t·          Cl       . . t·     Ineligible        Unsupported       Q    t·    d
 Fm mg       0 escnp 10n              ass111ca 10n   C t               C t                 ues 1one
                                                      OS S                 OS S          C OS t S

             Missing                 Material
             USAID pre-           Weakness in
 2019-01     approval for        Internal Control                 $0          $403,009         $403,009
             fixed fee             and Material
             invoice             Noncompliance
             Incorrect rate
                                 Internal Control
             used to             Deficiency and                   $0               $0               $0
 2019-02
             determine           Noncompliance
             indirect cost
- Totafs -         -   -      - - -          --          -        $0   -      $403,009 -       $403,009


In performing our testing, we considered whether the information obtained during our
testing resulted in either detected or suspected material waste, fraud or abuse, which
would be subject to reporting under Government Auditing Standards. Evidence of such
items was not identified during our testing.

Status of Prior Audit Findings
We requested prior audit reports, reviews and assessments pertaining to DAi's activities
under the task order. We identified three prior audit reports issued by SIGAR and USAID
Office of Inspector General (OIG) that contained 18 findings, nine of which may have a
material effect on the Special Purpose Financial Statement or other financial data
significant to the audit objectives. These reports are summarized as follows:


WILLIAMS ADLEY                           September 13, 2019                                               5
SIGAR         Special Purpose Financial Statement Audit Report F-148                  DAI



   •    Audit Report: SIGAR 18-61-Financial Audit, "USAID's Agricultural Credit
        Enhancement Project: Audit of Costs Incurred by Development Alternatives Inc.
        for the period July 15, 2010 through February 25, 2015" issued on July 18, 2018.

   •    Audit Report: SIGAR 19-41-Financial Audit, "USAID's Regional Agricultural
        Development Program in Northern Afghanistan: Audit of Costs Incurred by DAI
        Global LLC for the period January 1, 2016 through December 31 , 2017" issued on
        June 10, 2019 .

   •    USAID OIG report 3-306-17-035-R titled, "Financial Closeout Audit Report for
        Contracts No. 306-T0-13-00004, No. 306-A-0009-00508, No. 306-C-14-00002,
        No. 306-C-14-00016 & No. 306-C-12-00003," issued on September 26, 2017.

The reports had nine findings that may have a material effect on the Special Purpose
Financial Statement or other financial data significant to the audit objectives. We
performed follow up procedures and held discussions with management, reviewed
policies and procedures, and conducted testing of similar issues during our current audit.
Accordingly, we concluded that DAI had taken adequate corrective actions on the nine
findings and we did not observe evidence of those findings during this audit. Based on
our review, we determined that none of the prior audit findings had a material effect on
the Statement or other financial data significant to the audit objectives.

Please see Status of Prior Audit Report Findings and Recommendations for additional
details regarding these prior audit issues and status.

Summary of Management's Comments
The following represents a summary of the responses provided by DAI to the findings
identified in this report. The complete responses received can be found in Appendix A to
this report.

DAI disagreed with finding 2019-01 and asserted that it did obtain the appropriate
approvals based on meeting the deliverable requirements , which includes an email from
the USAID's Contracting Officer Representative (COR) stating her approval of invoices
was a "defacto" approval of deliverables. DAI agreed an incorrect indirect rate was used
for general and administrative (G&A) overhead costs for certain transactions as presented
in finding 2019-02. DAI, however, disagreed that a questioned cost resulted from the G&A
cost miscalculation because indirect cost calculations were updated and refunded to
USAID in subsequent invoices based on a negotiated indirect cost rate agreement issued
by USAID and its contract requirements. Our rebuttal to management comments is
detailed in Appendix B of this report.

Attachments

The auditor's reports are supplemented by two attachments:


WILLIAMS ADLEY                     September 13, 2019                                   6
SIGAR         Special Purpose Financial Statement Audit Report F-148       DAI



  •     Appendix A - Management Response to Findings and Recommendations
  •     Appendix B - Auditor's Response to Management Comments




WILLIAMS ADLEY                  September 13, 2019                           7
SIGAR        Special Purpose Financial Statement Audit Report F-148                  DAI


~~  ~ . 11 WILLIAMS
ll ! £.. 1 ADLEY
    Independent Auditor's Report on the Special Purpose Financial Statement

President and Chief Executive Officer and Board of Managers
DAI Global, LLC
7600 Wisconsin Avenue, Suite 200
Bethesda, MD 20814

Office of the Special Inspector General for Afghanistan Reconstruction
2530 Crystal Drive
Arlington, VA 22202

We have audited the Special Purpose Financial Statement ("the Statement") of DAI
Global, LLC (DAI) and the related notes to the Statement, with respect to United States
Agency for International Development (USAID) IDIQ AID-306-1-14-00013 task order
number AID-306-T0-15-00062 for the period July 1, 2015 through June 30, 2018.

Management's Responsibility for the Special Purpose Financial Statement
Management is responsible for the preparation and fair presentation of this Statement in
accordance with the requirements provided by the Office of the Special Inspector General
for Afghanistan Reconstruction (SIGAR). Management is also responsible for the design,
implementation, and maintenance of internal control relevant to the preparation and fair
presentation of the Statement that is free from material misstatement, whether due to
fraud or error.

Auditor's Responsibility
Our responsibility is to express an opinion on this Statement based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the
United Stated of America and the standards applicable to financial audits contained in
Government Auditing Standards issued by the Comptroller General of the United States.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement is free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the Statement. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the Statement, whether
due to fraud or error. In making those risk assessments, the auditor considers internal
control relevant to DAi's preparation and fair presentation of the Statement in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of DAi's internal control. Acco'rdingly, we
express no such opinion. An audit also includes evaluating the appropriateness of



WILLIAMS ADLEY                     September 13, 2019                                   8
SIGAR         Special Purpose Financial Statement Audit Report F-148                   DAI


accounting policies used and the reasonableness of significant accounting estimates
made by management, as well as evaluating the overall presentation of the Statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our aud it opinion.

Basis for Qualified Opinion
We noted a material weakness in adherence to invoicing terms and conditions, which
contributed to $403,009 in questioned costs and increases the risk of unallowable costs
being paid inadvertently by USAID. The total questioned cost amount is considered
material to the Statement.

Qualified Opinion
In our opinion , except for the effects of the $403,009 in questioned costs noted in the
Basis for Qualified Opinion paragraph, the Statement referred to above presents fairly, in
all material respects, the revenues earned, costs incurred , and reimbursed , and balances
for the indicated period in accordance with the terms of the agreement and in conformity
with the basis of accounting described below.

Basis of Accounting
We draw your attention to Note 2 to the Statement, which describes the basis of
accounting . As described in Note 2 to the Statement, the Statement is prepared by DAI
on the basis of the requirements provided by SIGAR, which is a basis of accounting other
than accounting principles generally accepted in the United States of America. Our
opinion is not modified with respect to this matter.

Report on Other Legal and Regulatory Requirements
In accordance with Government Auditing Standards , we have also issued our reports
dated June 6, 2019 , on our consideration of DAi's internal control over financial reporting
and our tests of its compliance with certain provisions of laws and regulations. Those
reports are an integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this Independent Auditor's Report in
considering the results of our audit.

Restriction on Use
Our report is intended solely for the information and use of DAI , USAID, and SIGAR, and
is not intended to be and should not be used by anyone other than these specified parties.
Financial information in this report may be privileged. The restrictions of 18 U.S.C. 1905
should be considered before any information is released to the public.
     .                        ,
lJt.1L; <i.VAA~ 0-di2e~ s         ( ' ~>?'-1 _:t)c_          LLf
Washington, D.C.         U ( _... · 0-~ .J               I
June 6 , 2019


W ILLIAMS ADLEY                     September 13, 2019                                    9
 SIGAR                    Special Purpose Financial Statement Audit Report F-148                                 DAI


                                              DAI Global, LLC
                                   Special Purpose Financial Statement
                                       July 1, 2015 to June 30, 2018



                                                                                   ~
                                       ~                                           ~ ~
                                                                                                                           2
                                                                    Actual                                        Notes
         Revenues
Al D-306-T0-15-00062                                                                                                   5
Award Fee
         Total Revenue


         Costs Incurred                                                                                                6
         Direct Cost                     51,076,367               24,734,073
         Grants Under                     4,500,000                  668,690
         Total Direct Costs            $ 55,576,367           $   25,402,763


         Indirect Costs
         Indirect Costs              11,965,085                   7,085,594




                                       - ---
                                          -
         Total Indirect Costs      $ 11,965,085               $   7,085,594
         Total Fixed Fee                                                                           $403,009            A
         Total Cost-Plus-          ~
         Outstanding Fund          $             -        $                  -                                         7
     t   •   I   •   I   • I   I                                                                    ' t   tI ,




 2   The Notes to the Special Purpose Financial Statement are an integral part of the Statement.




 WILLIAMS ADLEY                                 September 13, 2019                                                10
SIGAR               Special Purpose Financial Statement Audit Report F-148                                 DAI


                                          DAI Global, LLC
                         Notes to the Special Purpose Financial Statement3

Note 1. Basis of Presentation
The accompanying Special Purpose Financial Statement (the "Statement") includes costs
incurred under USAID's Afghan Women's Leadership in the Economy (AWLE) funded
through Task Order No. AID-306-T0-15-00062 under IDIQ No. AID-306-1-14-00013 for
the period July 1, 2015 through June 30, 2018. Because the Statement presents only a
selected portion of the operations of DAI Global, LLC, it is not intended to and does not
present the financial position, changes in net assets, or cash flows of DAI Global, LLC.
The information in this Statement is presented in accordance with the requirements
specified by the Office of the Special Inspector General for Afghanistan Reconstruction
("SIGAR") and is specific to the contract listed above. Therefore, some amounts
presented in this Statement may differ from amounts presented in, or used in the
preparation of, the basic financial statements.
Note 2. Basis of Accounting
Expenditures transacted in the Project's Afghanistan office are reported on the Statement
using the cash basis of accounting. Expenditures paid through DAi's Home Office are
reported using the accrual basis of accounting. All expenditures are recognized following
the cost principles contained in DAI Global, LLC's Cost Accounting Standards Disclosure
Statement, Generally Accepted Accounting Principles (GAAP), or the requirements of the
commercial entity cost principles appearing in Title 48, Part 31 of the United States Code
of Federal Regulations wherein certain types of expenditures are not allowable or are
limited as to reimbursement.
Note 3. Organizational History
DAI Global, LLC is a global development company with operations around the world. The
Company, formerly known as "Development Alternatives, Inc.," was originally
incorporated on May 6, 1970 and was converted into a limited liability company on
January 15, 2016 under the laws of the state of Delaware. The business and affairs of the
Company are managed by its Board of Managers.
Note 4. Foreign Currency Conversion Method
For purposes of preparing the Statement, conversions from local currency to United
States dollars were prepared in accordance with DAI Global, LLC's exchange rate policy.
To record financial transactions, DAI Global , LLC uses the exchange rate of the
authorized bank or financial institution effecting the conversion of U.S. dollars to local
currency for in-country purchases. This foreign currency exchange rate remains in effect
until another currency conversion is required .



3   The Notes t o t he Special Purpose Financial St atement are t he responsibility of DAi's management.




WILLIAMS ADLEY                                  September 13, 2019                                          11
SIGAR        Special Purpose Financial Statement Audit Report F-148                 DAI


Note 5. Revenues
Revenues are recorded on the same basis of accounting as presented in Note 2.
Note 6. Costs Incurred by Budget Category
The budget categories presented, and associated amounts reflect the budget line items
presented within the final, USAID-approved budgets adopted as a component of Task
Order No. AID-306-T0-15-00062 under IDIQ No. AID-306-1-14-00013. Actual
expenditures match the approved budget categories for the contract. The budget amount
covers the entirety of the task order performance period .
Note 7. Balance
The balance presented on the Statement represents the difference between the revenues
earned under the contract and the actual costs incurred plus fixed fee amount. An amount
greater than zero would reflect that revenues have been earned that exceed the costs
incurred or charged to the contract and an amount less than zero would indicate that
costs have been incurred but are pending additional evaluation before a final
determination of allowability and amount of revenue earned may be made.
Note 8. Currency
All amounts presented are shown in U.S. dollars.
Note 9. Program Status
The Afghan Women's Leadership in the Economy (AWLE) , renamed as Women in the
Economy (WIE) , project continues to date. The period of performance for the contract is
scheduled to conclude on June 30, 2019. Accordingly, adjustments to amounts currently
reported on the Special Purpose Financial Statement may be made as a result of final
negotiated indirect cost rate agreements.




WILLIAMS ADLEY                    September 13, 2019                                 12
SIGAR            Special Purpose Financial Statement Audit Report F-148                                   DAI


                                DAI Global, LLC
    Notes to the Questioned Costs Presented on the Special Purpose Financial
                                  Statement 4


Note A: Questioned Cost - Missing Fixed Fee Invoice Pre-Approval

Finding 2019-01 : DAI did not provide evidence of approval from the COR and Contracting
Officer prior to submitting the fi xed fees invoice for payment, which violated the terms and
conditions of the contract between DAI and USAID. This resulted in $403,009 in total
unsupported questioned costs.




4Alphabetic notes to the questioned costs presented on th e Special Purpose Financial Statement were developed
by and are the responsibility of the auditor




WILLIAMS ADLEY                             September 13, 2019                                               13
SIGAR         Special Purpose Financial Statement Audit Report F-148                   DAI


~ ~ ~ ~ 111 WILLIAMS
ll ! ~ 1 ADLEY
                  Independent Auditor's Report on Internal Control

President and Chief Executive Officer and Board of Managers
DAI Global, LLC
7600 Wisconsin Avenue, Suite 200
Bethesda, MD 20814

Office of the Special Inspector General for Afghanistan Reconstruction
2530 Crystal Drive
Arlington, VA 22202

We have audited the Special Purpose Financial Statement ("Statement") and related
notes to the Statement, in accordance with the auditing standards generally accepted in
the United States of America and the standards applicable to financial audits contained
in Government Auditing Standards issued by the Comptroller General of the United
States, by DAI Global LLC (DAI), under the United States Agency for International
Development (USAID) IDIQ AID-306-1-14-00013 task order number AID-306-T0-15-
00062 for the period July 1, 2015 through June 30, 2018. We have issued our report
thereon dated June 6, 2019 with a qualified opinion.

Internal Control Over Financial Reporting

In planning and performing our audit of the Statement, we considered DAi's internal
control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinion on the
Statement, but not for the purpose of expressing an opinion on the effectiveness of DAi's
internal control. Accordingly, we do not express an opinion on the effectiveness of DAi's
internal control.

A deficiency in internal control exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, misstatements on a timely basis. A material
weakness is a deficiency, or a combination of deficiencies, in internal control, such that
there is a reasonable possibility that a material misstatement of DAi's Statement will not
be prevented, or detected and corrected, on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies, in internal control that is less severe than a
material weakness, yet important enough to merit attention by those charged with
governance.

Our consideration of internal control was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal
control that might be material weaknesses or significant deficiencies. Given these


WILLIAMS ADLEY                      September 13, 2019                                   14
SIGAR          Special Purpose Financial Statement Audit Report F-148                   DAI


limitations, material weaknesses may exist that have not been identified. During our audit
we noted one matter involving internal control we consider to be a material weakness as
defined above and described as Finding 2019-01 in the Schedule of Findings and
Questioned Costs. We also identified one deficiency in internal control per Finding 2019-
02 in the Schedule of Findings and Questioned Costs.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control
and the results of that testing, and not to provide an opinion on the effectiveness of DAi 's
internal control. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering DAi's internal control. Accordingly, this
communication is not suitable for any other purpose.

Restriction on Use

This report is intended for the information of DAI, USAID, and the Special Inspector
General for Afghanistan Reconstruction. Financial information in this report may be
privileged . The restrictions of 18 U.S.C. 1905 should be considered before any
information is released to the public.

,.   ..,   \                .
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Washington, D.C.         0 ( n~
                             '-"-"' 'Y/"\a nJ_,:De. I u.f
June 6, 2019




WILLIAMS ADLEY                      September 13, 2019                                    15
SIGAR        Special Purpose Financial Statement Audit Report F-148                   DAI


~~      " • 111 WILLIAMS
~AA- 1 ADLEY
                    Independent Auditor's Report on Compliance


President and Chief Executive Officer and Board of Managers
DAI Global, LLC
7600 Wisconsin Avenue, Suite 200
Bethesda, MD 20814

Office of the Special Inspector General for Afghanistan Reconstruction
2530 Crystal Drive
Arlington, VA 22202

We have audited the Special Purpose Financial Statement ("Statement") and related
notes to the Statement, in accordance with the auditing standards generally accepted in
the United States of America and the standards applicable to financial audits contained
in Government Auditing Standards issued by the Comptroller General of the United
States, by DAI Global LLC (DAI), under United States Agency for International
Development (USAID) IDIQ AID-306-1-14-00013 task order number AID-306-T0-15-
00062 for the period July 1, 2015 through June 30, 2018. We have issued our report
thereon dated June 6, 2019 with a qualified opinion .

Compliance and Other Matters

As part of obtaining reasonable assurance about whether DAi's Statement is free from
material misstatement, we performed tests of its compliance with certain provisions of
laws, regulations, contracts and grant agreements, noncompliance with which could have
a direct and material effect on the determination of financial statement amounts.
However, providing an opinion on compliance with those provisions was not an objective
of our audit, and accordingly, we do not express such an opinion. As we performed our
testing , we considered whether the information obtained during our testing indicated the
possibility of fraud or abuse. The results of our tests disclosed one instance of material
noncompliance per finding 2019-01 and one instance of noncompliance per finding 2019-
02 in the Schedule of Findings and Questioned Costs, which is required to be reported
under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of compliance and
the results of that testing, and not to provide an opinion on DAi's compliance. This report
is an integral part of an audit performed in accordance with Government Auditing



WILLIAMS ADLEY                     September 13, 2019                                   16
SIGAR       Special Purpose Financial Statement Audit Report F-148              DAI

Standards in considering DAi's compliance.   Accordingly, this communication is not
suitable for any other purpose.

Restriction on Use

This report is intended for the information of DAI, USAID, and the Special Inspector
General for Afghanistan Reconstruction. Financial information in this report may be
privileged. The restrictions of 18 U.S.C. 1905 should be considered before any
information is released to the public.


Will~~ a~~
Washington, D.C.     ·       - . . '1~-k LLP
                         U ( rl,/),
                                 r
                                     r'nv.
                                               -J
June 6, 2019




WILLIAMS ADLEY                   September 13, 2019                              17
SIGAR         Special Purpose Financial Statement Audit Report F- 148                   DAI



                     Schedule of Findings and Questioned Costs

Finding 2019-01: Missing Fixed Fee Invoice Pre-Approval
Nature of Finding: Material Weakness in Internal Control and Material Noncompliance

Condition: DAi's fixed fee is tied to the accomplishment of eight deliverables under its
task order. Upon successful achievement of a deliverable, DAI must provide evidence of
the deliverable's achievement to the Contracting Officer Representative and the
Contracting Officer, then receive approval from the Contracting Officer before submitting
an invoice for the fixed fee amount associated with the deliverable. Each deliverable
provides for a percentage payment of between 5% and 15% of the total fixed fee amount.
We reviewed 39 invoices submitted for payment during the period we audited, which
totaled $33,616,783 between July 1, 2015 and June 30, 2018. The submissions included
three invoices with fixed fees totaling             For one invoice that included a fixed
fee of $403,009, DAI did not provide evidence it received approval from USAID's
Contracting Officer (CO) prior to its submission . During our fieldwork, DAI provided
evidence of USAID's retroactive approval of the fixed fee . However, this after-the-fact
approval does not comply with the task order requirement.

Criteria: According to section B.5 of the task order AID-306-T0-15-00062:

"The Contractor's fixed fee is tied to the accomplishment of the deliverables outlined in
Section f.5. Upon successful achievement of the deliverable, the Contractor must provide
evidence of the achievement to the [Contracting Officer Representative] and the CO.
Upon acceptance by USAID and receipt of approval from the CO, the Contractor may
submit an invoice for the amount of the fee associated with the deliverable."

48 CFR § 31 .201-2, entitled Determining allowability,
"(a) A cost is allowable only when the cost complies with all of the following requirements :
      ... (4) Terms of the contract.
     (5) Any limitations set forth in this subpart...

(c) When contractor accounting practices are inconsistent with this subpart 31.2, costs
resulting from such inconsistent practices in excess of the amount that would have
resulted from using practices consistent with this subpart are unallowable.

(d) A contractor is responsible for accounting for costs appropriately and for maintaining
records, including supporting documentation, adequate to demonstrate that costs claimed
have been incurred, are allocable to the contract, and comply with applicable cost
principles in this subpart and agency supplements. The contracting officer may disallow
all or part of a claimed cost that is inadequately supported."

Cause: DAi's management stated that the project obtained a verbal approval for the fixed
fee invoice in question and the invoice with the deliverable fee was approved . However,
USAID's verbal approval does not substitute for or adequately provide the receipt of


WILLIAMS ADLEY                      September 13, 2019                                    18
SIGAR        Special Purpose Financial Statement Audit Report F-148                DAI

approval required before submission to USAID for payment. We determined that DAI
departed from the contractually mandated requirement in one instance because staff
were not adequately informed of acceptable evidence needed to verify task order
requirements were met that allow the submission of the fixed fee invoice for payment.

Effect: DAi's failure to document receipt of approval from USAID exposed an internal
control deficiency in DAi's documentation process and resulted in a questioned cost of
one fixed fee. Further, the internal control deficiency that led to the questioned cost
remains an issue and may result in future unsupported costs if not corrected.

Questioned Costs: We determined $403,009 in unsupported fixed fee costs.

Recommendation: We recommend that DAI :

1. Update its invoice approval protocol to include a checklist reminder to staff when
   invoices with fixed fees must receive prior approval from the USAID Contracting
   Officer and preserve evidence of the approval as required.

2. Reimburse USAID for the questioned cost of $403,009 that we determined was
   unsupported based on the task order requirements.




WILLIAMS ADLEY                    September 13, 2019                                19
SIGAR          Special Purpose Financial Statement Audit Report F-148                       DAI



Finding 2019-02: Incorrect G&A Indirect Cost Rate Used
Nature of Finding: Internal Control Deficiency and Noncompliance

Condition:      We tested 49 payroll transactions and 67 non- labor disbursement
transactions. We noted that DAI used - f o r 1 non-labor transaction and - f o r
3 payroll transactions as the General and Administration (G&A) rate when the ceiling per
the contract w a s - · We then re-computed the G&A rate applied across the totality
of direct labor and non-labor costs and determined there was a discrepancy in the overall
G&A rate applied that exceeded the contract ceiling rate for G&A costs. Therefore, we
concluded that DAI indirect costs claimed for the G&A cost category were calculated
incorrectly. Please see details in the table below:




Criteria: According to contract #AID-306-1-14-00013, Section B.9(c), Reimbursement for
indirect costs shall be at the final negotiated rates, but not in excess of the following ceiling
rates:G&~

DAi 's USG New Business and Project Management Manual, Procedure 5.1 New Project
Oracle Setup, defines responsibilities for setting up new award billings in DAi's system . .
Specifically, it assigned the Billing Manager with completing the billing portion of the
Oracle Contract & Billing Setup Form (OCBSF) provided by the Contract Analyst. The
Regional Finance & Operations Manager is responsible for ensuring the accuracy of the
OCBSF. Under Work Instruction 5.2, Bill Rates and Rate Caps in Oracle, paragraph 2.5
states that the head of Contracts is responsible for maintaining information regarding
indirect costs.

According to 48 CFR § 31.201 -2, Determining allowability,
(a)"A cost is allowable only when the cost complies with .. .the following requirements:


WILLIAMS ADLEY                        September 13, 2019                                      20
SIGAR             Special Purpose Financial Statement Audit Report F-148                                       DAI


... (4) Terms of the contract ...
(d) A contractor is responsible for accounting for costs appropriately and for maintaining
records, including supporting documentation, adequate to demonstrate that costs claimed
have been incurred, are allocable to the contract, and comply with applicable cost
principles in this subpart and agency supplements. The contracting officer may disallow
all or part of a claimed cost that is inadequately supported".

Cause: DAi's billing team inadvertently used the -unadjusted G&A rates for this
project, which indicates an internal control deficiency in monitoring to ensure the correct
indirect cost rates are used in all instances.

Effect: Although DAI provided evidence from a subsequent period that shows an
adjustment to indirect costs for the period audited based on updated G&A rates, the U.S.
Government was initially overbilled due to DAi's use and application of an incorrect G&A
indirect rate. Further, there is less assurance that future DAI indirect cost calculations on
this project are accurate without more robust internal controls for ensuring the correct
indirect rates are applied in all instances.

Questioned Costs: None5 .

Recommendation: We recommend that DAI:

1. Develop and implement more effective controls to ensure its process for billing G&A
   indirect costs to USAID agrees with the contractually mandated rates. For example,
   DAI could add a procedural step in its USG New Business and Project Management
   Manual to describe how the indirect cost rate approved in the award will be updated
   in the Oracle system and verified as entered accurately for billing purposes.




5
 Originally, we determined a question ed cost for $1,412 for ineligible indirect costs. However, th e questioned cost
was removed after DAI provided evidence that the indirect cost ca lculations subsequently were adjusted to match
th e provisional indirect cost rates approved by USAID.




W ILLIAMS ADLEY                               September 13, 2019                                                  21
SIGAR         Special Purpose Financial Statement Audit Report F-148                  DAI


           Status of Prior Audit Report Findings and Recommendations

We reviewed three prior audit reports, reviews and assessments pertaining to DAi's
activities in Afghanistan. We identified three prior audits that contained 18 findings, of
which nine findings may have a material effect on the Special Purpose Financial
Statement or other financial information significant to the audit objectives. The reports
containing findings are:

   1. SIGAR 18-61 Financial Audit, titled "USAID's Agricultural Credit Enhancement
      Project: Audit of Costs Incurred by Development Alternatives Inc." issued on July
      18, 2018.

   2. SIGAR 19-41 Financial Audit, titled "USAID's Regional Agricultural Development
      Program (RADP) in Northern Afghanistan: Audit of Costs Incurred by DAI Global
      LLC" issued on June 10, 2019.

   3. Audit Report: USAID Office of Inspector General close out audit report of costs
      incurred by DAI in Afghanistan under contract and cooperative agreement
      numbers 306-T0-13-00004, 306-C-14-00002, 306-A-00-09-00508, 306-C-14-
      00016, and 306-C-12-00003. The audit report, which covered the period between
      December 1, 2014 and December 31, 2015, was issued on September 26, 2017
      for the ALBA project, RADP, Incentives for Driving Economic Alternatives for the
      North, East and West project, Strong Hubs for Afghan Hope and Resilience project
      and Stabilization in Key Areas North project.

We conducted follow-up procedures including discussion with management, reviewed
evidence of corrective actions, and performed testing of similar matters during our current
audit. Accordingly, we concluded that DAI had taken corrective actions on the nine
findings and none of the findings had a material effect on the current SPFS or other
financial data significant to the audit objectives.

Report: USAID OIG Audit Report 3-306-17-035-R, Closeout and Financial Audits of
Schedule of Costs Incurred in Afghanistan by Development Alternatives Inc. (DAI)
for Contract number 306-T0-13-00004 for the period December 1, 2014 to December
31, 2015; Contract number 306-A-00-09-00508 for the period December 1, 2014 to
September 30, 2015; Contract number 306-C-14-00002 for the period December 1,
2014 to December 31, 2015; Contract number 306-C-14-00016 for the period
December 1, 2014 to December 31, 2015; and Contract number 306-C-12-00003 for
the period December 1, 2014 to May 31, 2015.

Issue: Finding 5.1 - For the ALBA project, there were instances where no documentation
supporting the trip was provided, which resulted in $30,233 in questioned cost.

Status: The transactions in question were reviewed and DAI asserted that in each
instance travel took place as planned. Recognizing the absence of some boarding
passes, DAI provided lodging bills as ancillary documents and confirmed that the dates


WILLIAMS ADLEY                     September 13, 2019                                   22
SIGAR         Special Purpose Financial Statement Audit Report F-148                  DAI


on the bills are consistent with the travel dates. USAID made a final determination and
requested reimbursement of $1 ,263.67 in questioned travel costs, for which we verified
that DAI made the reimbursement. We tested travel costs for adequate supporting
documentation for the period we audited without exception. We determined that the
conditions, which existed in the prior audit report, were not repeated.

Report: USAID's Agricultural Credit Enhancement Project: Audit of Costs Incurred
by Development Alternatives Inc. Under Task Order number EDH-1-14-05-00004 for
the period from July 15, 2010 through February 25, 2015

Issue: Finding number 2018-01 - Missing or insufficient source documentation to support
incurred field office labor expenses (Deficiency). The external auditors determined that
DAI did not maintain documentation to support field office employees' hours and rates
charged to the project. As a result, the external auditors~ned the unsupported
amount of $4,331 of which-         were in direct costs and -      n indirect costs.

Status: We followed up on the status of the questioned cost and determined that USAID
considered this issue resolved and eliminated the questioned cost. We reviewed payroll
procedures and tested labor costs for proper support. We determined that the conditions,
which existed in the prior audit report, were not repeated .

Issue: Finding number 2018-02 - Missing or Insufficient Source Documentation to
Support Incurred Equipment and Supply Expenses (Deficiency). The external auditors
determined that DAI did not maintain supporting documentation for three supply related
disbursements. As a result, they questioned the unsupported amount of $7,169 of which
-      were in direct costs and -    in indirect costs.

Status: We followed up on the status of this finding and determined that it was resolved.
We also performed substantive testing of support for non-payroll related charges without
exception. We determined that the conditions, which existed in the prior audit report, were
not repeated.

 Issue: Finding number 2018-03 - Lack of Evidence of Competitive Bidding (Non-
  Compliance). The external auditors determined that the total cost of $9,774, of which
-         were in direct costs plus -   in allocated indirect costs, were questioned as
 ineligible as DAI could not provide documentation to support that the equipment and
 supplies purchased were acquired throughout the required procurement process. DAI
 could not provide bidding documents, costs analysis or sole source justification.

Status: We followed up on the questioned costs and determined that USAID resolved the
issue. We also performed substantive testing of contracts under the current award for
compliance with competitive or noncompetitive documentation support requirements and
did not find this issue repeated.

Report: SIGAR 19-41 Financial Audit of USAID's Regional Agricultural
Development Program in Northern Afghanistan: Audit of Costs Incurred by DAI


WILLIAMS ADLEY                     September 13, 2019                                   23
SIGAR         Special Purpose Financial Statement Audit Report F-148                     DAI


Global LLC Under Contract number AID-306-C-14-00002 for the period January 1,
2016 through December 31, 2017.

Issue: Finding number 2018-01 - Noncompliance with the NICRA G&A Base of
Application. DAI assessed its general and administrative (G&A) rate against pass through
other direct costs, which is inconsistent with Negotiated Indirect Cost Rate Agreement
(NICRA) provisions and resulted in $543,104 in questioned cost.

Status: According to DAI, USAID has requested DAI write up and submit an action plan
to address the recommendations and submit to the Contracting Officer by no later than
July 10. USAID has yet not ruled on corrective actions it will accept regarding this finding .
We tested NICRA calculations for this award and found that the NICRA calculation did
not agree with the contract requirements in all instances. The error in the NICRA
calculation we observed is not the same as presented in the prior audit since we did not
find that DAI applied the G&A rate to pass through costs. We determined that this finding
has not been repeated and the error we observed with NICRA calculations did not have
a material impact on our audit objectives.

Issue: Finding number 2018-02 - Failure to Obtain USA/0 Approval Prior to Executing
Grants Under Contract. The external auditor identified 11 of 42 grants it tested did not
have evidence of USAID's prior written approval as required by DAi's contract, which
resulted in $31,469 in questioned cost.

Status: According to DAI, USAID has requested DAI write up and submit an action plan
to address the recommendations and submit to the Contracting Officer by no later than
July 10. USAID has yet not ruled on corrective actions it will accept regarding this finding.
We reviewed contracts for all required approvals as part of our audit and did not find that
this issue was repeated .

Issue: Finding number 2018-03- Uncertified and Improperly Formatted Annual Inventory
of Government Properly. The external auditor determined that the annual inventory was
not in the format required by AIDAR 752.245-70 and excluded required information.

Status: According to DAI, USAID has requested DAI write up and submit an action plan
to address the recommendations and submit to the Contracting Officer by no later than
July 10. USAID has yet not ruled on corrective actions it will accept regarding this finding .
We tested inventory records for completeness and verified the physical existence of 23
inventory items without exception . We determined that this finding has not been repeated.

Issue: Finding number 2018-06 - Material Misstatements and Omissions of Required
Components in the Special Purpose Financial Statement. The external auditor noted that
DAI failed to include the revenue and balance accounts required by SIGAR.

Status: According to DAI, USAID has requested DAI write up and submit an action plan
to address the recommendations and submit to the Contracting Officer by no later than
July 10. USAID has yet not ruled on corrective actions it will accept regarding this finding.


WI LLIAMS ADLEY                      September 13, 2019                                    24
SIGAR         Special Purpose Financial Statement Audit Report F-148                    DAI

We reviewed all components of the Special Purpose Financial Statement (SPFS)
prepared for this audit. We specifically tested revenues reported on the SPFS with the
amount reported on the general ledger DAI provided without exception . We determined
that the conditions, which existed in the prior audit report, were not repeated .

Issue: Finding number 2018-07 - Evidence of Grantee Monitoring Not Provided. The
external auditor identified 3 of 42 grants reviewed wherein DAI did not follow its grant-
monitoring procedures.

Status: According to DAI, USAID has requested DAI write up and submit an action plan
to address the recommendations and submit to the Contracting Officer by no later than
July 10. USAID has yet not ruled on corrective actions it will accept regarding this finding.
For our audit, we reviewed supporting documentation for grant disbursements for
evidence of appropriate grant monitoring . We did not find evidence that this issue was
repeated .




WILLIAMS ADLEY                      September 13, 2019                                    25
   SIGAR            Special Purpose Financial Statement Audit Report F-148               DAI


     Appendix A - Management's Response to the Findings and Recommendations


   DAI Washington         7600 Wisconsin Avenue           Tel: +1 301 771 7600
                          Suite 200                       Fax: +1 301 771 7777
                          Bethesda, Maryland 208 14 USA   www.dai.com




== DAI
   August 19, 2019

   Williams, Adley & Company DC, LLP
   1030 15th Street, NW, Suite 350 West
   Washington DC , 2005

   Subject: DAI Global LLC's Management Response to the Special Purpose Financial
   Statement audit of the United States Agency for International Development (USAID)
   funded Afghan Women's Leadership in the Economy (AWLE) project under task
   order number AID-306-T0-15-00062, under Indefinite Delivery Indefinite Quantity
   (IDIQ) contract number AID-306-1-14-00013, for the period June 1, 2015 through
   June 30, 2018.

   This document is to provide DAi's response to the two audit findings and
   recommendations identified in the subject audit report. Below you will find our response
   to each of the findings and where applicable, referenced additional support
   documentation is also included.

   DAI would like to thank Williams, Adley & Company DC. LLP , for providing the opportunity
   to respond to the findings and recommendations as reported under SIGAR's Special
   Purpose Financial Statement audit.

   Finding 2019-01: Missing Fixed Fee Invoice Pre-Approval
   Material Weakness in Internal Control and Noncompliance

   The Auditors examined 39 monthly invoices to USAID corresponding to the audit period ,
   of which three invoices (Invoices No. 6, 9 and 21 ) would have contained a billed fixed fee
   amount in accordance with the task order deliverables. Auditors assert that DAI did not
   provide evidence of USAID's Contracting Officer (CO) approval for one (Invoice 9) of
   three fixed fee containing invoices, and questioned the fixed fee portion of $403,009 as
   an unsupported questioned cost. Auditors also noted that during the fieldwork, DAI
   provided evidence of USAID's retroactive approval of the fixed fee . However, this after
   the fact approval did not comply with the task order requirements and the questioned cost
   finding was maintained.




   WILLIAMS ADLEY                              September 13, 2019                          26
SIGAR         Special Purpose Financial Statement Audit Report F-148                    DAI


DAI Management Response:
DAI does not concur with the Auditor's assertion that the fixed fee amount of $403,009
billed to USAID was unsupported based on task order requirements and that the failure
to secure written deliverable approval prior to billing the associated fixed fee amount
constitutes adequate grounds for this cost to be questioned as unallowable.

Per Section B.5 of the task order AID-306-T0-15-00062, DAI is required to submit
evidence of deliverable completion to the COR and CO. Upon acceptance of the
deliverable by USAID and approval by the CO, DAI is eligible to bill the fee associated
with the approved deliverable. DAI communicated the completion of Deliverable #14
(initiate geographically responsive and specific activities in the five major population
centers in the regional economic zones I economic corridors of Kabul, Mazar-i-Sharif,
Jalalabad, Kandahar and Herat) to the COR, Heather Van Nurden, both verbally in
meetings and through the submission of biweekly reports for the period January-March
2016. The COR provided verbal approval of the deliverable and written approval of
invoice #9 inclusive of the $403,009 fixed fee charge.

To further substantiate her concurrence with the fixed fee amount, the COR provided
retroactive written approval of Deliverable #14, which was shared with the Auditor during
fieldwork. We therefore maintain that de facto approval of Deliverable #14 was received
in a timely manner and that the fixed fee amount of $403,009 is fully supported and eligible
for payment.

Going forward, DAI will take measures to document formal, written acceptance by USAID
and approval from the CO of all contract deliverables, before submitting and invoicing any
fees associated with these deliverables.

Attachment DAl-2019-1A - COR confirmation of fee deliverable on Invoice No. 9
Attachment DAl-2019-1 B - March 2016 Bi-weekly Report


Finding 2019-02: Incorrect G&A Indirect Cost Rate Used
Internal Control Deficiency and Noncompliance

Auditors determined that DAI used-for one sampled non-labor transaction and
- f o r three sampled payroll transactions as the General and Administration (G&A)
rate when the ceiling per the contract w a s - · When re-computing the G&A rate
applied across the totality of direct labor and non-labor costs in the audit period, auditors
calculated there was a discrepancy of $1,412 in the overall G&A rate applied that
exceeded the contract ceiling rate of - f o r G&A costs. Auditors questioned this
discrepancy as an ineligible indirect cost.

DAI Management Response:
DAI concurs that the incorrect G&A rate o f - w a s applied to a limited number of
cost transactions as a result of an internal rate setup error. However, we do not agree



WILLIAMS ADLEY                      September 13, 2019                                    27
SIGAR         Special Purpose Financial Statement Audit Report F-148                        DAI


with the Auditor's questioning of $1,412 in G&A costs as ineligible, nor with the calculation
used to arrive at the questioned cost amount.

Per the terms of PROMOTE IDIQ AID-306-1-14-00013, G&A should be applied at the final
negotiated rate, but should not e x c e e d - Rather than conduct a comprehensive
analysis of all G&A rates applied in the audit period, the Auditor extrapolated the error to
the entire sampled cost population, arriving at an arbitrary total of $1,412 in questioned
cost. The basis for this extrapolation, however, remains unclear. For the four sampled
transactions identified as burdened with the incorrect G&A rate, the calculated overbilling
is $136.36, per the table below:


 Sample       Payment                                                         Overbilled
                             Raw Cost
   No.          Date                                                              $

    18         2/18/2016      33,314.40                                            49.97
    40          5/1/2018       5,722.46                                             8.59
    46         8/15/2016      27,386.98                                            41.08
    49         2/18/2016      24,480.60                                            36.72
             TOTAL                                                                 136.36

In August 2018 and April 2019, DAI re-costed all the incorrectly burdened transaction
items, applying the correct ceiling o f - o r lower and crediting USAID for the
difference (please refer to WIE invoices #42 and #51). DAI maintains that any ineligible
costs billed to USAID as a result of incorrectly applied G&A indirect rates have already
been refunded to USAID, therefore no further action is necessary to address this finding .

To prevent a reoccurrence of G&A billing errors, we have established additional ongoing
internal control initiatives to strengthen our invoicing process. These initiatives include the
creation of two reports that list the burden schedule names and ceiling rates at the
subprojects and task level. Project Billing Accountants will check their projects against
these reports when a new subproject and or task is added under a master project to
ensure the correct burden schedule has been setup before billing.

Attachment DAl-2019-2A -August 2018 Invoice (#1002611-42) with adjustment
Attachment DAl-2019-2B -April 2019 Invoice (#1002611-51) with adjustment
Attachment DAl-2019-2C - NICRA Letter July 17, 2018

DAI believes that our management comments properly address the two identified
deficiencies and reflects our commitment to implementing and ensuring adequate
controls and compliance with relevant policies and applicable regu lations. DAI will make
sure to share and emphasize any lessons learned from this audit to ensure that our
policies, procedures, and operations, adequately addresses any identified deficiencies as
identified in this audit report.



WILLIAMS ADLEY                       September 13, 2019                                      28
SIGAR        Special Purpose Financial Statement Audit Report F-148                   DAI

Please do not hesitate to contact DAI if you have any further questions, would require
additional information , or wish to further discuss DAI responses provided in this letter.


Sincerely,


Damir Salkovic
Senior Manager, Internal Audit
301 .771.7385




WILLIAMS ADLEY                     September 13, 2019                                  29
SIGAR         Special Purpose Financial Statement Audit Report F-148                    DAI


Appendix B - Auditor's Response to Management Comments

Williams Adley & Company-DC, LLP (Williams Adley) has reviewed DAI Global LLC's
(DAi's) management response to the audit findings. In consideration of management
views, we have included the following rebuttal to certain matters presented by DAI. A
rebuttal has been included in those instances where management disagreed with the
facts presented in the finding or otherwise did not concur with our recommendations. DAI
did not agree with Finding 2019-01 and disagreed with the questioned cost amount in
Finding 2019-02. Williams Adley's rebuttal to DAI management comments is as follows:

Finding 2019-01: Missing Fixed Fee Invoice Pre-Approval
Management disagreed with Williams Adley's conclusion that for one invoice, which
included a fixed fee of $403,009, DAI did not provide evidence it received approval from
USAID's Contracting Officer (CO) prior to its submission as required. Specifically, DAI
asserted that it did obtain the appropriate approvals based on meeting the deliverable
requirements, which includes an email from the USAID's Contracting Officer
Representative (COR) stating her approval of the invoices was a "defacto" approval of
the deliverables.

Williams Adley does not dispute the deliverables as described by DAI and the COR. The
discussion and evidence provided still is missing the approval from the CO, which is a
contractual requirement prior to submittal of an invoice for the fee amount associated with
the deliverable. For that reason, the finding and recommendation remain as stated .

Finding 2019-02: Incorrect G&A Indirect Cost Rate Used
While management agreed that an incorrect indirect rate was used for general and
administrative (G&A) overhead costs in certain instances, DAI disagreed with Williams
Adley's conclusion that the incorrect indirect cost rate should result in a questioned cost.
Specifically, DAI asserted that it adjusted the indirect costs per invoices 42 and 51 in
October 2018 and April 2019, respectively, to agree with ~sional rates issued by
USAID in July 2018 without exceeding the ceiling rate o f - ( T h e provisional rates
for G&A ranged f r o m - t o - f o r the period audited. The ceiling rate for G&A
was-per the contract). DAI concluded that any questioned cost resulting from
application of the incorrect G&A rate has been refunded to USAID.

Williams Adley reviewed the information provided by DAI in its response and agrees that
the G&A indirect cost was adjusted in a subsequent period. As such, the finding has been
corrected to remove the questioned cost amount while other aspects of the finding remain
unchanged .




WILLIAMS ADLEY                      September 13, 2019                                   30
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