oversight

SIGAR 21-17-FA

Published by the Office of the Special Inspector General for Afghanistan Reconstruction on 2021-02-18.

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

 SIGAR                                                     Special Inspector General for
                                                            Afghanistan Reconstruction




                                                                    SIGAR 21-17 Financial Audit




        U.S. Department of State’s Community-Based
        Demining Projects in Afghanistan: Audit of Costs
        Incurred by Afghan Technical Consultants




                                                                         FEBRUARY
                                                                               2021

SIGAR 21-17-FA/State’s Community-Based Demining Projects
                                                            February 2021




SIGAR
                                                            U.S. Department of State’s Community-Based Demining Projects in
                                                            Afghanistan: Audit of Costs Incurred by Afghan Technical Consultants

                                                            SIGAR 21-17-FA

Special Inspector General for                               WHAT SIGAR FOUND
Afghanistan Reconstruction                                  Conrad identified four findings. Conrad classified three findings with
                                                            deficiencies, two of which were significant, in ATC’s internal controls, and
                                                            three instances of noncompliance with the terms of the grants. For
WHAT THE AUDIT REVIEWED
                                                            example, the auditors noted that ATC exceeded the approved budget for
The U.S. Department of State’s Bureau of Political-         office rentals and the authorized rate for employee salaries; these
Military Affairs, Office of Weapons Removal and             resulted in ATC overcharging the government $4,298.
Abatement (State) awarded Afghan Technical
                                                            Because of the deficiencies in internal controls and instances of
Consultants (ATC) five grants to support
                                                            noncompliance, Conrad identified a total of $8,087 in questioned costs.
community-based demining, humanitarian mine
                                                            The questioned costs consisted of $3,789 in unsupported costs—costs
clearance, and conventional weapons destruction
                                                            not supported with adequate documentation or that did not have
projects in Afghanistan. Under the grants, ATC
                                                            required prior approval—and $4,298 in ineligible costs—costs prohibited
performed a variety of tasks, including clearing
                                                            by the contract, applicable laws, or regulations.
landmines to reduce civilian casualties and
provide safe land for farming, grazing, and human                                                                                Total
habitation. The budgets for all five grants totaled         Category                      Ineligible     Unsupported       Questioned
$6,376,420, and the period of performance was                                                                                   Costs
from December 2, 2015, through March 31, 2019.              Vendor invoices and/or
After nine amendments, the end date changed to              quotations were not                 $0             $3,159            $3,159
May 31, 2019; the budget remained the same.                 addressed to ATC
                                                            Lack of adherence to
SIGAR’s financial audit, performed by Conrad LLP            procurement policy                  $0               $630             $630
(Conrad), reviewed $6,376,420 in costs incurred             Costs claimed exceeded
for the five grants from December 2, 2015,                  approved budget rates          $4,298                  $0            $4,298
through May 31, 2019. The objectives were to (1)            Total Costs                    $4,298              $3,789            $8,087
identify and report on significant deficiencies or
material weaknesses in ATC’s internal controls              Conrad identified one previous audit report with three findings that could
related to the grants; (2) identify and report on           have a material impact on the SPFS, and concluded that ATC took
instances of material noncompliance with the                adequate corrective action on the findings.
terms of the grants and applicable laws and
                                                            Conrad issued an unmodified opinion on ATC’s SPFS, noting that it
regulations, including any potential fraud or abuse;
                                                            presents fairly, in all material respects, revenues received and costs
(3) determine and report on whether ATC has
                                                            incurred for the period audited.
taken corrective action on prior findings and
recommendations; and (4) express an opinion on
the fair presentation of ATC’s Special Purpose
Financial Statement (SPFS). See Conrad’s report
for the precise audit objectives.
In contracting with an independent audit firm and
drawing from the results of the audit, auditing              WHAT SIGAR RECOMMENDS
standards require SIGAR to review the audit work
performed. Accordingly, SIGAR oversaw the audit              Based on the results of the audit, SIGAR recommends that the
and reviewed its results. Our review disclosed no            responsible agreement officer at State:
instances where Conrad did not comply, in all                  1.   Determine the allowability of and recover, as appropriate,
material respects, with U.S. generally accepted                     $8,087 in questioned costs identified in the report.
government auditing standards.                                 2.   Advise ATC to address the report’s three internal control findings.
                                                               3.   Advise ATC to address the report’s three noncompliance findings.




       For more information, contact SIGAR Public Affairs at (703) 545-5974 or sigar.pentagon.ccr.mbx.public-affairs@mail.mil.
@ s1GAR I                           Office of the Special Inspector General
                                    for Afghanistan Reconstruction



February 18, 2021


The Honorable Antony Blinken
Secretary of State

Mr. Dean Thompson
Acting Assistant Secretary
Bureau of South and Central Asian Affairs


We contracted with Conrad LLC (Conrad) to audit the costs incurred by Afghan Technical Consultants (ATC) under
five grants supporting the U.S. Department of State’s Bureau of Political-Military Affairs, Office of Weapons
Removal and Abatement’s (State) community-based demining, humanitarian mine clearance, and conventional
weapons destruction projects in Afghanistan.1 Under the grants, ATC performed a variety of activities including
clearing landmines to reduce civilian casualties and provide safe land for agriculture, grazing, and human
habitation.
Conrad’s audit covered $6,376,420 in costs incurred from December 2, 2015, through May 31, 2019, across all
five grants. Our contract with Conrad 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 agreement officer at State:
     1. Determine the allowability of and recover, as appropriate, $8,087 in questioned costs identified in the
        report.
     2. Advise ATC to address the report’s three internal control findings.
     3. Advise ATC to address the report’s three noncompliance findings.
The results of Conrad’s audit are discussed in detail in the attached report. We reviewed Conrad’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
ATC’s Special Purpose Financial Statement. We also express no opinion on the effectiveness of ATC’s internal
control or compliance with the contract, laws, and regulations. Conrad is responsible for the attached auditor’s
report and the conclusions expressed in it. However, our review disclosed no instances in which Conrad did not
comply, in all material respects, with generally accepted government auditing standards issued by the Comptroller
General of the United States.
We are requesting documentation related to corrective actions taken and target dates for completion for the
recommendations. Please provide this information to sigar.pentagon.audits.mbx.recommendation-
followup@mail.mil within 60 days from the issue date of this report.




John F. Sopko
Special Inspector General
   for Afghanistan Reconstruction


(F-196)


1The grant numbers are S-PMWRA-16-GR-1005, S-PMWRA-16-GR-1052, S-PMWRA-16-GR-1056, S-PMWRA-17-GR-1084, and
S-PMWRA-18-GR-0013.

            1550 Crystal Drive, 9th Floor       Mailing 2530 Crystal Drive
            Arlington, Virginia 22202           Arlington, Virginia 22202-3940   Tel 703 545 6000   www.sigar.mil
                    Afghan Technical Consultants (ATC)

                    Financial Audit of Costs Incurred Under
Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
            Office of Weapons Removal and Abatement (PM/WRA)
Supporting Various Community Based Demining Projects throughout Afghanistan

           For the Period of December 2, 2015 through May 31, 2019
                                       Table of Contents


                                                                                 Page


Transmittal Letter

Background                                                                        1

Work Performed                                                                    2

Objectives, Scope, and Methodology                                                3

Summary of Results                                                                6

Summary of ATC’s Responses to Findings                                            8

Independent Auditor’s Report on the Special Purpose Financial Statement           9

Special Purpose Financial Statement (Consolidated)                                12

Notes to the Special Purpose Financial Statement                                  13

Notes to Questioned Costs Presented on the Special Purpose Financial Statement    16

Independent Auditor’s Report on Internal Control                                  19

Independent Auditor’s Report on Compliance                                        21

Schedule of Findings and Questioned Costs                                         23

Status of Prior Audit Findings                                                    33

Appendices:
 Appendix A:                                                                      35
   Special Purpose Financial Statement – Grant No. S-PMWRA-16-GR-1005
   Special Purpose Financial Statement – Grant No. S-PMWRA-16-GR-1052
   Special Purpose Financial Statement – Grant No. S-PMWRA-16-GR-1056
   Special Purpose Financial Statement – Grant No. S-PMWRA-17-GR-1084
   Special Purpose Financial Statement – Grant No. S-PMWRA-18-GR-0013

 Appendix B: ATC’s Responses to Audit Findings                                    40

 Appendix C: Auditor’s Rebuttal to ATC’s Responses to Audit Findings              47
Conrad
January 11, 2021

Board of Directors
Afghan Technical Consultants
Kabul, Afghanistan

Special Inspector General for Afghanistan Reconstruction (“SIGAR”)
Arlington, VA


Conrad LLP (referred to as “Conrad” or “we”) hereby provides to you our final report, which reflects results
from the procedures we completed during our audit of Afghan Technical Consultants’ (“ATC”) Special
Purpose Financial Statement (“SPFS”) for costs incurred under five grants (“Grants”) awarded by the
Department of State (“State”), Bureau of Political-Military Affairs, Office of Weapons Removal and
Abatement (“PM/WRA”) for the period of December 2, 2015 through May 31, 2019.

On December 9, 2020, we provided SIGAR with a draft report reflecting our audit procedures and results.
ATC received a copy of the report on December 9, 2020; and provided written responses subsequent
thereto. These responses have been considered in the formation of the final report, along with the written
and oral feedback provided by SIGAR and ATC. ATC’s responses and our corresponding auditor analysis
are incorporated into this report following our audit reports.

Thank you for providing us the opportunity to work with you and to conduct the audit of these Grants.

Sincerely,




Sam Perera, CPA, CFE, CITP, CGMA
Partner




             __________________________________________________________________________________________________________________________________________________________________________________

                               23161 Lake Center Drive, Suite 200, Lake Forest, CA 92630 ■ T: (949) 552-7700 ■ www.conradllp.com
                              Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019


Background

Between 2015 and 2019, the Department of State (“State”), Bureau of Political-Military Affairs, Office of
Weapons Removal and Abatement (“PM/WRA”) awarded five (5) Grants to Afghan Technical Consultants
(“ATC”) to support community-based demining, humanitarian mine clearance, and conventional weapons
destruction projects in Afghanistan. These Grants had various periods of performance with an original
period of performance, which ran between December 2, 2015 and March 31, 2019, with a total estimated
original budget of $6,376,420. ATC was tasked with the following principal objectives:

   1. To contribute to improved security and stability in Afghanistan through the application of land
      release procedures to selected hazard sites in Parwan and Baghlan Provinces.

   2. To assist the government and people of Afghanistan by contributing to development by clearing
      landmines and other explosive hazards.

   3. To improve human security by enabling community-based demining in 14 communities in Kunduz
      Province, Afghanistan.

   4. The elimination of landmines and Explosive Remnants of War (“ERW”) in Afghanistan, thereby
      reducing the number of casualties among the civilian population, ensuring a safe environment,
      and enabling land to return to productive agricultural, grazing, habitation, and other economic
      development use.

ATC provided services, equipment, and facilities, as necessary. The initial approved budget for all five
Grants totaled $6,376,420. This total approved budget remained unchanged; however, there were
various amendments that extended the period of performance for four out of the five Grants, which
resulted in the Grants periods of performance being ran from December 2, 2015 and May 31, 2019. See
Summary of Grants below:

Summary of Grants


                                     Original                                As Amended
  Grant Number
                                                                 No. of        Total Final
                       Cost ($)       Start         End                                         End
                                                               Amendments      Budget ($)

 S-PMWRA-16-         $1,887,370 12/02/2015 09/30/2016                1         $1,887,370    11/30/2016
 GR-1005

 S-PMWRA-16-           1,057,218 10/01/2016 09/30/2017               3          1,057,218    11/30/2017
 GR-1052




                                                  -1-
                                Afghan Technical Consultants (ATC)

                              Financial Audit of Costs Incurred Under
          Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                      Office of Weapons Removal and Abatement (PM/WRA)
          Supporting Various Community Based Demining Projects throughout Afghanistan

                       For the Period of December 2, 2015 through May 31, 2019


 S-PMWRA-16-             1,040,832 10/01/2016 09/30/2017                3           1,040,832     08/31/2017
 GR-1056

 S-PMWRA-17-               620,000 09/28/2017 08/27/2018               None            620,000    No Change
 GR-1084

 S-PMWRA-18-             1,771,000 05/11/2018 03/31/2019                2           1,771,000     05/31/2019
 GR-0013

 Total:                 $6,376,420                                      9          $6,376,420


Work Performed

Conrad LLP (“Conrad”) was engaged by the Office of the Special Inspector General for Afghanistan
Reconstruction (“SIGAR”) to conduct a financial audit of five Grants, as mentioned above, of ATC’s Special
Purpose Financial Statement (“SPFS”) for costs incurred under the PM/WRA totaling $6,376,420 for the
period December 2, 2015 through May 31, 2019.

A summary of the program to be audited is as follows:

                                      Grant Period               Audit Period*               Audit Amount
           Grant No.
                                     Start            End      Start             End             Cost ($)

 S-PMWRA-16-GR-1005            12/02/2015       11/30/2016   12/02/2015       11/30/2016**       $1,887,370

 S-PMWRA-16-GR-1052            10/01/2016       11/30/2017   10/01/2016       11/30/2017**        1,057,218

 S-PMWRA-16-GR-1056            10/01/2016       08/31/2017   10/01/2016       08/31/2017**        1,040,832

 S-PMWRA-17-GR-1084            09/28/2017       08/27/2018   09/28/2017       08/27/2018**          620,000

 S-PMWRA-18-GR-0013            05/11/2018       05/31/2019   05/11/2018       05/31/2019**        1,771,000

                                             Total:                                              $6,376,420

   * The period of performance falls within the scope of the audit.
   ** Close-out Audit




                                                       -2-
                               Afghan Technical Consultants (ATC)

                            Financial Audit of Costs Incurred Under
        Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                    Office of Weapons Removal and Abatement (PM/WRA)
        Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019


Objectives, Scope, and Methodology

Audit Objectives

The objectives of the audit of the aforementioned awards include the following:

   •    Special Purpose Financial Statement (“SPFS”) – Express an opinion on whether ATC’s SPFS for
        the awards presents fairly, in all material respects, the 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 awards and generally accepted accounting principles or other comprehensive
        basis of accounting.

   •    Internal Controls – Evaluate and obtain a sufficient understanding of ATC’s internal controls
        related to the awards; assess control risk; and identify and report on significant deficiencies
        including material internal control weaknesses.

   •    Compliance – Perform tests to determine whether ATC complied, in all material respects, with the
        awards requirements and applicable laws and regulations; and identify and report on instances
        of material noncompliance with the terms of the awards and applicable laws and regulations,
        including potential fraud or abuse that may have occurred.

   •    Corrective Action on Prior Findings and Recommendations – Determine and report on whether
        ATC has taken adequate corrective action to address findings and recommendations from
        previous engagements that could have a material effect on the special purpose financial
        statement or other financial data significant to the audit objectives.

Scope

The scope of this audit included all costs incurred during the period of December 2, 2015 through May
31, 2019 totaling $6,376,420 under the Grants. Our testing of the indirect cost was limited to determining
that the indirect cost was calculated using the correct revised negotiated indirect cost rates or provisional
indirect cost rates, as applicable for the given fiscal year, as approved in each of the Grants and
subsequent applicable amendments.

Methodology

In order to accomplish the objectives of this audit, we designed our audit procedures to include the
following:

Entrance Conference

An entrance conference was held on May 13, 2020, with representatives of ATC, Conrad, SIGAR, and
PM/WRA participating via conference call. The purpose of the entrance conference was to discuss the


                                                    -3-
                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019


nature, timing, and extent of audit work to be performed, establish key contacts throughout the
engagement, and schedule status briefings. We also discussed the timeframe for the completion of the
audit.

Planning

During our planning phase, we performed the following:

   •   Obtained an understanding of ATC;

   •   Reviewed the Grants and Amendments;

   •   Reviewed regulations specific to State that are applicable to the Grants;

   •   Performed a financial reconciliation; and

   •   Selected samples based on our sampling techniques. According to the approved Audit Plan, we
       used the detailed accounting records that were reconciled to the financial reports, and based upon
       the risk assessment and materiality included as part of the approved Audit Plan, we performed
       data mining to assess individual expenditure accounts and transactions that were considered to
       be high or medium to low risk for inclusion in our test of transactions. None of the populations
       were homogeneous in nature, which means none of the costs are identical in nature, thus
       statistical sampling was not used. All samples were selected on a judgmental basis. Our sampling
       methodology for judgmental samples was as follows:

           o   For accounts that appear to contain unallowable and restricted items according to the
               terms of the Grants, Title 2 Part 200: Code of Federal Regulations (2 CFR 200), and Title
               2 Part 600: Code of Federal Regulations (2 CFR 600), and any other applicable
               regulations, we tested 100% of the transactions.

           o   For related party transactions, we did not identify any related party transactions.

           o   For high risk cost categories, we sampled transactions greater than $31,900 not to exceed
               30% of the total amount expended for each cost category.

           o   For medium risk cost categories, we sampled transactions greater than $63,800 not to
               exceed 20% of the total amount expended for each cost category.

           o   For low risk cost categories, we sampled transactions that are greater than $63,800 not
               to exceed 10% of the total amount expended for each cost category and not to exceed 50
               transactions in total for all accounts comprising low risk cost categories.




                                                   -4-
                              Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                   For the Period of December 2, 2015 through May 31, 2019


Special Purpose Financial Statements

In reviewing the SPFS, we performed the following:

   •   Reconciled the costs on the SPFS to the Grants and the applicable general ledgers;

   •   Documented procedures associated with controlling funds, including bank accounts and bank
       reconciliations;

   •   Traced receipt of funds to the accounting records;

   •   Sampled and tested the costs incurred to ensure the costs were allowable, allocable to the Grants,
       and reasonable; and

   •   Reviewed personnel costs to ensure they are supported, authorized, reasonable, and allowable.

Internal Controls Related to the Grants

We reviewed ATC’s internal controls related to the Grants to gain an understanding of the implemented
system of internal control to obtain reasonable assurance of ATC’s financial reporting function and
compliance with applicable laws and regulations. This review was accomplished through interviews with
management and key personnel, reviewing policies and procedures, and identifying key controls within
significant transaction cycles and testing those key controls.

Compliance with Grant’s Requirements and Applicable Laws and Regulations

We performed tests of transactions to determine whether ATC complied, in all material respects, with the
Grant’s requirements, 2 CFR 200, and any other applicable laws and regulations. We also identified and
reported on instances of material noncompliance with terms of the award and applicable laws and
regulations, including potential fraud or abuse that may have occurred.

Corrective Action on Prior Findings and Recommendations

Conrad requested from ATC, as well as conducted a search online to various governmental websites,
including SIGAR, State, and other applicable Federal agencies, to identify previous engagements that
could have a material effect on ATC’s SPFS. For those engagements, Conrad evaluated the adequacy
of corrective actions taken on findings and recommendations that could have a material effect on the
SPFS. See the Status of Prior Audit Findings section on page 31.




                                                  -5-
                                 Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                     For the Period of December 2, 2015 through May 31, 2019


Exit Conference

An exit conference was held on October 8, 2020, via conference call. Participants included
representatives from Conrad, ATC, SIGAR, and PM/WRA. During the exit conference, we discussed the
preliminary results of the audit and reporting process.

Summary of Results

Upon completion of our audit of the costs incurred by ATC under their five Grants with PM/WRA, we
issued an unmodified opinion on the SPFS and identified four findings that amounted to $8,087 in
questioned costs. We have summarized the details of these results in the Findings and Questioned Costs
subsection below. Our summary is intended to present an overview of the audit results and is not intended
to be a representation of the audit’s results in their entirety.

Auditor’s Opinion on the SPFS

Conrad issued an unmodified opinion on the fairness of the presentation of the SPFS. We identified
$8,087 in total questioned costs, comprised of $4,298 in ineligible costs, $3,789 in unsupported costs.
Ineligible costs are explicitly questioned because they are unreasonable; prohibited by the award
provisions 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.

Findings and Questioned Costs

The four findings listed below are classified as either an internal control deficiency or noncompliance, or
if both classifications were identified then a combination of both were presented. Also, internal control
findings were classified as a deficiency, a significant deficiency, or a material weakness based on their
impact on ATC’s SPFS. In performing our testing, we considered whether the information obtained during
our testing resulted in either detected or suspected material fraud, waste, or abuse, which would be
subject to reporting under Government Auditing Standards. Evidence of such items was not identified by
our testing.


                                                                                            Cumulative
   Finding           Nature of                               Ineligible    Unsupported
                                           Matter                                           Questioned
   Number             Finding                                  Costs          Costs
                                                                                              Cost

                                     Vendor invoices
                  Internal control
                                     and/or quotations
 2020-01          – Significant                                 $0            $3,159          $3,159
                                     were not addressed
                  Deficiency
                                     to ATC.




                                                    -6-
                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019



                 Non-
                                    Lack of adherence
                 Compliance;
 2020-02                            to procurement             $0             $630          $3,789
                 Internal Control
                                    policy
                 – Deficiency

                 Non-
                                    Costs claimed
                 compliance;
                                    exceeded approved
 2020-03         Internal control                            $4,298            $0           $8,087
                                    budget rates
                 – Significant
                 deficiency


                                    Lacked adherence
                 Non-
 2020-04                            to Afghanistan tax         $0              $0           $8,087
                 Compliance
                                    laws


                               Total Questioned Costs        $4,298          $3,789         $8,087

Internal Control Findings

Our audit discovered three internal control findings, one deficiency and two significant internal control
deficiencies. See Independent Auditor’s Report on Internal Control on page 17.

Compliance Findings

The results of our testing disclosed three instances of non-compliance related to this audit. See the
Independent Auditor’s Report on Compliance on page 20.

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

Review of Prior Findings and Recommendations

Based on our request and search of prior engagements pertinent to ATC’s activities under the Grants,
we identified 1 prior engagement that contained three findings that could have a material effect on the
SPFS or other financial data significant to the audit objectives. We have reviewed the corrective actions
taken to address these findings and recommendations. Our review procedures include a follow-up
discussion with management of the corrective action taken, reviewing evidence of revised policies and
procedures or other applicable recommended actions, as well as conducting tests of the similar areas
surrounding these issues during our current audit. Based on our review, ATC has taken adequate


                                                  -7-
                              Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                   For the Period of December 2, 2015 through May 31, 2019


corrective actions on the recommendations on all three findings. See Status of Prior Audit Findings on
page 34 for a detailed description of the prior findings and recommendations.

Summary of ATC’s Responses to Findings

The following represents a summary of the responses provided by ATC to the findings identified in this
report (The complete responses received can be found in Appendix B to this report):

   (1) 2020-01: ATC did not disagree nor agree with the finding. ATC stated that the main goals and
       objectives of the projects were successfully achieved as per the signed Grants. However, it was
       acknowledged that administration and procurement rules were affected due to security threats
       and lack of standard invoices in local market shops as well as uneducated shopkeepers. ATC
       stated internal audit policies and financial controlling mechanism will be reviewed for further
       improvements and that the issues described have been recorded as lessons learned.

   (2) 2020-02: ATC did not disagree nor agree with the finding. ATC stated that the internal
       procurement policy was followed. It was further stated that the emergency circumstance for the
       questioned procurement was documented by the purchase committee and the purchase
       committee explained that the process was affected due to mobilization of the team to remote
       districts, which confirmed the emergency process of the said procurement. ATC stated that the
       issue described has been recorded as a lesson learned.

   (3) 2020-03: ATC did not disagree nor agree with the finding. ATC stated that all budget lines for all
       Grants were underspent or less than 10% overspent.

   (4) 2020-04: ATC did not disagree nor agree with this finding. ATC stated the tax withholding from
       vendors for tax years 2016, 2017, and 2018 was challenging and that ATC was granted tax
       clearance for those years as the tax matters were closed. Furthermore, it was stated that improved
       policies have been implemented to communicate and collect the tax obligation from suppliers.




                                                  -8-
Conraci)
                                 INDEPENDENT AUDITOR’S REPORT
                          ON THE SPECIAL PURPOSE FINANCIAL STATEMENT



Board of Directors
Afghan Technical Consultants
Kabul, Afghanistan

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


Report on the Consolidated Special Purpose Financial Statement

We have audited the accompanying Special Purpose Financial Statement of Afghan Technical
Consultants (“ATC”) and the related notes to the Special Purpose Financial Statement, with
respect to the five Grants awarded by the Department of State, Bureau of Political-Military Affairs,
Office of Weapons Removal and Abatement, as listed under the Summary of Grants section of
this report, for the period of December 2, 2015 through May 31, 2019.


Management’s Responsibility for the Consolidated Special Purpose Financial Statement

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


Auditor’s Responsibility

Our responsibility is to express an opinion on the Special Purpose Financial Statement based on
our audit. We conducted our audit in accordance with 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. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the Special Purpose Financial Statement is free from material misstatement.

Government Auditing Standards require, among other things, that auditors performing audits in
accordance with Government Auditing Standards obtain 24 hours of continuing professional
education every two years, and the audit organization have an external peer review performed by
reviewers independent of the organization at least once every three years. We subcontracted a
portion of the audit to an independent chartered public accounting firm with an office located in
Kabul, Afghanistan. The work performed by our subcontractor consisted of performing all
fieldwork located in Afghanistan. Our subcontractor was not involved in the planning, directing or
                                                                                            -9-
       __________________________________________________________________________________________________________________________________________________________________________________

                         23161 Lake Center Drive, Suite 200, Lake Forest, CA 92630 ■ T: (949) 552-7700 ■ www.conradllp.com
reporting aspects of the audit. Our subcontractor did not meet the continuing professional
education requirements or peer review requirements as outlined in Government Auditing
Standards, as the firm is located and licensed outside of the United States of America. The results
of the audit were not affected as we directed the procedures performed and reviewed the work
completed by our subcontractor.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the Special Purpose Financial Statement. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the Special
Purpose Financial Statement, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the ATC’s preparation and fair presentation of
the Special Purpose Financial 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 the
ATC’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the Special
Purpose Financial Statement.

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


Opinion

In our opinion, the Special Purpose Financial Statement referred to above presents fairly, in all
material respects, the respective revenue received and costs incurred by ATC for the five Grants,
as listed under the Summary of Grants section of this report, for the period of December 2, 2015
through May 31, 2019, in accordance with the basis of accounting described below.


Basis of Accounting

We draw attention to Note 1 and Note 2 to the Special Purpose Financial Statement, which
describes the basis of presentation and accounting. As described in Note 1 and 2 to the
Statement, the Statement is prepared by ATC 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.


Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our reports dated
January 7, 2021 on our consideration of ATC’s internal control over financial reporting and on our
tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of those reports is to describe the scope of our testing
of internal control over financial reporting and compliance, and the results of that testing, and not
to provide an opinion on internal control over financial reporting or on compliance. Those reports
are an integral part of an audit performed in accordance with Government Auditing Standards in
considering ATC’s internal control over financial reporting and compliance.




                                            (Continued)
                                               - 10 -
Restriction on Use

This report is intended for the information of Afghan Technical Consultants, the United States
Department of State, Bureau of Political-Military Affairs, Office of Weapons Removal and Abatement,
and the Special Inspector General for Afghanistan Reconstruction, 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. However, subject to applicable laws, this report may be
released to Congress and to the public by SIGAR in order to provide information about programs
and operations funded with amounts appropriated or otherwise made available for the
reconstruction of Afghanistan.




Lake Forest, California
January 7, 2021




                                           (Continued)
                                              - 11 -
                               Afghan Technical Consultants (ATC)

                          Financial Audit of Costs Incurred Under
      Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                  Office of Weapons Removal and Abatement (PM/WRA)
      Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019

                       Special Purpose Financial Statement (Consolidated)



                                                                                    Questioned Costs
                                         Budget           Actual       Ineligible       Unsupported        Total       Notes
Revenues:
  Five Grants (Combined)             $6,376,420       $6,376,420         $          -    $        -    $           -    (4)

Total revenues                           6,376,420        6,376,420                 -             -                -

Costs incurred:

  Personnel                              2,498,814        2,503,852          2,703                -         2,703       (A)

  Fringe benefits                         921,954          857,905            265                 -           265       (A)

  Travel and DSA                          992,532         1,048,726                 -             -                -

  Training                                  3,920            1,017                  -             -                -

  Expendable equipment                    236,414          215,440                  -           751           751       (B)

  Non-Expendable equipment                 22,400           10,059                  -             -                -

  Contractual                             186,601          195,088            940               274         1,214       (C)

  Operating costs                         427,867          445,047                  -           264           264       (D)

  Other direct costs                      399,106          435,337                  -         2,156         2,156       (E)

  Indirect costs                          686,812          663,949            390               344           734       (F)

Total costs incurred                 $6,376,420       $6,376,420 $           4,298       $    3,789    $ 8,087

Outstanding fund balance             $            -   $            -

Note: SPFS related to each specific grant is included in Appendix A.


                            See Notes to the Special Purpose Financial Statement
             And Notes to Questioned Costs Presented on the Special Purpose Financial Statement
                                                   - 12 -
                                   Afghan Technical Consultants (ATC)

                              Financial Audit of Costs Incurred Under
          Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                      Office of Weapons Removal and Abatement (PM/WRA)
          Supporting Various Community Based Demining Projects throughout Afghanistan

                               Notes to the Special Purpose Financial Statement1


(1)       Basis of Presentation

          The accompanying Special Purpose Financial Statement (“Statement”) includes costs incurred
          under the Department of State, Bureau of Political-Military Affairs, Office of Weapons Removal
          and Abatement grant numbers S-PMWRA-16-GR-1005, S-PMWRA-16-GR-1052, S-PMWRA-16-
          GR-1056, S-PMWRA-17-GR-1084, and S-PMWRA-18-GR-0013 for demining activities
          conducted in Afghanistan during the period December 2, 2015 through May 31, 2019. Because
          the Statement presents only a selected portion of the operations of the Afghan Technical
          Consultants (“ATC”), it is not intended to and does not present the financial position, changes in
          net assets, or cash flows of ATC. 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 aforementioned Federal grants.


(2)       Basis of Accounting

          Expenditures reported on the Statement are reported on the cash basis of accounting. Such
          expenditures are recognized in accordance with the cost principles of the Uniform Guidance, 2
          CFR 200, wherein certain types of expenditures are not allowable or are limited to reimbursement.


(3)       Foreign Currency Conversion Method

          During the course of each project, ATC converts foreign currency from Afghanis to United States
          Dollars using an average exchange rate. The source of the exchange rates used in the
          conversions was the exchange rate employed by the bank at the time of the exchange.


(4)       Revenues

          Revenues on the Statement represent the amount of funds received from the United States
          Department of State through drawdowns made through the Payment Management System.


(5)       Costs Incurred by Budget Category

          The budget categories presented and associated amounts reflect the budget line items presented
          within the final, approved grant agreements and amendments, as applicable. Further approvals
          are required for adding new budget item lines and for more than a 10% variance to original budget
          categories.


1
    These Notes to the Special Purpose Financial Statement are the responsibility of Afghan Technical Consultants.

                                                       - 13 -
                              Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                          Notes to the Special Purpose Financial Statement


(6)    Expendable and Non-Expendable Equipment

       For purposes of the Statement, there are two line-items referencing Equipment. “Non-Expendable
       Equipment” is defined as goods or equipment with a cost of $1,000 or greater and having a useful
       life of one year or more. “Expendable Equipment” is defined as goods or equipment with a cost
       of less than $500 and having a useful life of less than one year as per ATC Internal Policies.
       (Based on DoS policies the equipment cost considered for an amount of $5,000)


(7)    Fund Balance

       The fund balance presented on the Statement represents the difference between revenues
       earned and costs incurred such that an amount greater than $0 would reflect that cash was
       received from the United States Government that exceeds the actual costs incurred or charged
       to the Grants and an amount less than $0 would indicate that costs have been incurred, but are
       pending additional evaluation prior to accompanying payments being received from the United
       States Government.


(8)    Currency

       All amounts presented are shown in United States dollars.


(9)    Bank Account Interest

       ATC maintains one main account for fund receiving and separate sub-bank accounts for payment
       management. These accounts are opened as current accounts with no interest received. The
       bank accounts are supported with monthly bank reconciliations and records of bank statements
       accordingly.


(10)   Periods of Performance

       Pursuant to Federal regulations, allowable costs are limited to those obligations incurred during
       the period of performance of a grant. The periods of performance for each grant began on the
       day stated in the award documents and the project duration was also stated in the award
       documents unless an extension was approved. The original project period for Award No: S-
       PMWRA-16-GR-1005 was December 2, 2015 through September 30, 2016, but was extended
       through November 30, 2016; the original project period for Award No: S-PMWRA-16-GR-1052
       was October 1, 2016 through September 30, 2017, but was extended through November 30,
       2017; the original project period for Award No: S-PMWRA-16-GR-1056 was October 1, 2016

                                              (Continued)
                                                 - 14 -
                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                            Notes to the Special Purpose Financial Statement


       through August 31, 2017, but was extended through September 30, 2017; and the original project
       period for Award No: S-PMWRA-18-GR-0013 was November 5, 2018 through March 31, 2019,
       but was extended through May 31, 2019.


(11)   Funds Returned/Re-Obligated

       No funds were returned to PMWRA for the awards under audit.


(12)   Status of Projects

       Each project funded by the Grants referenced in the Statement are implemented and closed. No
       additional charges are anticipated.




                                              (Continued)
                                                 - 15 -
                                Afghan Technical Consultants (ATC)

                          Financial Audit of Costs Incurred Under
      Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                  Office of Weapons Removal and Abatement (PM/WRA)
      Supporting Various Community Based Demining Projects throughout Afghanistan

        Notes to Questioned Costs Presented on the Special Purpose Financial Statement2

                   For the Period of December 2, 2015 through May 31, 2019


(A)      Personnel and Fringe Benefits

         ATC reported a total of $2,503,854 for personnel costs and a total of $857,905 in related
         fringe benefits across all five Grants for the period of December 2, 2015 through May 31,
         2019.

         During our audit of these costs, we noted:

         (1) Salary rates for various employee positions exceeded the proposed and approved
             rates, which resulted in total ineligible costs of $2,703. See Finding No. 2020-03 in the
             Schedule of Findings and Questioned Costs section of this report.

         (2) As a direct result of the ineligible personnel costs, the associated fringe benefits
             totaling $265 are also ineligible costs. See Finding No. 2020-03 in the Schedule of
             Findings and Questioned Costs section of this report.

         As a result of these findings, we have questioned a total of $2,968 in ineligible costs.


(B)      Expendable Equipment

         ATC reported a total of $215,061 for expendable equipment costs across all five Grants
         for the period of December 2, 2015 through May 31, 2019. During our audit of these costs,
         we noted that invoices and/or quotations for expendable materials, such as batteries,
         tools, paint, rope, and compasses, were not addressed to a specific entity. This resulted
         in total unsupported costs of $751. See Finding No. 2020-01 in the Schedule of Findings
         and Questioned Costs section of this report.


(C)      Contractual

         ATC reported a total of $195,087 for contractual costs across all five Grants for the period
         of December 2, 2015 through May 31, 2019.

         During our audit of these costs, we noted:

         (1) An invoice for contractual utility costs, such as gas, water, electricity, and oil, was not
             addressed to a specific entity. This resulted in total unsupported costs of $274. See

2
 These Notes to Questioned Costs presented on the Special Purpose Financial Statement were prepared by the
auditor for informational purposes only and as such are not part of the audited Special Purpose Financial Statement.

                                                       - 16 -
                             Afghan Technical Consultants (ATC)

                          Financial Audit of Costs Incurred Under
      Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                  Office of Weapons Removal and Abatement (PM/WRA)
      Supporting Various Community Based Demining Projects throughout Afghanistan

          Notes to Questioned Costs Presented on Special Purpose Financial Statement

                  For the Period of December 2, 2015 through May 31, 2019


            Finding No. 2020-01 in the Schedule of Findings and Questioned Costs section of this
            report.

         (2) Tent rental rates various exceeded the proposed and approved rates, which resulted
             in total ineligible costs of $940. See Finding No. 2020-03 in the Schedule of Findings
             and Questioned Costs section of this report.


(D)      Operating Costs

         ATC reported a total of $445,426 for operating costs across all five Grants for the period
         of December 2, 2015 through May 31, 2019. During our audit of these costs, we noted
         that various invoices for costs, such as field supplies and vehicle were not addressed to a
         specific entity. This resulted in total unsupported costs of $264. See Finding No. 2020-01
         in the Schedule of Findings and Questioned Costs section of this report.


(E)      Other Direct Costs

         ATC reported a total of $435,336 for other direct costs across all five Grants for the period
         of December 2, 2015 through May 31, 2019.

         During our audit of these costs, we noted:

         (1) Various invoices for costs, such as fuel, stationery, and equipment were not addressed
             to a specified entity or were addressed to an individual. This resulted in total
             unsupported costs of $1,583. See Finding No. 2020-01 in the Schedule of Findings
             and Questioned Costs section of this report.

         (2) Director’s approval on the purchase requisition for an urgent purchase was not
             obtained as required by ATC’s internal policy, which resulted in total unsupported costs
             of $573. See Finding No. 2020-02 in the Schedule of Findings and Questioned Costs
             section of this report.

         As a result of these findings, we have questioned a total of $2,156 in unsupported costs.




                                             (Continued)
                                                - 17 -
                            Afghan Technical Consultants (ATC)

                          Financial Audit of Costs Incurred Under
      Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                  Office of Weapons Removal and Abatement (PM/WRA)
      Supporting Various Community Based Demining Projects throughout Afghanistan

          Notes to Questioned Costs Presented on Special Purpose Financial Statement

                 For the Period of December 2, 2015 through May 31, 2019


(F)      Indirect Costs

         ATC reported a total indirect cost amount of $663,949 for the period of December 2, 2015
         through May 31, 2019. The indirect costs associated with questioned costs identified in
         Notes A through E above resulted in total ineligible indirect costs of $390 and total
         unsupported indirect cost of $344 are being questioned. This resulted in a total questioned
         indirect cost of $734.




                                             (Continued)
                                                - 18 -
Conraci)
               INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL



Board of Directors
Afghan Technical Consultants
Kabul, Afghanistan

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


We have audited, 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, the Special Purpose
Financial Statement of Afghan Technical Consultants (ATC) representing revenues received and
costs incurred for the five Grants listed Summary of Grants of this report, awarded by the United
States Department of State, Bureau of Political-Military Affairs, Office of Weapons Removal and
Abatement (PM/WRA) supporting various community based demining projects throughout
Afghanistan for the period of December 2, 2015 through May 31, 2019, and the related Notes to
the Special Purpose Financial Statement, and have issued our report thereon dated January 7,
2021 with an unmodified opinion..


Internal Control over Financial Reporting

In planning and performing our audit of the Special Purpose Financial Statement, we considered
the ATC’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 opinions
on the financial statements, but not for the purpose of expressing an opinion on the effectiveness
of the ATC’s internal control. Accordingly, we do not express an opinion on the effectiveness of
the ATCs 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 the entity’s financial statements 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 and therefore, material weaknesses or significant
deficiencies may exist that have not been identified. Given these limitations, during our audit we



                                               - 19 -
did not identify any deficiencies in internal control that we consider to be material weaknesses.
We did identify a total of three deficiencies in internal control as described in the accompanying
Schedule of Findings and Questioned Costs. Finding 2020-02 is considered to be a deficiency
and Findings and 2020-01 and 2020-03 are considered to be significant deficiencies.


ATC’s Response to Findings

ATC’s response to the findings identified in our audit is included verbatim in Appendix B. ATC’s
response was not subjected to the auditing procedures applied in the audit of the Special Purpose
Financial Statement, and accordingly, we express no opinion on it.


Purpose of this Report

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


Restriction on Use

This report is intended for the information of Afghan Technical Consultants, United States
Department of State, Bureau of Political-Military Affairs, Office of Weapons Removal and
Abatement (PM/WRA), and the Special Inspector General for Afghanistan Reconstruction 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. However, subject to applicable laws,
this report may be released to Congress and to the public by SIGAR in order to provide information
about programs and operations funded with amounts appropriated or otherwise made available
for the reconstruction of Afghanistan.




Lake Forest, California
January 7, 2021




                                             (Continued)
                                                - 20 -
Conraci)
                   INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE



Board of Directors
Afghan Technical Consultants
Kabul, Afghanistan

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


We have audited, 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, the Special Purpose
Financial Statement of Afghan Technical Consultants (ATC) representing revenues received and
costs incurred for the five Grants listed Summary of Grants of this report, awarded by the United
States Department of State, Bureau of Political-Military Affairs, Office of Weapons Removal and
Abatement (PM/WRA) supporting various community based demining projects throughout
Afghanistan for the period of December 2, 2015 through May 31, 2019, and the related Notes to
the Special Purpose Financial Statement, and have issued our report thereon dated January 7,
2021 with an unmodified opinion.


Compliance and Other Matters

As part of obtaining reasonable assurance about whether ATC’s Special Purpose Financial
Statement is free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, and the aforementioned 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. The results of our tests disclosed three
instances of noncompliance or other matters that are required to be reported under Government
Auditing Standards and which are described in the accompanying Schedule of Findings and
Questioned Costs as Findings 2020-02, 2020-03, and 2020-04.


ATC’s Response to Findings

ATC’s response to the findings identified in our audit is included verbatim in Appendix B. ATC’s
response was not subjected to the auditing procedures applied in the audit of the Special Purpose
Financial Statement, and accordingly, we express no opinion on it.




                                              - 21 -
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 compliance. This report is an integral part
of an audit performed in accordance with Government Auditing Standards in considering the
entity’s internal control. Accordingly, this communication is not suitable for any other purpose.

Restriction on Use

This report is intended for the information of Afghan Technical Consultants, United States
Department of State, Bureau of Political-Military Affairs, Office of Weapons Removal and
Abatement (PM/WRA), and the Special Inspector General for Afghanistan Reconstruction 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. However, subject to applicable laws,
this report may be released to Congress and to the public by SIGAR in order to provide information
about programs and operations funded with amounts appropriated or otherwise made available
for the reconstruction of Afghanistan.




Lake Forest, California
January 7, 2021




                                            (Continued)
                                               - 22 -
                              Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                   For the Period of December 2, 2015 through May 31, 2019

                             Schedule of Findings and Questioned Costs


Finding 2020-01: Vendor invoices and/or quotations charged to Grants were not addressed to
ATC


Nature of Finding: Internal Control – Significant Deficiency


Condition: During our testing of costs incurred for the five Grants, we noted the following instances
where vendor invoices and/or quotations were not specifically addressed to ATC but rather to an
individual or not addressed to a specific entity. ATC explained that suppliers occasionally missed the
organization name on the invoice or will write the name of the ATC personnel whom they were dealing
with or forget to write ATC’s name on the invoice. Addressing invoices and/or quotations to ATC allows
ATC to determine if the invoices are allowable and chargeable to the Grants.

   •   A sample of 687 transactions valued at $89,296 out of a population of 1,883 valued at $215,061
       was judgmentally selected from the Expendable Equipment category of the SPFS. Based on our
       analysis, we noted three instances where vendor invoices were not addressed to a specific entity
       and one instance where a vendor quotation was not addressed to a specified entity. Such costs
       incurred included demining equipment kits (GPS, compass, tools, paint, rope, hook, etc.) and
       batteries for torch/walkie-talkies and mine detector. The lack of a specified addressee and/or
       project resulted in questionable costs of $751.

   •   A sample of 335 transactions valued at $77,612 out of a population of 1,399 valued at $195,087
       was judgmentally selected from the Contractual category of the SPFS. Based on our analysis, we
       noted one instance where a vendor invoice was not addressed to a specific entity. Such costs
       incurred included utilities (gas, water, electricity, oil, etc.). The lack of a specified addressee
       and/or project resulted in questionable costs of $274

   •   A sample of 985 transactions valued at $153,983 out of a population of 3,820 valued at $445,426
       was judgmentally selected from the Operating Costs category of the SPFS. Based on our
       analysis, we noted six instances where vendor invoices were not addressed to a specific entity.
       Such costs incurred included field supplies and vehicle maintenance. The lack of a specified
       addressee and/or project resulted in questionable costs of $264.

   •   A sample of 927 transactions valued at $163,271 out of a population of 4,388 valued at $435,336
       was judgmentally selected from the Other Direct Costs category of the SPFS. Based on our
       analysis, we noted twenty instances where vendor invoices were not addressed to a specific entity
       and two instances were vendor invoices were addressed to an individual. Such costs incurred
       included fuel and lubricants for vehicle, stationery, fuel for heating/generator, field supplies,
       vehicle maintenance, and utilities. (gas, water, electricity, oil, etc.). The lack of a specified


                                                  - 23 -
       addressee and/or project and addressing to an individual rather than the entity resulted in
       questionable costs of $1,583.

These issues resulted in unsupported questionable costs totaling $2,872, as the costs could not be
properly verified to be project costs associated with a particular grant.


Criteria:

2 CFR 200.34 (Expenditures) states, in part:
      “Expenditures means charges made by a non-Federal entity to a project or program for which a
      Federal award was received.…”

2 CFR 200.83 (Project Cost) states, in part:
      “Project cost means total allowable costs incurred under a Federal Award…”

2 CFR 200.303 (Internal Controls) states, in part:
      “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal
      award that provides reasonable assurance that the non-Federal entity is managing the Federal
      award in compliance with Federal statutes, regulations, and the terms and conditions of the
      Federal award…”

2 CFR 200.405 (Allocable Costs) states, in part:
      “(a) A cost is allocable to a particular Federal award or other cost objective if the goods or services
      involved are chargeable or assignable to the Federal award or cost objective in accordance with
      relative benefits received. This standard is met if the cost:
              (1) Is incurred specifically for the Federal award;…”

2 CFR 200.413 (Direct Costs) states, in part:
      “(a) Direct costs are those costs that can be identified specifically with a particular final cost
      objective, such as a Federal award, or other internally or externally funded activity, or that can be
      directly assigned to such activities relatively easily with a high degree of accuracy.”


Cause: ATC did not have an internal policy that specifically required that vendor invoices and/or
quotations to be addressed to ATC in order for them to be paid.


Effect: ATC’s lack of internal policy ensuring that each invoice and/or quotation is specifically addressed
to ATC leads to uncertainty that invoiced costs are intended for the Grants and hinders efforts to verify
whether the invoiced amounts are chargeable to the Grants. As such, this resulted in unsupported costs
claimed.


Questioned Costs: Unsupported questioned costs identified totaled $3,159, of which $287 represents
associated indirect costs.




                                                (Continued)
                                                   - 24 -
Recommendation:

  (1) We recommend that ATC either provide PM/WRA with further evidence that the vendor invoices
      and/or quotations were billed to ATC and were related to the subject projects or return $3,159 in
      unsupported costs.

  (2) We recommend that ATC develop an internal policy that requires all vendor invoices/quotations
      to be addressed to ATC prior to payment and an internal memo informing all employees to strictly
      adhere to the newly developed policy.




                                             (Continued)
                                                - 25 -
Finding 2020-02: Lack of adherence to procurement policy



Nature of Finding: Non-compliance and Internal Control – Deficiency


Condition: A sample of 927 transactions valued at $163,271 out of a population of 4,388 valued at
$435,336 was judgmentally selected from the Other Direct Costs category of the SPFS. During our testing
to determine the allowability and support adequacy of these incurred costs, we noted that there was one
instance where ATC did not receive the Director’s approval on an “urgent” purchase of office stationery
totaling $573 as required by ATC’s internal policy.


Criteria:

ATC’s Logistics & Asset Management SOP, Section 1.3.1 – Purchasing, states:
      “Purchasing Limit at ATC will be as follow:…(d) Purchases of USD 501.00 and above will be made
      by a separate purchase committee. The committee will prepare three RFQ and will submit to
      concerned vendors for asking Quotations. After receiving all quotations, the procurement office
      will prepare the Comparative Statement to specify the lowest cost / vendor, then it will be attested
      by logistic manager and checked by finance manager and finally approved by director prior to
      making the purchase.”

ATC's Logistics & Asset Management SOP, Section 1.4.1 – Requisition Form, states:
       “Whenever a staff member needs for goods and services, he/she have to fill the requisition form
       and submit it to the logistic department for further process after the approval of his/her line
       manager, except for emergency situations. The person giving the requisition has to mention the
       level of priority or urgency in the requisition form. In case there is any order marked URGENT;
       at HQ level The Director approval is required and in Field offices the Project manager/officer
       approval is required.”

2 CFR 200.303 (Internal Controls) states in part:
      “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal
      award that provides reasonable assurance that the non-Federal entity is managing the Federal
      award in compliance with Federal statutes, regulations, and the terms and conditions of the
      Federal award…”

2 CFR 200.403 (Factors affecting allowability of costs) states in part:
      “Except where otherwise authorized by statute, costs must meet the following general criteria in
      order to be allowable under Federal awards:
      (a) Be necessary and reasonable for the performance of the Federal award and be allocable
          thereto under these principles…
      (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and
          other activities of the non-Federal entity…
      (g) Be adequately documented…”

2 CFR 200.404 (Reasonable Costs) states in part:
      "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred
      by a prudent person under the circumstances prevailing at the time the decision was made to
      incur the cost. The question of reasonableness is particularly important when the non-Federal

                                               (Continued)
                                                  - 26 -
       entity is predominantly federally-funded. In determining reasonableness of a given cost,
       consideration must be given to:…
               (e) Whether the non-Federal entity significantly deviates from its established practices and
               policies regarding the incurrence of costs, which may unjustifiably increase the Federal
               award’s cost."


Cause: ATC’s management failed to adhere to the specific requirement set forth in sections 1.3.1 and
1.4.1 of ATC’s procurement policy as it relates to urgent purchases. This appears to be an isolated
incident.


Effect: ATC’s failure to adhere to its own internal procurement policy can lead to unsupported costs
charged to the Grants which would concurrently inflate program costs.


Questioned Costs: Unsupported questioned costs identified totaled $630, of which $57 represents
associated indirect costs.


Recommendation:

   (1) We recommend that ATC either provide evidence to PM/WRA that the purchase was properly
       procured and approved by management as required by their procurement policy or return $630
       in unsupported costs.

   (2) We recommend that ATC provide training to employees responsible for procurement to assist in
       the strict adherence to its procurement policy.




                                               (Continued)
                                                  - 27 -
Finding 2020-03: Costs claimed exceeded the approved budget rates


Nature of Finding: Non-compliance and Internal Control – Significant Deficiency:


Condition: During our testing of Personnel and Contractual costs, we noted the following instances
where ATC claimed rates that exceeded the authorized rate as approved in the applicable budget:

   •    A sample of 534 transactions valued at $806,143 out of population of 1,612 valued at $2,503,854
        was judgmentally selected from the Personnel category of the SPFS. During our testing, we noted
        31 instances where employee salary rates claimed exceeded the authorized pay rate that was
        proposed and approved for various employee classifications. This resulted in total ineligible costs
        of $2,968, which includes related Fringe Benefits as illustrated below:

                                             Monthly Rate
                                                      Rate as
                                                    Authorized
                                                       in the
                                         Rate as     Approved                       No. of      Total
                   Position              Tested       Budget        Over (Under)    Issues     Variance
       Grant No: S-PMWRA-16-GR-1052
       Site/OPS Officer                    $   496      $     459        $    37      3           $   111
       Field – Operator                        334            226            108      1               108
       Fringe Benefits                                                                                 23
       Grant No. S-PMWRA-16-GR-1056
       Field – Operator                        259            226             33      2                66
       MD & Radio Mechanic                     440            329            111      4               444
       Machine Mechanic                        329            283             46      3               138
       Vehicle Mechanic                        388            226            162      1               162
       Field – Guard                           132            120             12      2                24
       Field – Operator                        331            283             48      1                48
       Driver                                  225            172             53      1                53
       Fringe Benefits                                                                                 92
       Grant No. S-PMWRA-17-GR-1084
       Admin In-Charge                         523            350            173      4               692
       Team Admin                              549            350            199      3               597
       Fringe Benefits                                                                                124
       Grant No. S-PMWRA-18-GR-0013
       MD & Radio Mechanic                     440            400             40      5               200
       DT Staff – Guard                        240            180             60      1                60
       Fringe Benefits                                                                                 26

                Subtotal - Personnel                                                                2,703
            Subtotal - Fringe Benefits                                                                265
                               Totals                                    $ 1,347     31           $ 2,968

   •    A sample of 335 transactions valued at $77,612 out of a population of 1,399 valued at $195,087
        was judgmentally selected from the Contractual category of the SPFS. During our testing, we
        noted two instances where site office rent claimed exceeded the authorized rate that was
        proposed and approved. This resulted in total ineligible costs of $940 as illustrated below:



                                                (Continued)
                                                   - 28 -
                                             Monthly Rate
                                                      Rate as
                                                    Authorized
                                                       in the
                                         Rate as     Approved                      No. of      Total
                 Cost Type               Tested       Budget      Over (Under)     Issues     Variance
     Grant No. S-PMWRA-18-GR-0013
     Site Office Rent – Nov 2018            $ 440        $ 300            $ 140      1            $ 140
     Site Office Rent – Jan-Apr 2019          500          300              200      4              800
                                Totals                                    $ 340      5            $ 940

Criteria:

Section 1.5.4 (Working Hours) of ATC’s Human Resource Management Standard Operating Procedures
states, in part:
        “ATC ensures all employees have the legal right to be employed in the ATC and shall be paid
        based on approved DMAC salary scales and project approved budget.”

5.5 Annex E (Salary Scale) of ATC’s Human Resource Management Standard Operating Procedures
states:
        “Salary is payable to project staff base on donor project approved budget.”

Section 1.4.2 (Responsibilities of verifying officers) of ATC’s Finance Manual Standard Operating
Procedures states:
       “Ensure that the payment is substantiated by proper documentation and that it is in accordance
       with the term of the contract”

2 CFR 200.303 (Internal Controls) states in part:
      “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal
      award that provides reasonable assurance that the non-Federal entity is managing the Federal
      award in compliance with Federal statutes, regulations, and the terms and conditions of the
      Federal award…”

2 CFR 200.403 (Factors affecting allowability of costs) states in part:
      “Except where otherwise authorized by statute, costs must meet the following general criteria in
      order to be allowable under Federal awards:…
              b) Conform to any limitations or exclusions set forth in these principles or in the Federal
              award as to types or amount of cost items…”

2 CFR 200.404 (Reasonable Costs) states in part:
      "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred
      by a prudent person under the circumstances prevailing at the time the decision was made to
      incur the cost. The question of reasonableness is particularly important when the non-Federal
      entity is predominantly federally-funded. In determining reasonableness of a given cost,
      consideration must be given to:…
              (c) Market prices for comparable goods or services for the geographic area.
              (d) Whether the individuals concerned acted with prudence in the circumstances
              considering their responsibilities to the non-Federal entity, its employees, where
              applicable its students or membership, the public at large, and the Federal government.




                                               (Continued)
                                                  - 29 -
              (e) Whether the non-Federal entity significantly deviates from its established practices and
              policies regarding the incurrence of costs, which may unjustifiably increase the Federal
              award’s cost."

Department of State’s Standard Terms and Conditions Section XIII, Prior Approval Requirements, states
in part:
         “For non-construction Federal awards, non-Federal entities must request prior approvals from
         Federal awarding agencies for one or more of the following program or budget-related
         reasons:..
                …(f) Rebudgeting more than 10% of the total approved award between direct cost
                categories”


Cause: ATC’s accounting for the excess charges as stated above is due to their unfamiliarity with the
Department of State’s Standard Terms and Conditions. ATC’s believes that based on the Department of
State’s Standard Terms and Conditions Section XIII, Prior Approval Requirements, prior donor
authorization is only required in the case when any of the budget cost category incurred exceeded total
direct costs of the award by more than 10%. However, this particular finding is not in direct correlation
with whether or not costs incurred under certain cost categories exceeded the 10% threshold or if it
required the donor’s approval. The finding states that ATC claimed certain salary position and rent rates
that had exceeded the approved rates in the applicable budget. As cited in the criteria section above,
ATC’s policies and procedures and the applicable CFR requires that ATC should be paid in conformity
with any limitations set forth in the Federal award as well as approved budget.


Effect: The monthly rates that were charged exceeded the applicable approved budget rates which
resulted in the award recipient overcharging the Grants with inflated costs. As such, this resulted in
ineligible costs being claimed.


Questioned Costs: Ineligible costs identified totaled $4,298, of which $390 represents associated
indirect costs.


Recommendation:

   (1)   We recommend that ATC obtain approval from PM/WRA for the items claimed to be allowable
         in the event that they exceeded the approved rates in the budget or return $4,298 in ineligible
         costs.

   (2)   We recommend that ATC develop additional controls and procedures to ensure rate charged to
         the Grants does not exceed the approved budget rate or submit modifications for any rate
         changes for State’s approval in a timely manner.

   (3)   We recommend that ATC provide training to management and staff to be better familiarize them
         with the State’s Standard Terms and Condition applicable to Grants.




                                               (Continued)
                                                  - 30 -
Finding 2020-04: ATC did not adhere to Afghanistan Tax Law


Nature of Finding: Non-Compliance


Condition: During our testing of the Contractual, Fringe Benefits, Operating, Indirect, and Other Direct
Costs under SPFS line items totaling 3,129 samples, we noted 26 instances where ATC did not withhold
taxes from supplier purchases as required by Afghanistan Tax Law. ATC explained that the issues were
noticed by the Tax office while clearing the Annual Income Tax Returns of ATC for the 2016, 2017, and
2018 tax years. ATC stated that the suppliers were contacted and had paid the related taxes along with
any other fees due to the Afghan government to close the matter.


Criteria:

According to the Mandatory Award Provisions, Section 15, Additional Bureau/Post Specific
Requirements, subsection (p), states:
       “All award recipients must comply with applicable local and national laws in the host countries in
       which this award is implemented.”

According to Article 72 of Afghanistan Tax law, Withholding tax on contractors, states:
       “(1) Persons who, without a business license or contrary to approved by- law, provide supplies,
       materials, construction and services under contract to government agencies, municipalities, state
       entities, private entities and other persons shall be subject to 7 percent fixed tax in lieu of income
       tax. This tax is withheld from the gross amount payable to the contractor.

       (2) Persons who have a business license and provide the services and other activities mentioned
       in paragraph (1) of this Article to the specified entities shall be subject to 2 percent contractor tax.
       The tax levied by this paragraph is creditable against subsequent tax liabilities.

       (3) The tax mentioned in paragraph (1) and (2) of this Article shall be withheld by the payer from
       payment and shall be transferred to the relevant account within ten days. Contractors subject to
       this Article shall be required to, upon signing the contract, send a copy thereof to the relevant tax
       administration. Natural persons who, according to provision of paragraph (1) of Article 17 of this
       Law, earn taxable salaries shall be excluded from this provision.”


Cause: Taxes were not withheld from the supplier(s) at the time of transaction, due to ATC personnel’s
lack of knowledge with the applicable Afghan tax law.


Effect: Not withholding and reporting applicable local tax is a violation of the host countries tax law
requirements, which resulted in non-compliance with the mandated requirements set forth in the terms
of the Department of State awards.


Questioned Costs: None




                                                 (Continued)
                                                    - 31 -
Recommendation:

  (1) We recommend that ATC implement policies and procedures to ensure compliance with all
      applicable Afghan tax laws.

  (2) We recommend that ATC train its current personnel on how to properly withhold and report
      required taxes on all applicable purchases in accordance with Afghanistan tax law.




                                         (Continued)
                                            - 32 -
                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019


Status of Prior Audit Findings

We requested from ATC, SIGAR, and conducted additional searches online for any prior engagements
including audits, reviews, and evaluations pertinent to ATC’s activities. We identified five audit reports
that were conducted by various local Afghanistan Chartered Accounting Firms on the five closed-out
Grants listed under the Summary of Grants section of this report. Based on our review of these reports,
no audit findings were identified that could have a material effect on the SPFS and other financial data
significant to the audit objectives.

In addition, we also reviewed a prior SIGAR audit report, Financial Audit 14-11, that was published in
December 2013, and noted that seven findings were identified. Based on our review of these findings,
we identified three findings could have a material effect on the SPFS and other financial data significant
to the audit objectives. We reviewed the responses and corrective actions taken to address these three
findings and recommendations. Our review procedures included a follow up discussion with ATC’s
management, as well as conducting similar tests surrounding the identified areas during our current audit.
We have summarized the results of our procedures below:

Finding No. 2013-01: Allowable Costs – International Travel Approvals

Issue: Non-compliance issue identified as it pertained to four international travel trips where the trips
were not pre-approved by the Grants Officer for a total questioned cost of $23,838.

Status: For the current engagement, it was noted that all international travel transactions selected for
testing were properly approved beforehand by the awarding agency. As such, it has been concluded that
ATC has taken adequate corrective action as this was not identified as a repeated issue.

Finding No. 2013-02: Equipment and Property Management – Stolen and Destroyed Property

Issue: A significant deficiency and non-compliance issue identified as it pertained a series of goods being
destroyed as a result of a fire or were stolen. This resulted in the items not being able to be used for
Federal purposes for a total questioned cost of $140,060.

Status: For the current engagement, it was noted that there were no reported thefts or occurrences of
destroyed property. ATC has hired a security guard to safeguard ATC’s offices and grant funded assets.
Also, we did not identify any evidence that would suggest otherwise. As such, it has been concluded that
ATC has taken adequate corrective action as this was not identified as a repeated issue.

Finding No. 2013-03: Allowable Costs – Employee Time Records

Issue: A material weakness and non-compliance issue identified as it pertained to employee timesheets
not being available to support eleven personnel cost transactions for a total questioned cost of $38,956.



                                                  - 33 -
Status: For the current engagement, it was noted that there were no instances identified where there
was a lack of evidence of employee timesheets. As such, it has been concluded that ATC has taken
adequate corrective action as this was not identified as a repeated issue.




                                            (Continued)
                                               - 34 -
                                                                                                               APPENDIX A

                                Afghan Technical Consultants (ATC)

                                Financial Audit of Costs Incurred Under
                                  Grant No. S-PMWRA-16-GR-1005

                                Special Purpose Financial Statement

                     For the Period of December 2, 2015 through November 30, 2016



                                                                                        Questioned Costs
                                     Budget           Actual           Ineligible            Unsupported           Total         Notes
Revenues:
   S-PMWRA-16-GR-1005            $   1,887,370    $    1,887,370   $                -         $            -   $             -    (4)


Total revenues                       1,887,370         1,887,370                    -                      -                 -


Costs incurred:
   Personnel                           659,551           669,134                    -                      -                 -

   Fringe benefits                     269,502           244,693                    -                      -                 -
   Travel and DSA                      280,228           307,322                    -                      -                 -
   Training                                   -                -                    -                      -                 -
   Expendable equipment                124,564           118,737                    -                  61                  61     (B)
   Non-Expendable equipment                   -                -                    -                      -                 -

   Contractual                          91,600            94,162                    -                 274                  274    (C)
   Operating costs                     240,275           243,567                    -                 264                  264    (D)
   Other direct costs                         -                -                    -                      -                 -
   Indirect costs                      221,650           209,755                    -                  60                   60    (F)


Total costs incurred             $   1,887,370    $    1,887,370   $                -    $            659      $           659


Outstanding fund balance         $            -   $            -




                                                      - 35 -
                                                                                                               APPENDIX A

                                 Afghan Technical Consultants (ATC)

                                 Financial Audit of Costs Incurred Under
                                   Grant No. S-PMWRA-16-GR-1052

                                 Special Purpose Financial Statement

                       For the Period of October 1, 2016 through November 30, 2017



                                                                                           Questioned Costs
                                      Budget           Actual             Ineligible         Unsupported           Total         Notes
Revenues:
   S-PMWRA-16-GR-1052             $   1,057,218    $    1,057,218     $                -        $          -   $             -    (4)


Total revenues                        1,057,218         1,057,218                      -                   -                 -


Costs incurred:
   Personnel                            423,096           404,267                 219                      -               219    (A)

   Fringe benefits                      150,431           148,408                  23                      -                23    (A)
   Travel and DSA                       179,347           196,486                      -                   -                 -
   Training                               1,960                 325                    -                   -                 -

   Expendable equipment                  51,133            51,446                      -               690                 690    (B)
   Non-Expendable equipment              11,200            10,059                      -                   -                 -
   Contractual                           20,400            22,415                      -                   -                 -
   Operating costs                       94,905           104,287                      -                   -                 -
   Other direct costs                          -                  -                    -                   -                 -
   Indirect costs                       124,746           119,525                  24                   69                  93    (F)


Total costs incurred              $   1,057,218    $    1,057,218     $           266       $          759     $      1,025


Outstanding fund balance          $            -   $              -




                                                   (Continued)
                                                      - 36 -
                                                                                                                 APPENDIX A

                                 Afghan Technical Consultants (ATC)

                                 Financial Audit of Costs Incurred Under
                                   Grant No. S-PMWRA-16-GR-1056

                                 Special Purpose Financial Statement

                        For the Period of October 1, 2016 through August 31, 2017



                                                                                           Questioned Costs
                                      Budget           Actual             Ineligible           Unsupported           Total         Notes
Revenues:
   S-PMWRA-16-GR-1056             $   1,040,832    $    1,040,832     $                -        $            -   $             -    (4)


Total revenues                        1,040,832         1,040,832                      -                     -                 -


Costs incurred:
   Personnel                            412,098           416,637                 935                        -               935    (A)

   Fringe benefits                      149,674           151,115                  92                        -                92    (A)
   Travel and DSA                       178,601           189,960                      -                     -                 -
   Training                               1,960                 692                    -                     -                 -
   Expendable equipment                  51,117            45,257                      -                     -                 -
   Non-Expendable equipment              11,200                   -                    -                     -                 -
   Contractual                           20,400            22,630                      -                     -                 -
   Operating costs                       92,687            97,193                      -                     -                 -
   Other direct costs                          -                  -                    -                     -                 -
   Indirect costs                       123,095           117,348                 103                        -               103    (F)


Total costs incurred              $   1,040,832    $    1,040,832     $         1,130      $                 -   $      1,130


Outstanding fund balance          $            -   $              -




                                                   (Continued)
                                                      - 37 -
                                                                                                             APPENDIX A

                                Afghan Technical Consultants (ATC)

                                Financial Audit of Costs Incurred Under
                                  Grant No. S-PMWRA-17-GR-1084

                                Special Purpose Financial Statement

                     For the Period of September 28, 2017 through August 27, 2018



                                                                                         Questioned Costs
                                     Budget           Actual            Ineligible         Unsupported           Total         Notes
Revenues:
   S-PMWRA-17-GR-1084           $      620,000    $      620,000    $                -        $          -   $             -    (4)


Total revenues                         620,000           620,000                     -                   -                 -


Costs incurred:
   Personnel                           286,055           291,496              1,289                      -          1,289       (A)

   Fringe benefits                     102,181            82,845                124                      -               124    (A)
   Travel and DSA                       92,812            98,819                     -                   -                 -
   Training                                   -                 -                    -                   -                 -
   Expendable equipment                       -                 -                    -                   -                 -
   Non-Expendable equipment                   -                 -                    -                   -                 -
   Contractual                          26,201            28,666                     -                   -                 -
   Operating costs                            -                 -                    -                   -                 -
   Other direct costs                   56,387            61,810                     -               318                 318    (E)
   Indirect costs                       56,364            56,364                141                   32                 173    (F)


Total costs incurred             $     620,000    $      620,000    $         1,554       $          350     $      1,904


Outstanding fund balance        $             -   $             -




                                                  (Continued)
                                                     - 38 -
                                                                                                              APPENDIX A

                                 Afghan Technical Consultants (ATC)

                                 Financial Audit of Costs Incurred Under
                                   Grant No. S-PMWRA-18-GR-0013

                                 Special Purpose Financial Statement

                           For the Period of May 11, 2018 through May 31, 2019



                                                                                          Questioned Costs
                                      Budget           Actual            Ineligible         Unsupported           Total         Notes
Revenues:
   S-PMWRA-18-GR-0013             $   1,771,000    $    1,771,000    $                -         $         -   $             -    (4)


Total revenues                        1,771,000         1,771,000                     -                   -                 -


Costs incurred:
   Personnel                            718,014           722,318                260                      -               260    (A)

   Fringe benefits                      250,166           230,844                 26                      -                26    (A)
   Travel and DSA                       261,544           256,139                     -                   -                 -
   Training                                    -                 -                    -                   -                 -
   Expendable equipment                   9,600                  -                    -                   -                 -
   Non-Expendable equipment                    -                 -                    -                   -                 -
   Contractual                           28,000            27,215                940                      -               940    (C)
   Operating costs                             -                 -                    -                   -                 -
   Other direct costs                   342,719           373,527                     -             1,838            1,838       (E)
   Indirect costs                       160,957           160,957                122                  183                 305    (F)


Total costs incurred              $   1,771,000    $    1,771,000    $         1,348        $       2,021     $      3,369


Outstanding fund balance          $            -   $             -




                                                   (Continued)
                                                      - 39 -
                                                                                     APPENDIX B

                             Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                   For the Period of December 2, 2015 through May 31, 2019

                                ATC’s Responses to Audit Findings




Included on the following pages are Afghan Technical Consultants’ responses received to the findings
identified in this report.




                                               - 40 -
                                                                                       APPENDIX B

                              Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                   For the Period of December 2, 2015 through May 31, 2019

                                  ATC’s Responses to Audit Findings


Finding 2020-01: Vendor invoices and/or quotations charged to Grants were not addressed to
ATC

Nature of Finding: Internal Control – Significant Deficiency

Condition: During our testing of costs incurred for the five Grants, we noted the following instances
where vendor invoices and/or quotations were not specifically addressed to ATC but rather to an
individual or not addressed to a specific entity. ATC explained that suppliers occasionally missed the
organization name on the invoice or will write the name of the ATC personnel whom they were dealing
with or forget to write ATC’s name on the invoice. Addressing invoices and/or quotations to ATC allows
ATC to determine if the invoices are allowable and chargeable to the Grants.

ATC Management Response to Finding 2020-01

The grants were implemented in remote areas and mostly out of cities, during project execution ATC
faced many challenges, such as security threats from AGEs, logistical support from cities to the base
camps and site operations locations was one of the main challengeable issues during the period.

Therefore, most small, and daily operations-related goods were purchased from local shops in the target
communities who could not provide the standard invoices as required. In those remote areas it is
extremely hard to find educated shopkeepers who can write properly the supplier’s name on the invoices
in English.

As the supporting documents were reviewed, it was found that suppliers had written the organization’s
name only on the mentioned vouchers related to invoices. Some supporting documents like quotations,
the person with whom they were dealing or and for some instances they had written the name of our
activity in the local language like MINE-PAKI (a word used for demining in local languages Dari and
Pashto). However, all other supporting documents such as purchase requisition forms, goods receipt
notes and similar related documents with signatures of purchase committee members and other
authorized officials, contain the exact names, signatures and stamps from both parties.

ATC successfully achieved the project main goals and objectives as per the signed grants documents,
but some administration and procurement rules were affected during the project implementation due to
above mentioned security threats and lack of standard invoices in local market shops as well as
uneducated shopkeepers, but the observations have been recorded as lessons learned. The ATC internal
audit policies and financial controlling mechanism will be reviewed for further improvements. For point
No -01 the details of supporting documents are as below.



                                              (Continued)
                                                 - 41 -
                                                                                           APPENDIX B

                               Afghan Technical Consultants (ATC)

                            Financial Audit of Costs Incurred Under
        Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                    Office of Weapons Removal and Abatement (PM/WRA)
        Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019

                                   ATC’s Responses to Audit Findings


Books of Account Ref:    JV 23/12-30-2015/16-G-1005
                         BPV-18 /01-23-2017/16- GR-1052

The Items purchased: demining equipment kit related Items such as tools, paint, rope, hook and battery
for Mine-Detector an amount of $ 61 by JV 23 & $ 690 by BPV-18.

Books of Account Ref:    JV 24/12-30-2017/16-GR-1005

The Items purchased: The utilities budget line related Items (Gas, Water, Electricity, Oil, etc.)
an amount of $274 by JV-24.

Books of Account Ref:    JV 66/04-30-2016 / JV-68 06-30-2016 / JV-127 09-30-2016/16-GR-1005

The Items purchased: The budget Items lines such as supplies and vehicle maintenance covers the
below number of invoices. An amount of $264.

   1-   Invoice from "Insaaf General Store" for AFN 1,250
   2-   Invoice of "Haji Wali & Bilal" for AFN 1,400
   3-   Invoice of "Tamim Seal Center" AFN 3,000
   4-    Invoice of "Majnoon Shah Faqirzada" AFN 300
   5-   "Sher Technical Workshop" Invoice for AFN 4,850
   6-    "Noor Muhammad Khanjari Ltd & Haji Shah Muhammad Spare Part Seller" Invoice for AFN 7,150

Books of Account Ref:    JV 55/01-31-2018 / JV-85/ 04-30-2018 / JV-60/ 01-31-2018/ JV 89/05-31-
2018/JV 13/ 11-30-2017/16-GR-1084

JV 118/11-30-2018/JV-119/ 11-30-2018/ JV-43/06-30-2018/JV 49/07-24-2018/JV 80/08-31-2018/ 16-
GR-0013

The Items purchased: The budget Items lines such as fuel and lubricants for field Vehicles, vehicle
maintenance, Stationery and field supplies covers the below number of invoices total amount GR-
1084=318.00 $ and GR-0013= 1,261.00 $.

JV- 55: 1-Fuel Purchased requisition form is missing for invoice no 70 an amount of AFN 2,401.
        The following Invoices were not on the name of ATC (Invoice No, Amount) (743-1,932,
        950-1,470, 943-1,470, 979-1470, 957-1470, 951-1470, 944-1470, 952-1470, 956-1470)

JV-85: The invoice no. 213 for AFN 500


                                               (Continued)
                                                  - 42 -
                                                                                    APPENDIX B

                              Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                   For the Period of December 2, 2015 through May 31, 2019

                                  ATC’s Responses to Audit Findings


JV-60: The invoice for stationary purchase from "Shahr Biraq" amounting AFN 3,000

JV-89: 1-The invoice for stationary from "Asia Photocopy" amounting AFN 340
       2-The invoice for stationary from "Asia Photocopy" amounting AFN 360
       3-The invoice for stationary from "Asia Photocopy" amounting AFN 200

JV-13: The invoice for stationary from "Ulfat Photography" amounting AFN 1,260

JV-118: 1-Invoice from " Fuel Pump Station" for AFN 4,736
        2-Invoice from " Fuel Pump Station" for AFN 7,973

JV-119: The invoice from "City Light Electric Store" for AFN 3,000

JV-43: The invoice from "Insta Telecom" for AFN 1,000

JV-49: The Invoice of " Vehicle Maintenance" $1,032

JV-80: The invoice from "Abdul Saboor" for vehicle repair for AFN 500




                                              (Continued)
                                                 - 43 -
                                                                                            APPENDIX B

                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019

                                   ATC’s Responses to Audit Findings


Finding 2020-02: Lack of adherence to procurement policy

Nature of Finding: Non-Compliance and Internal Control – Deficiency

Condition: A sample of 927 transactions valued at $163,271 out of a population of 4,388 valued at
$435,336 was judgmentally selected from the Other Direct Costs category of the SPFS. During our testing
to determine the allowability and support adequacy of these incurred costs, we noted that there was one
instance where ATC did not receive the Director’s approval on an “urgent” purchase of office stationery
totaling $573 as required by ATC’s internal policy.

ATC Management Response to Finding 2020-02

The ATC procurement manual clearly explains that quotation shall be sought for the goods of value USD
501 and above for all procurement processes and the purchase committee shall prepare three RFQs and
submit to qualified vendors to get the quotations. After receiving all quotations, the procurement officer
will prepare the comparative statement to specify the best offer.

In this specific procurement, which is stationery items for teams in the project location from local market,
it happened in emergency circumstances, the process has been explained by the purchase committee
in separate sheets and attached with related invoice. In the explanation the purchase committee have
written the process was affected due to mobilization of the team to remote districts and confirmed the
emergency process of the said procurement.

However, all other supporting documents to this invoice such as PR, quotation, purchase order, delivery
notes have been attached accordingly which contain the name of ATC and signatures from the purchase
committee, site officer, the controller and ATC Director.

The issue is recorded as a lesson learned for future improvement for management of emergency
procurements accordingly.

Books of Account Ref:    JV -155/01-31-2019/18-GR-0013

The Items purchased: Stationery for project teams during movement to remote target area an amount of
$ 573 by JV 155.




                                                (Continued)
                                                   - 44 -
                                                                                            APPENDIX B

                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019

                                   ATC’s Responses to Audit Findings


Finding 2020-03: Costs claimed exceeded the approved budget rates

Nature of Finding: Non-Compliance and Internal Control – Significant Deficiency:

Condition: During our testing of Personnel and Contractual costs, we noted the following instances
where ATC claimed rates that exceeded the authorized rate as approved in the applicable budget:

ATC Management Response to Finding 2020-03

The audited awards proposed budgets projected on average basis for support staff salary under the
proposed cost centers to the project. The changes to the budget and any variance to main categories
budget item lines less than 10% within a total project value does not require any approval from the donor.

Based on awards contract documents (Article No XIII. Prior Approval Requirements) and the email dated
4th February-2019 from Ms. Macy Johnson Grant Officer which is already shared for further clarifications.
On the other hand, the projected average for budget salary portion applied, the payments are made more
in some instances than the budget and similarly less than the budget in other instances.

Only the support staff were considered for these average payments due to unavailability of experienced
and qualified candidates in the market to work in the target communities.

For the above-mentioned audit observation, all these budget lines for all grants are still underspent or
less than 10% overspent. The stated observations are in calculating factors of the personnel line used
while estimating budgeted expenses for the line. During practical execution of the project, it may vary
according to the practical situation and requirements. We always try to follow the budgetary controls in
sub-categories as well as calculating factors. However, most of the times while practically implementing
the project, cost shifts happen among sub-categories and calculating factors of a budget line is inevitable.
Also, its mentionable that the main categories which has been shown the status of variance among the
grants shared with auditors, have remain unchanged.




                                                (Continued)
                                                   - 45 -
                                                                                            APPENDIX B

                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019

                                   ATC’s Responses to Audit Findings


Finding 2020-04: ATC did not adhere to Afghanistan Tax Law

Nature of Finding: Non-Compliance

Condition: During our testing of the Contractual, Fringe Benefits, Operating, Indirect, and Other Direct
Costs under SPFS line items totaling 3,129 samples, we noted 26 instances where ATC did not withhold
taxes from supplier purchases as required by Afghanistan Tax Law. ATC explained that the issues were
noticed by the Tax office while clearing the Annual Income Tax Returns of ATC for the 2016, 2017, 2018
tax years. ATC stated that the suppliers were contacted and had paid the related taxes along with any
other fees due to the Afghan government to close the matter.

ATC Management Response to Finding 2020-04

The tax withholding from vendors still a challenge in Afghanistan, especially in the project locations which
are implemented in remote areas where there is no awareness of tax obligations. Even in Kabul city we
face the situation when the suppliers do not agree such tax payments. They even bargain and ask for
additional costs to cover the government taxes.

'This issue was noticed by the Tax office while clearing the Annual Income Tax Return of ATC for the
year 2016, 2017 and 2018. In consultation with the tax office, the said company was contacted and they
paid their related taxes and other dues to the Government. The matter was closed, and tax clearance
was issued to ATC for the years accordingly.

The tax withholding from vendors for the year 2016, 2017 and 2018 was challengeable issue for ATC
during procurement process while much of them are solved and now ATC has a particularly good
improvement for the tax deductions from suppliers as well as for payroll the finance system updated for
tax deduction accordingly. The payments are made on time before due dates to Government through
MTO. Meanwhile, the purchase committee has been trained to communicate with suppliers about the tax
payment and make them understand that it is both sides obligation as per the Income Tax Law.




                                                (Continued)
                                                   - 46 -
                                                                                            APPENDIX C

                               Afghan Technical Consultants (ATC)

                           Financial Audit of Costs Incurred Under
       Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
                   Office of Weapons Removal and Abatement (PM/WRA)
       Supporting Various Community Based Demining Projects throughout Afghanistan

                    For the Period of December 2, 2015 through May 31, 2019

                        Auditor’s Rebuttal to ATC’s Responses to Audit Findings



ATC did not disagree nor agree with Findings 2020-01, 2020-02, 2020-03, and 2020-04, but provided a
response to each finding. We have reviewed ATC’s responses and provided the following rebuttals:

   (1) 2020-01: ATC did not disagree nor agree with the finding. ATC stated that the main goals and
       objectives of the projects were successfully achieved as per the signed Grants. However, it was
       acknowledged that administration and procurement rules were affected due to security threats
       and lack of standard invoices in local market shops as well as uneducated shopkeepers. ATC
       stated internal audit policies and financial controlling mechanism will be reviewed for further
       improvements and that the issues described have been recorded as lessons learned.

       Auditor Rebuttal: ATC agrees that the invoices were not addressed to ATC and it remains
       imperative that ATC personnel work with vendors to include all pertinent attributes of an invoice
       to demonstrate the allowability and chargeability of the costs to a project. As such, our finding,
       classification of finding, and recommendation remain unchanged.

   (2) 2020-02: ATC did not disagree nor disagree with the finding. ATC stated that the internal
       procurement policy was followed. It was further stated that the emergency circumstance for the
       questioned procurement was documented by the purchase committee and the purchase
       committee explained that the process was affected due to mobilization of the team to remote
       districts, which confirmed the emergency process of the said procurement. ATC stated that the
       issue described has been recorded as a lesson learned.

       Auditor Rebuttal: As described in the Condition section of the finding, there was a lack of approval
       by the Director for an “urgent” purchase. ATC’s internal procurement policy relevant to this
       condition was cited in the Criteria section of the finding and specifically requires Director approval
       for such purchases. As such, our finding, classification of finding, and recommendation remain
       unchanged.

   (3) 2020-03: ATC did not disagree nor disagree with the finding. ATC stated that all budget lines for
       all Grants were underspent or less than 10% overspent. ATC further stated that the observations
       are in calculating factors of the personnel line used while estimating budgeted expenses for the
       line and that during practical execution of the project, it may vary according to the practical
       situation and requirements. ATC indicated that they always try to follow the budgetary controls in
       sub-categories as well as calculating factors; however, most of the times while practically
       implementing the project, cost shifts happen among sub-categories and calculating factors of a
       budget line is inevitable. ATC also mentioned that the main categories which have been shown
       in the status of variance among the grants shared, have remain unchanged.



                                                   - 47 -
                                                                                        APPENDIX C

                           Afghan Technical Consultants (ATC)

                       Financial Audit of Costs Incurred Under
   Five Grants Awarded by Department of State, Bureau of Political-Military Affairs,
               Office of Weapons Removal and Abatement (PM/WRA)
   Supporting Various Community Based Demining Projects throughout Afghanistan

                For the Period of December 2, 2015 through May 31, 2019

                    Auditor’s Rebuttal to ATC’s Responses to Audit Findings


   Auditor Rebuttal: It was communicated to ATC that this particular finding is not in direct correlation
   with whether or not costs incurred under certain cost categories exceeded the 10% threshold.
   The finding states that ATC claimed certain salary position and rent rates that had exceeded the
   approved rates in the applicable budget. As cited in the Criteria section of the finding, ATC’s
   policies and procedures and the applicable CFR requires that ATC should be paid in conformity
   with any limitations set forth in the Federal award as well as approved budget. As such, our
   finding, classification of finding, and recommendation remain unchanged.

(4) 2020-04: ATC did not disagree nor agree with this finding. ATC stated the tax withholding from
    vendors for tax years 2016, 2017, and 2018 was challenging. ATC further stated that in
    consultation with the tax office, the appropriate vendor was contacted and that the related taxes
    and other dues owed to the Government were paid. ATC confirmed that the tax matters were
    closed, and tax clearance was issued to ATC for the years accordingly. Furthermore, it was stated
    that improved policies have been implemented to communicate and collect the tax obligation from
    suppliers.

   Auditor Rebuttal: As ATC agrees that the appropriate taxes had not been withheld during the tax
   years in question and that the tax matters were subsequently resolved with Afghan tax
   department, our finding, classification of finding, and recommendations remain unchanged.




                                            (Continued)
                                               - 48 -
                               The mission of the Special Inspector General for Afghanistan
           SIGAR’s Mission     Reconstruction (SIGAR) is to enhance oversight of programs for the
                               reconstruction of Afghanistan by conducting independent and
                               objective audits, inspections, and investigations on the use of
                               taxpayer dollars and related funds. SIGAR works to provide accurate
                               and balanced information, evaluations, analysis, and
                               recommendations to help the U.S. Congress, U.S. agencies, and
                               other decision-makers to make informed oversight, policy, and
                               funding decisions to:
                                           improve effectiveness of the overall reconstruction
                                            strategy and its component programs;
                                           improve management and accountability over funds
                                            administered by U.S. and Afghan agencies and their
                                            contractors;
                                           improve contracting and contract management
                                            processes;
                                           prevent fraud, waste, and abuse; and
                                           advance U.S. interests in reconstructing Afghanistan.


  Obtaining Copies of SIGAR    To obtain copies of SIGAR documents at no cost, go to SIGAR’s Web
                               site (www.sigar.mil). SIGAR posts all publically released reports,
   Reports and Testimonies     testimonies, and correspondence on its Web site.




                               To help prevent fraud, waste, and abuse by reporting allegations of
To Report Fraud, Waste, and    fraud, waste, abuse, mismanagement, and reprisal, contact SIGAR’s
      Abuse in Afghanistan     hotline:
   Reconstruction Programs                 Web: www.sigar.mil/fraud
                                           Email: sigar.pentagon.inv.mbx.hotline@mail.mil
                                           Phone Afghanistan: +93 (0) 700-10-7300
                                           Phone DSN Afghanistan: 318-237-3912 ext. 7303
                                           Phone International: +1-866-329-8893
                                           Phone DSN International: 312-664-0378
                                           U.S. fax: +1-703-601-4065



                               Public Affairs Officer
              Public Affairs               Phone: 703-545-5974
                                           Email: sigar.pentagon.ccr.mbx.public-affairs@mail.mil
                                           Mail: SIGAR Public Affairs
                                            2530 Crystal Drive
                                            Arlington, VA 22202