Watchdog: Follow the Money

Afghan officials improperly fining U.S. contractors, harming war effort

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Watchdog,Michal Conger,Secretary of Defense,Foreign Aid,Corruption,Inspectors General,Defense Spending,Pentagon,Military Budget,Waste and Fraud,Follow the Money,Government Contractors

Improper fines charged to American contractors by the Afghanistan government are adding "hundreds of millions of dollars" to the cost of the U.S. military's war effort in that country and may also be harming its execution, according to the Special Inspector General for Afghan Reconstruction.

"These additional fines, fees and penalties may cost these contractors, and ultimately the U.S. government, hundreds of millions of dollars, and the actions taken by the Afghan government to enforce them may have an adverse effect on U.S. military operations," Inspector General John F. Sopko wrote in a letter to Congress released Monday.

"As such, we believe that these costs warrant the immediate attention of Congress," Sopko said.

Sopko's report of additional charges comes less than two months after a SIGAR audit found the Afghan government was intimidating and even imprisoning U.S. contractors in the region over erroneously charged taxes.

U.S. agencies working in Afghanistan have agreements with the Afghan government exempting them from many taxes and fees, but the Afghan Ministry of Finance has been demanding that U.S. contractors pay nearly $1 billion in taxes, according to a SIGAR audit released in May.

At least three contractors have been imprisoned over late payment of the fees, and deliveries to U.S. troops have been delayed as well.

The SIGAR original report found that the Afghan Ministry of Finance charged 43 contractors a total of $921 million in dubious taxes and penalties.

The Afghan government is demanding Department of Defense commercial carriers pay more than $1 million in customs charges for exempt goods being shipped to troops. The government also charges high fees for business licensing and work permits, totaling millions each year.

"In addition, the Afghan government has restricted the freedom of movement for commercial carriers to deliver their cargoes — such as foodstuffs destined for U.S. military and ISAF [International Security Assistance Force] personnel — resulting in serious consequences for the U.S. government's combat mission and reconstruction effort in Afghanistan," Sopko wrote.

The improper fees also waste taxpayer dollars that would otherwise be paying for reconstruction, the letter said. The U.S. has spent nearly $93 billion for reconstruction in Afghanistan since 2002, according to the letter.

"However, as SIGAR has found, a substantial portion of these funds are being spent not to achieve these important goals, but, rather, to pay the cost of doing business in Afghanistan," the IG wrote.

"Enforcement efforts by the Afghan government to collect the assessed fees delay the delivery of cargo necessary to support the troops and cost the U.S. taxpayer millions in undue burden," he added.

In a response to the SIGAR's audit, the Afghan Minister of Finance wrote a letter in May arguing that the agreements exempting contractors are "legally suspect, poorly drafted, and ill-suited to the complex reality of 2013."

In his reply to the minister, Sopko wrote, "Regardless of your opinion of these agreements, they were agreed to by the Government of Afghanistan and are in effect today. Therefore, these bilateral agreements constitute sound criteria for assessing the legitimacy of levied taxes."

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