The Real Corruption of Aid: No Cash for Stunning Delivery in Afghanistan

October 15, 2013

My colleague Justin Sandefur has just written a piece for the Atlantic on the sad story of a successful aid program in Afghanistan being threatened by US government auditors.  Read the whole thing. But in brief: along with other donors, USAID supported the Afghan Ministry of Public Health to deliver a basic package of healthcare to 90% of the country, at a cost of $4.50 a head.  The program focused on measureable results and commissioned and independent evaluation which found vaccination rates and service delivery in areas like family planning shot up between 2004 and 2010.  Afghanistan has seen the most rapid increase in life expectancy worldwide 2004–2010, a rise from 42 to 62 years driven by a drop in child mortality of 100,000 kids each year. 

As Justin knows better than almost anyone, these estimates are ballpark—it is hard to do an accurate survey in a war zone.  And there were a lot of other factors at play than the Ministry of Health program.  Still, a considerable part of the improvement can be credited to the basic health program.  Each year there are about 1.2 million kids a year born in the country who’ll have that longer life expectancy.  Let’s assume the program takes one third the credit for increases in life expectancy: over five years that works out at $12 per year of life.  Say the program gets just 10% of the credit, that’s $40 per year of life.  Say the surveys are out by 50% on the rate of health improvement, that’s still only $80 per year of life.  Then compare that to health costs in the United States.  For one (disability-adjusted) life year, we’re willing to spend $5,000 on beta-blocker for a high-risk patient after a heart attack, $20,000 on HIV combination antiretroviral therapy, or even $50,000 to $60,000  to buy one quality-adjusted life year for kidney dialysis –and that’s still considered good value for money.

Enter the Special Investigator General for Afghanistan: SIGAR’s mission is to “promote economy and efficiency of US-funded reconstruction programs in Afghanistan and to detect and deter fraud, waste, and abuse.”  SIGAR wants the health program suspended because of “financial management deficiencies” at the Ministry of Public Health.  Note: SIGAR is not saying that it has proven cases of corruption.  It is not saying that the program didn’t work. It is calling for cancellation of a program with impact under difficult circumstances because procedures were not followed. As Justin suggests, this is a case of the counter bureaucracy run amok. 

This is the perfect illustration for why paying for outcomes or outputs is a better model for delivering support when you are worried about corruption derailing your project. With a cash on delivery model, money flows on the basis of independently verified service provision—the sort of verification we have in the case of Afghanistan’s health program.  And the money wouldn’t stop because harried officials in the Ministry of Health hadn’t perfectly followed every paragraph of a hundred page procurement manual.  In fact, the money wouldn’t even stop if the odd official took a bribe.  As long the kids get vaccinated and women get access to family planning, the Ministry would get $4.50 per person covered.  Or to put it more simply: if the program delivers impressive results at an incredibly low price, the ministry gets paid.  After all, isn’t that why we wanted to fund the program in the first place?  

It must be a considerable discomfort to Special Investigator General Sopko that he has felt unable to focus his mission on the “economy and efficiency”  of USAID’s efforts in Afghanistan.  Clearly he feels forced to concentrate solely on the “fraud, waste and abuse” part of his mandate.  So much so, that even where there is no evidence of corruption, imperfect financial management alone is enough to push the SIGAR to recommend cancelling programs that have demonstrated amazing economy and efficiency.  He is compelled to suggest cancelling a program that is adding years to children’s lives for $80 or less a pop.  If for no other reason, we should introduce cash on delivery as the vehicle for aid financing in Afghanistan in order to relieve the unbearable emotional toll on Mr. Sopko of making such tragicomic recommendations.


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