VZCZCXRO1645
PP RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #4091/01 3551004
ZNR UUUUU ZZH
P 211004Z DEC 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 4220
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY 0955
INFO RUCNAFG/AFGHANISTAN COLLECTIVE

UNCLAS SECTION 01 OF 02 KABUL 004091 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR S/SRAP AND SCA/A 
TREASURY FOR LMCDONALD, MNUGENT, JCASAL 
 
E.O. 12958: N/A 
TAGS: EFIN EAID PGOV PREL AF
SUBJECT: MINISTER OF FINANCE WELCOMES U.S. TECHNICAL ASSISTANCE ON 
INTERNAL AUDIT 
 
¶1. (SBU) Summary: On December 16, Coordinating Director for 
Development and Economic Affairs (CDDEA) E. Anthony Wayne met with 
Afghan Minister of Finance, Omar Zakhilwal, to discuss the internal 
audit capability of the Ministry of Finance (MOF).  CDDEA Wayne also 
introduced Bob Cortesi, a visiting Treasury advisor assessing MOF's 
needs for internal audit technical assistance.  Due to the recent 
reinstatement of Article 61 by the Ministry of Justice, MOF again 
has authority to audit all line ministries in the Government of the 
Islamic Republic of Afghanistan (GIRoA). (Note: We are seeking 
confirmation that the MOJ letter can overturn the Presidential 
decree that had revoked Article 61.)  Minister Zakhilwal noted that 
despite this authority, MOF's Internal Audit Department (IAD) does 
not yet have the capacity to execute audits across ministries.  He 
noted that assistance to build this capacity was both welcome and 
needed. End summary. 
 
MINISTRY OF FINANCE'S CAPACITY FOR INTERNAL AUDIT REMAINS LIMITED 
 
¶2. (SBU) Minister Zakhilwal stated that the reinstatement of Article 
61 of the Public Finance and Expenditure Management Law has granted 
MOF enormous authority and responsibility to conduct audits of all 
ministries within GIRoA.  Despite this authority, the Minister 
indicated that he did not believe IAD has the capacity to 
effectively execute this charge.  Minister Zakhilwal also expressed 
lack of confidence in the IAD and pointed out that, while he is 
personally following several "serious cases" of corruption within 
GIRoA, he is doing so without IAD involvement.  Moreover, Zakhilwal 
also pointed out that he does not "trust anyone beyond the Ministry" 
to handle sensitive, corruption-related cases that come to his 
attention. 
 
¶3. (SBU) Minister Zakhilwal's goal is to make IAD a "lean, clean, 
and capable" department.  His short-term focus is to increase IAD's 
ability to conduct audits within MOF.  Then, once capacity has been 
increased, IAD will begin to audit other ministries.  Zakhilwal 
noted this will require stronger leadership within IAD.  Zakhilwal 
said if he stayed on as Minister of Finance, he would replace the 
Director General of the IAD and people in several other key 
positions at MOF with more "effective leaders."  (NB: President 
Karzai announced Zakhilwal's reappointment as Finance Minister on 
December 19.) 
 
¶4. (SBU) Treasury Advisor Bob Cortesi outlined the initial results 
of his assessment of the IAD.  Overall, he was impressed with many 
of the structures and procedures in place. He credited much of this 
success to the World Bank's continuing provision of training, 
development of manuals and procedures, and logistical support to 
IAD.  Mr. Cortesi noted future assistance by the Treasury's Office 
of Technical Assistance is designed to build upon the strong 
foundations established by the World Bank and other donor programs, 
rather than duplicate efforts.  He also noted that the World Bank is 
"very supportive" of Treasury's proposal and views it as a positive 
development in an important area of public financial management. 
Mr. Cortesi recommended that the Minister of Finance consider having 
Treasury provide the following technical assistance positions in 
MOF: 
 
- One resident advisor to assist in the design and implementation of 
new audit responsibilities designated under Article 61.  The advisor 
would assist the Director General of IAD in developing staffing 
plans, audit programs, techniques, training, and mentoring in the 
area of financial audits. (Additional support in this area may 
result in the deployment of an additional resident advisor(s) and/or 
intermittent advisory assistance). 
 
- One advisor to assist in developing and providing audit programs, 
procedures, audit plans, training and mentoring on performing 
Information Technology (IT) systems audits.  (The government 
currently has several IT systems and databases which support 
government functions and can be subjected to audit, including AFMIS 
(financial), ASYCUDA (Customs), and TIN (Tax). 
 
- Mr. Cortesi also suggested placing advisors to help improve the 
current audit resolution procedure.  Minister Zakhilwal reacted 
positively to the proposed positions and asked for greater support 
in improving the Financial Investigative Unit (FIU), which conducts 
IAD's investigations.  Mr. Cortesi, who has more than 30 years of 
investigative experience, said he would work on developing an 
investigative training plan when he returns in mid-January. 
 
MINISTER OF FINANCE SEEKS QUICK "BIG WINS" THROUGH INTERNAL AUDIT 
 
¶5. (SBU) Minister Zakhilwal noted his main frustration with the 
current Deputy General, Mohammad Dindar, was that he focused on 
"trivial cases" rather than searching out big money cases. 
Zakhilwal noted his respect for DG Dindar's attention on process but 
emphasized the need for "big wins."  The difference in focus is 
 
KABUL 00004091  002 OF 002 
 
 
reflected in differing strategies for expanding MOF's internal audit 
operations out to other ministries:  DG Dindar's plan is to 
initially focus on six ministries, building up capacity and 
processes; Minister Zakhilwal however said he prefers a more 
aggressive and targeted approach focused on investigating 
"important" cases, where large sums of money are at stake, 
regardless of ministry. 
 
¶6. (SBU) Comment: We welcome Minister Zakhilwal's attention to 
improving internal audit but remain concerned that he may be looking 
for "big wins," at the expense of establishing greater long-term 
technical capacity and sound procedures.  Zakhilwal's audit bodies 
must be able to walk before they can run.  Technical advice provided 
by the U.S. Treasury to MOF will emphasize the importance of 
establishing high-quality internal audit practices and procedures to 
prevent fraud and abuse.   End comment. 
 
RICCIARDONE