Initiating G2G in Afghanistan

OFFICE OF EDUCATION

A G2G Case Study

Version: February 2014

G2G Education Toolkit

Case Study Afghanistan: Initiating G2G

This case study traces the development and initiation of the first government-to-government (G2G) assistance activity by USAID Afghanistan in the education sector. USAID is committed to an agreement with the Government of Afghanistan and donors to increase on-budget assistance to 50 percent of total USG development assistance in the country. The USAID Afghanistan project, Basic Education, Literacy, Technical and Vocational Education and Training (BELT) was designed to meet this target. The initial activity, using G2G Cost Reimbursement to pay for the contracted printing of approved primary school textbooks, began in 2011. While it appeared initially to be a simple and straightforward activity, implementation within the politically-charged environment of a conflict state has proven more complex than anticipated. Information for the case study was gathered from an extensive review of relevant documents and interviews with USAID Afghanistan and other education staff.

Education Office Economic Growth, Education and Environment February, 2014

G2G in Education: Case Study: Afghanistan Initiating G2G

FOREWORD

Government-to-government Education Toolkit

In line with the compelling policy guidance of USAID Forward, Agency Education Officers are currently exploring and developing new government-to-government (G2G) modalities in education projects. An immediate need exists for tools and training materials that will assist Education Teams as they design, implement, and monitor G2G activities to achieve USAID Strategy Goals in Education.

Under the leadership of the Bureau for Economic Growth, Education and Environment’s (E3) Education Office, the G2G Education Toolkit has been developed to provide this support. The Toolkit includes a literature review; an analysis of lessons learned and best practice; an analytic framework and roadmap; operational tools; and case studies. Additionally, sample G2G operational documents from Missions currently undertaking government-to-government activities are available to guide field staff.

The purpose of the G2G Education country case studies is to capture the lessons learned and effective practices through documentation of Missions’ operational steps in assessing, designing, implementing and evaluating education projects with G2G financing.

G2G in Education: Case Study: Afghanistan Initiating G2G

Acronyms

ARTF Afghanistan Reconstruction Trust Fund BELT Basic Education, Literacy and Technical-Vocational Education Training Project DAB Da Afghanistan Bank G2G Government-to-government assistance GIRoA Government of the Islamic Republic of Afghanistan IL Implementation Letter MOE Ministry of Education MOF Ministry of Finance MOPH Ministry of Public Health OAA Office of Assistance and Acquisitions [USAID] OBA On-budget Assistance OFM Office of Financial Management OSSD Office of Social Sector Development SOAG Strategic Objective Agreement

G2G in Education: Case Study: Afghanistan Initiating G2G

Contents

Acronyms ...... 4 Preface ...... 6 County context ...... 7 USAID Afghanistan and Government-to-government Assistance ...... 8 USAID/Afghanistan Support for Education...... 9 The BELT Project ...... 9 The G2G Strategy in BELT: Start with Books ...... 10 Key elements of the Design: The First Implementation Letter ...... 10 What Happened? ‘If only we knew then what we know now!’ ...... 14 Next steps for BELT Government-to-Government Activity...... 15 Key Takeaways ...... 16 Case Study Questions ...... 18 Document Sources ...... 19

Annexes ...... 20 Annex 1: BELT Textbook Procurement Project Description ...... 21 Annex 2: Implementation Letter #20-4 for Textbook Procurement, Nov. 16, 2011 ...... 28 Annex 3: Implementation Letter #41, Oct. 13, 2013 ...... 31

List of Figures Figure 1: Framework for G2G Assistance: Afghanistan BELT Textbook Procurement ...... 17

G2G in Education: Case Study: Afghanistan Initiating G2G

There is a path to the top of even the highest mountain. Afghan Proverb

Preface

The E3 Office of Education Team sought a case study within an Education Goal 3 context in which USAID designed and initiated a project using government-to-government (G2G) assistance. The Mission in Afghanistan has a decade of experience in budgetary support to the Afghan Government both through a multi-lateral trust fund managed by the World Bank and through direct on-budget support to large projects in the health sector. In 2010, the Government of the Islamic Republic of Afghanistan (GIRoA) and leading donors signed an agreement committing agencies to provision of at least 50 percent of development aid through on-budget assistance. This has considerably increased pressure to develop G2G assistance across all sectors.

In Education, USAID designed the Basic Education, Literacy, Technical and Vocational Education and Training (BELT) project to meet the 50 percent target. The initial G2G activity to pay for the contracted printing of approved primary school textbooks began in 2011. The use G2G Cost Reimbursement to pay vendors seemed initially to be a simple and straightforward activity. USAID determined that the Ministry of Education (MOE) had the necessary capacity to procure and contract out for the printing of textbooks. The strategy to start on-budget G2G assistance with the MOE through a relatively low-risk, easily-tracked activity appeared sound. Overlaid against the Afghanistan context, this case study illustrates the experience of managing the textbook procurement component of BELT project which ultimately has been more complex and problematic than anticipated. It underscores the importance of performing an initial examination of the larger institutional and system context and of developing relationships guided by strong communications and transparency. In an environment of high political stakes coupled with weak government systems, G2G assistance in the Afghanistan context puts an additional management burden on both Ministry of Education (MOE) and USAID technical staffs.

This case study traces USAID Afghanistan’s experience with budgetary support since 2002. Thereafter, the Mission’s assistance to the education sector, the current education project (BELT) and the design of G2G assistance, and the Mission’s experience of implementing the G2G activity are described. The case concludes with a summary of key points and a set of questions that provide a useful guide for reflection and analysis for other Missions and education teams in the process of operationalizing G2G assistance.

The case was developed based on an extensive review of documentation and interviews with the

G2G in Education: Case Study: Afghanistan

USAID Afghanistan Education Team. Additionally, the study benefited from interviews with E3 Office of Education Team members, Suezan Lee and Steven Kowal, who are assisting the Mission to develop additional BELT components using G2G assistance. Key source documents, the BELT textbook procurement project description and two Textbook Printing Implementation Letters, are provided in Annexes 1, 2, and 3 respectively.

County context

Afghanistan is a country devastated by years of war and conflict during which the education system was largely destroyed. Under the period of Taliban control from 1997 to 2001, girls were officially forbidden to attend secular public schools. Since 2002 however over 4,000 new schools have been built and enrollment has increased from 700,000 boys (no girls were officially enrolled at the time) to 8.6 million students of which 39 percent are girls. The teacher workforce has also expanded exponentially from 20,000 male teachers in 2002 to over 180,000 in 2012 of which 31 percent are female. 1

These are remarkable achievements for a country still embroiled in internal conflict and are largely dependent on external financing of public sector programs. Yet the challenges ahead remain daunting. Forty-two percent of school age children remain out of school; girls living in rural areas remain a large proportion of these. The shortage of female teachers combined with security and cultural constraints are major obstacles.

The quality of education for those in school is very low. The overall pupil/teacher ratio is 44:1 and 58 percent of teachers do not meet minimum qualifications. Many of the 18,000 school heads, district administrators, and supervisors lack effective management and supervisory skills and resources. Classrooms operate with a shortage of pupil textbooks and instructional supplies.

Sixty eight percent of the population is under the age of 25. Illiteracy of youth (53 percent of those aged 15 to 24) who have missed the opportunity to attend school is a major issue in Afghanistan.2 Most Afghanis over primary-school age have not been to school and have little opportunity to gain skills and literacy. Due to food insecurity, poverty, and lack of access to sustainable livelihoods, this group is particularly vulnerable to recruitment into criminal and insurgent groups. Despite gains made in building a stable central government, a resurgent Taliban and continuing provincial instability fueled by the poppy trade in the south and the east remain serious challenges for the Afghanistan Government.3

1 All data are from the Afghanistan Ministry of Education (2013) Education Joint Sector Review 2012. Kabul. 2 USAID Afghanistan (2012) National Risk and Vulnerability Survey 2011-2012. Kabul 3 Afghanistan is the world's largest producer of opium. The Taliban and other antigovernment groups participate in

G2G in Education: Case Study: Afghanistan

USAID Afghanistan and Government-to-government Assistance4

Shortly after the fall of the Taliban in 2002, the World Bank established the Afghanistan Reconstruction Trust Fund (ARTF) with the goal of providing a mechanism to coordinate donor assistance to the Government budget for priority national investment projects. Since 2002, USAID has disbursed $1.96 billion through the ARTF, representing 30 percent of total donor contributions to the Fund. Starting in 2003, USAID Afghanistan began funding the Ministry of Public Health (MOPH) using partner country contracts.5 This funding mechanism required a project management unit tasked with tracking all USG assistance as well as funding approvals between USAID, the MOPH, and the Ministry of Finance (MOF). The MOPH was the first ministry to receive direct funding from USAID. By increasing on-budget assistance through the transfer of key activities to the MOPH rather than through USAID implementing partners, USAID has improved the capacity of the Government to manage national finances and assume leadership to meet the needs of Afghan citizens. USAID assistance has aided development of Afghanistan’s own institutions and provided strong evidence that capacity building is a long-term process, requiring continuous efforts for progress to become durable and sustainable.

Between 2002 and 2013, USAID Afghanistan disbursed $2.208 billion dollars in on-budget assistance (OBA), with 91 percent going to multi-donor Trust Funds. Additionally, $141.3 million went through partner country contracting to the MOPH and $198.7 million was given as other bilateral assistance through cost reimbursement, fixed amount reimbursement, output- based reimbursement, and cash transfers for education, democracy and governance, agriculture, 6 roads and stabilization, and crosscutting issues.

In 2010, driven by the London and Kabul Conference calling for a 50 percent commitment of ‘on budget’ assistance, USAID Afghanistan moved to channel additional funds to the Government. This assistance continues to use multiple implementation modes, some of which contribute to the OBA commitment (e.g. partner-country contracting), but which are not defined by USAID ADS as government-to-government (G2G) assistance. For all donors, the 50 percent commitment is conditioned on evidence of progress to further strengthen public financial management systems, reduce corruption, improve budget execution rates, and develop a financing strategy. This is in addition to anticipated progress in other areas including elections,

and profit from the opiate trade. Widespread corruption and instability impede counterdrug efforts. Afghanistan is also struggling to respond to a burgeoning domestic opiate addiction problem (The World Factbook. https://www.cia.gov/library/publications/the-world-factbook/geos/af.html) 4 The Afghanistan Government and development agencies use the term ‘on-budget’ assistance (OBA) to describe donor financing to the government. Some aspects of OBA are not included in USAID’s definition of G2G. In this case, the G2G is used only when the assistance modality is consistent with the USAID ADS definition. 5 Partner country contracts are considered on-budget assistance (OBS) by the Afghanistan government, but they are not considered G2G per USAID ADS definition. 6 Data and information in this section are from USAID Afghanistan (2013) On-Budget Assistance Rapid Review.

G2G in Education: Case Study: Afghanistan

human rights, and gender empowerment.

Learning from previous experience, the Mission has strengthened internal processes for the design and management of OBA activities. Additional activities put into use by the Mission include OBA bi-weekly meetings, improved communications across technical and management offices, and integrated design teams. Mission capacity has improved in the design of OBA projects in consultations with ministry officials and aided by an internal Agency focus on increasing FSN staff skills through provision of more training, and extension of tours to two years for OFM staff and Program Office OBA liaisons. Simultaneously, gains have been made in the relevant implementing ministries in the areas of policies and procedures and improved accounting systems. However, challenges remain in the development of human and institutional capacity within ministries and strengthening of core civil services to effectively implement OBA projects. Some of the challenges faced by the Mission include delays in joint donor-ministry risk assessments that do not meet USAID standards, slow collaboration efforts with implementing line ministries, and frequent staff turnover. The Mission has learned two major lessons in the use of on-budget assistance in Afghanistan:

1. On-budget assistance for capacity building by USAID Afghanistan has to actively mitigate risk first before it can address service delivery.

2. Building on-budget project relationships, negotiation and implementation with government counterparts take time and careful consideration.7

USAID/Afghanistan Support for Education

USAID has made major investments in the Afghanistan education sector, particularly in the areas of teacher professional development, community-based education, literacy, and vocational education and training. Between 2006 and 2011, USAID achieved the following: training of 74,000 teachers, 31 percent of them female; access to schooling for 100,000 students in remote rural locations through community-based education programs; literacy and vocational skills training to over 200,000 youth and adults; and construction or renovation of 563 school buildings. Since 2002, USAID has funded the printing of over 148 million textbooks for grades one to twelve in Dari and Pashto languages. Additionally, USAID has built the capacity of the Ministry of Education to assume a stronger leadership role in the reconstruction of the nation’s education sector.

The BELT Project

In line with USAID’s commitment to the Kabul Conference agreement to provide 50 percent of assistance through on-budget support, the Mission worked extensively with the MOE to assess the most advantageous placement for direct assistance within the overall government strategy for

7 Ibid USAID Afghanistan 2013

G2G in Education: Case Study: Afghanistan

education sector development. As a result, USAID and the MOE cooperatively designed the Basic Education, Literacy, and Technical-Vocational Education and Training (BELT) project which would transition a large portion of USAID assistance into the budget of the MOE. BELT objectives which mirror those of the MOE’s Education Sector Plan, contains six components designed for phased implementation over three years:

1. Strengthening MOE management capacity, including measurement of student learning outcomes; 2. Professional development of teachers and school administrators; 3. Expansion of primary and lower secondary education through community-based schools; 4. Printing of textbooks to improve the primary school learning environment; 5. Literacy programming targeting out-of-school youth; and 6. Building a strategic approach to TVET.

The G2G Strategy in BELT: Start with Books The Mission strategy began G2G assistance to the MOE with an activity that would apparently be straightforward and of low risk. Following a review of the Ministry’s procurement procedures by the Mission (involving the OAA, OFM, and OSSD), the Mission concluded that systems and personnel were capable of advertising, fairly competing, and meeting Afghanistan Procurement law for procurement. The Mission decided that a stand-alone activity, the Textbook Printing Procurement activity, would be used to initiate the transition of USAID support through G2G assistance.

The BELT Component 4, Textbook Printing, is the first education sector activity to move on- budget, in this case through the use of cost reimbursement. The cost reimbursement grant supports the Government to procure the services of qualified firm/s to print 47.6 million approved primary school textbooks in Pashto, Dari, and English languages. The provision of textbooks that follow and reflect the approved curriculum is anticipated to improve the learning environment in primary schools.

Key elements of the Design: The First Implementation Letter The BELT Textbook Printing Procurement Activity was initiated through an implementation letter in November 2011 which provides $20 million over three years (FY12-14) to cover the costs of procurement for printing 47.6 million textbooks. Using a full and open competition, the MOE would solicit and award a procurement contract in full compliance with the Grantee's procurement laws, regulations, policy and procedures. USAID would finance the contract but not be a party to it.

The implementation letter specified the covenants between the MOE and USAID Afghanistan, the preconditions for the disbursement of USAID funds, and other conditions for the BELT textbook

G2G in Education: Case Study: Afghanistan

procurement. Key provisions of the implementation letter are described below and reflect the care and thoroughness of the Mission in preparation and implementation of the activity. The full initial Implementation Letter is provided in Annex 2.

COVENANTS:

The Ministry of Education shall: 1 Draft, collect, and provide all applicable documentation and reporting requirements; 2 Implement the activity in accordance with all applicable laws and regulations in effect in the Islamic Republic of Afghanistan, including environmental and health and safety laws; 3 Provide a list of Ministry-approved texts each year; 4 For the first year of implementation, ensure that USAID funding is limited to the printing of approved texts (listed in an annex). Approval and financing of additional procurement of textbooks in subsequent years shall be subject to review by USAID; 5 Promptly notify USAID if, at any stage during either the procurement or disbursement of texts, MOE should become aware of or suspect any misappropriation or diversion of funds or possible fraud or corruption relating to activities funded by the Grant; and 6 Make efforts to ensure approved texts address the needs of women and girls. As MOE approves future lists of textbooks, it will attempt to coordinate with the Ministry of Women's Affairs and other interested parties to meet this requirement.

The Ministry of Finance shall: 7 Establish a separate, non-commingled, non-interest bearing account at the Afghanistan Bank (DAB) for the Grant funds that provides for prompt disbursement and tracking of all account activity; 8 Provide USAID with an executed copy of a third-party authorization letter, granting USAID information access rights to the MOE Basic Education, Literacy, and Technical-Vocational Education and Training (BELT) Textbook Procurement Activity special account; 9 Provide to USAID the names of the representatives of the GIRoA, with specimen signatures who are duly authorized as signatories for any instrument in implementation of this Grant; and 10 Immediately notify USAID if, at any stage during either the procurement or disbursement of texts, the MoF or DAB should become aware of, or suspect, any misappropriation or diversion of funds or possible fraud or corruption relating to activities funded by the Grant.

USAID shall: 11 Finance the approved activities by using a reimbursable mode of payment. Funds will be disbursed for the implementation through the MOF when requests for payment are made by providing appropriate documentation such as an invoice/payment schedule; and 12 Deposit funds into a separate, non-commingled, non-interest bearing account at the Afghanistan Bank denominated in Afghanis established in the name of the Ministry of Education BELT Textbook Procurement Activity by the MoF.

G2G in Education: Case Study: Afghanistan

Eligible uses of grant proceeds: The Parties agree that Grant funds shall be used only for the printing of appropriate, MOE- approved primary texts in Pashto, Dari, and English. Grant proceeds shall not be used for any purposes other than the printing of approved textbooks. The GIRoA agrees to redeposit to the bank account U.S. Dollars equal to the amount of any Grant proceeds used for purposes prohibited under this Section or the SOAG and to treat such re-deposited amounts as though they were principal (i.e., Grant proceeds) received under the terms of this IL. Until such re-deposits to the bank account are made, the GIRoA may make no further withdrawal from that account.

Conditions Precedent Prior to the initial disbursement of Grant Proceeds by USAID, the GIRoA shall: 1 Include the Textbook Procurement Activity in the annual Government budget so that procurement for textbook printing can be carried out immediately with funds provided directly to the budget; 2 Provide USAID with documentation from DAB showing the establishment of a separate, non- commingled, non-interest-bearing, Afghan denominated special account entitled Ministry of Education BELT Textbook Procurement Activity. All disbursements under this Grant shall be made by the GIRoA from this account and USAID shall deposit all funds into this account. 3 Provide USAID with an executed copy of a third-party authorization letter, granting USAID information access rights to the special account; 4 Provide documentation satisfactory to USAID that appropriate processes and procedures have been established by MOE for disbursement of funds; 5 Develop and draft, in consultation with USAID, a plan for monitoring and evaluating performance of the Textbook Procurement Activity; 6 Develop and draft, in consultation with USAID, a reporting format; 7 Provide a letter from DAB stating that no funds will be released from the Ministry of Education BELT Textbook Procurement Activity special account without a letter authorizing such release, signed by MOE. Provide any other documentation requested by USA I D to ensure funds will be used for eligible uses.

Monitoring and Evaluation MOE will work with USAID to establish a Monitoring and Evaluation plan with a baseline, targets and indicators identified prior to the initial and subsequent disbursements. The plan will address: 1 A process to monitor both quality and quantity of procured textbooks: 2 A process to monitor the distribution of procured textbooks to MOE primary schools: and, 3 Identification and evaluation of problem areas or constraints that may prohibit the attainment of either the procurement or the distribution of textbooks. 4 USAID may advise and recommend additional monitoring and evaluation criteria.

G2G in Education: Case Study: Afghanistan

Financial Reporting Requirements 1 The MOE will provide USAI D a complete executed copy of the Textbook Procurement Contract immediately upon signature by the MOE and selected vendor. 2 Pursuant to the Textbook Procurement Contract payment terms, upon receipt of any invoice from the vendor, the MOE will immediately forward a copy of the vendor payment request to USAID. 3 Based upon the MOE executed contract terms and receipt from the MOE of the copy of the vendor invoice payment request, USAID will immediately deposit the amount of the vendor payment request to the BELT Textbook account. 4 On a quarterly basis, the MOE will submit to USAID a full accounting of all activity of the separate bank account including a full copy of the bank statement. 5 USAID may confirm directly with the Vendor that all payments due the vendor under the contract terms were received in accordance with the contract terms between the MOE and Vendor. 6 Upon final payment under the vendor contract. MOE will provide USAI D with a full accounting of all activity surrounding the vendor contract and the separate bank account including a full copy of the bank statement.

Program Reporting Requirements: A reporting format will be developed with USAID to report on the distribution of procured texts to schools. Additional reporting requirements may be requested by USAID.

Audit and Financial Review The IL provides details and specifications for the GIRoA to maintain accounting books, records, documents and other evidence related to the procurement, receipt and distribution of the textbooks provided by the Activity, and to make these records available for financial reviews and audits by USAID.

The implementation letter provides clear, specific, and detailed requirements to the MOE and MOF for the implementation of the textbook procurement and reimbursement activity. These requirements can be summarized in four key points: 1. The procurement process for the printing of approved textbooks should be open, fair and consistent with government regulations. 2. The reimbursements will be based on invoices from the vendor for the verified delivery of textbooks and can be used for no other purpose. 3. USAID will receive regular activity and financial reports and will have full access to contracts, accounts, reports and records related to the textbook procurement. 4. USAID should be informed about any actual or suspected misappropriation of either funds or the textbooks.

G2G in Education: Case Study: Afghanistan

With clear and specific covenants and conditions laid out and little or no risk anticipated, the implementation of this activity would not be problematic. What could go wrong??

What Happened? ‘If only we knew then what we know now!’

What appeared to be a straightforward initial G2G activity has since become a complex and difficult management issue. The single initiating implementation letter has been amplified and modified through a series of seven more ILs, adding an additional $6.995 million to the original $20 million USAID commitment. Significant modifications have been made to the original single intent of reimbursement of vendor invoices for the printing of books. In spite of specific instructions and guidance laid out in the original implementation letter, communication between MOE and USAID on critical matters was not as extensive or intensive as it needed to be. The most significant issues of noncompliance from the MOE are:

• USAID’s participation in the process was restricted to contract negotiations. A sole-source contract was issued through a joint venture between Afghanistan and Indonesian owners. The MOE made no request for a waiver of procurement regulations to USAID for this sole- source award. According to the verbal explanation of the rational provided for the non- competitive award process was that timing was important and the MOE wanted no delay in delivery of books.

• The actual number of books provided by the contract was nearly 2.4 million fewer than the agreed number of 36,457,400, as verified by a USAID inspection. The MOE made no request to USAID for an approval in the reduction of the total number of books. The explanation provided by MOE was that modifications to texts leading to a reduction in the number of pages in each book were underway but would not be completed in time for the procurement. Thus, while the total number of books was reduced, the actual number of pages printed was equivalent to the number of pages in the original approved textbook list.

• USAID funds were used to pay taxes on the books (estimated to be approximately one million dollars by USAID staff). The levying of taxes for textbooks procured internationally is not an allowable expense in USAID’s commitment under the SOAC and subsequent ILs. Negotiations between the vendor and the Government were disclosed to USAID only afterward at the request of the Mission.

• Perhaps the most problematic issue was the MOE purchase of 484 expensive shipping containers at an estimated cost of nearly $2.3 million as a part of the textbook contract. The MOE has included this purchase in the printing contract without USAID’s concurrence and will retain ownership of those containers.

As clearly illustrated by this set of non-compliance issues, expectations of USAID/Afghanistan for the implementation of this G2G contract were not fully realized. Regular, specific and detailed reporting on the procurement process, the contract negotiations and specifications, the receipt

G2G in Education: Case Study: Afghanistan

of books, and the reporting of finances are all issues of contention. In spite of a series of additional implementation letters further specifying conditions and offering technical help to the MOE, communications for the resolution of these issues has continued to be problematic. In the most recent implementation letter8 USAID explained that payment of the full amount of $11,003,243 of the vendor’s current invoice would not be possible until matters were clarified, specifically the details of the purchase of the 484 storage containers.

From an instructional point of view, non-compliance issues that have arisen were not specifically anticipated. The sole-source contractor award, the change in the number of books delivered, the use of USAID funds for taxes on the books (which specifically violates the Foreign Assistance Act), and the purchase of high-cost shipping containers are issues not because of their mindful omission in the original contract but because they were un-expected and independent actions by the government.

The books have been produced and now await distribution to the provinces and schools. The cost of distribution was not included in the original activity or implementation letter; yet for the Textbook Activity to have an impact on pupils’ opportunity to learn, the books have to be delivered and used in classrooms. The MOE has explained that the containers will assist the distribution process and will remain at the provinces to provide necessary storage space. The MOE has estimated that the distribution of the textbooks will cost an additional $1.13 million and requested an additional $296,813 to cover this cost. In IL #20-05, issued in July 2013, USAID agreed to this request conditional on provision by the MOE of a detailed distribution plan to the school level and evidence that distribution has been completed.

Next steps for BELT Government-to-Government Activity As of the writing of this case study in February 2014, two years and three months after issuance of the original BELT Textbook Procurement implementation letter, USAID Afghanistan is working with the MOE to resolve non-compliance issues and distribute the textbooks to schools. Distribution itself requires a complex management process contingent on the availability of complete and accurate information of the location and size of thousands of primary schools in thirty-four provinces. For equitable distribution, current enrollment data for each class will be necessary so that schools, classes, and pupils receive the required numbers of appropriate books in the correct language (Dari, Pashtun and English).

As stipulated in IL #20-05, MOE has provided a detailed distribution plan of textbooks by province, district, school, and grade level. Given the lessons learned through the procurement of the printing process, USAID has been actively participating in the procurement of the textbook distribution contract. The Mission provides input and concurrence on solicitation documents and attends pre-bidding and bid opening conferences at the MOE. In addition, USAID has procured a third-party audit firm to verify the actual distribution of the textbooks to all provinces in a

8 IL #41, October 13, 2013 is available in Annex 3.

G2G in Education: Case Study: Afghanistan

sample size of approximately 20 percent of all primary schools. Textbooks distribution is expected to commence in April 2014.

With regards to the improper tax withholding, USAID received a copy of a letter from the Ministry of Finance to the Ministry of Education which grants tax exemption for the textbook procurement contracts. This letter serves as a precedent for all on-budget activities in the future to ensure tax-exemption for USAID OBA. MOE has also submitted a request for the one million dollars in taxes to be returned to the MOE special account for textbooks. MOE has provided adequate documentation for the purchase of shipping containers and reduction in the number of textbooks and is moving forward in making payment for the amount withheld from the second invoice.

Although the textbook printing component continues to face challenges, the Mission is moving forward with the implementation of two additional BELT components using partner country systems, 1) Strengthening MOE management capacity through a bi-lateral implementation letter and 2) Professional development of teachers (in-service) and school administrators through contributions to the ARTF. The Mission will use the G2G cost reimbursement modality based on receipt of vendor invoices for goods and services for the capacity building component (as in the Textbook Printing Procurement Activity). The MOE recently submitted a new request for more primary school textbooks for which the Mission is contemplating a continuation of funding through a G2G cost-reimbursement modality. The Mission has designed a G2G activity to implement BELT component 3: expansion of primary and lower secondary education through community-based schools. This program uses the G2G fixed-cost milestone reimbursement modality.

Key Takeaways

In this situation, three forces are in play reflecting the particular operating environments in many Goal 3 contexts and challenges facing Mission and education team staffs. The first force is the policy mandate in Afghanistan, committing 50 percent of all development funds to on-budget assistance. This requires USAID to design and manage a process which minimizes fiduciary risk and ensures strict oversight and tracking of USAID dollars while also complying with evolving Agency guidance on G2G operationalization. A second force is implicit in Aid Forward: to implement through national systems and contribute to sustainable institutional capacity. In the Textbook Printing Procurement Activity, this means strengthening the various departments in the Ministry of Education and Ministry of Finance which are responsible for management of the G2G activities. The third force compelling USAID officers is to produce significant, measurable results. The Textbook Activity will not achieve results until pupils are using the books. Strong political oversight exists, especially in Afghanistan, to assure that this impact is realized quickly. These forces place a significant burden on Mission staffs to reduce fiduciary and programmatic risk while using government systems, building partner-country institutional capacity, and realizing project

G2G in Education: Case Study: Afghanistan

results and impacts visibly and quickly. The framework for government-to-government assistance in Afghanistan is illustrated in Figure 1.

Figure 1: Framework for G2G Assistance: Afghanistan BELT Textbook Procurement

Achieving Results: textbooks delivered & in use The BELT Textbook Activity results will CHALLENGE: To achieve long-term, How to prioritize and balance be achieved when approved textbooks are in schools and in use. Success or failure the three pillars of Achieving development aid: achieving Results: has a high political profile and is far more results; using government Textbooks complex to achieve than simply paying an systems; and building delivered and invoice for production of textbooks. institutional capacity? used

AID FORWARD: Achieve long-term, sustainable development: support institutions so they can serve their own citizens

Using Partner Country Building Systems Capacity G2G

G2G policy mandates that 50 percent Institutional capacity building requires of aid is OBA yet ADS 220 requires a sustainable system development and development, support strengthening, a slow process that rigorous assessment of government so they can serve their financial & procurement systems along own depends on development of strong with specified preconditionsBuilding and relationships and good covenants that reduce risk of communications, reliable agreements, misappropriation of USAID money. covenants, and trust.

G2G in Education: Case Study: Afghanistan

The key elements in this case study:

• The policy mandate that 50 percent of all aid will be on- budget is at a higher level than the goal of 30 percent set by USAID Forward. This puts increased pressure on the Agency and the Education Team to design and effectively implement G2G activities in a Goal 3 context. • The strategy was to initiate G2G implementation with what appeared to be a relatively simple and straightforward activity: to reimburse the amount required to cover invoices from a contracted vendor for the printing and delivery of approved textbooks. • The implementation has become far more challenging than anticipated. Non-compliance issues not brought to USAID’s attention included: the procurement and award of a sole-source contract; the reduction of the number of books supplied; the imposition of taxes on the textbooks; and the purchase of storage containers worth $ 2.39 million. To cover additional costs and to deal with these issues, seven additional implementation letters have been issued. • Management of this activity has created an unanticipated level of effort for USAID/Afghanistan staffs. A significant challenge ahead will be the financing and management of the delivery of textbooks to the schools.

The move to G2G assistance requires a significant change in USAID and Government interaction and capacity. Whereas USAID has previously depended to a large extent on contractors and grantees to manage and implement projects, that burden now falls on both the partner government and USAID staffs. The Afghanistan Textbook Printing and Procurement experience reinforces the lesson that initial G2G assistance should start small with discreet, easily identified and managed outputs to allow mutual learning by USAID and the government about G2G management to take place. G2G assistance needs to develop within a collaborative, trusting relationship with provision of flexible technical support as needed. The placement of experienced USAID Foreign Service Nationals where possible within the MOE is one strategy to improve communications and support MOE institutional capacity.

Case Study Questions

• What could have been done differently in the preparation and design of the first BELT Textbook Printing Implementation Letter? What institutional capacities and systems could be strengthened at USAID and the MOE to ensure successful implementation of the BELT Textbook printing activity?

• What are the challenges to reach a satisfactory conclusion to the current BELT Textbook Printing Activity? How could that be addressed?

• Knowing what is now known about this case, what elements could be included in the design of a new G2G activity for the improved supply of instructional materials to schools?

G2G in Education: Case Study: Afghanistan

Document Sources

Interview notes: Steven Kowal and Suezan Lee, EGAT/ED TDY Support to USAID/Afghanistan for On-Budget Education Programming. March 1, 2012

The World Factbook/Afghanistan. CIA (2014) https://www.cia.gov/library/publications/the- world-factbook/geos/af.html

USAID/Afghanistan (2011) Action Memorandum Requesting Approval for Basic Education, Literacy, and Technical-Vocational Education and Training (BELT) Project. Kabul. USAID/Afghanistan (2011) Implementation Letter 20

USAID/Afghanistan (2012) Implementation Letter 27

USAID/Afghanistan (2012) Implementation Letter 20-04

USAID/Afghanistan (2012) Implementation Letter 20-05 USAID/Afghanistan (2013) On-Budget Assistance Rapid Review. Kabul

USAID/Afghanistan (2013) On-Budget Assistance: Learn-As-We-Go & Way Forward: Presentation on November 16, 2013.

G2G in Education: Case Study: Afghanistan

Annexes

1 BELT Textbook Procurement Program Description 2 Implementation Letter #20-4 for Textbook Procurement, Nov. 16, 2011 3 Implementation Letter #41, Oct. 13, 2013

G2G in Education: Case Study: Afghanistan

Annex 1: BELT Textbook Procurement Project Description

November 16, 2011

Project Summary The purpose of this grant is to support the Government of the Islamic Republic of Afghanistan (GIRoA) procurement of the printing of appropriate, Ministry of Education (MoE)-approved primary -grade textbooks in Pashto, Dari, and English. The provision of appropriate, MoE approved textbooks is expected to .improve the learning environment in those primary schools to which the purchased texts arc distributed.

The BELT Textbook Procurement Activity will be implemented through a contract solicited and awarded by the MoE, using full and open competition and observing full compliance with the Grantee's procurement laws, regulations, policy and procedures. USAID hereby agrees to serve as a financier of, but not a party to, such contract, in accordance with USAID rules, policies and procedures.

2. Covenants of the Parties a) The Ministry of Education shall: i. Draft, collect, and provide all applicable documentation and reporting requirements; ii. Implement the activity in accordance with all applicable laws and regulations in effect in the Islamic Republic of Afghanistan, including environmental and health and safety laws; iii. Provide a list of Ministry-approved texts each year; iv. For the first year of implementation, ensure that USAID funding is limited to the printing of approved texts (listed in an annex). Approval and financing of additional procurement of textbooks in subsequent years shall be subject to review by USAID; v. Promptly notify USAID if, at any stage during either the procurement or disbursement of texts, MOE should become aware of or suspect any misappropriation or diversion of funds or possible fraud or corruption relating to activities funded by the Grant; and vi. Make efforts to ensure approved texts address the needs of women and girls. As MOE approves future lists of textbooks, it will attempt to coordinate with the Ministry of

G2G in Education: Case Study: Afghanistan

Women's Affairs and other interested parties to meet this requirement. b) The Ministry of Finance shall: i. Establish a separate, non-commingled, non-interest bearing account at the Afghanistan Bank (DAB) for the Grant funds that provides for prompt disbursement and tracking of all account activity; ii. Provide USAID with an executed copy of a third-party authorization letter, granting USAID information access rights to the MOE Basic Education, Literacy, and Technical- Vocational Education and Training (BELT) Textbook Procurement Activity special account; iii. Provide to USAID the names of the representatives of the GIRoA, with specimen signatures who are duly authorized as signatories for any instrument in implementation of this Grant; and iv. Immediately notify USAID if, at any stage during either the procurement or disbursement of texts, the MOF or DAB should become aware of, or suspect, any misappropriation or diversion of funds or possible fraud or corruption relating to activities funded by the Grant. c) USAID shall: i. Finance the approved activities by using a reimbursable mode of payment. Funds will be disbursed for the implementation through the MOF when requests for payment are made by providing appropriate documentation such as an invoice/payment schedule; and ii. Deposit funds into a separate, non-commingled, non-interest bearing account at the Afghanistan Bank denominated in Afghanis established in the name of the Ministry of Education BELT Textbook Procurement Activity by the MoF.

3. USAID Funding Information: USAID sub-commits and sub-obligates $6,700,000 U.S. dollars (Six million, seven hundred- thousand U.S. dollars) under the fiscal data to cover the Textbook Procurement Activity as described in Annex IV.

The sub-obligation and payment not to exceed $6,700,000 U.S. dollars will be made after the fulfillment of the conditions precedent in Section 5 of the Annex.

4. Eligible uses of grant proceeds: a) The Parties agree that Grant funds shall be used, subject to the restrictions outlined in this IL and any further restrictions as may be provided in agreed modifications or amendments by the

G2G in Education: Case Study: Afghanistan

Parties, for any or all of the following: • Printing of appropriate, MoE-approved primary texts in Pashto, Dari, and English. b) The Parties agree the Grant proceeds will be used only for the purposes set forth herein. GIRoA expressly agrees and affirms that no payments will be received by any official of GIRoA in connection with the procurement of goods or services financed under this IL. GIRoA shall ensure USAID funding is not used to purchase any texts that are inherently religious in nature. Further, Grant proceeds shall not be used to finance the import of ineligible commodities including commodities for military or paramilitary purposes, surveillance equipment, abortion equipment, luxury goods and gambling equipment, or weather modification equipment; nor may Grant proceeds be used for the payment of stipends, honoraria, tuition, scholarships, fellowships, or international exchange programs, by or on behalf of any person including GIRoA employees, or for any purposes other than those authorized pursuant to Section 4 a). GIRoA agrees to redeposit to the bank account established pursuant to Section 5, U.S. Dollars equal to the amount of any Grant proceeds used for purposes prohibited under this Section or the SOAG, and to treat such re-deposited amounts as though they were principal (i.e., Grant proceeds) received under the terms of this IL. Until such re-deposits to the bank account set forth in Section 5 are made, GIRoA may make no further withdrawal from that account.

5. Conditions Precedent a) Initial Disbursement: Prior to the initial disbursement of Grant Proceeds by USAID, the GIRoA shall: i. Include the Textbook Procurement Activity in the annual Government budget so that procurement for textbook printing can be carried out immediately with funds provided directly to the budget; ii. Provide USAID with documentation from DAB showing the establishment of a separate, non-commingled, non-interest-bearing, Afghan denominated special account entitled Ministry of Education BELT Textbook Procurement Activity. All disbursements under this Grant shall be made by the GIRoA from this account and USAID shall deposit all funds into this account. iii. Provide USAID with an executed copy of a third-party authorization letter, granting USAID information access rights to the special account; iv. Provide documentation satisfactory to USAID that appropriate processes and procedures have been established by MOE for disbursement of funds; v. Develop and draft, in consultation with USAID, a plan for monitoring and evaluating performance of the Textbook Procurement Activity; vi. Develop and draft, in consultation with USAID, a reporting format;

G2G in Education: Case Study: Afghanistan

vii. Provide a letter from DAB stating that no funds will be released from the Ministry of Education BELT Textbook Procurement Activity special account without a letter authorizing such release, signed by MOE. Provide any other documentation requested by USA I D to ensure funds will be used for eligible uses.

6. Method of Disbursement: Unless otherwise agreed to by USAIO: a. All disbursements under this IL shall be made by USAID via cash disbursement to a separate, non-commingled, non-interest bearing special account at the DAl3 denominated in Afghanis, established by the Grantee for disbursements under this I L as required by section 2(b)(i). Grantee shall not commingle funds with any other fund source including other U.S. Government grants for other projects/programs.

7. Terminal Date for Disbursements: This IL automatically will terminate on the earl ier of the (i) Completion Date or (ii ) the expiration of the current SOAG, which expires on December 31, 2012, or any successor agreement except as USAID may otherwise agree to in writing. USAI D will not authorize the disbursement of Grant funds after the Tem1ination Date.

8. Monitoring and Evaluation: MOE will work with USAID to establish a Monitoring and Evaluation plan with a baseline, targets and indicators identified prior to the initial and subsequent disbursements. The plan will address: • A process to monitor both quality and quantity of procured textbooks: • A process to monitor the distribution of procured textbooks to MOE primary schools: and, • Identification and evaluation of problem areas or constraints that may prohibit the attainment of either the procurement or the distribution of textbooks. USAID may advise and recommend additional monitoring and evaluation criteria.

9. Financial Reporting Requirements a) The MOE will provide USAI D a complete executed copy of the Textbook Procurement Contract immediately upon signature by the MOE and selected vendor. b) Pursuant to the Textbook Procurement Contract payment terms, upon receipt of any invoice from the vendor, the MOE will immediately forward a copy of the vendor payment request to USAID. c) Based upon the MOE executed contract terms and receipt from the MOE of the copy of

G2G in Education: Case Study: Afghanistan

the vendor invoice payment request, USAID will immediately deposit the amount of the vendor payment request to the BELT Textbook account. d) On a quarterly basis, the MOE will submit to USAID a full accounting of all activity of the separate bank account including a full copy of the bank statement. e) USAID may confirm directly with the Vendor that all payments due the vendor under the contract terms were received in accordance with the contract terms between the MOE and Vendor. f) Upon final payment under the vendor contract. MOE will provide USAI D with a full accounting of all activity surrounding the vendor contract and the separate bank account

10. Program Reporting Requirements: A reporting format will be developed with USAID to report on the distribution of procured texts to schools. Additional reporting requirements may be requested by USAID.

11. Audit and Financial Review The GIRoA shall maintain accounting books, records, documents, and other evidence relating to the IL adequate to show without l imitation all transactions relating to the procurement of textbooks, the receipt and d distribution of textbooks acquired under the IL by the GIRoA, the nature and extent of solicitations of prospective suppliers of goods and services acquired by the GIRoA, the basis of awards of GIRoA contracts and orders and the overall progress of GIRoA toward completion of the activity.

The GIRoA shall maintain Textbook Procurement Activity books and records in accordance with generally accepted accounting principles prevailing i n the United States or at the GIRoA’s option with approval by USAID, other accounting principles such as those ( 1 ) prescribed by the International Accounting Standards Committee (an affiliate of the I international Federation of Accountants) or (2) prevailing i n the country of the GIRoA. Textbook Procurement Activity books and records shall maintained for at least three years after the date of last disbursement by USAID or for such longer period if any required to resolve any litigation, claims or audit findings.

Textbook Procurement books and records shall at all reasonable times be made available for financial reviews and audit by USAID or its designees for the period of the Grant and up to three years following the date of the last disbursement of the Grant hereunder. With USAID approval, the GIRoA shall use its Supreme Audit Institution or select and independent auditor in accordance with the Guidelines for Financial Audit as Contracted by Foreign Recipients.

Guidelines issued by the USAI D Inspector General and the audits shall be performed in accordance

G2G in Education: Case Study: Afghanistan

with the Guidelines The audit shall determine whether the receipt and expenditure of the funds provided under the I L are presented in accordance with generally acceptable accounting principles and whether the GIRoA has com plied with the terms of the I L. Each audit shall be completed no later than nine months after the close of the GIRoA’s fiscal-year audit.

12. Miscellaneous a) Additional Implementation Letters: USAID may from time to time, issue implementation letters elaborating on the terms of this IL, further describing applicable procedures, or recording agreement of the Parties in details of implementation. b) Authorized Representatives. 1. For all purposes relevant to the IL, the GIRoA shall be represented by the Individuals holding or acting in the offices of the Minister of Education and the Minister of Finance and USA will be represented by the individual holding or acting as the USAID Mission Director USAID/Afghanistan. 2. USAID and the GIRoA may by written notice, designate additional representatives for all purposes other than signing additional Implementation Letters. USAID hereby designates the Office Director of USAID/Afghanistan’s Office of Social Sector Development (OSSD) as an additional representative for the purposes of this IL. 3. The names of the representatives of the GIRoA with specimen signatures will be provided to USAID which may accept as duly authorized any instrument signed by such representatives in implementation of this Grant until receipt or written notice of revocation of their authority. c) Communications. Any notice, request document or other communication submitted by either Party to the others under this I L will be communicated by letter mail registered mail, telegram, or cable and will be deemed duly given or sent when delivered to al l Parties at the following address as applicable:

To the GIRoA: MoF and MoE:

The Honorable Minister Ministry of Finance Islamic Republic of Afghanistan, Kabul, Afghanistan

And

G2G in Education: Case Study: Afghanistan

The Honorable Minister Ministry of Education Islamic Republic of Afghanistan, Kabul, Afghanistan

And

USAID Mission Director US Embassy, Great Masood Road Kabul, Afghanistan

All such communications will be in English, unless the Parties otherwise agree in writing. Other addresses may be substituted for the above upon the provision of notice. d) Amendment. This lL may be amended by the execution of additional Implementation Letters by the authorized representatives of all Parties designated in Section 11(b)(i) above. e) Ratification. The GIRoA shall take all necessary action to obtain all GI RoA approvals and complete all legal procedures necessary to implement the terms of this IL. f) Prohibited Uses. Grant funds may not be used i) to finance the import of ineligible commodities including commodities for military or paramilitary purposes, surveillance equipment, abortion equipment, luxury goods and gambling equipment, or weather- modification equipment nor may Grand proceeds he used for purposes other than those authorized pursuant to Article VL or ii) to finance goods or services i n violation of sanctions administered by the Depa11ment of Treasury's Office of Foreign Assets Control, in particular the Iranian Assets Control Regulations (31 C.F.R. Part 535). The GIRoA agrees to refund to USAI D U.S. dollars in an amount equal to the amount of any Grant proceeds used for purposes prohibited under this Section plus any interest that would have been otherwise earned on such proceeds. g) Changed Circumstances. Notwithstanding any provision to the contrary in the IL USAID shall have no obligation to make any disbursement(s) to the GIRoA if circumstances occur which make it unlikely that the Objectives sought by the Textbook Procurement Activity will be achieved. This IL serves to sub-commit $6.700.00 U.S. dollars. This IL does not constitute an obligation of funds and all additional funding contemplated is subject to the availability of funds. h) Unspent Grand Proceeds. Any Grant proceeds provided for the purpose of this IL held in the Special Account and unspent by the Termination Date as stated in Section 7 of this IL, will be returned to the U SG.

G2G in Education: Case Study: Afghanistan

Annex 2: Implementation Letter #20-4 for Textbook Procurement, Nov. 16, 2011

July 04, 2012

The Honorable Omar Zakhilwal Minister of Finance Islamic Republic of Afghanistan

The Honorable Ghulam Farooq Wardak Minister of Education Islamic Republic of Afghanistan

Subject: Implementation Letter Number 20-4 for Basic Education, Literacy, and Technical (BELT) - Vocational Education and Training Textbook Procurement Activity - Reimbursement Procedures

Reference: USAID Strategic Objective Grant Agreement for a Better Educated and Healthier Population (USAID Grant Agreement Number 306-07-00, "the Agreement")

Implementation Letter Number 20-1 for Basic Education, Literacy, and Technical (BELT) - Vocational Education and Training Textbook Procurement Activity

Implementation Letter Number 20-2 for Basic Education, Literacy, and Technical (BELT) - Vocational Education and Training Textbook Procurement Activity

Dear Minister Zakhilwal and Minister Wardak:

This Implementation Letter (IL) Number 20-4, issued in accordance with Section A.2., Annex 2 of the above-referenced Agreement, serves to record the mutual understandings and agreement of the Government of the Islamic Republic of Afghanistan ("the Grantee" or "GIRoA"), as represented by the Ministries of Finance ("MoF") and Education ("MoE"), and the United States Agency for International Development (USAID) (hereinafter collectively referred to as "the Parties") and to set forth the terms and conditions and our respective roles and responsibilities with regard to the BELT Textbook Procurement Activity reimbursement procedures.

G2G in Education: Case Study: Afghanistan

Nothing in this IL modifies or alters the Agreement, IL Number 20-1, IL Number 20-2 or any other IL under the Agreement. In the event of a conflict between this IL and the Agreement, IL Number 20-1 or IL Number 20-2, the Agreement, IL Number 20- 1 and IL Number 20-2 shall control.

I. Purpose of IL - Specification of Reimbursement Procedures

The purpose of this IL is to specify reimbursement procedures for the BELT Textbook Procurement Activity. As stated in IL Number 20-1 and IL Number 20-2, USAID's disbursement of funds for textbook procurement shall be based upon submission by the MoE of a copy of invoices from a contractor or supplier of goods or services furnished in connection with the BELT Textbook Procurement Activity and written verification that the goods or services specified in the invoice were delivered and accepted by the MoE.

Following the first disbursement by USAID to the separate, non-commingled, non interest bearing account established pursuant to IL Number 20-1 (the "Special U.S. Dollar Account"), in addition to the above, subsequent disbursement may, at USAID's election as determined on a case-by-case basis, be based further upon the presentation by the MoE of written verification from its contractor or supplier that it has received payment from the MoE for goods and services covered by invoices previously submitted by the MoE to USAID against which USAID has disbursed funds to the Special U.S. Dollar Account.

II. Method of Disbursement of USAID funds for the BELT Textbook Procurement Activity Under this IL

Concurrent with the funds transfer request to USAID, the MoE will process the contractor or supplier's invoice in accordance with standard GIRoA accountability requirements.

Specific procedures are as stated below:

1. Upon execution of any contract by the MoE under the BELT Textbook Procurement Activity, a copy of the entire signed contract will be provided to the USAID Office of Financial Management.

2. The MoE, upon receipt of a valid contractor's invoice requesting reimbursement for costs incurred under the contract issued by the MoE pursuant to the BELT Textbook Procurement Activity, immediately may request a transfer of funds by USAID to the Special U.S. Dollar Account in the amount of the contractor's invoice. 3. The MoE's request for the funds transfer will be initiated by a separate Request for Reimbursement Letter (Attachment 1), accompanied by a written verification from the MoE that the goods or services specified in the invoice were delivered and accepted by the MoE.

G2G in Education: Case Study: Afghanistan

4. The Request for Reimbursement Letter will be prepared and approved only by an authorized and designated representative of the MoE. The Request for Reimbursement Letter will be transmitted via email to USAID Of1ice of Financial Management's designated email box ([email protected]).

5. USAID will process the transfer reimbursement request within 24 business hours and disburse the funds into the Special U.S. Dollar Account.

6. The USAID Office of Financial Management will notifY the MoE by return email when the reimbursement funds transfer request has been processed.

7. The MoE will immediately notifY the USAID Office of Financial Management via email if any issues arise that prevents the MoE from reimbursing the full invoice amount to their designated contractor.

III. Conclusion

This IL is executed in triplicate. Please sign where indicated below to acknowledge the receipt of, and to confirm your agreement to, the terms and conditions set forth herein, including all attachments hereto. USAID respectfully requests that the MoF sign each IL and transmit all three originals to the MoE. USAID then respectfully requests that the MoE sign each IL, transmit one to USAID, one to the MoF and retain one for its records.

USAID looks forward to our mutual collaboration and coordination under the BELT Textbook Procurement Activity.

Sincerely,

Brooke Isham Acting Mission Director

G2G in Education: Case Study: Afghanistan

Annex 3: Implementation Letter #41, Oct. 13, 2013

October 13, 2013

The Honorable Farooq Wardak Minister of Education Islamic Republic of Afghanistan Kabul

Subject: Implementation Letter 41, Remaining Requirements for Disbursement of Funds under Implementation Letter 20 of the Basic Education, Literacy and Technical-Vocational Education, and Training (BELT) Textbook Procurement Program

References: Implementation Letters 20, 26, and 27 under the BELT Textbook Procurement Program

Dear Minister Wardak:

This Implementation Letter (IL number 41) serves to communicate the status of the second invoice for textbooks printed by Baheer Printing & Packaging Co. Ltd, Kabul, Afghanistan, and P.T. Gramedia Printing, Indonesia, under the contract with the Ministry of Education (MoE), funded through the BELT program textbook printing activity. USAID received this second invoice on July 6, 2013, requesting payment in the amount of $11,003,243, or 55 percent of the total contract between MoE and the printing company.

The USAID Offices of Financial Management (OFM) and Social Sector Development (OSSD) have reviewed the invoice and the supporting documentation and have conducted several physical verifications at the MoE central warehouse. During the review of the documentation, meetings with MoE staff, and observation of the delivery, condition and quantity of textbooks received, USAID found several instances of noncompliance with the terms of the referenced ILs. These instances of noncompliance include but not limited to I) MoE purchasing shipping containers as part of the textbook purchase and retention of ownership of those containers without USAJD approval and concurrence; 2) accepting 2.3 million fewer textbooks from the printing company without a reduction in the price of the contract, and without informing USAID of the discrepancy; 3) helping the printing company to get a preferential tax benefit for printing textbooks in Afghanistan , without proving the textbooks actually were printed in Afghanistan ; and 4) entering into a sole source contract for the purchase of the textbooks without USAID approval, which resulted in higher costs per book than earlier textbook purchases.

G2G in Education: Case Study: Afghanistan

OFM staff has met with MoE staff on several occasions and has offered to help MoE address the noncompliance issues. Nonetheless, several documents regarding the noncompliance matters are still pending, and MoE has not yet accepted OFM's offer to help. Accordingly, of the $11,003,243 invoiced, USAID is withholding $3,954,611 for the estimated cost of the shipping containers, the undelivered textbooks, and the estimated tax benefit for printing in Afghanistan. Payment of the remaining $7,048,632 was processed on October 8, 2013.

To complete the review and pay the amount withheld, USAID will require the following documents: • Negotiation notes or other relevant documentation supporting the reduction of books to be procured from 36,457,400 to 34,073,119. On September 16, 2013, USAID confirmed the receipt of 34,073,l 19 books. • Shipping and customs documents for the books shipped from Indonesia, and detailed invoices and shipping documents for those books printed in Kabul. • Detailed distribution plan, including how shipping containers will be used for the distribution and the use or disposition of those containers after the books are fully distributed. The distribution plan must detail the geographic distribution of textbooks and the approximate amount for each school. USAID/OFM has offered to help MoE develop the plan. • Invoices/receipts and other relevant documents for a) the procurement and transport of the 478 shipping containers used in connection with the shipment of the books, and b) the transfer of the containers to MoE as part of the contract with the printing company. (The ILs did not expressly provide for USAID financing for the procurement of shipping containers, only "the printing of appropriate MoE-approved primary grade textbooks").

This IL addresses only documentation that we need to complete our review and to pay the amount withheld on the second invoice. We reserve the right to ask for additional documentation (including a complete copy of the MOE contract files, including 1) the itemized budget drafted by the Ministry and used for the solicitation, and 2) the itemized budget proposed by the contractor) in connection with our review and payment of the final invoice. This position is consistent with IL Number 20 of November 16, 2011, in which we reserved the right to ask for "any other documentation ... to ensure that funds will be used for eligible purposes."

We appreciate your efforts to move forward in resolving the remaining payment terms. If you have any questions regarding this letter, please do not hesitate to contact USAID.

Sincerely, . Acting Mission Director

G2G in Education: Case Study: Afghanistan