Feds terminate Deloitte's Afghanistan contract

by Vault Consulting Editors | March 16, 2011

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A report to be released today by the US federal government will depict a culture of corruption at Afghanistan's central bank, the Wall Street Journal reports. Ahead of the release, a government spokesman confirmed that Deloitte's contract to "help clean up Afghanistan's poorly regulated financial sector" had been terminated as a result of the firm's "failure to flag corruption" at the bank.

Kabul Bank, Afghanistan's largest private lender, is in the midst of a corruption-fueled meltdown that has seen the institution lose nearly $1 billion in recent years. According to the Journal, the US Agency for International Development (USAID) hired Deloitte in 2009 to overhaul the Bank's technology infrastructure, seeking better transparency amidst reports that shareholders engaged in "hundreds of millions of dollars worth of financial impropriety."

Now, a USAID investigation has concluded that the consulting firm failed to do enough to accurately identify and report clear instances of corruption. Deloitte's five year, $92 million contract with Kabul Bank was terminated as a result. A USAID spokesman suggested that Deloitte's efforts were ineffective. "We don't believe that Deloitte can be held responsible for the fraud at Kabul Bank," said USAID's Lars Anderson, "but we do want our technical assistance to be as effective as possible."

Deloitte contested Anderson's charges. "Deloitte Consulting's performance of its obligations—including communications—was consistent with the terms of its engagement," a spokesman said, noting that the firm would cooperate with USAID to exit Kabul Bank responsibly.

The Journal reports that Kabul Bank officials have regularly abused resources—much of which came from the IMF, which has since withdrawn its financial support—to support luxurious lifestyles and finance personal business ventures on the side.

With access to employee communication records, including emails, USAID concluded that Deloitte should have been aware of these transgressions, the likes of which have "brought Afghanistan's financial sector to its knees."

Deloitte will continue to serve USAID and the Afghan government through a series of other contracts.

For more information:
WSJ

Filed Under: Consulting

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