SECURITY NEEDS AND GOVERNORS' DISCRETIONARY FUND

UNCLAS SECTION 01 OF 03 KABUL 000459

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/FO DAS GASTRIGHT, SCA/A, S/CRS, S/CT,
EUR/RPM, INL/CIVPOL
STATE PASS TO USAID FOR AID/ANE, AID/DCHA/DG,
NSC FOR AHARRIMAN
OSD FOR KIMMITT
CENTCOM FOR CFC-A, CG CJTF-76, POLAD

E.O. 12958: N/A
TAGS: PGOV ASEC KFIN SNAR PTER AF
SUBJECT: SECURITY NEEDS AND GOVERNORS' DISCRETIONARY FUND

REF: A) KABUL 359 B) KABUL 371


1. (SBU) Summary: Governors in a number of provinces
slated to receive payments out of the Governors,
Discretionary Fund have recently begun complaining
that suspension of the Fund for the fourth quarter of
the Afghan fiscal year has negatively impacted their
ability to counter the security threat (reftels). The
Fund, which was created in early 2005 in response to a
perceived security threat in mostly Southern and
Eastern provinces, was intended to supplement money
received by governors out of their normal operating
budget, development funds, and normal line ministry
payments. The money was in principle earmarked for
security-related expenses, but lack of accountability
as well as a gradually more capable Afghan National
Police have led to a GOA review of the Fund as part of
the budget review process for the new fiscal year.
Inquiries to the Ministries of Finance and Interior
have provided some clarity as to the nature of the
Discretionary Fund, its status, and the serious issues
that have led to the MOF,s recommendation that the
Fund be cut from next year,s GOA budget. In general,
we support the move to greater transparency but we
must be careful that short term security is not
menaced. End summary.

What Is the Fund, Who Gets It, and How Much?
--------------


2. (U) The Governor,s Discretionary Fund was created
by Presidential Decree in Afghan fiscal year 1384 (Mar
2005-Mar 2006). For Fiscal Year 1385 (Mar 2006-Mar
2007) it was a line item in the MOI budget and as such
approved by Parliament. It was intended to fund
supplementary security activities in those provinces
with an immediate need. The total amount of money
available for FY 1385 was 800 million afghanis,
approximately USD 16 million. The following provinces
received monthly disbursements for the first eight
months of the fiscal year approximately as follows
(note: actual numbers vary, as discussed para 3):

Ghazni: 5.221 million afghanis (USD 104,420) per month
Paktika: 8.15M (USD 163K)
Uruzgan: 13 M (USD 260K)
Zabul: 12.5M (USD 250K)
Helmand: 10M (USD 200K)
Kandahar: 15M (USD 300K)
Kunar: 4.760M (USD 95K)
Nuristan: 1.71M (USD 34.2K)
Khost: 3.555M (USD 71.1K)
Nangarhar: 5M (USD 100K)
Balkh: 3M (USD 60K)
Center: 15M (USD 300K)


3. (U) Exceptions: Paktia received 200,000 afghanis
(USD 4,000) and Badghis 1 million afghanis (USD
20,000) in the Afghan month of Qaws (Nov/Dec). Farah
received a total of 4 million afghanis (USD 80,000)
only in the four months from July/Aug to Oct/Nov;
Herat received 1 million afghanis (USD 20,000) in Qaws
(Nov/Dec) only; the center (Kabul) received varying
amounts that averaged about 15 million per month; and
other amounts varied with payments having been either
front- or backloaded. Overall, however, almost 778
million afghanis (USD 50.56 million) had been fully
expended by the beginning of the Afghan month of Qaws,
which began Nov. 21, and the account was fully
depleted by the end of that month (Dec. 20). Only a
few provinces and the center received payment in Qaws.


KABUL 00000459 002 OF 003


How is the Fund Used?
--------------


4. (SBU) The original purpose of the Discretionary
Fund was to allow governors to pay expenses that were
not easily covered in the MOI recurring operational
budget, for example paying for informants or other
temporary security measures. While anecdotal
reporting suggests that the Fund has been used for
diverse purposes, its primary purpose appears to have
been to pay for governor,s militias and/or to top off
salaries of Afghan National Police (ANP) patrolmen.
Regarding governor,s militias: In many provinces
President Karzai authorized the governors to recruit
militias last summer to counter what was perceived to
be a critical security threat. As money began to run
low in the fall and the auxiliary police concept began
to be implemented, it was thought that these militia
members would be folded into the Afghan National
Auxiliary Police (ANAP) and paid through that
mechanism. Since the PAG only recently authorized
expansion of the ANAP to the Eastern provinces,
however, there are a number of individuals who now do
not receive payment from either the Discretionary Fund
or normal MOI police channels. As the ANAP program
expands, this issue will gradually be resolved and the
need for governor,s militias will be mitigated.


5. (SBU) On the issue of topping off salaries: At
present, patrolmen who have not gone through training
at the Regional Training Centers receive 800 afghanis
or USD 16/month. In high threat areas such as
Kandahar, the governors have argued that even post-
reform salaries of 3,500 afghanis or USD 70/mo are not
enough to retain ANP personnel. However, if the GOA
and international community agree to a raise in the
base pay of all GOA patrolmen to USD 100/mo (whether
RTC-trained or not) - a proposal that will be
considered by a JCMB Working Group this spring - that
should make less compelling the governors, arguments
that they need to top off salaries.

No Accountability
--------------


6. (SBU) Since the government did not establish a
reporting requirement for the use of money disbursed
through this fund, opportunities for the misuse (and
appearance of misuse) of the Fund abound. According
to Deputy Finance Minister Shahrani, NDS Director
Saleh has told the GOA leadership that most or all
governors have pocketed at least half of the their
payments. Stories circulate about the former Kabul
Police Chief - who, for reasons not entirely clear,
had access to the Discretionary Fund disbursements for
the Central region - handing out sheaves of hundred
dollar bills to his officers to assure their personal
loyalty. Some governors are alleged to have put
family members on Discretionary Fund payrolls, to keep
the money "in house." Others have allegedly used
their militias to extort illegal "taxes" to increase
their private incomes. One governor was alleged to
have financed his children,s education in Australia
through money from the Discretionary Fund. Due to the
regularization of funding for and improvement of the
ANP, to include an MOI Criminal Investigation Division
and other specialized forces, as well as the
tremendous potential for misuse of this Fund, the
Ministry of Finance has recommended that the line item
be cut from the 1386 budget that is now being
negotiated. The Minister of Interior reportedly
supports the MOF proposal.

KABUL 00000459 003 OF 003



Comment
--------------


7. (SBU) No final decisions have been made, and
governors in the dozen or so affected provinces do not
yet seem to realize that their Discretionary Fund
payments are about to be permanently zeroed out.
(Note: This will not affect the governors, operating
budget, which is the normal source of funding for all
provincial governors, or other programmatic funds
available to them. End note.) According to NSA
Rassoul in the February 7 PAG, President Karzai and
his ministers are debating the issue as part of the
budget review process. The MoF is proposing in place
of the Fund a monthly allocation of USD 3,000-5000 to
each of the 34 provincial governors to cover costs of
small governor-hosted events. Given the number of
complaints raised by governors since December about
the difficulty of tiding over their operations until
the new fiscal year, their response to a proposed
permanent elimination of the Fund would likely be
sharp, swift, and directed to the top. Indeed,
according to Rassoul they are already raising
vociferous complaints about the temporary depletion of
the Fund for FY 1385.


7. (SBU) Whether President Karzai supports the prudent
fiscal position of his line ministers or bends to the
demands of his governors - who are certain to argue
that eliminating the fund will jeopardize the security
situation in their provinces - will become clearer over
the next month. In general, the Embassy will press the
government to follow the MOF,s recommendation to
regularize funding to the governors by phasing out the
Discretionary Fund. This is consistent with our
overall objective of moving toward normal, transparent,
and sustainable funding for all key government
functions. We will also encourage other donors to
support the MOF position while recognizing that there
needs to be enough flexibility in the budget for the
governors to respond to pressing needs. However, we
are receiving reports of local police walking off the
job and leaving checkpoints unmanned, for example in
Konar Province. We will have to assess if there are
short term, critical security gaps that need some
attention more immediate than the long term transition
plan provides.
NEUMANN