[Senate Hearing 114-630] [From the U.S. Government Publishing Office] S. Hrg. 114-630 OVERSIGHT OF TASK FORCE FOR BUSINESS AND STABILITY OPERATIONS PROJECTS IN AFGHANISTAN ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON READINESS AND MANAGEMENT SUPPORT OF THE COMMITTEE ON ARMED SERVICES UNITED STATES SENATE ONE HUNDRED FOURTEENTH CONGRESS SECOND SESSION __________ JANUARY 20, 2016 __________ Printed for the use of the Committee on Armed Services [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Available via the World Wide Web: http://www.fdsys.gov/ __________ U.S. GOVERNMENT PUBLISHING OFFICE 25-364 PDF WASHINGTON : 2017 ---------------------------------------------------------------------------------------- For sale by the Superintendent of Documents, U.S. Government Publishing Office, http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free). E-mail, [email protected]. COMMITTEE ON ARMED SERVICES JOHN McCAIN, Arizona, Chairman JACK REED, Rhode Island JAMES M. INHOFE, Oklahoma BILL NELSON, Florida JEFF SESSIONS, Alabama CLAIRE McCASKILL, Missouri ROGER F. WICKER, Mississippi JOE MANCHIN III, West Virginia KELLY AYOTTE, New Hampshire JEANNE SHAHEEN, New Hampshire DEB FISCHER, Nebraska KIRSTEN E. GILLIBRAND, New York TOM COTTON, Arkansas RICHARD BLUMENTHAL, Connecticut MIKE ROUNDS, South Dakota JOE DONNELLY, Indiana JONI ERNST, Iowa MAZIE K. HIRONO, Hawaii THOM TILLIS, North Carolina TIM KAINE, Virginia DAN SULLIVAN, Alaska ANGUS S. KING, JR., Maine MIKE LEE, Utah MARTIN HEINRICH, New Mexico LINDSEY GRAHAM, South Carolina TED CRUZ, Texas Christian D. Brose, Staff Director Elizabeth L. King, Minority Staff, Director_________________________________________________________________ Subcommittee on Readiness and Management Support KELLY AYOTTE, New Hampshire, TIM KAINE, Virginia Chairman JAMES M. INHOFE, Oklahoma CLAIRE McCASKILL, Missouri DEB FISCHER, Nebraska JEANNE SHAHEEN, New Hampshire MIKE ROUNDS, South Dakota MAZIE K. HIRONO, Hawaii JONI ERNST, Iowa MARTIN HEINRICH, New Mexico MIKE LEE, Utah (ii) C O N T E N T S _________________________________________________________________ january 20, 2016 Page Oversight of Task Force for Business and Stability Operations 1 Projects in Afghanistan. McKeon, Honorable Brian P., Principal Deputy Under Secretary of 98 Defense for Policy. Sopko, John F., Special Inspector General for Afghanistan 107 Reconstruction. Questions for the Record......................................... 180 APPENDIX A....................................................... 187 APPENDIX B....................................................... 219 APPENDIX C....................................................... 220 APPENDIX D....................................................... 234 APPENDIX E....................................................... 434 APPENDIX F....................................................... 439 APPENDIX G....................................................... 448 (iii) OVERSIGHT OF TASK FORCE FOR BUSINESS AND STABILITY OPERATIONS PROJECTS IN AFGHANISTAN ---------- WEDNESDAY, JANUARY 20, 2016 U.S. Senate, Subcommittee on Readiness and Management Support, Committee on Armed Services, Washington, DC. The subcommittee met, pursuant to notice, at 3:03 p.m. in Room SR-232A, Russell Senate Office Building, Senator Kelly Ayotte (chairwoman of the subcommittee) presiding. Committee members present: Senators Ayotte, Rounds, Ernst, Kaine, McCaskill, Shaheen, and Heinrich. OPENING STATEMENT OF SENATOR KELLY AYOTTE, CHAIRWOMAN Senator Ayotte. Welcome, everyone. I appreciate both of our witnesses being here today for this important hearing to receive testimony on the oversight of the Task Force for Business and Stability Operations in Afghanistan [TFBSO]. This is a hearing of the Subcommittee on Readiness and Management Support. I want to thank, first of all, my ranking member, Senator Kaine, for joining me in leading this subcommittee and for his hard work every day on behalf of our servicemembers and their families. I look forward to the work we will do together this year. We begin this subcommittee's first hearing of the year to receive testimony on the Task Force for Business and Stability Operations, TFBSO, projects in Afghanistan. We are joined this afternoon by Secretary Brian McKeon, the Principal Deputy Under Secretary of Defense for Policy, as well as Mr. John F. Sopko, the Special Inspector General for Afghanistan Reconstruction [SIGAR]. I want to thank each of you for your willingness to testify today and for your dedicated service to our country. TFBSO was a Department of Defense [DOD] task force created to address economic revitalization efforts in Iraq. Then in early 2010, TFBSO began operations in Afghanistan. The goals of TFBSO in Afghanistan were to reduce violence, enhance stability, and support economic normalcy for Afghanistan. The task force sought to, one, restore productive economic capacity; two, stimulate economic growth; and three, serve as a catalyst for international investment in Afghanistan. In order to support these goals, according to SIGAR, more than $820 million was appropriated since fiscal year 2009 for TFBSO programs and operations in Afghanistan. Of that $820 million, about $759 million was obligated, and $638 million was disbursed for the task force's operations and activities in Afghanistan. The real purpose of today's hearing is to determine, foremost, whether these resources were spent wisely and properly, and whether measurable results were achieved from the hundreds of millions of dollars that were spent on task force TFBSO. SIGAR has published a number of reports and inquiries on this task force. I am going to briefly touch on them. First, in July 2014, SIGAR released an inspection report about a cold and dry storage facility, which cost TFBSO nearly $3 million for this facility to store local produce, provide a location for sorting and packaging produce, and serve as a transit point for trucks. According to SIGAR's report in July 2014, it has never been used and is not being maintained. In April 2015, SIGAR released the first report about TFBSO and U.S. Agency for International Development [USAID] extractive projects. This report identified a lack of a clear and cohesive development strategy by TFBSO and that TFBSO had not improved interagency coordination, subsequent to issues that were identified by the Government Accountability Office [GAO] as a weakness in 2011, when it evaluated this issue. In October 2015, SIGAR released a special projects report about TFBSO's compressed natural gas filling station project, which TFBSO paid $43 million in direct and overhead costs to construct, according to a number originally provided by the DOD to the SIGAR and was not subsequently disputed until we received Mr. McKeon's testimony recently. A somewhat similar facility in Pakistan, according to SIGAR, would cost only between $200,000 and $500,000 to build. In November 2015, SIGAR sent an inquiry to DOD questioning the expenditure of $150 million, nearly 20 percent of its total budget, for villas and associated armed security. SIGAR found that TFBSO could have saved tens of millions of taxpayer dollars, if TFBSO members had lived at existing DOD facilities, bases existing in Afghanistan. Then most recently in January 2016, SIGAR released an audit report on TFBSO's and USAID's efforts to assist Afghanistan's oil, gas, and mineral industries. The report found eight of the 11 TFBSO extractive projects, worth $175 million of the total $215 million disbursed, either had little to no or partial project achievement. Further, not a single project was transitioned to the Department of State [State] or USAID when the TFBSO task force ceased operations in Afghanistan. The totality of these reports, and some of the conclusions reached in a RAND report that was actually commissioned by TFBSO itself, raise very serious questions about how the money that was appropriated by Congress for TFBSO and its work in Afghanistan was spent, and whether this money was wasted. SIGAR concluded that TFBSO generally has not delivered on its stated goals. According to SIGAR, they have received more complaints of waste, fraud, and abuse relating to TFBSO activities than for any other organization operating in Afghanistan. These questions have been exacerbated by the failure of the Department of Defense to respond to SIGAR's legitimate questions. TFBSO ended its programs in Afghanistan in December 2014, and the task force ceased operations in March 2015. One of the most troubling aspects of this task force and DOD's oversight is that, on multiple occasions, SIGAR asked DOD to answer questions about this task force, including about the compressed natural gas station as early as May 2015, at that point, two months after the task force ceased. Yet, DOD repeatedly failed to provide documents, claiming the department no longer processed the personnel expertise to address these questions. These assertions were made repeatedly despite the fact that members of TFBSO were still working for DOD, and the former acting director of TFBSO worked in the Office of Secretary of Defense [OSD] beginning in June. In fact, a hard drive of over 100 GB of documents was just recently made available to SIGAR only last week. In Secretary McKeon's testimony today, DOD disputes SIGAR's numbers on what the compressed natural gas [CNG] station cost. According to SIGAR, DOD actually gave this number to a company called Vestige, the $43 million figure, that was contracted by DOD, which in turn provided this information to SIGAR. It is notable that when the draft report was issued by SIGAR on the compressed natural gas station in September, DOD did not dispute the $43 million figure then, and did not dispute it at the time the final report was issued in October. We have only recently received the dispute of what the number is. Most importantly to this, putting aside the dispute on how much the compressed natural gas station actually cost, there are many other important questions that need to be addressed today. First of all, what happened to the money, all of it? Second, regardless of cost for this compressed natural gas station, was there ever even a feasibility study conducted before money was invested on this project and other projects in Afghanistan? There are other troubling issues raised. Why did we spend $150 million on villas and security for no more than five to ten TFBSO staff a majority of the time when they could have stayed on base? Why did we spend $55 million to facilitate an oil lender process that resulted in a Chinese company winning a contract that some have said--and, in fact, this Congress has even noted--could be used to exploit an estimated $1 trillion worth of Afghanistan mineral resources? What did DOD spend and should DOD have spent money to develop carpet, jewelry, and ice cream businesses in Afghanistan? Why is it that after operating for years and spending millions of dollars that most of TFBSO's extractive projects failed to fully meet project objectives? Finally, why were any of TFBSO's projects not transferred to State or USAID, so that we have continuity after having spent hundreds of millions of taxpayer dollars? Every dollar the Pentagon wastes is a dollar that we do not have to restore military readiness and provide our troops with what they need to protect themselves and our country. At a time of growing threats and constrained defense budgets, when we have issues like this raised and where we have serious questions about how taxpayer dollars have been spent, this is a very important inquiry for this committee and for the Senate because of our shared concern that we use every dollar to support our men and women in uniform in what they need to do to defend this station. So today, I will be asking these questions and many more. I look forward to this hearing, and I thank both of you for being here. With that, I would now like to call on the ranking member, Senator Kaine, for his opening remarks. STATEMENT OF SENATOR TIM KAINE Senator Kaine. I want to thank you, Madam Chair, and my colleagues, the witnesses, and all who are here. This was a hearing that got its momentum following the release of a SIGAR Office of Special Projects report that was issued in October. The report had an attention-grabbing title, ``DOD's Compressed Natural Gas Filling Station in Afghanistan: An Ill-Conceived $43 Million Project.'' I read and reviewed the report, and there are a number of issues that are raised by the report. TFBSO ceased existing at the end of 2014, so it is no longer a project in its own way, but there are a number of lessons here that we need to dig into do make sure: A) that we understand the situation; and B) if there were mistakes, we need to correct them going forward, issues that interest me. First, in doing economic development or reconstruction work, is the DOD the best agency to do it, or should we rely upon agencies of the United States Government that do it as their normal, everyday work, like USAID, for example. I think that is a very important question for Congress. Second, to the extent that DOD does work on economic reconstruction or other projects, has money been wasted? Can it be used better? That is a traditional oversight role that this subcommittee and the larger committee needs to take very seriously. Third, what is the relationship between the Department of Defense and the Inspector General's [IG] office? Is it a cooperative one? Does the DOD provide the information that it is supposed to? We are all human beings. We can understand there might be some natural tension in the relationship of an agency to an IG, but the public looks at us as all part of the same family, and we are all supposed to be working together. The role of the IG is a critical one. Congress would not pass statutes empowering IGs if we did not think they were important. One of the issues raised by this report is whether the DOD has been cooperative with the IG or not. That is a very important question. There are also some questions about the IG. The report with the attention-grabbing headline about the ill-conceived $43 million expenditure was issued by one division of SIGAR, the Office of Special Projects. There have been other reports issued earlier in April and subsequently in December from the SIGAR's Audit Division suggesting that the cost of this filling station was not $43 million but $5 million. So if the SIGAR that is charged with providing the facts that we need to exercise oversight is producing different answers depending upon which division of SIGAR is speaking, that is a question as well. What is the reason for that? Is there communication between the different divisions of SIGAR? Do the different divisions of SIGAR, Special Projects and Audit Division, use different accounting standards? I think when the $43 million report came out, a lot of us were outraged. Many took to the floor, put out information about this as a classic example of government waste. It was generally not put out at the same time that SIGAR had previously and subsequently reached a different calculation about the cost of this gas station. Now, I am not in the business. I do not know whether $5 million is an effective figure and $43 million is not. The fact that the IG is putting out material with two different numbers is something that I definitely want to dig into today and understand. If there is a need for us to clarify that the government accounting standards should be used uniformly regardless of which division is looking at a problem, I hope that is something that we will explore as well. So this is a big hearing because it is about what is the right role for DOD in reconstruction. Has DOD wasted money in this now defunct project? Should there be lessons learned going forward for other projects? Does the DOD fairly cooperate and communicate with the IG, which we expect them to do as Members of the Senate. Why would the IG be producing reports with different numbers about this? Those are the questions that I am interested in exploring today and in the future. Madam Chair, I would like to just ask for a few items to be put into the record, with consent, first the TFBSO activities reports to Congress beginning in 2011 through 2014; second, a letter to Chairman McCain and Ranking Member Reed from the former Minister of Mines and Petroleum of Afghanistan; third, a letter to SASC from Jim Bullion, who is a former director of the TFBSO; fourth, a letter to the Readiness Subcommittee from Paul Brinkley, a former Deputy Under Secretary of Defense and director of the TFBSO; and finally, a letter to SIGAR from Paul Brinkley's counsel. I would just like to make those part of the record, without objection. Senator Ayotte. Without objection. [The information referred to follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Senator Kaine. Thank you, Madam Chair. Senator Ayotte. Thank you. First, we are going to receive testimony from the Principal Deputy Under Secretary for Defense Policy, Secretary Brian McKeon. STATEMENT OF HONORABLE BRIAN P. McKEON, PRINCIPAL DEPUTY UNDER SECRETARY OF DEFENSE FOR POLICY Mr. McKeon. Thank you very much, Senator Ayotte, Senator Kaine, members of the committee. You have my longer statement for the record. Let me focus on a few key elements, including the genesis and purpose of the Task Force for Business and Stability Operations, and the oversight of the task force. Ultimately, time will tell whether the task force succeeded in its objectives. Independent assessments tell us that it had mixed results with some successes and some failures. The origins of the task force are rooted in the chaos of Iraq before President George Bush ordered the military surge early in 2007. It was created in June 2006 by then-Deputy Secretary Gordon England. He charged the task force with transforming military contracting in Iraq so that the task force could generate stability through economic development and job creation. In March 2010, Secretary Bob Gates directed the task force to expand its efforts to support Operation Enduring Freedom. In my statement for the record, I provide a detailed timeline of the task force's authority to operate in Afghanistan, including planning to transition the task force's projects to other government agencies and the Government of Afghanistan. Consistent with the direction from Congress and the Secretary of Defense and plans to draw down U.S. force levels in Afghanistan, the task force ceased its operations at the end of 2014. I requested authority for an additional three-month administrative sunset period, during which a small number of the task force employees engaged in closeout activities, as well as responded to SIGAR's request for information. I was not serving in the Department for most of the period during which the task force operated, but I have spoken to many former senior U.S. officials involved in Afghanistan policy, including Generals Stanley McChrystal, David Petraeus, and John Allen, and Ambassadors Karl Eikenberry and Ryan Crocker, to understand the history and rationale for the task force. These conversations make clear there was a strong demand signal from the field, strong support in the Pentagon, and strong support in the Government of Afghanistan for the work of the task force, the objective of which was to assist that government to generate economic activity in support of the military campaign plan. You asked me to address DOD's oversight of TFBSO activities. Let me make two broad points. There are a lot more in my statement for the record. First, the task force did not have independent contracting or procurement authority. All task force contracting and disbursement of funds and other support functions were handled either by U.S. Army Central in Kuwait, by DOD headquarters elements, or by other U.S. Government entities. Second, the reporting chain of the task force to the Under Secretary for Policy only commenced in August 2011. Prior to that time, the task force reported directly either to the Secretary or the Deputy Secretary. I have spoken to all of my predecessors in OSD Policy, who have reported they had regular meetings with task force leadership. In April 2014, as the task force was winding down, Michael Lumpkin, then performing the duties of the Under Secretary for Policy, asked the Department Inspector General to perform an overarching audit of the task force's operations, financial actions, and contracts. The IG declined to do so due to limited resources and the need to focus its efforts on ``projects with the greatest potential return on investment.'' After my arrival in DOD of August 2014 until the final administrative closeout in March of 2015, I met every few weeks with the acting director. My primary focus was on ensuring the orderly shutdown of the task force and responsible preservation of the records. In the fall of 2014, I requested a financial audit of the task force, which was completed last April. My written statement examines in some detail OSD's policy engagement with SIGAR over the last two years. Let me comment on the issue of SIGAR's access to the task force records. First, at all times, SIGAR had unfettered access to TFBSO records, consistent with the Inspector General Act of 1978. Second, SIGAR now possesses a hard drive containing the unclassified records of the task force. The provision of the hard drive followed a meeting that I initiated with SIGAR, and followed an exchange of letters between myself and Mr. Sopko setting forth the conditions of our doing so. With regard to the CNG station project that has been mentioned, I would offer two observations and point you to my statement for the record for more detail. First, SIGAR has issued two reports conducted by its Office of Audits on U.S. Government support for the extractives industry in Afghanistan, one issued last April and one issued last week, both of which review the CNG project in some detail. Notably, in the most recent report, one of the projects that SIGAR concluded had generally met project objectives is the CNG station project. Second, in preparing this report on the CNG station project, SIGAR relied on information provided by an economic impact assessment [EIA] prepared by a consulting firm that was hired by TFBSO. That assessment stated that the task force spent $43 million to fund the station, of which $12.3 million were direct costs and $30 million were overhead costs. We believe the methodology used by the EIA is flawed, and that the project costs are far lower. The consulting firm that conducted the assessment has also reviewed its work, and we have seen a copy of their memo to the committee staff indicating that total costs of the station are likely well under $10 million. With that, let me break down the costs of the station, as we understand them. First, the cost for the entire station project was $5.1 million. Of this amount, the gas station itself cost $2.9 million. This is consistent with the amount reported by SIGAR in its April 2015 audit report. Second, the data that the EIA team reviewed suggests that approximately $7.3 million was spent on subject matter experts, or SMEs. These experts were also involved in a broader effort to advise the Afghan Government to develop a natural gas industry. The figure of $7.3 million appears to be an average of all labor costs across the energy sector work by the task force divided by the number of projects. We believe the assumption that the labor costs were equal across all projects is likely flawed. Third, we cannot validate the figure of $30 million in overhead costs as being directly attributable to the CNG station. As with the labor costs, this appears to encompass the entire amount spent to support all natural gas or energy projects, which is a flawed method of accounting. I would note that in the most recent SIGAR audit on the extractives industry, when analyzing the costs of projects, it also appears to apply similar methodology to the one I just described. Reports that we commissioned to assess the task force work as well as SIGAR's work tell us that the task force had a mixed record of success. As was highlighted by both Senator Ayotte and Senator Kaine, the most recent audit on the extractives industry portrayed a mixed record of the various projects in the energy sector by the task force, some meeting their objectives, some not, some partially meeting their objectives. The overarching question of how we promote economic development during a contingency operation, the point which Senator Kaine emphasized, remains a challenge for all of us in the U.S. Government. I personally am skeptical that the Department of Defense is a natural home for that mission. As a government, we need to consider and develop a functioning mechanism so that we are prepared for future contingencies, and I commend the committee for engaging in that discussion. Thank you for listening. [The prepared statement of Mr. McKeon follows:] Prepared Statement by Brian McKeon Chairwoman Ayotte, Ranking Member Kaine, and Members of the Subcommittee, thank you for convening this hearing, which gives us a chance to review two important national security challenges that have confronted our government in the last decade: how to use non-military tools in concert with a military campaign, and how to strengthen our financial management and accountability in conflict zones. My testimony will address several subjects - the history of the Task Force for Business and Stability Operations, including the decision to close it down, OSD Policy's engagements with the Special Inspector General for Afghanistan Reconstruction regarding the work of the Task Force, the specifics of the Compressed Natural Gas Station project, and finally, lessons learned. I was not serving in the Department of Defense for most of the period of the operation of the Task Force. To prepare for this hearing, I have reviewed many reports, including reports by SIGAR, some of the records of the Task Force, and spoken to many former senior U.S. officials, civilian and military, involved in Afghanistan policy during the operation of the Task Force in Afghanistan, including Generals McChrystal, Petreaus, and Allen, and Ambassadors Eikenberry and Crocker. These conversations make clear that there was a strong demand signal from the field, strong support in the Pentagon, and strong support in the government of Afghanistan, for the work of the Task Force, the objective of which was to assist the government of Afghanistan to generate economic activity in support of the military campaign plan. Many of the commanding generals in Afghanistan had seen the work of the Task Force in Iraq, and welcomed its contributions in Afghanistan. The Task Force was, in a sense, expeditionary, operating not under Chief of Mission authority but under authority of the military commander. This unique status gave them a certain freedom to move around the country and engage more directly with Afghans than employees of the U.S. Embassy. During the course of its operation in Afghanistan, the Task Force obligated close to $800 million and disbursed over $600 million, which was roughly evenly divided between projects and support costs. These support costs are undoubtedly higher in Afghanistan due to the security requirements of operating in a war zone. The Task Force's work in Afghanistan was focused on a few major lines of effort, particularly efforts to assist Afghanistan benefit from its mineral resources and fossil fuels. Time will tell whether the Task Force succeeded in its objectives. Independent assessments tell us that it had mixed results, with some successes and some failures. We welcome continued oversight of the Task Force to help us understand lessons that can be applied to any future contingency operation. i. history of the task force for business and stability operations The origins of the Task Force for Business and Stability Operations (TFBSO) are rooted in the chaos of Iraq in 2006, before President Bush ordered the military surge early in 2007. On June 22, 2006, Deputy Secretary of Defense Gordon England issued a memo entitled ``Accelerating Reconstruction and Stability Operations in Iraq.'' The memo stated that the formation of a government in Iraq had created a ``short window to accelerate stabilization and reconstruction operations.'' Toward that end, Deputy Secretary England appointed Paul Brinkley, then Deputy Under Secretary of Defense for Business Transformation, to head a Task Force to Support Improved DOD Contracting and Stability Operations in Iraq. As the name implied, it was charged with adapting and unifying military contracting in Iraq such that the Task Force could become an engine for stability through economic development and job creation. The mandate of the Task Force was also to look forward to examine possible changes to acquisition law and practice to address future contingency operations, as well as to accelerate the definition of contingency operations doctrine in the business mission area. In short, the Task Force was born from the concept that economic development and job creation were necessary conditions for building a stable and secure Iraq. On March 11, 2009, Secretary Gates issued a memo indicating that he had asked Mr. Brinkley to continue the Task Force's economic revitalization efforts in Iraq for ``an appropriate transitional period into the new Presidential Administration'' and shifted the chain of command to have Mr. Brinkley report directly to him. A year later, on March 25, 2010, Secretary Gates issued a new memorandum, directing that Mr. Brinkley extend the efforts of the Task Force to support Operation ENDURING FREEDOM, and directing that it focus on ``development of economic opportunities including private investment, industrial development, banking and financial system development, agricultural diversification and revitalization, and energy development.'' Later that same year, some uncertainty about the status of the Task Force arose when the Office of General Counsel cast doubt on the legal authority of the Department of Defense to conduct economic development activities in a foreign country, as they appeared to be inconsistent with the Department's authorities. Many activities of the Task Force were suspended. Congress clarified the situation in the FY 2011 National Defense Authorization Act, providing statutory authority for activities of the Task Force in Afghanistan. The NDAA provided, however, that this authority would expire on September 30, 2011, and directed a plan to transition the activities of the Task Force to the Department of State and the Agency for International Development. The sunset provision caused an impression within the Department that the Task Force would continue only through Fiscal 2011, and contributed to a decision by Mr. Brinkley and other senior staff at the Task Force to depart in the summer of 2011. Consequently, Senators Levin and McCain, then the Chairman and Ranking Member of this Committee, wrote to Secretary Gates on April 19, 2011, stating that the NDAA provision should not be read as requiring the shutdown of the Task Force. Citing congressional testimony in support for the Task Force by then-Chairman of the Joint Chiefs Michael Mullen and by General David Petraeus, the two senators urged the Department to keep the Task Force in operation so that it could ``continue to serve as an important strategic tool for General Petraeus' counterinsurgency campaign in Afghanistan.'' On August 10, 2011, Secretary Panetta issued a new memo, underscoring that the activities of the Task Force remained ``critical to the current mission in Afghanistan.'' The memo altered the reporting chain, and required the Director of TFBSO to report directly to the Under Secretary of Defense for Policy. The Task Force was further directed to emphasize areas of indigenous industries, mineral development, and energy development. Consistent with the transition recommendation provided to Congress on May 1, 2012, indicating the agreement of the State Department, USAID, and DOD that Task Force operations should continue through 2014, Secretary Panetta issued a memorandum on October 18, 2012, reiterating TFBSO's mission and the expectation that it would continue through 2014, stating that, ``TFBSO will focus on developing economic opportunities, including mining sector development, private sector investment, and industrial development.'' In the FY 2014 NDAA, Congress made a parallel amendment to law, authorizing the Task Force through calendar 2014. The Senate report on the legislation said that the TFBSO ``has contributed to the stability of Afghanistan's economy, particularly the development of its mining sector.'' Consistent with this statutory provision, policy guidance, and plans to drawdown U.S. force levels in Afghanistan, the Task Force ceased operations in Afghanistan in December 2014. The Task Force requested authority for an additional three-month administrative sunset period, during which a small number of Task Force employees engaged in close-out activities, as well as responded to information requests by SIGAR. ii. shutting down the task force--records management, audits, and lessons learned You asked me to address DOD's oversight of TFBSO activities. Let me start by making two broad points before I detail specific oversight that occurred. First, I wish to emphasize that TFBSO did not have independent contracting authority. All Task Force contracting and disbursement of funds and other support functions were handled by U.S. Army Central (ARCENT), by a DOD headquarters element, or by other U.S. government contracting offices. Second, I can only speak to the period of oversight by the Office of the Under Secretary for Policy, which commenced in August 2011. I have spoken to all of my predecessors, all of whom reported that they had regular meetings with Task Force leadership and that the Deputy Assistant Secretary of Defense for Afghanistan and Pakistan also engaged closely on all activities. This level of oversight and engagement is similar to that is provided by OSD Policy to the two defense agencies and one field activity that report to the Under Secretary. I have no insight into the oversight during the period that the Task Force reported directly to the Secretary or Deputy Secretary. In 2014, the Task Force focused its efforts on bringing projects to completion or getting them to a point where the Afghan government or another U.S. entity might be able to continue the Task Force's work. From the Office of the Under Secretary of Defense for Policy's perspective, the emphasis during that period was on ensuring an orderly and responsible shutdown, including an effort to gather lessons learned. In February 2014, with the departure of the Task Force Director, the Deputy Director was appointed Acting Director. He commissioned two studies: the RAND Corporation was hired to conduct a study of lessons learned, while Vestige Consulting, LLC was hired to conduct an Economic Impact Assessment of Task Force work. This latter project was completed December 29, 2014. The RAND study was completed last fall and published last week, January 12, 2016. We have provided both of these studies to the Committee. On April 7, 2014, Assistant Secretary of Defense (Special Operations & Low Intensity Conflict) Michael Lumpkin, then Performing the Duties of the Under Secretary of Defense for Policy, asked the DOD Inspector General (IG) to perform an overarching audit of the Task Force's operations, financial actions, and contracts to ``help to ensure DOD captures lessons learned and closes the TFBSO books efficiently.'' On August 26, 2014, the DOD IG replied that it could not undertake the requested audit based on limited resources and the need to focus its efforts ``on projects with the greatest potential return on investment.'' Under Secretary Wormuth and I assumed our current positions in OSD Policy in the summer of 2014. Ms. Wormuth began her service as Under Secretary in late June, and I assumed the role of her Principal Deputy in mid-August. I oversaw the closure of the Task Force. After my arrival in August, until the final administrative closeout in March 2015, I met every few weeks with the Acting Director of the Task Force. My primary focus in these meetings was on ensuring the orderly shutdown of the Task Force and the responsible preservation of the records. In the fall of 2014, I requested that the Washington Headquarters Services (WHS), which provided administrative and financial support services for the Task Force, undertake a financial audit of the Task Force. WHS engaged the firm of Williams Adley for this purpose. It began work in early January 2015, and provided a final report on April 30, 2015. iii. osd policy engagement with sigar in 2014 and 2015 regarding tfbso In 2014, the Task Force provided SIGAR with several tranches of documents and content, in response to specific queries, on the Task Force's extractives industry programs. In late November 2014, a media account in a defense trade publication reported that Mr. Sopko intended to conduct an in-depth review of the TFBSO, which he asserted had been an ``abysmal failure'' and that, as far as he could determine, had ``accomplished nothing.'' On December 9, 2014, I phoned Mr. Sopko, and explained that following the administrative sunset period, the Department would not be in a position to retain TFBSO personnel for the purpose of responding to SIGAR requests. The SIGAR sent a letter to me the following day, requesting the preservation of Task Force records to enable ongoing SIGAR work. As noted, records preservation was already a focus of shutdown efforts. On January 15, 2015, the TFBSO staff provided information requested by SIGAR the previous December regarding travel and spending by Task Force employees and contractors, information on the program working with indigenous jewelry makers, the Economic Impact Assessment contract and draft deliverable, and copies of other consulting contracts. On January 29, 2015, SIGAR requested significant additional information on all Task Force work, including a list of all Task Force employees and their titles from 2010 to the present. All of the requested information was provided on March 3, 2015. During this period, SIGAR staff continued to interview a number of TFBSO staff, including the Acting Director. On March 30, 2015, I sent a letter to SIGAR with information regarding TFBSO records preservation, the location of the records, and points of contact following the March 31, 2015, closedown. On March 31, 2015, the sunset period was concluded and all records had been provided to WHS Executive Archives. At that point, the Task Force ceased to exist. SIGAR's release of CERP data On May 18, 2015, we discovered that a media organization had published nearly 18,000 records on projects DOD implemented in Afghanistan under the Commander's Emergency Response Program (CERP) on its website. The data, which the media organization received pursuant to a Freedom of Information Request (FOIA) submitted to SIGAR, included names and, in some cases, contact information for U.S. military personnel and civilians and Afghan civilians who received CERP funding. OSD expressed concern to SIGAR about the release of this information, and the security implications for our personnel and our Afghan partners. SIGAR's Chief of Staff conceded by email that the release was a breach of policy saying, ``The SIGAR FOIA clerk who handled this request did not follow SIGAR's procedures for processing FOIA requests. She is no longer with the agency. I am consulting with SIGAR's Office of General Counsel about this issue, but any future FOIA requests for data will be held until we can resolve how to handle the data.'' SIGAR requested DOD assistance to review the data, as SIGAR contended that it was too big a project for them to handle in way that fully addressed DOD concerns. The Department also asked the media organization to remove the data from its website. Engagement regarding the compressed natural gas station Also on May 18, 2015, DOD received a letter from SIGAR requesting additional information on the compressed natural gas (CNG) station project that is the subject of this hearing. The Task Force had already provided extensive information about the CNG station in response to a SIGAR audit that commenced in the summer of 2014 that examined all U. S. Government efforts, including the Task Force's, in the extractives sector. That audit report, released in April 2015, explains the purpose of the CNG station, and notes that $5.1 million was expended on the construction and tender of the station, conversion of four existing Ministry of Interior diesel generators, and provision of and training for the installation and maintenance of CNG engine conversion kits. On June 17, 2015, DOD's reply indicated that with the closure of TFBSO, OSD no longer possessed the personnel expertise to address the questions about the gas project or to assess properly the information in the Executive Archive. DOD also indicated it was fully prepared to arrange for access to TFBSO information, and suggested that our staffs meet to work out the modalities of SIGAR's access to the information requested. On June 30, 2015, our staffs met. DOD made clear that SIGAR would have unrestricted access to the TFBSO records in a reading room managed by WHS. If SIGAR wanted to obtain copies of any documents, the documents would first need to be reviewed by DOD attorneys to protect information that may be withheld from release under FOIA. DOD believed this step was necessary following the unwarranted release of the CERP data, which I outlined above. No limitation was placed SIGAR's access to unredacted documents. SIGAR never responded to this offer. On September 24, 2015, SIGAR sent us the draft version of its report on the CNG filling station. DOD was troubled by SIGAR's apparent decision not to undertake due diligence in reviewing the records, so our October 9, 2015, reply indicated both our continued willingness to provide access to the documents and to any DOD personnel that SIGAR wished to interview. On October 22, 2015, SIGAR's report on the CNG station was published. Access to TFBSO records I wish to underscore that at no time has SIGAR been denied access to any available records of TFBSO. The Department believes that providing SIGAR unfettered access to review unredacted TFBSO archived materials via a reading room, as outlined previously, satisfies the objective of providing access while mitigating the risk of inappropriate release of FOIA-exempt information. Such an arrangement is fully consistent with the statutory requirement for Inspector General ``access'' under the Inspector General Act (5 USC App. Sec. 6). Further, this approach has been used with other SIGAR staff as part of a separate SIGAR Afghan war lessons learned project, without any objections from SIGAR. On December 15, 2015, pursuant to my suggestion, Mr. Sopko and I met in his offices in Crystal City to discuss SIGAR's access to TFBSO records. Following an exchange of letters, and receipt of certain assurances from SIGAR, DOD agreed to provide a copy of the hard drive of TFBSO's unclassified records. That hard drive and a list of TFBSO personnel that we have determined still work within DOD was delivered to SIGAR last week. iv. the compressed natural gas (cng) filling station SIGAR's report on the Compressed Natural Gas filling station asserts that the project cost the United States Government $43 million, and was ill-conceived. A report to Congress on FY2011 Task Force activities (transmitted on December 16, 2011) explained the purpose of the project: ``As a pilot project, the TFBSO funded the construction of a CNG complex in Sheberghan City, including the compression station, pipeline extension from the current gas grid, desulphurization and dehydration systems, engine conversion kits, and installation and maintenance training for station operators. The TFBSO is also coordinating with the taxi association in Sheberghan for the first opportunity to convert their fleet of cars to dual-use (CNG/gasoline) engines.'' That report indicated that construction of the station and its associated refining and conversion facilities cost $2.9 million. A SIGAR report on extractive industries in Afghanistan, issued in April 2015, described the project in a similar fashion: Because Afghanistan's electric power plants and transport fleet rely on expensive diesel imports, TFBSO leadership decided that taking steps to develop a domestic fuel market would be critical to Afghanistan's economy and energy security. As a proof of concept to demonstrate that Afghanistan's automotive fleet could transition from a reliance on foreign diesel and instead use cheaper, locally-produced natural gas, TFBSO funded the construction of a compressed natural gas complex in Sheberghan City, including a compression station, pipeline extension from the current natural gas grid, desulphurization and dehydration systems, engine conversion kits, and installation and maintenance training for station operators. Additionally, TFBSO coordinated with the taxi association in Sheberghan to convert its fleet of approximately 150 cars to dual-use-compressed natural gas/petroleum-engines. TFBSO also converted two diesel generators operated by the Afghan Ministries of Interior and Defense to run on compressed natural gas. \1\ --------------------------------------------------------------------------- \1\ SIGAR Audit Report 15-55, ``Afghanistan's Mineral, Oil, and Gas Industries: Unless U.S. Agencies Act Soon to Sustain Investments Made, $488 Million in Funding is at Risk,'' April 2015, page 27. The CNG station was part of a larger effort to create a viable energy market within Afghanistan. The SIGAR Extractives report notes that TFBSO was working with the Afghan authorities to refurbish an existing pipeline running between natural gas fields in Sheberghan and a power plant near Mazar-e-Sharif. TFBSO also planned to build an entirely new pipeline alongside this older pipeline. In parallel, USAID was investing funds to rehabilitate and develop natural gas wells in Sheberghan, and construction of a nearby natural gas processing plant. The Task Force's focus on the natural gas sector was consistent with guidance from the Secretary of Defense, and with the overall effort to assist in the development of Afghanistan's natural resources. The CNG project was detailed in the annual TFBSO activities reports to Congress and referenced in several quarterly SIGAR reports. In its July 30, 2012, quarterly report to Congress, SIGAR noted as follows: This quarter, the compressed natural gas station (CNG) in Sheberghan was handed over to the Ministry of Mines. It began commercial operation in May. Construction of the station had been funded by [TFBSO]. Because CNG is 50% cheaper than gasoline, as well as cleaner, the TFBSO said the CNG station should reduce fuel imports and provide greater security. \2\ --------------------------------------------------------------------------- \2\ SIGAR quarterly report to Congress, July 30, 2012, page 123. In preparing its report on the CNG station project issued last October, SIGAR relied on information provided by the Economic Impact Assessment (EIA) prepared by a consulting firm engaged by TFBSO. That EIA report stated that the Task Force spent $43 million to fund the CNG station, of which there were $12.3 million in direct costs and $30 million in overhead costs. We believe the methodology used by EIA, and relied on by SIGAR, is flawed, and that the costs of the station are far lower. I believe the consulting firm has also reviewed its work and engaged the Committee staff, and we have received a copy of their memo to one of your staff that indicates that the total costs of the station are likely ``well under $10 million.'' CNG Station Cost Breakdown In preparation for this hearing, DOD has examined records to ascertain the costs of the CNG station. Let me breakdown the costs of the CNG station as we understand them today. First, the costs for the entire station project were $5.1 million. As noted previously, the costs for the station portion of the project were $2.9 million. The $5.1 million covered the costs of the fueling station, two dispensers, one CNG trailer filling point, a car conversion center, an administrative office building, gas compression and processing equipment, and the conversion of two generators to power Ministry of Interior bases. This is consistent with the amount reported by SIGAR in its April 2015 audit report. Second, the data provided to the EIA team suggests that approximately $7.3 million was spent on subject matter experts (SMEs) working to support the technical, legal, financial, policy and governance requirements for a natural gas consuming industry. The SME work supported the gas station project as well as a broader effort to help the Afghan government develop a natural gas industry. The SMEs supported the Afghan government as they went through the process of setting a price for natural gas, creating a framework for licensing a station, creating safety standards, and creating a legal framework for distributing natural gas to individual consumers for the first time. The figure of $7.3 million is based on an average of all labor costs by the SMEs across the entire energy sector, divided by the number of projects. The assumption that the labor costs were equal across all projects is likely flawed. The consulting firm estimates that the more accurate allocation of the SME costs to the CNG station project is two to four percent of the total labor costs of $36.4 million. DOD cannot validate the figure of $30 million in overhead costs set forth in the SIGAR report as directly attributable to the CNG station project. This appears to represent an effort to capture the amount shared across all natural gas or energy projects. This is a flawed method to determine overhead costs for a given project. The preferred method is to use actual cost data attributed to the specific project, because each project has unique support requirements. The support costs data available to us do not provide the necessary fidelity to determine overhead costs in support of the CNG project. The SIGAR report also compares the cost of this station to a comparable station in neighboring Pakistan. We believe that there are several reasons this station was more expensive than a station in Pakistan. First, this station was the prototype for all of Afghanistan. In 2012, Pakistan had one of the most established and largest CNG distribution networks, with 2.9 million CNG vehicles and 3,330 refueling stations. \3\ With a large and established market, along with the ability to source locally or import construction materials by sea and rail, building new CNG stations is substantially less expensive in Pakistan. --------------------------------------------------------------------------- \3\ Data from the International Association for Natural Gas Vehicles. --------------------------------------------------------------------------- Second, this station had several additional components not included in a basic filling station. It had the ability to fill trailers for use by future stations, to convert cars, and to refine the sour gas coming into the station. \4\ The ability to fill trailers was critical to the business model being established as it eliminated the need for direct pipeline access. DOD understands that the Afghan government continues to plan for a future station in Mazar-e-Sharif, and that these trailers will assist in that effort. --------------------------------------------------------------------------- \4\ As SIGAR notes in the April 2015 extractive industries audit, ``Sour gas is natural gas that contains measurable amounts of hydrogen sulfide. It is colorless, flammable, poisonous to humans and animals, and, unlike sweet natural gas, it is extremely corrosive and requires refining before use'', page 27. --------------------------------------------------------------------------- Third, the costs of construction in Afghanistan are much higher than in neighboring countries due to the lack of existing production and manufacturing capacity related to construction in general and for extractive industries specifically, the land-locked nature of the country, and the costs of security in a war zone. SIGAR noted that that the cost of converting cars would be prohibitive to the average Afghan. To be sure, the average Afghan does not own a vehicle. As the Fiscal Year 2011 report to Congress highlighted, a primary focus of this project was those who do own vehicles, primarily taxi drivers. In addition, it was expected that the government would seek to convert its vehicle fleets. For taxi drivers, conversion would reduce monthly fuel consumption costs by 50 percent. DOD understands that, in many neighboring nations, conversion costs are paid upfront by station owners, who then charge vehicle owners more for gas until the conversion cost is paid for, generally within a year, due to the price differential. In this case, the Task Force committed to paying for conversion of 120 vehicles to ensure the targeted community of vehicle owners would be able to demonstrate the value of conversion. Last, SIGAR's report questioned whether the station is still operating. My staff contacted the operator of the CNG station by email on November 15, 2015. The operator indicated that the station was working normally, that 230 cars had been converted, and that every day approximately 160 cars obtain fuel from the station. v. lessons learned You asked me to address the lessons learned and how these lessons will inform DOD activities going forward. At the Task Force's request, Vestige Consulting, LLC provided an Economic Impact Assessment (EIA) for TFBSO work done in Afghanistan. DOD also commissioned reports by CSIS in 2010 and RAND in 2015. In addition, GAO, the Special Inspector General for Iraq Reconstruction (SIGIR), and SIGAR have all conducted reviews of TFBSO activity. The two reports from SIGIR (2008 and 2009) highlighted the difficult environment in which the Task Force was operating, suggested some process improvements, and clarified the resources and activities of Task Force work in Iraq. I commend all of these reports to the Committee. The CSIS lessons learned report endorsed the value of the Task Force and its approach in Iraq, stating that, ``The Task Force needs to retain its essential attributes of entrepreneurial leadership, a broad mandate that enables flexibility in approach and operations, and responsiveness to military commanders in theater . . . .The Task Force has demonstrated value to DOD field commanders and to Iraqis. It serves a useful and key role as part of economic operations in conflict zones, and it helps fill the gap between initial stabilization and longer-term economic development.'' \5\ --------------------------------------------------------------------------- \5\ CSIS, ``Final Report on Lessons Learned: Department of Defense Task Force for Business and Stability Operations,'' June 2010, page 5. --------------------------------------------------------------------------- One important point made by CSIS was that it was difficult to measure the real value and merit of specific Task Force projects, saying, ``CSIS concludes that many of the activities the Task Force pursued were worthwhile, with the caveat that for a specific activity, it is difficult to ascertain whether the value the Task Force generated or received - economic or otherwise - exceeded the money spent. Some results achieved by the Task Force can be reasonably quantified, though calculation of a return on investment or similar metric is often not possible and perhaps not meaningful.'' \6\ --------------------------------------------------------------------------- \6\ Ibid, page 29. --------------------------------------------------------------------------- The report also recommends developing a more sustainable approach to economic operations in combat zones, ``There is a substantial gap in U.S. government capability with regard to economic operations. That gap in capability is caused in part by resource shortfalls but also by significant and unresolved policy differences . . . Further action to address these challenges is needed . . . '' \7\ The report then provides more detailed findings, including recommending ``an effort to analyze and develop longer-term options for organization both for DOD civilian support for expeditionary operations and for DOD economic operations in conflict environments.'' \8\ --------------------------------------------------------------------------- \7\ Ibid, page 5. \8\ Ibid, page 51. --------------------------------------------------------------------------- The RAND lessons learned report's review of TFBSO project implementation concludes ``TFBSO's record is very mixed overall. Stakeholders who discussed these projects and other sources pointed to numerous instances of both success and failure. Respondents who discussed the business accelerator, the carpet program, Ariana Airlines, and, to some extent, the Amu Darya tender often commented that the programs were helpful. In several of these cases, project successes grew out of early failures, but it was possible to see learning and improvement. Respondents saw other projects, such as the Sheberghan Gas Pipeline and the Khas Kunar chromite crusher, as more problematic. In general, TFBSO had problems implementing large, complicated infrastructure investments. In the cases in which TFBSO interventions were more in the vein of advising, matchmaking, and closing small gaps in value chains, the implementation seems to have been smoother.'' \9\ --------------------------------------------------------------------------- \9\ RAND, ``Task Force for Business and Stability Operations: Lessons from Afghanistan,'' January 12, 2016, page 82. --------------------------------------------------------------------------- RAND offered the overarching recommendation that, ``Economic development is likely to remain a key component of U.S. contingency operations. Regardless of today's perceived effectiveness of the Task Force in Afghanistan, or Iraq, it is likely that these future economic development efforts will contain private sector-focused elements akin to those employed by TFBSO. The U.S. policy community should plan for future organizational solutions to these same challenges.'' \10\ --------------------------------------------------------------------------- \10\ Ibid, pages xviii-xix. --------------------------------------------------------------------------- The just released second SIGAR Audit on extractives also highlighted TFBSO's mixed record, saying, ``TFBSO's 11 projects achieved mixed results, with 3 of those projects showing little to no achievement of their project objectives, 5 partially met project objectives, and the final 3 generally met project objectives.'' \11\ --------------------------------------------------------------------------- \11\ SIGAR 16-11 Audit Report, ``Afghanistan's Oil, Gas, and Minerals Industries: $488 Million in U.S. Efforts Show Limited Progress Overall, and Challenges Prevent Further Investment and Growth,'' January 2016, page i. --------------------------------------------------------------------------- In closing, the overarching question of how we promote economic development during a contingency operation remains a challenge for all of us in the U.S. government, both in the legislative and executive branches. I am skeptical that the Department of Defense is the natural home for that mission. We have struggled with this challenge over the last decade or more, and as a government we need to develop a functioning mechanism so that we are prepared for future contingencies. I commend the Committee for engaging in this discussion. Senator Ayotte. Thank you. I would now like to call on Mr. Sopko. Mr. Sopko is the Special Inspector General for Afghanistan Reconstruction. STATEMENT OF JOHN F. SOPKO, SPECIAL INSPECTOR GENERAL FOR AFGHANISTAN RECONSTRUCTION Mr. Sopko. Thank you very much, Chair Ayotte, Ranking Member Kaine, and other members of the subcommittee. Thank you for inviting me to testify today about our ongoing work related to the Task Force for Business and Stability Operations, or TFBSO. TFBSO, as has been stated, was an $800 million experiment in which DOD attempted to attract private sector investment to Afghanistan to stimulate the economy and create jobs. Unfortunately, what might have seemed like a good idea on paper seems to have turned out rather differently in reality. SIGAR's review of the construction of the compressed natural gas filling station in Sheberghan, Afghanistan, highlights many of the problems we have found in other TFBSO programs dealing with planning, management, coordination, and oversight. I would like to address two issues right now in my oral statement. My written statement covers a lot more issues. The first issue is this question about the cost of the CNG station. It is important to note that the $43 million number is not a SIGAR number. That number came from the Department of Defense. Although Mr. McKeon's testimony glosses over this and makes it sound like the number came from their consultant Vestige or SIGAR, the truth is that number came from the Department of Defense. SIGAR had an obligation to report that number when we found it. It was the best evidence we had at the time. It would have been irresponsible for SIGAR not to report it. In addition, yesterday, the Department of Defense made available to us for the first time the DOD Comptroller who reviewed that $43 million number for Under Secretary McKeon. That comptroller told our staff that he confirmed, first of all, the $12 million of direct costs, but he also said that while his ``gut feeling'' was that the overhead charge was wrong and was probably less than $30 million, due to the poor records maintained by TFBSO, the $43 million number with the $30 million overhead was the best number available. I would remind all of the members, our requirement is to report the best number available. We do not make numbers up. We do not call people in Afghanistan to get their opinion or send an email to someone in Afghanistan to get their opinion on what the number is. We tend to rely on the Department of Defense when we ask for records about DOD expenditures. Remember, we asked the Department of Defense to comment on that number and explain that number as far back as May 18, 2015. Again, along with the rest of our draft report that we sent to Under Secretary McKeon on September 24, we again repeated our request to please explain that number, explain that overhead, because we ourselves realized it was a very extraordinarily high number. We never got an answer. You never got an answer. The American taxpayer never got an answer, until last night when apparently DOD discovered that the number was in error. Now, if DOD now repudiates that number and says it was actually $10 million or $7 million or $5 million or some other number, we are glad they finally decided to look at their own records and take a second look. I have to say, Senators, I wish they had done so earlier, but I guess it is better late than never. In the end, whether it is $43 million or $20 million or $10 million, it is still a lot more than should have been spent in Afghanistan, and DOD to date still has no real explanation for the expenditure and what benefit the U.S. taxpayer got from that expenditure. It is very clear at this point that DOD never did a cost- benefit analysis before they spent whatever the amount is in Afghanistan. Right now, essentially, this is a giveaway that apparently benefits 150 taxi drivers in Sheberghan. That is all the U.S. taxpayer got out of it. The second issue I want to address--and, Senator Kaine, I am glad you raised it--is the mistaken notion that special reports issued by SIGAR for some reason do not follow professional standards. That is simply incorrect. All SIGAR reports are fact-based. All SIGAR reports note the sources. All SIGAR reports comply with relevant, professional standards, including CIGIE, which is the Council of Inspectors General on Integrity and Efficiency Silver Book standards. Senator Kaine, you pointed out that we have used different numbers in different reports. I am certain your staff has read the reports and has told you that the reports where we use the $5 million number was because we were comparing TFBSO programs and AID programs, and we did not have overhead numbers for those reports. So in fairness to TFBSO, in fairness to AID, we did not want to compare apples and oranges. So we used just direct costs to make the comparison. With the special projects report, which was a discrete report that was based upon work that our auditors and investigators uncovered, we had seen this tremendously high expenditure of overhead, we had the overhead cost numbers. We had them from the DOD contractor. I must say, it is surprising now that it turns out DOD spent $2 million for that contract report and apparently DOD is now saying that they wasted the $2 million because they did not know how to figure overhead costs. Now only late last Thursday, my office received from DOD a hard drive containing what DOD claims to be all of TFBSO's unclassified records. My staff has spent the weekend doing a preliminary review. What does that review show us? It again corroborates the $43 million number. The records show that TFBSO managers, including senior managers of TFBSO, reviewed the draft economic impact statement numerous times, even corrected numbers, because the initial draft was $50 million. They backed out $10 million that had been erroneously put in, and TFBSO accepted the overhead charges. Now, mysteriously last night, the numbers are wrong. In addition, we have not been able to find in our preliminary review any cost-benefit analyses done by TFBSO. However, I will say this and caution you, the data provided is substantially inadequate. There is obviously a lot of data missing in this hard drive that we got, so much so that we have forensic accountants now reviewing it to determine if the data has been manipulated. We are also concerned that we are missing emails, major email files. We are also concerned that this is supposed to be all of the records of TFBSO and it only amounts to 100 GB of data. That seems extraordinary for an organization that lasted for 5 years and employed up to 80 people. As one younger staffer in my office has said, 100 gigabytes of data is what I have on my iPhone. We are surprised by the assurances from DOD that these are all the records of TFBSO. Finally, I want to raise one last issue, which is again a larger issue beyond how much money a gas station costs in Afghanistan. That is the issue that, since December 2014, the Department of Defense has been telling us, because of legislation Congress passed, they have no authority, no money, and no bodies to explain this important program to an Inspector General who is required by statute to investigate allegations of fraud, waste, and abuse. Now I worked for Sam Nunn for approximately 15 years, worked for John Dingell for other years. In my 20-some years working in Congress, I have never heard of that excuse. My deputy worked for 38 years for GAO. He has looked at many closed programs. He has never heard that excuse. As a matter of fact, USAID and State Department and other elements of DOD have been reporting to us on a regular basis on closed programs. Only TFBSO has this institutional amnesia. I close by saying if that institutional amnesia continues, it will be bad for oversight, bad for criminal investigations that we are conducting, and bad for the U.S. taxpayer. Thank you very much, Senators. [The prepared statement of Mr. Sopko follows:] [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] Senator Ayotte. Thank you, Mr. Sopko. I want to start with a basic question, Secretary McKeon. That is, there was roughly $638 million disbursed over the life of the TFBSO task force. Can the DOD account for how each of those dollars was spent? As I look at the big picture here, and a lot of the questions that have been raised on recordkeeping, can you fully account to the taxpayers as to how each of those $638 million was spent? Mr. McKeon. Senator Ayotte, we can give you a list of the contracts, and I believe we can tell you how all the money was disbursed broadly by sector. In answering the question about the CNG station, it points to an inadequacy in the way they kept the books in the task force in terms of allocating the support costs to specific projects. They did not do it on a project-by-project basis, which gives us the challenge of coming up with the right number for the CNG station. It is my understanding, based on what I have been told and what I have seen in reviewing some of the records, that we know where all the money went. The money was contracted or disbursed through other parts of the Department, either U.S. Army Central in Kuwait or other DOD entities, such as the Washington Headquarters Services, or contracts that went through the Department of the Interior, for example. So I think we have all the paper that shows---- Senator Ayotte. Let me just ask you a basic question, then. If we can account for each of these dollars--but I have serious questions given even this dispute listening to this that we can--was it worth it? What did we get for the taxpayers? That is the fundamental question. What can we say in terms of deliverables for the mission that is anything sustainable that we get to accomplish the purpose of economic development in Afghanistan? Mr. McKeon. That is the big question, Senator, and it is the right one. As I said in my statement, I think it is a mixed record. I also think it is a little early to say. So, for example, some of the work the task force did and USAID has done in advising the Ministry of Mines and Petroleum on governance, competitive tenders, administration of the ministry, that kind of thing, the jury is still out on that. There are number of tenders that I am told are still in a decision making process within the government. The Ghani government is looking closely at and reviewing a number of decisions by the Karzai government. As I think even the task force's most recent audit on the extractives industry says, it is ultimately up to the Government of Afghanistan to carry the ball forward. Senator Ayotte. Right. So did we keep metrics or anything like that for this task force? Mr. McKeon. I have not seen, in all the materials I have reviewed, specific metrics. Senator Ayotte. Is Mr. Sopko right when he said, using the gas station as an example, that there was no feasibility study? Mr. McKeon. I cannot dispute that, Senator. We have not found in our search of the records what we would understand to be a feasibility study. Senator Ayotte. So there are a number of other issues, one that I wanted to ask about as well, and I am going to give Mr. Sopko an opportunity to comment on the questions that I have raised, but there was a letter that was written about $150 million that was spent on villas and security for TFBSO staff. That is 20 percent, roughly, of the money appropriated by Congress. Why could they have not stayed on base? Why was that decision made? Why is it justifiable for 20 percent of the money allocated for economic development for that purpose? Mr. McKeon. Senator, we owe SIGAR an answer to that letter. We are still digging into the questions that he asked about the housing in Kabul and Herat and a couple other places. What I understand was the reason for this was, first, the task force was unique insofar it was not under the Chief of Mission authority. They were somewhat entrepreneurial and took a little risk. I think part of the reason for the housing was housing for staff coming from Washington in and out. I do not think a lot of people lived there permanently. They were also used as offices, and they were used to show international businesses and executives that they could come to Afghanistan to do business. Senator Ayotte. So did we get any deliverable contracts of international businesses there because we spent $150 million on villas versus having them stay on base? Mr. McKeon. Senator, I cannot tie a specific visit of an executive in one of these houses to a later investment. I would not make that claim. The other thing I would say is the task force had their own private security to help them with security movements. They were not relying on the United States military for movements within the country, by and large. There is a document that we have seen in the records that---- Senator Ayotte. Could they not have? I mean, they were a DOD task force. Could they not have asked the DOD and allocated some of the cost to support that? Mr. McKeon. I have not asked that question of Central Command [CENTCOM], whether that would have been feasible at the time. I have seen one document where they signed an Memorandum of Understanding [MOU] between U.S. Forces Afghanistan [USFOR- A] and the task force as a contingency, essentially, for the task force to go on base or to be supported by the military. It was signed by a one or two star general who wrote a note to the commander and said he had a little misgivings about this because he was not sure if they were going to be able to support it completely. Senator Ayotte. Well, it just seems to me as a DOD task force, $150 million, this is very important question. Obviously, I think we as a committee would like to know why those decisions were made and what were the justifications, and what return on investments we think we got from taking 20 percent of the appropriations to do that. I also wanted to follow up on the issue of the $55 million that was spent to facilitate an oil lender process that resulted, essentially, in the Chinese company winning a contract for extractives in Afghanistan. Do you think that was a wise use of taxpayer dollars? Mr. McKeon. Senator, what I know about that is the task force assisted the Afghan Ministry of Mines to offer a tender in accordance with general international principles, and the Chinese company competed and won. I cannot tell you whether it was completely transparent and followed all the rules that we would expect in such a tender. Senator Ayotte. Stepping back for a second, my time is expiring and I know a number of others have questions, and I am, certainly, going to want another round of questions, but I am just trying to think how I tell the people of New Hampshire that we spent $55 million to facilitate an oil tender process so that we could pave the way for the Chinese to get a contract in Afghanistan, where apparently what is at issue is their ability to exploit an estimated $1 trillion worth of Afghanistan mineral resources. I am laying it out there. Just in your opinion, do you think that was a wise use of our resources? Mr. McKeon. Senator, it is my opinion, the foundational work, as I said, of advising the Ministry of Mines may pay off in the future. There are a lot of ifs. It will require some significant advances in security, significant advances in the rule of law, and significant embedding, essentially, of a culture of openness and transparency in business practices. So I am not going to tell you that we are happy about the Chinese Government winning that tender. I do not think we tried to skew the results toward a non-Chinese firm. I do not know great detail about who else bid on the contract. We will go back and try to look at that. As I understood it, the task force was going in to try to advise them about how to do an international tender the way that international businessmen would expect. That was the objective. Senator Ayotte. Mr. Sopko, did you want to add on that? Mr. Sopko. Yes, Madam Chairman. If I could just add one thing about the Ministry of Mines--and I think, Senator Kaine, this is also important to you, because I know you got a letter from a former minister. There has been a lot of analysis of that one tender, but there has been even more analysis done by Afghans themselves that during the time that tender was done-- remember, this is the Karzai regime--the Ministry of Mines was the most corrupt ministry in a very corrupt government. It was so corrupt that USAID pulled back any direct assistance because they did a study on that, and it is a public study provided to all government agencies about how corrupt and incompetent that ministry was under the leadership of Minister Wahidullah Shahrani. Now what is important about this, and some of you know I am a former prosecutor, but I also was an attorney and partner for Akin Gump, representing a lot of Fortune 100 firms. One thing you know when you deal with corporate America, American businesses know their customers, they know where they are going to be selling the products, and they know what the bottom line is. If you look at TFBSO and apply just reason and common sense, what we are talking about is here the Department of Defense still does not know who their clients were and what the bottom-line cost was for all of this. So I would caution, before we have this pie in the sky that this is all going to come to fruition, we understand what we are dealing with. I think that is the big picture question about TFBSO. They did not know where they were working. Senator Ayotte. Thank you. Senator Kaine? Senator Kaine. Thank you, Madam Chair. I, basically, have three lines of questioning, but the testimony has knocked off the first one. I wanted to ask DOD about the efficacy of DOD doing these kinds of reconstruction projects. Secretary McKeon, I gather from your testimony that, in analyzing this, you think they should be placed somewhere other than DOD. I strongly believe that. I am a member of the Senate Foreign Relations Committee. I am ranking on the committee that oversees USAID. Whether it is USAID or another agency that does economic development as their daily work--we would not ask USAID to do military operations, for sure. I appreciate your concession that activities of this kind are probably best done somewhere else in government. So I am not going to beat that one. I think we have established that. I have then one line of questioning for SIGAR, and one other one for DOD. So on SIGAR, just looking at the record, I have the April 2015 audit report, Audit Report 1555. There is a discussion on page six of the compressed natural gas station. There is a listing of its cost, distributed funds, $5.051 million. By my read of this, I see no caveat that does not include overhead or this is an incomplete number. Maybe that is somewhere else in the report, but I do not see a caveat or qualification with respect to that. I will get to my question in a second, and I would love to hear if there is a caveat there. I see, after that, an April 2015 report saying the cost is $5.051 million, and the October 2015 special projects report with the title, ``DOD's Compressed Natural Gas Filling Station in Afghanistan: An Ill-Conceived $43 Million Project.'' Then I am looking at the January Audit Report 1611, basically saying TFBSO spent at least $39.4 million, $5.1 million toward a compressed natural gas infrastructure development, and $33.8 million for other activities. I do not see a caveat on that $5.1 million number, that it does not include overhead costs, although in the next paragraph, there is a reference to the special projects report and the $42.7 million number. So the questions that I have are basically these, and you testified to this, and I want to make sure I understand this. Does SIGAR's special projects unit use the government accounting standards? You mentioned the standards that are unique to IGs. Are these done according to Generally Accepted Government Auditing Standards [GAGAS], the special project department's work? Mr. Sopko. By definition, GAGAS, which is the Generally Accepted Government Auditing Standards, only apply to audits. This is not an audit. SIGAR, like 11 other inspectors general, have other reports than audits. They use different terms. Senator Kaine. Okay, this is very helpful. Mr. Sopko. Of those 11 other IGs--and actually, the GAO issues reports that are not GAGAS. Now we follow the general overarching policies of GAGAS in all of our reports, and that is that you have to be factual, you have to be independent, you have to be free of any conflicts of interest, and you have to support all the statements you make. In some areas, and it is very interesting, even in GAGAS for audits, you are not required to do indexing and referencing, but we do indexing and referencing for even our special project reports. Senator Kaine. Do you believe the audit reports of April and January from your agency were performed in accordance with GAGAS? Mr. Sopko. Yes. Senator Kaine. Because they are audits? Mr. Sopko. Yes, they are audits. By definition, they have to. They take longer because of---- Senator Kaine. They take longer. Are they more elaborate? Mr. Sopko. Well, yes, the whole audit process, and that is one of the reasons why we created special projects and why other IGs have created it. For an audit, usually, and the way we work, we get together with the GAO, State, AID, the Department of Defense IGs, and do an audit plan based upon what the big issues are out there. When we do an audit, there is a set policy of sitting down, having an entrance conference, and do planning. Audits usually take up to a year to get out. When I took this job four years ago, I met with the staff of this committee and the staff of many other committees, including the Foreign Relations Committee---- Senator Kaine. Just really quickly, because I am going to be out of time. I just want to put on the record that there is a little bit of a challenge for those of us who are exercising an oversight function if the auditing division of SIGAR issues reports that are consistent with GAGAS standards with one number and they are consistent, and the special projects division uses a different set of standards--I am not saying they are inappropriate; I gather that they are the standards that are used by IGs--that come up with a different number. That kind of leaves us in a jump ball as to which we believe and how we harmonize those. Some I am just going to put on the record that that may be a point for some additional conversation, because I, certainly, find it confusing to see that $5 million number in two audits, and the $43 million number on the headline of the report. So that is something that we want to dig into. I want to come back to DOD with a minute and 20 seconds. Mr. Sopko's testimony was not too complimentary about this ``we will turn over the records at the 11th hour.'' I mean, I find that pretty disappointing, because while I certainly get the natural human tension between an agency and Inspector General--I have been in this business for a while--we are all on the same team. This is all of our taxpayer dollars. We have to be accountable for them. So, Secretary McKeon, you spoke first, then you heard his testimony. How do you respond to the notion that it was only when we had this hearing and it was going to happen finally that DOD said, okay, here are all the records that you ought to take a look at? Mr. McKeon. Sure. Senator, I would point you to my written statement for more detail on this, but let me try to talk through the story as quickly as I can. Last year around this time from January to March, the task force responded to voluminous requests for information from SIGAR and turned over about five discs of CD-ROMs of material, including a list of the former staff of the task force for the last several years. When we got the request for information in the spring, we made available to SIGAR the task force records that were set aside in a reading room at the Washington Headquarters Services. They had full access to those records, which is what the IG Act requires, which is access to records. What we said to them is that if you want to copy any of these documents and take them back to your office, we need to review them for Freedom of Information Act [FOIA] releasability. The reason we did that, sir, is, in a prior case, working closely with SIGAR, our Afghanistan and Pakistan Office had given over 18,000 records from the Commander's Emergency Response Program [CERP]. Those records were then released to media organizations subject to a FOIA request submitted to SIGAR. There were names of soldiers and Afghan partners in that dataset that was put on the Internet. It is still on the Internet. We have asked this media organization to take it down because of our security concerns for our soldiers and their Afghan partners. They have refused to do so. So that is why we did not simply hand over the records. Secondly, we did not have task force employees. In the normal case, our Office of Afghanistan and Pakistan works very closely with SIGAR. They come in and say, ``We want to examine this program. Can you give us your records on these issues?'' We never hand over full hard drives and computer drives in the way that we have here. It is a dialogue. ``Tell us what you need and we will provide it to you.'' So there were two reasons that we set aside this reading room for SIGAR to access. There were no restrictions on what they could read, absolutely none. They could read the full records unredacted. The question was, could they come back, take those records back to their office. After I met with Mr. Sopko in December, and we exchanged letters expressing our concern about the issue of the release of the information, and we came to a meeting of the minds on that, we agreed to turn over the hard drive, which SIGAR now has. Senator Kaine. Thank you, Madam Chair. Thank you to the witnesses. Senator Ayotte. Senator Rounds? Senator Rounds. Thank you, Madam Chair. Mr. Sopko, I am just curious, maybe just in terms of the top lines that we have been looking at, a lot of discussion has been occurring based upon the CNG station. It would appear that this is just part of the overall number of projects. You did a pretty good job of laying out a series of projects down the line that this particular operation was responsible for. We started out by saying that there was about $822 million that was appropriated, and we have approximately $638 million that was disbursed. The delta between the two, was it simply a matter that the other money was not released? Where is that, the delta between the $822 million that was appropriated and the $638 million that was actually spent, or that we can find disbursements for? Mr. Sopko. Senator, I do not have a good answer on that. I will ask one of my auditors, who probably knows. What he is saying is that the numbers could have been obligated, but not yet disbursed. That is delta we are talking about. Mr. McKeon. Senator, my understanding is this is not atypical for assistance programs, that an amount is allocated and put on the contract, but then over the course of the contract, they decide they do not need to spend as much of it. So the actual disbursements are lower. I do not know whether the ratio here is typical in an aid setting, but having that kind of delta is not atypical. Senator Rounds. The reason why I ask is I just want make sure we had an understanding of where we are beginning from, in terms of what the TFBSO was actually responsible for disbursing. That appears to be $638 million. A fair statement? The big picture, that is what we are talking about? Mr. McKeon. I think we have a slightly different number, but we are in the ballpark, yes, sir. Senator Rounds. Okay. Of the $638 million, there seems to be a question of how we would appropriate or at least allocate the resources for overhead, travel, and so forth, and whether it was appropriately laid out project-by-project. I will direct this to Mr. McKeon. Is there a broad understanding between both you and Mr. Sopko's office that there is an understandable appropriation or at least allocation among the different projects for overhead? Mr. McKeon. Senator, I do not know that we have had that discussion. Senator Rounds. You have not quite gotten to that point? Mr. McKeon. I am happy the engage in---- Mr. Sopko. I think that probably both of our staffs feel that it is very difficult to find out how they did allocate. Mr. McKeon. Senator Rounds, I think we can say that the spending was roughly evenly divided between project spending and overhead and security. Security costs are quite high because it is in a warzone. I talked about this at length with General Petraeus, and he sort of walked me through why it was so expensive. Mr. Sopko. Senator, if I can just add, the comptroller who helped Mr. McKeon take a look at it actually contacted one of our staff and gave some data. In that data, it looks like the overhead costs actually exceeded the amount of the actual programs. I cannot confirm that yet. That was just something he shared with our staff recently. Senator Rounds. Mr. McKeon, did TFBSO personnel actually attend a designer and tradeshow event in Europe in support of the TFBSO's Afghanistan carpet initiative? Mr. McKeon. I do not know the precise answer to your question about the show, Senator. I know it is listed in our activities reports, the task force activities reports to Congress. There was support for the indigenous carpeting industry in Afghanistan. They thought it was one of the high- end industries that could be advanced through regional and international markets. Senator Rounds. Could you then perhaps, just for the record, provide a summary of where the TFBSO personnel traveled in Europe in support of the carpet initiative, how long they stayed, and the total costs of those trips? Mr. McKeon, I just want to add, is it true that the TFBSO actually imported a large number of Italian goats via air shipment from Italy to Afghanistan? Mr. McKeon. I have not heard that, Senator. We will have to check. Senator Rounds. Okay, will you provide that for the record for us as well, please? Mr. McKeon. Yes. Senator Rounds. Thank you. I was going to ask whether or not the goat initiative was a success or failure, but apparently you are not in a position to find that out. Mr. McKeon. I am pretty sure if it happened, it happened before my time. Senator Rounds. My time has expired. Just looking at this project, I have one question for Mr. Sopko. That is, if you are not already looking at the entire $638 million in disbursements, do you have the capability to look through and to gain access to lay out where these disbursements were at? Do you have the capabilities to find the individuals who were working for us who are within the Armed Forces or contractors responsible to the Armed Forces? Do you have the legal capabilities right now to follow this through with your existing powers, sir? Mr. Sopko. In part. We can only find all of that and answer those questions if we have the total, full cooperation of the Department of Defense, because we need to find these individuals, and we need access to all the records. That is the only way we can do it. Now, we lack subpoena authority to get testimonial subpoena. I think there was legislation pending, but that would be very helpful. I am probably not allowed to pontificate on pending legislation, but I think you can see right now, if we had had subpoena authority to actually bring some of these people in, we may have gotten to the bottom of this a lot earlier than now. Right now, we have to basically beg people to talk to us who are nongovernment employees. We were trying to get Mr. Brinkley. He is an excellent witness, but we kept contacting him, and he kept blowing us off. It was not until we put his name in the report explaining why we were quoting his book but not him that all of a sudden he contacted us. Then, I must say, he submitted to an interview, which was very helpful. If I had subpoena authority, like most prosecutors do, I could have dropped paper on him and gotten him in here for an interview, so that would have been helpful. Senator Rounds. Mr. McKeon, I just want to give you an opportunity to respond. Based upon the discussion that we have had here today, it would seem as though you are in a position to where we are going to be looking back at you for additional answers in the future. Can you make a commitment to this committee to provide as much information as possible or that you have available to you, and that that information would also be made available to Mr. Sopko on a timely basis? Mr. McKeon. Yes, Senator. To the extent we can help find additional records, if Mr. Sopko thinks there are shortcomings, we will do that. I believe the records that we turned over are the unclassified records. There may be other records elsewhere in the Department not owned by the task force relative to this work. Senator Rounds. By that, would you be suggesting that in a classified setting, you would have it additional information that you would share with this committee? Mr. McKeon. No. I do not have additional information. For example, as I said, the contracting was done by other elements, not by the task force. There may be records in those components that are not on the hard drive that we gave Mr. Sopko. Senator Rounds. Meaning the Department of the Interior? Mr. McKeon. Department of the Interior or U.S. Army Central or Washington Headquarters Services. Senator Rounds. One last question. Do you have the ability to follow through with the Department of the Interior, Mr. Sopko? Mr. Sopko. Yes, sir. We will pursue wherever we can, where the records are. I think we are probably going to do either a complete financial audit--we have been asked by some Senators to do that--or we will do an entire programmatic audit of TFBSO. Senator Rounds. Thank you, sir. My time is expired. Thank you, Madam Chair. Senator Ayotte. Thank you. I would just say that we would appreciate that audit. I think it would be very important for us to have a financial audit, so that we can ensure that each of the dollars that were disbursed, how they were spent, we can account to taxpayers for that. I would like to call on Senator Shaheen. Senator Shaheen. Thank you, Madam Chair. Thank you both for being here. I found the history of the task force very instructive, Secretary McKeon, because one of the things that you point out is, in March 2009, Secretary Gates issued a memo indicating he had asked Mr. Brinkley to continue the task force efforts. Then there was a new memorandum in 2010 directing Mr. Brinkley to continue the efforts. I think it was in 2009 that the chain of command was shifted so that he reported directly to Secretary Gates. What I particularly found instructive was looking at the role that this committee played, which I confess I did not remember with respect to continuing the organization in the 2011 National Defense Authorization Act, where we initially said that the authority should expire in September 2011 and because of concerns by General Petraeus and the Chairman of the Joint Chiefs, Mike Mullen, they came back and asked Chairman Carl Levin and Senator John McCain to change the provision and not require the shutdown of the task force. So clearly, there were a lot of hands in why we got to the place that we got on the TFBSO. I wonder if, Mr. Sopko, you can suggest the kinds of questions that this committee should have asked or what kind of information we should have been looking for, as this issue of whether we should continue what they were doing came up before this committee. Mr. Sopko. I would be happy to provide that to you. I think right now I will go back to the point I made to Senator Kaine based upon my experience dealing with companies, corporations. Corporate America understands whom they are selling to. They understand their market. Again, this may have been the problem. We are asking the Department of Defense to start thinking like corporate America. I represented clients who knew how many pickles were being used on any particular day in a city, when I worked for Akin Gump. DOD does not think in those terms. I remember having a nice conversation with a three star general who said, ``Look, we are good at blowing things up. We are not really good at building things.'' Now, they will do it, and they may do it, if the State Department and AID are not there and are not sitting at the table. Like on many of these provincial reconstruction teams, we knew there were seats for State and AID, and we actually reported on it, but State and AID for financial reasons, they did not have the bodies, they are not there. So DOD is then forced to take up the slack. I think, Senator, it is great that you are sitting on both committees because you realize--and you, too, I am sorry, Senator Shaheen--it is going to be a whole-of-government approach the next time we do this. If we just plus-up DOD and do not plus-up State and AID, then who is going to be left doing this kind of work? I agree with Secretary McKeon, but I cannot speak from a GAGAS point of view or audit point of view. We have not done the report yet. That is a serious question that needs to be asked: Is this the proper role for DOD? Senator Shaheen. Well, I would, certainly, agree with Secretary McKeon and with Senator Kaine. I think that this is not the proper role for DOD. I appreciate the challenges that we were facing in Afghanistan, but it seems to me that one of the things that we do need to look at is what the role for DOD is, and what the role for the Department of State is, and how diplomacy figures in to what we are doing as we are facing conflicts in places like Afghanistan. We had a hearing before the Armed Services Committee today where we heard comments from the people who were speaking about the need for military action sometimes to get to diplomacy, but they were not making the connection that we needed to do economic development through DOD in order to get diplomacy. So I do think it raises serious questions. I guess I would ask you, Mr. Sopko, are there other takeaways from your analysis of the TFBSO that you would urge us as a committee to look at? Mr. Sopko. Senator, I think it is important to look at lessons learned. Now, the TFBSO hired CSIS, the Center for Strategic and International Studies, to do lessons learned on Iraq. What we found out is that issued a pretty good report, but it does not seem like anybody ever read it and followed up on it. The RAND Corporation has been hired, and I give credit to TFBSO, and I think maybe Under Secretary McKeon was involved with that. RAND is a reputable organization. They came in and developed some lessons learned. The problem with the RAND report is they even admit in the beginning they did not consider the cost-benefit analysis, so they are leaving that to us to do. So I think lessons learned is so important. You may want to require every agency that participated that is under your jurisdiction in Afghanistan, ask them if they are doing real lessons learned. Now, we are trying to do that, because we are required to do it. Actually, General Allen said we are the only agency in the government that has this broad ability, because we are not housed in any government agency. We can do an across-the-board, whole-of-government approach. So we are doing that. Each particular agency can also help. Clearly, not only lessons observed, but you have to apply them. I do not think this was done in this case at all. Senator Shaheen. Just a final comment because you raised the question of being able to subpoena people to come before SIGAR. I would point out that, as you said, I was one of the people who introduced that legislation in August 2012 that would have allowed subpoena power for SIGAR. I think it is something that we actually ought to consider again. I do not know if either of you would like to comment on whether that is helpful. Secretary McKeon, I think we have already heard Mr. Sopko's view of that. Do you have thoughts about whether that is legislation that should be in existence that might help deal with some of these questions before we get to this point? Mr. McKeon. Senator Shaheen, the power of the IGs is a little bit outside my lane in OSD policy. What I have said and committed to is any former task force employees who work in the department, we will obviously make them available, and any former employees that we can help try to find, we will do that. Whether he needs subpoena power or the IGs need subpoena power, that is not really for me to say. If I could comment on your other statement about lessons learned, first, quickly, I suspect the Army Corps of Engineers would take exception to the unnamed general that said the Army does not know how to build things. I think one thing to think about, as you think about this issue, is the task force was a startup, and they brought in a lot of business folks from outside the Department and were outside of Chief of Mission authority. There is a law in the Foreign Service Act of 1980 that says everybody is under the Chief of Mission except Voice of America correspondents and people under combatant commander authority. It is unusual for civilians, unless they work directly for the combatant command [COCOM], to be under COCOM authority and not Chief of Mission. So you already had this very unusual animal of the task force being under COCOM authority. The other parts of the Department and other agencies--and now I am just speaking impressionistically--some of the antibodies in government and human nature come out. They look at who are these people, and why are they in our swim lanes? I think it is quite clear that there were challenges in cooperation across interagency at least in the beginning, and then it was mandated that the State Department concur on projects, and I think it got a little bit better. There is an opportunity cost any time you stand something up and you bring in people from outside the department who are not really of the department. Now Mr. Brinkley would say that is what made us different. We were entrepreneurial. We did not follow the normal government rules. We were able to do things quickly. Those are some of the comments I heard from General Petraeus and General Allen. So it is a trade-off. If you want to do it that way, you are breaking a little china in the normal governmental systems, and the other side of the ledger is institutionalizing them in normal government entities. So I do not have a clear answer for you. Obviously, I have a bias that this is not a DOD function, but that is something you need to think about. Senator Shaheen. Well, my time is up, but I would just say I think we would all be okay with breaking a little china if they were efficient and effective in doing it. The challenge here is that there are real questions about how effective and efficient they were. Thank you, Madam Chair. Senator Ayotte. Senator McCaskill? Senator McCaskill. This is like deja vu all over again, over and over and over and over again. We had an ugly morphing of CERP to this task force to the Afghanistan Infrastructure Fund [AIF], no proof that the metrics worked on any of it in terms of fighting counterinsurgency. There has never been any data presented that the walking-around money in CERP helped. There has never been any data presented that the ridiculous fuel station in Afghanistan helped anything. It was dual fuel and totally impractical and not sustainable. There has never been any data that the highway that we had to spend more on security to build than actually it cost to build it did any good. So the idea that we are worried about Yellow Book standards today, give me a break. We have almost $1 billion--no metrics, no cost-benefit analysis, no sustainability analysis, a program that is dumb on its face. The average person in Afghanistan, their annual income is $690. It costs $800 to convert a car to natural gas. Did anybody in the room sit there and say, is there anybody in Afghanistan that can afford this? The 120 cars we did, we paid for. Now what I want to know, Secretary McKeon, is who made this decision? Was it Brinkley? Was it Petraeus? Who decided it was a brilliant idea when the people of a country makes $690 a year that we are going to spend--I do not care if it was $2.9 million or $200 million. Who made the brilliant decision that this was a good idea to put a natural gas station in Afghanistan? Mr. McKeon. Senator McCaskill, the project started in 2011. Mr. Brinkley left in June 2011. I am not sure if it was in the first half or second half that this decision was made to start it. I think it was under Mr. Brinkley, but I will have to get that---- Senator McCaskill. I want to know, because I want to talk to that person and find out what they were on that day, because that is bizarre. Do you not agree that sounds improbable on its face that we are going to get a good result out of that? Mr. McKeon. Senator, there is a long excerpt that I would point you to in the SIGAR report about what the theory of the case was and how this was a proof of concept. It is in the SIGAR audit report of April 2015. That is what we have is evidence of what the plan and what the thinking was behind it. Senator McCaskill. Okay. When SIGAR asked questions about this, you said in a letter that DOD lacked personnel expertise to address the questions. I am quoting from your letter. Is it true that Dr. Joseph Catalino, a former acting director of TFBSO, was actually working in your office at the time? Mr. McKeon. He was not working in my office at the time. He was employed after that letter was written. Senator McCaskill. Okay. When he was, did you offer him up, since now you had personnel that obviously knew an awful lot about it because he was the director of the program? Mr. McKeon. Senator, he started as the director in 2014. He was interviewed at length by SIGAR before the task force shut down. He was interviewed again earlier this month. So he has been available to the task force. Senator McCaskill. You know, the point I am trying to make, Secretary, is the program has been shut down for five months and all of a sudden nobody is home, nobody knows nothing. We have nobody here to help you. We have no personnel to help you, because nobody is here. It has been shut down for five months. Do you think you would be frustrated if you were trying to get to the bottom of what occurred and why the money was spent and how it was spent? Mr. McKeon. Senator, it was a unique task force, as we discussed. It is far from the core competency of the Department of Defense. We do not have investment bankers and energy sector advisers working in OSD Policy or even in Acquisition, Technology, and Logistics [AT&L]. So what we thought and understood was SIGAR was set up for success. We provided a lot of information in the first quarter of 2015. We made the records available. They had a list of all the former employees. We let the task force people go, and we brought back Mr. Catalino to perform a different function. He has been advising me and helping me respond to these queries that the committee has given us, and the SIGAR questions. This expertise does not normally reside in OSD Policy, ma'am. Senator McCaskill. Well, there is a lot of expertise that normally does not reside in the Department of Defense. It does not mean that they did not start building highways and they did not start building a lot of other things in both Iraq and Afghanistan that never were good investments of taxpayer money because of sustainability and security issues. So let us talk about security. If you are spending close to $800 million and 20 percent of the money has to be spent on security in order to convince businesses to come do business in Afghanistan, once again, common sense, do you see a problem with that scenario? You do not want them to be military because you do not maybe want the businesses to know that they are going to have to spend multiples of millions just to be secure in this country, if they want to come in and do business? Do you see the fallacy in the logic there that you have one company making $50 million. You have 24/7--I mean, I wish our embassies had the security these villas had. We have a whistleblower who says they sat empty except for the security personnel most of the time. I mean, it was amazing the security they had in place, besides the queen-size bed, flat-screen TVs in each room 27 inches or larger, a DVD player in each room, a mini refrigerator in each room, and an investor villa that had even upgraded furnishings. We are talking about $51 million for secured accommodations 24 hours a day, 7 days a week by armed guards and a closed- circuit television [CCTV] monitoring system where you can view the entire perimeter and surrounding area. They paid another person $40 million to provide transportation and personal protection from terrorists or criminal attacks. I mean, look at the money we are spending supposedly keeping the people safe that we are trying to get there to come open businesses. This is not exactly a traditional Chamber of Commerce move. If you have to spend that much money on security, do you think most businesses are going to go, ``We cannot afford to open a business here, especially if the average Afghan makes $690 a year?'' Mr. McKeon. Senator McCaskill, I am not a businessman. You make a lot of valid points. Investing in a warzone and conducting activities is dangerous and high cost. What I said at the outset is I think there was an understandable imperative and desire on the part of the commanding generals to get something going, recognizing that it was high cost. Whether it has succeeded, the jury is out, but it is a pretty mixed picture. I agree with a lot of what you have said. The costs sound quite exorbitant. We are digging into this villas question. Senator McCaskill. I apologize for being so short but you have no idea how many hearings like this I have sat in and gone through project after project not well thought out. These all began before we passed the contracting bill where you have to show sustainability, and you have to show some other measures. I will tell you that not cooperating and pulling the Band- Aid off as quickly as possible just makes it worse. The argument that has been put forth in the press that somehow the figures in this are not correct, I mean, frankly, all you did was fan the flames that somehow it was not $43 million when you cannot even say where the $30 million went. This is a terrible waste of taxpayer money when we have so many other uses for it. Mr. Sopko, I wish we could get you testimonial subpoena power. A bunch of us are trying for both you and the IGs. We are running into roadblocks, but we are going to keep trying, and thank you for your work. Senator Ayotte. Thank you, Senator McCaskill. I fully support what Senator McCaskill and Senator Shaheen have said, that our IGs deserve subpoena authority and full access to records, which they are not getting right now. Important legislation is being blocked by the Department of Justice, of all people. Anyway, I would like to call on Senator Heinrich. Senator Heinrich. Thank you, Madam Chair. I want to get back to this issue of core competency. At this point, it seems very clear to all of us that this was not a natural place or function for DOD. I want to pick at a little bit why this occurred in the first place. I am trying to remember back. What years, for starters, Secretary, did this task force exist? From what fiscal years? Mr. McKeon. It was created in June 2006 by Deputy Secretary England to operate initially in Iraq. Then Secretary Gates in 2010 directed them to operate in support of Operation Enduring Freedom, which technically would have put them in places other than Afghanistan. Mr. Brinkley's book details exploratory efforts in Pakistan. Senator Heinrich. That is consistent with my memory. In 2009, I was a new Member of Congress in the House and trying to understand why we would fund some of these things through DOD as opposed to through USAID and other State and other more appropriate places. If my memory serves me right, there was, to some degree, an attitude that things that could get appropriated through DOD would never ever get appropriated if they were sought through USAID or State. Do you have an opinion as to whether or not some of these things landed in DOD's lap because it seemed at the time easier to put them in the budget there and actually get appropriations, as opposed to where the core competencies would have existed to execute more appropriately? Mr. McKeon. Senator Heinrich, at the time, I was working at the Senate Foreign Relations Committee for then-Senator Biden. So that was the conventional wisdom, that the Department of Defense could more easily get the funds from Congress, and there was some skepticism about State and AID's ability to operate, particularly in a warzone. There was even a case in the second term of President Bush where there was a lot of criticism of the police and security forces training program in Iraq, and I cannot remember exactly how it got done, but essentially Secretary of State Condoleezza Rice pushed over a lot of the authority for that kind of training to the Department of Defense. So that was what was sort of in the atmosphere at the time. Senator Heinrich. That is actually quite helpful. I am in no way justifying the sort of lack of analysis or execution that may have gone into this CNG project or any other projects. I do think we need to learn some lessons in terms of when you sort of play those games, what the potential ramifications are, because, obviously, this simply has not worked. Mr. Sopko, do you have any opinion on that matter whatsoever? Or is that outside the scope of what you look at, at SIGAR? Mr. Sopko. As to how this came about, in our analysis we basically identify, and I think we reported in some of our audits, similar to what the Under Secretary said. There was a view that State or AID could not move fast enough and was not quite attuned to it. Now, again, State and AID, and particularly AID, they have implementing partners who have the same flexibility in movement that TFBSO did. We were a bit surprised when we interviewed Mr. Brinkley that Mr. Brinkley had never known that. He had never talked to an implementing partner. So there seemed to have been a parallel track, and they were not well coordinated. Senator Heinrich. Clearly. Mr. Sopko. One of our audits said that. They did not coordinate very well. It did cause a lot of resentment. When we say we heard so many complaints, many of the complaints came from people inside our own Embassy about how this program was being run. So there were warning bells about this program from the beginning. Senator Heinrich. Would you ever think it would be appropriate to have an agency or task force that could pay contractors who do not keep project-by-project financial numbers? Mr. Sopko. I would never do that, particularly in Afghanistan. You are just basically asking to lose all your money. That is the big problem now. We do not really know how much money of this was stolen. I mean, I can understand why the Minister of Mines loved this program and sent that letter. I saw a copy of it. Of course he did. I mean, his predecessor disappeared to Germany with $35 million in cash, as reported in the press. Senator Heinrich. As a standard matter, should access to those kinds of records be contractually obligated for any contract? Mr. Sopko. Absolutely. The interesting thing is, USAID did an analysis of the ministry it is dealing with and withheld money because they did not trust it. TFBSO, no problem, let us just give them the money. I think that is a good analysis of how USAID is used to this. They deal with this all the time. They work in some very difficult places. They understand the terrain and who they are dealing with. The TFBSO team was just short of a scattershot approach. I know one of the members started talking about the things with the goats and everything else. It sounded like they just got together and said, ``Hey, this sounds like a great idea and we have an unlimited budget, let us just do it and see if it works.'' That is why no one can really say with any credibility that the programs were effective. Senator Heinrich. Thank you, Madam Chair. Senator Ayotte. Thank you. I am actually going to call on the ranking member, Senator Kaine, first, and then I am going to go to my questions. Senator Kaine. Thank you, Madam Chair. She knows I just have one question while she has multiple. My question, actually, Mr. Sopko, I want to give you a chance to respond to some of what Secretary McKeon said in response to one of my questions. Your testimony had a litany of kind of instances where it was difficult for SIGAR to get the records that you needed to basically offer the oversight that you want to. I find that troubling. I think it is not a capital offense, but at least it is a cardinal offense to not cooperate with an IG that Congress has put in place to give us information that we need to exercise oversight. Since you testified after he testified, I asked him to respond, and he kind of went through a response. One of the elements of his response was the concern that kind of came up in this relationship over material that had been delivered from the DOD to SIGAR that was, I guess, mistakenly released via a FOIA that led to the identities of U.S. personnel and some contractors being disclosed in ways that could jeopardize them. He said that, and I did not give you a chance to respond, so I wanted to just see if you had any response. Mr. Sopko. Yes, I do. I mean, I think the claim that DOD has made that the individual names were covered under the Privacy Act is in error. The names that were in that CERP data--remember, we did not put it up on the Web. Somebody filed a FOIA, and we responded to the FOIA. Our staff normally as just a courtesy will take names out, if we are asked. We did release some names. The point is that names of soldiers, names of civilian employees, are not covered or barred from being released. We have actual DOD regs that talk about the Department of Defense privacy program dated 2007, which says civilian records can be revealed that include the names, titles, et cetera. I can give you a copy of that. So they are not covered. The other thing is the Privacy Act does not really protect names. It protects records about the names. The name itself you can reveal. I am happy to put into the record, if you want to, dozens of press releases from the Office of Secretary of Defense where they not only name the soldiers serving in Iraq, they name their wives, they name their kids, and they give their addresses. So we find this as a red herring. It is not Privacy Act material. Now what I also find is a red herring is this access was restricted only for TFBSO. No other element of the Department of Defense restricted our access to records, and we deal with classified information all the time. Nobody had this concern. Only for TFBSO was there some concern, and they put in these restrictions that basically violate the IG Act. Remember, I am supposed to be independent. I cannot let the Department apply FOIA exemptions to my request for documents, and that is what Mr. McKeon was suggesting. ``All'' means all under the IG Act. Senator Kaine. Let me just follow up. You indicated that it is your normal practice, and I think you used the word courtesy, when releasing information pursuant to FOIA of this kind, to take the names out, but in this case that did not happen. Mr. Sopko. There was a mistake because it was a multiple filing and you had to dig down. We accepted that the person did not understand. We do that just as a courtesy, if we are asked to do it. Senator Kaine. Is that a courtesy that you do because you are aware that there could be security sensitivities to names? Mr. Sopko. If there is specific security sensitivity, we will definitely do that. We do not release--we follow that. This was a case where you had a name of so-and-so was a CERP official or did something three or four or five years ago at some Provinual Reconstruction Team [PRT]. I doubt there was any security implication from that. Senator Kaine. There is a statement in Secretary McKeon's written testimony, not in his verbal testimony, I went back and checked, that as result of the release of these names via the FOIA, somebody at SIGAR was removed from a position for doing that. Is that accurate or not? Mr. Sopko. She was not removed. She left. She got a job somewhere else. We are a temporary agency. A lot of our people move on. No, nobody was fired or anything. Mr. McKeon. I did not mean to imply that she was fired. I do not know. May I respond, briefly, Senator? Senator Kaine. Yes, please. Mr. McKeon. So my colleague from the Office of General Counsel has handed me a statute--which I will read to you, and which I assume came from this committee--title 10 U.S. Code section 130b, which gives the Secretary the authority notwithstanding the Freedom of Information Act to withhold from disclosure to the public personally identifying information regarding any member of the Armed Forces assigned to an overseas unit or routinely deployable unit. Putting aside the legal debate about this provision or what Mr. Sopko just said about the Privacy Act, as a generic matter, we do not like to release names of personnel who are downrange our Afghan partners who are getting money from us on CERP. Mr. Sopko is no doubt right that we have press releases that praise soldiers in this place or that, but that is our decision. That is the Department's decision. It is not SIGAR's decision to release those names. That is what animated our concern. You can go on the Web site of this media organization today--I did it last weekend-- and still find these names of Afghan partners and soldiers. The information is still there. Senator Kaine. What about Mr. Sopko's position that the restricted nature of their access to these documents is highly unusual within the IG's interaction with DOD departments? Mr. McKeon. I am happy to address that, sir. Section 6 of the Inspector General Act of 1978, which is one of the authorities that SIGAR has, says that the Department shall provide access to records. Those are the words of the statute. We provided full access to the records in this reading room. We never said you cannot go see this record or that record. He had full access to the records. The issue, as I highlighted, was whether he could take the full records and whether we would review them for releasability under FOIA. This is now water under the bridge, in a sense, because we have now come to a meeting of the minds on this issue. He has the hard drive. It is in his control. He has agreed that it is not the policy of SIGAR to release names. So with that assurance and some other conditions that are set forth in the letters, he has these materials. Senator Kaine. Thank you. I do not have any other questions. Senator Ayotte. Thank you, Senator Kaine. I wanted to ask, as I looked at sort of the course of information here, one of the things that troubled me was that SIGAR either provided draft reports to DOD for comment or requested TFBSO information in March 2015, May 2015, June 2015, October 2015, and, of course, this month again. In each instance, the OSD or you, Secretary McKeon, responded by saying that the task force was shut down and that you could not answer questions about TFBSO because the task force was shut down. Now this task force shut down in March 2015. You yourself are who this task force reported to nine months prior to its shutting down. As I understand it, as soon as June 2015, Dr. Catalino, who had a significant role in the task force, was actually working at DOD, I think in OSD itself. Yet the repeated answer to SIGAR's question was, ``Listen, we cannot answer your questions, because the task force is shut down.'' So to follow up on what Senator McCaskill asked, I mean, if that is the case, how are we ever going to have oversight on any task force? Can you explain to me why that was the answer each time? The other issue is that, as I understand it, there were also military personnel who had assisted in the task force and had roles in the task force that were still serving that could have been made available as well. Yet, the answer was the same each time. Why would we answer in such a way, instead of just trying to get to the bottom of answering their questions? Mr. McKeon. Senator, if I could go back to about a year ago this time during the administrative shut down period from January to March, this task force and Mr. Catalino responded to fairly voluminous information requests from SIGAR, and I know Mr. Catalino was interviewed. So after the task force staff dispersed and were gone from the roles of the Department, we thought we had set up SIGAR for a way to successfully do its review. We provided access to the record. We already provided this information on several discs. We provided a list of the former employees of the task force from 2010 to 2014. Senator Ayotte. Can I ask you a question? When you provide a list of the employees on the task force, did you include in that list current members who were serving in the military? Mr. McKeon. Ma'am, I have not seen the list. I looked at the letter that was written from Mr. Catalino to SIGAR, setting forth what it was we provided. I have not seen the list of personnel, so I cannot tell you what level of detail about their assignments are. Senator Ayotte. I will, certainly, want to come back to that. I think, Mr. Sopko, you had a comment on this issue? I mean, obviously, with your history and experience in doing these types of investigations, this struck you as unusual, as I understand it? Mr. Sopko. Extremely unusual. As I said, my deputy was in GAO for nearly 40 years, and I did this for almost 20 years on the Hill, and I never heard of an organization--it would be like Harry Truman in 1945 saying, ``I cannot answer any questions about dropping the bomb. The war is over. We have shut down.'' This organization was not a dining facility [DFAC] out in Omaha. This was an organization that reported to the Secretary of Defense. It was the premier organization on developing the economy in Afghanistan by the Department of Defense. It was an organization that reported to my good colleague here for seven months. Then all of a sudden, it is like, poof, amnesia. It is not just access to individuals. They have a responsibility to answer some of the questions. It is not our responsibility to track down--and again, I have no subpoena authority. Once they retire or once they leave the military-- like Mr. Catalino. We interviewed him when he was working for TFBSO. He then left. Ironically, he was recruited in May and June by Mr. McKeon's Deputy Chief Operating Officer [COO], who in that June 30 meeting where his Deputy COO had just hired back Mr. Catalino, he makes a statement in front of everybody, including multiple staff members, that I know of no one in the Department who can answer any of your questions. Senator Ayotte. So you were told no one in the Department, in this meeting, can answer your questions, yet at the time, they recruited or already hired---- Mr. Sopko. They had already hired. We interviewed Mr. Catalino, and he told us he had been hired ten days before that meeting by the Deputy Chief Operating Officer, Mr. Steve Schleien. Now I have no idea. Maybe Mr. Catalino is mistaken. It is very easy to pull out his hiring documents. We know he knows Mr. Schleien. I do not know why Mr. Schleien then makes a pronouncement to us at this June 30 meeting, after he hires back Catalino, that I do not know anybody in the department who can answer your questions. Now that is what I am saying is an enigma. I have never faced this before in my dealings with the Department of Defense, both as a congressional staffer as well as a private attorney. I have never heard of this before. Senator Ayotte. The reason I wanted to ask whether when you provided a list of employees, whether you provided the names also of currently serving members of our military is because we have someone in the audience that I want to thank who is here, who has given me, I think, permission to recognize him, and that is Colonel John C. Hope, who is here with his wife. Colonel Hope actually was assigned to the TFBSO task force and served as Director of Operations of TFBSO from August 2014 until March 2015. Mr. Sopko, I want to ask you, is this someone who you spoke to in this investigation? Mr. Sopko. We normally do not say whom we have spoken to, but in this case, since I believe Colonel Hope has already mentioned that he has given his permission, yes, he has been very helpful to us and we are dealing with him and have followed up on some of his allegations. Mr. McKeon. Senator, can I respond briefly to what Mr. Sopko just said about the June 30 meeting? Senator Ayotte. Yes. Mr. McKeon. I do not know what was said. I was not at the meeting. We are not trying to hide Mr. Catalino. We have made him available and will make him available again. If Mr. Schleien made a mistake about the fact that Mr. Catalino had already started, that is on us. We are accountable for that. The irony is that if he was not in the Department, as Mr. Sopko has said, he would be free to decline to talk to SIGAR, because of the lack of subpoena power for testimonial purposes. So he is available to SIGAR, as are other former employees who are in the department. Senator Ayotte. So I want to raise the issue of Colonel Hope's service, which we are grateful for, because I think it is very important, as I look at the role that he played on this task force. When he was assigned to this task force, he started to raise issues immediately of deep concern. There is a long list of things he raised, about the lack of operation and financial oversight, about the lack of metrics or analysis to measure success, that essentially the oversight was lacking, no accounting of cost expenditures or money transfers, and serious questions about excessive travel, both from security and financial standpoints. I mean, this is a laundry list, that TFBSO had no property book or no property book officer over the lifetime of its existence. He claims, and I have to say I am very troubled as I see this whole course of record, that not only him but the entire Afghanistan military team was subjected to and continues to be subjected to retribution and retaliation after their return from the task force and after he, in particular, raised issues about this task force. As I understand it, when the list of employees was given to SIGAR, people like Colonel Hope were not listed on that list, and they obviously would have knowledge as current serving members of our military that were involved in important roles in this task force. That raised a flag for him that caused him to not only bring information to the attention of SIGAR but also, as result of him raising this, he had to file a retribution complaint with the Inspector General's Office of the department. He was given a review that was different than four other reviews he had received from very, very respected and senior members of our military. Really from you, Secretary McKeon, is one that any member of our military would view as a career- ender. As result, not only was this review one where it should have been issued in March and then was not issued until December, in violation of existing DOD policy, but essentially he raised all these issues about TFBSO and now, again, as someone who I would describe as doing the right thing as a whistleblower and who has really nothing to gain, and at this point, obviously, I am concerned about being the subject of retribution, is now in a position where this has been harmful to his military career. So I guess my question to you, Secretary McKeon, is, as Colonel Hope's senior rater, what was it in his role, why was his evaluation so late, why were his concerns not taken seriously? As I understand it, he sent to you an after-action report by email in 2015. In fact, he told me that he sent it actually in I believe March 2015, and he never received a response from you by email. So I guess what worries me is I hear this course of conduct where SIGAR asks a series of questions and they are told, well, the task force ended and no one can answer your questions right now. We had questions as a committee. I pushed to have this hearing. We did not get the new numbers on the gas station even though you had the draft report in September, and you had the final report in October, you had a follow-up written letter in December on this issue, we did not get the numbers until the night before. I have to ask, what is going on here? This worries me. Can you address Colonel Hope? Can you address that we should not be concerned that somehow this is being covered up, because all this course of conduct raises this flag that very much concerns me as to why this is not being played out in a way that we would normally see this type of investigation, the questions being answered and answered not without having to call a hearing on it but immediately? Mr. McKeon. Senator Ayotte, let me first address the issue of Colonel Hope. He was the Director of Operations in the Kabul office starting I believe in September 2014 until the end of the task force operation. He asked me probably about a year ago at this time to be a senior rater because I was the next person above Mr. Catalino. He emailed me and asked me to do that and asked to come see me so I could put a face with the name, and I did meet with him last January. His Officer Evaluation Report [OER] did not come to me until September. I cannot account for the delay. Senator Ayotte. What does OER stand for? Mr. McKeon. I am sorry, ma'am. Officer evaluation report. His OER came to me in September, and I filled it out. Let me look at the dates that I have here. It was signed by Mr. Catalino on the 2nd of September. I signed it on the 11th of September. At that time, I am a little embarrassed to say this, when I filled out the form, in filling out one part of the form, I did not completely fill it out. The computer program that the Army has for its personnel allowed me to hit the signature box even though I had not completed the form. You know, with a lot of merchants or government Web sites, if you go through and you do not fill out the key one, it will not let you sign it and hit submit. This one did. That is on me. It is my fault. I am not blaming the Army system. That is what happened. When it was called to our attention that it had not been completed, it was completed in mid-November, on November 19 by Mr. Catalino, and I signed it also the same day. Then the system pushed it to Colonel Hope. That is my understanding of how it works, based on an Army colonel who works in our front office. Our records show that Colonel Hope signed it on 15 December. I read the after-action report only in the last month or so. If Colonel Hope emailed it to me last March--I will go back and look at my records--I do not remember seeing it at that time or reading it at that time. As to what the report says, it says some of the things you said about the lack of a property book and property accountability, and Colonel Hope recites how he and his colleagues sought to remedy that. I do not recall that the report says some of the other things you said about travel abuse. I would unequivocally deny that the rating he received had anything to do with that report. As to the rating received, I do not feel it is my place to discuss that in this open hearing. As to the other issue raised, Senator, about trying to answer SIGAR's questions, I think I tried to answer it earlier, but I will do it again, which is, I know it may sound odd that we did not have the expertise to dig through these records and understand them, but other than Mr. Catalino, we really had no one who had familiarity with these records. He was not steeped in the energy project. It was started before his time as deputy director. I talked to him about it, about his knowledge about it. It was not deep. We have spent a lot of time in the last couple months by grabbing staff from other projects to try to help sort through these records. The comptroller that Mr. Sopko referred to earlier is not in Mr. McCord's part of the organization. He is the comptroller for the Defense Security Cooperation Agency who reports to the Under Secretary for Policy. I asked him to take a few days to sift through these records and see if he could make sense of the CNG project as somebody who understands DOD financial practices. The statements I make in my written testimony are derived directly from what he told me. So we have conveyed that, and we made him available to SIGAR to do explain his analysis. So what I am trying to say, ma'am, is, as I said before, because of the unique nature of this task force and because we shut it down and chose not to keep legacy employees around, it has been a challenge for us to go back and try to reconstruct these records. We are doing that now in response to your requests and response to SIGAR's requests. I am trying to see if we can find a former employee of the task force to come work on a temporary basis to assist us. So we will work in good faith to try to respond to these requests, but they had 150, 200 employees, a lot from the business sector. They are all gone. To try to recreate what happened five and six years ago is going to be a very hard challenge for us. We welcome the audit that you and other Senators have asked for. As I said, Mr. Lumpkin, when he was performing the duties of the Under Secretary in April 2014, asked the DOD IG to perform a full audit. I requested a financial audit at the end of 2014, which Washington Headquarters Services paid for. I think we have provided that to you, but if we have not, we will. So we are an open book on these records. SIGAR has them. If there are other records that he thinks that are out there that we have not provided, we will look. We are not trying to hide anything. I think it is very useful to find out what happened, but it is going to be hard for us to recreate some of this history with all the task force employees gone except for a handful of people who might still be in the Department. Senator Ayotte. Just so I can finish up this circle on Colonel Hope, because I am very appreciative of his service, I want to ask, Mr. Sopko, do you know generally when Colonel Hope started speaking at least to SIGAR about his concerns about TFBSO? Mr. Sopko. Offhand, I do not. I would have to check with the staff. Senator Ayotte. Can you get that for me, for the record? Mr. Sopko. Absolutely. Senator Ayotte. I would appreciate it. Secretary McKeon. Senator, if I can say one more thing about Colonel Hope. I did not witness his work firsthand. I read his report. It is my understanding he did perform a critical function in Kabul. When I saw him here today before you arrived, I apologized to him for the delay in the OER. So I do apologize publicly for the delay. I deny and believe to my core there was no retaliation. Senator Ayotte. Well, I think the concern is also when Colonel John C. Hope was rated by General Odierno, who many of us know has a distinguished record of service, he called him a top 1 percent officer and one of the top 20 of the 100 colonels he had served with in his 40-plus years in the Army. So I just want to make sure that that is in the record, because having certainly had the opportunity to know General Odierno, we know he is one of the finest generals to serve our Nation. So this issue does raise a flag for me, and I want to make sure that every member of our military or our civilian workforce understands that they can fully come forward with any issue that they have or concern about not only how taxpayer dollars are spent but also how the business of the government is conducted in a way that they know that they will not face any potential for retribution. I want to follow up on a couple specific issues to make sure that this committee, as we get information about the activities of TFBSO, in follow-up not only to Senator Rounds' questions, in addition to the goats and the carpet, I would like to make sure that we get travel records of where people traveled for the carpet industry, the purchase and shipment of the goats. Also I would like to have the same type of information about the jewelry manufacturing initiative. We have been given information that TFBSO traveled to India and other locations as part of that. I do not know if you have information on that today. I would like to understand that on the jewelry initiative, and also the ice cream initiative. Apparently, TFBSO had a Herat ice cream project run out of the villa in Herat, Afghanistan. A former TFBSO employee says this initiative was one of the primary reasons that they had a villa or safe house established in Herat. So I would like to understand, as we get the answer on the villa issue, the information about the ice cream initiative, the jewelry initiative, the goat initiative, and the carpeting initiative. One of the issues that, as I heard you talking, Secretary McKeon, about the challenges of not having the employees, when we had the wind-down of the task force, did it not occur to anyone at that point that the Congress would want to have a full accounting of how the taxpayer dollars were spent, and whether we actually got any return on the investment? Secretary McKeon. It did, Senator. That is why Mr. Lumpkin asked for the Inspector General to conduct an audit. That is why I asked for the financial audit. That is why we contracted the RAND Corporation to help us with the lessons learned examination. Senator Ayotte. That RAND report by its own admission is not an audit and does not fully account for how dollars were spent and also a cost-benefit analysis of those dollars. Secretary McKeon. That is correct. It is a general, impressionistic review based on interviews of whether projects were meritorious and succeeded. We do not have an audit ability in OSD Policy. We asked the IG to do it. He declined based on resources and wanting to work on current projects rather than backward-looking. I only know that from his letter. This is the former IG, Mr. Jon Rymer. He has now left the Department. I spoke to him briefly. That is why I asked for the financial audit, which WHS contracted for, which I believe you have. We support if SIGAR wants to undertake a full audit at your request or the committee's request. We have no objection to that. Senator Ayotte. I would like to request that audit. I think the members of the committee would like to see that. Obviously, we would hope that you would fully cooperate in getting whatever information is needed so that the SIGAR could conduct a full audit, so that we could account for not only the initiatives that we talked about today but we are able to account for each of the dollars that were expended and how they were expended in this task force. I do have to ask though on the gas station issue, why it took so long for DOD--I mean, when there was draft report in September, when there was the final report in October, where there were issues raised even in December in a follow-up letter about the villas that again reiterated the $43 million number for the gas station, in each of those instances, DOD did not challenge the number. I am just curious why it took basically the night before this hearing, or day before this hearing, for that to come forward and for you to then challenge the number. I am not disputing whether the number is right or wrong in that. I am just trying to understand what took so long. Secretary McKeon. As I said, Senator, we have been borrowing staff from other functions to try to answer the inquiries over the last few months on this issue and trying to drill down on the data and the records. I cannot remember when the comptroller from the Defense Security Cooperation Agency came up with his analysis. We knew you were planning this hearing, so I think it was before yesterday. We, certainly, had some of this information and were preparing to provide it to the committee. Senator Ayotte. Do you agree it would have at least been helpful to say to SIGAR we think there is a huge problem with this number and we are going to have a financial analysis done on it? Mr. Sopko. Senator, if I can interject to maybe help Mr. McKeon, we spoke to that comptroller. As I told you, we just got his name. We have been asking Mr. McKeon for his name and contact information since December. He actually told us that he started his review on November 17 and finished it on November 20. Like yourself, he finished it on November 20, it would have been useful if we had gotten a copy of it before last night. We still do not have a copy of his final report. We have just interviewed him. Senator Ayotte. Again, as I understand your testimony, Mr. Sopko, even that individual cannot fully answer the question about the number because of the lack of recordkeeping. Mr. Sopko. You are absolutely correct, Senator. He basically said that the analysis underlying the overhead number is probably incorrect, but due to poor recordkeeping, there is no way to get a better number. Again, I reiterate that under GAGAS, under CIGIE standards, we are required to get the best number. So, therefore, he basically makes our case that the number we gave--which came from DOD, again--it was the best number. His gut feeling, he indicated, it is probably less, but he stated that there is no fidelity in the overhead numbers. It would be impossible to arrive at a more accurate estimate of the total overhead costs for CNG. I think this is critical not because of the number. The gas station number is really not that important. This goes back to the underlying problems that I think the Senators have pointed out, and that there is poor planning, poor management, and poor coordination at TFBSO. They cannot even get their overhead numbers right. No wonder we do not know how much money was spent on goats or if the goats were even eaten or not. We do not know. This is so poorly managed. That is a problem that was identified by the General Accounting Office years ago when they first did their first audit. We have been identifying that since then. Senator Ayotte. That brings me to my final question, which is, there was the 2011 GAO report based on what happened with TFBSO in Iraq before the decision was made to transition to Afghanistan. It strikes me that as you look at what is in the GAO recommendations, the lessons learned from Iraq, none were taken into account as this transitioned to Afghanistan. In fact, I do not think that Mr. Brinkley could account for costs or feasibility. In fact, projects seem to have been approved without knowing what they would cost. As you look at the GAO report, about how you should establish project criteria, metrics, monitoring, these were all lessons taken from Iraq and also from the CSIS report, similar lessons, all that information, it does not appear to me, Secretary McKeon, that any of that was considered or addressed based on the lessons we learned in Iraq as this task force undertook its activities in Afghanistan. Would you disagree with me on that? Secretary McKeon. I was not there at the time, Senator. Based on the record I have seen, I am not sure I can disagree. What I would say is that Mr. Brinkley left in the summer of 2011 and a lot of senior people left with him. There was a gap before there was a new director hired. In 2012, there was an acting director. I think they probably had to reinvent the wheel a little bit. When they first went into Afghanistan, it is my understanding they asked McKinsey & Company to do an analysis of what sectors might be productive in terms of economic generation. They focused on a few set issues, including particularly the extractives industries, minerals and fossil fuels. We have not found this review or study. In my experience with McKinsey, it is a ten-page slide deck, so I am not sure it is going to answer many questions anyway. I am told that the McKinsey work helped to direct and guide the focus of the task force. I think in terms of mineral resources that Afghanistan has, as I said earlier, there are a lot of ifs here, if you had security, if you had strong companies, if you had an open and noncorrupt government, there is a lot of potential there for Afghanistan to benefit from its natural resources. There are a lot of countries in the world who have as many natural resources as Afghanistan, and they have not managed them well, corrupt governments have not shared prosperity with all. So it is a pretty big challenge even in the absence of a war. So whatever useful work was done by the task force and USAID to lay the foundation for the Government of Afghanistan, I am not sure we are going to see a payoff anytime soon from that, if, indeed, there ever is a payoff. Senator Ayotte. Yes, I think that is one of the problems when we look at $800 million of taxpayer dollars, and we cannot show any metrics or deliverables. I think that is where my constituents, certainly, become upset about how we are spending their dollars. I would just end with how can we make sure that this does not happen again? I think we heard today that DOD is not the best place for this type of work. Unfortunately, as we look at what we do going forward, how do we make sure that this does not happen again? How do we make sure that you have what you need, Mr. Sopko, to properly conduct oversight and to make sure that the Inspector General's Office has the teeth that it needs to get us information that we need to ensure that we are doing our job on oversight for the taxpayers of this country? Mr. Sopko. Senator, I think you can make certain this does not happen again by having hearings like this. Oversight is important. Congressional oversight, and I am a little biased, having spent 25 years doing it for Sam Nunn, Carl Levin, and John Dingell, among others, and Warren Rudman from your State. You need oversight. Senator Ayotte. You have worked for really good people. Mr. Sopko. I learned from the best. It is important. It has to be done. I can tell you, I am usually not shy in expressing my concerns about issues. One of the reasons why I am not shy is I realize, and I learned from those Senators, that you sometimes have to publicize an event to reach over the heads of the people who are trying to protect their bosses from hearing bad news. I say, Senators, you have already done quite a bit. By announcing this hearing, for the first time, we have access to records. We have a list of names. We have, for the first time in years, Mr. McKeon's shop actually looking at some of those numbers. I think you have a success already. Now there are many more miles to go on this, but that is the importance of congressional oversight. Your hearing itself has started the ball rolling in the right direction. I think with Secretary McKeon and myself working together on this, we can help give you more answers to these questions. Secretary McKeon. Senator, may I respond? I think I said it a few times, but I have to rebut what Mr. Sopko just said. He had access to records and he had the names of employees all of last year. The point I would make in response to your question is that we welcome oversight from the IG or from SIGAR. It is unfortunate that some of this oversight of the task force work did not come earlier so we could have had course corrections. We are now doing retrospective history, which is still useful in its own right, but it is going to be a challenge, I wish to underscore, for us, without the people who were there, to recreate what happened, but we will do our best to respond. Senator Ayotte. I appreciate that. I want to thank both of you for testifying today. I would just say that we had the lessons learned from the CSIS report and the GAO report from 2011. We just have to stop repeating these lessons over and over again. It is my hope, and I think the point that Senator McCaskill made today, that this is not the first instance where we have seen big issues with how taxpayer dollars have been spent and wasted. So we need to take the work that has been done, take it to heart, and actually apply the lessons from it, and I hope that we will. This committee still does expect to be able to account to the people of this country for how this money was spent, so I hope that every effort will be made to do that. I would like to insert a letter and its attachments from Mr. Sopko for the record. See APPENDIX A. Thank you. [Whereupon, at 5:12 p.m., the hearing was adjourned.] [Questions for the record with answers supplied follow:] Questions Submitted by Senator Kelly Ayotte department of inspector general 1. Senator Ayotte. Secretary McKeon: During the hearing you stated that in, ``April of 2014, as the Task Force was winding down, Michael Lumpkin, then performing the duties of the Under Secretary for Policy asked the department Inspector General to perform an overarching audit of the Task Force's operations, financial actions and contracts. The IG declined to do so, due to limited resources and the need to focus its efforts on quote `projects with the greatest potential return on investment.' '' Please provide a copy of the DOD Inspector General's response, declining to conduct this audit. Secretary McKeon. Please find enclosed the request by Assistant Secretary of Defense (Special Operations & Low Intensity Conflict) Michael Lumpkin, then Performing the Duties of the Under Secretary of Defense for Policy, as well as the DOD Inspector General's response. See APPENDIX B. financial audit 2. Senator Ayotte. Secretary McKeon: You stated that, ``In the fall of 2014 I requested a financial audit of the Task Force, which was completed last April.'' Are you referring to the April 30, 2015, report by Williams Adley entitled, ``Agreed-Upon Procedures Report for the Task Force for Business and Stability Operations in Afghanistan?'' Secretary McKeon. Yes. In the fall of 2014, I requested that the Washington Headquarters Services (WHS), which provided administrative and financial support services for the Task Force, undertake a closeout audit of the Task Force. WHS developed a statement of work, solicited contract support, and awarded a contract (GS-23F-8184H) to conduct an independent audit of the TFBSO operations. The audit focus was to validate and fully support forensic documentation of TFBSO's operation from inception to closure. WHS awarded this contract to the firm of Williams Adley, a small business, for this purpose of determining if the TFBSO office complied with applicable National Defense Authorization Acts and DOD fiscal guidelines. It began work in early January 2015, and provided a final report on April 30, 2015. The final report was entitled ``Agreed-Upon Procedures Report for the Task Force for Business and Stability Operations in Afghanistan.'' The agreed-upon procedures were developed to support WHS's management objective of determining whether TFBSO transactions were in compliance with Authorization Acts and fiscal guidance. These procedures where arranged, and agreed to, between Williams Adley (the contractor) and WHS (the client) The audit results concluded that while there were transactional discrepancies there were no identifiable material weaknesses, deficiencies, or reportable conditions of the procedures and/or practices that guided TFBSO's financial operations. See APPENDIX C for the report. 3. Senator Ayotte. That report says the following: ``Because the procedures did not constitute an audit conducted in accordance with generally accepted auditing standards, we do not express an opinion on the TFBSO's financial information, nor do we express any form of assurance on (1) the TFBSO's or WHS's overall compliance with laws, federal regulations or DOD policies and procedures, or (2) the overall effectiveness with which the TFBSO carried out its mission. Had we performed additional procedures or conducted an audit in accordance with generally accepted auditing standards, other matters might have come to our attention that would have been reported to you.'' If this is what you were referring to, in light of the statement above which is contained in the report, why do you consider this an audit? Why did DOD's Washington Headquarters Services (WHS) not have the contractor perform a financial audit as you stated in your testimony? Secretary McKeon. As stated previously, Mr. Lumpkin had requested that the Department's Inspector General (DOD IG) conduct an overarching audit of TFBSO operations, financial actions, and contracts in order to help to ensure DOD captured lessons learned and closed the TFBSO books efficiently. As a result of DOD IG denial to conduct such a review, I asked WHS leadership to fulfil the intent of this request by contracting for an independent audit of TFBSO operations. The statement of work which guided the audit was focused on verifying the compliance of the TFBSO activities (to include financial transaction) with established authorities. As TFBSO was one of the organizational elements within the overall WHS financial statement, they did not have a separate financial statement. A full financial audit can only be completed on the total WHS financial statement. WHS has recently completed an independent financial examination on the Schedule of Budgetary Activities. This examination resulted in corrective action plans that will improve control activities and supporting documentation for all organizational entities within the WHS financial statement. dod suitability 4. Senator Ayotte. Secretary McKeon: In your oral testimony, you said, ``I am personally skeptical of the Department of Defense as a natural home for [economic development during a contingency operation]. As a government, we need to consider, and figure, and develop a functioning mechanism so that we're prepared for future contingencies.'' How have your observations of TFBSO made you skeptical that DOD should be involved in these kinds of economic development activities during a contingency? Secretary McKeon. When the Task Force was created in 2006, it was charged with transforming military contracting in Iraq so that the Task Force could generate stability through economic development and job creation. TFBSO was specifically designed to be expeditionary, operating not under Chief of Mission authority but under authority of the military commander. This status gave it certain freedom to move around the country and engage more directly with Afghans than employees of the U.S. Embassy. Although there was a rationale for how the Task Force was structured and operated, the Task Force was ultimately a multi-year experiment in how to generate economic growth in Iraq and later in Afghanistan. Economic development overseas is not a core DOD competency, and as such, it does not appear that the Department of Defense was the natural home for the Task Force's mission. For this reason, the Department is not contemplating assuming this mission again and we are instead focused on capturing lessons learned. response to sigar 5. Senator Ayotte. Secretary McKeon: You testified that, ``There may be other records elsewhere in the department not owned by the task force relative to this work.'' You also said that TFBSO ``contracting was done by other elements, not by the task force. There may be records in those components that are not in the hard drive that we gave Mr. Sopko.'' Has the DOD provided SIGAR all of the TFBSO-related documents and hard drives, both unclassified and classified, that DOD has in its possession? Secretary McKeon. On January 14, 2016, OSD Policy provided to SIGAR a copy of the unclassified records that SIGAR requested. These records have been archived at the Washington Headquarters Services Executive Archives. On March 8, 2016, SIGAR requested any classified information on TFBSO that was retained by the Executive Archives. On March 14, 2016, OSD Policy delivered to SIGAR the TFBSO records from DOD's Secret Internet Protocol Router Network that are stored at the Executive Archives. 6. Senator Ayotte. Which TFBSO-related questions posed to DOD by SIGAR has DOD not yet answered? Secretary McKeon. On February 19, 2016, the Department of Defense received a notification that SIGAR is initiating a comprehensive performance audit of TFBSO's programs and activities in Afghanistan. The notification requested that the Department notify the appropriate officials of this work, which we did. On March 17, 2016, SIGAR conducted the entrance conference with OSD Policy. The Department will work with SIGAR as SIGAR notifies us of subsequent steps. To our knowledge, as of March 29, the Department of Defense had answered all other TFBSO-related questions and inquiries that we received from SIGAR. tfbso contracts 7. Senator Ayotte. Secretary McKeon: In your oral testimony, you said that DOD ``can give you a list of the [TFBSO] contracts. I believe we can tell you how all the money was disbursed broadly by sector.'' Please provide a list of all TFBSO contracts and all available details on how all $638 million was disbursed. For all contracts, please provide the purpose of the contract, who received the contract, how much was disbursed for the contract, and whether DOD has evidence that a feasibility study was conducted. Please include the total costs of the ``gem program,'' ``carpet program,'' and ``cashmere goat program.'' Secretary McKeon. I am enclosing the spreadsheet with the list of contracts that I referenced during the January 20, 2016, hearing. The spreadsheet provides a detailed account of all contract obligations. The project names are listed, but not the purpose of each contract. The enclosed Economic Impact Assessment provides more detailed information on each project. See APPENDIX D for the report. accounting for costs 8. Senator Ayotte. Secretary McKeon: In your oral testimony you testified that TFBSO did not account for costs ``on a project-by- project basis.'' How is it acceptable or possible that DOD cannot provide cost information on a ``project-by-project basis'' for TFBSO projects? If you can't provide this information, how can TFBSO or DOD assess the performance of a project or ensure the money was not stolen? Has this problem been fixed for all present DOD task forces? If not, what steps are you taking to rectify this unacceptable situation? When do you expect this shortcoming to be remedied? Secretary McKeon. As was common practice, TFBSO did not directly attribute overhead costs to individual programs or projects. As such, we are unable to list all TFBSO projects in which the overhead costs exceeded the direct costs of the program. The preferred method is to use actual cost data attributed to the specific project, because each project has unique support requirements. In the case of the CNG project, the support costs data available to us do not provide the necessary fidelity to determine overhead costs in support of the CNG project itself. In fiscal year (FY) 2015, each of the Military Departments began an audit of its FY 2015 General Fund Schedule of Budgetary Activity in December of 2014. These initial audits are already proving invaluable by testing our systems, process controls, and our audit infrastructures while also highlighting key dependencies between organizations that could represent financial reporting weaknesses. Over the next two years, we will continue to expand the scope of audits until full audit readiness is achieved. Senior leadership remains fully engaged and is taking a risk-based approach to achieving audit readiness and proceeding into full financial statement audits in FY 2018, as required by the NDAA for FY 2010 and subsequent years. To accelerate progress in the high-risk areas, the Office of the Under Secretary of Defense (Comptroller) developed critical path milestones along with target dates for completion. Progress in these areas is being carefully tracked and monitored by both the Under Secretary of Defense (Comptroller)/Chief Financial Officer and the Deputy Chief Management Officer. 9. Senator Ayotte. For each TFBSO project, provide the written performance metrics that were established for that project and whether each of those performance metrics were met. For which TFBSO projects is there no evidence that there were written performance metrics? Secretary McKeon. TFBSO maintained metrics for all projects across each focus areas (Energy, Minerals, Indigenous, and Investment). Each metric report per focus area was updated at least monthly. Enclosed are the final close-out metric reports for each sector. Documents retained in Committee files. cng filling station 10. Senator Ayotte. Secretary McKeon: In your oral testimony, you said that you could not dispute that there was not a feasibility study conducted for the CNG filling station project. Please confirm whether TFBSO conducted a feasibility study for the CNG filling station project. If one was performed, please provide a copy of the feasibility study. Who made the decision to proceed with the CNG filling station project? Secretary McKeon. Although the Economic Impact Assessment (EIA) cited in SIGAR's report on the CNG filling station references a cost- benefit analysis (CBA) of the CNG station covering the years 2011 to 2018, we were unable to find such a CBA in the TFBSO archive. A CBA is a feasibility study that is typically performed prior to project initiation to determine if the project has a positive return on investment. According to the EIA, the total discounted value of benefits for this project were estimated to be $1.2 million while the total discounted value of costs was estimated to be $32.5 million between 2011 and 2018. If this recitation of the data is correct, it suggests that the costs exceeded the benefits of pursuing the CNG station. A technical feasibility study that focused on the type of gas (e.g., CNG, diesel) and whether the Afghanistan's existing wells and infrastructure were sufficient to provide natural gas to the CNG station was produced. I have enclosed this technical feasibility study. The project began in fiscal year 2011, but I have no further insights into who made the decision to proceed with the CNG station project. See APPENDIX E. 11. Senator Ayotte. Secretary McKeon: In your testimony, you mentioned that you asked the Defense Security Cooperation Agency comptroller to review records related to the cost of the CNG filling station. Please provide the comptroller's cost analysis of the CNG filling station, including all related work papers and records used to produce the cost analysis. Secretary McKeon. I have enclosed the two slides that the Defense Security Cooperation Agency (DSCA) comptroller compiled after reviewing the records for the CNG filling station. I am also enclosing the records that were sent to the DSCA comptroller. Documents retained in Committee files. accommodations ``villas'' 12. Senator Ayotte. When do you expect DOD to provide SIGAR a response to its November 25, 2015, letter related to the TFBSO `villas'? Secretary McKeon. The Department of Defense provided an interim replied to SIGAR's November 25, 2015, letter on December 4, 2015. On February 5, 2016, the Department provided a final response to the November 25 letter with a commitment to continue looking into a couple matters related to TFBSO's private security and housing expenditures. 13. Senator Ayotte. Secretary McKeon: In response to my questions about TFBSO living in `villas', as well as their private security, you cited a memorandum of understanding (MOU) between USFOR-A and TFBSO which apparently discussed the possibility of TFBSO living on base or being supported by the military. Please provide a copy of that MOU. Secretary McKeon. I have enclosed a copy of the memorandum of understanding (MOU) between USFOR-A and TFBSO. See APPENDIX F. 14. Senator Ayotte. Provide any documentation related to the `villas' and the decision to use them instead of staying on base, including any cost-benefit analysis used as a basis for this decision. Secretary McKeon. I have enclosed the documentation on private housing and security expenditures that was provided to SIGAR in conjunction with our reply dated February 5, 2016. Documents retained in Committee files. china national petroleum corporation 15. Senator Ayotte. Secretary McKeon: During the hearing, I raised the issue of the Chinese National Petroleum Corporation--International (CNPC-I) winning the oil tender process that TFBSO spent $55 million to facilitate. Please provide details regarding this TFBSO project. Was a feasibility study conducted? Did that study anticipate a country like China winning the contract? Did TFBSO, DOD, or the U.S. government make any effort to encourage Afghanistan to award the contract to a company from the U.S. or other member of ISAF? Secretary McKeon. TFBSO engaged many U.S.-based mining companies regarding Afghanistan opportunities. The majority of large U.S. mining companies were not interested in exploration projects in Afghanistan. One exception was Chevron, which engaged in discussion on the Turkmenistan, Afghanistan, Pakistan, India (TAPI) pipeline. TFBSO's interest in Afghanistan's mining industry was to Train, Advise, and Assist the Afghan ministry to develop the capability to let mineral contracts. TFBSO facilitated the processes used by the Afghans in this industry. The Afghans received bids from various companies, many state- owned, such as CNPC-I. Given that China has significant economic and political interests in the region, it was not surprising there would be bidders from China and other countries. As TFBSO was in an advise and assist role, the task force was not in a position to ask the Afghan ministry to reject the CNPC-I bid. tfbso program costs 16. Senator Ayotte. Please provide a list of all TFBSO projects in which the overhead costs exceeded the direct costs of the program. Secretary McKeon. As was common practice, TFBSO did not directly attribute overhead costs to individual programs or projects. As such, we are unable to list retroactively all TFBSO projects in which the overhead costs exceeded the direct costs of the program. 17. Senator Ayotte. Please provide a list of all foreign travel of TFBSO personnel outside Afghanistan or the United States. Include the date of the trip, the number of individuals who traveled, where they went, the purpose of the trip, and the total cost of the trip. Please include suspected trips to Europe for the carpet project and India for the jewelry project. Secretary McKeon. I understand that SIGAR was examining allegations of travel fraud, waste, and abuse of 15 TFBSO employees. Enclosed are the records provided to SIGAR in January 2015 from its data call. We have been unable to find a list of all the foreign travel of TFBSO personnel outside Afghanistan or the United States. TFBSO's mission to facilitate investment in Afghanistan required personnel to travel to investor conferences, trade shows, or other events attended by potential investors. These meetings occurred in various locations with specific focus areas (e.g., gemstones, carpets, investment). Documents retained in Committee files. 18. Senator Ayotte. Did TFBSO import goats from Italy to Afghanistan? Please provide details, including activities and costs. Was a feasibility study conducted for this project? Who approved this project? How were they transported to Afghanistan? How much was spent to bring the goats to Afghanistan? What were the results of bringing the goats to Afghanistan? Secretary McKeon. Afghanistan is the third largest producer of cashmere in the world and there are varying degrees of cashmere quality. A large percentage of Afghan-produced raw cashmere is illegally sold to China where it may or not be treated before it is harvested for clothing manufacturing and sold around the world. TFBSO engaged goat farmers and developed an Afghan cashmere coop. The intent was to improve the quality of Afghan cashmere as well as the value chain of the commodity in the market. TFBSO partnered with Colorado State University through a $2.3 million grant to develop a cashmere certification lab and goat farm. The grant funded testing equipment and the purchase and shipment of nine bucks from Italy to breed with the Afghan goats at the farm. The certification farm ensured international standards were met related to cashmere production and distribution. TFBSO also helped Afghanistan pass a law banning the export of raw cashmere. The cashmere lab and goat farm was tendered off to an Afghan cashmere producer and continues to operate today. The cashmere lab and farm preliminary financials are enclosed. See APPENDIX G. 19. Senator Ayotte. Does DOD have classified information related to TFBSO? If so, why hasn't that information been provided to SIGAR? Secretary McKeon. On January 14, 2016, OSD Policy provided to SIGAR a copy of the unclassified records that SIGAR requested. These records had been archived at the Washington Headquarters Services Executive Archives. On March 8, 2016, SIGAR requested any classified information on TFBSO that was retained by the Executive Archives. On March 14, 2016, OSD Policy delivered to SIGAR the TFBSO records from DOD's Secret Internet Protocol Router Network that are stored at the Executive Archives. lessons learned 20. Senator Ayotte. I appreciate that TFBSO sponsored a RAND study of the task force. However, the fact that many concerns from the 2010 CSIS report and the 2011 GAO report were not addressed increases my concern that DOD will likely make the same mistakes again if a concerted effort is not made to garner and codify lessons learned. What are DOD's specific lessons learned from TFBSO and how are those lessons being codified within DOD, in coordination with other relevant agencies, to avoid similar mistakes in the future? What office or agency is responsible for maintaining those lessons learned for future application? Please provide a detailed answer. If DOD expects other agencies to take certain steps, please detail what DOD has done to request certain actions from other agencies and how those agencies have responded. Secretary McKeon. The Department sent to Congress transition reports for fiscal years 2012, 2013, and 2014, as well as a final closeout plan in May 2015. Prior to its disestablishment, TFBSO worked with interagency partners and the Government of Afghanistan to determine, where possible, an appropriate entity to assume responsibilities for TFBSO programs. No U.S. government agencies were in a position to assume responsibility for legacy TFBSO programs. As I expressed during the January 20 hearing, I am personally skeptical that the Department of Defense is the natural home for the Task Force's mission of generating economic development overseas because it does not appear to be a core DOD competency. The Department is not currently planning for another undertaking of this nature. Instead, the Department will focus on its responsibility to be prepared to conduct stability operations activities through all phases of conflict and across a range of military operations, including in combat and non-combat environments, pursuant to DOD Directive 3000.05. tfbso personnel 21. Senator Ayotte. When DOD provided the list of TFBSO employees to SIGAR, did that list include military servicemembers assigned to the task force? If not, why not? Do DOD cost estimates of TFBSO include the costs associated with military servicemembers assigned to TFBSO? How many military servicemembers worked for TFBSO during its tenure in Afghanistan? Secretary McKeon. The list of former TFBSO employees that the Department provided to SIGAR on January 14, 2016, did include some military servicemembers who were previously assigned to the task force. There may be other former employees who are still currently employed by the Department of Defense and we are not aware of their employment status. The Department does not maintain records regarding the current employment of former TFBSO employees, but OSD Policy has created our own list based on our own due diligence. 22. Senator Ayotte. What was the specific date when former TFBSO Director Joseph Catalino was hired by the Department of Defense to work in the Office of the Undersecretary of Defense for Policy after he departed TFBSO? Secretary McKeon. Mr. Joseph Catalino resumed employment with the Department of Defense on June 29, 2015. support for warfighters 23. Senator Ayotte. Some have suggested that one of the justifications for a DOD task force like TFBSO is that it filled a niche supporting military commanders that the State Department and USAID did not. Yet, the January RAND report, sponsored by TFBSO, concluded that, `` . . . integrating TFBSO operations into tactical and strategic military operations remained a challenge through the organization's life in Afghanistan.'' The report found that, ``there was a significant gap with the U.S. military on types of activities that TFBSO should be engaged in . . . '' The RAND report also concluded that, ``A prevailing view among the military respondents was that TFBSO was a tool that should have benefited the military effort, but that it `stayed out on an island' rather than becoming a team player.'' What is your assessment of those RAND findings in a report sponsored by TFBSO? Secretary McKeon. The findings of the RAND report are similar to questions and concerns I expressed during the January 20 hearing. New organizations often have difficulty integrating into established agencies or operations, and RAND's findings suggest that TFBSO, despite being a DOD entity, may have experienced problems integrating into military operations and considerations. 24. Senator Ayotte. Were any TFBSO projects in Afghanistan transitioned to USAID or any other U.S. government entity? If not, why not? Is there any evidence that TFBSO made an effort to transition their projects to other agencies? Secretary McKeon. USAID did not assume any former TFBSO projects. TFBSO worked to transition projects to USAID, the Afghan government, or other entities. Each project was tracked through a formal metric process, including a transition plan. As early as January 2012, TFBSO participated in an interagency steering committee, and continued to engage the Department of State and USAID through the end of 2014. Ultimately, the Department of State and USAID declined to assume any TFBSO projects. 25. Senator Ayotte. In 2013 the Special Inspector General for Afghanistan Reconstruction (SIGAR) issued a report saying the Afghanistan Government has levied nearly a billion dollars in business taxes on contractors supporting U.S. efforts in Afghanistan despite agreements exempting them from such. Have you followed up on the Inspector General's initial report as requested? Mr. Sopko. SIGAR contacted the Department of Defense, Department of State, and the U.S. Agency for International Development 60 days after issuing its May 2013 business taxes audit report, \1\ and regularly thereafter, to determine the implementation status of its recommendations. In August 2014, SIGAR closed all remaining report recommendations as implemented. --------------------------------------------------------------------------- \1\ SIGAR Audit 13-8, Taxes: Afghan Government Has Levied Nearly a Billion Dollars in Business Taxes on Contractors Supporting U.S. Government Efforts in Afghanistan, 5/14/2016. 26. Senator Ayotte. Can you report back on the current situation regarding business taxes on contractors supporting U.S. efforts in Afghanistan? Mr. Sopko. The United States and the Afghan government signed the Bilateral Security Agreement (BSA) on September 30, 2014. The BSA defines requirements for U.S. defense contractors for taxation, registration, and entry and exit. The U.S. military also operates an International Agreements Branch to help ensure that U.S. defense contractors comply with Afghan government law and regulations. Since SIGAR issued its audit report in May 2013, private sector companies supporting U.S. government efforts in Afghanistan have reported to SIGAR that the Afghan government continues to levy taxes and associated penalties from which they should be exempt. SIGAR has on-going criminal investigative work in this area. 27. Senator Ayotte. What is DOD doing to address the issues raised in the 2013 SIGAR report (SIGAR audit 13-8)? Secretary McKeon. Of the $921 million in tax assessments that SIGAR asserts were improperly levied against US contractors, $93 million was identified by SIGAR as levied on DOD contractors. By comparison, in a January 2015 report to Congress, DOD noted that following an extensive data call by the Office of the Undersecretary of Defense for Acquisition, Logistics and Technology, DOD contractors reported being levied $83 million in taxes in 2013, of which they paid $7 million in taxes to the Afghan government. Almost all of the remaining $921 million in reportedly illegitimate assessments that SIGAR identified was, according to SIGAR, levied against State Department contractors, but State strongly questioned the basis for SIGAR's claim. In the 2013 audit, SIGAR made three recommendations for DOD, all of which were implemented in 2013: Develop procedures to help contractors obtain appropriate documentation of tax exempt status with the Afghan Government; Issue guidance and training to contracting officer on how to properly identify taxes in contracts and invoices; and Ensure through guidance and training that contractors are reimbursed only for eligible tax payments. DOD is preparing a required report for Congress describing efforts to address taxation of DOD contractors by the Afghan government that will be submitted upon completion of intra-Department coordination. [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]