Skimming Off the Top: US Army Charged Germany Fees for Afghanistan Donations

One cable obtained from WikiLeaks highlights irritation between Berlin and Washington over a 15-percent "administrative fee" the US sought to charge Germany on a 50 million euro donations made to a trust fund whose purpose is to improve the Afghan army. A top German diplomat complained the fee would be a tough sell to taxpayers.

Afghan National army soldiers and German Bundeswehr army soldiers of the International Security Assistance Force patrol during a mission in the mountains near Feyzabad.

Foto: FABRIZIO BENSCH/ REUTERS

In the glossy brochure "The Bundeswehr in Afghanistan," everything seems blissfully positive. One section, under the heading, "the current state of our engagement," mentions a massive donation that Germany made to Afghanistan. In 2009, the German government transferred €50 million ($66.14 million) to the Afghan Army National Trust Fund. The money from Germany was intended to "improve the operational capabilities and development of the ANA (Afghan National Army)," according to the publicity materials from the Bundeswehr, Germany's armed forces. The money, the message seems to be, is well spent. After all, once the NATO ISAF troops withdraw from Afghanistan, the Afghan army is expected to take responsibility for the country's security.

But little has happened with the German donation in the months since it was made -- at least nothing that Germany had hoped would as a result of its multimillion euro gift. There was also considerable anger over the fact that the Americans had been trying to claim some of the money for themselves.

That was apparent in a sharply worded demarche from Germany's then-ambassador to NATO in Brussels, Ulrich Brandenburg, to his American counterpart, Ivo Daalder. The US NATO Ambassador forwarded the German "non-paper," dated Feb. 3, on the very same day to the US State Department with a "request for guidance." Brandenburg complained that the German donation had not yet been disbursed to the desired projects.

The German money was to be used "exclusively" for projects stipulated by Berlin, according to Brandenburg's demarche, including one project in Kabul (€2 million), one in Feyzabad (€1 million) and an additional one in Mazar-i-Sharif (€4 million). "As of today," he wrote, "no project financing has occurred."

The delay, the demarche makes clear, had already resulted in "construction delays" of the ANA logistics school in Kabul, which was described as "the financially most pressing case." Germany expected that a total of €7 million for the three flagship projects be "transferred without any further delay," the incendiary letter also stated.

Inevitable, Heavy Criticism

It isn't the only complaint from the Germans. Inconsistent to the agreement made, the money was being administered by the trust fund's American donation managers. This had created a situation in which the US Army Corps of Engineers, which was responsible, wanted to charge an "administrative fee" of 15 percent for the disbursement of funds. Such a fee, the German demarche makes clear, would be difficult to explain to German taxpayers.

"The issue has been raised already in the German parliament leading to questions why the Federal Government had donated money without any tangible effect on the prioritized projects yet," the German complaint reads. The paper also says that the 15 percent charge "will inevitably attract heavy criticism by German audit bodies and parliamentary commissions." As such, the funds "need to be reallocated" to the German mission headquarters at ISAF in Kabul "to allow for a swift implementation of the prioritized projects."

ORIGINAL: The Donation Cable

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split Important note on the dispatches...

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VZCZCXRO5414 OO RUEHDBU RUEHPW RUEHSL DE RUEHNO #0052/01 0341556 ZNY CCCCC ZZH O 031556Z FEB 10 FM USMISSION USNATO TO RUEKJCS/SECDEF WASHINGTON DC IMMEDIATE RUEHC/SECSTATE WASHDC IMMEDIATE 3835 RUEKJCS/JOINT STAFF WASHDC IMMEDIATE RHEHNSC/WHITE HOUSE NSC WASHDC IMMEDIATE INFO RUCNAFG/AFGHANISTAN COLLECTIVE PRIORITY RUEHRL/AMEMBASSY BERLIN PRIORITY 0796 RUEHBUL/AMEMBASSY KABUL PRIORITY 1342 RUEAIIA/CIA WASHDC PRIORITY RHEFDIA/DIA WASHDC PRIORITY RHMFISS/HQ USEUCOM VAIHINGEN GE PRIORITY RHMFISS/HQ USCENTCOM MACDILL AFB FL PRIORITY RUEHNO/USDELMC BRUSSELS BE PRIORITY RHMFISS/USNMR SHAPE BE PRIORITY RUCNDT/USMISSION USUN NEW YORK PRIORITY 1139 TAGS: MOPS, MASS, MCAP, PREL, PGOV, NATO, AF, GM SUBJECT: RFG: GERMAN DEMARCHE ON DISBURSEMENT OF

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E.o. 12958: decl: 02/03/2020 Tags: mops, mass, mcap, prel, pgov, nato, af, gm Subject: rfg: german demarche on disbursement of contribution to ana trust fund

Classified By: A/PolAd A. "Hoot" Baez. Reasons: 1.4 (b) and (d).

1. (SBU) This is a request for guidance. Please see para 8.

2. (C) SUMMARY: On February 3, German PermRep Brandenburg demarched Ambassador Daalder regarding concerns Berlin has over the disbursement of 50 million Euros it donated in October 2009 to the Afghan National Army Trust Fund. He said that money for earmarked projects had not been disbursed, resulting in delayed projects. He also said that the U.S. Army Corps of Engineers was charging a 15 percent administrative fee. He said that German parliamentarians were beginning to ask questions about how this money has been handled, adding that this could make it difficult for Berlin to provide additional contributions in the future. Ambassador Daalder said that he believed there were some factual inaccuracies in the German demarche, but promised to forward it to Washington for a formal response. We request Washington guidance NLT Monday, February 8, on how to respond to Brandenburg. We ask that in drafting this guidance Washington take into consideration appropriate political factors, as well as technical budget and project management ones. END SUMMARY

Germany: Why Has Our Money Not Been Used on Our Projects? --------------------------------------------- ------------

2. (C/REL GERMANY) On February 3, German PermRep Brandenburg demarched Ambassador Daalder regarding 50 million euros that Berlin had donated to the Afghan National Army (ANA) Trust Fund in October 2009, handing over a non-paper reported in para 10 below. According to Brandenburg, this money had been earmarked for use in several specific projects -- the ANS Logistics School in Kabul, an engineering school in Mazar-e-Sharif, and an ANA Barracks in Feyzabad -- but so far no money had been disbursed for these projects. He argued, for example that construction of the logistics school had come to a halt.

And Why Are You Charging Us an Administrative Fee? --------------------------------------------- -----

3. (C/REL GERMANY) Brandenburg said that he had been instructed to raise this with us because of the unique role of the U.S., particularly the U.S. Army Corps of Engineers, in this process. He said that there was a particular concern in Berlin about a 15 percent administrative fee allegedly being charged by the U.S. Army Corps of Engineers. At the same time, he acknowledged that Berlin also had issues with how SHAPE and the NATO Office of Resources was handling the issue, adding that Germany would also be raising this issue with NATO officials.

Creates Problems for Future Donations to the ANA Trust Fund --------------------------------------------- --------------

4. (C/REL GERMANY) Brandenburg said that this was more than a technical budget and project management issue He said that several German parliamentarians were asking questions about these funds. He said that the German Government was in the process of preparing its 2010 budget and would like to be able to make an additional contribution to the ANA Trust Fund, but that parliamentary questions and concerns about how the initial 50 million euro contribution was being handled could make this increasingly difficult. He added that -- since this was becoming "the talk of the town" in Kabul -- it might also create difficulties in our ability to get other countries to contribute to the ANA Trust Fund.

5. (C/REL Germany) Brandenburg said that this demarche would be delivered in Washington, as well as other places. (Note: We understand it was also delivered to the Embassy Berlin.)

German FM to Raise with SecGen ------------------------------

6. (C/REL GERMANY) Brandenburg said that since this money came from the MFA, German FM Westerwelle had taken an interest in the issue and would likely raise this with NATO

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Secretary General Rasmussen when he sees him at the Munich Security Conference.

Daalder: Inaccuracies, but Will Seek Washington Guidance --------------------------------------------- -----------

7. (C/REL GERMANY) The Ambassador said that there appeared to be some factual inaccuracies in the German demarche, but promised to forward it to Washington with a request for a formal response.

Request for guidance --------------------

8. (C) RFG: We request Washington guidance NLT Monday, February 8, on how to respond to the German demarche.

9. (C/NF) COMMENT: As the Ambassador said to Brandenburg, there do seem to be some inaccuracies in the German demarche. At the same time, it is important we also recognize the serious political concerns the demarche raises. For example, while there may be good reasons for the 15 percent fee -- we understand it is a contingency fee not an administrative one -- the appearance that the U.S. is charging Allies an excessive fee for the use of monies they have donated to the ANA Trust Fund may be difficult to explain away during a parliamentary debate. Brandenburg is probably correct in arguing that issues such as this could make it more difficult to encourage nations to donate to the Trust Fund. Indeed, it took us months to even work out the agreements we needed to get the original German donation to the Trust Fund. We therefore urge Washington to look into this issue from a political, as well as technical/financial, dimension and with as much transparency as possible. END COMMENT

The Demarche Text -----------------

10. (C/REL Germany) The text of the German non-paper is reproduced in full below:

Begin text

3 February 2010

-- Refer to GER Agreement dated October 1st with NATO acting through its Office of Resources by which GER has committed to a voluntary contribution of Euros 50 mio to the ANA Trust Fund. Funds had been transferred to a SHAPE account in late October 2009.

-- Note the agreement that the GER contribution should be used exclusively for the aims set out in the ANA TF Project Document dated September 15th 2009, among them three prioritised projects mentioned in Annex 10 of the Project Document (1. ANS Logistic School Kabul, to the amount of Euro 2 mio in 2009; 2. Engineering School in Mazar-e-Sharif, to the amount of Euros 4 mio in 2009, 3. ANA Barracks in Feyzabad, to the amount of Euro 1 mio. in 2009). As of today, no project financing has occurred.

-- Note that, at variance with the GER/IS agreement and the overarching MoU between the US, NATO and SHAPE on the "Management and Administration of Trust Fund Donations for support and sustainment of the ANA", transfer of the German ANA TF contribution to an US treasury account (resulting in the prevalence of US procurement procedures, including assignment of the US Army Corps of Engineers and an administrative fee of 15 percent) would be made without due consideration of the German donation caveat, thereby hindering the early funding of the prioritised projects and thus the application of the German/IS Agreement.

-- Note that the issue has been raised already in the German Parliament leading to questions why the Federal Government had donated money without any tangible effect on the prioritised projects yet. Likewise, charging a 15 percent fee for managing and executing ANA TF, especially when

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applied to the funding of projects pursued by Germany, will inevitably attract heavy criticism by German audit bodies and parliamentary commissions.

-- Request partners, given construction delays that have already occurred and the urgency of respective funding requirements, to revert to the letter and spirit of the GER/IS Agreement and make sure that funds earmarked for the prioritised projects totalling Euro 7 mio will be transferred without any further delay. As laid down in the GER/IS agreement the earmarked funds (with regard to the prioritised projects to the amount of Euro 7 mio, in particular with regard to the ANA Logistic School, Kabul, to the amount of Euro 2 mio., as the financially most pressing case, since construction is already under way) need to be re-allocated at the Kabul level to the GER Einsatzverwaltungsstelle ISAF in order to allow for a swift implementation of the prioritised projects.

-- Urge partners to expedite the execution of funds donated by GER to the ANA TF aside from the prioritised projects and submit proofs of employment of funds in accordance with the US/NATO/SHAPE MoU as soon as possible.

-- Express concern about the fact that any further delay in allocating funds to the prioritised GER projects and executing the remainder of funds donated by GER must substantially impair prospects for any further German contributions to the ANA TF.

End text heffern

The German demarche concludes with a clear warning: "Any further delay in allocating funds" would "substantially impair prospects for any further German contributions to the ANA trust fund."

In his dispatch to the US State Department, Ambassador Daalder expressed sympathy for the complaint from his German counterpart. Although he said there were some "inaccuracies" in the German demarche, he added that "it is important we also recognize the serious political concerns the demarche raises." There may be good reasons for the 15 percent fee, but "the appearance that the US is charging allies an excessive fee for the use of monies they have donated to the ANA Trust Fund may be difficult to explain away during a parliamentary debate."

Daalder wrote that German NATO Ambassador Brandenburg "is probably correct in arguing that issues such as this could make it more difficult to encourage nations to donate to the Trust Fund."

Officials in Germany's Foreign Ministry state today that, in their response to the German letter, officials in Washington did in fact express considerable understanding for the Germans' irritation. Nevertheless, the Americans have since stated that they have very limited maneuvering room when it comes to the administrative fee: The administration of trust funds is conducted under American budgetary law. Sorry, officials essentially said, there's not a lot we can do.

There was, however, at least one gesture of goodwill: The Americans wired €3 million back to to the Bundeswehr.