* "Sloppy" controls, oversight so far
* Promises to track down corruption
* Iraq lessons not learned so far
By Sue Pleming
WASHINGTON, Nov 10 (Reuters) - Oversight and controls for more than $40 billion in U.S. funds to rebuild Afghanistan have been "sloppy" so far despite lessons from Iraq, the U.S. chief inspector for Afghanistan reconstruction said on Tuesday.
Retired Major General Arnold Fields said there needed to be more accountability, particularly as the Obama administration intends to funnel more funds through Afghan institutions.
"I think sloppy is a fairly decent characterization," said Fields in an interview, when asked about oversight so far of U.S. taxpayer funds dedicated to rebuilding Afghanistan since 2002.
"There is an underlying issue of corruption that needs to be addressed," added Fields, the Special Inspector General for Afghanistan Reconstruction, an office funded by Congress last year to track U.S. funds there.
Fields' assessment comes as President Barack Obama weighs sending more U.S. troops to Afghanistan to counter a resurgent Taliban, accompanied by greater U.S. civilian efforts to boost Afghan capacity.
So far, Fields' office has 57 staff, of whom about half are in Afghanistan, with plans to more than double that next year.
"If folks are out there wasting, defrauding or abusing taxpayer dollars, they will be caught," said Fields, who has established a hotline for people to report abuses (here)
Two dual Afghan-U.S. nationals were set to be sentenced on Friday in the United States after they pleaded guilty to attempting to bribe a U.S. sergeant for the design of a road in Logar province.
Their bribery scheme amounted to about $3 million, said retired FBI agent Raymond DiNunzio, who works in Fields' Arlington, Virginia, office. It involved wiring money to U.S. banks, the delivery of luxury vehicles to the homes of contractors and many other schemes.
DiNunzio said of 50 investigations he was currently working on in Afghanistan, a third involved contractor fraud or criminal wrongdoing.
While much of their work has only just begun, auditors and investigators indicated early signs were not good.
"My overall impression is that there is an awful lot to audit and investigate," said John Brummet, chief of audits in the inspector general's office.
About $18.6 billion of the more than $40 billion in U.S. funds is dedicated to security -- the training and equipping of the Afghan army and police force. Investigators have several audits open for security contracts which will be complete next year.
"We probably should expect more to show for our money," Fields said.
He recalled visiting military facilities in Herat province where roads, buildings and equipment looked good but this did not translate into improved Afghan capacity.
"You don't fight the Taliban or al Qaeda with good facilities. You fight with good troops who know how to use the equipment and how to maintain it. Maybe that is where the rub is, but I don't know yet."
Fields was appointed in June last year, drawing on his experience coordinating more than $21 billion in U.S. funds to rebuild Iraq after the U.S. invasion of March 2003.
As in Iraq, a big chunk of Afghan spending goes toward providing security for projects, sometimes accounting for 30 to 40 percent of the total cost, Brummet said.
The Bush administration was roundly assailed for its rebuilding efforts in Iraq. Critics said it served more to pad the pockets of major U.S. companies than build local capacity.
This time, the Obama administration wants Afghan firms to have more opportunities, but this has its own problems in a country where corruption is endemic and limited controls are in place to ensure money is used properly.
"We need to have proper oversight of contractors whether they be U.S. or Afghan and that is something we are looking at," said Brummet.
Fields and his investigators are frequently asked whether lessons learned in Iraq were being implemented. Early audits point to the same problems -- lack of oversight and internal controls, inattention to maintenance and not putting enough into building up Afghan institutions.
"These are all themes that came out of the hard lessons book and we are seeing the same things," said Brummet.
(Editing by Eric Beech)