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IRAQ: U.S. Authorities Didn't Keep Track Of Iraq Reconstruction Spending, Audit Says

by Matt KelleySFGate.com
July 30th, 2004

U.S. authorities in Baghdad spent hundreds of millions of Iraqi dollars without keeping good enough records to show whether they got some services and products they paid for, government investigators said.

Officials of the former Coalition Provisional Authority did not have records to justify the $24.7 million cost for replacing Iraq's currency, according to the report from the authority's inspector general. The report also said the authority paid nearly $200,000 for 15 police trucks without knowing if the trucks were delivered.

The report, released in Washington late Wednesday, is the first formal audit of contracting procedures under the authority, which oversaw billions of dollars in reconstruction spending that critics say was doled out without proper controls.

The agency's defenders say it did the best it could given the pressure of operating in a war zone and trying to get reconstruction going quickly.

In a report to Congress being released Friday, the authority's inspector general, Stuart W. Bowen Jr., said his teams found several management problems. Bowen's office is investigating 27 possible criminal cases and has closed or referred for prosecution 42 others.

One example was poor control over an oil pipeline repair contract that resulted in more than $3 million in overcharges, including billing for work not done. Also, the assistant to the U.S. military coach for an Iraqi sports team gambled away part of the $40,000 allocated for team travel to tournaments.

Officials have seized $29,000 in an investigation of counterfeiting in Iraq, the report to Congress said.

The report did not say if any investigations had resulted in criminal charges but noted that at least two Americans had been fired and returned to the United States. Iraqi prosecutors are handling the case of an Iraqi who took payoffs while falsely claiming to be with the Education Ministry, the report said.

The general overseeing reconstruction contracts in Iraq said in response to the audit that the lack of documentation did not prove the money was wasted.

"We believe the contracts awarded with Iraqi funds were for the sole benefit of the Iraqi people, without exception," Army Brig. Gen. Stephen M. Seay wrote to the inspector general.

The authority ran Iraq from May 2003 until the United States handed over power to an interim Iraqi government on June 28. The authority used seized funds from Saddam Hussein's government and oil revenues to pay for 1,928 contracts worth about $847 million, the inspector general's report said.

An authority rule from last August called for following international law and U.N. regulations while spending Iraqi money. But the authority did not issue standard operating procedures or develop effective contract review, monitoring and evaluation, the report said.

Seay said the authority's contracting office was overworked, understaffed and under constant threat of attack.

The investigators reviewed 43 contracts and found 29 had incomplete or missing documentation. For each of the 29, "We were unable to determine if the goods specified in the contract were ever received, the total amount of payments made to the contractor or if the contractor fully complied with the terms of the contract," investigators wrote.

For example, the official overseeing a contract for 15 double-cab pickup trucks for an Iraqi police department paid $87,500 before the trucks were delivered and an additional $100,000 without getting written records that the trucks arrived at the police department, the report said. The report did not say whether the trucks were ever delivered.

The report also criticized the contract for exchanging Iraqi currency, which had been cited as a key success by the authority's former administrator, L. Paul Bremer.

The Defense Contract Audit Agency reviewed the proposed contract in August 2003 and identified $5 million in possible savings. But the authority awarded the contract at the original amount and has no documentation showing any further review of costs, the inspector general's report said.

Seay said the authority and the new organization overseeing contracts, the Project and Contracting Office, had made changes to fix problems such as the lack of review and monitoring.

The authority's inspector general released a report this week saying that the company responsible for the largest logistics contract in Iraq had lost track of more than $18 million worth of equipment including vehicles and electric generators.

The report said investigators could not track down 52 of 164 randomly selected items in an inventory of more than 20,000 items overseen by KBR, a subsidiary of Halliburton. The missing items included two electric generators worth nearly $1 million, 18 trucks or sport utility vehicles and six laptop computers.





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