Audits find flaws in U.S. handling of Iraq deals
http://www.reuters.com/newsArticle.j...toryID=8391641
Wed May 4, 2005 05:18 PM ET
WASHINGTON (Reuters) - The United States has carelessly, and possibly fraudulently, handled some Iraqi money meant for rebuilding and poorly managed billions of dollars of U.S.-funded contracts, said U.S. audits released on Wednesday.
In one area of Iraq alone, nearly $100 million in cash used for rebuilding was unaccounted for. Incompetence by U.S. procurement staff ranged from contractors being paid twice to files being misplaced.
Two audits by the U.S. Special Inspector General for Iraq Reconstruction found flaws in how U.S. government and military officials ran contracts paid for by the Development Fund for Iraq, Iraqi money entrusted to the United States after the 2003 invasion.
A third audit looked at a small sample of U.S.-funded projects paid for with $18.4 billion appropriated by Congress to rebuild Iraq and found sloppy and disorganized administration of some of those deals.
"There was no assurance that fraud, waste and abuse did not occur," all three audits said.
The most scathing criticism was in audits of the development fund, made up of proceeds from Iraqi oil sales, frozen assets from foreign governments and surplus from the U.N. Oil for Food program. Handling of that fund has already come under fire by previous U.S.- and U.N.-mandated audits.
An audit released by the Iraq reconstruction inspector in January concluded the U.S. had not properly safeguarded about $8.8 billion of Iraq's own money in the development fund.
Of concern in the new audits was poor oversight of hundreds of millions of dollars of cash used to pay contractors.
One audit looking at about $119.9 million in DFI cash paid out in south-central Iraq, the account manager could not properly account for over $96.6 million in cash.
FRAUD SUSPECTED
"During this audit we found indications of potential fraud and referred these matters to the Assistant Inspector General for Investigations (for reconstruction)," the report said.
Examples of sloppiness included 645 transfers of more than $23 million in cash using the wrong form; one contractor being paid twice for the same work, and 10 payments amounting to $324,500 were submitted for canceled contracts.
Two payment officers with cash account balances of $777,050 and $715,000 left Iraq without clearing their balances with the account manager. An attempt was made to remove the outstanding balances by "simply washing accounts," the report said.
Democratic Sen. Russ Feingold of Wisconsin criticized the "disorganized, sloppy management" of Iraq rebuilding deals.
"Billions of dollars, the success of the stabilization mission and U.S. credibility are at stake," Feingold said.
The military agreed with most of the recommendations made in the cash audit, and Col. Thomas Stefanko said in a written response that "extensive corrective actions" have been taken in the past four months to resolve problems raised by the audit.
Another audit looked at how DFI contracts were administered by the Iraq Project and Contracting Office, which is responsible for most of the contracts paid for by $18.4 billion.
Auditors said they could not identify the total value of contracts financed by the fund and said the contracting office lacked the necessary controls and adequate documentation to effectively perform its responsibilities.
In its written response, the contracting office acknowledged confusion in the early management of DFI contracts but said new controls were now in place.
"We have taken many corrective actions and will continue to do so," said Maj. Gen. Daniel Long, head of the office.
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