U.S. cannot account for spending of nearly $100 million in Iraq

WASHINGTON -- U.S. civilian authorities in Iraq cannot properly account for nearly $100 million that was supposed to have been spent on reconstruction projects in south-central Iraq, government investigators said Wednesday.

There are indications of fraud in the use of the $96.6 million, according to a report by the Special Inspector General for Iraq Reconstruction. A separate investigation of possible wrongdoing continues.

More than $7 million of the total is unaccounted for, the report said. An additional $89.4 million in payments do not have the required supporting documents.

The report accused civilian contract managers of "simply washing accounts" to try to make the books balance. Staffing shortages and the quick turnover of those responsible for the cash contributed to the problems, the report said.

Col. Thomas Stefanko, the official now in charge of the program, wrote the investigators that he agreed with their conclusions. Stefanko said his office had corrected or was in the process of fixing or investigating the problems detailed in the report.

A congressional critic of U.S. reconstruction spending in Iraq said Wednesday the findings showed "disorganized, sloppy management."

"The U.S. risks fostering a culture of corruption in Iraq," said Sen. Russ Feingold, D-Wis.

The money at issue is from proceeds from Iraqi oil sales and seizures from the former government of Saddam Hussein. Distribution of the money was handled first by the Coalition Provisional Authority, the U.S.-run occupation government in Iraq from 2003 to June 28, 2004.

After that, the money was overseen by the Joint Area Support Group-Central, which is managed from the U.S. Embassy in Baghdad, the Iraqi capital.

Managers gave the cash to "division level agents" responsible for distributing the money for reconstruction programs in a certain area. Those agents were supposed to keep detailed, signed receipts and other documentation for the money they spent, but usually did not, the report said.

Part of the problem was a last-minute push to spend millions on reconstruction projects before the interim Iraqi government took over, the report said. One agent got $6.75 million in cash a week before the handover, with the expectation that the money would be spent before the Iraqis took power, the report said.

Several of these agents "were under the impression that it was more important to quickly distribute the money to the region than to obtain all necessary documentation," the report said.

"Securing the required documentation should not have been overlooked by those officials specifically charged with safeguarding Iraqi funds," investigators said.

Controls over the cash were so lax that two of the agents hired to distribute the money were allowed to leave Iraq before they had accounted for all of it, the report said. Between them, those two had been given more than $1.4 million in cash which remains unaccounted for, the report said.

A different agent failed to provide proper documentation for more than $12.4 million in spending but had his accounts cleared by his supervisors, the report said.

Yet another agent kept distributing money for three weeks after his authority to handle the funds was revoked, the report said. That agent, told that $1,878,870 was missing from his account, delivered precisely that amount to his supervisors three days later, the report said.

That suggests, the report said, that the agent had a reserve of cash and only turned in enough to make his account balance.

---

On the Net:

Iraq reconstruction Project and Contracting Office: http://www.rebuilding-iraq.net

Special Inspector General for Iraq Reconstruction: www.sigir.mil