Global Policy Forum

By Matt Kelley

U.S. civilian authorities in Baghdad failed to keep good track of nearly $1 billion in Iraqi money spent for reconstruction projects and can't produce records to show whether they got some services and products they paid for, anew audit concludes.

The former Coalition Provisional Authority paid nearly $200,000 for 15 police trucks without confirming they were delivered, and auditors have not located them, the report from the CPA's Inspector General said. Officials also didn't have records to justify the $24.7 million pricetag for replacing Iraqi currency which used to carry Saddam Hussein's portrait, the report said. The report, released in Iraq late Wednesday, is the first formal audit of contracting procedures under the CPA, which oversaw billions 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.

The one-star general overseeing reconstruction contracts in Iraq said in response to the audit that the lack of documentation didn't 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 Coalition Provisional Authority ran Iraq from May of 2003 until the United States handed over power to an interim Iraqi government June 28. The CPA used seized funds from Saddam's government and oil revenues to pay for 1,928 contracts worth about $847 million, the inspector general's report said. A CPA rule issued last August called for following international law and United Nations regulations while spending Iraqi money. But the CPA did not issue standard operating procedures or develop effective contract review, monitoring and evaluation, the report said.

Seay said the CPA contracting office was overworked, understaffed and under constant threat of attack. The general said his office had overhauled policies and organization in recent months to do better contract oversight. 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 another $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 former CPA 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 CPA awarded the contract at the original amount and has no documentation showing any further review of costs, the inspector general report said. Seay's response to the audit said the CPA and the new organization overseeing contracts, the Project and Contracting Office, had made changes to fix some problems such as the lack of review and monitoring.

The CPA inspector general released another report earlier 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 SUVs and six laptop computers.

Project and Contracting office officials said they easily tracked down most of the missing items, but the inspector general's investigators said they could not find the gear despite working with officials from KBR and military contracting officers. After the audit, the Defense Contract Management Agency found three of the missing vehicles in the hands of "unauthorized users" but discovered 111 vehicles had not been returned for required check-in after two weeks of use. KBR is working with DCMA to track down all of its equipment in Iraq, Halliburton spokeswoman Wendy Hall said. "The facts show that KBR has adequately managed the property for this mission by aggressively monitoring its property management functions," Hall said in a statement.