Global Policy Forum

Rebuilding Aid Unspent, Tapped to Pay Expenses


By Jonathan Weisman and Ariana Eunjung Cha

Washington Post
April 20, 2004

Seven months after Congress approved the largest foreign aid package in history to rebuild Iraq, less than 5 percent of the $18.4 billion has been spent and occupation officials have begun shifting more than $300 million earmarked for reconstruction projects to administrative and security expenses.

Recent reports from the Coalition Provisional Authority, the CPA's inspector general and the U.S. Agency for International Development attest to the growing difficulties of the U.S.-led reconstruction effort. And they have raised concerns in Congress and among international aid experts that the Bush administration's ambitious rebuilding campaign is adrift amid rising violence and unforeseen costs.

Rep. Jim Kolbe (R-Ariz.), chairman of the House Appropriations foreign operations subcommittee, cited "bureaucratic infighting" and a "loss of central command and control" at a hearing yesterday as he sharply questioned top administration officials: "I have very serious concerns about the pace of assistance in Iraq and the management of those funds."

Deputy Defense Secretary Paul D. Wolfowitz pointed to successes in rebuilding and blamed contracting snafus for some of the delays. But Richard L. Armitage, the deputy secretary at the State Department, which will take over from the CPA this summer, refused to make what he called "excuses." "Of course we're not satisfied," he said. "We feel the same sense of urgency that Paul feels to get on with it."

Of the $18.4 billion in Iraqi aid approved by Congress in October, just $2.3 billion had been steered to projects through March 24, the CPA told Congress this month. Only $1 billion has actually been spent, the authority's inspector general told congressional aides Monday. In January, the CPA had said it had planned to spend nearly $8 billion during the first six months of this fiscal year.

The first round of rebuilding funds, about $4.5 billion, focused on rebuilding the electricity grid, restoring the flow of oil, Iraq's main source of revenue, and fixing schools and hospitals. In a report this month, occupation officials warned Congress that security, project management and logistics expenses may "reduce slightly" the level of funding for reconstruction but said they were still working with the Office of Management and Budget to determine how much money would be moved.

So far, occupation officials have reassigned $184 million appropriated for drinking-water projects to fund the operations of the U.S. Embassy after the provisional authority is dissolved June 30. An additional $29 million from projects such as "democracy building" were reallocated to fund the U.S. development agency's administrative expenses.

And more diversions may be coming. Armitage said the State Department still faces a shortfall of $40 million to $60 million in embassy operating funds this year. And embassy construction and operations could consume as much as $2.5 billion in fiscal 2005, none of which has been requested by President Bush.

"The first time there' s talk of a supplemental [appropriations bill], we'll be up here early and often," Armitage told House members yesterday. Until then, he said, State will have to rely on its authority under last year's Iraqi aid law to divert as much as 10 percent of the aid -- $1.84 billion -- into overhead. In addition, the CPA, which was allocated $858 million for operating expenses, can spend up to additional 1 percent of the total funding on itself.

The shift of money has already raised objections from Capitol Hill and fueled worries that it could undermine the U.S. government's position with the Iraqi people. Aides from both parties told CPA officials this week to find the embassy money somewhere else, said Tim Rieser, chief Democratic clerk for the Senate Appropriations foreign operations subcommittee. "Cutting funds from water and sanitation makes no sense," Rieser said. "Potable water is desperately needed in that country."

Administration officials said the money was taken from drinking-water projects because such projects have been allocated $2.8 billion through 2005, of which only $14 million has been channeled to projects. They said they felt it would be easier to take the full $184 million they were allowed to shift to CPA expenses from one place, rather than siphoning off smaller amounts from various accounts.

"We worked with Congress to develop a package of options to ensure the embassy would have needed resources," said White House budget office spokesman Chad Kolton. "We are continuing to work with Capitol Hill as the process moves forward."

Attacks on foreign civilians have also made the CPA reassess its plan for rebuilding the Iraqi security forces. Some $93 million has been reallocated from facilities protection, border enforcement and the Iraqi Armed Forces to build a fortified police training facility in Baghdad, in addition to an $800 million training academy in Jordan. The reason is that international police trainers needed a secure place to work in the Iraqi capital, said Rep. Nita M. Lowey (D-N.Y.), the ranking Democrat on the House subcommittee responsible for aid funding.

Almost since the very beginning, the reconstruction of Iraq has been set back by problems including the widespread looting in the country and competition between various U.S. agencies. "At its worst," Kolbe said yesterday, the infighting "has led to different parts of the U.S. government pursuing different policies in a given country."

The first set of contracts was awarded before the war ended, and occupation authorities reported significant progress in rebuilding schools and power plants by last fall. But turning the new round of congressional funding into visible projects and jobs has been hampered by continuing administrative and security problems.

Shortly after Congress approved the funds in mid-November, senior government officials became embroiled in a debate over who would manage the money and whether proper financial controls were in place. The Pentagon had set up a new entity called the Program Management Office to coordinate between the various contracting agencies. Some officials argued that the idea of the new office was too experimental and that it might be better for USAID or another agency to take over. The result was that the first major group of contracts were awarded in March, instead of February.

The Program Management Office Web site now says $1.5 billion in work is "under way" on 42 projects, and its director, David J. Nash, a retired Navy rear admiral, said in Iraq last week that $5 billion of the funds "will be committed to construction" by July 1.

Meanwhile, the deteriorating security situation has forced CPA officials to change some spending priorities. USAID spokesman Luke Zahner said the shift of funds from "democracy building," electricity, education and water to agency overhead was a technical adjustment. Limited funds were allocated for operations by Congress because it was unclear last fall which agency would oversee which projects in Iraq, he said.

Most of the reallocation is for security, said Lu'ay Eris, deputy president of Baghdad City Council, which he called a reasonable decision. A spokesman for the Iraqi Oil Ministry, Asim Jihad, agreed: "Everything is linked to everything else. If there is no security, it will be impossible to do reconstruction projects."

But, Eris predicted, "taking this money will affect reconstruction. It will lengthen the period." The CPA's recent report to Congress shows how little of Congress's latest rebuilding allocation has been spent since Oct 1. Of the $279 million earmarked for irrigation projects, for instance, none has been spent. The same goes for $152 million allocated for dam repair and construction. The occupation government earmarked $240 million for road and bridge construction, of which $20 million has been "obligated" to projects so far. One bridge, at Al Mat, has been rebuilt, another at Khazir is partially reopened.

Some of the programs that generated objections as gratuitous and expensive when debated in Congress last fall also have yet to take hold. The administration's $75 million witness protection initiative got its first team of U.S. marshals on March 25 to begin designing the program. Congress pared back Bush's $400 million request for two new prisons to $100 million; so far, only "the initial scope of work" has been approved. The Defense Department did shift $15 million from judicial security to prisons to fund 107 contractors "as trainers and mentors."

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