Global Policy Forum

Political Dispute over Funds Comes at a Transition Point for Bush's Reconstruction Effort

By Yochi J. Dreazen

The Bush Administration's effort to rebuild Iraq is winding down, but the political battle over the money's oversight has flared anew. The Senate last week approved $109 billion in additional spending for the wars in Iraq and Afghanistan, including $1.5 billion in added Iraq reconstruction money. The administration has spent $20.9 billion to reconstruct Iraq's infrastructure and modernize its oil industry, but the effort hasn't restored the country's electricity output, water supply or sewage capabilities to prewar levels.

A behind-the-scenes battle among legislators has made a crucial distinction between the new reconstruction money and that already spent: The new funds won't be overseen by the government watchdog charged with curbing the mismanagement that has overshadowed the reconstruction. The administration's main vehicle for rebuilding Iraq has, in the past, been designated "Relief and Reconstruction" funds, which by law are overseen by a special inspector general, Stuart Bowen. The new money going toward similar reconstruction goals will be classified as coming from "Foreign Operations" accounts. The State Department is responsible for spending both pools of money.

By law, Mr. Bowen can oversee only relief and reconstruction funds. Because the new money technically comes from a different source, Mr. Bowen, who has 55 auditors on the ground in Iraq, will be barred from overseeing how the new money is spent. Instead, the funds will be overseen by the State Department's inspector general office, which has a much smaller staff in Iraq and warned in testimony to Congress in the fall that it lacked the resources to continue oversight activities in Iraq.

Exactly how and why the change was made isn't clear. Republican Appropriations Committee aides say legislators shifted the Iraq money to the foreign operations accounts at the request of the White House, not to curb oversight. They say administration officials sought the change to streamline accounting so the Iraq reconstruction would be incorporated into the State Department's operations and budget rather than kept in stand-alone accounts.

The White House said that requesting the new Iraq money from the government's foreign operations account is part of its "goal of normalizing our treatment of Iraq assistance" now that the initial Iraq reconstruction is winding down. Scott Milburn, a spokesman for the White House's Office of Management and Budget, said the administration was confident that the State Department's inspector general was "capable and experienced with auditing and reviewing this type of funding."

A fight in Congress over the money flared in the final hours before the spending bill was approved, when a group of senators wrote an amendment that would have given Mr. Bowen oversight responsibility for the new money. What happened next is a matter of dispute. The measure's sponsors say they asked Republican Sen. Thad Cochran of Mississippi, chairman of the Senate Appropriations Committee, to allow the measure to be brought to a vote but were turned down. Mr. Cochran denies receiving such a request and says the amendment's sponsors could have formally introduced the measure but chose not to, according to his spokeswoman, Margaret Wicker.

The bill passed the Senate without the amendment. As the House version of the spending bill makes the State Department inspector general responsible for the new money, it is likely the funds ultimately will be treated that way. "This is nothing more than a transparent attempt to shut down the only effective oversight of this massive reconstruction program which has been plagued by mismanagement and fraud," said Sen. Patrick Leahy (D., Vermont).

The fight over the funds comes at a transition point for the administration's reconstruction effort. After three years and more than $20 billion, the fiscal year 2007 budget request the White House released this year included no new Iraq relief and reconstruction money, and administration officials said the program was going to be allowed to expire when its remaining money was spent. In its place, the administration's budget sought $1.49 billion in funds to "sustain" the rebuilding work under way, including $287 million to harden oil, electricity, and water infrastructure against insurgent attacks, as well as other small-scale rebuilding projects.

Oversight for those funds likely will fall to State Department inspector general Howard Krongard, whose office maintains a minimal presence in Iraq and, by its own admission, lacks the necessary financial resources for oversight work there. In written testimony to Congress in October, Mr. Krongard noted that his office was able to do oversight work in Iraq last year because it had received $1.7 million in supplemental funds to pay for it.

The recently passed Senate version of the Iraq spending bill allocates $1.3 million in new money to Mr. Krongard's office to fund oversight activities in Iraq, a decline from last year's levels that matches a similar cutback in the House version. Mr. Bowen's office is allotted $24 million. Mr. Krongard's office maintains no permanent presence in Iraq, but he said that he was confident his office could provide effective oversight over the new money. He said that his office regularly works with Mr. Bowen's personnel in Iraq, allowing the State Department auditors to "leverage" the Iraq watchdog's far-larger human and financial assets in the country. "Very simply, if the Congress asks us to take on this oversight responsibility we will do the very best we can to discharge it," he said in a telephone interview.

Mr. Bowen's criticism of how the rebuilding funds have been managed has put him at odds with some administration officials, who have waged several behind-the-scenes attempts to close down his office. Jim Mitchell, a spokesman for Mr. Bowen, declined to comment on the legislative scuffle.