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posted January 27, 2006 at 11:45 a.m.

US audit finds 'spectacular' waste of funds in Iraq

Millions lost in 'chaotic misuse,' while report says many reconstruction projects won't be finished.

By Tom Regan | csmonitor.com

"Spectacular misuse of tens of millions of dollars."

That is what The Australian says an audit by the the US Special Inspector-General for Iraq Reconstruction of the former Coalition Provisional Authority office in Hilla, Iraq, has uncovered. The newspaper says the report details bundles of money stashed in filing cabinets, a US soldier who gambled away thousands of dollars, and stacks of newly minted notes distributed without receipts.

The findings come almost a year after Stuart Bowen, the Inspector-General, found that more than $9 billion of Iraq's oil revenues, which was disbursed in 2004 by the then US-led CPA, could not be accounted for.

The audit, released on Wednesday ... describes a country in the months after the overthrow of Saddam Hussein awash with US dollars and a "wild west" atmosphere where even multi-million-dollar contracts were paid for in cash ...
The huge sums in cash were paid out with little or no supervision and often without any paperwork, the reconstruction spending audit found. The report found problems with almost 2000 contracts worth $US88.1 million.

The New York Times reports that the new audit found problems "in an area that includes half the land mass in Iraq, with new findings in the southern and central provinces of Anbar, Karbala, Najaf, Wasit, Babil, and Qadisiya."


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Some of the misuse details in the report: Agents from the inspector general's office found the living and working quarters of American officials "awash in stacks of $100 bills" known as bricks. In another case, a soldier gambled away $40,000 of reconstruction money when he accompanied the Iraq boxing team to the Philippines. One contractor received more than $100,000 to completely refurbish an Olympic pool but only polished the pumps. In a more tragic case, three people plunged to their deaths in a Hilla hospital elevator that had been rebuilt and improperly certified as safe.

"What's sad about it is that, considering the destruction in the country, with looting and so on, we needed every dollar for reconstruction," said Wayne White, a former State Department official whose responsibilities included Iraq from 2003 to 2005, and who is now at the Middle East Institute, a research organization. Instead, Mr. White said, large amounts of that money may have been wasted or stolen, with strong indications that the chaos in Hilla might have been repeated at other provisional authority outposts.
Others had a similar reaction. "It does not surprise me at all," said a Defense Department official who worked in Hilla and other parts of the country, who spoke anonymously because he said he feared retribution from the Bush administration. He predicted that similar problems would turn up in the major southern city of Basra and elsewhere in the dangerous desert wasteland of Anbar province. "It's a disaster," the official said of problems with contracting in Anbar.

The BBC reports that the audit said one reason for the accounting system's problems was that "US postwar planning was limited by a desire for secrecy."

There were no detailed, overt preparations for the reconstruction of Iraq in the run-up to the 2003 invasion "to avoid the impression that the US government had already decided on [military] intervention", the report by the Special Inspector General for Iraq Reconstruction (SIGIR) said. Nevertheless, the US has allocated billions of dollars to rebuilding Iraq, and large amounts have been raised through the sale of Iraqi oil.

An editorial in the Miami Herald notes that "US comptroller David Walter estimated in 2005 that at least $1 billion has been wasted in inefficient spending in Iraq." The Herald writes that this latest report means it's time for Congress to act.

So far, at least four Americans have been arrested in a related investigation involving Iraq reconstruction projects in Hillah, and more arrests are expected. What's needed, however, is better oversight and accounting by a Congress that has been loath to look into irregularities in Iraq, whether it involves policy or the inexcusable mishandling of public funds.

Meanwhile the Times also reports that the Inspector General's office issued a separate audit Thursday showing that the American-financed reconstruction program in Iraq will not finish scores of projects. For example, only 49 of the 136 projects designed to improve Iraq's sanitation and water facilities will be completed, and only 300 of the 415 projects to improve electricity.

"We have gone beyond just the concept of the reconstruction gap and identified the specific impacts of how many projects in the electrical sector and the water sector will not be completed and the reasons why," said Jim Mitchell a spokesman for the [inspector general's] office. "We point out that the dramatic increase in security spending is a part of this as well," Mr. Mitchell said. "Those who planned the reconstruction did not understand at the time the hostile environment in which reconstruction would be taking place."

The Washington Times reports that the report's findings are a setback for the Bush administration, which had counted on "more robust rebuilding across Iraq to help deliver the country from a harsh dictatorship to a prosperous democracy."

Officials in Mr. Bowen's office say that if the projects are to be completed, Iraq will have to receive more money from donor nations, which have pledged but not fully delivered $13 billion; from the World Bank; and from oil proceeds. The problem is insurgents repeatedly attack Iraq's oil facilities and pipelines, especially one leading to Turkey, depriving Iraq of huge streams of revenue.

As the Inspector General was detailing misuse of funds in Iraq by US officials, the US was accusing the United Nations of misusing funds in its peacekeeping efforts. The Associated Press reports that a UN audit of $1 billion in peacekeeping procurement contracts spanning a six-year period found as much as $300 million of the total may have been wasted, US Ambassador John Bolton said on Thursday. Mr. Bolton said that the US contribution to the peacekeeping budget was 27 percent of the budget. If 30 percent of the budget was wasted, as the audit shows, "that means the entire contribution went to waste."