Iraq Reconstruction: Fraud-Filled Program To Be Exempt From Iraq Auditor Oversight?
Thursday May 11, 2006
From the lightly (or almost not) reported news department: Last month, an audit by the special inspector general for Iraqi reconstruction noted even more problems with how we've spent $20.9 billion to rebuild the country. The program is "plagued by reports of billions of dollars of waste, fraud and abuse," concludes the LA Times. The special auditor in Iraq has 72 open investigations into alleged fraud and corruption, according to its April report to Congress.
In January 2005, an audit revealed that $9 billion in UN oil-for-food reconstruction monies -- funds administered by the US government for the Iraqi people via the Coalition Provisional Authority (CPA) -- was unacccounted for.
In January 2006, the audit showed that the US "will not complete hundreds of basic water and electricity projects planned after the 2003 invasion because more than $3 billion was shifted to meet unanticipated security and other needs."
And yet. That $109 billion spending bill that the Senate passed last week? It would exempt its $1.5 billion in reconstruction dollars from the probing eyes of the special Iraqi auditor, according to the Wall Street Journal yesterday. (registration required, tip)
The WSJ reports that the White House asked for the funds to be shifted from "Relief and Reconstruction" -- which must, by law, be audited by special inspector general, Stuart Bowen -- to "Foreign Operations." This shift moves oversight responsibility to State Department Inspector General Howard Krongard. Bowen has an office on the ground with 55 auditors and a budget of $24 million. Krongard has a "minimal" presence on the ground and would have a special budget of $1.3 million to exercise audit responsibility.
According to the WSJ, Senators won't own up to why monies were shifted out of Bowen's oversight, but the bill does now match the House version in this regard. Instead, they are playing the finger-pointing game.
In January 2005, an audit revealed that $9 billion in UN oil-for-food reconstruction monies -- funds administered by the US government for the Iraqi people via the Coalition Provisional Authority (CPA) -- was unacccounted for.
In January 2006, the audit showed that the US "will not complete hundreds of basic water and electricity projects planned after the 2003 invasion because more than $3 billion was shifted to meet unanticipated security and other needs."
And yet. That $109 billion spending bill that the Senate passed last week? It would exempt its $1.5 billion in reconstruction dollars from the probing eyes of the special Iraqi auditor, according to the Wall Street Journal yesterday. (registration required, tip)
The WSJ reports that the White House asked for the funds to be shifted from "Relief and Reconstruction" -- which must, by law, be audited by special inspector general, Stuart Bowen -- to "Foreign Operations." This shift moves oversight responsibility to State Department Inspector General Howard Krongard. Bowen has an office on the ground with 55 auditors and a budget of $24 million. Krongard has a "minimal" presence on the ground and would have a special budget of $1.3 million to exercise audit responsibility.
According to the WSJ, Senators won't own up to why monies were shifted out of Bowen's oversight, but the bill does now match the House version in this regard. Instead, they are playing the finger-pointing game.
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 Journal, not exactly a bastion of liberalism, concludes:
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).
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.In its April report to Congress, the The Office of the Special Inspector General for Iraq Reconstruction reported that Contractor Philip Bloom and CPA regional comptroller Robert Stein pleaded guilty "to participating in a scheme to defraud the CPA of over $8.6 million. Bloom faces up to 40 years in prison and a fine of $750,000" as well as $3.6 million in restitution. Stein faces up to 30 years in prison; he admitted stealing $2 million.
Despite U.S. allocations of $1.7 billion to this sector, oil and gas production has yet to return to pre-war levels. Several factors continue to limit progress on oil and gas production levels: the deteriorated infrastructure, uncer- tainties regarding the legal framework governing Iraq’s petroleum industry, corruption, and insurgent attacks and sabotage. The United States and other donors should develop strategies with the new Iraqi government that will stimulate investment in this sector and help boost production levels. [T]he story of Iraq reconstruction has been punctuated by shortfalls and deficiencies, the infrastructure overview provided in Section 2 of this Quarterly Report presents a picture of significant progress achieved through a substantial U.S. investment of time, talent, and tax dollars in Iraq’s relief and reconstruction.The SIGIR is the successor to the Coalition Provisional Authority Office of Inspector General (CPA-IG). SIGIR was created in October 2004 by a congressional amendment to Public Law 108-106 (55KB PDF), triggered by the June 28, 2004 dissolution of the CPA.
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I worked in the US Embassy from 5/04 to 3/06 as one of a team of US Advistors setting up the Iraqi anti-corruption agency, Commission on Public Integrity. I knew Bowen’s staff auditors and met him, and reviewed some of their late 2005 reports for factual accuracy on behalf of the Iraq Reconstruction Management Office. Back then, I wrote requests to SIGIR’s lead Audit Manager to review USAID’s constant scope changes, but they resisted looking at any USAID projects. Additionally, the shift of funds from construction to security was widely known, and one reason why in 2004, reconstruction programs for water systems was reduced from $4-billion to $2-billion. Bowen had only about 12-20 auditors in Iraq, but built up a huge staff in DC including consulting agreements. His staff still developed more issues than any other audit group - GAO wasn’t there at all because State wouldn’t give them facilities. However, Bowen’t auditors practiced the old fashioned tail end audits, reviewing work after spending is over. Most corporations with professional internal auditors moved to doing front end reviews and fixing process problems in the first months of a program, not waiting until after all the spending is over. If qualified Certified Internal Auditors with operational audit expertise had been running SIGIR, the system problems would have been uncovered and fixed back in 2004. See my blog on Corruption in Iraq at www.fiscalrangers.com .
vj
I might add a comment about the funds switch to State’s Krongard. He came to Iraq’s US Embassy when I was there in 2005, and offered to meet with anyone, so I visited him. He didn’t know much about audit - and was very non-assertive - the opposite of Bowen. There was a scandal reported about Krongard in the last several months - staff auditors were saying he reduced audit coverage of Iraq. When I was there, there was only ONE State Dept. auditor that visited, and that was only for 6 weeks. Iraq contracting oversight will suffer greatly if Krongard gets the funding and authority. State’s auditors and staff are nowhere near the level of the retired GAO auditors working for SIGIR, and they don’t have independence like SIGIR does. I am a Republican, but this constant effort by the Republicans to try and bury legitimate business and management control problems in Iraq needs to be reversed. Don’t let them give oversight authority to State or EVER rely on USAID for the truth (I was there in Iraq for 23 months, and learned a lot).