Bloomberg News

Iraq Rebuilding Risked Billions in Funds, Auditor Finds

July 13, 2012

The U.S. government’s drive to rebuild Iraq “put billions of American taxpayer dollars at risk of fraud, waste and abuse,” and the amount misspent will never be known, according to the final report by a U.S. watchdog agency.

The report by Special Inspector for Iraq Reconstruction Stuart Bowen, released today, questioned almost $636 million in costs through June. Auditors found such lapses as “inadequate reviews of contractors’ invoices,” a lack of sufficient oversight staff and poor recordkeeping, according to the report.

The U.S. provided more than $51 billion for reconstruction projects in war-torn Iraq from fiscal year 2003 to 2011.

The report said U.S. officials failed in “numerous instances” to thoroughly review contractors’ invoices before paying them. In one case involving a State Department contract, the department’s Bureau of International Narcotics and Law Enforcement Affairs had one contracting officer validating invoices totaling more than $2.5 billion.

“As a result, invoices were not properly reviewed, and the $2.5 billion in U.S. funds were vulnerable to fraud and abuse,” the report found. The State Department instituted stronger oversight of the contract and recovered more than $60 million that should never have been paid, the report said.

High Turnover

High staff turnover added to the risk of waste and fraud, the inspection agency said. In one case, the U.S. government paid a contractor almost $123 million to build electrical transmission and distribution facilities in southern Iraq, with 14 different contract officers supervising from March 2004 to September 2006. That is a new contracting supervisor every 65 days, undercutting the effectiveness of oversight, the report found.

The agency said work by its investigators and those of other agencies have resulted in 71 convictions and almost $177 million in fines and forfeitures.

Kickbacks were the leading type of criminal activity, accounting for 71 percent of indictments, according to the report. The report said one case involved an army major contracting officer deployed to Afghanistan, Iraq and Kuwait who accepted Rolex watches, cash and other items valued at more than $200,000 in exchange for help to foreign companies seeking Army contracts.

To contact the reporter on this story: Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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