Pentagon Audit Faults Payments to Contractors in Iraq

International Herald Tribune.com

A Pentagon audit of $8.2 billion in American taxpayer money spent by the U.S. Army on contractors in Iraq has found that almost none of the payments followed federal rules and that in some cases, contracts worth millions of dollars were paid despite little or no record of what, if anything, was received.

The audit also found a sometimes stunning lack of accountability in the way the U.S. military spent about $1.8 billion in seized or frozen Iraqi assets, which in the early phases of the conflict were often doled out in stacks or pallets of cash. The audit was released Thursday in tandem with a congressional hearing on the payments.

In one case, according to documents displayed by Pentagon auditors at the hearing before the House Committee on Oversight and Government Reform, a cash payment of $320.8 million in Iraqi money was authorized on the basis of a single signature and the words “Iraqi Salary Payment” on an invoice. In another case, $11.1 million was paid to IAP, an American contractor, on the basis of a voucher with no indication of what was delivered.

Mary Ugone, the Pentagon’s deputy inspector general for auditing, told the committee that the absence of anything beyond a voucher meant that “we were giving or providing a payment without any basis for the payment.”

“We don’t know what we got,” Ugone said, responding to questions by the committee chairman, Representative Henry Waxman, Democrat of California.

The report is especially significant because while other federal auditors have severely criticized the way the United States has handled payments to contractors in Iraq, this is the first time that the Pentagon itself has acknowledged the mismanagement on anything resembling this scale.

The disclosure that $1.8 billion in Iraqi assets was mishandled comes on top of an earlier finding by an independent federal oversight agency, the Special Inspector General for Iraq Reconstruction, that U.S. occupation authorities early in the conflict could not account for the disbursement of $8.8 billion in Iraqi oil money and seized assets.

“This report is further documentation of the fact that the United States had absolutely no preparation to use contracting on the scale that it needed, either at the military or aid level in going to war in Iraq,” said Anthony Cordesman of the Center for Strategic and International Studies in Washington.

“We had really allowed ourselves to become more and more dependent on contractors in peacetime,” Cordesman said. “We were unprepared to use contractors in wartime and all of this had an immense impact.”

The Pentagon report, “Internal Controls Over Payments Made in Iraq, Kuwait and Egypt,” also notes that auditors were unable to find a comprehensible set of records to explain $134.8 million in payments by the U.S. military to its allies in the Iraq war.

The mysterious payments, whose amounts had not been publicly disclosed, included $68.2 million to the United Kingdom, $45.3 million to Poland and $21.3 million to South Korea. Despite repeated requests, Pentagon auditors said they were unable to determine why the payments were made.

“It sounds like the coalition of the willing is the coalition of the paid – they’re willing to be paid,” said Waxman, who later in the day introduced what he called a “clean contracting” amendment to a defense authorization bill being debated on the House floor. The amendment, which was accepted by voice vote, would institute a number of reforms, including new whistleblower protections and requirements on competitive bidding.

The audit was carried out by the Defense Department Office of the Inspector General, which is led by Claude Kicklighter, a retired lieutenant general. Kicklighter was not at the hearing Thursday because of a scheduling conflict.

Many of the previous investigations of payments to contractors in Iraq have focused on the flawed effort to rebuild the country’s decrepit electricity grid, oil infrastructure, transportation network and public institutions. The feeble accountability and spotty paperwork of the contracts examined by Kicklighter’s office make it difficult to say what many of them were for, but the report indicates that many appeared to be for things as mundane as bottles of water, truck rentals and food deliveries.

According to the report, the U.S. Army made 183,486 “commercial and miscellaneous payments” from April 2001 to June 2006 from field offices in Iraq, Kuwait and Egypt, for a total of $10.7 billion in taxpayer money. The auditors focused on $8.2 billion in so-called commercial payments to contractors – American, Iraqi and probably other foreign citizens – although the report does not give details on the roster of companies.

Because the contracts were too numerous to be examined one by one, the auditors said they took a standard approach and examined 702 statistically representative contracts, then extrapolated the results to the full set.

When the results were compiled, they revealed a lack of accountability notable even by the shaky standards detailed in earlier examinations of contracting in Iraq. The report said that about $1.4 billion in payments lacked even minimal documentation “such as certified vouchers, proper receiving reports and invoices,” to explain what had been purchased and why.

An additional $6.3 billion in payments did contain information explaining the expenditures but lacked other information required by federal regulations governing the use of taxpayer money – things like payment terms, proper identification numbers and contact information for the agents involved in the transactions. Taken together, those results meant that almost 95 percent of the payments had not been properly documented.

Troop reductions possible
President George W. Bush’s nominees for commander of U.S. forces in the Middle East and senior commander in Baghdad told a Senate hearing on Thursday that modest troop reductions might be possible this autumn and that the United States might not need to strengthen patrols for provincial elections now expected in November.

But they acknowledged that Iraqi security forces would probably be unable to take the leading role in all provinces of the country this year, as the Pentagon had predicted in December.

General David Petraeus said at the hearing on his nomination to lead the military’s Central Command, which includes the Middle East and some adjacent areas, that the provincial elections would probably be held in November rather than October. The reason for the delay, he said, is the recent violence in Basra, where militias back competing political factions.

That might mean that Iraq’s next round of voting occurs after the U.S. presidential and congressional elections on Nov. 4.

Lieutenant General Raymond Odierno, nominated to succeed Petraeus as the top U.S. commander in Iraq, said he did not foresee a need for extra troops to guard against violence around the time of the Iraqi elections.