$96.6 million earmarked to rebuild Iraq disappears

I say, 'tis my opinion that the money was removed from sight by less than scrupulous individuals...eegads...

From The Kansas City Star:
WASHINGTON — Nearly $100 million in Iraqi reconstruction cash — intended to be handed out by U.S. workers in shrink-wrapped bricks of $100 bills — can't be accounted for, federal auditors reported Wednesday.

A criminal investigation into possible fraud in a handful of cases is under way to determine what happened to some of the $96.6 million earmarked to rebuild south-central Iraq, according to a report by the Special Inspector General for Iraq Reconstruction.

The money came from Iraqi oil sales and other local revenue, not from U.S. taxpayers, and it was to be distributed by the main financial office of the U.S. rebuilding effort in Iraq. That office — first part of the now-defunct Coalition Provisional Authority, now run by Joint Area Support Group-Central — hired U.S. workers to pay cash to locals and contractors to repair Iraq and provide relief to Iraqis.

But U.S. officials didn't watch where the cash went, the inspector general found.

An examination of financial records between June 2003 and October 2004 showed poor bookkeeping, and investigators “found indicators of potential fraud,” the report said.

According to the inspector general's officer, in two cases, U.S. workers left Iraq without telling their bosses what happened to $1.49 million in cash they were in charge of. When the inspector general's office looked into it, it found that those two “field paying agents” didn't sign the required forms to take on personal liability for lost cash.

Instead of trying to find out what happened to the money, the agents' boss tried to use other funds “to remove outstanding balances by simply washing accounts,” the 36-page report said.

On other occasions, wads of cash were handed out without being counted properly, according to the inspector general. One U.S. office wasn't cleared to receive cash — and had even asked not to be given any — but got some anyway. The Joint Area Support Group-Central said the delivery was supposed to be $3.5 million. When the money was counted, it came to only $3.25 million.

“You have a system that is broken down,” said Brookings Institution senior fellow Peter Singer, author of the book Corporate Warriors. “It's what people warned about. It's what people knew was going on. Now I'm afraid it's too late.”

Sen. Russell Feingold, a Wisconsin Democrat, said the findings “paint a picture of disorganized, sloppy management.”

He said: “The U.S. risks fostering a culture of corruption in Iraq.”

The inspector general examined a total of $119.9 million in cash, but auditors could properly account for only $23.3 million of that money.

The inspector general's office was unable even to estimate how much of the missing $96.6 million was due to sloppy record keeping and how much was lost to criminal activity.

Contracting officials told the inspector general where they thought $89.4 million of the missing money went — but couldn't provide adequate receipts or paperwork to prove it.

Another $7.2 million vanished off the books.

“It was a tough situation with not enough people — people shooting,” said Defense Department spokeswoman Lt. Col. Rose-Ann Lynch. “They had to move constantly. (It was) very challenging in an austere environment.”

The inspector general issued several recommendations for fixing cash controls, which military officials in Iraq promised to undertake.

These problems might be expected a year and a half ago, but not well after the fall of Baghdad, said Keith Ashdown, vice president of policy and communications for Taxpayers for Common Sense.

In the past, reports show that the U.S. government has “lost forklifts, misplaced generators,” Ashdown said. “Now you're doing something you thought you could never do: You're misplacing millions of dollars.”