Audit Finds Fraud, Other Abuses in Iraq Contract Awards
By Ariana Eunjung Cha
Washington Post Staff Writer
Friday, July 30, 2004; Page A10
In its second report to Congress, the inspector general's office for the occupation authority that ruled Iraq until recently found significant cases of mismanagement, fraud, missing paperwork and manipulation in the awarding of contracts using millions of dollars of U.S. and Iraqi funds.
The Coalition Provisional Authority inspector general audit, to be released today, uncovered cases of abuse by officials of the occupation government. The report does not name names, but the inspector general's office said its work has resulted in 69 criminal investigations. Forty-two have been closed or sent to other investigative agencies and an additional 27 are still open.
According to the report, a high-ranking adviser for the CPA manipulated the contract-award system to bypass the bidding process for a security contract. The $7.2 million award was revoked, a $2.3 million advance payment was returned and the CPA official was fired. A Defense Department civilian who was a coach for an Iraqi amateur sports team was advanced $40,000 cash for expenses to take the team to compete in other countries. But the coach gave the funds to his military assistant, who gambled the money and lost some of it. The missing amount was then written off as a legitimate loss.
The inspector general's office also found weaknesses in the monitoring process for work done under CPA contracts. Its staffers went to inspect work for a contract for oil pipeline repair and found that employees were not in the field doing the labor specified by the contract. The contractor was docked $3.4 million for improper charges. Auditors also found that a different contractor providing security for the oil pipeline repair crew overcharged by $20,000.
Inspector General Stuart W. Bowen Jr., in a letter accompanying the report, said the findings should be looked at in the context of the volatile environment in Iraq.
"The CPA faced a variety of daunting challenges, including extremely hazardous working conditions," he wrote, adding that he believes that the occupation authority's "many successes" should also be recognized.
Lt. Col. Joseph M. Yoswa, a spokesman for the Pentagon, concurred, saying the CPA did the best it could under difficult conditions.
The inspector general's office looked at 178 major, $5 million-plus contracts awarded in 2003 and 2004. It could not find documentation for 14 of those contracts, but the total value of the others was about $29.5 billion.
Many of the problems it found, like the lack of documentation, were systemic. The report said that the CPA comptroller created polices and regulations -- "although well intended" -- that did not ensure effective control over $600 million in Iraqi funds held as cash. It also could not properly account for property purchased by some of those contracts and valued at between $11.1 million and $26.2 million.
The audit report highlighted some progress. It noted that the CPA had made tremendous strides in opening up the contracting process to competition. In 2003, the CPA awarded 66 percent of contracts on a no-bid basis. In 2004, less than one percent of contracts were in that manner. Meanwhile, those awarded contracts through full and open competition increased from 25 percent in 2003 to 99 percent in 2004.
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