Ability to Track Costs in Iraq May Be Difficult, Report Says

By Griff Witte
Washington Post Staff Writer
Monday, May 9, 2005

Auditors monitoring reconstruction funding in Iraq are concerned that the system for managing work there is so diffuse that the government may not be able to get an accurate estimate of how much its projects cost, according to an inspector general's report set for release today.

Congress allocated $18.4 billion for Iraqi reconstruction in 2003, of which about a quarter had been spent as of April. The money was intended for programs aimed at restoring basic services to the Iraqis, such as electricity, water, health care and education after the U.S. invasion in spring 2003.

But auditors with the special inspector general for Iraq reconstruction say the lack of accurate cost estimates raises the possibility that the government could be stuck without enough money to pay for reconstruction programs already begun. "That's always a danger if you don't know how much you've spent," said James Mitchell, spokesman for special Inspector General Stuart W. Bowen Jr.

The report points to projects under an Army reconstruction program that were more than 90 percent complete and had cost more than 50 percent above the initial estimate. It also cites U.S Agency for International Development projects that are more than half complete and are on track to cost 85.5 percent more than estimated.

The report notes that security costs in particular have been higher than expected, as the Iraqi resistance continues to create a dangerous environment for workers.

State Department spokesman Steven L. Pike disputed the notion that the government is at risk of running out of money for reconstruction, and that the cost of security could be to blame.

"You've got to have security. You've got to keep people alive. That's the first priority," Pike said. "Security sucked up more money than we expected. That said, it's not like it sucked up all the money. There's still a lot left. We'll make it."

The State Department manages 6.4 percent of the money Congress appropriated. The Defense Department manages 70 percent and Marine Lt. Col. Rose Ann Lynch, a Pentagon spokeswoman, said in a written statement that her department also took issue with the report's findings. Defense officials in Iraq, she said, have put in place "a comprehensive cost management plan to make sure they stay on top of cost data and have adequate funds to complete projects."

The $18.4 billion in U.S. government funding was divided into different categories with targets for each, though the priorities have changed along the way. Most notably, nearly $3.5 billion was moved out of water, sanitation and electricity funds in September, with about half that total shifted to security.

The inspector general report released today cites a review of U.S. AID contracts that found that of $673.8 million spent, $70.8 million was committed to security. The share of security spending grew as time went on: From March 2003 to February 2004, it was 4.2 percent, before climbing to 22.3 percent for the rest of 2004.

An overall percentage of reconstruction funds being spent on security was not available.

At least 12 government offices have had a hand in spending the reconstruction money, the report says. Previous reports have said that contracting offices in Iraq have suffered from high turnover rates and chronic understaffing. Audits released by the special inspector general last week told of poor record-keeping, and possible fraud in some areas. One audit found that nearly $100 million in cash intended for use in reconstruction projects in south-central Iraq could not be properly accounted for. The matter was referred to criminal investigators.

The report noted some accomplishments, including the completion of 33 water-treatment projects, the building of 26 health care facilities and the training of 114 judges. It also reported that more than 170,000 Iraqis were employed on U.S. government projects as of mid-March, that Iraqi crude oil production stabilized after an extended stretch of volatility in 2004 and that the number of wireless telephone users in Iraq now exceeds the number of land-line phone users. Demand for electricity, however, has surged this year even as supply has plateaued.

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