Gone But Not Forgotten

LATimes (05.05.05):

"The U.S. government has opened a criminal inquiry into suspected embezzlement by officials who failed to account for almost $100 million they disbursed for Iraqi reconstruction projects, federal investigators said Wednesday.

Auditors have been unable to fully document how the money was allocated to Iraqi workers by a small group of officials working from a U.S. outpost in Hillah, according to an audit report released Wednesday by Stuart W. Bowen Jr., the special inspector general for Iraq reconstruction."

U.S. Officials Suspected of Embezzlement in Iraq

The money at issue here came "from seized assets of the former regime of Saddam Hussein and from Iraqi oil revenue, not from U.S. taxpayer money."

Of all the money made available for reconstruction, it's the "Rapid Regional Response Program, an obscure rebuilding effort operated from the Hillah office" that really caught the auditors' attention. "The program was designed to jump-start reconstruction in south-central Iraq by allowing U.S. officials to quickly issue contracts worth up to $200,000 each."

"To pay for contract work in Iraq's cash-based economy, the U.S. appointed military personnel and civilians to physically hand out money to Iraqis. The U.S. officials were then supposed to reconcile those payments with receipts. But the auditors found that such receipts were lacking or incomplete for $96.6 million of $119.9 million in payments." Which is a little over 80%.

Well, what happend?

• Two guys left Iraq without accounting for $1.5 million. Their manager just zeroed out the balance on a spreadsheet to make it go away. Presto!!
• Even though one guy, who was "in charge of the overall cash program", was fired, he was allowed to stay on the job for a month. When asked about $1,878,870 he hadn't accounted for, he went out and came back a few days later with the cash. This lead "to suspicions that he had 'a reserve of cash and turned in only the amount' needed to complete the clearance process, the report says." Suspicions?
• Another guy "told superiors that he had given $311,100 to another U.S. official when he had actually handed over $1,210,000, leaving it unclear where the remaining $898,900 was, the report says."

QOTD: "''We're not saying the money is lost. We're saying they can't account for it,' Mitchell said."

To give you an idea of how this could have happened, let's turn to the Air Force Comptroller:

Once upon a time, Major General Frank Faykes, Director of Financial Management of Air Force Materiel Command, had four members of his staff "serving in various positions in Baghdad, Iraq, serving in 3 different organizations." One was budget director, Colonel Don Davis, who was "serving as the Coalition Provisional Authority (CPA) Comptroller in Baghdad, occupying real estate in the former Presidential Palace." Colonel Davis and his staff were "charged with overseeing the $17B Development Fund for Iraq (DFI), funding generated largely from the country's oil revenues."

Sounds like Colonel Davis had a tough job. "'I have had to learn many things about commercial banking over the last sixty days. I only wish I had paid more attention to those banking and economic courses I took years ago.'"

To help Colonel Davis, General Faykes assigned Lieutenant Demetrius Prado, a Financial Services Officer from Edwards Air Force Base, to the CPA Comptroller's office. The Lieutenant was put in charge of DFI disbursements.

The Lieutenant's qualifications? Well, let's let the Comptroller explain:

"Although new to the financial management career field, Lt Prado plays a critical role in the management of the DFI. His primary duties include ensuring all payments from the $17 Billion fund are in accordance with CPA regulations. He is also directly responsible for distributing and tracking over $700 Million in cash issued to 15 disbursing agents throughout the country in support of the Commander's Emergency Response Program (CERP) and the Rapid Regional Response Program."

New to the financial management career field? Cheezus H. Like a lamb to the slaughter.

"When asked about having four of his field grade officers serving in Baghdad at the same time, General Faykes said 'the most important job my financial personnel can do is to provide first class, expert financial advice, guidance and support to the warfighters. I want them focused solely on this mission and my home team will 'check their six' back here at Wright Patterson AFB."

Should have checked the nine, twelve and three too, General.