Iraq's funds were spent quickly, says GAO official

By Rajiv Chandrasekaran
The Washington Post

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However, the U.S.-led occupation authorities were much quicker to channel Iraq's own money, expending or earmarking nearly all of $20 billion in a special development fund fed by the country's oil sales, a congressional investigator said.

Only $366 million of the $18.4 billion U.S. aid package had been spent as of June 22, the White House budget office told Congress Friday in a report that offers the first detailed accounting of the massive reconstruction package.

Thus far, according to the report, nothing from the package has been spent on construction, health care, sanitation and water projects. More money has been spent on administration than all projects related to education, human rights, democracy and governance.

Of $3.2 billion earmarked for security and law enforcement, a key U.S. goal in Iraq, $194 million has been spent. Another central objective of the aid program was to reduce the 30 percent unemployment rate, but money has been spent to hire about 15,000 Iraqis, despite U.S. promises that 250,000 jobs would be created by now, U.S. officials familiar with the aid program said.

U.S. officials involved in the reconstruction blame security concerns and bureaucratic infighting among the Pentagon, the State Department and the White House for delays in the allocation of funds. By the time the Pentagon's contracting office in Baghdad began awarding contracts, the risk of kidnapping and other attacks aimed at foreign workers was so dire that many projects never began. Several Western firms that won contacts summarily have withdrawn their employees from Iraq.

Fewer than 140 of the 2,300 reconstruction projects that were to be funded with the U.S. aid package are under way, the officials said.

Officials with the contracting office contend the amount of money actually spent does not reflect the full scope of work being performed. A more accurate figure, they said, is the amount of money allocated for reconstruction work. Just over $5.2 billion had been allocated as of June 22, according to the White House budget report.

Spending patterns have been different with the Iraqi money. The Coalition Provisional Authority (CPA), the now-dissolved U.S.-led occupation administration, spent or locked in for future programs more than $19 billion from the $20 billion Development Fund for Iraq, which was established by the U.N. Security Council to manage Iraq's oil revenue, said Joseph Christoff, director of international affairs and trade at the General Accounting Office, the watchdog arm of Congress. About $6 billion of that came in the past two months.

Some Iraqi officials have criticized the contrasting spending practices.

The occupation authorities "came here and spent a lot of our money but very little of theirs," said a senior Iraqi official, who spoke on condition of anonymity on the ground that criticism could affect his relationship with the new U.S. Embassy here.
 
The official did not contest the CPA's decision to use the development-fund money to pay the expenses of running Iraq's government during the occupation, but he condemned spending on what he called "less essential projects that should have been left up to the Iraqis to decide."

Beth Marple, a U.S. spokeswoman in Baghdad, Iraq, said the rapid spending was agreed on between the now-dissolved Coalition Provisional Authority and Iraqi officials. "The unfunded needs of the Iraqi people demanded that these dollars be put to work," she said.

Allocations and disbursements from the development fund were made by the 12-member Program Review Board, a committee composed of Americans representing the CPA, Iraqis from the U.S.-appointed government and officials from the governments of Britain and Australia. Most voting members were non-Iraqis.

"It was a CPA-run thing," the senior Iraqi official said. "There was lots of talk about taking input from the Iraqis, but in the end, they made all the decisions."

Two former CPA officials involved in contracting issues said the CPA spent money from the development fund faster because it was not governed by the same rules requiring competitive bidding as the money from Congress was. The CPA has not identified how many noncompetitive contracts were awarded. U.S. officials have said that Halliburton was among the firms to receive no-bid contracts from the Program Review Board.

"Perhaps they prefer to have the flexibility to give away contracts to whichever companies they want on whatever terms they want," said Svetlana Tsalik, director of the George Soros-funded Revenue Watch, part of the Open Society Institute. Although the Security Council created a monitoring board, its efforts to audit the process were stymied by the CPA, which has failed to hand over documents, according to other officials, who spoke on condition of anonymity.

Material from The Baltimore Sun is included in this report.