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New Audits Cite Lax Oversight of US Contracts in Iraq

US Special Inspector General for Iraq Reconstruction Stuart Bowen

The U.S. Special Inspector General for Iraq Reconstruction has criticized the State Department for its management of nearly $3 billion in contracts and grants in Iraq.

In two reports, auditors cited weak and ineffective State Department oversight of a $2.5 billion contract for police training and a grant of $250 million for programs to build democratic institutions.

The first report found that lax oversight of the police training contract with DynCorp International has left the contract's funds vulnerable to fraud and abuse.

Special Inspector General for Iraq Reconstruction Stuart Bowen says the issue of oversight has long plagued the DynCorp contract.

"This is not a new issue. It's one we pointed out previously in reviews of the police training oversight there. But it's a troubling issue because not enough progress has been made in addressing the problems we have uncovered in our prior reports," he said.

Bowen points to questionable invoices from DynCorp, such as an order for electric power generators it already had and payments for real estate that far exceeded local market value.

Bowen say the State Department does not have enough personnel to monitor the costs associated with the police training contract.

"What this audit is really about, though, is weaknesses in controls over the review of DynCorp's invoices. These are enormous invoices with thousands of line items charging millions of dollars, and you have one person essentially actively reviewing them. And that's insufficient," he said.

State Department spokesman P.J. Crowley said Monday that the department acknowledges the need for more auditors in Iraq. But he took issue with the report's assertions regarding vulnerability to fraud and waste.

"I don't think that we agree with the characterization in that report. But we will continue to work with the I.G. [i.e., Inspector General] on it," he said.

In a written statement, DynCorp says its performance of the contract has been "exemplary" and that the firm welcomes thorough scrutiny of its billing and invoices.

In the second report, auditors questioned the effectiveness of grants totaling some $248 million to the National Democratic Institute and the International Republican Institute for democracy promotion.

Bowen says both groups engage in a variety of programs to help build civil institutions in post-Saddam Iraq.

"It's called 'democracy-building' - specifically, training for elections, training for political parties, training for all aspects of the electoral process. Iraq is a fledgling democracy. It has no foundation from which to work in this regard. And there have been five elections in the past six years in Iraq, and that has required essentially a system to be built from scratch coming out of the tyranny that preceded it," he said.

Although these grants are small compared to the police training contract, Bowen says the problems are the same.

"[They are] a much smaller effort, but similar nevertheless in that there is not sufficient oversight being carried out in-country - both in review of expenditures and in provision of outcomes. The grants themselves require pretty detailed reporting on achievements. And we found that that is just not being done. Very cursory reporting is being provided regarding these grants," he said.

Without detailed reporting, Bowen says, the effectiveness of the two programs cannot be accurately gauged. A National Democratic Institute official, who asked not to be named, says his organization's reporting on its activities has been detailed and far in excess of State Department requirements.

Auditors also noted that the National Democratic Institute, or NDI, spent almost one-third of grant funds for security, and that the International Republican Institute used more than half of its funds for the same purpose. The NDI official said the organization's security costs were moderate and reasonable in light of the situation in Iraq. In a written statement, the International Republican Institute denies that its security costs were excessive. A previous Inspector General report found that security costs for contractors and grantees in Iraq ranged between 24 and 53 percent of the contract or grant.