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Context of 'January 30, 2005: Inspector General Finds That $8.8 Billion in Iraqi Funds Handled by CPA Cannot be Accounted for'

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San Diego Business Address of North Star Consultants, Inc.San Diego Business Address of North Star Consultants, Inc. [Source: NBC News]North Star Consultants, Inc. wins a $1.4 million contract to review the Coalition Provisional Authority’s internal controls for managing Iraq’s funds and provide the CPA with a written evaluation. The small firm is not a certified public accounting firm as is required by both UN Security Council Resolution 1483 (see May 22, 2003) and the CPA’s Regulation Number 2 (see June 10, 2003). [US Congress, 2/6/2007 pdf file] The firm is so small that it operates out of a private home near San Diego. [MSNBC, 2/17/2005] A 2004 audit performed by the Special Inspector General for Iraq Reconstruction will find that “North Star Consultants did not perform a review of internal controls as required by the contract. Consequently, internal controls over DFI disbursements were not evaluated. In addition, the Comptroller verbally modified the contract and employed the contractor to primarily perform accounting tasks in the Comptroller’s officer.” [Special Inspector General for Iraq Reconstruction, 7/28/2006, pp. 7 pdf file] A single Northstar employee will reportedly use spreadsheets, not accounting software, to track the $20 billion that the CPA will spend on Iraq’s behalf between April 2003 and June 28, 2004. Of that amount, $12 billion is in cash (see June 25, 2004). [MSNBC, 2/17/2005]

Entity Tags: North Star Consultants, Coalition Provisional Authority

Timeline Tags: Iraq under US Occupation

Stuart W. Bowen.Stuart W. Bowen. [Source: PBS]A report completed by Stuart W. Bowen, the Special Inspector General for Iraq Reconstruction, finds that $8.8 billion of the $20 billion in Iraqi funds that the Coalition Provisional Authority spent between April 16, 2003 and June 28, 2004 is unaccounted for because of inefficiencies and bad management. “Severe inefficiencies and poor management” by the Coalition Provisional Authority has “left auditors with no guarantee the money was properly used,” the report says. The reports says that in once case, it’s possible that thousands of “ghost employees” were on an unnamed ministry’s payroll. “CPA staff identified at one ministry that although 8,206 guards were on the payroll, only 602 guards could be validated,” the audit report states. “Consequently, there was no assurance funds were not provided for ghost employees.” [Special Inspector General for Iraq Reconstruction, 1/30/2005, pp. 16 pdf file; CNN, 1/31/2005] Two years after the release of this report, the inspector general will tell Congressman Henry Waxman (D-Ca) that the $8.8 billion figure was in fact too low because his investigation was limited to funds disbursed to Iraqi ministries between October 2003 and June 24, 2004. Bowen will tell Waxman that he believes that the lack of accountability and transparency actually extended to the entire $20 billion spent by the CPA. [US Congress, 2/6/2007, pp. 16 pdf file]

Entity Tags: Coalition Provisional Authority, Special Inspector General for Iraq Reconstruction, Stuart W. Bowen

Timeline Tags: Iraq under US Occupation

Retired Admiral David Oliver, who served as the Coalition Provisional Authority’s principal deputy for financial matters during the summer of 2003, is interviewed by the BBC, which is doing a documentary on the billions of dollars in missing Iraqi funds. When asked what happened to the $8.8 billion that the Special Inspector General for Iraq Reconstruction concluded could not be accounted for (see January 30, 2005), Oliver responds: “I have no idea, I can’t tell you whether or not the money went to the right things or didn’t—nor do I actually think it’s important.” The interviewer than asks, “Not important?” And Oliver says, “No. The coalition—and I think it was between 300 and 600 people civilians—and you want to bring in 3,000 auditors to make sure money’s being spent?” The interview than notes, “Yes, but the fact is billions of dollars have disappeared without trace…” And Oliver says in response, “Of their money. Billions of dollars of their money, yeah I understand, I’m saying what difference does it make?… I chose to give that money to the Iraqis, they got the power working within eight days in the major hospitals in Baghdad.” [BBC, 11/9/2006; US Congress, 2/6/2007, pp. 17 pdf file]

Entity Tags: David Oliver

Timeline Tags: Iraq under US Occupation

A Senate panel finds that billions of taxpayer dollars have been wasted in reconstruction efforts throughout Iraq through fraud, corruption, incompetence, and outright theft. The panel, led by independent Democrat Joseph Lieberman and moderate Republican Susan Collins, say they are considering legislation to create a commission to help fix problems after investigators found confusion and disarray in the four-year-old Iraq reconstruction effort. Lieberman observes, "Where we’ve seen failure is when the US government failed to plan projects carefully and then failed to keep a close watch over contractors and now we’ve seen billions of dollars wasted—a cost measured not just in dollars but in the undermining of the overall US mission in these war-torn countries." Inspector General Stuart Bowen’s latest report on the occupation’s reconstruction efforts found that nearly $400 billion had either been wasted or simply disappeared, though Bowen’s report was careful not to make allegations of outright criminality. Bowen’s report primarily blames confusion, disarray, and incompetence in joint efforts between the rival Defense and State Departments. "Anyone who has spent appreciative time in the Iraq reconstructive effort understands the tension that exists between the two," Bowen says. Bowen’s latest report finds, among other things, that a Defense Department agency charged with running the reconstruction effort never developed a fully coordinated plan upon members’ arrival in 2003, leading to confusion and duplication of effort. "We were bumping into one another as we tried to solve the same problem,” a former agency official is quoted as saying. Money flowed to reconstruction projects before procedures, training and staffing were fully in place, resulting in a "lack of clearly defined authorities" and little accountability in terms of how dollars were being spent. There was little oversight to ensure that Iraqi companies hired to do reconstruction work operated according to international standards. Earlier this year, federal investigators determined that the Bush administration had squandered as much as $10 billion in reconstruction aid in part because of poor planning and contract oversight, resulting in contractor overcharges and unsupported expenses. [Associated Press, 3/22/2007]

Entity Tags: Stuart W. Bowen, Joseph Lieberman, US Department of State, Susan Collins, US Department of Defense

Timeline Tags: Iraq under US Occupation

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