Development Fund for Iraq missing $8.7 billion

by Kurt Schulzke

False Claims Act and SEC whistleblower claims could be lurking in records, such as they are, of the Development Fund for Iraq.  The U.S. Department of Defense is unable to account for 96 percent of $9.1 billion in Development Fund for Iraq money it has received, according to an audit report just released by the Special Inspector General for Iraq Reconstruction (“SIGIR”).  Understatement of the day:  The subject heading of the SIGIR’s Memo to the Secretary of Defense reads, “Department of Defense Needs To Improve Financial and Management Controls.”  Report excerpts and commentary follow the jump.

U.S. Weaknesses in DoD’s financial and management controls left it unable to properly account for $8.7 billion of the $9.1 billion in DFI funds it received for reconstruction activities in Iraq. This situation occurred because most DoD organizations receiving DFI funds did not establish the required Department of the Treasury accounts and no DoD organization was designated as the executive agent for managing the use of DFI funds. The breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss.

The Department of the Treasury established guidance for accounting for non-U.S. government funds when U.S. agencies act as a custodian of those funds, but DoD did not implement the guidance in a timely manner. More importantly, most DoD organizations that received DFI funds did not follow the guidance. Only one of these organizations established the required account and, as a result, accounts were not established for $8.7 billion (96%) of the DFI funds made available to DoD.

To the extent that “required Treasury Accounts” were a condition of payment, a claim for such funds without the required account could constitute a false claim.  The DOD’s confusion over where the money went matches mine regarding where it came from.

The SIGIR repeatedly states that DFI money is not U.S. government funds but I’m not convinced.  SourceWatch says $3.1 billion was contributed by the U.S. Congress.   The SIGIR’s Audit Report provides more details on the audit findings but does not drill down very far on funding sources except to say, on page 5, that $6.6 billion came from the Coalition Provisional Authority in 2004.  Much of the CPA’s funding must have come from the U.S. Government.

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