Sunday, July 30, 2006

USAID Creative Accounting On Iraq Reconstruction Projects Alleged

Cynical folks have harbored suspicions that the ill-fated U.S. endeavor in Iraq may have been motivated -- in part at least -- to provide a fertile ground for boondoggles by large government contractors.

This story will not allay any conjectures along such lines:

The State Department agency in charge of $1.4 billion in reconstruction money in Iraq used an accounting shell game to hide ballooning cost overruns on its projects there and knowingly withheld information on schedule delays from Congress, a federal audit released late Friday has found.

The agency hid construction overruns by listing them as overhead or administrative costs, according to the audit, written by the Special Inspector General for Iraq Reconstruction, an independent office that reports to Congress, the Pentagon and the State Department.

Called the United States Agency for International Development, or A.I.D., the agency administers foreign aid projects around the world. It has been working in Iraq on reconstruction since shortly after the 2003 invasion. (...)

The hospital's construction budget was $50 million. By April of this year, Bechtel had told the aid agency that because of escalating costs for security and other problems, the project would actually cost $98 million to complete. But in an official report to Congress that month, the agency "was reporting the hospital project cost as $50 million," the inspector general wrote in his report.

The rest was reclassified as overhead, or "indirect costs." According to a contracting officer at the agency who was cited in the report, the agency "did not report these costs so it could stay within the $50 million authorization."

The inspector general also found that the agency had not reported known schedule delays to Congress. On March 26, 2006, Bechtel informed the agency that the (Basra) hospital project was 273 days behind, the inspector general wrote. But in its April report to Congress on the status of all projects, "U.S.A.I.D. reported no problems with the project schedule."

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