Keeping tabs on the money in Iraq

Arguments about the merits of the war effort in Iraq aside, it would be nice to know that the money intended for rebuilding the country and doing positive things was actually doing just that. Sadly, it comes as no surprise to me that hundreds of millions of dollars can't be accounted for in Iraq.

The story goes like this: The Pentagon audited $8.2 billion of U.S. taxpayer money that was supposed to be spent for rebuilding. And almost none of it was accounted for properly. They can't even verify the receipt of goods and services totaling millions of dollars. Crazy items showed up, like $320.8 million paid based on an invoice that simply said "Iraqui Salary Payment." In another situation, $11.1 million was paid to a contractor based upon a voucher that didn't even show what (if anything) was delivered. Allies like the United Kingdom, Poland, and South Korea have been paid $134.8 million, but the Pentagon auditors have no idea why.Experts say this all went wrong because the United States wasn't prepared to handle this large scale business with contractors. From April 2001 to June 2006, over 183,000 payments were made from field offices in Iraq, Kuwait, and Egypt, totaling $10.7 billion of taxpayer funds. It's clear that the U.S. may not have been prepared to handle that type of volume, but in my opinion, the money should not be handed out unless and until the goods and services are properly verified. If that means contractors are paid more slowly, so be it. If that means that work is delayed while a proper procedure for verification is created and implemented, then that's what needs to happen.

Whether or not we agree with the money being spent on the war and reconstruction in Iraq, we can likely all agree on this: Don't pay contractors unless their work can be verified, period.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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