We sent tons of lawyers and judges to Iraq. Did we forget to send accountants?
The Iraqi Board of Supreme Audit, in a confidential report delivered to Iraqi Prime Minister Ibrahim al-Jaafari and reviewed by Knight Ridder, has uncovered widespread fraud and waste in $1 billion worth of weapons procurement contracts involving senior Iraqi officials in the Defense Ministry. The audit report indicates that as much as $500 million may have been lost through three intermediary companies that hid “kickbacks they received from contracts involving the purchase of unnecessary, overpriced or outdated equipment”, Knight Ridder reported.
The Iraqi Defense Minister has ordered the arrest of his procurement chief (who fled) and placed one of his deputies on leave. Among the audit findings were :
- Senior Iraqi officials kept little or no record of major purchases. Nearly all purchases for which there were records contained a clause that required payment up front in cash for the full value of the contract.
- The Ministry of Defense hired middlemen, who subsequently disappeared, to negotiate contracts leaving officials with no way to complain about problems with fulfillment.
- While internal records indicated that the Ministry of Defense signed contracts with Poland, Arab countries and the United States, in fact all contracts were signed by Iraqi suppliers.
To say the least, this is not encouraging. One of the reasons the people of Iraq are distrustful of government is that Saddam's regime was as crooked as a mountain road. (Not to mention the torturing and mass murder.) If the new Iraqi government is to gain the people's trust it is vital that it's officials not steal from them and/or lose their money. We're not exactly off to a good start here.
To accomplish this, they're going to need meticulous records and complete transparency in their budgets as well as their historical records. According to this report, many intermediaries the Ministry hired were actually transitory individuals or groups who subsequently disappeared. This is simply atrocious.
Unfortunately, it gets worse:
An audit report citing similar problems in Development Fund for Iraq (DFI), Iraq’s oil account, from June 24 to December 24, 2004, was delivered to the International Advisory and Monitoring Board (IAMB) by KPMG in May. KPMG noted, according to a statement from IAMB, that records maintained by both Iraqi and U.S. agencies were incomplete, and that Iraqi ministries did not explain the lack of competition for contracts.
The KPMG audit also cited “unreconciled quantities of oil and oil products exported indicating a lack of control and possible misappropriation of oil revenues. . . and non-deposit of proceeds of export sales of petroleum products into the appropriate accounts”, according to the IAMB statement.
This oil money is the future of the Iraqi people. If that money is going missing, that future is in jeopardy.
If their accounting is that bad, maybe I should be volunteering to go. (Although I don't know what my wife would think of that.)