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Pentagon management turns “Development Fund for Iraq” into misnomer August 5, 2010

Posted by Matthew Leatherman in Uncategorized.
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Eight former officials of the Defense Department or Coalition Provisional Authority currently are in federal prison for bribery, fraud, and money laundering in association with $96.6 million in Development Funds for Iraq that went missing in 2005.  Last week the Special Inspector General for Iraq Reconstruction reported that the Pentagon cannot account for another $7.73 billion of these development funds, bringing the total to $8.7 billion.

Fully 96% of this total fund ($9.1B) was lost somewhere in Pentagon accounting.  And this wasn’t even the Pentagon’s money – the Development Fund for Iraq held export revenues from Iraq’s oil and gas fields, along with surpluses from the U.N.’s Oil-for-Food program, and was operated by the Pentagon under management delegated by the interim Iraqi government.

The Defense Department confesses that it is “one of a very few cabinet level agencies without a ‘clean’ financial audit opinion.” Abstract as that sounds, it is a critical obstacle to our success overseas.

There was no mysterious purpose for the Development Fund for Iraq – it was meant to fund development in Iraq.  There is no way to know if anything of the sort happened with this money, but it is clear that a number of other things did.  The U.S. Army Corps of Engineers (USACE) was delegated between $2.1 – $2.3 billion, for instance, and it kept the money.  According to last week’s report, USACE treated it as “advance payments for reconstruction work they were planning.”

This flies in the face of development practice – subsidizing USACE does nothing to build local capacity; locals have no authority over USACE decisions; and money was hemorrhaged on costly American salaries instead of maximized on the local economy.  Added on top, we broke the newborn government of Iraq’s trust.  It was their money, after all, and the best that we can tell them is that it disappeared through inefficiency, outright loss, and – occasionally – crime.

Even in circumstances far better than this, the Defense Department is not an international development organization.  Using it in that way is an example of what ADM Mike Mullen, Chairman of the Joint Chiefs of Staff, has called the militarization of foreign policy.  That militarization undercuts the civil-military relationship on which our democracy depends but, for the past decade, Congress has tolerated this risk on the pretense that the Defense Department is the only organization on the ground in Iraq and Afghanistan able to fulfill this mission.

Losing $8.7 billion in development funds is an example of just how thin this pretense is.  Just because the military is in Iraq and Afghanistan doesn’t mean that it is sufficiently capable of providing everything Iraq and Afghanistan need.

Nor is this the only example of the Pentagon struggling with development tasks.  GAO released a report in April on the Combined Joint Task Force – Horn of Africa, a Pentagon mission based in Djibouti that focuses heavily on development.  It determined that “some personnel lack needed skills for (1) applying funding to activities, (2) understanding African cultural issues, and (3) working with interagency partners at U.S. embassies.” On the basis of this and other findings, GAO found the severity of the situation sufficient to warrant a recommendation that AFRICOM “evaluate…whether the task force should be retained.”

Now is the time to learn the lessons we’ve ignored so far.  Every nook and cranny of the federal government should have clean financial audit opinions, especially the Pentagon.  Congress has required it to meet this standard by September 2017 (see §1003), but that is way too far in the future.  Intermediate milestones need to be publicly set with the explicit expectation that failing to meet them will result in a loss of funding.

Equally important is ensuring that development professionals do our development work.  Many have pointed out how the State Department and Agency for International Development lack the capacity, capability, and culture to do this work in places like Iraq and Afghanistan.  That determination is absolutely correct.  It is not right, however, to tolerate that shortcoming.  Congress needs to be just as stern in getting the State Department and USAID ready for this work as it is with the Pentagon on meeting audit standards.

Too often Washington plays serious about things like financial audit and bureaucratic breakdown, treating them in fact as nothing more than grist for political point scoring.  Yet these issues tangibly hamstring our efforts on the ground.  Both the administration and Congress need to get serious about them now if they hope to turn the tide in Afghanistan over the coming months.

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