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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.

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