American officials rushing to start small building projects in a large area of Iraq in 2003 and last year did not keep required records on the spending of US$89.4 million in cash and cannot account at all for another US$7.2 million, a federal watchdog reported on Wednesday.
Most of the poorly documented spending appeared to involve incompetence or haste, but in some cases the auditors said they suspected theft.
"We found indications of fraud,V said the report by Special Inspector General for Iraq Reconstruction Stuart Bowen Jr.
Some cases were referred to a criminal investigations unit of the inspector general's office.
The report did not name the people suspected of crimes or say how much money may have been involved in possible fraud.
LACK OF CONTROLS
The report described instances in which district and field officers in the small-scale construction program did not provide adequate receipts for money they had reported as having been spent, or left Iraq without accounting for all the cash they had received.
It said the chief money manager in Baghdad "did not maintain full control and accountability."
The district and field workers included military officers and American civilians under contract.
The auditors reviewed the disbursement of US$120 million in cash in south-central Iraq.
Starting in spring of last year, with the repair of Iraq's major infrastructure stalled and the insurgency intensifying, US officials rushed to spread jobs and money through small projects.
They also rushed, critics charge, to spend Iraqi money entrusted to the Americans before June 28, last year, when the new Iraq government took charge of it.
UN CONCERN
The evidence of sloppy controls is of international concern because the Americans were using the Iraqi funds under authority from the UN that required strict accounting.
UN monitors have said the US has not fully documented how billions of dollars in Iraqi money, from the Development Fund for Iraq, was spent in 2003 and last year.
The new report noted that a division agent got US$58.8 million in cash from the American office in Baghdad that dispensed Iraqi funds in January last year, but that later documents said he got US$1 million less, a discrepancy that has not been explained.
MISSING FUNDS
The report also noted that two field agents finished their contracts and left Iraq with apparent cash surpluses of US$777,000 and US$715,000. The money has not been located.
In one of those cases, the report said, the manager closed the agent's account with a paper transfer of US$777,000 to a different office without ascertaining where the money went.
"This appears to be an attempt to remove outstanding balances by simply washing accounts," the report said.
The Pentagon, which administered the Iraqi money, said it agreed with the report's main conclusions and had acted to improve controls.
Responding to a draft of the report, Colonel Thomas Stefanko, commander of Joint Area Support Group-Central in Baghdad, wrote that his office had taken "extensive corrective action" and was reviewing expenditures.
He also said high turnover, a shortage of monitors, the urgency of the building effort and the dangers of travel had contributed to the shortcomings.
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