SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

400 Army Navy Drive • Arlington, Virginia 22202

October 13, 2005 

MEMORANDUM FOR DEPUTY SECRETARY OF DEFENSE 

SUBJECT: Management of Commanders’ Emergency Response Program for Fiscal Year 2004 

(Report No. SIGIR 05-014) 

In response to a request from your office, we are providing this audit memorandum for your 

information and use. Your office asked, through the Inspector General, Department of Defense, 

that the Office of the Special Inspector General for Iraq Reconstruction review the Commanders’ 

Emergency Response Program (CERP) to determine whether funds were properly administered. 

This report discusses controls over the CERP, which was funded by seized assets, funds provided 

by the Development Fund for Iraq (DFI), and appropriated funds for fiscal year 2004. After 

coordinating our work with evaluations by other agencies, we decided not to review CERP 

projects funded by seized assets. Further, at the time of our review, the timeframe for obligating 

DFI funds had expired. As a result, we restricted our review to samples of CERP projects 

funded by appropriated funds. 

We concluded that, while CERP appropriated funds were properly used for intended purposes, 

overall controls over CERP processes required improvement. Federal Acquisition Regulation 

and Department of Defense controls over the distribution of appropriated funds were not 

consistently followed and the required documents were not consistently used to maintain 

accountability of projects. 

Objectives, Scope, and Methodology. The overall objective of this audit was to evaluate the 

adequacy of controls over CERP funds. Specifically, we sought to determine whether: (1) fund 

allocation procedures were adequate; (2) funds were used for intended purposes; and 

(3) financial records were accurately maintained and supported. During the course of our audit, 

we found that we could not fully address the overall objective because of other more pressing 

priorities concerning the management of the Iraq Relief and Reconstruction Fund. We narrowed 

our audit’s objective and are reporting the results of audit work performed regarding the extent to 

which CERP managers: 

• obtained and documented required contracting officer’s approval 

• expended funds in accordance with authorized project limits 

• effectively controlled the distribution of appropriated funds 

Overall, funds available for the CERP amounted to more than $727.1 million, of which 

approximately $140 million represented appropriated funds available for CERP in Iraq. We 

reviewed CERP transactions made by the U.S. Central Command’s Multi-National Force – Iraq 

(MNF-I). Our review excluded CERP transactions made by the U.S. Central Command’s MultiNational Security Transition Command – Iraq because those transactions were being audited by 

the U.S. Army Audit Agency. We will report on fiscal year 2005 CERP transactions in a future 
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report, and we will continue to coordinate with the U.S. Army Audit Agency on its reviews of 

CERP projects managed by the Multi-National Security Transition Command – Iraq to avoid 

duplication of efforts. 

We conducted this performance audit from October through December 2004 and June through 

September 2005, in accordance with generally accepted government auditing standards. 

Background. The CERP was an instrumental part of the U.S. government’s efforts to secure 

and stabilize Iraq. In June 2003, the Coalition Provisional Authority authorized the operation of 

the CERP. The CERP was used to respond to urgent humanitarian relief and reconstruction 

requirements by allowing military commanders to carry out programs and projects that would 

immediately assist the Iraqi people and support the reconstruction of Iraq. Projects funded 

through the program were for immediate requirements of relatively small dollar-value 

procurements. The Coalition Provisional Authority initially funded the CERP through seized 

assets and funds provided by the DFI. 

Congress subsequently passed an appropriation for the CERP in November 2003 as part of the 

“Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq 

and Afghanistan, 2004,” Public Law 108-106, section 1110. The overall CERP funds were 

divided into three categories, and each of those categories had different requirements for use and 

reporting. The CERP-fund categories and dollar amounts applicable to our review were: 

• funds seized or captured from ongoing combat operations ($176,688,000) 

• funds provided by the United Nations ($370,431,406) 

• funds provided by the U.S. Congress (not to exceed $180 million) 

Commanders’ Emergency Response Program Guidance. The MNF-I provided guidance to 

subordinate commands on the appropriate use of CERP funds. Project types eligible for funding 

under the CERP at the time of our review included: 

• Civic cleanup 

• Education 

• Electricity 

• Food production and distribution 

• Healthcare 

• Irrigation 

• Rule of law and governance 

• Telecommunications 

• Water and sanitation 

However, guidance prohibited appropriated funds to be used on types of projects that were for 

the following purposes: 

• Activities with a direct or indirect benefit to U.S. or Coalition Forces 

• Buyback of weapons 

• Entertainment for local population 

• Purchases of firearms and ammunition 

• Removal of unexploded ordnance 
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• Rewards 

• Services that would duplicate those provided by municipal governments 

Controls Over the Commanders’ Emergency Response Program. We obtained project 

folders and analyzed payment records of 76 projects funded by the CERP and managed by the 

MNF-I through the 126th Finance Battalion, 336th Finance Command, Baghdad, Iraq. The 

MNF-I disbursed more than $3.6 million for these 76 projects from August 1 through 

October 13, 2004. We focused our review on the records for commitments, obligations, and 

expenditures funded by appropriated funds for this period. 

Contracting Officer’s Approval Documentation. We determined that all 76 projects we 

reviewed met Department of Defense requirements that CERP funds be used only to purchase 

goods and services for the building, reconstitution, reestablishment, and repair of the social and 

material infrastructure in Iraq. 

Of the 76 projects reviewed, 74 were valued at approximately $3.6 million and thus required a 

contracting officer’s approval based on project-dollar limits. Of these 74 projects, 46 exceeded 

the $10,000 threshold for which Combined Joint Task Force-7, Fragmentary Order 89, June 19, 

2003, required a minimum of three separate quotes from vendors and the Federal Acquisition 

Regulation required contracting officer’s documentation showing that the price was determined 

to be fair and reasonable. Specifically, we determined that: 

• 58 of the 74 projects did not have documentation showing that a contracting officer’s 

approval was obtained; 

• 5 of the 46 projects did not have the required three quotes from vendors; and 

• 19 of the 46 projects did not have documentation showing that a fair and reasonable price 

was obtained 

Adherence to Authorized Project Limits. Based on our review of the 76 projects, we 

concluded that Army division-level commanders expended CERP funds in accordance with 

authorized project limits. Commanders followed proper funding-source guidelines for CERP 

projects and correctly obligated CERP-appropriated funds and not seized or DFI funds. Further, 

there were no CERP-appropriated funds commingled with the Army’s Operations and 

Maintenance appropriated funds, and no CERP projects included payments for prohibited 

purposes. 

Controls Over Distributions Of Funds. We found that the Joint Area Support Group – 

Central Comptroller, which functioned as the MNF-I Comptroller as well as the DFI Account 

Manager, did not effectively control CERP funds distribution. The DFI Account Manager 

inappropriately authorized the Multi-National Corps - Iraq Budget Officer, who was not 

appointed as a disbursing officer or funds agent, to issue and receive funds. Our review of the 

Statement of Agent Officer’s Account (DD Form 1081) forms showed that the budget officer 

received funds and other items in the amount of $289,340,819.70 and assumed responsibility for 

that amount. However, the budget officer’s appointment only delegated him the authority to 

certify the availability of funds allocated to the Multi-National Corps - Iraq of up to $10 million 

and to obligate funds as necessary to support mission requirements, but not to receive or disburse 

funds. Consequently, the budget officer inappropriately signed the Statement of Agent Officer’s 

Account form for more than $289 million. 

Results. We concluded that, while CERP appropriated funds were properly used for intended 

purposes, overall controls over CERP processes required improvement. Federal Acquisition 

Regulation and Department of Defense controls over the distribution of appropriated funds were 
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not consistently followed and required documents were not consistently used to maintain 

accountability of projects. 

Actions. We are currently reviewing fiscal year 2005 CERP projects and will make 

recommendations as warranted if conditions reported herein persist. We briefed senior 

leadership at the commands involved in the management of the CERP. No specific 

recommendations were made; therefore, no written response to this report was required. We are 

providing this information so that any necessary actions may be taken as appropriate to improve 

the controls over the CERP. 

We appreciate the courtesies extended to the staff. For additional information on this report, 

please contact Mr. Joseph T. McDermott at (703) 428-1100, or at joseph.mcdermott@sigir.mil, 

or Mr. Clifton Spruill at (703) 343-8817, or at clifton.spruill@iraq.centcom.com. 

Stuart W. Bowen, Jr. 

Inspector General