OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

MMAANNAAGGEEMMEENNTT OOFF RRAAPPIIDD RREEGGIIOONNAALL

RREESSPPOONNSSEE PPRROOGGRRAAMM CCOONNTTRRAACCTTSS

IINN SSOOUUTTHH--CCEENNTTRRAALL IIRRAAQQ

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JJJAAANNNUUUAAARRRYYY 222333,,,222000000666 
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

400 Army Navy Drive • Arlington, Virginia 22202

January 23, 2006 

MEMORANDUM FOR UNITED STATES AMBASSADOR TO IRAQ 

COMMANDING GENERAL, JOINT CONTRACTING COMMAND 

– IRAQ/AFGHANISTAN 

COMMANDER, JOINT AREA SUPPORT GROUP - CENTRAL 

SUBJECT: Management of Rapid Regional Response Program Contracts in South-Central Iraq 

 (SIGIR-05-023) 

We are providing this audit report for your information and use. We performed the audit in 

accordance with our statutory duties contained in Public Law 108-106, as amended, which 

mandates the independent and objective conduct of audits relating to the programs and 

operations funded with amounts appropriated or otherwise made available to the Iraq Relief and 

Reconstruction Fund. Public Law 108-106, as amended, requires that we provide for the 

independent and objective leadership and coordination of, and recommendations on, policies 

designed to promote economy, efficiency, and effectiveness in the administration of such 

programs and operations and to prevent and detect waste, fraud, and abuse. 

The Chief of Mission of the United States Embassy Baghdad did not respond to the draft of this 

report. However, we considered management comments from the Joint Contracting CommandIraq/Afghanistan, and the Joint Area Support Group-Central on a draft of this report when 

preparing the final report. Comments by those organizations conformed to requirements and left 

no unresolved issues. 

We request comments on the final report from the Chief of Mission of the United States 

Embassy Baghdad by February 13, 2006. Please send management comments, with the 

signature of the authorized official, in electronic format (Adobe Acrobat) to 

SIGIRAuditReports@sigir.mil. 

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

please contact Mr. Joseph T. McDermott at (914) 822-4618, or by email at 

joseph.mcdermott@iraq.centcom.mil, or Mr. Clifton Spruill at (703) 343-8816 or 

(914) 822-2798, or by email at clifton.spruill@iraq.centcom.mil. For the report distribution, see 

Appendix K. 

Stuart W. Bowen, Jr. 

Inspector General 
i 

Special Inspector General for Iraq Reconstruction 

Report No. SIGIR-05-023 January 23, 2006 

Management of Rapid Regional Response Program 

Contracts in South-Central Iraq 

Executive Summary 

Introduction. This audit report is one of a series of reports addressing controls over 

cash, contract management, and grants management for the Coalition Provisional 

Authority South-Central Region. This audit report discusses the processes used for the 

authorization, award, execution, and oversight of contracts within the Coalition 

Provisional Authority South-Central Region. 

During 2003-2004, the Coalition Provisional Authority used contracts to purchase 

products or services. The contracts were intended to help carry out a program or project 

that directly benefited the Iraqi people or assisted in the reconstruction and recovery of 

Iraq. Between October 2003 and June 2004, the Coalition Provisional Authority SouthCentral Region used funds provided from the Development Fund for Iraq through the 

Rapid Regional Response Program to award 907 contracts and 1,212 micro-purchases 

worth approximately $88.1 million. 

Objective. The overall audit objective was to determine whether disbursing officers in 

selected locations in southern Iraq complied with applicable guidance and properly 

controlled and accounted for Development Fund for Iraq cash assets and expenditures. 

During our audit, we observed deficiencies in contract award documentation and 

expanded our scope to determine whether Coalition Provisional Authority South-Central 

Region personnel properly managed contracts. 

Results. South-Central Region personnel, under the direction of the Coalition 

Provisional Authority, did not effectively manage 907 contracts and 1,212 micropurchase contracts awarded through the Rapid Regional Response Program in the 

amount of $88.1 million. As a result, for 907 contracts and 1,212 micro-purchase 

contracts we reviewed: 

• 4 projects, using 20 contracts (2.2 percent) and several contract 

modifications, totaling approximately $9.1 million, appeared to have had the 

requirements split to keep the contract awards under the $500,000 approval 

threshold to circumvent the required reviews 

• 158 contracts (17.4 percent), totaling approximately $16.3 million, were 

either not competitively awarded or lacked documentation that showed a 

competitive process had taken place and 26 contract files (3.0 percent), 

totaling approximately $2.6 million, did not contain a signed contract 

• 11 contracts (1.2 percent), totaling more than $5.6 million, were issued 

without proper authorization and 38 contracts (4.2 percent), totaling 

approximately $7.0 million, were awarded after the transfer of responsibility 

for the Development Fund for Iraq to the Iraqi government on June 28, 2004 

• 91 projects (10.7 percent), totaling approximately $11.6 million, were paid 

in full at the time of contract signing and the completion of the project work 

was not verified; 11 contracts (1.2 percent) were overpaid by $571,823; 
ii 

approximately $515,000 was disbursed for Coalition Provisional Authority 

salaries and operations in violation of Program Review Board 

Guidance 06.2 (amended); approximately between $47,000 and $87,000 in 

cash was lost but not reported to the Coalition Provisional Authority 

Comptroller; and approximately $23.0 million was transferred to 

unauthorized personnel but documentation showed only $6.3 million 

disbursed to contractors resulting in the loss of oversight of $16.7 million 

• 286 contract files (31.5 percent), totaling approximately $31.0 million, did 

not contain certificates of completion yet $24.0 million had been disbursed 

for the projects; while other contract files were missing documentation for 

approximately $12.6 million in disbursements and, consequently, it could 

not be determined whether contractors were paid for work performed 

• a property record book to document the property purchased with Rapid 

Regional Response Program funds was not maintained; contract files for 

160 vehicles, totaling approximately $3.3 million, did not document the 

receipt of the vehicles and there was limited documentation in the contract 

files to identify whether the beneficiary actually received the vehicles; and 

ammunition and weapons were purchased but detailed records of deliveries 

and distribution were not maintained and not all of the weapons could be 

located 

• 346 micro-purchase contracts (28.5 percent) exceeded the micro-purchase 

dollar limitation of $5,000 yet did not maintain the required documentation 

in the files for awards in dollar amounts greater than $5,000; 387 micropurchase contract files (31.9 percent) did not contain disbursement 

documentation; 786 files (64.9 percent) did not contain a vendor invoice; 

and 838 files (69.1 percent) did not have a completion document 

We concluded, based on the documentation examined during our review that the 

Coalition Provisional Authority South-Central Region failed to adequately manage its 

Rapid Regional Response Program contracts and micro-purchases. 

Material Internal Control Weaknesses. Our audit identified material internal control 

weaknesses. U.S. government agents and Coalition partners did not comply with 

applicable guidance and did not properly control and account for Iraqi cash assets. In 

addition, based on the award process for contracts and the management of contracts we 

evaluated, there was no assurance that fraud, waste, and abuse did not occur in the 

management and administration of assets. 

Indications of Potential Fraud. During this audit, we found indications of potential 

fraud and referred these matters to the Assistant Inspector General for Investigations, 

Office of the Special Inspector General for Iraq Reconstruction, for action. Related 

investigations are continuing. 

Prior Recommendations. We issued four previous reports addressing controls over 

cash, contract management, and grant management for the CPA South-Central Region.1

 

 

1

 Those four reports were SIGIR Report No. 05-006, “Control of Cash Provided to South-Central Iraq,” 

April 30, 2005; SIGIR Report No. 05-015, “Management of Rapid Regional Response Program Grants in 

South-Central Iraq,” October 25, 2005; SIGIR Report No. 05-016, “Management of the Contracts and 

Grants Used to Construct and Operate the Babylon Police Academy,” October 26, 2005; and SIGIR Report 

No. 05-020, “Management of the Contracts, Grant, and Micro-Purchases Used to Rehabilitate the Karbala 

Library,” October 26, 2005. 
iii 

We made a total of 31 recommendations to management in those four reports. In 

response to the recommendations made in those four reports, management generally 

concurred, agreed to take the necessary actions to resolve the problems discussed, and 

initiated actions on the specific recommendations. Therefore, the recommendations made 

in those previous four reports that are applicable to this audit will not be repeated. 

Recommendations. Since the Coalition Provisional Authority was dissolved on 

June 28, 2004, we are addressing the recommendations to two of the four successor 

organizations: the Joint Contracting Command – Iraq/Afghanistan and the Joint 

Area Support Group-Central, Baghdad; as well as to the United States Ambassador 

to Iraq. 

1. We recommend that the United States Ambassador to Iraq recover specifically 

the $571,823 that was overpaid on 11 contracts. 

2. We recommend that the Commanding General, Joint Contracting Command – 

Iraq/Afghanistan establish adequate and required documentation to record the 

receipt and disposal of all purchased property. 

3. We recommend that the Commander, Joint Area Support Group - Central, require 

paying agents to obtain proper contract approval documentation prior to making 

disbursements. 

Management Comments and Audit Response. The Commanding General, Joint 

Contracting Command-Iraq/Afghanistan; and the Commander, Joint Area Support 

Group-Central concurred with the finding and recommendations and the comments 

received are fully responsive. 

We provided a draft of this report on December 29, 2005, to the Chief of Mission of the 

United States Embassy Baghdad. No management comments to the draft of this report 

were received. Therefore, we request that the Chief of Mission provide comments on this 

final report by February 13, 2006. 
Table of Contents 

Executive Summary i 

Introduction 

Background 1 

Objective 3 

Finding 

Management of Contracts and Micro-Purchase Contracts in the 

South-Central Region 4 

Appendixes 

A. Scope and Methodology 21 

B. Coalition Provisional Authority Guidance Applicable 

to Contracts and Micro-Purchase Contracts 24 

C. Coalition Provisional Authority Organizational Responsibilities 

for Contracts and Micro-Purchase Contracts 25 

D. Present U.S. Government Organizational Responsibilities 

for Contracts and Micro-Purchase Contracts 26 

E. Contracts Overpaid 27 

F. Previous Audit Recommendations – Special Inspector General 

for Iraq Reconstruction Report No. 05-006, “Control of Cash 

Provided to South-Central Iraq,” April 30, 2005 28 

G. Previous Audit Recommendations – Special Inspector General 

for Iraq Reconstruction Report No. 05-015, “Management of 

Rapid Regional Response Program Grants in South-Central Iraq,” 

October 25, 2005 31 

H. Previous Audit Recommendations – Special Inspector General 

for Iraq Reconstruction Report No. 05-016, “Management of the 

Contracts and Grants Used to Construct and Operate the Babylon 

Police Academy,” October 26, 2005 33 

I. Previous Audit Recommendations – Special Inspector General 

for Iraq Reconstruction Report No. 05-020, “Management of the 

Contracts, Grant, and Micro-Purchases Used to Rehabilitate the 

Karbala Library,” October 26, 2005 35 

J. Acronyms 37 

K. Report Distribution 38 

L. Audit Team Members 40 

Management Comments 

 Commanding General, Joint Contracting Command-Iraq/Afghanistan 41

 Commander, Joint Area Support Group-Central 42
1 

Introduction 

Background 

This audit report is one of a series of reports addressing controls over cash, contract 

management, and grant management for the Coalition Provisional Authority (CPA) 

South-Central Region. This audit report discusses the processes used for the 

authorization, award, execution, and oversight of contracts within the CPA South-Central 

Region. 

Coalition Provisional Authority Regulation Number 1. CPA Regulation Number 1 

was issued by the CPA Administrator on May 16, 2003. CPA Regulation Number 1 

described the powers and purposes of the CPA and stated: 

The CPA shall exercise powers of government temporarily in order to 

provide for the effective administration of Iraq during the period of 

transitional administration, to restore conditions of security and 

stability, to create conditions in which the Iraqi people can freely 

determine their own political future, including by advancing efforts to 

restore and establish national and local institutions for representative 

governance and facilitating economic recovery and sustainable 

reconstruction and development. 

The Development Fund for Iraq. United Nations Security Council Resolution 1483, 

adopted May 22, 2003, noted the establishment of the Development Fund for Iraq (DFI) 

and assigned responsibility for managing the fund to the CPA. The resolution noted that 

the CPA should direct disbursement of DFI funds, in consultation with the Iraqi interim 

administration. The resolution also required the CPA to use DFI funds in a transparent 

manner to meet the humanitarian needs of the Iraqi people, for the economic 

reconstruction and repair of Iraq’s infrastructure, for the continued disarmament of Iraq, 

for the costs of Iraqi civilian administration, and for other purposes benefiting the people 

of Iraq. The DFI was the primary financial vehicle to channel revenue from ongoing 

Iraqi oil sales, unencumbered Oil for Food deposits, and repatriated Iraqi assets into the 

relief and reconstruction of Iraq. 

During the CPA administration of Iraq, the CPA Comptroller managed the DFI and the 

Program Review Board (PRB) was responsible for recommending expenditures of 

resources from the DFI. For a description of CPA Regulation Number 2, which applied 

to the DFI, and CPA Regulation Number 3, which applied to the PRB, see Appendix B. 

Program Review Board Guidance. The Director of the PRB provided directives that 

applied to contract management within CPA regions. Two of these directives addressed 

the management of the Rapid Regional Response Program (R3P): 

• PRB Guidance 06, “Rapid Regional Response Program Overview,” 

September 27, 2003 

• PRB Guidance 06.2, “Rapid Regional Response Program Overview 

(amended),” December 14, 2003, and January 25, 2004 

Rapid Regional Response Program. The R3P funds were derived from the DFI, and 

the CPA provided those funds to the Iraqi people for needed infrastructural repairs and 
2 

upgrades. The objectives of the R3P were to create local jobs, support local industries, 

and stimulate the economy. The R3P was initially conceived as a civilian equivalent of 

the Commander’s Emergency Response Program fund.2 Further, it was designed to 

provide maximum flexibility to regional and governorate coordinators in implementing 

projects responsive to the needs in their areas of responsibility. The program 

incorporated and expanded upon authorities of two previously funded programs: 

• the Director’s Emergency Response Program, which provided an emergency 

response capacity

• the Construction Initiative, which provided greater funding authority for 

construction activities

The discretionary authority under which regions could execute programs without prior 

Regional Program Coordinator approval was increased to $500,000 from $200,000 

through PRB Guidance 06.2, “Rapid Regional Response Program Overview,” as 

amended on December 14, 2003, and January 25, 2004.

South-Central Region. The CPA established the South-Central Regional office in the 

spring of 2003, and it was comprised of the provinces of Anbar, Babil, Karbala, Najaf, 

Qadisiyah, and Wasit; which cover approximately half of the land mass of Iraq. SouthCentral Region personnel worked with the Iraqi people and coalition forces to establish 

the conditions for a free, sovereign, and democratically-elected representative 

government in Iraq. The top priorities of the South-Central Region were electricity, 

human rights, security, strategic communications, tribal democracy, and women’s rights. 

Organizations Responsible for Contract Management. The CPA was the authority 

responsible for the temporary governance of Iraq through June 28, 2004. Thereafter, the 

Iraqi Interim Government assumed the authority to govern Iraq. The responsibility for 

the DFI transferred from the CPA to the Iraqi Interim Government on June 28, 2004. For 

information on the CPA’s organizational responsibilities concerning contract 

management, until it ceased to exist on June 28, 2004, see Appendix C. 

Due to the dissolution of the CPA, four U.S. government organizations assumed 

responsibilities for the management of contracts and micro-purchase contracts in Iraq. 

For information on the present organizational responsibilities for the management of 

contracts and micro-purchase contracts in Iraq, see Appendix D.

Project and Contracting Office. The Project and Contracting Office now has the 

responsibility to assess requirements for contracts. National Security Presidential 

Directive 36, “United States Government Operations in Iraq,” May 11, 2004; established 

the Project and Contracting Office and directed that it provide acquisition and project 

management support with respect to activities in Iraq, to include contract-related 

activities. The Project and Contracting Office reports through the Deputy Assistant 

Secretary of the Army (Policy and Procurement) to the Assistant Secretary of the Army 

for Acquisition, Logistics, and Technology. 

Iraq Reconstruction Management Office. The Iraq Reconstruction Management 

Office now has the responsibility to approve contracts. National Security Presidential 

Directive 36, “United States Government Operations in Iraq,” May 11, 2004, established 

the Iraq Reconstruction Management Office within the Department of State and directed 

 

2

 According to Combined Joint Task Force-7, Fragmentary Order 89, June 19, 2003, DFI funds were to be 

used to help fund the Commanders’ Emergency Response Program, which provides reconstruction 

assistance to the Iraqi people. 
3 

that organization to facilitate the transition in Iraq. The Iraq Reconstruction Management 

Office reports to the Chief of Mission in Iraq. 

Joint Contracting Command – Iraq/Afghanistan. The Head of Contracting 

Activity, Joint Contracting Command – Iraq/Afghanistan now has the responsibility to 

administer contracts. The Joint Contracting Command – Iraq/Afghanistan was 

established in 2004 to consolidate contracting activities and reports through the Deputy 

Assistant Secretary of the Army (Policy and Procurement) to the Assistant Secretary of 

the Army for Acquisition, Logistics, and Technology. 

Joint Area Support Group - Central Comptroller. The Joint Area Support 

Group - Central now has the financial responsibility3 for contracts. The 

CPA Comptroller, as part of the CPA, ceased to exist on June 28, 2004. When the CPA 

was dissolved, the CPA Comptroller was realigned as the Joint Area Support Group - 

Central Comptroller. The Joint Area Support Group - Central Comptroller continued to 

perform the same duties for that portion of the DFI still administered by the 

U.S. Government. The Joint Area Support Group - Central reports to the Commander, 

Multi-National Force – Iraq. 

Objective 

The overall audit objective was to determine whether disbursing officers in selected 

locations in southern Iraq complied with applicable guidance and properly controlled and 

accounted for DFI cash assets and expenditures. 

During our audit, we observed deficiencies in contract award documentation and 

expanded our scope to determine whether CPA South-Central Region personnel properly 

managed contracts. 

For a discussion of the audit scope, methodology, and a summary of prior coverage, see 

Appendix A. For definitions of the acronyms used in this report, see Appendix J. For a 

list of the audit team members, see Appendix L. 

 

3

 The Joint Area Support Group-Central Comptroller provided funds to the CPA regions to disburse for 

contracts. Afterward, the disbursement documentation was returned to the Joint Area Support GroupCentral Comptroller’s office for review and to be cleared. 
4 

Management of Contracts and Micro-Purchase 

Contracts in the South-Central Region 

South-Central Region personnel, under the direction of the CPA, did not effectively 

manage 907 contracts and 1,212 micro-purchase contracts awarded through the R3P 

in the amount of $88.1 million. 

This condition occurred because South-Central Region personnel did not always: 

• follow established policies and procedures for authorizing, competing, and 

properly documenting contract awards 

• follow established policies and procedures for consolidating contracts 

• properly monitor contractor performance 

• use effective procedures to disburse funds for contracts 

• account for the funds disbursed for the contracts or determine how those 

funds were used 

• report lost cash to the CPA Comptroller, prevent payments that exceeded the 

award value of contracts, and prevent payments for unauthorized purposes 

• maintain adequate contract file documentation or R3P property book 

As a result, for 907 contracts and 1,212 micro-purchase contracts we reviewed: 

• 4 projects, using 20 contracts (2.2 percent) and several contract 

modifications, totaling approximately $9.1 million, appeared to have had the 

requirements split to keep the contract awards under the $500,000 approval 

threshold to circumvent the required reviews 

• 158 contracts (17.4 percent), totaling approximately $16.3 million, were 

either not competitively awarded or lacked documentation that showed a 

competitive process had taken place and 26 contract files (3.0 percent), 

totaling approximately $2.6 million, did not contain a signed contract 

• 11 contracts (1.2 percent), totaling more than $5.6 million, were issued 

without proper authorization and 38 contracts (4.2 percent), totaling 

approximately $7.0 million, were awarded after the transfer of responsibility 

for the DFI to the Iraqi government on June 28, 2004 

• 91 projects (10.7 percent), totaling approximately $11.6 million, were paid 

in full at the time of contract signing and the completion of the project work 

was not verified; 11 contracts (1.2 percent) were overpaid by $571,823; 

approximately $515,000 was disbursed for CPA salaries and operations in 

violation of PRB Guidance 06.2 (amended); approximately between 

$47,000 and $87,000 in cash was lost but not reported to the 

CPA Comptroller; and approximately $23.0 million was transferred to 

unauthorized personnel but documentation showed only $6.3 million 

disbursed to contractors resulting in the loss of oversight of $16.7 million 

• 286 contract files (31.5 percent), totaling approximately $31.0 million, did 

not contain certificates of completion yet $24.0 million had been disbursed 

for the projects; while other contract files were missing documentation for 

approximately $12.6 million in disbursements and, consequently, it could 

not be determined whether contractors were paid for work performed 
5 

• a property record book to document the property purchased with R3P funds 

was not maintained; contract files for 160 vehicles, totaling approximately 

$3.3 million, did not document the receipt of the vehicles and there was 

limited documentation in the contract files to identify whether the 

beneficiary actually received the vehicles; and, ammunition and weapons 

were purchased but detailed records of deliveries and distribution were not 

maintained and not all of the weapons could be located 

• 346 micro-purchase contracts (28.5 percent) exceeded the micro-purchase 

dollar limitation of $5,000 yet did not maintain the required documentation 

in the files for awards in dollar amounts greater than $5,000; 387 micropurchase contract files (31.9 percent) did not contain disbursement 

documentation; 786 files (64.9 percent) did not contain a vendor invoice; 

and 838 files (69.1 percent) did not have a completion document 

We concluded, based on the documentation examined during our review, that the CPA 

South-Central Region failed to adequately manage its R3P contracts and micropurchases. 

Guidance for Contracts 

In Iraq, contracts were used to purchase products or services. The contracts were to 

directly benefit the Iraqi people or assist in the recovery of Iraq. The South-Central 

Region disbursed funds for contracts by using DFI cash issued by the CPA Comptroller 

(now the Joint Area Support Group - Central Comptroller). 

Coalition Provisional Authority Memorandum 4. CPA Memorandum Number 4, 

“Contract and Grant Procedures Applicable to Vested and Seized Iraqi Property and the 

Developmental Fund for Iraq, Implementation of Regulation Number 3, Program Review 

Board,” August 19, 2003, (CPA Memorandum Number 4) established “procedures 

applicable to the execution of contracts and grants for the benefit of the Iraqi people 

using Iraqi Funds. . . .” The memorandum directed that “the CPA will manage and spend 

Iraqi Funds, which belong to the Iraqi people, for their benefit. . . . in a transparent 

manner that fully comports with the CPA's obligations under international law, including 

Resolution 1483.” The memorandum also stated:

Consistent with their programmatic responsibility to ensure that 

contractors and grantees properly perform their duties, Contracting 

Officers shall be responsible for regularly monitoring the post-award 

execution of all Contracts they approve. This monitoring process 

includes ensuring that the contractor provides the agreed upon goods, 

services or construction in accordance with the provisions, and that 

payments are made in a timely manner. Contracting Officers shall 

include in the Contract file a written report describing post-award 

performance by contractors or grantees, including a final assessment 

upon completion of the Contract. Contracting officers shall rely upon 

locally available military engineering resources in assessing all repair 

and construction projects. All documents related to the establishment 

and execution of Contracts will be maintained in a Contract file that 

includes the materials described in Appendix A to this Memorandum.
6 

Further, the memorandum stated “the Head of Contracting Activity, CPA, shall provide 

administrative oversight as well as technical supervision” of contracting officers. Finally, 

the memorandum stated that “Large purchase preliminary award decisions by Contracting 

Officers appointed by the Head of the Contracting Activity, CPA will be coordinated 

with the Head of Contracting Activity, CPA, or his designee, prior to award.” 

The appendixes to this memorandum provided supplemental instructions on preparing 

and executing contracts and grants pursuant to the memorandum. Specifically, 

Appendixes A, B, and C of the memorandum identified the contract file requirements, 

standard terms and conditions for solicitations and contracts in excess of $5,000, and 

contract and grant procedures applicable to vested and seized Iraqi property and the DFI. 

Combining and Dividing Awards. CPA Memorandum 4, Section 6, “Principles 

Applicable to Instruments,” addressed combining and dividing awards and stated that to 

the “extent practicable, requirements for a project or related projects may be consolidated 

into one contract, in order to reduce the administrative burden of contracting. 

Requirements may not be split to avoid the application of these rules.” 

Contract Requirements. CPA Memorandum 4, Section 3, “Definitions,” defined 

a micro-purchase as “A contract with a value of US$5,000 or less,” a small purchase as 

“A contract with a value greater than US$5,000 and less than or equal to US$500,000,” 

and a large purchase as “A contract with a value greater than US$500,000.” Micropurchases simply required the provision of material contract terms and the receipts or 

invoices that demonstrated the outcome. Micro-purchases were considered 

advantageous, because they were subject to less stringent contract file requirements than 

small purchases. Small purchases required documented solicitations, competition, 

communication with vendors, and invoices. 

Generally, the large purchase contract process required competition and negotiation but 

also required written justifications for an award without competition. The justifications 

were to be “reviewed and approved in writing by either the Contracting Officer’s 

appointing authority or the Head of Contracting Activity, CPA, or his designee.” 

Extensive documentation was required for large purchases that was “sufficient to enable 

review by the Contract Award Committee prior to award and then by auditors during the 

period of contract performance and thereafter.” CPA Memorandum 4, Appendix A, 

“Contract File Requirements,” provided details on the required documentation for all 

types of contracts. For a definition of contracts, see Appendix B. 

Program Review Board Guidance 06.2 (amended) - Discretionary Authority. 

PRB Guidance 06.2 (amended), stated that the “discretionary authority under which 

Regional Coordinators can execute projects without RPC [Regional Program 

Coordinator] approval is increased to $500,000, and projects up to $100,000 can be 

executed at the Governorate Coordinators’ discretion.” 

Regional Program Coordinator Approval Authority. Projects over $500,000 required 

Regional Program Coordinator approval via form PRB-01, “Funding Request Form.” 

The Regional Program Coordinator was to review and approve the funding request for 

completeness of the information concerning budget and justification, appropriate 

clearances, identification of funding sources, and other pertinent factors. 
7 

Authorization and Award of Contracts 

South-Central Region personnel did not follow established policies and procedures 

for authorizing, competing, and properly documenting the awarding of contracts 

issued through the R3P. 

Competition in Awarding Contracts. CPA Memorandum 4, Section 6, “Principles 

Applicable to Instruments” addressed competition and stated that “Unless otherwise 

exempted under this Memorandum, competition is mandatory for all Contracts. . . . If 

circumstances required award of a contract without competition, a written justification 

describing the exigencies requiring contracting without competition will be documented 

in the Contract file. Contracts will be awarded to the offer providing the greatest value to 

the CPA or Coalition Forces, based on price and all other evaluation factors contained in 

the solicitation.” 

We determined that 158 (17.4 percent) of the 907 contracts reviewed, totaling 

approximately $16.3 million, were either not competitively awarded or lacked 

documentation that showed a competitive process had taken place. Contract files 

did not always contain complete bid proposal information, such as bid proposals 

with no identification of the company that prepared the proposal. In one instance, 

the contract files contained evidence of competition that appeared to be fraudulent. 

For example, the contractor told us that he did not submit a bid proposal even 

though the contract file contained an estimate from his company. 

Authorization Authority for Contracts. PRB Guidance 06.2 (amended), stated that 

“the disbursing authority may not be involved in the approval process” of authorizing 

contracts or projects. We identified a situation in which a disbursing agent authorized 

eight contracts totaling approximately $3.8 million instead of the appropriate approval 

authority. In addition, in at least two instances, this disbursing agent also signed a receipt 

for the goods and services for which he disbursed cash in payment. 

Discretionary Authority for Contracts. We identified four contracts awarded for 

amounts greater than $500,000, and we found that three had not received the proper 

authorization. Each of the three contracts had been approved by South-Central 

Region personnel rather than by the Regional Program Coordinator, as required. 

Authorization for Development Fund of Iraq Contracts. The CPA was the authority 

responsible for the temporary governance of Iraq through June 28, 2004. Thereafter, the 

Iraqi Interim Government assumed the authority to govern Iraq. The responsibility for 

the DFI transferred from the CPA to the Iraqi Interim Government on June 28, 2004. 

An individual appointed as an ordering officer on May 25, 2004, awarded 38 contracts 

totaling approximately $7.0 million after the transfer of responsibility for the DFI to the 

Iraqi government on June 28, 2004. For example, one contract in the amount of 

$511,710, was awarded in August 2004. The ordering officer was aware of the 

expiration of his warrant, since he wrote in an email to a Project and Contracting Office 

representative on July 13, 2004, “is there a problem with my doing the contracts on an 

expired CPA warrant or should I just back date them? Where the level exceeds the 

written CPA guidelines (they gave the field only $50K instead of $100K), do I complete 

them anyway?” 
8 

Multiple Contracts 

South-Central Region personnel did not follow established policies and procedures for 

consolidating contracts using R3P funds. Specifically, the South-Central Region 

personnel circumvented guidance by splitting requirements into more than one contract to 

avoid having to seek the appropriate funding-level approval or to avoid required 

documentation and issued contracts for dollar amounts that exceeded the requirement 

documents. 

Dividing Contract Awards. South-Central Region personnel awarded 20 contracts 

and several contract modifications, totaling approximately $9.1 million, for four 

projects. Records show indications that South-Central Region personnel 

intentionally split the requirements to keep the contract awards under the $500,000 

approval threshold to circumvent the required reviews. We combined the split 

contracts by project and calculated that the total values for each of the four projects 

would have been $5.3 million, $1.7 million, $1.3 million, and $0.8 million. 

Combining and Dividing Micro-Purchase Contract Awards. It also appears 

that, in some cases, South-Central Region personnel circumvented guidance by 

splitting requirements into more than one micro-purchase contract to avoid the 

small purchase contracting requirements but, in other cases, awarded micropurchase contracts that exceeded the $5,000 micro-purchase dollar limitations yet 

did not maintain the required documentation for dollar amounts greater than $5,000. 

For example, on April 9, 2004, four separate purchases, each in the amount of 

$5,000, were made for identical leaflets, all to the same person. In another 

example, micro-purchases were used to support the Iraqi Olympic Boxing Team. In 

total, approximately $427,000 was spent to support the team, including four 

separate disbursements of $40,000. Supporting receipts were available for only 

approximately $127,000 of the $427,000 disbursed. We determined that 

346 (28.5 percent) of the 1,212 micro-purchase contracts we reviewed were in 

excess of $5,000. 

Monitoring Performance 

South-Central Region personnel did not properly monitor contract performance as 

required by the guidance provided by CPA Memorandum Number 4 and 

PRB Guidance 05, “Project Monitoring and Evaluation,” September 30, 2003 

(PRB Guidance 05). Although CPA Memorandum Number 4 stated that 

performance monitoring was important to ensure that contractors are properly 

performing their duties, this guidance and PRB Guidance 05 generally were not 

followed. Specifically, South-Central Region personnel did not use effective 

procedures to monitor performance of contracts; and, in some cases, projects were 

not monitored at all. Further, contract files did not always contain certificates of 

completion. In addition, for the certificates of completion we reviewed, the 

certificates were not always used properly or were, in some cases, not completed 

properly. 

Coalition Provisional Authority Memorandum 4 – Monitoring Performance. CPA 

Memorandum 4, Section 8, “Monitoring Contract Performance,” addressed the 

contracting officers’ monitoring responsibilities. CPA Memorandum 4 stated that 
9 

Consistent with their programmatic responsibilities to ensure that 

contractors and grantees properly perform their duties, Contracting 

Officers shall be responsible for regularly monitoring the post-award 

execution of all Contracts they approve. This monitoring process 

includes ensuring that the contractor provides the agree[d] upon goods, 

services or construction in accordance with the provisions, and that 

payments are made in a timely manner.

Monitoring Methods. CPA Memorandum 4 and PRB Guidance 05 identified 

performance monitoring as a significant duty to ensure that the recipients were properly 

performing. The South-Central Region contracting officer was responsible for 

monitoring projects within the South-Central Region. Monitoring required South-Central 

Region personnel to employ some or all of the following methods: 

• Discussions with the contracting entity or grant recipient with regard to project 

timelines and implementation of the project 

• Regular site visits 

• Production of reports and/or other evidence of project activity by the 

implementing partner 

• Confirmation of delivery of the goods or products and verification that the 

targeted beneficiary or recipient had received the product 

• Discussions with the Iraqi beneficiary of the project to evaluate whether the 

project achieved the desired outcome 

• Documentation or other evidence (pictures) of a satisfactory work product 

including a completed Certificate of Completion 

Monitoring of Project Activity. South-Central Region personnel were required to visit 

the construction sites to determine whether the contractor was adequately performing or 

providing the goods and services required. However, monitoring of project activity was 

not always performed effectively or in some cases, not at all. For example, we 

determined that 91 projects (10.0 percent) of the 907 contracts reviewed, totaling 

approximately $11.6 million, were paid in full at the time of contract signing. SouthCentral Region personnel confirmed that they did not verify whether the projects were 

completed. 

In a specific example, South-Central Region personnel attempted to verify the completion 

of 6 of the 91 projects discussed in the previous paragraph, totaling approximately 

$500,000, located in the Najaf province. However, an internal South-Central Region 

memorandum, dated April 3, 2005, stated “we have made multiple attempts to get 

contract payment and status information from Najaf Governorate Coordinator . . . who 

assured that he had no certain information about these projects . . . we presume that these 

projects are complete and all the money was paid in full, so we are closing these 

contracts.” A similar internal South-Central Region memorandum was prepared for 

projects located in Anbar province. The conclusion of this memorandum was that “these 

projects are old . . . we presume the projects are complete and all the money was paid in 

full.” 

Certificates of Completion. The contract files were required to contain documents to 

verify performance. We determined that 286 contract files (31.5 percent) of the 

907 contracts reviewed, totaling approximately $31.0 million, did not contain certificates 
10 

of completion. Regardless, contract file documentation indicated that approximately 

$24.0 million had been disbursed for the 286 projects. For example, a contract was 

awarded in the amount of $473,000 to install internet service in Ramadi. The contract 

file did not contain a certificate of completion or inspection reports. In April 2005, 

South-Central Region personnel, in an internal memorandum, decided to “close this 

project. There is no way to verify this project was ever completed, because we don’t 

even know where exactly in Ramadi it was supposed to take place. It appears the 

contractor was paid. . . .” 

Although the remaining 621 of the 907 contracts reviewed had some sort of completion 

documentation, the paperwork was often questionable. For example, South-Central 

Region personnel used the certificate of completion to document only that the contractor 

was paid in full instead of using the form to document the contractor’s project 

performance. The certificate of completion form was designed to document the status of 

a project, the payment of funds to the contractor, and comment on the contractor’s work. 

Consequently, the project was considered “completed” when using the certificate of 

completion to document only that the contractor was paid in full. 

We visited four South-Central Region projects in an attempt to determine the adequacy of 

the certificates of completion and found the certificates deficient for all four projects. 4 We discuss two of the four projects below, the renovation of the Al Hillah General 

Hospital and the Al Hillah Olympic Swimming Pool, for which the certificates of 

completion were deficient. 

Al Hillah General Hospital. The South-Central Region awarded a contract for 

the renovation of the Al Hillah General Hospital on March 30, 2004, in the amount of 

$662,800. The statement of work called for civil, electrical, and mechanical work to 

rehabilitate the hospital. Specifically, the mechanical work called for the installation of 

four new elevators. The project officer signed a certificate of completion on 

June 10, 2004, stating that the final payment had been made even though the project was 

only 80 percent completed. The project officer stated “I feel confident that he [the 

contractor] will complete all of his work within the next 20 days.” As a result of the 

signed certificate of completion, the contractor was paid in full on June 10, 2004. 

We visited the Al Hillah General Hospital on September 18, 2004. The hospital 

administrator immediately escorted us to the site of the elevators. The administrator said 

that just a couple days prior to our arrival the elevator crashed and killed three people 

(see Photo 1). The administrator stated that the contractor was attempting to renovate the 

existing elevator (see Photo 2) rather than install a new elevator. Since the contractor had 

been paid in full, the contractor’s performance was not held accountable to the 

requirements of the contract. South-Central Region personnel lost the cash expended to 

pay for the installation of the new elevators, and three people lost their lives. 

 

4 In addition to the Al Hillah General Hospital and the Al Hillah Olympic Swimming Pool, we also 

visited the Babylon Police Academy and the Karbala Library. The certificates of completion for the 

latter two projects were discussed in SIGIR Report No. 05-016, “Management of the Contracts and 

Grants Used to Construct and Operate the Babylon Police Academy,” October 26, 2005; and SIGIR 

Report No. 05-020, “Management of the Contracts, Grant, and Micro-Purchases Used to Rehabilitate 

the Karbala Library,” October 26, 2005. 
11 

Photo 1. Al Hillah General Hospital Elevator
12 

Photo 2. Al Hillah General Hospital Elevator

Al Hillah Olympic Swimming Pool. South-Central Region personnel awarded a 

contract to renovate the Al Hillah Olympic Swimming Pool on March 22, 2004, in the 

amount of $108,140. The statement of work called for replacing all of the pump houses 

and pipes. A certificate of completion was signed on July 16, 2004, stating that “all work 

had been completed.” South-Central Region records stated that this “case is considered 

to be closed.” 

Our visit to the Al Hillah Olympic Swimming Pool revealed that the contractor had not 

replaced the pumps (see Photo 3). The contractor had simply attempted to polish the 

existing pumps instead of replacing the pumps and pipes. When the pool was filled using 

the old pumps, the water came out a murky brown due to the accumulated dirt and grime 

in the old pumps (see Photo 4). The water had to be drained and this caused the 

cancellation of the re-opening of the pool. It was readily apparent that the pumps were 

not new or even polished and it did not appear that the author of the certificate of 

completion could have inspected the site. Since the contractor had been paid in full, the 

contractor’s performance was not held accountable to the requirements of the contract. 

South-Central Region personnel lost the cash expended to pay for the installation of the 

new pumps, and the pool could not be used. 
13 

Photo 3. Al Hillah Olympic Swimming Pool Pumps

Photo 4. Al Hillah Olympic Swimming Pool
14 

Disbursement and Accountability for Funds

South-Central Region personnel did not use effective procedures to disburse funds 

for contracts using R3P funds and could not always account for the funds that were 

disbursed or how those funds were used. Further, South-Central Region personnel 

did not always report lost cash to the CPA Comptroller, made payments that 

exceeded the award value of certain contracts, and made payments for unauthorized 

purposes. In addition, contract files were missing significant amounts of 

disbursement documentation and it could not be determined whether contractors 

were paid for work performed. 

Vault Logs. The South-Central Region did not keep a record book to record cash funds 

deposited and withdrawn from the vault. A vault log should have been maintained to 

record the individual, amount, and date of each deposit/withdrawal from the vault. The 

South-Central Region had no tracking system to determine how much money was onhand and who was responsible for it. Upon the arrival of a new Regional Coordinator in 

the summer of 2004, procedures were established for a vault log. By the time this 

procedure was enforced, tens of millions of dollars in cash had gone in and out of the 

South-Central Region vault without any tracking of who deposited or withdrew the 

money, and why it was taken out.5

 

In addition, within the vault, cash funds were stored in either a footlocker or a file 

cabinet. At one point, several paying agents secured their funds in a file cabinet within 

the vault. Since the cash funds were not separated, the cash ultimately became 

commingled. As a result, one paying agent withdrew $100,000 in cash from another 

paying agent’s funds while trying to clear his account balance. This was only discovered 

because the other paying agent had to make a disbursement that day and realized that he 

was short cash. 

Physical Security of Funds. South-Central Region personnel did not maintain adequate 

physical control of cash funds. Instead of all cash funds being secured in the vault, cash 

funds were kept in various places throughout the South-Central Region headquarters. For 

example, one contracting officer kept approximately $2 million in cash in a safe in his 

office bathroom; while a paying agent kept approximately $678,000 in cash in an 

unlocked footlocker in his office. 

Transfers of Cash. The South-Central Region Division Level Agent (DLA) lost 

oversight of cash transferred to unauthorized South-Central Region personnel. We 

identified at least 57 South-Central Region personnel who received cash transfers. 

Examples of individuals who received cash transfers were project officers, U.S. military 

officers, contracting officers, and foreign military officers; only two had signed an 

appointment letter authorizing custody. An appointment letter included pecuniary 

liability language explaining personal liability for the entire amount entrusted to them. 

Further, our review identified at least 54 separate transfers to individuals whose 

signatures could not be determined. The DLA transferred approximately $23.0 million to 

these individuals who were supposed to make payments to the contractors. However, 

contract file documentation showed only $6.3 million being paid to the contractors. In 

addition, the DLA transferred the cash with a pay document instead of the required 

Statement of Agent Officer’s Account, a form that maintains each individual’s account 

 

5

 In SIGIR Report No. 05-006, “Control of Cash Provided to South-Central Iraq,” April 30, 2005, we stated 

that the South-Central Region could not account for $7.2 million in cash and that $89.4 million in 

disbursements were not properly supported by required documentation. 
15 

balances with the DLA. The DLA failed to require each individual to produce receipts 

and clear their accounts with him. Therefore, oversight of more than $16.7 million in 

cash transfers was lost. 

In a specific example concerning transfers of cash, the DLA provided the Iraqi contractor 

$420,000 in cash to wire $412,800 to a Jordanian contractor; the remaining $7,200 was 

kept by the Iraqi contractor as a transaction fee. The DLA previously had used the CPA 

Comptroller’s office for wire transfers, but in this case, using the Iraqi contractor resulted 

in a loss of $7,200 that could have been used for projects benefiting the Iraqi people. 

Further, the CPA Comptroller’s office did not realize the $7,200 fee was paid to the Iraqi 

contractor because the DLA’s receipts were not properly scrutinized. 

In another specific example concerning transfers of cash, South-Central Region 

transferred cash to a project officer who failed to properly account for how the money 

was used. The project officer was provided $350,000 in cash to fund projects in the 

human rights sector but could only account for $192,037 in disbursements. SouthCentral Region records contain no evidence that the $154,963 that could not be accounted 

for was returned or that the South-Central Region made any effort to recover the money. 

South-Central Region personnel did not advise the CPA Comptroller that it could not 

account for the missing $154,963. 

Reporting Lost Cash. Several South-Central Region personnel lost cash and did not 

report the losses to the CPA Comptroller. For example, two Field Paying Agents had 

cash in the amounts of $20,000 and $7,000 stolen during insurgent raids. Although these 

funds were stolen as a result of insurgent activities, the loss of the cash was never 

reported to the DLA or the CPA Comptroller. In another instance, a U.S. military 

assistant accompanying the Iraqi Olympic boxing team on a trip to the Philippines lost 

between $20,000 and $60,000 gambling. The exact amount of the loss is unknown 

because the DLA was unable to establish how much cash was provided to cover the cost 

of the trip. The South-Central Region had to provide additional cash to pay for the 

remainder of the trip, yet there was no record of how much cash was needed to cover the 

gambling losses. The CPA Comptroller was never advised of the loss of these funds. 

Payments to Contractors. South-Central Region personnel overpaid 11 contracts by 

$571,823. The contract files contained no evidence indicating that the overpayments 

were ever returned or that South-Central Region personnel ever asked for the return of 

this money. For example, South-Central Region records show that one contractor went to 

two different Field Paying Agents on the same day and was paid $14,000 on four separate 

occasions for the same contract modification. For the details of the contracts for which 

overpayments were made, see Appendix E. 

Disbursements Tied to Contractor Performance. CPA Memorandum 4 stated that 

contracts “will contain payment terms including an agreed upon payment schedule 

(preferably with milestones tied to performance) for service contracts, and performance 

requirements clearly defining the responsibilities and time for performance.” SouthCentral Region personnel did not always tie contractor payments to work performed. For 

example, four contracts for the Karbala Library, worth approximately $1.3 million, were 

paid the date the contracts were signed, not when work had been completed. 

In many cases South-Central Region personnel paid the contractor the entire contract 

amount at the time of signing the contract. This put the South-Central Region in a 

precarious situation if the contractor failed to perform. For instance, a contract in the 

amount of $120,000 was awarded for convoy security; the entire contract amount was 

paid upfront to the contractor. Less than one month into the three month contract, the 
16 

contract was terminated for the convenience of the CPA. The South-Central Region 

Contracting Officer determined the final termination settlement to be $86,630, which left 

the contractor owing the South-Central Region $33,370. South-Central Region personnel 

sent a letter to the contractor in an attempt to recover the money but never actively 

pursued the recovery of the money. As a result of paying the entire contract amount 

upfront to the contractor, $33,370 was paid for services not rendered. 

Payments for Coalition Provisional Authority Salaries and Operations. PRB 

Guidance 06.2 (amended) stated that R3P funds “cannot be used to support CPA 

operations or to hire local staff for CPA offices, to equip or support any U.S. or coalition 

military force, or to pay rewards for information or for weapons ‘buy-back’ programs.” 

South-Central Region personnel violated this guidance by disbursing approximately 

$515,000 for CPA salaries and operations. 

For example, South-Central Region personnel disbursed over $81,000 for CPA employee 

salaries. In other examples, South-Central Region personnel paid approximately 

$160,000 for CPA life support, such as repairs to the office and accommodation 

buildings, and one Field Paying Agent paid $45,000 to a provincial council member and a 

bank employee for information regarding a bank account in Diwaniyah. 

In another instance, South-Central Region personnel provided three vehicles and 

two weapons for two local Iraqi employees of the CPA. One vehicle and both 

weapons were ultimately returned to South-Central Region personnel, while the 

remaining two vehicles were sold by one of the Iraqi employees. We could not 

determine if the sale was authorized or legal and without an accurate property book, 

we were unable to determine the exact number of vehicles and weapons that were 

provided to CPA personnel and local Iraqi employees. 

Further, one South-Central Region employee and an unknown individual were sent 

to Lebanon to purchase approximately $500,000 worth of library books. While the 

purchase of the library books was a legitimate use of DFI funds, these two 

individuals spent over $1,700 on air and hotel expenses, including telephone, room 

service, and mini bar charges.

Disbursement Documentation. South-Central Region contract files were missing 

documentation for approximately $12.6 million in disbursements even though CPA and 

R3P Guidance 04, “Maintaining Project Files,” required each contract and micropurchase file to maintain disbursement documentation that recorded the date, amount, 

and payee for each disbursement made. Without the disbursement documentation, it 

cannot be determined whether South-Central Region personnel paid contractors for work 

performed. 

Disbursement documentation was also missing from the micro-purchase files. Of 

1,212 micro-purchases made by the South Central Region, 387 files (31.9 percent) did 

not contain disbursement documentation. Those disbursements were documented by 

either a completion document or a log entry in a spreadsheet, but not by the required 

disbursement documentation. In addition, 786 files (64.9 percent) did not contain a 

vendor invoice and 838 files (69.1 percent) did not have a completion document. 

Contract Documentation and Property Records

South-Central Region personnel did not maintain any contract files in some cases, or 

complete contract files in other cases, to support transactions made for contracts using 
17 

R3P funds. Further, a property book was not maintained to account for vehicles and 

weapons purchased with R3P funds. 

Contract and Micro-Purchase Files. South-Central Region personnel did not 

maintain files that contained required documentation. This included entire contract 

files, missing contracts, missing oversight documentation, missing disbursement 

documentation, and missing evidence of competition. 

During our review, South-Central Region personnel could not locate either the 

signed contract or the contract file for 22 projects totaling approximately 

$2.0 million. Further, for four contracts, totaling approximately $648,000, SouthCentral Region personnel could not locate either the signed contract or the 

disbursement documentation. While these projects were captured in a SouthCentral Region database, South-Central Region personnel stated they, “do not know 

whether the contract was awarded or not.” 

Property Records. South-Central Region personnel did not keep a property record book 

to document the property purchased with R3P funds. We identified 387 vehicles 

(including ambulances, armored vehicles, motorcycles, sport utility vehicles, and trucks) 

totaling approximately $7.5 million that were purchased through 50 separate contracts 

awarded by South-Central Region personnel. We found that the contract files did not 

document the receipt of 160 vehicles, totaling approximately $3.3 million. In addition, 

for the vehicles that were delivered to the South-Central Region, there was limited 

documentation in the contract files to identify whether the beneficiary actually received 

the vehicles.

Further, South-Central Region personnel contracted for ammunition and weapons, such 

as assault rifles, Glock 9mm automatic pistols, and hand grenades, without maintaining 

detailed records of deliveries received and to whom the weapons were provided. SouthCentral Region personnel, including local Iraqi workers, were provided with weapons 

purchased with DFI funds. Several months later, South-Central Region personnel 

attempted to collect and account for the weapons distributed, but according to their own 

records, were not able to locate all the weapons purchased. 

Vehicles and weapons became the concern of the Regional Coordinator, who in an email 

stated “weapons and armored vehicles were acquired in a manner that raises questions of 

legal authorities, accountability and propriety. Both sets were possibly acquired in an 

irregular manner. A number of these items remain on site and we are working to account 

for them as best we can. . . .” South-Central Region personnel were never able to fully 

account for all the vehicles and weapons purchased, primarily because they did not know 

the number of each purchased or to whom the items were given. 

Summary 

South-Central Region personnel, under the direction of the CPA, issued 907 

contracts and 1,212 micro-purchase contracts awarded through the R3P in the 

amount of $88.1 million. Of the 907 contracts and 1,212 micro-purchase contracts 

we reviewed: 

• 4 projects, using 20 contracts (2.2 percent) and several contract 

modifications, totaling approximately $9.1 million, appeared to have had the 

requirements split to keep the contract awards under the $500,000 approval 

threshold to circumvent the required reviews 
18 

• 158 contracts (17.4 percent), totaling approximately $16.3 million, were 

either not competitively awarded or lacked documentation that showed a 

competitive process had taken place and 26 contract files (3.0 percent), 

totaling approximately $2.6 million, did not contain a signed contract 

• 11 contracts (1.2 percent), totaling more than $5.6 million, were issued 

without proper authorization and 38 contracts (4.2 percent), totaling 

approximately $7.0 million, were awarded after the transfer of responsibility 

for the DFI to the Iraqi government on June 28, 2004 

• 91 projects (10.7 percent), totaling approximately $11.6 million, were paid 

in full at the time of contract signing and the completion of the project work 

was not verified; 11 contracts (1.2 percent) were overpaid by $571,823; 

approximately $515,000 was disbursed for CPA salaries and operations in 

violation of PRB Guidance 06.2 (amended); approximately between 

$47,000 and $87,000 in cash was lost but not reported to the CPA 

Comptroller; and approximately $23.0 million was transferred to 

unauthorized personnel but documentation showed only $6.3 million 

disbursed to contractors resulting in the loss of oversight of $16.7 million 

• 286 contract files (31.5 percent), totaling approximately $31.0 million, did 

not contain certificates of completion yet $24.0 million had been disbursed 

for the projects; while other contract files were missing documentation for 

approximately $12.6 million in disbursements and, consequently, it could 

not be determined whether contractors were paid for work performed 

• a property record book to document the property purchased with R3P funds 

was not maintained; contract files for 160 vehicles, totaling approximately 

$3.3 million, did not document the receipt of the vehicles and there was 

limited documentation in the contract files to identify whether the 

beneficiary actually received the vehicles; and ammunition and weapons 

were purchased but detailed records of deliveries and distribution were not 

maintained and not all of weapons could be located 

• 346 micro-purchase contracts (28.5 percent) exceeded the micro-purchase 

dollar limitation of $5,000 yet did not maintain the required documentation 

in the files for awards in dollar amounts greater than $5,000; 387 micropurchase contract files (31.9 percent) did not contain disbursement 

documentation; 786 files (64.9 percent) did not contain a vendor invoice; 

and 838 files (69.1 percent) did not have a completion document 

Conclusion 

We concluded, based on the documentation examined during our review, that the 

CPA South-Central Region failed to adequately manage its R3P contracts and micropurchases. 

Management Response to Prior Audit Reports 

We issued four previous reports addressing controls over cash, contract 

management, and grant management for the CPA South-Central Region.6 We made 

a total of 31 recommendations to management in those four reports. 

 

6

 Those four reports were SIGIR Report No. 05-006, “Control of Cash Provided to South-Central Iraq,” 

April 30, 2005; SIGIR Report No. 05-015, “Management of Rapid Regional Response Program Grants in 
19 

In response to the recommendations made in those four reports, management 

generally concurred, agreed to take the necessary actions to resolve the problems 

discussed, and initiated actions on the specific recommendations. Therefore, the 

recommendations made in those previous four reports that are applicable to this 

report will not be repeated. For the details of the recommendations made in the 

four previous reports noted above, see Appendixes F, G, H, and I, respectively. 

Internal Controls and Indications of Potential Fraud 

Material Internal Control Weaknesses. Our audit identified material internal control 

weaknesses. U.S. government agents and Coalition partners did not comply with 

applicable guidance and did not properly control and account for Iraqi cash assets. In 

addition, based on the award process for contracts and the management of contracts we 

evaluated, there was no assurance that fraud, waste, and abuse did not occur in the 

management and administration of assets. 

Indications of Potential Fraud. During this audit, we found indications of potential 

fraud and referred these matters to the Assistant Inspector General for Investigations, 

Office of the Special Inspector General for Iraq Reconstruction, for action. Related 

investigations are continuing. 

Recommendations, Management Comments, and Audit 

Response 

Since the Coalition Provisional Authority was dissolved on June 28, 2004, we are 

addressing the recommendations to two of the four successor organizations: the 

Joint Contracting Command – Iraq/Afghanistan and the Joint Area Support GroupCentral, Baghdad; as well as to the United States Ambassador to Iraq. 

1. We recommend that the United States Ambassador to Iraq recover specifically 

the $571,823 that was overpaid on 11 contracts. 

Management Comments. No management comments to the draft of this report were 

received from the Chief of Mission of the United States Embassy Baghdad. 

2. We recommend that the Commanding General, Joint Contracting Command – 

Iraq/Afghanistan establish adequate and required documentation to record the 

receipt and disposal of all purchased property. 

Management Comments. The Commanding General, Joint Contracting 

Command-Iraq/Afghanistan concurred with the finding and recommendations. 

3. We recommend that the Commander, Joint Area Support Group - Central, 

require paying agents to obtain proper contract approval documentation prior to 

making disbursements. 

 South-Central Iraq,” October 25, 2005; SIGIR Report No. 05-016, “Management of the Contracts and 

Grants Used to Construct and Operate the Babylon Police Academy,” October 26, 2005; and SIGIR Report 

No. 05-020, “Management of the Contracts, Grant, and Micro-Purchases Used to Rehabilitate the Karbala 

Library,” October 26, 2005. 
20 

Management Comments. The Commander, Joint Area Support Group-Central 

concurred with the finding and recommendations. 

Audit Response. The Commanding General, Joint Contracting CommandIraq/Afghanistan; and the Commander, Joint Area Support Group-Central comments’ to 

all recommendations are fully responsive. 

We provided a draft of this report on December 29, 2005, to the Chief of Mission of the 

United States Embassy Baghdad. No management comments to the draft of this report 

were received. Therefore, we request that the Chief of Mission provide comments on this 

final report by February 13, 2006. 
21 

Appendix A. Scope and Methodology 

In September 2004, we initiated this audit, Project No. D2004-DCPAAF-0034.5, to 

review cash controls over disbursing officers in southern Iraq as a result of concerns 

brought to our attention by staff of the Coalition Provisional Authority (CPA) 

Comptroller. 

We reviewed the following documents issued by the CPA: 

• CPA Regulation Number 2, “Developmental Fund for Iraq,” June 10, 2003 

• CPA Regulation Number 3, “Program Review Board,” June 18, 2003 

• CPA Memorandum Number 4, “Contract and Grant Procedures Applicable 

to Vested and Seized Iraqi Property and the Developmental Fund for Iraq, 

Implementation of Regulation Number 3, Program Review Board,” 

August 19, 2003 

• Combined Joint Task Force-7, Fragmentary Order 89, June 19, 2003 

• Combined Joint Task Force-7, Fragmentary Order 1268, December 22, 2003 

• Director, Program Review Board, Program Review Board Guidance 01, 

“Coalition Provisional Authority Allocation Process,” June 9, 2003, updated 

October 4, 2003 

• Director, Program Review Board, Program Review Board Guidance 02, 

“Program Management Model for the Regions,” July 30, 2003 

• Director, Program Review Board, Program Review Board Guidance 03, 

“Program Management Assessment,” July 9, 2003 

• Director, Program Review Board, Program Review Board Guidance 04, 

“Maintaining Project Files,” September 30, 2003 

• Director, Program Review Board, Program Review Board Guidance 05, 

“Project Monitoring and Evaluation,” September 30, 2003 

• Director, Program Review Board, Program Review Board Guidance 06, 

“Rapid Regional Response Program Overview,” September 27, 2003 

• Director, Program Review Board, Program Review Board Guidance 06.2, 

“Rapid Regional Response Program Overview (amended),” 

December 14, 2003 and January 25, 2004 

The CPA South-Central Region used Rapid Regional Response Program funds to 

award 907 contracts and 1,212 micro-purchase contracts between October 2003 and 

June 2004 in the amount of approximately $88.1 million. We reviewed all contracts 

and micro-purchases. 

During our audit, we observed deficiencies in contract award documentation and 

expanded our scope to determine whether contracts were properly managed by 

coalition representatives in the South-Central Region to include the authorization, 

award, execution, and oversight of the contracts. We spoke with the contracting 

officials available at the time of our audit regarding the status of the contract 

projects and examined documentation maintained in the contract files. Those 

contracting officers primarily were located at the South-Central Region, now known 

as the U.S. Regional Embassy Office, located in Al Hillah, Iraq; but one contracting 
22 

officer who had previously worked for the South-Central Region was working for 

the Joint Contracting Command – Iraq/Afghanistan. 

We performed audit work at two locations to review applicable documentation and 

contract management procedures. At the Joint Area Support Group - Central 

Comptroller’s Office, located in the U.S. Embassy, Baghdad, Iraq; we reviewed 

receipts submitted by South-Central Region pay agents to confirm disbursements 

made for the contracts and micro-purchases. At the U.S. Regional Embassy Office, 

we reviewed all other aspects of the contracts and micro-purchases. 

We conducted this performance audit from September 2004 through 

September 2005, in accordance with generally accepted government auditing 

standards. 

Use of Computer-Processed Data. We did not use computer-processed data to 

perform this audit. 

Prior Coverage. The Special Inspector General for Iraq Reconstruction (SIGIR), 

which was formerly the Office of the Inspector General, Coalition Provisional 

Authority (CPA-IG), issued eight reports related to controls over cash and the 

management of contracts. The U.S. Army Audit Agency also issued a report 

related to controls over cash. The reports are listed below and are available at the 

indicated website addresses. 

Special Inspector General for Iraq Reconstruction Reports. Reports can be accessed 

on its website at http://www.sigir.mil. 

SIGIR Report No. 05-006, “Control of Cash Provided to South-Central Iraq,” 

April 30, 2005 

SIGIR Report No. 05-008, “Administration of Contracts Funded by the 

Development Fund of Iraq,” April 30, 2005 

SIGIR Report No. 05-015, “Management of Rapid Regional Response Program 

Grants in South-Central Iraq,” October 25, 2005 

SIGIR Report No. 05-016, “Management of the Contracts and Grants Used to 

Construct and Operate the Babylon Police Academy,” October 26, 2005 

SIGIR Report No. 05-020, “Management of the Contracts, Grant, and MicroPurchases Used to Rehabilitate the Karbala Library,” October 26, 2005 

CPA-IG Report No. 04-007, “Oil for Food Cash Controls for the Office of Project 

Coordination in Erbil, Iraq,” July 26, 2004 

CPA-IG Report No. 04-009, “Coalition Provisional Authority Comptroller Cash 

Management Controls Over the Development Fund for Iraq,” July 28, 2004 

CPA-IG Report No. 04-013, “Coalition Provisional Authority’s Contracting 

Processes Leading Up to and Including Contract Award,” July 27, 2004 
23 

U.S. Army Audit Agency. Reports can be accessed on its website at 

https://www.aaa.army.mil/reports.htm. 

U.S. Army Audit Agency Audit Report: A-2005-0095-FFG, “Vested and Seized 

Assets, Operation Iraqi Freedom,” February 16, 2005 
24 

Appendix B. Coalition Provisional Authority 

Guidance Applicable to Contracts and MicroPurchase Contracts 

Coalition Provisional Authority (CPA) guidance for the Development Fund of Iraq 

(DFI) and for the Program Review Board’s (PRB) operations that are relevant to 

contracts are: 

Coalition Provisional Authority Regulation Number 2. CPA Regulation 

Number 2, “Development Fund for Iraq,” June 10, 2003, described the 

responsibilities for the administration, use, accounting, and auditing of the DFI. 

This regulation was intended to ensure that the DFI was managed in a transparent 

manner for and on behalf of the Iraqi people, consistent with United Nations 

Security Council Resolution 1483, and that all DFI disbursements would be for 

purposes benefiting the people of Iraq. 

Coalition Provisional Authority Regulation Number 3. CPA Regulation 

Number 3 “Program Review Board,” June 18, 2003, established the procedures 

applicable to the PRB operations. The PRB was responsible for recommending 

expenditures of resources from the DFI in a manner that meets the interests of the 

people of Iraq, furthers CPA policy objectives, and comports fully with CPA 

stewardship and financial management duties under the applicable laws and 

regulations, including United Nations Security Council Resolution 1483. The PRB 

was not responsible for overseeing the manner in which approved spending 

requirements were executed. 

Coalition Provisional Authority Memorandum 4. CPA Memorandum 

Number 4, “Contract and Grant Procedures Applicable to Vested and Seized Iraqi 

Property and the Developmental Fund for Iraq, Implementation of Regulation 

Number 3, Program Review Board,” August 19, 2003, defined contracts. 

A contract was defined as “A written agreement whereby the CPA or Coalition 

Forces acquire goods, services or construction from a person or entity under 

prescribed terms and conditions, for the purpose of assisting the Iraqi people or 

assisting in the recovery of Iraq.” 
25 

Appendix C. Coalition Provisional Authority 

Organizational Responsibilities for Contracts 

and Micro-Purchase Contracts 

The diagram shown below identifies organizational entities within the Coalition 

Provisional Authority (this is not a complete organizational diagram of the 

Coalition Provisional Authority) that had oversight and administrative 

responsibilities for contracts until it ceased to exist on June 28, 2004. 

Administrator

Comptroller

Rapid Regional 

Response Program

Coordinator

Head Contracting 

Activity

Program

Management

Office

Field 

Disbursing Agents

Field

Contracting Agents
26 

Appendix D. Present U.S. Government 

Organizational Responsibilities for Contracts 

and Micro-Purchase Contracts 

The diagram shown below identifies the present U.S. government organizational 

entities that had oversight and administrative responsibilities for contracts. 

Director, 

Iraq Reconstruction 

Management Office 

Approval 

Project and 

Contracting Office 

Requirements 

Joint Contracting 

Command - 

Iraq/Afghanistan 

Award/Monitor 

Joint Area Support 

Group - Central 

Disburse 
27 

Appendix E. Contracts Overpaid 

South-Central Region personnel overpaid 11 contracts by $571,823. The contract 

files contained no evidence indicating that the overpayments were ever returned or 

that South-Central Region personnel ever asked for the return of this money. For a 

list of the contracts, see the table below. 

Overpayments for Contracts Awarded 

Contract Number 

Date the Contract 

was Signed Contract 

Amount 

Overpayment 

Amount Scope of Work

DAVB01-04-M-8007 January 3, 2004 $27,747 $3,130 Building improvements for the 

Meshkahab Council Building 

DAVB01-04-M-8022 January 5, 2004 $86,385 $8,615 Renovation of the Tribal 

Democracy Center in Karbala 

DAVB01-04-M-8132 November 29, 2004 $46,880 $3,120 Upgrade the police department 

facilities in Hillah 

DAVB01-04-M-8134 November 29, 2004 $32,300 $780 Upgrades and repairs at the Al 

Mahawel Fire Department 

DAVB01-04-M-8224 March 3, 2004 $131,400 $10,000 Jasrah Pedestrian Bridge 

DAVB01-04-M-8258 March 11, 2004 $420,000 $420,000 2 armored vehicles 

DAVB01-04-M-8278 March 18, 2004 $98,576 $7,208 

Site preparation for the 

installation of a water 

treatment compacting unit 

DAVB01-04-M-8288 March 18, 2004 $41,100 $11,100 Rebuild the Al Nasser School 

DAVB01-04-M-8355 April 1, 2004 $120,000 $33,370 Convoy security force 

DAVB01-04-M-8366 – 

P0001 June 2, 2004 $14,000 $42,000 Oversight in original contract 

specifications 

DAVB01-04-M-8779 June 28, 2004 $127,500 $32,500 Road paving in Grait Kabaza 

in Kharat 

Total Contract 

Amounts

$1,145,888 $571,823
28 

Appendix F. Previous Audit 

Recommendations - Special Inspector General 

for Iraq Reconstruction Report No. 05-006, 

“Control of Cash Provided to South-Central 

Iraq,” April 30, 2005 

We issued four previous reports addressing controls over cash, contract 

management, and grant management for the Coalition Provisional Authority SouthCentral Region. We made a total of 31 recommendations to management in those 

four reports. The recommendations made in those previous reports that are 

applicable to this report will not be repeated as the organizations to which those 

recommendations were made generally concurred and agreed to take necessary 

actions. The recommendations and the management comments from Special 

Inspector General for Iraq Reconstruction Report No. 05-006, “Control of Cash 

Provided to South-Central Iraq,” April 30, 2005, are shown below.

We recommend that the Commander, Joint Area Support Group - Central, require these 

actions of the Development Fund for Iraq Account Manager: 

1. Scrutinize, verify, and investigate Statements of Agent Officer’s Account maintained 

to identify statement errors, omissions, inaccuracies, and incompleteness. 

Management Comments. The Commander, Joint Area Support Group - Central (JASGC) Comptroller concurred and is taking corrective actions. The Development Fund for 

Iraq (DFI) Account Manager has assessed all Statement of Agent Officer’s Account 

forms that were also reviewed by the previous Deputy Disbursing Officer and JASG-C 

Comptroller. As such, the DFI Account Manager is currently accounting for all cash 

disbursements to Division Level Agents for all regions and is verifying the accuracy of 

cash amounts recorded. The JASG-C Comptroller has also initiated actions in 

accordance with the Department of Defense Financial Management Regulation 

provisions to ensure proper disposition of Division Level Agents files that included 

irreconcilable balances. Additional review required will be performed by special action 

teams. The JASG-C Comptroller estimated the completion date to be September 30, 

2005. 

2. Ensure that the Statement of Agent Officer’s Account documentation is used for 

recording all transfers of cash between agents and the total amount of money provided to 

Division Level Agents. 

Management Comments. The JASG-C Comptroller concurred and took corrective 

actions. The JASG-C Comptroller is currently maintaining and completing accurate 

Statement of Agent Officer’s Account forms for all Division Level Agents. All Division 

Level Agents are currently maintaining Statements of Agent Officer’s Account when 

advancing funds to Field Paying Agents, as well as requiring Field Paying Agents to 

reconcile their accounts every 30 days. The JASG-C Comptroller does not entrust funds 

to any persons unless they have been properly appointed as a Division Level Agent by 

the JASG-C Comptroller. Division Level Agents are provided with both instruction and 

training regarding their responsibilities to ensure that they are aware of their authority to 
29 

issue and control funds. All Division Level Agents are required to provide proper 

documentation of any cash advances/returns of Field Paying Agents upon reconciliation 

with the JASG-C Deputy Disbursing Officer. The JASG-C Comptroller stated that the 

corrective actions were completed as of April 1, 2005. 

3. Initiate actions to resolve instances of noncompliance. 

Management Comments. The JASG-C Comptroller concurred and is taking corrective 

actions. The JASG-C Comptroller is establishing a receipt clearing process to include the 

use of a newly implemented checklist for the Division Level Agents/Field Paying Agents 

and verification by the DFI Disbursing Officer so that Division Level Agents can 

properly reconcile and clear their accountability. The disbursements checklist is required 

to be presented by the Division Level Agent, for every voucher submitted, to properly 

document and account for each disbursement of funds. All submitted forms are verified 

to ensure they include dates and valid signatures from authorized individuals. The JASGC Comptroller estimated the completion date to be September 30, 2005. 

4. Direct Field Paying Agents to present required documentation to the Division Level 

Agents every 30 days and clear their cash accounts and direct Division Level Agents to 

present required documentation to the Development Fund for Iraq Account Manager 

every 30 days and clear their cash accounts only after all required documentation has 

been reviewed and verified. 

Management Comments. The JASG-C Comptroller concurred and took corrective 

actions. The JASG-C Comptroller has directed Division Level Agents and Field Paying 

Agents and is enforcing requirements to ensure strict adherence to cash accountability 

requirements to include any Division Level Agent relieved of their duties and served with 

a revocation letter; that includes instructions pertaining to clearing their account with the 

appropriate Disbursing Officer, returning all cash and disbursement documentation to the 

appropriate Disbursing Officer, and ceasing all disbursements within 72 hours of 

receiving the revocation letter. The JASG-C Comptroller requires all Division Level 

Agents to properly reconcile their account with the JASG-C Deputy Disbursing Officer 

prior to departing the country. Although there were prior instances where Division Level 

Agents left the country without notifying the Deputy Disbursing Officer or their 

respective Program Manager, the JASG-C Comptroller and Deputy Disbursing Officer 

have reviewed these accounts and taken disposition action in accordance with the 

Department of Defense Financial Management Regulation. The JASG-C Comptroller 

stated that the corrective actions were completed as of April 1, 2005. 

5. Issue and maintain required appointment letters for all paying agents that include 

pecuniary liability language. 

Management Comments. The JASG-C Comptroller concurred and took corrective 

actions. The JASG-C Comptroller has validated that all agents have been issued 

appointment letters that include pecuniary liability language. Additionally, all Division 

Level Agents who are appointed and sign their appointment letter acknowledge they will 

reconcile prior to being relieved of their duties. The JASG-C Comptroller stated that the 

corrective actions were completed as of April 1, 2005. 
30 

6. Establish special action teams with these responsibilities: 

a. Thoroughly review the receipts previously provided by each Division Level 

Agent and Field Paying Agent to determine the exact amount of valid receipts presented. 

Management Comments. The JASG-C Comptroller concurred and is taking corrective 

actions. The JASG-C is establishing a special action team to conduct and complete the 

review, in addition to actions taken as described in the preceding. We will include 

receipts for Division Level Agent/Field Paying Agent accounts that did not reconcile and 

were referred for investigation and will determine the validity of all receipts presented. 

The JASG-C Comptroller estimated the completion date to be September 30, 2005. 

b. Reconcile the previous Statements of Agent Officer’s Account for errors and 

omissions to establish the amount of cash funding provided to each Division Level Agent 

and Field Paying Agent. 

Management Comments. The JASG-C Comptroller concurred and is taking corrective 

actions. Based on known discrepancies and as a result of those identified during the 

audit, the JASG-C Comptroller reconciled Division Level Agents and Field Paying 

Agents Statement of Agent Officer’s Account forms and identified agents whose 

accounts did not completely reconcile. Although the Comptroller referred accounts for 

investigations, we plan to also review these accounts for accuracy to determine the exact 

amount of funds advanced and any errors or omissions. The Comptroller has also 

established procedures to emphasize that it is the responsibility of the Division Level 

Agents to reconcile their respective Field Paying Agents before reconciling with the DFI 

Disbursing Officer and to determine possible errors or omissions to establish amount of 

cash funding provided to the Field Paying Agent. The JASG-C is establishing a special 

action team to conduct and complete the review of Division Level Agents’ Statement of 

Agent Officer’s Account forms. The JASG-C Comptroller estimated the completion date 

to be September 30, 2005. 

c. Reconcile each Division Level Agent’s and Field Paying Agent’s previous 

accounts to determine if outstanding balances exist. If an outstanding balance exists, take 

appropriate actions to collect the cash. 

Management Comments. The JASG-C Comptroller concurred and is taking corrective 

actions. The JASG-C is establishing a special action team that will reconcile Division 

Level Agents and Field Paying Agents accounts to identify outstanding balances. 

Accordingly, if outstanding balances do exist, the JASG-C Comptroller will take 

appropriate actions to collect cash owed. The JASG-C Comptroller estimated the 

completion date to be September 30, 2005. 

Special Inspector General for Iraq Reconstruction Position. The Commander, JASGC concurred with the audit finding and recommendations and was fully responsive. The 

Commander, JASG-C has taken actions or is in the process of taking actions to correct 

the reported deficiencies. There were three different individuals filling the position of 

JASG-C Comptroller, who also serves as the DFI Account Manager, from the initiation 

of the audit in September 2004 to its completion in April 2005. During the course of the 

audit, the audit team informed each of the JASG-C Comptrollers of deficiencies being 

detected. As a result, those JASG-C Comptrollers initiated corrective actions as noted in 

the management comments. Reasonable estimated completion dates have been 

established for the corrective actions not yet completed. 
31 

Appendix G. Previous Audit 

Recommendations - Special Inspector General 

for Iraq Reconstruction Report No. 05-015, 

“Management of Rapid Regional Response 

Program Grants in South-Central Iraq,” 

October 25, 2005 

We issued four previous reports addressing controls over cash, contract 

management, and grant management for the Coalition Provisional Authority SouthCentral Region. We made a total of 31 recommendations to management in those 

four reports. The recommendations made in those previous reports that are 

applicable to this report will not be repeated as the organizations to which those 

recommendations were made generally concurred and agreed to take necessary 

actions. The recommendations and the management comments from Special 

Inspector General for Iraq Reconstruction Report No. 05-015, “Management of 

Rapid Regional Response Program Grants in South-Central Iraq,” October 

25, 2005, are shown below.

1. We recommend that the U.S. Ambassador to Iraq determine the party 

responsible for collecting the overpaid grant amounts and direct the responsible 

individual to take action to seek reimbursement for the overpaid grant amounts. 

Management Comments. We are awaiting a response from the U.S. Ambassador 

to Iraq to this recommendation. 

2. We recommend that the Director, Iraq Reconstruction Management Office, 

ensure proper authorization and oversight of the grant approval and 

administrative process for all existing and future grants. 

Management Comments. The Director, Iraq Reconstruction Management Office 

concurred. 

3. We recommend that the Commanding General, Joint Contracting Command – 

Iraq/Afghanistan require that contracting officers, for all existing and future 

grants: 

a. Follow the Department of Defense 3210.6-R, Grants and Agreements, 

for the award and administration of grants. 

b. Require grant recipients to provide receipts for all expenditures. 

c. Require monthly reports from the grant recipients detailing expenditures 

and achievements. 

d. Ensure regular site-visits to the grant recipient location. 

e. Require reports at the end of the grant to assess the performance of the 

grantee and to document the outcome of the grant in relation to the grant 

goals. 
32 

Management Comments. The Commanding General, Joint Contracting 

Command – Iraq/Afghanistan concurred and noted that Joint Contracting 

Command – Iraq/Afghanistan currently has no grants officers and the normal 

requirement for grants reporting is quarterly. 

4. We recommend that the Commander, Joint Area Support Group - Central: 

a. Require paying agents to obtain proper grant approval documentation 

prior to making disbursements. 

b. Require the appropriate separation of duties. 

c. Establish a special team to review disbursements made in other regions 

of Iraq to determine if the same conditions exist as determined by the 

Special Inspector General for Iraq Reconstruction in the South-Central 

Region. 

Management Comments. The Commander, Joint Area Support Group - Central 

generally concurred with all recommendations and took corrective actions. The 

Commander, Joint Area Support Group - Central partially concurred with the 

recommendation to seek reimbursement for overpayments, stating that the 

responsibility for seeking reimbursement of any overpayments is up to the office 

that managed the grant, not the disbursing office. However, it will support 

whatever guidance it is provided by the office that is responsible. As a result, we 

deleted the recommendation to the Commander, Joint Area Support Group - Central 

to seek reimbursement for the overpayments. 

Special Inspector General for Iraq Reconstruction Position. The Director, Iraq 

Reconstruction Management Office; the Commanding General, Joint Contracting 

Command – Iraq/Afghanistan; and the Commander, Joint Area Support Group - 

Central generally concurred with the finding and recommendations. The comments 

that concurred with recommendations are responsive. However, for one 

recommendation, the Joint Area Support Group - Central stated it did not have the 

responsibility for seeking recovery of overpayments to grantees. Therefore, we 

added a recommendation to the United States Ambassador to Iraq in the final report 

to establish who is responsible to recover these funds and deleted the 

recommendation directed to the Joint Area Support Group - Central to seek 

recovery of overpayments. 
33 

Appendix H. Previous Audit 

Recommendations - Special Inspector General 

for Iraq Reconstruction Report No. 05-016, 

“Management of the Contracts and Grants 

Used to Construct and Operate the Babylon 

Police Academy,” October 26, 2005 

We issued four previous reports addressing controls over cash, contract 

management, and grant management for the Coalition Provisional Authority SouthCentral Region. We made a total of 31 recommendations to management in those 

four reports. The recommendations made in those previous reports that are 

applicable to this report will not be repeated as the organizations to which those 

recommendations were made generally concurred and agreed to take necessary 

actions. The recommendations and the management comments from Special 

Inspector General for Iraq Reconstruction Report No. 05-016, “Management of the 

Contracts and Grants Used to Construct and Operate the Babylon Police Academy,” 

October 26, 2005, are shown below.

1. We recommend that the Director, Iraq Reconstruction Management Office, 

ensure that established policies and procedures for authorizing, awarding, and 

consolidating contracts and grants are effectively implemented and followed 

and that complete files to support transactions made for contracts and grants are 

maintained. 

Management Comments. The Director, Iraq Reconstruction Management Office 

did not provide written comments to the report but verbally concurred with the 

finding and recommendations through a telephone conversation with the Inspector 

General. 

2. We recommend that the Commanding General, Joint Contracting CommandIraq/Afghanistan: 

a. Ensure that established policies and procedures for awarding, and 

consolidating contracts and grants are effectively implemented and followed. 

b. Ensure that established policies and procedures for monitoring contract and 

grant performance are effectively implemented and followed. 

c. Ensure that purchased equipment is delivered and construction is completed. 

d. Maintain complete files to support transactions made for contracts and grants. 

Management Comments. The Commanding General, Joint Contracting 

Command-Iraq/Afghanistan concurred with the finding and recommendations. 

3. We recommend that the Commander, Joint Area Support Group-Central, ensure 

that established policies and procedures for disbursing funds obtained through 

the Development Fund for Iraq for contracts and grants are effectively 

implemented and followed, that funds are disbursed for intended purposes, and 
34 

that complete files to support transactions made for contracts and grants are 

maintained. 

Management Comments. The Commander, Joint Area Support Group-Central 

concurred with the finding and recommendations. 

Special Inspector General for Iraq Reconstruction Position. The Director, Iraq 

Reconstruction Management Office; the Commanding General, Joint Contracting 

Command-Iraq/Afghanistan; and the Commander, Joint Area Support Group-Central 

concurred with the finding and recommendations and the comments to all 

recommendations are fully responsive. 
35 

Appendix I. Previous Audit Recommendations 

- Special Inspector General for Iraq 

Reconstruction Report No. 05-020, 

“Management of the Contracts, Grant, and 

Micro-Purchases Used to Rehabilitate the 

Karbala Library,” October 26, 2005 

We issued four previous reports addressing controls over cash, contract 

management, and grant management for the Coalition Provisional Authority SouthCentral Region. We made a total of 31 recommendations to management in those 

four reports. The recommendations made in those previous reports that are 

applicable to this report will not be repeated as the organizations to which those 

recommendations were made generally concurred and agreed to take necessary 

actions. The recommendations and the management comments from Special 

Inspector General for Iraq Reconstruction Report No. 05-020, “Management of the 

Contracts, Grant, and Micro-Purchases Used to Rehabilitate the Karbala Library,” 

October 26, 2005, are shown below.

1. We recommend that the United States Ambassador to Iraq recover specifically 

the $154,000 in rescinded grant funds remaining on deposit, any other funds 

related to the rescinded grant, and funds that exceeded the contracted amount 

and return the recovered funds to the Iraqi government. 

Management Comments. We are awaiting a response from the U.S. Ambassador 

to Iraq to this recommendation. 

2. We recommend that the Director, Iraq Reconstruction Management Office, 

ensure that established policies and procedures for authorizing, awarding, and 

consolidating contracts and grants are effectively implemented and followed 

and that complete files to support transactions made for contracts and grants are 

maintained. 

Management Comments. The Director, Iraq Reconstruction Management Office 

did not provide written comments to the report but verbally concurred with the 

finding and recommendations through a telephone conversation with the Inspector 

General. 

3. We recommend that the Commanding General, Joint Contracting CommandIraq/Afghanistan: 

a. Ensure that established policies and procedures for awarding and 

consolidating contracts and grants are effectively implemented and followed. 

b. Ensure that established policies and procedures for monitoring contract and 

grant performance are effectively implemented and followed. 

c. Ensure that repairs were completed, purchased equipment and services were 

delivered, and work was performed. 
36 

d. Maintain complete files to support transactions made for contracts and grants. 

Management Comments. The Commanding General, Joint Contracting 

Command-Iraq/Afghanistan concurred with the finding and recommendations. 

4. We recommend that the Commander, Joint Area Support Group-Central, ensure 

that established policies and procedures for disbursing funds obtained through 

the Development Fund for Iraq for contracts and grants are effectively 

implemented and followed, that funds are disbursed for intended purposes, and 

that complete files to support transactions made for contracts and grants are 

maintained. 

Management Comments. The Commander, Joint Area Support Group-Central 

concurred with the finding and recommendations. 

Special Inspector General for Iraq Reconstruction Position. The Director, Iraq 

Reconstruction Management Office; the Commanding General, Joint Contracting 

Command-Iraq/Afghanistan; and the Commander, Joint Area Support Group-Central 

concurred with the finding and recommendations and the comments to all 

recommendations are fully responsive. 
37 

Appendix J. Acronyms 

CPA Coalition Provisional Authority 

CPA-IG Coalition Provisional Authority Office of the Inspector General 

DFI Development Fund for Iraq 

DLA Division Level Agent 

PRB Program Review Board 

R3P Rapid Regional Response Program 

SIGIR Special Inspector General for Iraq Reconstruction 
38 

Appendix K. Report Distribution 

Department of State 

Secretary of State 

Senior Advisor to the Secretary and Coordinator for Iraq 

U.S. Ambassador to Iraq 

Director, Iraq Reconstruction Management Office 

Inspector General, Department of State 

Department of Defense 

Secretary of Defense 

Deputy Secretary of Defense 

Director, Defense Reconstruction Support Office 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

 Deputy Chief Financial Officer 

 Deputy Comptroller (Program/Budget) 

Inspector General, Department of Defense 

Department of the Army 

Assistant Secretary of the Army for Acquisition, Logistics, and Technology 

Principal Deputy to the Assistant Secretary of the Army for Acquisition, 

Logistics, and Technology 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Director, Project and Contracting Office 

Commanding General, Joint Contracting Command – Iraq/Afghanistan 

Assistant Secretary of the Army for Financial Management and Comptroller 

Chief of Engineers and Commander, U.S. Army Corps of Engineers 

 Commanding General, Gulf Region Division 

Auditor General of the Army 

U.S. Central Command

Commanding General, Multi-National Force – Iraq 

 Commanding General, Multi-National Security Transition Command – Iraq 

 Commander, Joint Area Support Group – Central 

Other Defense Organizations

Director, Defense Contract Audit Agency 
39 

Other Federal Government Organizations 

Director, Office of Management and Budget 

Comptroller General of the United States 

Inspector General, Department of the Treasury 

Inspector General, Department of Commerce 

Inspector General, Department of Health and Human Services 

Inspector General, U.S. Agency for International Development 

Mission Director – Iraq, U.S. Agency for International Development 

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

U.S. Senate 

Senate Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations and Related Programs 

Senate Committee on Armed Services 

Senate Committee on Foreign Relations 

Subcommittee on International Operations and Terrorism 

Subcommittee on Near Eastern and South Asian Affairs 

Senate Committee on Homeland Security and Governmental Affairs 

Subcommittee on Federal Financial Management, Government Information and 

International Security 

Subcommittee on Oversight of Government Management, the Federal 

Workforce, and the District of Columbia 

U.S. House of Representatives 

House Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on Foreign Operations, Export Financing and Related Programs 

Subcommittee on Science, State, Justice and Commerce and Related Agencies 

House Committee on Armed Services 

House Committee on Government Reform 

Subcommittee on Management, Finance and Accountability 

Subcommittee on National Security, Emerging Threats and International 

Relations 

House Committee on International Relations 

Subcommittee on Middle East and Central Asia 
40 

Appendix L. Audit Team Members 

This audit report was prepared and the audit work was conducted under the 

direction of Joseph T. McDermott, the Assistant Inspector General for Auditing, 

Office of the Special Inspector General for Iraq Reconstruction. The staff members 

who contributed to the report include: 

Angelina Johnston 

Kevin O’Connor 

Robert Murrell 

William Shimp 

William Whitehead 
41 

Management Comments 

Commanding General, Joint Contracting CommandIraq/Afghanistan 
42 

Management Comments 

Commander, Joint Area Support Group Central 

(Provisional), Multi-National Force Iraq