OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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JJJAAANNNUUUAAARRRYYY 222999,,,222000000777
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

January 29, 2007 

MEMORANDUM FOR U.S. AMBASSADOR TO IRAQ 

 DEVELOPMENT FUND FOR IRAQ ADMINISTRATOR 

 COMMANDING GENERAL, JOINT CONTRACTING 

COMMAND-IRAQ/AFGHANISTAN 

 COMMANDER, JOINT AREA SUPPORT GROUP-CENTRAL 

SUBJECT: Follow-up on SIGIR Recommendations Concerning the Development Fund 

 for Iraq (DFI) (SIGIR-06-036) 

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

accordance with our statutory duties contained in the Inspector General Act of 1978, as 

amended, that requires us to determine by follow-up and report semiannually on actions 

planned or taken to implement the recommendations made in our reports. This report 

discusses our assessment of the actions taken to address the recommendations made in six 

reports starting in April 2005. 

A draft of this report was provided to the Chief of Mission, Joint Contracting CommandIraq/Afghanistan, and Joint Area Support Group-Central. This report does not contain 

additional recommendations; therefore no written responses to this report were required or 

received. Verbal comments received were addressed in the final report, as appropriate. 

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

report, please contact Mr. Joseph T. McDermott, Assistant Inspector General for Audit, 

(703-604-0982 / joseph.mcdermott@sigir.mil); or Mr. Glenn Furbish (914-360-3573 / 

glenn.furbish@iraq.centcom.mil). For the report distribution, see Appendix D. 

Stuart W. Bowen, Jr. 

Inspector General 

cc: See Distribution 

400 Army Navy Drive • Arlington, Virginia 22202
Table of Contents 

Executive Summary i 

Introduction

Background 1 

Objective 2 

Follow-up on Open Recommendations 3 

Conclusion and Recommendations 9

Observations and Lessons Learned 10

Appendices 

Appendix A—Scope and Methodology 11 

Appendix B—Summary of Recommendations and Corrective Actions 13 

Appendix C—Acronyms 25 

Appendix D—Report Distribution 26 

Appendix E—Audit Team Members 28 
Follow-up on SIGIR Recommendations Concerning the 

Development Fund for Iraq (DFI) 

SIGIR-06-036 January 29, 2007

Executive Summary 

Introduction 

This report follows up on actions taken by U.S. government agencies to address 

recommendations made in previous Special Inspector General for Iraq Reconstruction 

(SIGIR) audit reports on the control and accountability for contracts, grants, and cash 

transactions using the Development Fund for Iraq (DFI). These recommendations were 

made to the U.S. Ambassador to Iraq, the Joint Area Support Group-Central (JASG-C), 

and the Joint Contracting Command-Iraq/Afghanistan (JCC-I/A). In April 2006, we 

reported that appropriate actions had been taken to close 23 of 40 SIGIR 

recommendations.1

 Since then, we have redirected our recommendations that were made 

to the U.S. Ambassador as more appropriately placed under the purview of the DFI 

Administrator, who is also the Commanding General, JCC-I/A. This report follows up on 

the remaining 17 open recommendations to determine whether appropriate corrective 

actions were taken to address the deficiencies. 

Objective 

The objective of this review was to determine whether the U.S. Ambassador to Iraq, 

JASG-C, and JCC-I/A have developed and implemented action plans to address the 

deficiencies identified by SIGIR in these reports: 

• Control of Cash Provided to South-Central Iraq (SIGIR-05-006, April 30, 2005) 

• Administration of Contracts Funded by the Development Fund for Iraq (SIGIR05-008, April 30, 2005) 

• Management of Rapid Regional Response Program Grants in South-Central Iraq 

(SIGIR-05-015, October 25, 2005) 

• Management of the Contracts and Grants Used To Construct and Operate the 

Babylon Police Academy (SIGIR-05-016, October 26, 2005) 

• Management of the Contracts, Grant, and Micro-Purchases Used to Rehabilitate 

the Karbala Library (SIGIR-05-020, October 26, 2005) 

 

1

 “Follow-up on Recommendations Made in SIGIR Audit Reports Related to Management and Control of 

the Development Fund for Iraq,” SIGIR-06-005, April 28, 2006. 

i 
• Management of Rapid Regional Response Program Contracts in South-Central 

Iraq (SIGIR-05-023, January 23, 2006) 

Results 

As of August 31, 2006, the U.S. government spent about $1.4 million on audit services 

and computer equipment to satisfy SIGIR recommendations, but failed to effectively 

write the contract and monitor the contractor’s work. The contract requirements were not 

specific enough and were changed twice, through modification, late in the performance 

period. Inspections and quality assurance surveillance were not performed. As a result, 

DFI accountability has only slightly improved, and seven SIGIR recommendations 

directed to JASG-C remain open. 

As of December 30, 2006, 8 of the 17 recommendations that we reported as open in our 

April 2006 follow-up report are now closed and 9 remain open. Our review identified 

these actions taken in response to the open recommendations: 

• JASG-C. Our April 2006 report identified seven open recommendations made to 

the Commander, JASG-C. At that time, we reported that JASG-C had taken 

action to address all seven recommendations by contracting with a private firm to 

review and reconcile all DFI accounts throughout Iraq. The key deliverable on 

the contract was a DFI accountability database with embedded scans of 

supporting DFI documentation. Since then, we have determined that the action 

did not satisfy any of the open recommendations because U.S. government 

agencies failed to properly write detailed requirements into the contract’s 

statement of work and failed to effectively monitor contractor performance. 

Therefore, all seven recommendations remain open. Specifically, since we 

reported in April 2006: 

o JASG-C has taken additional action on four of the recommendations 

relating to the review and reconciliation of Statements of Agent Officer’s 

Accounts. The JASG-C Comptroller has taken available records from the 

DFI accountability database and entered them into a separate Access 

database. The JASG-Comptroller has also developed a list of paying 

agent names whose DFI accounts require reconciliation. We consider the 

actions underway to be responsive to our recommendations; however a 

full review and reconciliation of all DFI records has not yet been 

completed. Therefore, all four recommendations remain open. Our 

recommendations were intended to ensure that the types of problems we 

identified with the control and accountability of DFI cash disbursements in 

South-Central Iraq would also be appropriately addressed if found during 

the contracted accountability review of other Iraqi regions. 

o The scope of work for the DFI accountability contract did not address the 

three remaining recommendations, and there has been no subsequent 

action by JASG-C to address them. Therefore, the status of these three 

recommendations was downgraded from open, actions underway. The 

three recommendations are: one to establish a special team to review grant 

ii 
disbursements made in other regions of Iraq to determine if the same 

condition exists as determined by SIGIR in the South-Central Region 

(open, no action); and two recommendations requiring that complete files 

supporting payment and contract/grant execution are maintained (open, 

action incomplete). 

• JCC-I/A. Our April 2006 report identified six open recommendations made to 

the Commanding General, JCC-I/A. JCC-I/A has implemented a new review 

process that addresses these six recommendations. The new process, known as 

Procurement Management Reviews, provides enhanced monitoring of contracts. 

In addition, JCC-I/A has developed a Principal Assistant Responsible for 

Contracting-Iraq (PARC-I) Acquisition Instruction, which is a comprehensive 

guide to JCC-I/A contracting procedures in Iraq. All six recommendations have 

been closed. 

• DFI Administrator. Our April 2006 report identified four open 

recommendations made to the U.S. Ambassador to Iraq. Because the SIGIR 

recommendations directed to the U.S. Ambassador have now been identified as 

the purview of the DFI Administrator, we have redirected the recommendations. 

 

JCC-I/A representatives, acting under the direction of the DFI Administrator, have taken 

action to close two of the recommendations, and action is underway to close one other 

recommendation relating to the recovery of DFI funds disbursed for grants. In addition, 

action is underway to satisfy a recommendation to acquire a centralized database system 

to assemble and maintain accurate and reliable historical DFI records. JCC-I/A personnel 

have received training on the DFI accountability database and are in the process of 

reconciling records in that database with records in JCC-I/A’s database of contracts. 

JCC-I/A actions are responsive to the two open recommendations.

Recommendations 

Of the 17 recommendations that were open as of our April 2006 report, 9 remain open. 

We consider the actions underway to be responsive for 6 of the 9. Effective action is not 

underway on the remaining 3 recommendations. We make no additional 

recommendations. 

Management Comments and Audit Response 

We provided a draft of this report to officials with JCC-I/A, JASG-C; and the Chief of 

Mission. This report contains no additional recommendations; therefore no written 

responses were required or received. We received verbal comments from JCC-I/A and 

JASG-C officials. JCC-I/A officials, under the direction of the DFI Administrator, also 

provided adequate information to support the closure of an outstanding recommendation, 

which we addressed in this final report. Both JASG-C and JCC-I/A officials verbally 

concurred with the facts and results of this report, which we consider to be responsive. 

iii 
Observations 

Our recommendations were intended to determine if the unsatisfactory conditions 

regarding the control and accountability of the DFI that were present in the South-Central 

Region in 2004 existed in other regions of Iraq. More than two years after we first 

identified these material control and accountability weaknesses, U.S. government 

agencies still do not know the extent of the conditions of control and accountability in the 

other regions. 

During our follow-up review, we also observed that under JCC-I/A policy, when a 

contracting officer representative (COR) departs, the contracting officer has discretion to 

either appoint a new COR on the contract or terminate the previous COR’s appointment 

and take on the responsibility personally. The contracting officer for the DFI 

accountability contract failed to follow JCC-I/A policy and appoint a new COR or 

terminate the departing COR’s appointment. During our audit, we discussed this with 

JCC-I/A officials who acknowledged that the type of COR succession described in the 

JCC-I/A policy is a part of its internal control procedures, but in this case it was not 

followed. This failure represents an internal control weakness; however, because the 

contract has now ended, no action is required on our observation. 

Lessons Learned 

During the course of our review of the management of the DFI accountability contract, 

we noted that if the statement of work had been written in sufficient detail, it could have 

improved the mutual understanding of requirements between the U.S. government 

officials and the contractor. We found that the turnover of multiple government 

personnel and an unclear requirements statement resulted in an unsatisfactory result in the 

administration and execution of the contract. 

iv 
Introduction 

Background 

Between April 2005 and January 2006, the Special Inspector General for Iraq 

Reconstruction (SIGIR) issued six reports addressing the use of Development Fund for 

Iraq (DFI) for relief and reconstruction activities. These reports were: 

• Control of Cash Provided to South-Central Iraq, (SIGIR-05-006, April 30, 2005) 

• Administration of Contracts Funded by the Development Fund for Iraq, (SIGIR05-008, April 30, 2005) 

• Management of Rapid Regional Response Program Grants in South-Central Iraq, 

(SIGIR-05-015, October 25, 2005) 

• Management of the Contracts and Grants Used To Construct and Operate the 

Babylon Police Academy, (SIGIR-05-016, October 26, 2005) 

• Management of the Contracts, Grant, and Micro-Purchases Used to Rehabilitate 

the Karbala Library, (SIGIR-05-020, October 26, 2005) 

• Management of Rapid Regional Response Program Contracts in South-Central 

Iraq, (SIGIR-05-023, January 23, 2006) 

Overall, these reports determined that improvements could be made in the control and 

accountability for contracts, grants, and cash transactions using the DFI, and we made 

recommendations for such improvements. In April 2006, we issued our first report that 

followed up on the recommendations to determine whether the U.S. Ambassador to Iraq, 

the Joint Contracting Command-Iraq/Afghanistan (JCC-I/A), and the Joint Area Support 

Group-Central (JASG-C) have developed and implemented action plans to correct the 

deficiencies identified in our six DFI reports. Our April 2006 follow-up report found that 

actions had been taken to close 23 of 40 recommendations. 

United Nations Security Council Resolution 1483, dated May 22, 2003 assigned 

responsibility for managing the Development Fund for Iraq to the Coalition Provisional 

Authority (CPA). Resolution 1483 noted that DFI funds should be disbursed at the 

direction of the CPA, in consultation with the Iraqi interim administration. It also 

required that the DFI be used in a transparent manner to meet the humanitarian needs of 

the Iraqi people; the economic reconstruction and repair of Iraq’s infrastructure; the 

continued disarmament of Iraq; 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 to the relief and reconstruction efforts for Iraq. 

During the CPA administration of Iraq, the CPA Comptroller managed DFI funds. 

However, when the CPA was disestablished in June 2004, responsibility for 

administering DFI funds shifted to the U.S. Army’s Joint Area Support Group-Central 

(JASG-C). The CPA Comptroller was realigned as the JASG-C Comptroller, who 

1
assumed responsibility for the DFI and continued to perform the same duties for that 

portion of the DFI still being administered by the U.S. Government. 

On April 5, 2005, senior Chief of Mission and Multi-National Force-Iraq officials 

approved a memo that designated JCC-I as responsible for, “centralized coordination of 

the administration, accounting and reporting DFI contracts to closure.” The overall 

responsibility is now under the direction of the DFI Administrator, who is also the 

Commanding General, JCC-I/A. 

Objective 

The overall audit objective was to assess actions taken by the DFI Administrator, the 

JCC-I/A, and the JASG-C on the remaining 17 open recommendations made in prior 

SIGIR audit reports on the accountability for contracts, grants, and cash transactions 

using the DFI. We also reviewed the work performed under contract W91GXQ-05-C0014, which was let in response to our recommendations to capture DFI-related contract 

and financial records and associated documentation. 

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

see Appendix A. For a summary of recommendations and corrective actions, see 

Appendix B. For definitions of the acronyms used in this report, see Appendix C. For a 

list of the audit team members, see Appendix E. 

2
Follow-up on Open Recommendations 

This report is a second follow-up on open recommendations from six SIGIR audit reports 

addressing the use of the DFI for relief and reconstruction activities. The first follow-up 

report, dated April 28, 2006, closed 23 of the 40 total recommendations and discussed the 

status of the remaining 17. This report follows up on the remaining 17 recommendations: 

7 recommendations to the Commander, JASG-C; 6 recommendations to the 

Commanding General, JCC-I/A, and 4 recommendations to the U.S. Ambassador to Iraq. 

Further, as a result of this review, recommendations that were originally directed to the 

U.S. Ambassador were identified as the purview of the DFI Administrator and have been 

redirected. 

Joint Area Support Group-Central (JASG-C) 

The Commander, JASG-C, did not take effective action to close seven open 

recommendations, but action is underway to address four of the recommendations. As 

we reported in April 2006, JASG-C contracted for audit services in September 2005 with 

a private firm, Reviewer Management International, Ltd (RMI)2, in the amount of 

$1,025,000 (later increased to $1,525,000 through modification) to address the seven 

remaining open recommendations. The total amount included $260,000 in reimbursable 

direct costs to purchase computer equipment needed to complete the contract. 

The audit services were expected to satisfy SIGIR recommendations to: 

• Identify errors and omissions in the Statements of Agent Officer’s Accounts (DD 

Form 1081s) and determine the amount of cash funding provided to each Division 

Level Agent and Field Paying Agent, the amount of valid receipts presented by 

each Division Level Agent and Field Paying Agent, and whether outstanding 

balances exist. 

• Determine if grant disbursements throughout Iraq lacked controls, as SIGIR 

determined they were lacking in the South Central Region. 

• Ensure that complete files supporting contracts and grants are maintained. 

However, we found that the JCC-I/A and JASG-C Comptroller did not effectively 

monitor the contract or inspect the services during the period of performance, and was 

unable to provide any: 

• record of inspections 

• record of the required bi-monthly progress reports from the contractor 

• record of a plan, schedule, or performance of quality assurance 

 

2

 On September 24, 2005, a contract was awarded to Reviewer Management International, Inc. (RMI), for 

professional audit services (contract number W91GXQ-05-C-0014). 

3
• monthly report by the contracting officer representative (COR) concerning 

performance of services under the contract 

• appointment letter designating a COR to replace the last one, who left that 

position on June 30, 2006, as required by JCC-I/A policy 

On August 6, 2006, RMI delivered a searchable database combining DFI project, 

contract, and financial records, with embedded scans of hard copy documents, into one 

electronic system. However, the outcome of this effort has not produced: 

• reconciled Statements of Agent Officer’s Accounts 

• a review of grant files to determine if grant disbursements throughout Iraq lacked 

controls 

• a database that ensures complete files supporting contracts and grants are 

maintained 

The contractor stated that there were over 300,000 documents and records added to the 

database system. However, we found that because U.S. government agencies did not 

effectively state requirements in the contract or monitor the performance of the 

contractor, there is no assurance that the information in the searchable database is 

accurate or complete. 

As a result, we determined that due to ineffective contract administration, the direction 

and outcome of these contracted services did not fully satisfy any of the seven 

recommendations directed to JASG-C. Furthermore, we found that no additional action 

was taken on three of the recommendations; therefore, the status of those 

recommendations has been downgraded since the April 2006 follow-up report. For a 

summary on the status of the seven recommendations, see Table 1. 

Paying Agent Accounts 

SIGIR recommendation 05-006 (1) states that the JASG-C Commander should direct the 

DFI Account Manager (the Comptroller) to scrutinize, verify, and investigate Statements 

of Agent Officer’s Account maintained to identify statement errors, omissions, 

inaccuracies, and incompleteness. 

SIGIR recommendations 05-006 (6), (7), and (8) state that the JASG-C Commander 

should direct the DFI Account Manager to establish special action teams with these 

responsibilities: 

(6) Thoroughly review the receipts previously provided by each Division Level 

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

presented. 

(7) 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. 

4
(8) 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. 

None of the four recommendations relating to pay agent accounts were effectively 

addressed by the RMI contract. The words “paying agent” and “Statements of Agent 

Officer’s Account” do not appear anywhere in the original contract, the first five 

modifications, or either the original or revised performance-based work statement. 

On June 13, 2006, the contract was modified for the sixth time extending the performance 

period another month at no additional cost to the U.S. government. The description 

section of the modification states, “the contractor is to concentrate on reconciliation of 

the database immediately and add additional information regarding Paying Agents as 

time permits.” Nonetheless, we believe that if the focus of the audit services was 

intended to be on addressing the paying agent issues, the requirement should have been 

documented and emphasized in the contract earlier—certainly before the contractor had 

worked for nine months and the performance period was close to expiring. 

JASG-C has started a process of copying thousands of records from the searchable 

database into an Access database for the purpose of reconciling pay agent receipts. 

JASG-C has developed a list of DFI paying agents whose accounts need to be reviewed. 

Because these actions are responsive to our recommendations, but remain in progress, the 

status of the four recommendations remains: Open, Actions Underway.

Review of Grant Files 

Another open SIGIR recommendation that was expected to be addressed by the RMI 

contract was recommendation 05-015 (10) relating to grants. The recommendation 

states, “The Commander, JASG-C should establish a special team to review 

disbursements made in other regions of Iraq to determine if the same condition exists as 

determined by SIGIR in the South-Central Region.” 

Although the DFI accountability database does have a field identifying grants, no review 

of the files had been performed to determine if grant disbursements throughout Iraq 

lacked controls as they did in the South-Central Region. Furthermore, we did not identify 

any other action by the JASG-C to address this recommendation. Therefore, the status of 

this recommendation was downgraded to: Open, No Action. 

Supporting Documentation for Complete Contract and Grant Files 

Two SIGIR recommendations require the Commander, JASG-C to ensure that 

established policies and procedures for disbursing funds obtained through the DFI for 

contracts and grants are effectively implemented and followed, that funds are disbursed 

for intended purposes, and complete files support transactions made for contracts and 

grants are maintained. In our first follow-up, we reported that JASG-C had put in place 

policies and procedures for disbursing DFI funds. We further reported that JASG-C has 

an effective follow-up system that ensures proper payments have been made. 

5
On August 6, 2006, the contractor, RMI, delivered a searchable DFI accountability 

database containing DFI project, contract, and financial records, with embedded scans of 

hard copy documents to JASG-C Comptroller. Although the database does not include a 

record of every document related to DFI, a knowledgeable official at JCC-I/A stated that 

the database expands the amount of researchable DFI records available to U.S. 

government agencies. The searchable database gathers DFI project, contract, and 

financial data into one electronic system. 

However, the database has a significant limitation for users. RMI only entered data into 

the database that was typed or written on the face of the document. Therefore, many 

fields in the database are left as default characters because data for those fields were not 

on the document. For example, if a pay document did not have the associated contract 

number typed or written on it, then RMI did not enter a contract number into the record 

for the pay document. Thus, a user who runs a query on a field cannot be confident of 

receiving the complete package of documents associated with it. 

A knowledgeable senior official at the JASG-C Comptroller office stated that the DFI 

accountability database is only a collection of records that were not audited or effectively 

connected to each other. The official stated that the DFI accountability database does not 

add much value because of this significant limitation. 

We did not identify any other JASG-C action taken for these two recommendations. 

Because complete files to support transactions made for contracts and grants are not 

effectively maintained, the status for each recommendation was downgraded to: Open, 

Action Incomplete. 

Table 1: Status of Recommendations Made to JASG-C 

REPORT NUMBER TOTAL CLOSED OPEN 

05-006 (CASH) 4 0 4 

05-008 (CONTRACTS) 0 0 0 

05-015 (GRANTS) 1 0 1 

05-016 (CONTRACTS & GRANTS) 1 0 1 

05-020 (CONTRACTS & GRANTS) 1 0 1 

05-023 (CONTRACTS) 0 0 0 

TOTAL 7 0 7 

6
Joint Contracting Command-Iraq/Afghanistan (JCC-I/A) 

The Commanding General, JCC-I/A, has taken effective action to close six open 

recommendations by implementing a review process and issuing an acquisition 

instruction guide to address the six open recommendations directed to JCC-I/A. The 

reviews, known as Procurement Management Reviews, provide enhanced monitoring of 

contracts. JCC-I/A developed procedures and a checklist that is used to execute the 

reviews. The checklist comprises questions under five categories of review with 

references to the applicable Federal Acquisition Regulations or other criteria. The five 

categories are Management of the Acquisition Function; Pre-solicitation; Solicitation, 

Evaluation, and Award; Contract Administration; and Special Acquisition Situations and 

Requirements. 

Also, JCC-I/A developed an acquisition instruction designed to assist incoming 

contracting officers on the requirements for contracting in Iraq. The instruction is a 

comprehensive compilation of regulations and procedures covering the entire 

procurement process. Included are appendices listing required contract file contents and 

providing examples of key documents. For a summary on the status of the six 

recommendations, see Table 2. 

As the actions taken are responsive to our recommendations to JCC-I/A, the status of all 

six is now: Closed. 

Table 2: Status of Recommendations Made to JCC-I/A 

REPORT NUMBER TOTAL CLOSED OPEN 

05-006 (CASH) 0 0 0 

05-008 (CONTRACTS) 2 2 0 

05-015 (GRANTS) 0 0 0 

05-016 (CONTRACTS & GRANTS) 2 2 0 

05-020 (CONTRACTS & GRANTS) 2 2 0 

05-023 (CONTRACTS) 0 0 0 

TOTAL 6 6 0 

DFI Administrator 

Because the SIGIR recommendations originally directed to the U.S. Ambassador have 

now been identified as the purview of the DFI Administrator, we redirected four open 

recommendations to the DFI Administrator. JCC-I/A representatives, under the direction 

of the DFI Administrator, have taken action to close one recommendation relating to 

funds recovery for contracts and one recommendation relating to funds recovery for a 

grant. Action is underway to close a third recommendation relating to funds recovery for 

grants. Also, JCC-I/A has taken action to satisfy a fourth recommendation to acquire a 

centralized database system to assemble and maintain accurate and reliable historical DFI 

7
records. Some of the significant actions taken by the DFI Administrator to resolve the 

issues identified in our reports include the following: 

• We made a recommendation to recover $571,823 that was suspected to be 

overpaid on eleven DFI contracts. A JCC-I/A official reviewed the eleven 

contracts and attempted to resolve the possible overpayments through analysis of 

available documentation and by contacting contractors through e-mail and 

demand letters. Although no funds were recovered, JCC-I/A performed a 

thorough review. 

• JCC-I/A representatives determined that $154,000 in DFI from a rescinded grant 

remains in a bank account and they have taken steps to recover the funds. Also, 

JCC-I/A representatives are researching potential overpayments of DFI identified 

by SIGIR on grants. Following the issuance of the draft of this report, a senior 

JCC-I/A official provided us with additional information regarding management 

action taken to recover the $154,000 from the rescinded grant. The official stated 

that “the U.S. government has exhausted all avenues to recoup any funds and 

asked that the Board of Supreme Audit3 recover these funds.” This action is 

responsive to our recommendation. 

• Action is underway to satisfy a recommendation to acquire a centralized database 

system in order to assemble and maintain accurate and reliable historical DFI 

records. JCC-I/A personnel have received training on the DFI accountability 

database and are in the process of reconciling records in that database with 

records in JCC-I/A’s database of contracts.

As a result, two recommendations are Closed and two remain Open with Action 

Underway. For a summary on the status of the four recommendations, see Table 3. 

Table 3: Status of Recommendations Made to DFI Administrator 

REPORT NUMBER TOTAL CLOSED OPEN 

05-006 (CASH) 0 0 0 

05-008 (CONTRACTS) 1 0 1 

05-015 (GRANTS) 1 0 1 

05-016 (CONTRACTS & GRANTS) 0 0 0 

05-020 (CONTRACTS & GRANTS) 1 1 0 

05-023 (CONTRACTS) 1 1 0 

TOTAL 4 2 2 

 

3

 The Board of Supreme Audit is the supreme audit institution of Iraq, established as a separate and 

independent government institution with juridical personality empowered to enhance the economy, 

efficiency, effectiveness, and credibility of the Iraqi government. 

8
Conclusion and Recommendations 

Conclusion 

Based upon our review, we conclude that the actions taken to-date by each of the 

responsible organizations have closed 8 of the 17 recommendations that remained open 

as of our April 2006 follow-up report. Nine remain open. The responsible organizations 

are taking effective action on six of the recommendations; however, effective action is 

not underway on the remaining three recommendations. 

The U.S. government spent about $1.4 million on audit services and computer equipment 

to satisfy SIGIR recommendations, but failed to effectively write the contract and 

monitor the contractor’s work. The contract’s requirements were not specific enough and 

were changed twice through modification late in the performance period. Inspections and 

quality assurance surveillance were not performed. As a result, DFI accountability has 

only slightly improved for those recommendations that remained open in our April 2006 

follow-up report. Currently: 

• 6 of 6 recommendations to JCC-I/A are now closed 

• 7 of 7 recommendations to JASG-C remain open 

• 2 of 4 recommendations redirected to the DFI Administrator are open 

Recommendations 

We make no additional recommendations. 

Management Comments and Audit Response 

We provided a draft of this report to officials with JCC-I/A, JASG-C; and the Chief of 

Mission. This report contains no additional recommendations; therefore no written 

responses were required or received. We received verbal comments from JCC-I/A and 

JASG-C officials. JCC-I/A officials, under the direction of the DFI Administrator, also 

provided adequate information to support the closure of an outstanding recommendation, 

which we addressed in this final report. Both JASG-C and JCC-I/A officials verbally 

concurred with the facts and results of this report, which we consider to be responsive. 

9
Observations and Lessons Learned 

Observations 

Our recommendations were intended to determine if the unsatisfactory conditions 

regarding the control and accountability of the DFI that were present in the South-Central 

Region in 2004 existed in other regions of Iraq. More than two years after we first 

identified these material control and accountability weaknesses, U.S. government 

agencies still do not know the extent of the conditions of control and accountability in the 

other regions. 

During our follow-up review, we also observed that under JCC-I/A policy, when a 

contracting officer representative (COR) departs, the contracting officer has discretion to 

either appoint a new COR on the contract or terminate the previous COR’s appointment 

and take on the responsibility personally. The contracting officer for the DFI 

accountability contract failed to follow JCC-I/A policy and appoint a new COR or 

terminate the departing COR’s appointment. During our audit, we discussed this with 

JCC-I/A officials who acknowledged that the type of COR succession described in the 

JCC-I/A policy is a part of its internal control procedures, but in this case it was not 

followed. This failure represents an internal control weakness; however, because the 

contract has now ended, no action is required on our observation. 

Lessons Learned 

During the course of our review of the management of the DFI accountability contract, 

we noted that if the statement of work had been written in sufficient detail it could have 

improved the mutual understanding of requirements between the U.S. government 

officials and the contractor. We found that the turnover of multiple government 

personnel and an unclear requirements statement resulted in an unsatisfactory result in the 

administration and execution of the contract. 

10
Appendix A—Scope and Methodology

In July 2006, we initiated this audit (Project No. 6025), to determine if appropriate 

corrective actions were taken to address the 17 remaining open recommendations made in 

six SIGIR audit reports related to deficiencies with the management and control of the 

Development Fund for Iraq (DFI). We also reviewed the work performed under contract 

W91GXQ-05-C-0014, which was let in response to the recommendations. We conducted 

interviews with agency officials and reviewed documentation to support the 

implementation of corrective actions taken or underway. For a discussion of the 

corrective actions taken, see Appendix B. 

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

procedures. At the JASG-C Comptroller’s office, located in the Republican Palace, 

Baghdad, we met with the JASG-C Comptroller to obtain information regarding action 

taken in response to the SIGIR recommendations. Assisted by the JASG-C Comptroller 

staff, we also reviewed the capabilities of the searchable DFI accountability database 

delivered under the audit services contract with Reviewer Management International, Ltd 

(RMI). We obtained printouts of screen displays as evidence of the system’s limitations. 

The JASG-C Comptroller office also provided a list of the paying agents whose records 

they plan to reconcile. We reviewed all documentation provided. 

At the Regional Contracting Office, Baghdad, we met with the contracting officer on the 

DFI accountability contract and we reviewed the hard copy of the contract file. At the 

Republican Palace in Baghdad, we reviewed the electronic copy of the contract file. 

At the JCC-I/A office, located in the Project and Contracting Office (PCO) Annex, 

Baghdad, we interviewed the Chief of Policy to obtain information regarding 

improvements to procedures and internal controls made in response to the 

recommendations, and we reviewed documentation supporting those changes. We 

interviewed JCC-I/A personnel to determine actions taken to account for potential 

overpayments on DFI contracts and grants. We obtained documentation of those actions. 

Furthermore, we obtained supporting documentation in order to verify management 

action on SIGIR recommendations directed to JCC-I/A. Supporting documentation 

obtained and reviewed included a list of procedures and questions to be used in 

Procurement Management Reviews. We also obtained documentation of the review 

conducted by JCC-I/A at the Baghdad Regional Contracting Center from October 15-17, 

2006, as well as a schedule of future reviews at other Regional Contracting Centers. In 

addition, we obtained and reviewed the Principal Assistant Responsible for ContractingIraq (PARC-I) Acquisition Instruction. 

We met with a representative of the contractor, RMI, to discuss action taken to perform 

on the contract. 

We conducted this follow-up audit from July 2006 through November 2006, in 

accordance with generally accepted government auditing standards. 

11
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) issued 

six reports addressing controls over cash disbursements in southern Iraq, as well as one 

follow-up report. Reports issued by SIGIR can be accessed on its website 

http://www.sigir.mil. The reports are: 

• Control of Cash Provided to South-Central Iraq, (SIGIR 05-006, April 30, 2005) 

• Administration of Contracts Funded by the Development Fund for Iraq, (SIGIR 

05-008, April 30, 2005) 

• Management of Rapid Regional Response Program Grants in South-Central Iraq, 

(SIGIR 05-015, October 25, 2005) 

• Management of the Contracts and Grants Used To Construct and Operate the 

Babylon Police Academy, (SIGIR 05-016, October 26, 2005) 

• Management of the Contracts, Grant, and Micro-Purchases Used to Rehabilitate 

the Karbala Library, (SIGIR 05-020, October 26, 2005) 

• Management of Rapid Regional Response Program Contracts in South-Central 

Iraq, (SIGIR 05-023, January 23, 2006) 

• Follow-up on Recommendations Made in SIGIR Audit Reports Related to 

Management and Control of the Development Fund for Iraq, (SIGIR-06-005, 

April 28, 2006) 

12
Appendix B—Summary of Recommendations and 

Corrective Actions 

This audit report is the second follow-up report on initially 40 recommendations made in 

six prior SIGIR reports addressing controls over DFI contracts and grants and DFI cash 

disbursements. In our April 2006 follow-up report we closed 23 of the 40 

recommendations. This report discusses the remaining 17 recommendations. 

Also, in the April 2006 follow-up report, we identified four open recommendations made 

to the U.S. Ambassador to Iraq that have now been identified as under the purview of the 

DFI Administrator. As such, we redirected those recommendations to the DFI 

Administrator. This report discusses action taken on the 17 recommendations that 

remained open, including six recommendations to the Commanding General, JCC-I/A; 

seven recommendations to the Commander, JASG-C; and four recommendations to the 

DFI Administrator. The six prior reports and their recommendation status are discussed 

below. 

Summary of Follow-up Status of Recommendations 

Report No. Total 

JCC-I/A 

open 

JCC-I/A 

closed 

JASG-C 

open 

JASG-C 

closed 

DFI 

Admin.1 

open 

DFI 

Admin. 

closed 

05-006 4 0 0 4 0 0 0 

05-008 3 0 2 0 0 1 0 

05-015 2 0 0 1 0 1 0 

05-016 3 0 2 1 0 0 0 

05-020 4 0 2 1 0 0 1 

05-023 1 0 0 0 0 0 1 

Total 17 0 6 7 0 2 2 1

DFI Admin is the DFI Administrator. The open recommendations identified in our April 2006 follow-up report as the responsibility of 

the Chief of Mission were redirected to the DFI Administrator. 

Control of Cash Provided to South-Central Iraq, (SIGIR 05-

006, April 30, 2005) 

This audit report discusses control of DFI cash disbursements issued by the JASG-C 

Comptroller to Division Level Agents and Field Paying Agents located in the SouthCentral Region, Iraq. 

The audit found that the DFI Account Manager’s office did not maintain full control and 

accountability for approximately $119.9 million of DFI cash issued to South-Central 

13
Region paying agents in support of Rapid Regional Response Program projects. The 

processes employed by the DFI Account Manager’s office for completing, controlling, 

and maintaining accurate records for the issuance of cash to paying agents in the SouthCentral Region and for clearing those agents’ cash account balances were flawed. 

Specifically, the DFI Account Manager did not: 

• adhere to the clearing process for receipts of cash disbursements to ensure that 

cash accountability records were complete, accurate, and reconciled 

• have required cash accountability documentation to identify the total amount of 

money provided to paying agents 

• properly document transfers of cash between paying agents 

• review required documentation and clear the cash accounts of all Division Level 

Agents every 30 days and instruct those agents to review required documentation 

and clear the cash accounts of Field Paying Agents every 30 days 

• review required documentation in a timely manner 

• issue appointment letters to all individuals to whom cash was entrusted 

As a result, the DFI Account Manager and paying agents in the South-Central Region did 

not fully comply with applicable guidance and did not properly control, account for, and 

turn-in DFI cash assets. We further concluded that the South-Central Region paying 

agents and the DFI Account Manager cannot properly account for or support over 

$96.6 million in cash and receipts. 

The following recommendations were reported as “open” in our April 2006 follow-up 

report: 

Recommendation 05-006 (1). The JASG-C Commander should direct the DFI 

Account Manager to scrutinize, verify, and investigate Statements of Agent 

Officer’s Account maintained to identify statement errors, omissions, 

inaccuracies, and incompleteness. 

Action taken. In September 2005, the JASG-C Comptroller contracted for the 

recommended services, but the direction and outcome did not satisfy the 

recommendation. However, the JASG-C Comptroller has a plan to enter records 

from the RMI database into an Access database to facilitate reconciliation. As of 

August 28, 2006, 4,147 voucher records and 9,898 contract records have been 

entered into the Access database. The JASG-C Comptroller office has also 

developed a list of paying agents whose accounts need to be reviewed. Because 

these actions are responsive to our recommendations, but remain in progress, the 

status of the four recommendations remains: Open, Actions Underway. 

14
Recommendation 05-006. The JASG-C Commander should direct the DFI 

Account Manager to establish special action teams with these responsibilities: 

(6) Thoroughly review the receipts previously provided by each Division 

Level Agent and Field Paying Agent to determine the exact amount of 

valid receipts presented. 

(7) 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 

(8) 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. 

Action taken. In September 2005, the JASG-C Comptroller contracted for the 

recommended services, but the direction and outcome did not satisfy the 

recommendations. However, the JASG-C Comptroller has a plan to enter records 

from the RMI database into an Access database to facilitate reconciliation. As of 

August 28, 2006, 4,147 voucher records and 9,898 contract records have been 

entered into the Access database. The JASG-C Comptroller office has also 

developed a list of paying agents whose accounts need to be reviewed. The 

actions that are underway are responsive to our recommendations. However, 

because action is in progress, these recommendations remain open. Status: 

Open, Actions Underway.

Administration of Contracts Funded by the Development Fund 

for Iraq, (SIGIR 05-008, April 30, 2005) 

The audit report discusses procedures used by the Project and Contracting Office (PCO) 

and its predecessor, the Program Management Office, to monitor the administration of 

contracts funded by the DFI. The Interim Iraqi Government issued a memorandum 

assigning responsibility to the Director of the Program Management Office to monitor 

and confirm performance, certify and/or make payments, and otherwise administer 

contracts or grants that were funded with monies from the DFI. The audit objective was 

to determine whether the PCO complied with the memorandum. 

The audit found that the Program Management Office and its successor organization, the 

PCO, did not fully comply with the requirements in the memorandum. The PCO and the 

JASG-C Comptroller could not accurately identify the current value of obligations, 

payments, and unpaid obligations for DFI contracts. However, cash payments appeared 

to be made in a timely manner. Additionally, the Program Management Office and PCO 

lacked the necessary controls and adequate documentation to effectively perform its 

responsibilities to monitor and administer contracts funded by the DFI. 

15
The following recommendations were reported as “open” in our April 2006 follow-up 

report: 

Recommendation 05-008 (3). The Chief of Mission should provide the PCO and 

the JASG-C Comptroller with automated accounting and contracting systems to 

maintain accounting, disbursing, and contract records for the Development Fund 

for Iraq. A centralized database or system should be acquired and used to 

assemble and maintain accurate and reliable historical records. 

Action taken. JCC-I/A is now managing contracts for the PCO. JCC-I/A 

maintains a database of JCC-I/A contracts called the Rebuilding of Iraq database. 

The Chief of Policy, JCC-I/A reviews the database every two weeks. According 

to the JCC-I/A Chief of Policy, they have entered over 9,000 DFI contracts into 

this database. However, the data base has a limited research capability because 

not all key identifier fields are entered. For example, according to the contractor 

building the database, it is not possible to sort the database to identify all water 

sector projects, nor is it possible to link specific projects to the contracts because 

these identifiers are not in the database. 

Further, JASG-C contracted to build a centralized database of DFI financial 

records associated with the above contracts. Although the delivered searchable 

database is a centralized system comprising project, contract, and financial 

records, including embedded scans of documents, JASG-C personnel stated that 

the database does not effectively maintain accurate and reliable records. However, 

JCC-I/A personnel have received training on the DFI accountability database and 

are in the process of reconciling records in that database with records in JCCI/A’s database of contracts. This recommendation was redirected to the DFI 

Administrator. Status: Open, Actions Underway.

Recommendation 05-008 (4). The Director, PCO, and the JASG-C Comptroller 

should develop and coordinate standard procedures, controls, and organizational 

functions needed to maintain DFI records, paying particular attention to the 

necessary controls and adequate documentation needed to effectively monitor and 

administer contracts funded by the DFI. 

Action taken. JCC-I/A is now managing contracts for PCO. JCC-I/A has begun 

executing Procurement Management Reviews. These are periodic reviews of 

contracts by contract specialists, contract officer representatives, and the 

contracting officers from each JCC-I/A sector. JCC-I/A provided to us 

documentation of the first review conducted at the Baghdad Regional Contracting 

Center. The review, based on a checklist, satisfactorily addressed the 

completeness of contract and grant files. In addition, JCC-I/A provided a 

schedule of future Procurement Management Reviews. Also, JCC-I/A has issued 

a PARC-I Acquisition Instruction, which establishes contracting procedures for 

the PARC-I. The instruction provides internal guidance including delegations of 

authority, work-flow procedures, and internal reporting requirements. Status: 

Closed. 

16
Recommendation 05-008 (5). The Director, PCO, should establish procedures to 

verify that Contracting Officers maintain and monitor contract execution data, to 

include specific payments and outstanding balances, for each contract awarded. 

Action taken. JCC-I/A is now managing contracts for PCO. JCC-I/A has begun 

executing PARC-I Management Reviews. These are periodic reviews of 

contracts by contract specialists, contract officer representatives, and the 

contracting officers from each JCC-I/A sector. JCC-I/A provided to us 

documentation of the first review conducted at the Baghdad Regional Contracting 

Center. The review, based on a checklist, satisfactorily addressed the 

completeness of contract and grant files. In addition, JCC-I/A provided a 

schedule of future Procurement Management Reviews. Also, the JCC-I/A DFI 

Officer, who reports to the DFI Administrator, maintains a list of pending 

payments on DFI contracts and receives periodic updates from the JASG-C 

Disbursing Officer. Status: Closed. 

Management of Rapid Regional Response Program Grants in 

South-Central Iraq, (SIGIR 05-015, October 25, 2005) 

This audit report discusses the process used for the authorization, award, execution, and 

oversight of grants within the CPA South-Central Region. During 2003-2004, the CPA 

used DFI funds for grants intended to help carry out programs or projects that directly 

benefited the Iraqi people or assisted in the reconstruction and recovery of Iraq. Between 

February and June 2004, the CPA South-Central Region awarded 74 grants worth 

approximately $20.8 million. 

The audit found that South-Central Region personnel did not effectively manage the 

grants. South-Central Region personnel cannot account for more than $20.5 million in 

DFI funds provided for the grants, and made payments that exceeded the total value or 

grants awarded by more than $2.6 million. For example, the audit found that CPA SouthCentral Region personnel disbursed a total of almost $23.5 million for the 74 grants, 

although the award value of these grants was only $20.8 million. Additionally, no 

documentation to support grant performance could be found. Consequently, it is 

unknown whether the grants met their intended goals, or if the work for which the grants 

were awarded was started or satisfactorily completed. 

The following recommendations were reported as “open” in our April 2006 follow-up 

report: 

Recommendation 05-015 (1). The Chief of Mission should 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 amount. 

Action taken. JCC-I/A personnel are reviewing the grant records to identify 

actions to recoup possible overpayments of about $2.7 million in DFI for eight 

grants. This recommendation was redirected to the DFI Administrator. Status: 

Open, Actions Underway. 

17
Recommendation 05-015 (10). The Commander, JASG-C should establish a 

special team to review disbursements made in other regions of Iraq to determine if 

the same condition exists as determined by SIGIR in the South-Central Region. 

Action taken. In April 2006, we reported that JASG-C contracted with RMI to 

evaluate the DFI disbursements across Iraq. However, our latest review 

determined that the direction and outcome did not satisfy the recommendation. 

Therefore, the status of the recommendation has been downgraded since our April 

2006 follow-up report. Status: Open, No Action. 

Management of the Contracts and Grants Used to Construct 

and Operate the Babylon Police Academy, (SIGIR 05-016, 

October 26, 2005) 

This audit discusses the deficiencies in the CPA South-Central Region’s process for 

managing contracts and grants awarded to establish and operate the Babylon Police 

Academy. Altogether, the South Central Region awarded 11 contracts, 4 grants, and 1 

grant modification totaling $7.3 million. 

The audit found that in managing these contracts and grants South-Central Region 

personnel: 

• Entered into an unauthorized land grant in violation of conflict-of-interest rules. 

• Circumvented guidance by splitting requirements into more than one contract to 

avoid seeking the required funding-level approval and needlessly expended funds 

because work was not consolidated into a single contract. 

• Did not make site visits, did not issue final performance reports, and did not 

properly prepare certificates of completion forms. 

• Disbursed funds before contracts and grants were signed and that were not tied to 

performance. 

• Did not establish the required separation of duties as a control over the 

disbursement of funds. 

• Did not maintain accurate or required documentation. 

South-Central Region personnel needlessly expended almost $1.3 million in contract 

funds for duplicate construction; equipment not needed, not delivered, and overpriced; 

and inaccuracies not identified in contract documents. Further, the South-Central Region 

could not account for more than $2.0 million of disbursed grant funds. Although we 

were able to determine that parts of the project were complete, we were unable to clearly 

determine that all requirements were accomplished with the remaining contract funds that 

amounted to almost $4.0 million. 

18
The following recommendations were reported as “open” in our April 2006 follow-up 

report: 

Recommendation 05-016 (1). The IRMO Director should 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. 

Action taken. JCC-I/A assumed responsibility for IRMO contracting in January 

2005. As an established contracting office, JCC-I/A has a process for inspecting 

and reviewing contracts during the contract award process. For contracts valued 

at one million dollars or more, a contract specialist puts the contract packet 

together, and forwards it, in turn, to the Contracting Officer, the Chief of Policy, 

and the legal office for review. The packet is then sent back to the contract 

specialist to advertise the contract. Once the contract is sourced, the process is 

repeated, except that the contract packet is sent from legal to the contracting 

officer for signature. 

There are several actions underway for improving the DFI contract files. First, 

JCC-I/A personnel have been conducting detailed close-out reviews of completed 

projects. JCC-I/A has begun executing Procurement Management Reviews. 

These are periodic reviews of contracts by contract specialists, contract officer 

representatives, and the contracting officer from each JCC-I/A sector. JCC-I/A 

provided to us documentation of the first review conducted at the Baghdad 

Regional Contracting Center. The review, based on a checklist, satisfactorily 

addressed the completeness of contract and grant files. In addition, JCC-I/A 

provided a schedule of future Procurement Management Reviews. Second, JCCI/A has issued a PARC-I Acquisition Instruction, which establishes contracting 

procedures for the PARC-I. The instruction provides internal guidance including 

delegations of authority, work-flow procedures, and internal reporting 

requirements. Status: Closed.

Recommendation 05-016 (3). The Commanding General, JCC-I/A, should 

ensure that established policies and procedures for monitoring contract and grant 

performance are effectively implemented and followed. 

Action taken. JCC-I/A is now managing contracts for the PCO. JCC-I/A has 

begun executing Procurement Management Reviews. These are periodic reviews 

of contracts by contract specialists, contract officer representatives, and the 

contracting officer from each JCC-I/A sector. JCC-I/A provided to us 

documentation of the first review conducted at the Baghdad Regional Contracting 

Center. The review, based on a checklist, satisfactorily addressed the 

completeness of contract and grant files. In addition, JCC-I/A provided a 

schedule of future Procurement Management Reviews. In addition, JCC-I/A has 

issued a PARC-I Acquisition Instruction, which establishes contracting 

procedures for the PARC-I. The instruction provides internal guidance including 

delegations of authority, work-flow procedures, and internal reporting 

requirements. Status: Closed. 

19
Recommendation 05-016 (6). The Commander, JASG-C, should ensure that 

established policies and procedures for disbursing funds obtained through the DFI 

for contracts and grants are effectively implemented and followed, that funds are 

disbursed for intended purposes, and that complete files support transactions 

made for contracts and grants are maintained. 

Action taken. In April 2006, we reported that JASG-C had put in place policies 

and procedures for disbursing DFI funds. They also had an effective follow-up 

system whereby they periodically review the payment files to ensure proper 

payments have been made. We also reported that JASG-C contracted to build a 

centralized database of DFI financial records associated with the above contracts. 

The delivered searchable DFI accountability database is a centralized system 

comprising project, contract, and financial records, including embedded scans of 

documents. However, JASG-C personnel stated that the database does not 

effectively support complete files for contracts and grants. Therefore, the action 

that was underway regarding the database did not satisfy the recommendation, 

and the status of the recommendation for this remaining corrective action has 

been downgraded since our April 2006 follow-up report. Status: Open, Action 

Incomplete.

Management of the Contracts, Grant, and Micro-Purchases 

Used To Rehabilitate the Karbala Library, (SIGIR 05-020, 

October 26, 2005) 

This audit report discusses the Coalition Provisional Authority South-Central Region’s 

processes for managing 5 contracts, 1 grant, and 33 micro-purchase contracts awarded for 

more than $2.1 million for the rehabilitation of the Karbala Library. 

The audit found that in managing these contracts and grants the South-Central Region: 

• Circumvented guidance by splitting requirements into more than one contract to 

avoid seeking the required funding-level approval or to avoid required 

documentation. 

• Issued contracts for dollar amounts that exceeded the requirement documents. 

• Did not monitor the contracts, the grant, or micro-purchase contracts; did not 

make any site visits; did not issue performance reports; did not prepare postaward assessments; and did not act on the reports that the contractor was not 

performing to the standards set in the contracts. 

• Needlessly disbursed funds for contracts, a grant, and micro-purchase contracts 

for which work was not performed and the contracted amount was exceeded. 

• Paid-in-full, on the day the contracts, a grant, and micro-purchase contracts were 

signed, but did not require that progress payments be tied to project performance. 

• Did not maintain files that contained accurate or required documentation. 

20
Altogether, South-Central Region personnel disbursed approximately $1.6 million for 

which work was not performed. Further, the Region disbursed approximately $2.3 

million on the contracts and grants although the total value of the contracts, grant, and 

micro-purchase was only approximately $2.1 million. 

The following recommendations were reported as “open” in our April 2006 follow-up 

report: 

Recommendation 05-020 (1) The U.S. Ambassador to Iraq should recover the 

$154,000 in rescinded grant funds remaining on deposit along with any other 

funds related to the rescinded grant and funds that exceeded the contracted 

amount and return the recovered funds to the Iraqi government. 

Action taken. We made recommendations to the Ambassador to resolve the 

recovery of $154,000 unspent on a grant that we discovered still in a bank 

account. In November 2006, JCC-I/A personnel determined that the DFI funds 

were still in the bank. This recommendation was redirected to the DFI 

Administrator. After the issuance of our draft report, a JCC-I/A senior official, 

under the direction of the DFI Administrator, provided additional information 

regarding management action on this recommendation. The official stated that 

“the U.S. government has exhausted all avenues to recoup any funds and asked 

that the Board of Supreme Audit recover these funds.” This action is responsive 

to our recommendation. Status: Closed.

Recommendation 05-020 (2). The Director of IRMO should 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. 

Action taken. JCC-I/A assumed responsibility for IRMO contracting in January 

2005. As an established contracting office, JCC-I/A has a process for inspecting 

and reviewing contracts during the contract award process. For contracts valued 

at one million dollars or more, a contract specialist puts the contract packet 

together, and forwards it, in turn, to the contracting officer, the Chief of Policy, 

and the legal office for review. The packet is then sent back to the contract 

specialist to advertise the contract. Once the contract is sourced, the process is 

repeated, except that the contract packet is sent from legal to the contracting 

officer for signature. 

Several actions were implemented to improve the DFI contract files. First, JCCI/A personnel have been conducting detail close-out reviews of completed 

projects. JCC-I/A has begun executing Procurement Management Reviews. 

Procurement Management Reviews are periodic reviews of contracts by contract 

specialists, contract officer representatives, and the contracting officer from each 

JCC-I/A sector. JCC-I/A provided to us documentation of the first review 

conducted at the Baghdad Regional Contracting Center. The review, based on a 

checklist, satisfactorily addressed the completeness of contract and grant files. In 

addition, JCC-I/A provided a schedule of future Procurement Management 

21
Reviews. Second, JCC-I/A has issued a PARC-I Acquisition Instruction, which 

establishes contracting procedures for the PARC-I. The instruction provides 

internal guidance including delegations of authority, work-flow procedures, and 

internal reporting requirements. Status: Closed.

Recommendation 05-020 (4). The Commanding General, JCC-I/A should take 

action to ensure that established policies and procedures for monitoring contract 

and grant performance are effectively implemented and followed. 

Action taken. JCC-I/A has addressed this recommendation. JCC-I/A has begun 

executing Procurement Management Reviews. These are periodic reviews of 

contracts by contract specialists, contract officer representatives, and the 

contracting officer from each JCC-I/A sector. In addition, JCC-I/A has issued a 

PARC-I Acquisition Instruction, which establishes contracting procedures for the 

PARC-I. The instruction provides internal guidance including delegations of 

authority, work-flow procedures, and internal reporting requirements. Status: 

Closed.

Recommendation 05-020 (7). The Commander, JASG-C ensure that established 

policies and procedures for disbursing funds obtained through the DFI for 

contracts and grants are effectively implemented and followed, that funds are 

disbursed for intended purposes, and that complete files support transactions 

made for contracts and grants are maintained. 

Action taken. In April 2006, we reported that JASG-C had put in place policies 

and procedures for disbursing DFI funds. They also had an effective follow-up 

system where by they periodically review the payment files to ensure proper 

payments have been made. We also reported that JASG-C contracted to build a 

centralized database of DFI financial records associated with the above contracts. 

The delivered database is a centralized researchable system comprising project, 

contract, and financial records, including embedded scans of documents. 

However, JASG-C personnel stated that the database does not effectively support 

complete files for contracts and grants. Therefore, the action that was underway 

regarding the database did not satisfy the recommendation, and the status of the 

recommendation for this remaining corrective action as been downgraded since 

our April 2006 follow-up report. Status: Open, Action Incomplete.

Management of Rapid Regional Response Program Contracts 

in South-Central Iraq, (SIGIR 05-023, January 23, 2006) 

This audit report discusses the processes used for the authorization, award, execution, and 

oversight of contracts within the CPA’s South-Central Region. During 2003-2004, the 

CPA 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 CPA 

South-Central Region used funds provided from the DFI through the Rapid Regional 

22
Response Program to award 907 contracts and 1,212 micro-purchases worth 

approximately $88.1 million. 

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 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%) 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%), 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%), totaling approximately 

$2.6 million, did not contain a signed contract 

• 11 contracts (1.2%), totaling more than $5.6 million, were issued without proper 

authorization and 38 contracts (4.2%), 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%), 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%) were overpaid by $571,823; approximately $515,000 was 

disbursed for CPA salaries and operations in violation of Program Review Board 

Guidance 06.2 (amended); approximately $47,000 to $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%), 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 the 

weapons could be located 

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• 346 micro-purchase contracts (28.5%) 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 micro-purchase contract 

files (31.9%) did not contain disbursement documentation; 786 files (64.9%) did 

not contain a vendor invoice; and 838 files (69.1%) did not have a completion 

document 

The CPA South-Central Region failed to adequately manage its Rapid Regional 

Response Program contracts and micro-purchases. 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. 

The report made the following recommendation: 

Recommendation 05-023 (1). The U.S. Ambassador to Iraq should recover the 

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

Action taken. We made recommendations to the Ambassador to resolve the 

recovery or collection of overpayments and/or duplicative payments of about $3.2 

million and another $154,000 unspent in a bank account. We did this because the 

Ambassador has overall responsibility for relief and reconstruction in Iraq. The 

Embassy in Baghdad responded to our recommendation as we expected that it 

does not have legal standing to recover funds. However, the U.S. Ambassador 

stated that he was working with the Commanding General of the Multi-National 

Force-Iraq to recover overpayments. This recommendation has now been 

identified as coming under the purview of the DFI Administrator and as a result 

was redirected to the DFI Administrator. JCC-I/A officials reviewed the eleven 

contracts and attempted to resolve the possible overpayments through analysis of 

available documentation and by contacting contractors through e-mail and 

demand letters. This information was made available for our review. Although 

no funds were recovered, JCC-I/A performed a thorough review and took 

appropriate actions to implement the intent of the recommendation. Status: 

Closed.

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Appendix C—Acronyms 

Acronym 

COM Chief of Mission, the U.S. Ambassador to Iraq 

COR Contracting Officer Representative 

CPA Coalition Provisional Authority

DFI Development Fund for Iraq 

JASG-C Joint Area Support Group-Central 

JCC-I/A Joint Contracting Command-Iraq/Afghanistan 

PARC-I Principal Assistant Responsible for Contracting-Iraq 

PCO Project and Contracting Office 

RMI Reviewer Management International, Ltd. 

SIGIR Special Inspector General for Iraq Reconstruction 

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Appendix D—Report Distribution 

Department of State 

Secretary of State 

Senior Advisor to the Secretary and Coordinator for Iraq 

Director of U.S. Foreign Assistance/Administrator, U.S. Agency for 

International Development 

 Director, Office of Iraq Reconstruction 

 Assistant Secretary for Resource Management/Chief Financial Officer, 

 Bureau of Resource Management 

U.S. Ambassador to Iraq* 

Director, Iraq Reconstruction Management Office 

Mission Director-Iraq, U.S. Agency for International Development 

Inspector General, Department of State 

Department of Defense 

Secretary of Defense 

Deputy Secretary of Defense 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

 Deputy Chief Financial Officer 

 Deputy Comptroller (Program/Budget) 

Deputy Assistant Secretary of Defense-Middle East, Office of Policy/International 

Security Affairs 

Inspector General, Department of Defense 

Director, Defense Contract Audit Agency 

Director, Defense Finance and Accounting Service 

Director, Defense Contract Management Agency 

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 

Chief Financial Officer, U.S. Army Corps of Engineers 

Auditor General of the Army 

U.S. Central Command

Commanding General, Multi-National Force-Iraq 

Commanding General, Multi-National Corps-Iraq 

Commanding General, Multi-National Security Transition Command-Iraq 

Commander, Joint Area Support Group-Central* 

*Recipient of the draft audit report 

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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 

President, Overseas Private Investment Corporation 

President, U.S. Institute for Peace 

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 

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Appendix E—Audit Team Members 

This report was prepared and the audit was conducted under the direction of Joseph T. 

McDermott, Assistant Inspector General for Audit, Office of the Special Inspector 

General for Iraq Reconstruction. The staff members who contributed to the report 

include: 

Karen Bell 

Glenn Furbish 

Arlene Hunt 

William Shimp 

Clifton Spruill 

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SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, 

and operations in Iraq, the Special Inspector General 

for Iraq Reconstruction provides independent and 

objective: 

• oversight and review through comprehensive 

audits, inspections, and investigations 

• advice and recommendations on policies to 

promote economy, efficiency, and effectiveness 

• deterrence of malfeasance through the prevention 

and detection of fraud, waste, and abuse 

• information and analysis to the Secretary of 

State, the Secretary of Defense, the Congress, 

and the American people through Quarterly 

Reports 

Obtaining Copies of SIGIR 

Reports and Testimonies 

To obtain copies of SIGIR documents at no cost, go 

to SIGIR’s Web site (www.sigir.mil). 

To Report Fraud, Waste, 

and Abuse in Iraq Relief 

and Reconstruction 

Programs 

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline: 

• Web: www.sigir.mil/submit_fraud.html 

• Phone: 703-602-4063 

• Toll Free: 866-301-2003 

Congressional Affairs Marthena Cowart 

Assistant Inspector General for Congressional 

 Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-604-0368 

Email: marthena.cowart@sigir.mil 

Public Affairs Denise Burgess 

Assistant Inspector General for Public Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1217 

Fax: 703-428-0818 

Email: PublicAffairs@sigir.mil 

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