OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

400 Army Navy Drive • Arlington, Virginia 22202

April 28, 2006 

MEMORANDUM FOR U.S. AMBASSADOR TO IRAQ 

 COMMANDING GENERAL, JOINT CONTRACTING 

COMMAND-IRAQ/AFGHANISTAN 

 COMMANDER, JOINT AREA SUPPORT GROUPCENTRAL 

SUBJECT: Audit Report on the Follow-up on Recommendations Made in SIGIR Audit 

Reports Related to Management and Control of the Development Fund for 

Iraq (SIGIR-06-005) 

We are providing this 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. We also 

performed this review, in part, at the request of the Development Fund for Iraq 

administrator located in Baghdad, Iraq. This report discusses our assessment of the actions 

taken to address the recommendations made in six reports starting in April 2005. 

This report does not contain recommendations; therefore no written response to this report 

is required. We appreciate the courtesies extended to the staff. For additional information 

on this report, please contact Mr. Joseph T. McDermott at (703) 343-7926, or by email at 

joseph.mcdermott@iraq.centcom.mil; or Mr. Glenn Furbish by email at (703) 343-9254, or 

by email at glenn.furbish@iraq.centcom.mil or at. For the report distribution, see 

Appendix D. 

Stuart W. Bowen, Jr. 

Inspector General 

cc: Distribution 
i 

Special Inspector General for Iraq Reconstruction 

SIGIR-06-005 April 28, 2006

Follow-up on Recommendations Made in SIGIR Audit Reports Related 

to Management and Control of the Development Fund for Iraq 

Executive Summary 

Introduction. This report follows up on recommendations made in a series of Special 

Inspector General for Iraq Reconstruction (SIGIR) reports addressing the use of the 

Development Fund for Iraq (DFI) for relief and reconstruction activities. 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 (JCCI/A). Overall, these reports determined that improvements could be made in overall 

control and accountability for contracts, grants, and cash transactions using the DFI and 

we made recommendations for such improvements. This report follows up on those 

recommendations to determine if 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 correct 

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) 

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

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

Results. A total of 40 recommendations were made in the six SIGIR reports in our 

review that addressed the use of the DFI for contracts, grants, and cash transactions. 

There were 15 recommendations made to the Commander, JASG-C; 19 to the 

Commanding General, JCC-I/A; and 6 to the U.S. Ambassador to Iraq.1

 

 

1

 Three of the six recommendations were made to the U.S. Ambassador to Iraq and the Commander, MultiNational Force-Iraq. 
ii 

Our review identified these actions taken in response to the recommendations: 

• JASG-C. The Commander, JASG-C, implemented appropriate actions to close 8 

recommendations from the above reports and has actions underway to address the 

remaining 7 recommendations. SIGIR recommended that JASG-C establish 

special action teams to review and reconcile DFI accounts and ensure that all 

transactions are appropriately supported and documented. JASG-C has contracted 

for these services and estimates the contractor will complete all tasks by April 30, 

2006.2

• JCC-I/A. The Commanding General, JCC-I/A, implemented appropriate action 

to close 13 recommendations and is in the process of implementing a new review 

process that should address the remaining 6 recommendations. The new reviews, 

known as Procurement Management Reviews, will provide enhanced monitoring 

of contracts. JCC-I/A anticipates starting these reviews in the spring of 2006. 

JCC-I/A is also developing a database of DFI contracts and will be utilizing the 

JASG-C contractor efforts to assist in completing this database. 

• U.S. Ambassador to Iraq. The U.S. Ambassador implemented appropriate 

action to close 2 recommendations and is coordinating actions with JCC-I/A and 

JASG-C to resolve the issue in the 4 remaining recommendations. 

We consider the actions taken or underway to be responsive to our recommendations and 

as a result we make no further recommendations. However, we do plan to follow-up on 

the special action team’s work at the completion of the contract. For a summary of the 

six prior reports and the actions taken or underway for each recommendation, see 

Appendix B. 

 

2

 At the time the draft of this report was published, there was a modification to this contract to extend it for 

a short period to address an expanded statement of work. This included automating the contract file 

documentation. The extension also addressed excusable delays as a result of Iraqi government holidays. 
Table of Contents 

Executive Summary i 

Introduction 

Background 1 

Objective 3 

Finding 

Follow-up on Recommendations 4 

Appendices 

A. Scope and Methodology 8 

B. Summary of Recommendations and Corrective Actions 10 

C. Acronyms 24 

D. Report Distribution 25 

E. Audit Team Members 27 
1 

Introduction 

Background 

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

responsibility for managing the Development Fund for Iraq (DFI) 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 

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. 

CPA Regulation Number 2, “Development Fund for Iraq,” dated June 10, 2003, 

described the responsibilities for the administration, use, accounting, and auditing of the 

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

manner for and on behalf of the Iraqi people, consistent with Resolution 1483, and that 

all DFI disbursements would be for purposes benefiting the people of Iraq. 

CPA Memorandum Number 4, “Contract and Grant Procedures Applicable to Vested and 

Seized Iraqi Property and the Developmental Fund for Iraq” dated August 19, 2003, 

establishes procedures applicable to the execution of contracts and grants using Iraqi 

Funds. The memo directs 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 

memo also states: 

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. 
2 

The appendices to the memorandum provided supplemental instructions on preparing and 

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

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 DFI. 

The United States used DFI cash to help fund the Commander’s Emergency Response 

Program and the Rapid Regional Response Program. The Commander’s Emergency 

Response Program enables U.S. military commanders in Iraq to respond to urgent 

humanitarian relief and reconstruction requirements of the local population by providing 

funds for repairs and condolence payments after combat operations; providing equipment 

such as electrical generators to support critical infrastructure, and large scale civic 

cleanup and construction activities to employ as many Iraqis as possible. The Rapid 

Regional Response Program was conceived as a civilian equivalent of the Commander’s 

Emergency Response Program fund intended to create local jobs, support local industries, 

and stimulate the economy. 

Military regulations and guidance provide additional requirements for managing cash 

funds. Department of Defense 7000.14-R Financial Management Regulation Volume 5 

establishes disbursing policy principles, standards, responsibilities, procedures, practices, 

and liability for disbursing officers, certifying officers and accountable officials 

throughout the Department. The military also issued an instruction titled Guidance on 

the Use of the Development Fund for Iraq In Support of the Commander’s Emergency 

Response Program. The guidance applied to all parties involved in receiving, disbursing, 

accounting for, securing, and reporting for the DFI. It designates the CPA Comptroller as 

the DFI Account Manager with the responsibilities of overall financial and program 

accountability for the use of DFI monies in the Commander’s Emergency Response 

Program and the Rapid Regional Response Program. The CPA Comptroller’s 

responsibilities included accounting and reconciling DFI monies that were used in the 

Commander’s Emergency Response Fund and appointing Division Level Agents in 

addition to his other duty as the appropriated funds manager. As noted earlier, the 

JASG-C Comptroller assumed the role of the DFI Account Manager when the CPA was 

disestablished. 

The Division Level Agents were responsible for receiving and disbursing DFI cash to 

support the Commander’s Emergency Response Program and the Rapid Regional 

Response Program. The Division Level Agents were required to maintain cash 

accountability using the Statement of Agent Officer’s Account, to maintain an accounting 

ledger of all cash received and payments processed, to reconcile and clear with the DFI 

Account Manager’s office at least monthly, and to advance DFI cash to Field Paying 

Agents. The Field Paying Agents were responsible for issuing cash payments to 

designated entities (individuals and/or businesses) and for clearing their accounts with 

Division Level Agents. The Comptroller’s (DFI Account Manager’s) office was required 

to maintain an accounting ledger of cash accountability that included evidence of cash 

issued and receipts returned. The Comptroller’s (DFI Account Manager’s) office was to 

advance cash to the appointed Division Level Agents using the DD Form 1081, 

“Statement of Agent Officer’s Account.” 
3 

Objective 

The overall audit objective was to determine whether the U.S. Ambassador to Iraq, the 

Joint Contracting Command-Iraq/Afghanistan, and the Joint Area Support Group-Central 

have developed and implemented action plans to correct the deficiencies identified by the 

Special Inspector General for Iraq Reconstruction 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 (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) 

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 C. For a 

list of the audit team members, see Appendix E. 
4 

Follow-up on Recommendations 

This report follows up on 40 recommendations from 6 SIGIR audit reports addressing the 

use of the Development Fund for Iraq for relief and reconstruction activities. 

Specifically, this report discusses 15 recommendations made to the Commander, Joint 

Area Support Group-Central (JASG-C); 19 recommendations made to the Commanding 

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

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

Joint Area Support Group-Central (JASG-C). The Commander, JASG-C, took 

appropriate actions to close 8 recommendations from the reports and has actions 

underway to address the remaining 7 recommendations. One of the key 

recommendations made was for the JASG-C to establish special action teams to review 

and reconcile all JASG-C DFI accounts and ensure all transactions are appropriately 

supported and documented. Some of the significant actions taken by JASG-C to resolve 

the issues identified in our reports include the following: 

• JASG-C has contracted with a private firm to review and reconcile its DFI 

accounts. These reviews will establish the amount of cash provided to each 

Division Level Agent and Field Paying Agent, and its disposition. Statements of 

Accountability (DD Form 1081s) are prepared each time there is a turn-in or 

settlement of account occurs. The DD Form 1081s will be reviewed for errors, 

omissions, inaccuracies, and completeness along with receipts presented by each 

Division Level Agent and Field Paying Agent. The contractor is expected to 

complete all tasks by April 30, 2006.3

• JASG-C has revised its checklist and Appointment Letter for Division Level 

Agents. This should provide greater assurance that all required documentation is 

submitted in reconciliation packages and that the Division Level Agents have 

complied with all established policies. 

• JASG-C has added pecuniary liability language to its Appointment Letters for 

Division Level Agents. This makes Division Level Agents personally liable for 

errors in their accounts. 

 

3

 At the time the draft of this report was published, there was a modification to this contract to extend it for 

a short period to address an expanded statement of work. This included automating the contract file 

documentation. The extension also addressed excusable delays as a result of Iraqi government holidays. 
5 

Table 1: Status of Recommendations made to JASG-C 

SIGIR REPORT NUMBER. TOTAL CLOSED OPEN 

 05-006 (Cash) 8 4 4 

 05-008 (Contracts) 1 1 0 

 05-015 (Grants) 3 2 1 

 05-016 (Grants & Contracts) 1 0 1 

 05-020 (Cash & Contracts) 1 0 1 

 05-023 (Contracts) 1 1 0 

Total 15 8 7 

Joint Contracting Command - Iraq/Afghanistan (JCC-I/A). The Commanding 

General, JCC-I/A, took appropriate action to close 13 recommendations and is in the 

process of implementing a new review process that should address the remaining 6 

recommendations. The new reviews, known as Procurement Management Reviews, 

should provide enhanced monitoring of contracts. JCC-I/A anticipates starting these 

reviews in the spring of 2006. Some of the significant actions taken by JCC-I/A to 

resolve the issues identified in our reports include the following: 

• JCC-I/A enhanced its contract award process to provide a more thorough 

inspection and review. Contracts over $1 million in value are reviewed by a 

Contract Specialist, a Contracting Officer, the Chief of Policy, and the legal 

office. Once the contract is sourced, the process is repeated before the contract 

is signed. Contracts less than $1 million go through a less intensive review, but 

are reviewed by both a Contract Specialist and a Contracting Officer. The 

contracts are also spot checked by the Chief of Policy. JCC-I/A has also 

established a training program on source selection, and the Contracting Officer 

reviews the solicitation on all contracts during the awarding process. These 

actions closed 7 recommendations. 

• JCC-I/A established a database of DFI contracts called the Rebuilding of Iraq 

database. The Chief of Policy currently reviews the “Rebuilding of Iraq” 

database every two weeks. 

• JCC-I/A established policies and procedures to record the receipt and disposal of 

all purchased property. Contracting Officer Representatives now verify 

purchases and work performed, and contracts are following Department of 

Defense and Army regulations. Contractors are being held responsible for 

adhering to Federal Acquisition Regulations dealing with construction inspection 

and property clauses, and are required to establish inventory systems, which are 
6 

audited on a regular basis by the JCC-I/A Property Sector. Finally, when a 

contract is expiring or about to be terminated, the contractor is given disposition 

instructions for government property and a final inventory is conducted. 

• Six recommendations directing JCC-I/A to establish policies and procedures for 

monitoring contracts are pending. According to the Chief of Policy, JCC-I/A 

will begin conducting Procurement Management Reviews during the spring of 

2006. The Procurement Management Reviews are periodic reviews of the 

contracts from each JCC-I/A Sector. When implemented, the Procurement 

Management Review should address the 6 remaining recommendations. 

• We considered 6 recommendations related to grants closed because JCC-I/A has 

not awarded and, at this time, does not administer any DFI grants. The grants in 

question were made by the CPA Administrator. The CPA was disestablished in 

June 2004. JCC-I/A officials told us that they would follow the appropriate U.S. 

Department of Defense and Federal Acquisition Regulations if any grants were 

to be awarded in the future. 

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

SIGIR REPORT NUMBER. TOTAL CLOSED OPEN 

 05-008 (Contracts) 2 0 2 

 05-015 (Grants) 6 6 0 

 05-016 (Grants & Contracts) 5 3 2 

 05-020 (Cash & Contracts) 5 3 2 

 05-023 (Contracts) 1 1 0 

Total 19 13 6 

U.S. Ambassador to Iraq. The U.S. Ambassador took appropriate action to close 2 

recommendations, and is coordinating actions with JCC-I/A and JASG-C to resolve the 

issues in the 4 remaining recommendations. The significant actions taken by the U.S. 

Ambassador to Iraq to resolve the issues identified in our reports include the following: 

• We made recommendations to the Ambassador to resolve the recovery or collection 

of over payments 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 that it does not have legal standing to recover 

funds. However, the U.S. Ambassador has stated that he is working with the 

Commanding General of the Multi-National Force-Iraq to recover overpayments. 

JCC-I/A and JASG-C were working together to recover the DFI funds. 
7 

Table 3: Status of Recommendations made to the U.S. Ambassador to Iraq 

SIGIR REPORT NUMBER. TOTAL CLOSED OPEN 

 05-008 (Contracts) 3 2 1 

 05-015 (Grants) 1 0 1 

 05-020 (Cash & Contracts) 1 0 1 

 05-023 (Contracts) 1 0 1 

Total 6 2 4 

Conclusion 

Based upon our review, we conclude that the actions taken by each of the responsible 

organizations to date and the planned actions are responsive to our recommendations to 

improve controls and management of DFI. 
8 

Appendix A: Scope and Methodology 

In January 2006, we initiated this audit (Project No. 6002), to determine if appropriate 

corrective actions were taken to address the recommendations made in six SIGIR audit 

reports related to deficiencies with the management and control of the Development Fund 

for Iraq (DFI). 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, Iraq, we met with the JASG-C Comptroller (who also serves as the DFI 

Account Manager and DFI Disbursing Officer) and the DFI Manager to obtain 

information regarding changes made in response to the recommendations. Supporting 

documentation reviewed included: 

• Appointment Letters for paying agents 

• “Statement of Agent Officer’s Account,” DD Form 1081s (May 75) issued for all 

Division Level Agents who received cash from the JASG-C Comptroller’s Office 

since May 2005 

• a judgmental sample of payment packages for recent Division Level Agents to 

determine whether the procedures established met the goals of the recommendations 

and provided the supporting documentation as required in the Appointment Letter, 

and whether the payment packages supported the amount of cash funding 

• the contract that was awarded to the vendor who was engaged to address 

recommendations which were to be completed by a special action team. The 

recommendation for a special action team was to provide a full and accurate 

accounting of the management of the DFI funds. 

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

Iraq, we interviewed the Chief of Policy to obtain information regarding policy changes 

made in response to the recommendations. In addition, we reviewed contract clauses that 

applied to contract administration. 

Supporting documentation was obtained in order to verify that the indicated policies had 

been changed. Supporting documentation reviewed included administrative contract 

checklists. 

We also spoke with the Director of JCC-I/A, to discuss improvements in the grants 

administration process and reviewed administrative contract checklists. 

We met with a representative of the Chief of Mission (COM), the U.S. Ambassador to 

Iraq, who was provided with copies of the reports and a list of the six recommendations 

that were addressed to the Office of the U.S. Ambassador to Iraq. We received 

correspondence from the Ambassador pledging active participation and coordination of 

remedial action with JCC-I/A and JASG-C. 
9 

We reviewed the following documents issued by the Coalition Provisional Authority 

(CPA): 

• CPA Regulation Number 1, “Coalition Provisional Authority,” May 16, 2003 

• 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 

• CPA Memorandum Number 15, “Amendment to Coalition Provisional Authority 

Memorandum Number 4,” June 18, 2004 

We also reviewed: 

• United Nations Security Council Resolution 1483, Adopted May 22, 2003 

• DoD 7000.14-R, Federal Management Regulation, Volume 5l, Disbursing Policy 

and Procedures, August 1999 (with changes through June 2005) 

We conducted this follow-up audit from January 2006 through March 2006, 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) issued 

six reports addressing controls over cash disbursements in southern Iraq. 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) 
10 

Appendix B. Summary of Recommendations and 

Corrective Actions 

This audit report follows up on 40 recommendations made in 6 prior SIGIR reports 

addressing controls over DFI cash disbursements. This report discusses 19 

recommendations made to the Commanding General, JCC-I/A; 15 recommendations to 

the Commander, JASG-C; and 6 recommendations directed to the U.S. Ambassador to 

Iraq – The Chief of Mission (COM). The six prior reports and their recommendation 

status are discussed below. 

Table 4: Follow-up Status of Recommendations 

Report 

No. 

Total JCC-I/A

open 

JCC-I/A

closed 

JASG-C

open 

JASG-C

closed 

COM1 

open 

COM 

closed 

05-006 8 0 0 4 4 0 0 

05-008 6 2 0 0 1 1 2 

05-015 10 0 6 1 2 1 0 

05-016 6 2 3 1 0 0 0 

05-020 7 2 3 1 0 1 0 

05-023 3 0 1 0 1 1 0 

Total 40 6 13 7 8 4 2 

1

 Chief of Mission (COM) is the Ambassador to Iraq. 

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 

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. 
11 

 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 report made the following recommendations: 

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. The Comptroller estimates the contractor will complete 

all tasks by April 30, 2006. Status: Open, corrective action underway.

Recommendation 05-006 (2). The JASG-C Commander should direct the DFI 

Account Manager to 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. 

Action taken. The JASG-C Comptroller reports that he has taken a number of 

actions to include maintaining and completing accurate Statements of Agent 

Officer’s Account (DD Form 1081) for all Division Level Agents entrusted with 

DFI funds. All Division Level Agents are currently maintaining DD Form 1081s 

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 also 

reports that he does not entrust funds to any persons unless they have been 

properly appointed as a Division Level Agent by the JASG-C Comptroller. 

Finally, Division Level Agents are provided with both instruction and training 

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

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

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

with the JASG-C Deputy Disbursing Officer. We randomly reviewed several 

recent payment packages and found one payment package with a missing DD 

Form 1081. Upon further review we obtained the missing document and the 

account was reconciled to the authorized records. Status: Closed.
12 

Recommendation 05-006 (3). The JASG-C Commander should direct the DFI 

Account Manager to initiate actions to resolve instances of noncompliance. 

Action taken. The JASG-C Comptroller reports that he has established a 

thorough receipt clearing process to include the use of a newly implemented 

checklist for the Division Level Agent/Paying Agents and verification by the DFI 

Manager so that Division Level Agents can properly reconcile and clear their 

accountability. This disbursement 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. However, we found two payment 

packages missing receipts. We then tested additional reconciliation records and 

found only one checklist was missing from these records. Copies of missing 

documentation were provided by JASG-C. Status: Closed. 

Recommendation 05-006 (4). The JASG-C Commander should direct the DFI 

Account Manager to direct Field Paying Agents to present required 

documentation to the Division Level Agents every 30 days and clear their cash 

accounts. The DFI Account Manager should also direct Division Level Agents to 

present required documentation to the DFI Account Manager every 30 days and 

clear their cash accounts only after all required documentation has been reviewed 

and verified. 

Action taken. The JASG-C Comptroller reports that he 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. 

The revocation letter includes instructions pertaining to clearing their account 

with the appropriate Disbursing Officer. The JASG-C Comptroller also requires 

all Division Level Agents to properly reconcile their account with the JASG-C 

Deputy Disbursing Officer prior to departing the country. In those past incidents 

where Division Level Agents left country without notifying the Deputy 

Disbursing Officer or their respective Program Manager, the JASG-C Comptroller 

and Deputy Disbursing Officer have taken action in accordance with the DoD 

Financial Management Regulation. Status: Closed. 

Recommendation 05-006 (5). The JASG-C Commander should direct the DFI 

Account Manager to issue and maintain required appointment letters for all 

paying agents that include pecuniary liability language. 

Action taken. The JASG-C Comptroller has validated that all current agents 

have been issued letters with pecuniary liability language. This makes Division 

Level Agents personally liable for errors in their accounts. Status: Closed. 
13 

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. These three recommendations remain open. In September 2005, 

the JASG-C Comptroller contracted for the recommended services. The 

Comptroller estimates the contractor will complete all tasks by April 30, 2006.4 Status: Open, implementation 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 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 Project and Contracting Office complied with the memorandum. 

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

Project and Contracting Office, did not fully comply with the requirements in the 

memorandum. The Project and Contracting Office 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 Project and Contracting Office lacked 

the necessary controls and adequate documentation to effectively perform its 

responsibilities to monitor and administer contracts funded by the DFI. 

The report made the following recommendations: 

Recommendation 05-008 (1). The Chief of Mission should define and assign the 

Project and Contracting Office and JASG-C Comptroller roles, responsibilities, 

and methods to effectively manage and accurately determine the current value of 

obligations, payments, and unpaid obligations for DFI funded contracts. 

Action taken. The U.S. Ambassador to Iraq requested that the Department of 

Defense, who was delegated responsibility for DFI administration, take the action 

to implement this recommendation. Our review determined that both the JASG-C 

and JCC-I/A have defined their respective roles and are working very well 

together on DFI management issues. Status: Closed.

 

4

 At the time the draft of this report was published, there was a modification to this contract to extend the 

time for a short period due to expanding the statement of work to include automating the contract file 

documentation and for excusable delays as a result of Iraqi government holidays. 
14 

 

 Recommendation 05-008 (2). The Chief of Mission should direct the assessment 

of comptroller and financial management tasks to determine if existing functions 

could incorporate or support management responsibilities for the DFI. At a 

minimum, establish government or contractor positions to perform accounts 

payable tasks for the Development Fund for Iraq to include maintaining a history 

of individual payments and current contract balances by individual contract. 

Action taken. The JCC-I/A maintains a database to keep the current value of 

obligations, payments, and unpaid obligations. This database is called the 

Rebuilding of Iraq database and it is maintained by the U.S. Army Corps of 

Engineers, Gulf Region Division. Also, the JASG-C Comptroller maintains an 

Excel spreadsheet of the payments made and the remaining DFI cash balance. 

Status: Closed. 

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

and Contracting Office 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 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 JCCI/A Chief of Policy, they have entered over 9,000 DFI contracts into this data 

base. 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 

data base, it is not possible to sort the data base to identify all water sector 

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

identifiers are not in the data base. 

Further, JCC-I/A has also contracted to build a centralized database of DFI 

financial records associated with the above contracts. However, we could not 

determine how these two data bases will be reconciled since the new database is 

limited to financial records for the contracts and does not contain all the contract 

records. We plan to follow up on these actions once the special action team 

completes its contract. Status: Open, action underway.

 

Recommendation 05-008 (4). The Director, Project and Contracting Office, 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. Corrective actions 

addressing this recommendation are in progress. Although JCC-I/A has a process 

to award the contracts, no periodic review is done by management at this time. 

However, JCC-I/A will start conducting Procurement Management Reviews 

during the spring of 2006. Procurement Management Reviews are periodic 

reviews of contracts by Contract Specialists, Contract Officer Representatives, 

and the Contracting Officer from each JCC-I/A sector. Status: Open, partially 

implemented, actions continue to be implemented. 
15 

Recommendation 05-008 (5). The Director of the Project and Contracting 

Office 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. Corrective actions 

addressing this recommendation are in progress. Although JCC-I/A has a process 

to award the contracts, no periodic review is done by management at this time. 

However, JCC-I/A will start conducting Procurement Management Reviews 

during the spring of 2006. Procurement Management Reviews are periodic 

reviews of contracts by Contract Specialists, Contract Officer Representatives, 

and the Contracting Officer from each JCC-I/A sector. Status: Open, partially 

implemented, actions continue to be implemented. 

Recommendation 05-008 (6). The JASG-C Comptroller should require that all 

agents issuing DFI funds comply with existing guidance for the separation of 

duties, to include specific written instructions and checklists for making proper 

payments. 

 

Action taken. JASG-C maintains Excel spreadsheets for tracking DFI 

transactions to Division Level Agents and has instituted changes to the 

Appointment Letter and revised the checklists. Also, the JASG-C Comptroller 

said that policies and procedures have been established to guide paying agents in 

taking custody of and making disbursements of the DFI. 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 report made the following recommendations: 

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. We made recommendations to the Ambassador to resolve the 

recovery or collection of over payments of about $2.7 million for eight grants. 

We did this because the Ambassador has overall responsibility for relief and 
16 

reconstruction in Iraq. The Embassy in Baghdad responded to our 

recommendation that it does not have legal standing to recover funds. However, 

the U.S. Ambassador has stated in a February 22, 2006, letter that he is working 

with the Commanding General of the Multi-National Force-Iraq to recover 

overpayments. JCC-I/A and JASG-C were working together recover the DFI 

funds. Status: Open, corrective actions underway. 

 Recommendation 05-015 (2). The Director of the Iraq Reconstruction 

Management Office should ensure proper authorization and oversight of the grant 

approval and administrative processes for all existing and future grants. 

 Action taken. JCC-I/A does not award or administer grants. The grants in 

question were made by the CPA Administrator. The CPA was disestablished in 

June 2004. Status: Closed.

Recommendation 05-015. The Commanding General, JCC-I/A, should require 

Contracting Officers to: (3) follow DoD 3210.6-R, Grants and Agreements, for the award and 

administration of grants 

(4) require grant recipients to provide receipts for all expenditures 

(5) obtain monthly reports from the grant recipients for all expenditures 

(6) make regular site visits to the grant recipient’s locations 

(7) 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

 Action taken. JCC-I/A no longer awards or administers grants. According to the 

JCC-I/A Chief of Policy, the grants discussed in the report are closed and JCC-I/A 

has no grant authority. We considered six recommendations related to grants 

closed because JCC-I/A has not awarded and, at this time, does not administer 

any DFI grants. The grants in question were made by the CPA Administrator. 

The CPA was disestablished in June 2004. JCC-I/A officials told us that they 

would follow the appropriate U.S. Department of Defense and Federal 

Acquisition Regulations if any grants were to be awarded in the future. Status: 

Closed. 

Recommendation 05-015. The Commander, JASG-C, should require: 

 (8) paying agents to obtain proper grant approval documentation prior to making 

disbursements 

 (9) the appropriate separation of duties 

 Action taken. Relating to recommendations (8) and (9), the CPA was 

disestablished in June 2004. JASG-C officials told us that they would follow the 

appropriate U.S. Department of Defense and Generally Accepted Accounting 

Standards and the Federal Acquisition Regulations if any grants were to be 

awarded in the future. Status: Closed. 
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. JASG-C has contracted with private firm to evaluate the DFI 

disbursements across Iraq. Status: Open, but actions underway to complete. 

 

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 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 million. 

The report made the following recommendations: 

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 $1 million 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 
18 

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 has been conducting detailed close out reviews of completed projects. 

Further, as part of the special contractor assessment team scope of work, the 

contractor is reviewing contract files for completeness not only for the SouthCentral Region but for DFI contracts across Iraq. JCC-I/A also plans to initiate 

Procurement Management Reviews of contract and grant files in the Spring of 

2006. According to the JCC-I/A Chief of Policy, these reviews should ensure the 

completeness of contract and grant files. Status: Open, actions underway.

Recommendation 05-016 (2). The Commanding General, JCC-I/A, should 

ensure that established policies and procedures for awarding and consolidating 

contracts and grants are effectively implemented and followed. Action taken. JCC-I/A has a process for inspecting and reviewing contracts 

during the contract award process. For contracts valued at $1 million 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. Additionally, JCC-I/A 

has conducted training on source selection; the Contracting Officer reviews the 

solicitation on all contracts during the awarding process; and the U.S. Army 

Corps of Engineers, Gulf Region Division (GRD) has brought in Quality 

Assurance Specialists and Construction Inspectors to ensure purchased equipment 

is delivered and construction is complete. 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 PCO. Corrective actions 

addressing this recommendation are in progress. Although JCC-I/A has a process 

to award the contracts, no periodic review is done by management at this time. 

However, JCC-I/A will start conducting Procurement Management Reviews 

during the spring of 2006. Procurement Management Reviews are periodic 

reviews of contracts by Contract Specialists, Contract Officer Representatives, 

and the Contracting Officer from each JCC-I/A sector. Status: Open, partially 

implemented, actions continue to be implemented. 

Recommendation 05-016 (4). The Commanding General, JCC-I/A, should 

ensure that purchased equipment is delivered and construction completed. 

Action taken. The U.S. Army Corps of Engineers, Gulf Region Division (GRD) 

has brought in Quality Assurance Specialists and Construction Inspectors to 

ensure purchased equipment is delivered and construction is complete. Status: 

Closed. 
19 

Recommendation 05-016 (5). The Commanding General, JCC-I/A, should 

maintain complete files to support transactions made for contracts and grants. 

Action taken. There are several actions underway for improving the DFI 

contract files. First, JCC-I/A has been conducting detail close out reviews of 

completed projects. Further, as part of the special contractor assessment team 

scope of work, it is reviewing contract files for completeness not only for the 

South-Central Region but for DFI contracts across Iraq. JCC-I/A also plans to 

initiate Procurement Management Reviews of contract and grant files in the 

Spring of 2006. According to the JCC-I/A Chief of Policy, these reviews should 

ensure the completeness of contract and grant files. Status: Closed. 

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. JASG-C has put in place policies and procedures for disbursing 

DFI funds. They also have an effective follow-up system where by they 

periodically review the payment files to ensure proper payments have been made. 

Further, JASG-C has also contracted for an independent review of contract and 

grant files and to ensure that the financial records support and are available to 

ensure proper support for payment and contract/grant execution. Status: Open, 

actions underway. 

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 post-award 

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 report made the following 

recommendations: 

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. We did this because the Ambassador has overall responsibility for relief 

and reconstruction in Iraq. The Embassy in Baghdad responded to our 

recommendation that it does not have legal standing to recover funds. However, 

the U.S. Ambassador has stated that he is working with the Commanding General 

of the Multi-National Force-Iraq to recover overpayments. JCC-I/A and JASG-C 

were working together recover the DFI funds. Status: Open, action underway.

 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 $1 million 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 have been conducting detail close out reviews of completed projects. 

Further, as part of the special contractor assessment team scope of work, it is 

reviewing contract files for completeness not only for the South-Central Region 

but for DFI contracts across Iraq. JCC-I/A also plans to initiate Procurement 

Management Reviews of contract and grant files in the Spring of 2006. 

According to the JCC-I/A Chief of Policy, these reviews should ensure the 

completeness of contract and grant files. Status: Open, actions underway.

 

Recommendation 05-020 (3). The Commanding General, JCC-I/A, should take 

action to ensure that established policies and procedures for awarding and 

consolidating contracts and grants are effectively implemented and followed. 

 Action taken. The actions taken in response to recommendation 05-020 (2), 

discussed above, are considered responsive to this recommendation. Status: 

Closed.
21 

 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. Action has not yet been taken to ensure complete files that support 

contract and grant transactions are maintained. JCC-I/A plans to initiate 

Procurement Management Reviews of contract and grant files in the Spring of 

2006. According to the JCC-I/A Chief of Policy, these reviews should ensure the 

completeness of contract and grant files. Status: Open, actions underway.

Recommendation 05-020 (5). The Commanding General, JCC-I/A, should take 

action to ensure that repairs were completed, purchased equipment and services 

were delivered, and work was performed. 

 

Action taken. The Chief of Policy, JCC-I/A, stated that there are Contracting 

Officer Representatives in place now to verify purchases and work performed. 

Contracts are following DoD and Army regulations and policy is being 

developed. The contractors are being held responsible by Federal Acquisition 

Regulations (FAR) dealing with construction inspection clauses. Status: Closed.

 Recommendation 05-020 (6). The Commanding General, JCC-I/A, should take 

action to maintain complete files to support transactions made for contracts and 

grants. 

 

Action taken. The administration of all contracts is explained in the FAR and the 

Defense FAR (DFAR). JCC-I/A uses a contract file checklist to ensure the 

completeness of contract and grant files. Status: Closed. 

Recommendation 05-020 (7). 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. JASG-C has put in place policies and procedures for disbursing 

DFI funds. They also have an effective follow-up system where by they 

periodically review the payment files to ensure proper payments have been made. 

Further, JASG-C has also contracted for an independent review of contract and 

grant files and to ensure that the financial records support and are available to 

ensure proper support for payment and contract/grant execution. Status: Open, 

actions underway.

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 

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

approximately $88.1 million. 
22 

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 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 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 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 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 

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.
23 

The report made the following recommendations: 

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

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

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

recovery or collection of over payments 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 has stated that he is working with the Commanding General of the 

Multi-National Force-Iraq to recover overpayments. JCC-I/A and JASG-C were 

working together recover the DFI funds. In an update to SIGIR, dated March 13, 

2006, JCC-I/A provided notification that their DFI team has researched the eleven 

contracts; found no evidence of overpayments; but will be issuing demand letters 

to the contractors. Their final report will be provided to SIGIR and we will 

follow-up to ensure appropriate documentation supports the actions taken. 

Status: Open, actions underway. 

 Recommendation 05-023 (2) . The Commanding General, JCC-I/A, should 

establish adequate and required documentation to record the receipt and 

disposal of all purchased property. 

Action taken. The JCC-I/A Property Chief reviews all property solicitations and 

contracts to ensure proper disposition of purchased property. The property sector 

provides the full contract to the Quality Assurance Specialist for contracts that 

have a property clause. The Quality Assurance Specialist provides payment 

documents to the paying official and to the contract officer once the material is 

delivered or service has been completed. The contract clause explains that the 

property purchased for the contract will become Contractor Furnished 

Government Owned Property. The contract cites the Federal Acquisition 

Regulation clause that explains how the property will be maintained and disposed 

of once the contract is fulfilled. Contractors who are purchasing Government 

property must also establish an inventory system, which is audited on a regular 

basis by the JCC-I/A Property Sector. When it is determined that a contract is 

expiring or will be terminated, the contractor is given disposition instructions for 

government property and a final inventory is conducted. Status: Closed. 

Recommendation 05-023 (3). The Commander, JASG-C, should require paying 

agents to obtain proper contract approval documentation prior to making 

disbursements. 

Action taken. During the review, the JASG-C Comptroller stated that corrective 

actions were taken immediately upon receiving the recommendations for this 

report that established policies and procedures for disbursing DFI funds for 

contracts and grants. Corrective action consisted of adding the word “grant” to 

the checklist. In addition, the Comptroller stated that his office now ensures that 

payment packages are complete and all supporting documentation attached prior 

to the Division Level Agent clearing his account. Status: Closed. 
24 

Appendix C: Acronyms 

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

CPA Coalition Provisional Authority

DFI Development Fund for Iraq 

DoD Department of Defense 

JASG-C Joint Area Support Group-Central (Provisional) 

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

SIGIR Special Inspector General for Iraq Reconstruction 
25 

Appendix D. 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 

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

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 

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 

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 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 
26 

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 
27 

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: 

Glenn Furbish 

Arlene Hunt 

Ronald Rembold