OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

October 26, 2005 

MEMORANDUM FOR DIRECTOR, IRAQ RECONSTRUCTION MANAGEMENT 

OFFICE 

COMMANDING GENERAL, JOINT CONTRACTING 

COMMAND-IRAQ/AFGHANISTAN 

COMMANDER, JOINT AREA SUPPORT GROUPCENTRAL 

SUBJECT: Management of the Contracts and Grants Used To Construct and Operate 

the Babylon Police Academy (Report No. SIGIR 05-016) 

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

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

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

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

Relief and Reconstruction Fund. Public Law 108-106, as amended, requires that we 

provide for the independent and objective leadership and coordination of, and 

recommendations on, policies designed to promote economy, efficiency, and 

effectiveness in the administration of such programs and operations and to prevent and 

detect waste, fraud, and abuse. 

We considered management comments from the Iraq Reconstruction Management 

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

Group-Central on a draft of this report when preparing the final report. Comments on the 

draft of this report by those organizations conformed to requirements and left no 

unresolved issues. Therefore, no additional comments are required. 

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

report, please contact Mr. Joseph T. McDermott at (703) 428-1100, or at 

joseph.mcdermott@sigir.mil or Mr. Clifton Spruill at (703) 343-8817, or at 

clifton.spruill@iraq.centcom.com. For the report distribution, see Appendix H. 

Stuart W. Bowen, Jr. 

Inspector General 

400 Army Navy Drive • Arlington, Virginia 22202
Special Inspector General for Iraq Reconstruction 

Report No. SIGIR 05-016 October 26, 2005 

(Project No. D2004-DCPAAF-0034.4)

Management of the Contracts and Grants Used To 

Construct and Operate the Babylon Police Academy 

Executive Summary 

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

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

Authority South-Central Region. This audit report discusses the deficiencies in the 

Coalition Provisional Authority South-Central Region’s process for managing 

11 contracts, 4 grants, and 1 grant modification awarded for more than $7.3 million to 

establish and operate the Babylon Police Academy (the Academy). 

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

selected locations in southern Iraq complied with applicable guidance and properly 

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

We expanded the scope of our audit to determine whether the South-Central Region 

properly managed contracts and grants at specific projects because of deficiencies 

identified in Office of the Special Inspector General for Iraq Reconstruction, Report No. 

05-006, “Control of Cash Provided to South-Central Iraq,” April 30, 2005, and at the 

request of the Deputy Secretary of Defense. We chose to review the Academy project 

because of the multiple contracts and grants that had been awarded to establish and 

operate the Academy. 

Results. South-Central Region personnel, in the management of contracts and grants 

using Rapid Regional Response Program funds to construct and operate the Academy:

• 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 files that contained accurate or required documentation 

South-Central Region personnel, under the direction of the Coalition Provisional 

Authority, did not comply with applicable guidance and did not properly manage 

approximately $7.3 million of Rapid Regional Response Program funds provided through 

11 contracts, 4 grants, and 1 grant modification used to establish and operate the 

Academy. Specifically, South-Central Region needlessly expended almost $1.3 million 

in contract funds for duplicate construction; equipment not needed, not delivered, and 

i 
overpriced; and inaccuracies not identified in contract documents. Further, the SouthCentral 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,1

 we were 

unable to clearly determine that all requirements were accomplished with the remaining 

contract funds that amounted to almost $4.0 million. 

Material Internal Control Weaknesses. The audit identified material internal control 

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

Provisional Authority, did not comply with applicable guidance and did not properly 

manage approximately $7.3 million of Rapid Regional Response Program funds. 

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

management and administration of cash and property used to establish and operate the 

Academy. 

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

fraud and referred these matters to the Assistant Inspector General for Investigations, Office of the Special Inspector General for Iraq Reconstruction, for action. Related 

investigations are continuing. 

Recommendations. Since the Coalition Provisional Authority was dissolved on 

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

successor organizations: the Iraq Reconstruction Management Office, the Joint 

Contracting Command-Iraq/Afghanistan, and the Joint Area Support GroupCentral. 

1. We recommend that the Director, Iraq Reconstruction Management Office, ensure that established policies and procedures for authorizing, awarding, and 

consolidating contracts and grants are effectively implemented and followed 

and that complete files to support transactions made for contracts and grants are 

maintained. 

2. We recommend that the Commanding General, Joint Contracting CommandIraq/Afghanistan: 

a. Ensure that established policies and procedures for awarding, and 

consolidating contracts and grants are effectively implemented and followed. 

b. Ensure that established policies and procedures for monitoring contract and 

grant performance are effectively implemented and followed. 

c. Ensure that purchased equipment is delivered and construction is completed. 

d. Maintain complete files to support transactions made for contracts and grants. 

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

that established policies and procedures for disbursing funds obtained through 

the Development Fund for Iraq for contracts and grants are effectively 

implemented and followed, that funds are disbursed for intended purposes, and 

that complete files to support transactions made for contracts and grants are 

maintained. 

 

1

 For example, classrooms and living quarters were built and mobile command posts were delivered. 

ii 
Management Comments and Audit Response. The Director, Iraq Reconstruction 

Management Office; the Commanding General, Joint Contracting CommandIraq/Afghanistan; and the Commander, Joint Area Support Group-Central concurred with 

the finding and recommendations and the comments to all recommendations are fully 

responsive. 

iii 
Table of Contents 

Executive Summary i 

Introduction 

Background 1 

Objective 4 

Finding 

Management of the Contracts and Grants Used to Construct and Operate 

the Babylon Police Academy 5 

Appendixes 

A. Scope and Methodology 19 

B. Coalition Provisional Authority Guidance Applicable 

 to Contracts and Grants 22 

C. Contracts Awarded to Establish and Operate 

 the Babylon Police Academy 24 

D. Grants Awarded to Establish and Operate 

 the Babylon Police Academy 25 

E. Coalition Provisional Authority Organizational Responsibilities 

 for Contracts and Grants 26 

F. Present U.S. Government Organizational Responsibilities 

 for Contracts and Grants 27 

G. Acronyms 28 

H. Report Distribution 29 

I. Audit Team Members 31 

Management Comments 

Commanding General, Joint Contracting Command-Iraq/Afghanistan 32

Commander, Joint Area Support Group-Central 34 
Introduction 

Background 

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

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

South-Central Region. This audit report discusses the deficiencies in the CPA SouthCentral Region’s process for managing 11 contracts, 4 grants, and 1 grant modification 

awarded for the establishment and operation of the Babylon Police Academy (the 

Academy). 

Coalition Provisional Authority Regulation Number 1. CPA Regulation Number 1 

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

described the powers and purposes of the CPA and stated: 

The CPA shall exercise powers of government temporarily in order to

provide for the effective administration of Iraq during the period of 

transitional administration, to restore conditions of security and

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

determine their own political future, including by advancing efforts to

restore and establish national and local institutions for representative 

governance and facilitating economic recovery and sustainable 

reconstruction and development.

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

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

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

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

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

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

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

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

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

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

relief and reconstruction of Iraq. 

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

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

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

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

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

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

management of the Rapid Regional Response Program (R3P): 

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

September 27, 2003 

• PRB Guidance 06.2, “Rapid Regional Response Program Overview 

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

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

CPA provided those funds to the Iraqi people for necessary repairs and upgrades to the 

1 
infrastructure. The objectives of the R3P were to create local jobs, support local 

industries, and stimulate the economy. The R3P was initially conceived as a civilian 

equivalent of the Commanders’ Emergency Response Program fund.2

 Further, it was 

designed to provide maximum flexibility to regional and governorate coordinators in 

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

program incorporated and expanded the authorities of two previously funded programs: 

• the Directors’ Emergency Response Program, which provided an emergency 

response capacity

• the Construction Initiative, which provided greater funding authority for 

construction activities

The discretionary authority under which regions could execute programs without prior 

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

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

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

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

spring 2003, comprising the provinces of Anbar, Babil, Karbala, Najaf, Qadisiyah, and 

Wasit, approximately half of the land mass of Iraq. South-Central Region personnel 

worked with the Iraqi people and coalition forces to establish the conditions for a free, 

sovereign, and democratically-elected representative government in Iraq. The top 

priorities of the South-Central Region were electricity, human rights, security, strategic 

communications, tribal democracy, and women’s rights. 

Babylon Police Academy. The Academy was established in December 2003.3

 The 

Academy is the leading institution and the focal point for security, training, and the rapid 

response of security forces in the South-Central Region. It is essential for ensuring the 

growth of the South-Central Region’s police force. It provides instruction and training on 

the latest forensic and investigation techniques and coordinates with the Ministry of 

Interior on standardizing training and providing first response police personnel. 

The South-Central Region awarded 11 contracts in support of the Academy for the 

purchase of equipment and the following services: 

• demolishing the former Ba’ath Party Headquarters 

• building living quarters and classrooms

• installing a water purification system 

• providing security walls 

• providing mobile command posts 

A single contractor competed for the contracts using two different company names and 

all 11 contracts were awarded to that single contractor. The 11 contracts are valued at 

$5,262,015. Details concerning the 11 contracts are shown in Appendix C. 

In addition, the South-Central Region awarded four grants and one grant modification to 

provide operating support for the Academy, establish training of elite police forces and 

counter-terror teams, and establish a criminal security tracking program. The four grants 

 

2

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

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

assistance to the Iraqi people. 3

 The Academy was located at the former Ba’ath Party Headquarters site in Al Hillah, Iraq. 

2 
and one grant modification are valued at $2,050,000. Details concerning the four grants 

and one grant modification are shown in Appendix D. 

The total value of the contracts and grants awarded for the Academy was $7,312,015. 

Organizations Responsible for Contract and Grant Management. The CPA was the 

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

Thereafter, the Iraqi Interim Government assumed the authority to govern Iraq. The 

responsibility for the DFI transferred from the CPA to the Iraqi Interim Government on 

June 28, 2004. For information on the CPA organizational responsibilities for 

management of contracts and grants, until it ceased to exist on June 28, 2004, see 

Appendix E. 

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

responsibilities for the management of contracts and grants in Iraq. For information on 

the present organizational responsibilities for the management of contracts and grants in 

Iraq, see Appendix F.

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

responsibility to assess requirements for contracts and grants. National Security 

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

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

project management support for activities in Iraq, including contract and grant related 

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

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

for Acquisition, Logistics, and Technology. 

Iraq Reconstruction Management Office. The Iraq Reconstruction Management 

Office now has the responsibility to approve contracts and grants. National Security 

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

established the Iraq Reconstruction Management Office within the Department of State 

and directed that organization to facilitate the transition in Iraq. The Iraq Reconstruction

Management Office reports to the Chief of Mission in Iraq. 

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

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

administer contracts and grants.4

 The Joint Contracting Command-Iraq/Afghanistan was 

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

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

the Army for Acquisition, Logistics, and Technology. 

Joint Area Support Group-Central Comptroller. The Joint Area Support GroupCentral now has the financial responsibility5

 for contracts and grants. The CPA 

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

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

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

the same duties for that portion of the DFI still administered by the U.S. Government. 

 

4

 The Joint Contracting Command-Iraq/Afghanistan used the Federal Acquisition Regulation and 

Department of Defense 3210.6-R, “DoD Grant and Agreement Regulations,” April 13, 1998, as guidance. 5

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

contracts and grants. Afterward, the disbursement documentation was returned to the Joint Area Support

Group-Central Comptroller’s office for review and to be cleared.

3 
The Joint Area Support Group-Central reports to the Commander, Multi-National ForceIraq. 

Objective 

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

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

accounted for DFI cash assets and expenditures. 

We expanded the scope of our audit to determine whether contracts and grants were 

properly managed by the South-Central Region at specific projects because of 

deficiencies identified in Office of the Special Inspector General for Iraq Reconstruction, 

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

and at the request of the Deputy Secretary of Defense. We chose to review the Academy 

project because of the multiple contracts and grants that had been awarded to establish 

and operate the Academy. 

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 G. For a 

list of the audit team members, see Appendix I. 

4 
Management of Contracts and Grants Used To 

Construct and Operate the Babylon Police 

Academy 

South-Central Region personnel, in the management of contracts and grants using 

R3P funds to construct and operate the Academy: 

• 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 files that contained accurate or required documentation 

This occurred because South-Central Region personnel did not: 

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

consolidating contracts and grants 

• use effective procedures to monitor performance and disburse funds for contracts 

and grants 

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

• ensure that purchased equipment was delivered, construction was completed, and 

that funds were disbursed for intended purposes 

As a result, South-Central Region personnel, under the direction of the CPA, did not 

comply with applicable guidance and did not properly manage approximately 

$7.3 million of R3P funds provided through 11 contracts, 4 grants, and 1 grant 

modification used to establish and operate the Academy. Specifically, South-Central 

Region 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,6

 we were unable to clearly determine that all 

requirements were accomplished with the remaining contract funds that amounted to 

almost $4.0 million. 

 

6

 For example, classrooms and living quarters were built and mobile command posts were delivered. 

5 
Guidance for Contracts and Grants 

In Iraq, contracts were used to purchase products or services, and grants were used to 

support or stimulate the efforts of the grant recipients to carry out a program or project. 

The contracts and grants were to directly benefit the Iraqi people or assist in the recovery 

of Iraq. The South-Central Region disbursed funds for contracts and grants by using DFI 

cash issued by the CPA Comptroller (now the Joint Area Support Group-Central 

Comptroller). 

Coalition Provisional Authority Memorandum 4. CPA Memorandum Number 4, 

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

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

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

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

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

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

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

Resolution 1483.” The memorandum also stated:

Consistent with their programmatic responsibility to ensure that 

contractors and grantees properly perform their duties, Contracting 

Officers shall be responsible for regularly monitoring the post-award

execution of all Contracts they approve. This monitoring process 

includes ensuring that the contractor provides the agreed upon goods, 

services or construction in accordance with the provisions, and that 

payments are made in a timely manner. Contracting Officers shall 

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

performance by contractors or grantees, including a final assessment 

upon completion of the Contract. Contracting officers shall rely upon 

locally available military engineering resources in assessing all repair 

and construction projects. All documents related to the establishment 

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

includes the materials described in Appendix A to this Memorandum.

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

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

the memorandum stated that “Large Purchase preliminary award decisions by 

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

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

The memorandum defined a large purchase as “A contract with a value of greater than 

US$500,000.” 

The appendices to this 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 the DFI. 

The memorandum defined a small purchase as “A contract with a value greater than 

US$5,000 and less than or equal to US$500,000.” 

6 
Department of Defense 3210.6-R. Department of Defense 3210.6-R, “DoD 

[Department of Defense] Grant and Agreement Regulations,” April 13, 1998, provided 

guidance for the management of grants. For a definition of contracts and grants, see 

Appendix B. 

Authorization of Contracts 

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

authorizing and awarding contracts using R3P funds. Specifically, the South-Central 

Region Chief Operating Officer (also the Division Level Agent) entered into 

unauthorized land grant in violation of conflict-of-interest rules. 

Coalition Provisional Authority Memorandum 4-Conflicts-of-Interest. 

CPA Memorandum 4, Section 6, “Principles Applicable to Instruments,” addressed 

conflicts-of-interest and stated that “Persons involved in the contracting process, from the 

development of the requirement through the completion of performance, shall not: . . . 

knowingly make unauthorized commitments or promises of any kind purporting to bind 

the CPA.” 

Contract for Land Transfer. On April 22, 2004, the South-Central Region Chief 

Operating Officer gave a contractor Iraqi land “seized from the former Saddam Hussein 

Government” for a period of 10 years. This land grant was officially recorded as a CPA 

letter and was signed by the South-Central Region Chief Operating Officer. 

According to the letter, the contractor was “entitled to operate and develop the property 

in compliance with its mandate to build the Police Academy and is given the premises 

‘free and clear’ of any liens. Taxes shall be exempt for the same ten (10) year period.” 

The letter further provided that, at the end of 10 years, the contractor “shall have the right 

to exercise an option to remain as ‘title holder’ of the property until such time as the 

beneficiary decides to sell the property. In the event of a sovereign Iraq, a simple 

signature from the commandant7 (Iraqi) shall suffice to continue this transfer of land.” 

The South-Central Region Chief Operating Officer that issued the letter for this land 

grant was also responsible for approving 8 of the 11 Academy contracts awarded to the 

single contractor and disbursing the funds for all 11 contracts to that contractor. 

Rescission of the Land Transfer Letter. South-Central Region personnel subsequently 

discovered the letter for the land grant, and the Project and Contracting Office legal 

department decided that the letter was not “considered a legally binding instrument.” 

Additionally, the Project and Contracting Office legal department stated that “the

individual that signed the document did not have the authority to act in this capacity and 

sign this letter.” In July 2004, the South-Central Region Director of Contracting issued a 

letter to the contractor stating that the previous letter for the land grant was void and was 

rescinded. 

 

7

 The letter did not identify who the commandant might be or specify the authority by which the 

commandant could continue the transfer of the land. 

7 
Multiple Contracts 

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

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

Region personnel circumvented guidance by splitting requirements into more than 

one contract to avoid having to seek the appropriate funding-level approval and funds 

were needlessly expended because work was not consolidated into a single contract. 

Coalition Provisional Authority Memorandum 4-Combining and Dividing Awards. 

CPA Memorandum 4, Section 6, “Principles Applicable to Instruments,” addressed 

combining and dividing awards, stating that to the “extent practicable, requirements for a 

project or related projects may be consolidated into one contract, in order to reduce the 

administrative burden of contracting. Requirements may not be split to avoid the 

application of these rules.” 

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

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

Regional Coordinators can execute projects without RPC [Regional Program

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

executed at the Governorate Coordinators’ discretion.”

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

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

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

completeness of the information concerning budget and justification, appropriate 

clearances, identification of funding sources, and other pertinent factors. The following 

examples show how the guidance was circumvented by splitting requirements into more 

than one contract to avoid having to seek the appropriate funding-level approvals. 

Construction Design Contracts. The design of the Academy called for the 

demolition of the former Ba’ath Party Headquarters; construction of living quarters and 

classrooms; and the installation of security walls, mobile command posts, power 

generators, and a water purification system. The single purpose underlying the creation 

of the Academy required the South-Central Region to complete the project as a whole. 

However, South-Central Region personnel split the design into 11 separate requirements, 

awarded 11 separate contracts, and the single contractor was paid for all 11 contracts. 

The records show indications that South-Central Region personnel may have 

intentionally split the requirements. For example, eight Funding Request Forms were 

submitted for approval to either the South-Central Region Chief Operating Officer or the 

Division Level Agent8

 within 2 weeks of each other. Those included four requests that 

amounted to a total of approximately $1.9 million which were submitted for approval on 

the same day, January 22, 2004. 

Further, the total cost of the Academy was approximately $5.3 million and each of the 

11 contracts was awarded for slightly less than $500,000. For example, five of the 

contracts were between $495,000 and $498,600. The Regional Program Coordinator 

discretionary approval authority was not required in those cases because each contract 

was less than $500,000. In addition, South-Central Region personnel also circumvented 

coordinating the contracts with the Head of Contracting Activity, CPA, by avoiding the 

$500,000 threshold. 

 

8

 The individuals in those positions were not authorized to approve projects.

8 
Mobile Command Posts Contracts. South-Central Region personnel split the 

purchase of 13 mobile command posts for the Academy in order to keep the cost of each 

contract under $500,000. A Funding Request Form for seven mobile command posts and 

a second Funding Request Form for six mobile command posts and six all-terrain 

vehicles were completed on the same day and both contracts were awarded to the same 

contractor on the same day. The South-Central Region purchased all 13 mobile 

command posts for the same price, $65,000 each, but South-Central Region personnel 

were able to circumvent the $500,000 threshold by splitting the requirement for the 

13 mobile command posts into 2 contracts. 

Academy Grant. A South-Central Region grant to provide operating support to 

the Academy also exceeded the discretionary authority level. The grant was initially 

awarded in the amount of $150,000. However, 2 months later, the grant was increased to 

a total of $600,000 by a $450,000 modification to the grant. The South-Central Region 

required the approval of the Regional Program Coordinator because the total grant after

the modification was more than $500,000. A review of the grant file produced only 

one Funding Request Form for $450,000, which had not been approved. 

Reconciling the Work Solicited, Required, and Performed. South-Central Region 

personnel entered into 11 contracts that were issued to the same contractor and this 

resulted in the duplication of efforts and unnecessary work. A former South-Central 

Region contracting officer9

 we interviewed had difficulty reconciling the work solicited, 

the work required, and the actual work performed by the contractor because the 

requirements for the Academy project were not consolidated into a single contract. 

According to this contracting officer, he could locate only 8 of the 11 contracts and it 

appeared to him that some of the contracts were written after the work had been 

performed. As a result, funds were needlessly expended because work had not been 

consolidated into a single contract. 

Demolition of the Ba’ath Party Headquarters. The South-Central Region 

awarded two contracts for the demolition of the former Ba’ath Party headquarters for the 

Academy site. The Funding Request Form for the first contract, awarded in the amount 

of $491,000 on January 4, 2004, stated the purpose of the contract was to “restore the 

vacant lot into a usable condition for further construction.” This contract was awarded to 

“destroy an existing building, level and grade, build a wall around the property, and clear, 

grub, and remove trash, brush, and debris from the site.” Further, this contract required 

the “structural base material over the entire footprint of the camp.” 

The second contract was awarded in the amount of $452,800 on February 19, 2004, to 

“destroy all existing buildings from corner to corner, remove, clear, and grub the site of 

all trash, brush, and debris.” This contract also called for importing structural base 

material over the entire footprint of the camp. The former South-Central Region 

contracting officer stated he was told that this contract was for the demolition of 

two existing buildings on a different section of the Academy grounds. However, he also 

stated that the contract file lacked any documentation to indicate there were two existing 

buildings anywhere else on the Academy grounds. The former South-Central Region 

contracting officer said that the Academy design documentation was so lacking that he 

was not certain if this contract was even necessary and that it may have duplicated other 

contracts. In our opinion, this second contract appears to be a duplication of the 

 

9

 This South-Central Region contracting officer arrived after all 11 contracts for the establishment of the 

Academy had been awarded. 

9 
first contract. As a result, the contractor was paid for work on the second contract that 

duplicated payment for the same work obtained through the first contract. 

Further, a third contract, awarded in the amount of $498,235, required the same site 

preparation for the living quarters as one of its deliverables that had been required by the 

two previous demolition contracts. As a result, the contractor was paid $43,445 for work 

in this third contract that duplicated payment for the same work obtained through the 

two previous contracts. 

Power Generators. The South-Central Region awarded two separate contracts to 

purchase power generators for the Academy. It appears from our review that the 

Academy required a 500 kilowatt generator and a 1 megawatt generator as power 

sources. However, the two contracts were used to purchase three generators for the 

Academy-two 500 kilowatt generators and a single 1 megawatt generator. The 

first contract, awarded February 1, 2004, included one 500 kilowatt generator valued at 

$177,000. The second contract, awarded March 23, 2004, included a second 500 kilowatt 

generator and a single 1 megawatt generator valued at a total of $479,550 (the price of

each generator was not stated in the contract). 

The former South-Central Region contracting officer we interviewed said there were so

many contracts for the Academy that he was never able to determine just how many 

generators were supposed to be there. He also stated that the second 500 kilowatt 

generator was “more than likely” contracted for in error. Nevertheless, using a separate 

contract to purchase a generator not required resulted in an unnecessary expenditure of 

funds (we were unable to determine the value of the second 500 kilowatt generator). 

Monitoring Performance 

South-Central Region personnel did not use effective procedures to monitor performance 

for contracts and grants using R3P funds. Specifically, South-Central Region personnel 

did not make site visits, did not issue final performance reports, and did not properly 

prepare certificates of completion forms. 

Coalition Provisional Authority Memorandum 4-Monitoring Performance. CPA 

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

contracting officers monitoring responsibilities. CPA Memorandum 4 states that 

Consistent with their programmatic responsibilities to ensure that 

contractors and grantees properly perform their duties, Contracting 

Officers shall be responsible for regularly monitoring the post-award

execution of all Contracts they approve. This monitoring process 

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

services or construction in accordance with the provisions, and that 

payments are made in a timely manner.

Monitoring Methods. CPA Memorandum 4 and R3P guidance identified performance 

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

Monitoring required South-Central Region personnel to employ some or all of the 

following methods: 

• discussions with the contracting entity or grant recipient about project timelines

and implementation of the project 

10 
• production of reports and/or other evidence of project activity by the 

implementing partner 

• confirmation of delivery of the goods or products and verification that the targeted 

beneficiary or recipient had received the product 

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

project achieved the desired outcome 

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

including a completed Certificate of Completion

Monitoring of Project Activity. The South-Central Region contracting officer was 

responsible for monitoring the Academy projects, including making regular site visits, 

according to CPA Memorandum 4 and R3P guidance. The contract and grant files lack

any evidence that South-Central Region personnel visited the Academy site. 

In addition, CPA Memorandum 4 states that the “Contracting Officer shall rely upon 

locally available military engineering resources in assessing all repair and construction

projects.” South-Central Region personnel did not use local assets that were at their 

disposal to perform monitoring duties. The Iraqi Forward Engineering Support Team

was available to monitor the progress of the Academy contracts. 

The Iraqi Forward Engineering Support Team employed Iraqi professional engineers who 

worked for the U.S. Army Corps of Engineers and oversaw Iraqi construction sites and 

reported on quality assessments. The Iraqi Forward Engineering Support Team was used 

by South-Central Region personnel to monitor a contractor’s performance at other 

construction activity sites such as the Karbala Library. In that case, the Iraqi Forward 

Engineering Support Team found and documented in written reports significant problems 

with a contractor’s performance. However, South-Central Region personnel did not 

request the Iraqi Forward Engineering Support Team to perform any monitoring duties 

for the 11 Academy contracts. 

Performance Reports. South-Central Region personnel did not issue any final reports 

for the Academy contracts or grants. None of the contract or grant files contained details 

regarding the outcome of the contracts and grants or the number of Iraqis directly 

benefiting from the use of DFI funds. 

In addition, South-Central Region contracting officers did not perform a post-award 

assessment of the contractor and grantee to detail the impact the contracts or grants had 

upon the community or to detail the performance of the contractor or grantee. The postaward report was necessary to document the benefits for the Iraqi people and to 

determine whether the contractor or grant recipient could be considered for additional 

contracts or grants. 

Certificates of Completion. South-Central Region personnel were required to be at the 

construction site to determine whether the contractor was adequately performing or 

providing the goods and services required. The contract and grant files were required to 

contain performance verification. Of the 11 Academy contract files, 7 contained signed 

certificates of completion forms. Of the four grant and one grant modification files, none 

contained certificates of completion forms. The certificate of completion form was 

designed to document the status of a project, the payment of funds to the contractor, and 

comment on the contractor’s work. However, South-Central Region personnel used this 

form to document only that the contractor was paid in full instead of using the form to 

document the contractor’s project performance. Consequently, the project was 

considered “completed” when using this practice. 

11 
Disbursing Funds 

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

contracts and grants using R3P funds. Specifically, funds were disbursed before 

contracts and grants were signed and were not tied to performance. In addition, the 

required separation of duties was not established as a control over the disbursement of 

funds. 

Coalition Provisional Authority Memorandum 4-Payment Terms. CPA Memorandum 4, Section 7, “Contracts,” states that “All Small Purchase contracts 

will contain payment terms including an agree[d] upon payment schedule (preferably 

with milestones tied to performance) for service contracts. . . .” South-Central Region 

personnel made one disbursement to the contractor for Academy work before that 

particular contract had been signed. In addition, disbursements not tied to performance 

measures were made for two contracts when the contractor came in to sign another 

contract. 

Coalition Provisional Authority Memorandum 4-Specific Milestones. 

CPA Memorandum 4, Section 9, “Grants,” states that “Grants should be reviewed during 

implementation and where appropriate funds should be made available on a schedule tied 

to the accomplishment of specific milestones. . . .” South-Central Region personnel did 

not tie the disbursement of funds to any specific accomplishments for the four Academy 

grants. Instead, the South-Central Region disbursed the entire amount of the grants at 

one time and, in two instances, prior to the grant being signed by the recipient. 

Separation of Duties. PRB Guidance 06 states that "the disbursing authority may not be 

involved in the approval process." We identified 10 examples where the South-Central 

Region disbursing agent approved the Funding Request Forms for Academy work. 

However, those Funding Request Forms should have been approved by the South-Central 

Regional Coordinator who was the appropriate approval authority. The disbursing agent 

personally authorized and disbursed approximately $4.8 million for contracts and grants 

although he did not have the discretionary authority to approve any funding requests. We 

could not determine whether this disbursing agent had approved any additional grant 

funding because of the lack of documentation in the contract and grant files. 

Contract and Grant Documentation

South-Central Region personnel did not maintain complete contract files to support 

transactions made for contracts and grants using R3P funds. Specifically, South-Central 

Region personnel did not maintain files that contained accurate or required 

documentation. 

Approval Authority Documentation. PRB Guidance 06 required that “all project 

proposals must be justified based upon the criteria in the Program Review Board -01 

Funding Request Form.” We reviewed the files for the 11 contracts and 4 grants for the 

Academy and none of the files had the required documentation or the proper approval 

authority. We could not locate any complete contract files during our review. 

Of the 11 contracts and 4 grants, 13 had the required Funding Request Forms but none of 

the 13 forms were signed by an appropriate approving authority. Of the 13 Funding 

Request Forms in the files, 1 form was unsigned and 12 forms were signed but by SouthCentral Region personnel that did not possess the appropriate discretionary authority. 

12 
Disbursement Documentation. Disbursement documentation for Academy contracts 

was available for only 3 of the contracts, worth approximately $1.4 million, even though 

the contractor was paid more than $5.3 million for the 11 contracts. 

Accuracy of Documentation. In addition, South-Central Region personnel did not 

adequately review a contractor’s bid on a contract for Academy work and did not identify 

a mathematical error on the contractor’s bid in the amount of $29,600. The total of the 

contractor’s costs was actually $441,200, not $470,800, but the contract was awarded and 

subsequently paid in the amount of $470,800. As a result, $29,600 was needlessly 

expended. 

Academy Site Evaluation 

We visited the Academy in May 2005, to evaluate the results of the work that was 

required by the contracts and grants. South-Central Region personnel did not ensure that 

purchased equipment was delivered, construction was completed, and that funds were 

disbursed for the intended purposes. 

Contracts. We reviewed contracting actions for the Academy to determine whether the 

contractor provided the agreed upon goods and services in the 11 contracts and to 

determine whether the contractor’s performance was adequate.

Power Generators. We identified three generators that were purchased for the 

Academy—two 500-kilowatt generators and a 1-megawatt generator. The total value of 

the three generators was $656,550. 

We observed the shell of one 500-kilowatt generator which Academy officials stated was 

delivered in non-operating condition by the contractor. The contractor had removed the 

generator to have it repaired, but as of the date of this report the generator had not been 

returned. Photo 1 shows the shell for the 500-kilowatt generator that was undergoing 

repairs. 

13 
Photo 1. Shell for the 500-Kilowatt Generator Undergoing Repairs 

Academy officials also stated that the Academy never received the 1-megawatt generator 

or the second 500-kilowatt generator. Academy officials identified to us the location in 

which the 1-megawatt generator was to be placed, and we determined that the generator 

was never delivered to that particular site. Photo 2 shows the site where the missing 1-

megawatt generator was to be located.

14 
Photo 2. Site for the Missing 1-Megawatt Generator 

The Academy had to rely upon local power, rather the generators, for all of its power 

needs because the 500-kilowatt generator was not operable and neither the second 500-

kilowatt generator, nor the 1-megawatt generator were delivered. The Academy was 

subsequently expanded in late 2004 to train more students. This Phase II expansion 

project used funds provided by the Iraq Relief and Reconstruction Fund. The expansion 

project contract10 included the purchase and delivery of two generators11 to provide for 

the Academy’s electric needs during local power outages. It appears that the 

requirements for generators were duplicative in that two generators would have been 

sufficient rather than the five ordered, but contract documentation was insufficient for us 

to reach a firm conclusion. 

All Terrain Vehicles. Of the 11 contracts, 1 contract called for the delivery of 

6 all-terrain vehicles, valued at $108,600, to the Academy. We reviewed the contract file 

and could not locate any evidence that the vehicles were delivered. Academy officials 

stated that they never received any vehicles and were not aware that they were supposed 

to receive any vehicles. 

Grants. We reviewed the four grants made to the Academy to determine how the grant 

funding was spent. The Academy was the recipient of two grants awarded in March 2004 

and two grants awarded in April 2004. The four grants totaled $2,050,000 and were to 

help support the following projects: 

 

10 The expansion project contract was awarded to a different contractor than the contractor that was 

awarded the first 11 Academy contracts. 11 This subsequent requirement for two generators was in addition to the original requirement for

three generators that were part of the first 11 Academy contracts. 

15 
• Babylon Police Academy (two separate grants)12

• Babylon Police Community Awareness Project (one grant)13

• Babylon Police Security Tracking Project (one grant)14

Rescission of the Grants. Three15 of the four grants were rescinded by the SouthCentral Region on May 13, 2004. The rescission letters stated that the Academy now fell 

under the Ministry of the Interior and thus the supporting rationale for the grants ceased. 

The first Academy grant in the amount of $150,000 was not rescinded even though the 

Academy was placed under the Ministry of the Interior. South-Central Region internal 

memoranda indicated that the reason for rescinding the three grants was that the funding 

was being used for intelligence gathering purposes. This allegation (allegedly about the 

grant recipient) was said to be based upon “numerous receipts” provided by the grant 

recipient. However, we did not find those receipts in any of the four grant files. Current 

and former South-Central Region personnel stated they do not remember any receipts 

presented by the grant recipient. We were unable to determine for what purposes the 

$1,450,000 was expended as we could not locate any of the alleged receipts in the grant 

files. 

Grant Modification. The first Academy grant was modified with an increase of 

funding in the amount of $450,000 and totaled $600,000 after the modification. This was 

done 13 days after the rescission letter was signed by the contracting officer. The 

increase in funding was paid in full to the same individual (the grant recipient) who had 

been originally accused of using the funds from the other three grants for intelligence 

gathering purposes. In addition, a South-Central Region internal memorandum stated 

that the “purpose of the grants was not fulfilled and continuing the term of the grant 

would violate the agreement and policy within the guidelines set forth by CPA 

requirements.” The memorandum further stated that the South-Central Region had 

“instituted corrective actions to return purchased equipment and supplies.” We

interviewed current and former South-Central Region personnel who stated there was no 

return of any equipment or money from this grant. 

We spoke to the Dean of Instruction at the Academy who stated that the Academy never 

received any of the funding disbursed for the four grants. He stated he was unaware that 

four grants were even awarded to the Academy. The South-Central Region lost oversight 

of $2,050,000 in grants to the Academy because it did not require monthly reports 

detailing all expenditures and did not monitor the performance of the grants. The SouthCentral Region did not know what happened to the disbursements made for the 

four grants. The information obtained during this audit concerning the four grants was 

referred to the Assistant Inspector General for Investigations, Office of the Special

Inspector General for Iraq Reconstruction. 

 

12 The first of two grants for the Academy was initially awarded in the amount of $150,000 and a 

subsequent modification to the grant added an additional $450,000, for a total award in the amount of 

$600,000. The second grant was awarded in the amount of $500,000. 13 This grant was awarded in the amount of $450,000. 14 This grant was awarded in the amount of $500,000. 15 The second Academy grant, the Babylon Police Community Awareness Project grant, and the Babylon 

Police Security Tracking Project grant were rescinded. The amount rescinded was a total of $1,450,000.

16 
Conclusion 

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

applicable guidance and did not properly manage approximately $7.3 million of R3P 

funds provided through 11 contracts, 4 grants, and 1 grant modification used to establish 

and operate the Academy. Specifically, South-Central Region 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,16 we were unable to clearly determine that all requirements were accomplished 

with the remaining contract funds that amounted to almost $4.0 million. 

Material Internal Control Weaknesses. The audit identified material internal control 

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

comply with applicable guidance and did not properly manage approximately 

$7.3 million of R3P funds. Consequently, there was no assurance that fraud, waste, and 

abuse did not occur in the management and administration of cash and property used to 

establish and operate the Academy. 

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

fraud and referred these matters to the Assistant Inspector General for Investigations, Office of the Special Inspector General for Iraq Reconstruction, for action. Related 

investigations are continuing. 

Recommendations, Management Comments, and Audit 

Response 

Redirected Recommendations. Since the Coalition Provisional Authority was 

dissolved on June 28, 2004, we are addressing the recommendations to three of the 

four successor organizations: the Iraq Reconstruction Management Office, the Joint 

Contracting Command-Iraq/Afghanistan, and the Joint Area Support GroupCentral. 

1. We recommend that the Director, Iraq Reconstruction Management Office, ensure that established policies and procedures for authorizing, awarding, and 

consolidating contracts and grants are effectively implemented and followed 

and that complete files to support transactions made for contracts and grants are 

maintained. 

Management Comments. The Director, Iraq Reconstruction Management Office 

did not provide written comments to the report but verbally concurred with the 

finding and recommendations through a telephone conversation with the Inspector 

General. 

2. We recommend that the Commanding General, Joint Contracting CommandIraq/Afghanistan: 

a. Ensure that established policies and procedures for awarding, and 

consolidating contracts and grants are effectively implemented and followed. 

 

16 For example, classrooms and living quarters were built and mobile command posts were delivered. 

17 
b. Ensure that established policies and procedures for monitoring contract and 

grant performance are effectively implemented and followed. 

c. Ensure that purchased equipment is delivered and construction is completed. 

d. Maintain complete files to support transactions made for contracts and grants. 

Management Comments. The Commanding General, Joint Contracting 

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

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

that established policies and procedures for disbursing funds obtained through 

the Development Fund for Iraq for contracts and grants are effectively 

implemented and followed, that funds are disbursed for intended purposes, and 

that complete files to support transactions made for contracts and grants are 

maintained. 

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

concurred with the finding and recommendations. 

Audit Response. The Director, Iraq Reconstruction Management Office; the 

Commanding General, Joint Contracting Command-Iraq/Afghanistan; and the 

Commander, Joint Area Support Group-Central comments to all recommendations are 

fully responsive. 

18 
Appendix A. Scope and Methodology 

In September 2004, we initiated an audit of cash controls over disbursing officers in 

southern Iraq as a result of concerns brought to our attention by staff of the 

Coalition Provisional Authority (CPA) Comptroller. 

We reviewed the following documents issued by the CPA: 

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

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

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

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

Implementation of Regulation Number 3, Program Review Board,” 

August 19, 2003 

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

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

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

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

October 4, 2003 

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

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

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

“Program Management Assessment,” July 9, 2003 

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

“Maintaining Project Files,” September 30, 2003 

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

“Project Monitoring and Evaluation,” September 30, 2003 

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

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

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

“Rapid Regional Response Program Overview (amended),” December 14, 

2003 and January 25, 2004 

We expanded the scope of our audit to determine whether contracts and grants were 

properly managed by the South-Central Region at specific projects because of 

deficiencies identified in Office of the Special Inspector General for Iraq Reconstruction, 

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

and at the request of the Deputy Secretary of Defense. We chose the Babylon Police 

Academy (the Academy) project because of the multiple contracts and grants that had

been awarded to establish and operate the Academy. 

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

establish and operate the Academy, and it awarded 11 contracts in the amount of 

$5,262,015 and 4 grants and 1 grant modification in the amount of $2,050,000 for a 

total of $7,312,015 for this purpose. 

We reviewed all the contracts and grants to establish and operate the Academy that 

were awarded from January through May 2004 and associated files. 

19 
We initially reviewed the Program Review Board minutes to determine whether the 

South Central Region contracts and grants in excess of $500,000 were approved by the 

Program Review Board. During the course of our audit, we observed deficiencies in the 

contract and grant award documentation and expanded our scope to include the entire 

process.

We spoke with the contracting officials available at the time of our audit regarding 

the status of the projects and examined documentation maintained in the contract 

and grant files. Those contracting officers primarily were located at the SouthCentral Region, now known as the U.S. Regional Embassy Office, located in 

Al Hillah, Iraq; but one contracting officer who had previously worked for the 

South-Central Region was working for the Joint Contracting CommandIraq/Afghanistan. 

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

contract and grants management procedures. At the Joint Area Support GroupCentral Comptroller’s Office, located in the U.S. Embassy, Baghdad, Iraq; we 

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

disbursements made for the contracts and grants. At the U.S. Regional Embassy 

Office, we reviewed all other aspects of the contracts and grants. In addition, we 

evaluated the results of the work acquired by the contracts and grants by visiting the 

Academy to perform an on-site evaluation. 

We conducted this performance audit from September 2004 through September 

2005, in accordance with generally accepted government auditing standards. 

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

perform this audit. 

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

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

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

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

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

indicated website addresses. 

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

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

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

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

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

SIGIR Report No. 05-019, “Attestation Engagement Concerning the Award of NonCompetitive Contract DACA63-03-D005 to Kellogg, Brown, and Root Services, 

Inc.,” September 30, 2005 

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

April 30, 2005 

20 
SIGIR Report No. 05-008, “Administration of Contracts Funded by the 

Development Fund of Iraq,” April 30, 2005 

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

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

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

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

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

Coordination in Erbil, Iraq,” July 26, 2004 

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

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

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

Assets, Operation Iraqi Freedom,” February 16, 2005 

21 
Appendix B. Coalition Provisional Authority 

Guidance Applicable to Contracts and Grants 

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

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

contracts and grants is: 

Coalition Provisional Authority Regulation Number 2. CPA Regulation 

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

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

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

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

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

purposes benefiting the people of Iraq. 

Coalition Provisional Authority Regulation Number 3. CPA Regulation 

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

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

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

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

stewardship and financial management duties under the applicable laws and 

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

was not responsible for overseeing the manner in which approved spending 

requirements were executed. 

Coalition Provisional Authority Memorandum 4. CPA Memorandum 

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

Property and the Developmental Fund for Iraq, Implementation of Regulation 

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

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

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

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

assisting in the recovery of Iraq.” 

A grant was defined as “A written instrument that transfers Iraqi Funds from the 

CPA or Coalition Forces to a recipient grantee, in order to carry out a program or 

project that directly benefits the Iraqi people or assisting in the recovery of Iraq.” 

Department of Defense 3210.6-R. According to Department of Defense 3210.6-R, 

“DoD [Department of Defense] Grant and Agreement Regulations,” April 13, 1998, a 

grant is: 

A legal instrument which, consistent with 31 U.S.C. 6304, is 

used to enter into a relationship:

(a) The principal purpose of which is to transfer a thing of

value to the recipient to carry out a public purpose of support or

stimulation authorized by a law of the United States, rather than to 

acquired property or services for the Department of Defense’s direct

benefit or use.

22 
(b) In which substantial involvement is not expected between 

the Department of Defense and the recipient when carrying out the 

activity contemplated by the grant. 

23 
Appendix C. Contracts Awarded to Establish 

and Operate the Babylon Police Academy 

The South-Central Region awarded 11 contracts, in support of the Academy, for the 

purchase of equipment and services. The value of the 11 contracts amounted to 

$5,262,015. The amount expended for the 11 contracts amounted to $5,262,015. 

Contracts Awarded to Establish and Operate the Babylon Police Academy 

Contract Number 

Date the Contract 

was Signed 

Contract 

Amount Scope of Work 

DABV01-04-M-8016 January 4, 2004 $491,000 

Renovate the old Ba’ath 

Party Building for use 

by the Academy 

DABV01-04-M-8064 January 20, 2004 $470,800

Construct eight 

classrooms and provide 

furniture 

DABV01-04-M-8069 January 24, 2004 $475,000 Security walls for the 

compound 

DABV01-04-M-8070 January 24, 2004 $495,000

Construct two new 

conference rooms and 

install a waste water 

system

DABV01-04-M-8089 January 31, 2004 $455,000 Seven mobile command 

posts 

DABV01-04-M-8091 January 31, 2004 $498,600

Six mobile command 

posts and six all-terrain 

vehicles 

DABV01-04-M-8092 February 2, 2004 $497,530

Conference and office 

structures and one 500 

kilowatt generator 

DABV01-04-M-8093 February 2, 2004 $498,235

Office and living 

structures and install a 

waste water system

DABV01-04-M-8167 February 20, 2004 $452,800 Demolition of two 

structures 

DABV01-04-M-8265 March 15, 2004 $448,500 Security 

upgrades 

DABV01-04-M-8326 March 25, 2004 $479,550 

One 500 kilowatt and 

one 1 megawatt 

generators 

Total Contracts 

Amount $5,262,015 

24 
Appendix D. Grants Awarded to Establish and 

Operate the Babylon Police Academy 

The South-Central Region awarded four grants and one grant modification to provide 

operating support for the Academy, establish training of elite police forces and counterterror teams, and establish a criminal security tracking program. The value of the 

four grants and one grant modification amounted to $2,050,000. The amount expended 

for the four grants and one grant modification amounted to $2,050,000. 

Grants Awarded to Establish and Operate the Babylon Police Academy 

Grant Number 

Date the Grant 

was Signed 

Grant 

Amount Purpose of Grant 

DABV01-04-G-8007 March 15, 2004 $150,000 Operating support for 

the Academy 

DABV01-04-G-8007 

P001 (modification) May 26, 2004 $450,000 Operating support for the Academy 

DABV01-04-G-8008 March 15, 2004 $500,000 Operating support for 

the Academy 

DABV01-04-G-8013 Unsigned $450,000 Community awareness 

program

DABV01-04-G-8014 Unsigned $500,000 Security tracking 

program

Total Grants 

Amount $2,050,000 

25 
Appendix E. Coalition Provisional Authority 

Organizational Responsibilities for Contracts 

and Grants 

The diagram shown below identifies organizational entities within the Coalition 

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

Coalition Provisional Authority) that had oversight and administrative 

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

Administrator

Comptroller

Rapid Regional

Response Program

Coordinator

Head Contracting

Activity

Program

Management

Office

Field 

Disbursing Agents

Field

Contracting Agents

26 
Appendix F. Present U.S. Government 

Organizational Responsibilities for Contracts 

and Grants 

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

entities that had oversight and administrative responsibilities for contracts and 

grants. 

Director, 

Iraq Reconstruction 

Management Office 

Approval 

Project and Joint Contracting Joint Area Support 

Contracting Office Command- Group-Central 

Iraq/Afghanistan 

Requirements Disburse 

Award/Monitor 

27 
Appendix G. Acronyms 

CPA Coalition Provisional Authority 

CPA-IG Coalition Provisional Authority Office of the Inspector General 

DoD Department of Defense 

DFI Development Fund for Iraq 

PRB Program Review Board 

RPC Regional Program Coordinator 

R3P Rapid Regional Response Program

SIGIR Special Inspector General for Iraq Reconstruction 

28 
Appendix H. Report Distribution 

Department of State 

Secretary of State 

Senior Advisor to the Secretary and Coordinator for Iraq 

U.S. Ambassador to Iraq 

Director, Iraq Reconstruction Management Office

Inspector General, Department of State 

Department of Defense 

Deputy Secretary of Defense 

Director, Defense Reconstruction Support Office 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

Deputy Chief Financial Officer 

Deputy Comptroller (Program/Budget) 

Inspector General, Department of Defense 

Department of the Army 

Assistant Secretary of the Army for Acquisition, Logistics, and Technology 

Principal Deputy to the Assistant Secretary of the Army for Acquisition, 

Logistics, and Technology 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Director, Project and Contracting Office 

Commanding General, Joint Contracting Command-Iraq/Afghanistan 

Assistant Secretary of the Army for Financial Management and Comptroller 

Chief of Engineers and Commander, U.S. Army Corps of Engineers 

Commander, Gulf Region Division 

Auditor General of the Army

U.S. Central Command

Commanding General, Multi-National Force-Iraq 

Commanding General, Multi-National Security Transition Command-Iraq 

Commander, Joint Area Support Group-Central 

Other Defense Organizations

Director, Defense Contract Audit Agency 

29 
Other Federal Government Organizations 

Director, Office of Management and Budget 

Comptroller General of the United States 

Inspector General, Department of the Treasury 

Inspector General, Department of Commerce 

Inspector General, Department of Health and Human Services 

Inspector General, U.S. Agency for International Development 

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

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

U.S. Senate 

Senate Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations and Related Programs

Senate Committee on Armed Services 

Senate Committee on Foreign Relations 

Subcommittee on International Operations and Terrorism

Subcommittee on Near Eastern and South Asian Affairs 

Senate Committee on Homeland Security and Governmental Affairs 

Subcommittee on Federal Financial Management, Government Information and 

International Security 

Subcommittee on Oversight of Government Management, the Federal 

Workforce, and the District of Columbia 

U.S. House of Representatives 

House Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on Foreign Operations, Export Financing and Related Programs

Subcommittee on Science, State, Justice and Commerce and Related Agencies 

House Committee on Armed Services 

House Committee on Government Reform

Subcommittee on Management, Finance and Accountability 

Subcommittee on National Security, Emerging Threats and International 

Relations

House Committee on International Relations 

Subcommittee on Middle East and Central Asia 

30 
Appendix I. Audit Team Members 

The Office of the Assistant Inspector General for Auditing, Office of the Special 

Inspector General for Iraq Reconstruction, prepared this audit report. The Office of 

the Special Inspector General for Iraq Reconstruction staff members who 

contributed to the report include: 

Angelina Johnston 

Robert Murrell 

Kevin O’Connor 

William Shimp 

William Whitehead 

31 
Management Comments 

Commanding General, Joint Contracting CommandIraq/Afghanistan 

32 
33 
Management Comments 

Commander, Joint Area Support Group Central

34