If you’ve ever wondered what a company with no internal audit controls looks likes you may be interested in my current bedtime reading: Learning From Iraq, A Final Report From the Special Inspector General for Iraq Reconstruction. The report is the final government examination of the $60 billion America misspent in an attempt to allegedly rebuild Iraq.
Congress created the office of the Special Inspector in 2003 to find out what happened to all those billions. The Bush administration opposed its creation and unsuccessfully tried to defund it after it was created. The folks at SIGR had the most thankless job you can imagine. They performed audits and investigations in an active war zone, which resulted in the prosecutions and convictions of civilians and military personnel.
The report opens, as all such reports do, with an attempt to determine what went right. Here is an example of how hard the inspectors had to look to find a success:
"A revised Iraqi-oriented construction company … fed economic potential into local towns and villages." [emphasis added]
You may be able to feed economic potential, but you sure as hell can’t eat it.
Everything after that in the report explains in stark detail why it was the best the inspectors could find.
In keeping with the near-total lack of planning that defined the war from the start, The Pentagon spent money without any sort of system to track how the funds were spent, what it was spent on or if the spending was effective.
An example: In 2007 the U.S. Department of Defense, "awarded a $300 million contract to Anham, LLC, to operate and maintain two warehouse and distribution facilities, one near Baghdad International Airport and the other at the Port of Umm Qasr." Two years later the government owed Anham an additional $119 million for cost overruns, etc, including:
- $900 for a control switch valued at $7.05 (a 12,666 percent markup);
- $80 for a small segment of drain pipe valued at $1.41 (a 5,574 percent markup);
- $75 for a different piece of plumbing equipment also valued at $1.41 (a 5,219 percent markup);
- $3,000 for a circuit breaker valued at $94.47 (a 3,076 percent markup);
- $4,500 for another kind of circuit breaker valued at $183.30 (a 2,355 percent markup).
How does this story end?
"SIGIR questioned the entire contract and recommended that the U.S. military initiate a systematic review of billing practices on all Anham contracts in Iraq and Afghanistan. At the time of SIGIR’s review in 2011, Anham held about $3.9 billion in U.S. government contracts. That number has since increased."
The controls and technology needed to prevent all this were readily available and could have been easily installed had anyone cared to do so. SAP and other companies have quite a bit of experience developing and installing financial accounting systems for large organizations. Or DOD could have even started with something more basic. Something like not shipping $10 billion "to Baghdad on U.S. military aircraft in the form of massive shrink-wrapped bundles of $100 bills stored on large pallets."
Thanks to SIGR several people who helped themselves to some of the funds went to jail. In a way I feel sorry for those folks. Seeing all that money literally lying around would have tempted anyone.
America spent billions on electric and sewage treatment plants, prisons, jobs programs, farm equipment, health-care facilities, police training, creating Chambers of Commerce (not kidding) and on and on and on, but what did it get for the trouble? Here are the opinions of three people interviewed for the report:
"After suffering through 25 years of Saddam’s brutal dictatorship, including three wars, 13 years of a harsh trade sanctions, and continuous infrastructure neglect, [Deputy Prime Minister al-Shahristani] observed that virtually any rebuilding project accomplished in 2003 should have met some minimal need in a then-decrepit Iraq. But all too few of the projects the United States undertook at that time met this standard."
"With all the money the U.S. has spent, you can go into any city in Iraq and you cannot find one building or project [built by the U.S. government],” Minister al-Asadi observed. “You can fly in a helicopter around Baghdad or other cities, but you cannot point a finger at a single project that was built and completed by the United States."
And, finally, Gen. David Petraeus, who said the reconstruction program brought:
"[C]olossal benefits to Iraq. Over time, we got the electricity infrastructure running and the oil industry working again, and, thanks to these efforts, the country began generating significant oil revenues. Beyond those critical efforts, the program touched every aspect of Iraq’s society, from the economy to education to health care to governance."
I sure would like some of whatever he was smoking.
If you don’t care to read the SIGR report (which is actually well-written for a government document), allow me to suggest Peter Van Buren’s superb book We Meant Well: How I Helped Lose the Battle for the Hearts and Minds of the Iraqi People, about the year he spent in Iraq for the State Department. It is a mix of Catch-22, Dispatches and Kafka’s The Trial. Like these other novels, Van Buren's book will make you laugh, but they won't be laughs you enjoy.