Iraq Audit

Here is the full pdf of the most recent audit report of the Special Investigator General for Iraq Reconstruction.

Surprisingly, the audit only encompassed 15 projects this quarter -- it actually only completed 8 audits -- the 15 refers merely to "project assessments," which in many cases include conclusions that they were not able to determine whether or not a project was being undertaken successfully (although they don't say why). That doesn't seem like a lot to me!

According to the report, spending on relief and reconstruction is basically totally complete (already contracted to different "bidders"), and of all that money given out to fund different projects, over 80% of it ($21 billion) has been spent already.

The result?

Well, this time last year the Special Investigator General announced that 2006 would be "the Year of Transition" (doesn't that sound very Maoist?). At that time, six goals were announced, none (ZERO) of which were achieved, according to the report (see page 4 of the report).

The report describes how the funds dried-up with huge amounts of money (tens of billions) being shifted out of health care and social development projects and into security projects (I'm not clear on what that means, but it sounds like Congress allocates our taxes to the fund, and the fund then pays for our military presence there??).

It describes how, with these funds diversions, electricity is below pre-war levels (in Baghdad it fell from 16-24 hrs/day before the war to 6.5 hrs/day now -- not even enough for a full work day), water funding has been cut by more than 50%, and the oil output that was intended to pay for the reconstruction "has yet to materialize." It also says that hospitals and primary healthcare centers were not reconstructed as a result of "poor management by the contractor" AND "weak oversight by the US government" -- a grand total of EIGHT have been completed thus far (8!).

Appendix F is really interesting because it has all the contracts set-out in a billable list that reminds me of the one we'd keep at our law firm and give to the client. In one entry the banking services consulting firm Bearing Point has one contract for $116 million and another for $32 million. Wow! One would think electricity would be required to have credit markets!...

The World Health Organization got less than $5 million.

A company called Parsons Global Services also did quite well (its contracts were *endless*), and from what I can tell it's a Halliburton-like middleman services provides (great position to be in!). I did research the Board of Directors and didn't see anything suspicious (ie: Mary Cheney and the Bush twins are not board members), but these are exactly the kinds of "pay us and we can do ANYTHING" companies that get nothing done and make tons of money with their inefficiency.

Another of the same is Fluoramec LLC (HUGE contracts), although I wasn't able to dig up anything on them. Their website basically just says "we do everything in Iraq" and has no info about the corporate governance.

Add to that list Perini Corporation (which is at least transparent about its governance), and (the weirdest one of all) MAC International FZE. MAC is the exclusive dealer of American autos in Iraq and netted close to $100 million in contracts from what I can see. That is about 20,000 hummers (they also sell Chevrolet, Cadillac, etc.). That is a LOT of car.

Siemens also did very well, but I won't criticize, since I rooted for Siemens for a long time when it was the only non-US corporation that was one of the top 5 largest in the world.

The report is long but mostly because of Appendix F. The disappointing stuff you can get through pretty quickly.

You're going to see this all over the news (I hope), but I wanted to provide one bit of context for something that's being thrown around with respect to refugee flows. When I originally saw the report on CNN they made the case that there were millions of Iraqi's fleeing the country while on the Eastern border hundreds of thousands of Iranians are pouring in. I think it's pretty irresponsible to not note that the 300,000 Iranians who have entered Iraq since 2003 are returnees -- likely the shi'i who fled the country under Saddam. They aren't random Iranians flooding the border; they are Iraqis refugees RETURNING to Iraq.

VC