Internal Controls Lost in the Iraqi Desert

A Pentagon audit of $5.2 billion in Iraq war spending finds management and accounting flaws.
Sarah JohnsonDecember 7, 2007

A security services unit in Iraq does not have full command of its finances, according to an audit report released by the Department of Defense’s inspector general office earlier this week.

Indeed, the unit, called the Multi-National Security Transition Command-Iraq, lacks proof of whether some of its $5.2 billion funds are being used as intended. The funds are earmarked for providing equipment, training, and infrastructure repair for the Iraq Securities Forces. However, the audit command cannot show that some of its projects it paid for are even completed.

The group, headed by commander James Dubik, “was unable to provide reasonable assurance that the Iraq Security Forces Fund achieved the intended results, that resources were used in a manner consistent with the mission, and that the resources were protected from waste and mismanagement,” according to the report.

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The audit, conducted during March and May of this year, also found that the unit could have put $1.8 million of its funds to better use. In addition, the inspector general concluded that the lack of records hurts the command’s ability to keep track of equipment and get canceled services reimbursed.

The report suggests that Dubik establish internal controls to get a better grasp of his oversight of the funds and maintain better records for his group’s spending. He should also develop procedures for processing, managing, and overseeing internal purchase requests, the report said. In addition, he may want to outsource some of his team’s financial management “to ease the strain on the Command’s accounting personnel.”

For the most part, Dubik has agreed with the inspector general’s recommendations and has implemented some changes, including the addition of two accountants. In addition, his unit has come up with ideas for ensuring that property will be accounted for, and they have recovered $831 million after reviewing contract agreements.

In his response letter to the audit report, Dubik noted those changes along with plans to review all of the command’s accounting processes. The new accounting work “will ensure an accurate and timely oversight of documents as well provide an in-depth review of all accounting transactions,” he wrote.

To be fair, Dubik’s work is hampered by the conditions in Iraq. The audit acknowledges this fact, explaining that the instability during the war hinders communications and deliveries, as well as the command’s ability to visit construction sites to review a project’s progress.

Nonetheless, the DoD inspectors needed to take note of the group’s jagged audit trail. For example, of a 112-transaction sample, the auditors found five that were missing necessary information to show that the services had been delivered. Worth $664 million, those transactions stemmed from internal military purchase requests for the Department of State.

The command also could not account for 18 of 31 heavy-tracked recovery vehicles valued at $10.2 million. The trucks’ vehicle identification numbers were not recorded, and the command did not have a method for tracking back the contract’s delivery.

In another finding, the auditor discovered that even though $31.9 million was spent on work for a new facility, the construction project had never gotten off the ground. Indeed, the Iraq Ministry of Defense had not obtained the rights to the land. But Dubik’s group did not have documentation that showed the project had been canceled and may have to sue to get its money back.