The Army Corps of Engineers improperly created fake entries in government ledgers to maintain control over hundreds of millions of dollars in spending for the reconstruction of Iraq, according to a federal audit released Friday.
Corps officials listed $362 million in potential contracts for a nonexistent contractor labeled "Dummy Vendor" in a government database, an accounting trick to preserve funds due to expire at the end of this fiscal year, the audit said.
"They took this money and parked it to use later," said one senior U.S. official who requested anonymity because he was not authorized to elaborate on the audit.
"It's improper. It's wrong. This is not the way you do government business."
Corps officials acknowledged Friday that the technique was improper but said that there was no intent to deceive. They said that the entries were designed to ensure that the government had enough money on hand to pay contractors already at work in Iraq.
After being confronted with the audit's findings, corps officials changed the entries in the database to reflect that the money was being used to close down existing contracts in Iraq, the agency said.
"It wasn't the proper bookkeeping way to do this," said Suzanne Fournier, the corps' chief spokeswoman. "Apparently someone didn't understand that."
The audit by the Special Inspector General for the Reconstruction of Iraq is the latest to raise questions about accounting for the multibillion-dollar program, which has been plagued by accusations of waste, fraud and corruption.
At issue is $18 billion in funding approved by Congress in November 2003 to build new schools, power stations and sewage treatment plants in Iraq. At the time, Congress ordered that the funds be spent by Sept. 30.
Iraq's violence and continually shifting government priorities bogged down the pace of the rebuilding effort, leaving the corps with nearly $1 billion still to spend.
To prevent the money from reverting back to the Treasury, Corps officials in Iraq listed the "Dummy Vendor" as receiving 96 different contracts to build infrastructure for oil, electricity and other sectors, the audit said.
Such accounting trickery is not confined to Iraq.
The U.S. Special Operations Command, based in Tampa, Fla., was accused of "parking" $20 million in 2003, leading to language in this year's Defense Department budget to criminalize the practice.
That bill has yet to pass, and the inspector general for Iraq, Stuart Bowen, found no criminal wrongdoing involved in the corps' use of the dummy vendor. "We do not believe ... there was any attempt to mislead on the true status" of the contracting process, the audit said. Bowen was in Iraq and unavailable for comment.
The audit marks the second time in recent months that a government agency has been charged with accounting improprieties.
The U.S. Agency for International Development was accused in June of resorting to accounting tricks in an effort to hide the spiraling costs of a children's hospital in Iraq, a project that received special backing from First Lady Laura Bush.
San Francisco-based Bechtel, the chief contractor, was removed from the project after the inspector general determined that the cost to finish the hospital had soared from $50 million to almost $170 million.
U.S. officials now hope to have an Iraqi company finish the work.
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