Army in Iraq Is No Paymaster

Millions of dollars in Army payments made in Iraq and nearby countries, many in cash, have gone undocumented since 2001, says the Inspector General.

In a written response to a draft of the report, the Army says it was able to find full documentation for 96 percent of the 702 payments audited by the Inspector General’s office, and concludes that just 12 payment invoices could constitute loss of funds and that all but 2 of those had been validated as having actually been paid properly. The Inspector General’s office responded that Army and Department of Defense accountants had not provided any proof of that assertion or explained how they had reached their conclusions.

Acknowledging that proper accounting is difficult in a war zone, the Inspector General says that, of 53 legal and regulatory requirements for making payments in a “military contingency environment,” only 27 constituted the “minimum necessary information to support a payment.” The report concludes that $6.3 billion of commercial payments met these criteria, but did not comply with other statutory and regulatory requirements and were still missing such items as taxpayer identification numbers, contact information, and payment terms. “Without the taxpayer identification number, the Internal Revenue Service is not notified when payment is made to a U.S. contractor,” the report says. “This could lead to the potential loss of tax revenue.”

In his response, Short said, “The estimated dollar amount of payments not meeting all statutory or regulatory requirements appears to give each type of error equal weighting and does not distinguish between ‘critical’ and ‘noncritical’ errors.”

The Inspector General’s report also says the Department of Defense had not maintained an adequate audit trail over $1.8 billion in payments made to Iraqi representatives to ensure that the funds were used to help the Iraqi people, nor had it properly accounted for more than $134.8 million in payments made to representatives of foreign governments.

According to the report, Tina Jonas, Undersecretary of Defense CFO, announced new payment guidelines on May 16 to improve internal controls over payments made by disbursing stations in or near the war zone. “The audit identified areas where management controls needed improvement, but did not acknowledge the improvements made to address these areas,” she wrote in response to a draft of the Inspector General’s report. In addition, she said, “A forward deployed cell of [Defense Finance and Accounting Service] personnel was established in-theater to relieve warfighters of the administrative functions associated with documentation processing.”

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