Iraqi Relief Funds and Fraud [Guest Post]

Through the end of Fiscal Year 2011, the United States Congress appropriated $51.4 billion for the relief and reconstruction of Iraq. Congress also commissioned the Special Inspector General for Iraq Reconstruction (SIGIR) to perform an audit of the expenditures.

SIGIR released a final forensic audit report last Friday. The extent and nature of some of the frauds and waste encountered make it appropriate that the report was released on Friday the 13th. You can access the full report here. My reading of the report suggests a mixed signal. On the one hand, SIGIR finds relatively effective controls over the payment process. On the other hand, SIGIR found several prevalent and serious control weaknesses in the procurement process.

To quote the report:

Rouge Traders and Double Standards

You may have seen the recent news of a rouge trader at UBS whose trading activity led to a $2 billion loss for the company.  In a recent blog post, the WSJ highlights what may be a double standard in unauthorized trades:

How to Lose 95% of $9.1 Billion (i.e. that's $8.7 Billion with a B)

Leave it to the Department of Defense (DoD)! That's right. A new audit was released today shows that "the Pentagon cannot account for over 95 percent of $9.1 billion in Iraq reconstruction money, spotlighting Iraqi complaints that there is little to show for the massive funds pumped into their cash-strapped, war-ravaged nation" according to this article. The report states that the "breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss."

Unfortunately, this is not the first time that the DoD has been shown to be fertile ground for fraud and abuse. In fact, the DoD has never received a clean audit opinion. Never!!! Basically, the DoD has so many holes in their internal controls that you could fly a fleet of B-1 bombers through their financial safety nets.