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Iraq Rebuilding Marred by $9 Billion Loss, Auditor Says

The U.S. lost at least $9 billion of taxpayer money set aside to rebuild Iraq, as poor planning and weak oversight allowed waste and fraud to permeate the nine- year, $60.5 billion effort, according to a government watchdog.

Miscues by both the Bush and Obama administrations set the stage for as much as $8 billion in waste on rebuilding since 2003, according to Stuart Bowen, the U.S. special inspector general for Iraq reconstruction. At least an added $1 billion was lost to fraud, taking the potential loss from allocated funds to 15 percent of the total, he said.

“This is a reasonable estimate,” Bowen said in an interview. “Waste and fraud at the levels we saw are a symptom of a failure to have a structure in place to effectively plan for stabilization and reconstruction operations, execute such operations and be held accountable for them.”

Bowen’s findings, contained in a 171-page report released today, may rekindle the debate about the origins and results of the Iraq war as the 10th anniversary of the U.S.-led invasion approaches later this month. The report focuses on the cost to rebuild Iraq, much of which was included in the $729 billion that the Pentagon says it spent on operations in the country.

The war that toppled Iraqi dictator Saddam Hussein also took the lives of 4,475 U.S. service members, according to a separate tally by the Congressional Research Service in a new report. Another 32,220 were wounded in action, 991 of whom suffered amputations, including 797 for major limb removals, the service said.

‘Decrepit Conditions’

President George W. Bush ordered the March 2003 invasion, citing what proved to be false intelligence about weapons of mass destruction under Hussein’s control and ties between the secular dictator and al-Qaeda.

U.S. military forces found Iraq in much worse condition than prewar planners in the Bush administration had anticipated, and “it is not a stretch to say that Iraq was broken before the invasion,” according to Bowen’s report.

The “decrepit conditions severely worsened” in April and May 2003, “aggravated by looting, insecurity” and the complete dismantling of the Iraqi Army, an “arguably errant” decision by the U.S.’s Coalition Provisional Authority, according to the report.

Army Chief of Staff General Ray Odierno, who led the 4th Infantry Division through April 2004, told Bowen that the U.S. “underestimated the societal devastation” Iraq had suffered under Hussein and “miscalculated how incapacitated the country would be following the invasion,” according to the report.

No ‘Buy-In’

Bowen’s report catalogued past audits and outlines of U.S. and international money sources for Iraq. He also interviewed current and former policy makers from the U.S. and Iraqi governments.

One significant shortcoming of the rebuilding effort was a failure by U.S. officials to obtain genuine Iraqi support for projects, retired U.S. Ambassador to Iraq Ryan Crocker told Bowen. Instead, civilian leaders in the Bush White House and Pentagon underestimated the ethnic and religious tensions in the country and attempted to promote Iraqi exile leaders to positions of power.

“Once the work was completed” after what U.S. officials thought was “buy-in,” the Americans “frequently found that there was no will on the Iraqi side to accept or maintain the projects,” Bowen said in the report, summarizing Crocker.

Problems such as personnel shortages, insufficient oversight staffing, weak planning and inadequate coordination lingered in some degree for the duration of the war, Deputy Inspector General Glenn Furbish said in an interview.

Troops’ Withdrawal

“These are things we pointed out in 2005,” Furbish said. “They remained until the military left. That was the most frustrating issue I encountered.”

The last U.S. forces left Iraq in December 2011, helping to fulfill a promise that President Barack Obama made in his 2008 election campaign. Their withdrawal was hastened by the failure of both governments to renew a status of forces agreement that would exempt American troops from local prosecution.

Former Defense Secretary Leon Panetta, who served under Obama, told auditors that failing to extend the agreement past 2011 “left the U.S. without important leverage” over Iraqi political and military decisions, according to the report.

The reconstruction program’s early phases revealed a “lack of thought,” Panetta told Bowen, adding “there did not appear to be a sustained strategic vision of how reconstruction should be conducted following the invasion,” according to the report.

Iraqi Prime Minister Nouri al-Maliki told Bowen that “the overall benefit to Iraq was small when compared to the size” of reconstruction funds spent.

‘Positive Impact’

Asked whether the report provides ammunition for critics of the Iraq invasion, Bowen said that wasn’t its intention. The reconstruction effort “was a large waste, but also had a positive impact,” he said.

“If we had better controls and better planning, better oversight, better quality assurance, better quality control all in place, we would have wasted less -- for sure. There is no doubt about that,” he said. “But did we achieve important things? Yes.”

Bowen said that among the best money spent was the $25 billion used to rebuild and train Iraqi forces after the U.S. ordered the country’s military dismantled in 2003.

Now, with U.S. forces gone and auditors having concluded their review of how well the Iraqis are maintaining U.S. funded- projects, Bowen said he isn’t optimistic.

“We’ve got 10,000 people in the embassy who can’t get out very much because of the security problems,” he said. “The Sunni-Shiite conflict is back in a very serious fashion.”

“The biggest waste that may occur in the program -- we’re not going to be able to document because it’s going to occur after we turn our projects over to the Iraqis,” he said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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