U.S. taxpayers foot the tab when cash is lost

updated 9:46 p.m. ET Oct. 21, 2008

WASHINGTON - Say you misplaced $185,481 somewhere? Just expense it — Iraq style!

A U.S. contractor hired to teach Iraqis about good government misplaced that amount in cash, then claimed the loss as "an expense."

The U.S. government not only covered the loss, but paid the contractor tens of thousands of dollars more in special fees for overhead and other costs relating to the missing money, according to a report by the Special Inspector General for Iraq Reconstruction, known as SIGIR.

"SIGIR questions this decision," said the report, released Tuesday.

At issue is an admittedly small portion of money committed in a deal with the nonprofit Research Triangle Institute in North Carolina. The institute was awarded two contracts in 2003 and 2005 valued at $598 million to help Iraqis work on building local government and representative councils across the country's 18 provinces, said inspector general Stuart Bowen.

Matter of missing cash
For one thing, Bowen said in Tuesday's report, his auditors could not figure out whether the U.S. government got what it paid for in the two huge contracts, partly because no process was put in place for laying out objectives and assessing success over the first four years of the contract. In other words, auditors tend to think the contractor, and Iraqis, are making progress with the governance program, they just cannot prove it. Oversight of the contracts has been improved, Bowen said.

But then, there also was that matter of the missing cash.

During its work, the institute "lost $185,481 in cash," Bowen's report said. And with the agreement of the contracting agency, the State Department's U.S. Agency for International Development, the institute "claimed the loss as an expense."

In addition to getting the lost money back from the U.S. government, the institute also got an extra $57,000, which USAID says is standard practice, in fees for administering contracts.

"On August 19, 2004, Research Triangle Institute physically lost $185,481 in Local Governance Project cash," the report said. "It reported the loss to USAID, and on October 3, 2004, the USAID Iraq contracting officer issued a letter" stating the loss was "unforeseen" and not the institute's fault.

Deal with the issue later
Bowen's office said it had no details on how or where the money was lost, and the institute and USAID did not immediately provide an explanation Tuesday.

The inspector general said USAID approved the payment of more than $242,000 to the institute in the case, which included the $185,481 in lost cash and an additional $57,000 in "general and administrative expenses" and a "fixed fee."

Officials say it all might be legal under federal acquisition regulations. But USAID says it nevertheless agrees with Bowen's office that the fees should not have been paid and it will deal with the issue when the contract comes to final closeout.

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