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SPECIAL INSPE CTOR GENE RAL FOR IRAQ RECONSTRUCTION
October 26, 2005
MEMORANDUM FOR UNITED STATES AMBASSADOR TO IRAQ
DIRECTOR, IRAQ RECONSTRUCTION MANAGEMENT OFFICE
COMMANDING GENERAL, JOINT CONTRACTING COMMAND
-IRAQ/AFGHANISTAN
COMMANDER, JOINT AREA SUPPORT GROUP-CENTRAL
SUBJECT: Management of the Contracts, Grant, and Micro-Purchases Used To Rehabilitate
the Karbala Library (Report No. SIGIR 05-020)
We are providing this audit report for your information and use. We performed the audit in
accordance with our statutory duties contained in Public Law 108-106, as amended, which
mandates the independent and objective conduct of audits relating to the programs and
operations funded with amounts appropriated or otherwise made available to the Iraq Relief and
Reconstruction Fund. Public Law 108-106, as amended, requires that we provide for the
independent and objective leadership and coordination of, and recommendations on, policies
designed to promote economy, efficiency, and effectiveness in the administration of such
programs and operations and to prevent and detect waste, fraud, and abuse.
We considered management comments from the Iraq Reconstruction Management Office, the
Joint Contracting Command-Iraq/Afghanistan, and the Joint Area Support Group-Central on a
draft of this report when preparing the final report. Comments on the draft of this report by those
organizations conformed to requirements and left no unresolved issues. Therefore, no additional
comments are required.
Because we added a recommendation to the final report, we request that the
United States Ambassador to Iraq provide comments to the final report by November 14, 2005.
Comments should describe actions taken or planned in response to recommendations and provide
completion dates for the actions.
We appreciate the courtesies extended to the staff. For additional information on this report,
please contact Mr. Joseph T. McDermott at (703) 428-1100, or at joseph.mcdermott@sigir.mil or
Mr. Clifton Spruill at (703) 343-8817, or at clifton.spruill@iraq.centcom.com. For the report
distribution, see Appendix K.
Stuart W. Bowen, Jr.
Inspector General
400 Army Navy Drive • Arlington, Virginia 22202

Special Inspector General for Iraq Reconstruction
Report No. SIGIR 05-020 (Project No. D2004-DCPAAF-0034.3)
October 26, 2005
Management of the Contracts, Grant, and Micro-Purchases
Used To Rehabilitate the Karbala Library
Executive Summary
Introduction. This audit report is one of a series of reports addressing controls over
cash, contract management, and grant management for the Coalition Provisional
Authority South-Central Region. This audit report discusses the deficiencies in the
Coalition Provisional Authority South-Central Region’s process for managing
5 contracts, 1 grant, and 33 micro-purchase contracts awarded for more than $2.1 million
for the rehabilitation of the Karbala Library (the Library).
Objective. The overall audit objective was to determine whether disbursing officers in
selected locations in southern Iraq complied with applicable guidance and properly
controlled and accounted for Development Fund for Iraq cash assets and expenditures.
We expanded the scope of our audit to determine whether the South-Central Region
properly managed contracts and grants at specific projects because of deficiencies
identified in Office of the Special Inspector General for Iraq Reconstruction, Report No.
05-006, “Control of Cash Provided to South-Central Iraq,” April 30, 2005, and at the
request of the Deputy Secretary of Defense. We chose to review the Library because of
the multiple contracts, grant, and micro-purchase contracts that had been awarded for the
rehabilitation of the Library.
Specifically, for the Library, we reviewed the contract and grant award process to
determine whether fund agents adequately controlled cash assets, fully accounted for cash
assets and expenditures, and properly returned cash assets and whether expenditures
complied with guidance specifying dollar thresholds and allowable uses.
Results. South-Central Region personnel, in the management of contracts, a grant, and
micro-purchase contracts using Rapid Regional Response Program funds to rehabilitate
the Library:
• circumvented guidance by splitting requirements into more than one contract to
avoid seeking the required funding-level approval or to avoid required
documentation
• issued contracts for dollar amounts that exceeded the requirement documents
• did not monitor the contracts, the grant, or micro-purchase contracts; did not make
any site visits; did not issue performance reports; did not prepare post-award
assessments; and did not act on the reports that the contractor was not performing
to the standards set in the contracts
• needlessly disbursed funds for contracts, a grant, and micro-purchase contracts for
which work was not performed and the contracted amount was exceeded
i

• paid-in-full, on the day the contracts, a grant, and micro-purchase contracts were
signed, but did not require that progress payments be tied to project performance
• did not maintain files that contained accurate or required documentation
South-Central Region personnel needlessly disbursed more than $1.8 million on the
project to rehabilitate the Library. South-Central Region personnel, under the direction
of the Rapid Regional Response Program, did not comply with applicable guidance and
did not properly manage Rapid Regional Response Program funds provided through
5 contracts, 1 grant, and 33 micro-purchase contracts used to rehabilitate the Library.
Specifically, South-Central Region disbursed approximately $1.6 million for which the
work was not performed. Further, approximately $2.3 million was disbursed, although
the total value of the contracts, grant, and micro-purchase contracts awarded for the
Library was approximately $2.1 million.
Material Internal Control Weaknesses. The audit identified material internal control
weaknesses. South-Central Region personnel, under the direction of the Coalition
Provisional Authority, did not comply with applicable guidance and did not properly
manage approximately $2.3 million of Rapid Regional Response Program funds.
Consequently, there was no assurance that fraud, waste, and abuse did not occur in the
management and administration of cash and property used to rehabilitate the Library.
Indications of Potential Fraud. During this audit, we found indications of potential
fraud and referred these matters to the Assistant Inspector General for Investigations,
Office of the Special Inspector General for Iraq Reconstruction, for action. Related
investigations are continuing.
Recommendations. Since the Coalition Provisional Authority was dissolved on
June 28, 2004, we are addressing the recommendations to three of the four
successor organizations: the Iraq Reconstruction Management Office, the Joint
Contracting Command-Iraq/Afghanistan, and the Joint Area Support Group-
Central.
We added a recommendation to the United States Ambassador to Iraq because additional
information concerning a rescinded grant, including a copy of a bank account showing
that approximately $154,000 remaining on deposit for this particular grant, was made
available subsequent to the issuance of the draft audit report.
1. We recommend that the United States Ambassador to Iraq recover specifically
the $154,000 in rescinded grant funds remaining on deposit, any other funds
related to the rescinded grant, and funds that exceeded the contracted amount
and return the recovered funds to the Iraqi government.
2. We recommend that the Director, Iraq Reconstruction Management Office,
ensure that established policies and procedures for authorizing, awarding, and
consolidating contracts and grants are effectively implemented and followed
and that complete files to support transactions made for contracts and grants are
maintained.
3. We recommend that the Commanding General, Joint Contracting Command-
Iraq/Afghanistan:
a. Ensure that established policies and procedures for awarding and
consolidating contracts and grants are effectively implemented and followed.
ii

4. b. c. d. Ensure that established policies and procedures for monitoring contract and
grant performance are effectively implemented and followed.
Ensure that repairs were completed, purchased equipment and services were
delivered, and work was performed.
Maintain complete files to support transactions made for contracts and grants.
We recommend that the Commander, Joint Area Support Group-Central, ensure
that established policies and procedures for disbursing funds obtained through
the Development Fund for Iraq for contracts and grants are effectively
implemented and followed, that funds are disbursed for intended purposes, and
that complete files to support transactions made for contracts and grants are
maintained.
Management Comments and Audit Response. The Director, Iraq Reconstruction
Management Office; the Commanding General, Joint Contracting Command-
Iraq/Afghanistan; and the Commander, Joint Area Support Group-Central concurred with
the finding and recommendations and the comments to all recommendations are fully
responsive.
iii

Table of Contents
Executive Summary i
Introduction
Background 1
Objective 4
Finding
Management of the Contracts, Grant, and Micro-Purchase Contracts
Used to Rehabilitate the Karbala Library 5
Appendixes
A. Scope and Methodology 22
B. Coalition Provisional Authority Guidance Applicable
to Contracts and Grants 25
C. Contracts and Grant Awarded for the Karbala Library 27
D. Micro-Purchase Contracts Awarded for the Karbala Library 28
E. Coalition Provisional Authority Organizational Responsibilities
for Contracts and Grants 29
F. Present U.S. Government Organizational Responsibilities
for Contracts and Grants 30
G. Micro-Purchases for Books for the Karbala Library 31
H. Contractor Performance at the Karbala Library 32
I. Internet Service at the Karbala Library 35
J. Acronyms 37
K. Report Distribution 38
L. Audit Team Members 40
Management Comments
Commanding General, Joint Contracting Command-Iraq/Afghanistan Commander, Joint Area Support Group-Central 41
43
iv

Introduction
Background
This audit report is one of a series of reports addressing controls over cash, contract
management, and grant management for the Coalition Provisional Authority (CPA)
South-Central Region. This audit report discusses the deficiencies in the CPA South-
Central Region’s process for managing 5 contracts, 1 grant, and 33 micro-purchase
contracts awarded for the rehabilitation of the Karbala Library (the Library).
Coalition Provisional Authority Regulation Number 1. CPA Regulation Number 1
was issued by the CPA Administrator on May 16, 2003. CPA Regulation Number 1
described the powers and purposes of the CPA and stated:
The CPA shall exercise powers of government temporarily in order to
provide for the effective administration of Iraq during the period of
transitional administration, to restore conditions of security and
stability, to create conditions in which the Iraqi people can freely
determine their own political future, including by advancing efforts to
restore and establish national and local institutions for representative
governance and facilitating economic recovery and sustainable
reconstruction and development.
The Development Fund for Iraq. United Nations Security Council Resolution 1483,
adopted May 22, 2003, noted the establishment of the Development Fund for Iraq (DFI)
and assigned responsibility for managing the fund to the CPA. The resolution noted that
the CPA should direct disbursement of DFI funds, in consultation with the Iraqi interim
administration. The resolution also required the CPA to use DFI funds in a transparent
manner to meet the humanitarian needs of the Iraqi people, for the economic
reconstruction and repair of Iraq’s infrastructure, for the continued disarmament of Iraq,
for the costs of Iraqi civilian administration, and for other purposes benefiting the people
of Iraq. The DFI was the primary financial vehicle to channel revenue from ongoing
Iraqi oil sales, unencumbered Oil-for-Food deposits, and repatriated Iraqi assets into the
relief and reconstruction of Iraq.
During the CPA administration of Iraq, the CPA Comptroller managed the DFI, and the
Program Review Board (PRB) was responsible for recommending expenditures of
resources from the DFI. For a description of CPA Regulation Number 2, which applied
to the DFI, and CPA Regulation Number 3, which applied to the PRB, see Appendix B.
Program Review Board Guidance. The Director of the PRB provided directives that
applied to grant management within CPA regions. Two of these directives addressed the
management of the Rapid Regional Response Program (R3P):
• PRB Guidance 06, “Rapid Regional Response Program Overview,”
September 27, 2003
• PRB Guidance 06.2, “Rapid Regional Response Program Overview
(amended),” December 14, 2003, and January 25, 2004
Rapid Regional Response Program. R3P funds were derived from the DFI, and the
CPA provided those funds to the Iraqi people for necessary repairs and upgrades to the
infrastructure. The objectives of the R3P were to create local jobs, support local
1

industries, and stimulate the economy. The R3P was initially conceived as a civilian
equivalent of the Commanders’ Emergency Response Program fund.1 Further, it was
designed to provide maximum flexibility to regional and governorate coordinators in
implementing projects responsive to the needs in their areas of responsibility. The
program incorporated and expanded the authorities of two previously funded programs:
• the Directors’ Emergency Response Program, which provided an emergency
response capacity
• the Construction Initiative, which provided greater funding authority for
construction activities
The discretionary authority under which regions could execute programs without prior
Regional Program Coordinator approval was increased to $500,000 from $200,000
through PRB Guidance 06.2, “Rapid Regional Response Program Overview,” as
amended on December 14, 2003, and January 25, 2004.
South-Central Region. The CPA established the South-Central Regional office in the
spring 2003, comprising the provinces of Anbar, Babil, Karbala, Najaf, Qadisiyah, and
Wasit, approximately half of the land mass of Iraq. South-Central Region personnel
worked with the Iraqi people and coalition forces to establish the conditions for a free,
sovereign, and democratically-elected representative government in Iraq. The top
priorities of the South-Central Region were electricity, human rights, security, strategic
communications, tribal democracy, and women’s rights.
Karbala Library. The South-Central Region identified the Library, located in Karbala,
Iraq, as the focal point for academic and professional learning in the area. The Library
provided the area’s richest source of Arabic translations of the most important Western
works of history, literature, philosophy, politics, and science. During Saddam’s regime,
the people of the entire region were deprived of the most basic access to world literature.
The South-Central Region determined that supporting the Library was consistent with the
requirement that such projects benefit the people of Iraq.
The South-Central Region awarded four contracts, in support of the Library, for the
purchase of equipment and the following services:
• building repairs
• landscaping
• furniture
• Internet service
A fifth contract was awarded to train the Library staff. The five contracts were valued at
$1,383,810.2
1 According to Combined Joint Task Force-7, Fragmentary Order 89, June 19, 2003, DFI funds were to be
used to help fund the Commanders’ Emergency Response Program, which provides reconstruction
assistance to the Iraqi people.
2 Contracts DABV01-04-M-8339, in the amount of $373,400, for building repairs; DABV01-04-M-8342,
in the amount of $197,500, for landscaping; DABV01-04-M-8343, in the amount of $224,010, for
furniture; DABV01-04-M-8345, in the amount of $498,900, for Internet service; and DABV01-04-M-8353,
in the amount of $90,000, for library staff training.
2

Further, the South-Central Region awarded a grant to the Library to provide for salaries
for the Library staff. The value of the grant amounted to $210,000. Finally, the South-
Central Region awarded 33 micro-purchase contracts to acquire books for the Library.
The amount expended through the micro-purchases was $535,106.
The total value of the contracts, grant, and micro-purchase contracts awarded for the
Library was $2,128,916. For details on the contracts and the grant, see Appendix C. For
details on the micro-purchase contracts, see Appendix D.
Organizations Responsible for Contract and Grant Management. The CPA was the
authority responsible for the temporary governance of Iraq through June 28, 2004.
Thereafter, the Iraqi Interim Government assumed the authority to govern Iraq. The
responsibility for the DFI transferred from the CPA to the Iraqi Interim Government on
June 28, 2004. For information on the CPA’s organizational responsibilities for grants
management, until it ceased to exist on June 28, 2004, see Appendix E.
After the dissolution of the CPA, four U.S. government organizations assumed
responsibilities for the management of contracts, grants, and micro-purchase contracts in
Iraq. For information on the present organizational responsibilities for the management
of contracts and grants in Iraq, see Appendix F.
Project and Contracting Office. The Project and Contracting Office now has the
responsibility to assess requirements for contracts and grants. National Security
Presidential Directive 36, “United States Government Operations in Iraq,” May 11, 2004,
established the Project and Contracting Office and directed that it provide acquisition and
project management support for activities in Iraq, including contract and grant related
activities. The Project and Contracting Office reports through the Deputy Assistant
Secretary of the Army (Policy and Procurement) to the Assistant Secretary of the Army
for Acquisition, Logistics, and Technology.
Iraq Reconstruction Management Office. The Iraq Reconstruction Management
Office now has the responsibility to approve contracts and grants. National Security
Presidential Directive 36, “United States Government Operations in Iraq,” May 11, 2004,
established the Iraq Reconstruction Management Office within the Department of State
and directed that organization to facilitate the transition in Iraq. The Iraq Reconstruction
Management Office reports to the Chief of Mission in Iraq.
Joint Contracting Command-Iraq/Afghanistan. The Head of Contracting
Activity, Joint Contracting Command-Iraq/Afghanistan now has the responsibility to
administer contracts and grants.3 The Joint Contracting Command-Iraq/Afghanistan was
established in 2004 to consolidate contracting activities and reports through the Deputy
Assistant Secretary of the Army (Policy and Procurement) to the Assistant Secretary of
the Army for Acquisition, Logistics, and Technology.
Joint Area Support Group-Central Comptroller. The Joint Area Support
Group-Central now has the financial responsibility4 for contracts and grants. The CPA
Comptroller, as part of the CPA, ceased to exist on June 28, 2004. When the CPA was
dissolved, the CPA Comptroller was realigned as the Joint Area Support Group-Central
3 The Joint Contracting Command-Iraq/Afghanistan used the Federal Acquisition Regulation and
Department of Defense 3210.6-R, “DoD Grant and Agreement Regulations,” April 13, 1998, as guidance.
4 The Joint Area Support Group-Central Comptroller provided funds to the CPA regions to disburse for
contracts and grants. Afterward, the disbursement documentation was returned to the Joint Area Support
Group-Central Comptroller’s office for review and to be cleared.
3

Comptroller. The Joint Area Support Group-Central Comptroller continued to perform
the same duties for that portion of the DFI still administered by the U.S. Government.
The Joint Area Support Group-Central reports to the Commander, Multi-National
Force-Iraq.
Objective
The overall audit objective was to determine whether disbursing officers in selected
locations in southern Iraq complied with applicable guidance and properly controlled and
accounted for DFI cash assets and expenditures.
We expanded the scope of our audit to determine whether contracts and grants were
properly managed by the South-Central Region at specific projects because of
deficiencies identified in Office of the Special Inspector General for Iraq Reconstruction,
Report No. 05-006, “Control of Cash Provided to South-Central Iraq,” April 30, 2005,
and at the request of the Deputy Secretary of Defense. We chose to review the Library
project for a review of the management of contracts and grants because of the multiple
contracts, grant, and micro-purchase contracts that had been awarded for the
rehabilitation of the Library.
Specifically, for the Library, we reviewed the contract and grant award process to
determine whether:
• fund agents adequately controlled cash assets, fully accounted for cash assets and
expenditures, and properly returned cash assets
• expenditures complied with guidance specifying dollar thresholds and allowable
uses
For a discussion of the audit scope, methodology, and a summary of prior coverage, see
Appendix A. For definitions of the acronyms used in this report, see Appendix J. For a
list of the audit team members, see Appendix L.
4

Management of the Contracts, Grant, and Micro-
Purchase Contracts Used To Rehabilitate the
Karbala Library
South-Central Region personnel, in the management of contracts, a grant, and micro-
purchase contracts using R3P funds to rehabilitate the Library:
• circumvented guidance by splitting requirements into more than one contract to
avoid seeking the required funding-level approval or to avoid required
documentation
• issued contracts for dollar amounts that exceeded the requirement documents
• did not monitor the contracts, the grant, or micro-purchase contracts; did not make
any site visits; did not issue performance reports; did not prepare post-award
assessments; and did not act on the reports that the contractor was not performing
to the standards set in the contracts
• needlessly disbursed funds for contracts, a grant, and micro-purchase contracts for
which work was not performed and the contracted amount was exceeded
• paid-in-full on the day the contracts, a grant, and micro-purchase contracts were
signed, but did not require that progress payments be tied to project performance
• did not maintain files that contained accurate or required documentation
This occurred because South-Central Region personnel did not:
• follow established policies and procedures for awarding and consolidating
contracts and grants
• use effective procedures to monitor performance and disburse funds for contracts
and grants
• maintain complete files to support transactions made for contracts and grants
• ensure that repairs were completed, purchased equipment and services were
delivered, work was performed, and that funds were disbursed for intended
purposes
As a result, more than $1.8 million was needlessly disbursed on the project to rehabilitate
the Library. South-Central Region personnel, under the direction of the CPA, did not
comply with applicable guidance and did not properly manage R3P funds provided
through 5 contracts, 1 grant, and 33 micro-purchase contracts used to rehabilitate the
Library. Specifically, South-Central Region disbursed approximately $1.6 million for
which the work was not performed. Further, approximately $2.3 million was disbursed,
although the total value of the contracts, grant, and micro-purchase contracts awarded for
the Library was approximately $2.1 million.
Guidance for Contracts and Grants
In Iraq, contracts were used to purchase products or services, and grants were used to
support or stimulate the efforts of the grant recipients to carry out a program or project.
The contracts and grants were to directly benefit the Iraqi people or assist in the recovery
of Iraq. The South-Central Region disbursed funds for contracts and grants by using DFI
5

cash issued by the CPA Comptroller (now the Joint Area Support Group-Central
Comptroller).
Coalition Provisional Authority Memorandum 4. CPA Memorandum Number 4,
“Contract and Grant Procedures Applicable to Vested and Seized Iraqi Property and the
Developmental Fund for Iraq, Implementation of Regulation Number 3, Program Review
Board,” August 19, 2003, (CPA Memorandum Number 4) established “procedures
applicable to the execution of contracts and grants for the benefit of the Iraqi people
using Iraqi Funds. . . .” The memorandum directed that “the CPA will manage and spend
Iraqi Funds, which belong to the Iraqi people, for their benefit. . . . in a transparent
manner that fully comports with the CPA's obligations under international law, including
Resolution 1483.” The memorandum also stated:
Consistent with their programmatic responsibility to ensure that
contractors and grantees properly perform their duties, Contracting
Officers shall be responsible for regularly monitoring the post-award
execution of all Contracts they approve. This monitoring process
includes ensuring that the contractor provides the agreed upon goods,
services or construction in accordance with the provisions, and that
payments are made in a timely manner. Contracting Officers shall
include in the Contract file a written report describing post-award
performance by contractors or grantees, including a final assessment
upon completion of the Contract. Contracting officers shall rely upon
locally available military engineering resources in assessing all repair
and construction projects. All documents related to the establishment
and execution of Contracts will be maintained in a Contract file that
includes the materials described in Appendix A to this Memorandum.
Further, the memorandum stated “the Head of Contracting Activity, CPA, shall provide
administrative oversight as well as technical supervision” of contracting officers. Finally,
the memorandum stated that “Large Purchase preliminary award decisions by
Contracting Officers appointed by the Head of the Contracting Activity, CPA, will be
coordinated with the Head of Contracting Activity, CPA, or his designee, prior to award.”
The memorandum defined a large purchase as “A contract with a value of greater than
US$500,000.”
The appendices to this memorandum provided supplemental instructions on preparing
and executing contracts and grants pursuant to the memorandum. Specifically,
Appendices A, B, and C of the memorandum identified the contract file requirements,
standard terms, and conditions for solicitations and contracts in excess of $5,000 and
contract and grant procedures applicable to vested and seized Iraqi property and the DFI.
Department of Defense 3210.6-R. Department of Defense 3210.6-R, “DoD
[Department of Defense] Grant and Agreement Regulations,” April 13, 1998, provided
guidance for the management of grants. For a definition of contracts and grants, see
Appendix B.
Multiple Contracts
South-Central Region personnel did not follow established policies and procedures for
consolidating contracts using R3P funds. Specifically, the South-Central Region
personnel circumvented guidance by splitting requirements into more than one contract to
avoid having to seek the appropriate funding-level approval or to avoid required
6

documentation and issued contracts for dollar amounts that exceeded the requirement
documents.
Coalition Provisional Authority Memorandum 4–Combining and Dividing Awards.
CPA Memorandum 4, Section 6, “Principles Applicable to Instruments,” addressed
combining and dividing awards, stating that to the “extent practicable, requirements for a
project or related projects may be consolidated into one contract, in order to reduce the
administrative burden of contracting. Requirements may not be split to avoid the
application of these rules.”
Program Review Board Guidance 06.2 (amended)–Discretionary Authority.
PRB Guidance 06.2 (amended), stating that the “discretionary authority under which
Regional Coordinators can execute projects without RPC [Regional Program
Coordinator] approval is increased to $500,000, and projects up to $100,000 can be
executed at the Governorate Coordinators’ discretion.”
Coalition Provisional Authority CPA Memorandum 4–Micro-Purchases. CPA
Memorandum 4, Section 3, “Definitions,” defines a micro-purchase as “A contract with a
value of US$5,000 or less” and a small purchase as “A contract with a value greater than
US$5,000 and less than or equal to US$500,000.” Small purchases required documented
solicitations, competition, communication with vendors, and invoices. Micro-purchases,
however, simply required the provision of material contract terms and the receipts or
invoices that demonstrated the outcome. Micro-purchases were considered
advantageous, because they were subject to less stringent contract file requirements than
small purchases.
Regional Program Coordinator Approval Authority. Projects over $500,000 required
Regional Program Coordinator approval via form PRB-01, “Funding Request Form.”
The Regional Program Coordinator was to review and approve the funding request for
completeness of the information concerning budget and justification, appropriate
clearances, identification of funding sources, and other pertinent factors. The following
examples show how the guidance was circumvented by splitting requirements into more
than one contract to avoid having to seek the appropriate funding-level approvals.
Combining and Dividing Awards. South-Central Region personnel awarded four
contracts between March 30 and April 2, 2004, to provide building repairs, landscaping,
furniture, and Internet service for the Library. The four contracts, valued at almost
$1.3 million, were awarded to the same contractor.
The records show indications that South-Central Region personnel may have
intentionally split the requirements because all four Funding Request Forms were
approved on the same day, March 29, 2004, by the South-Central Region Chief of
Operations5
.
According to the Funding Request Forms, the purpose of the four projects was to
“renovate the existing library in Karbala.” The single purpose underlying the
rehabilitation of the Library required the South-Central Region to complete the project as
a whole. However, South-Central Region personnel split the work into 4 separate
requirements, awarded 4 separate contracts, and the single contractor was paid for all
4 contracts.
5 This individual in this position was not authorized to approve projects.
7

As a result of splitting the project into separate contracts, there were duplicate
administrative costs and questionable contracting choices. For example, on
March 30, 2004, the South-Central Region contracted for the replacement of a 20-foot
sliding gate, but on March 31, 2004, the South-Central Region contracted for the painting
of the same sliding gate. The cost of the gate was $3,500 while the cost of painting that
same gate was $4,500. The South-Central Region should have avoided these inconsistent
charges and the accompanying duplicative administrative costs by awarding the work in a
single project.
Approval Authority for Contracts. South-Central Region officials avoided having to
seek South-Central Region Regional Program Coordinator approval by splitting the
Library project into four contracts. While none of the contracts individually exceeded the
$500,000 discretionary approval authority of the Regional Program Coordinator,
collectively the four contracts did exceed the approval level. The Regional Program
Coordinator discretionary approval authority was not required in those cases because
each contract was less than $500,000. In addition, South-Central Region personnel also
circumvented coordinating the contracts with the Head of Contracting Activity, CPA, by
avoiding the $500,000 threshold.
Further, two of the four Funding Request Forms approved by the South-Central Region
Chief of Operations were awarded for more than they were approved. For example, one
Funding Request Form was approved for $131,189, but two days later, the contract was
awarded for $197,500. Another Funding Request Form was approved for $412,000, but
three days later, the contract was awarded for $498,900. The South-Central Region Chief
of Operations did not have the discretionary authority to approve any funding requests.
Micro-Purchases for Books. South-Central Region purchased books from Jordan and
Lebanon through the use of micro-purchase contracts. Receipts available at South-
Central Region indicate that $535,106 was spent to purchase more than 30,000 books for
the Library. Further, in some cases, South-Central Region personnel circumvented
guidance by splitting requirements into more than one micro-purchase contract to avoid
the small purchase contracting requirements. Yet in other cases they awarded micro-
purchase contracts that exceed the micro-purchase dollar limitations but did not maintain
the required documentation for the higher dollar amount. For the details of the micro-
purchases of books for the Library, see Appendix G.
Monitoring Performance
South-Central Region personnel did not use effective procedures to monitor performance
for contracts and the grant using R3P funds. Specifically, South-Central Region
personnel did not monitor any contracts, the grant, or micro-purchase contracts, did not
make any site visits, did not issue performance reports, did not prepare post-award
assessments, and did not act on the reports that the contractor was not performing to the
standards set in the contracts.
Coalition Provisional Authority Memorandum 4–Monitoring Performance. CPA
Memorandum 4, Section 8, “Monitoring Contract Performance,” addressed the
contracting officers monitoring responsibilities. CPA Memorandum 4 states that
Consistent with their programmatic responsibilities to ensure that
contractors and grantees properly perform their duties, Contracting
Officers shall be responsible for regularly monitoring the post-award
8

execution of all Contracts they approve. This monitoring process
includes ensuring that the contractor provides the agree[d] upon goods,
services or construction in accordance with the provisions, and that
payments are made in a timely manner.
Monitoring Methods. CPA Memorandum 4 and R3P guidance identified performance
monitoring as a significant duty to ensure that the recipients were properly performing.
Monitoring required South-Central Region personnel to employ some or all of the
following methods:
• discussions with the contracting entity or grant recipient about project timelines
and implementation of the project
• regular site visits
• production of reports and/or other evidence of project activity by the
implementing partner
• confirmation of delivery of the goods or products and verification that the targeted
beneficiary or recipient had received the product
• discussions with the Iraqi beneficiary of the project to evaluate whether the
project achieved the desired outcome
• documentation or other evidence (pictures) of a satisfactory work product
including a completed Certificate of Completion
Monitoring of Project Activity. The South-Central Region contracting officer was
responsible for monitoring the Library projects, including making regular site visits,
according to CPA Memorandum 4 and R3P guidance. The contract and grant files lack
any evidence that South-Central Region personnel visited the Library site.
Performance Reports. The contract and grant files were required to contain
performance verification, and the grant required at least a monthly report from the grant
recipient documenting the expenditures incurred and any achievements. However, the
contract and grant files did not contain any documents to verify performance.
South-Central Region personnel did not issue any final reports for the Library contracts
or the grant. None of the contract or grant files contained details regarding the outcome
of the contracts and the grant or the number of Iraqis directly benefiting from the use of
DFI funds. The reports were necessary to document that the contractor provided the
agreed upon goods, services, or construction.
In addition, South-Central Region contracting officers did not perform a post-award
assessment of the contractor and the grantee to detail the impact the contracts or the grant
had upon the community or to detail the performance of the contractor or grantee. The
post-award report was necessary to document the benefits for the Iraqi people and to
determine whether the contractor or grant recipient could be considered for additional
contracts or grants.
Iraqi Forward Engineering Support Team. The South-Central Region relied
exclusively upon the Iraqi Forward Engineering Support Team (IFEST) to monitor
contractor performance. The IFEST was comprised of Iraqi professional engineers who
worked for the U.S. Army Corps of Engineers. The IFEST personnel visited the Library
four times between May 25 and September 20, 2004, to evaluate the contractor’s
performance on the four contracts awarded for building repairs, landscaping, furniture,
9

and Internet service. They recorded their findings and conclusions in an inspection report
for each contract, which was provided to the South-Central Region.
The IFEST inspection reports for its visit on September 20, 2004, stated that the
contractor did not perform to the standards of the contracts for building repairs,
landscaping, and furniture, and that the contractor did not “bring any equipment for
internet” for the Internet service contract. The IFEST inspection reports listed numerous
items that the contractor did not provide in accordance with the contract terms. For the
details of goods and services not provided by the contractor for building repairs,
landscaping, and furniture, see Appendix H. For the details of goods and services not
provided by the contractor for the Internet service, see Appendix I.
According to CPA Memorandum 4, the South-Central Region contracting officer was
responsible for monitoring the projects, including making regular site visits. However,
the South-Central Region relied solely upon the IFEST to perform monitoring of the
four contracts but apparently did not use or respond to the IFEST inspection reports
concerning the Library. According to IFEST personnel, South-Central Region personnel
were made aware of the contractor’s deficiencies. Regular site visits by South-Central
Region personnel would have confirmed the fact that the contractor had not performed to
the standards of the contracts.
Coordinating the Monitoring Process. The South-Central Region did not effectively
coordinate and communicate the proposed work for the Library to the library
management. During our site visit to the Library in May 2005, the library manager stated
that he was never aware of the contracts or the grant awarded for Library and that the
South-Central Region did not provide the scope of work for the contracts. Further, the
manager was not advised that over 30,000 books were to be delivered and that a contract
and a grant were available to pay for librarians’ training and salaries.
Additionally, the library manager stated that when the contractor provided 14 personal
computers, he was not aware that the library was supposed to receive 68 personal
computers. The library manager said he only became aware of the fact the Library was to
receive 68 personal computers and Internet service when the IFEST performed its
inspections.
Since the library manager was not advised of the contracts or provided the scope of work
for each contract awarded for the Library, the library manager was not aware that the
contractor was not performing to the standards of the contracts. As a result, the library
manager did not immediately contact the South-Central Region because he was unaware
of the lack of performance by the contractor.
Micro-Purchases for Books. We discussed the books with the library site manager in
May 2005, and he stated that the Library never received any books from the South-
Central Region. Current and former South-Central Region personnel stated that they do
not know the location of books purchased for the Library. For the details of the micro-
purchases of books, see Appendix G.
Disbursing Funds
South-Central Region personnel did not use effective procedures to disburse funds for a
contract and the grant using R3P funds. Specifically, funds were needlessly disbursed for
contracts, a grant, and micro-purchase contracts for which work was not performed, work
was not contracted, equipment and services were not delivered, and the contracted
10

amount was exceeded. In addition, the South-Central Region paid-in-full on the day the
contracts, a grant, and micro-purchase contracts were signed, and therefore, did not
require that progress payments be tied to project performance.
Coalition Provisional Authority Memorandum 4–Payment Terms.
CPA Memorandum 4, Section 7, “Contracts,” states that “All Small Purchase contracts
will contain payment terms including an agree[d] upon payment schedule (preferably
with milestones tied to performance) for service contracts. . . .”
Coalition Provisional Authority Memorandum 4–Specific Milestones.
CPA Memorandum 4, Section 9, “Grants,” states that “Grants should be reviewed during
implementation and where appropriate funds should be made available on a schedule tied
to the accomplishment of specific milestones. . . .”
Documentation Requirements. CPA Memorandum 4 and R3P Guidance required each
contract, grant, and micro-purchase file to maintain disbursement documentation that
recorded the date, amount, and payee for each disbursement made.
Advance Payments. The South-Central Region did not tie any disbursements to the
contractor to performance milestones. Instead, the contractor was paid 100 % of the
amount awarded for each contract on the day the contract was signed. In addition, the
contractor for the Library staff training contract and the grant recipient for the Library
staff salaries grant were both paid 100 % of the amount awarded on the day the contract
and the grant were signed. Once the South-Central Region had disbursed the entire
contract amount in advance to the contractors and grant recipient, it was critical that the
South-Central Region contracting officer provide strict monitoring of the contractors and
grant recipient to confirm that performance was done according to the contracts and the
grant terms.
Library Staff Training Contract. The South-Central Region awarded
Contract DABV01-04-M-8353 on April 5, 2004, in the amount of $90,000 (even though
the contractor’s solicitation was in the amount of $86,100), to “provide comprehensive
training in Jordan” for a select group of young professional librarians from Karbala.
The day after the contract was signed, the acting South-Central Region Division Level
Agent made a disbursement of $100,000 to a CPA human rights advisor. The CPA
human rights advisor was responsible for paying the contractor after the contract had
been fulfilled. The contract file contained a receipt from the contractor in the amount of
$90,000. However, the contract file did not contain documents to show what happened to
the remaining $10,000. The $10,000 was still unaccounted for by the human rights
advisor responsible for disbursing the money. Former South-Central Region personnel
stated they believed that the CPA human rights advisor did not return the money.
We discussed the contract with the library site manager (who had been the manager for
the past 20 years) in May 2005, and he said he was unaware of this contract and stated
that none of his staff attended this training. The contract file did not have a list of names
of attendees for the training. Although former South-Central Region personnel
questioned whether any training was received since there were irregularities with the
awarding and disbursing of the funds for the contract, no action was taken.
Library Staff Salaries Grant. The South-Central Region awarded a grant to the Library
board on May 24, 2004, in the amount of $210,000 (although the Funding Request Form
for the grant lacked an approving official’s signature) to provide the salaries for
35 librarians at $500 per employee, per month for 12 months.
11

The grant required the establishment of a Library board before the disbursement of any
funding and called for the South-Central Region to perform compliance reviews
consisting of monthly reviews of expenditures of the grants funds for salaries.
Regardless, the acting South-Central Region Division Level Agent made two
disbursements, each in the amount of $210,000, to two different Library board members.
One of the Library board members deposited $210,000 into a local bank account, as
required by the grant agreement. We discussed the grant with the library site manager in
May 2005 and he said he was unaware of any grant for librarians’ salaries. When told
that the Library board was provided a grant to pay for 35 librarians’ salaries, the manager
said that he only had 8 librarians on his staff and that none of them were ever paid with
grant funds. Former South-Central Region personnel stated the grant had been rescinded
in November 2004 when they became aware of the fact that individuals were being
paid—even though they were not working at the Library. After the grant was formally
rescinded, former South-Central Region personnel took control of the bank account and
received receipt copies for all payments made by the board. Former South-Central
Region personnel provided receipts in May 2005, in the amount of approximately
$56,000 (disbursed as part of the $210,000 maintained in the local bank account), for
salaries paid to individuals who did not work at the Library. They also provided a copy
of the bank account showing that approximately $154,000 remaining on deposit.
Disbursements. As a result, South-Central Region personnel needlessly disbursed
$520,000 for the contract and grant. It appears that $300,000 was disbursed for work not
performed ($90,000 for the contract and $210,000 for the grant) and $220,000 was
disbursed that exceeded the awarded amount of the contract and the grant ($10,000 for
the contract and $210,000 for the grant).
Further, South-Central Region personnel did not tie the disbursements to any specific
performance. Instead, the South-Central Region disbursed the entire amounts for the
contract and grant at one time apparently before any work commenced. Finally, the lack
of a monthly review of the Library grant allowed funds to be disbursed for expenses that
were not intended by the grant’s objective.
Library Site Evaluation
We visited the Library in May 2005, to evaluate contractor performance under the
four contracts awarded to provide building repairs, landscaping, furniture, and Internet
service for the Library and to determine whether the IFEST inspection reports adequately
documented the quality and completeness of the contractor’s work. For the details of
goods and services not provided by the contractor, see Appendix H.
Building Repairs. We agreed with the conclusion in the IFEST inspection report that
the contractor failed to perform according to the scope of work. The contractor did not
provide numerous items; such as ceiling fans, glass panels, and seals around the
windows. In addition, the contractor did not provide quality repairs to the building. For
an illustration of the poor workmanship of some of the repairs, see Photo 1 and Photo 2.
For the details of goods and services not provided by the contractor for building repairs,
see Appendix H.
12

Photo 1. Incomplete door hinge repair
Photo 2. Improperly sized glass door panel
Landscaping. We agreed with the conclusion in the IFEST inspection report that the
contractor failed to perform according to the scope of work. The solicitation called for
the construction of a paved parking area of 42 m x 75 m. Instead, the contractor provided
a paved parking area of 30 m x 35 m and decreased the parking area require by
12 m x 40 m. In addition, the contractor did not provide a fountain with an operable
13

pump, did not provide any hedge plants, and did not provide the correct number of
landscaping lights. For an illustration of the fountain, hedge plants, and landscaping
lights, see Photo 3. Further, the contractor did not remove the three trees in the front, left,
and right of the steps and replant them. For an illustration of the trees, see Photo 4. For
the details of goods and services not provided by the contractor for landscaping, see
Appendix H.
Photo 3. Inoperable fountain, missing hedge plants, and partial landscaping lights
14

Photo 4. Trees flanking and in front of entrance that were not removed and
replanted, as required in the contract
Furniture. We agreed with the conclusion in the IFEST inspection report that the
contractor failed to acquire the agreed upon goods. The items the contractor provided
were not up to the standards in the scope of work, were used, or were not in good
condition. For example, the contractor provided plastic chairs instead of the required
upholstered metal chairs. For an illustration of the plastic chairs, see Photo 5. In
addition, the contractor supplied three very poor quality wood and glass frame cases
instead of the required new glass and wood frame cases. For an illustration of the poor
quality wood and glass frame cases, see Photo 6. Further, the 138 2-meter double face
bookshelves were made of pressed wood, not the “solid wood” the contract specifically
required. For an illustration of the pressed wood, see Photo 7. For the details of goods
and services not provided by the contractor for furniture, see Appendix H.
15

Photo 5. Plastic rather than upholstered metal chairs
Photo 6. Used wood and glass frame cases
16

Photo 7. Pressed rather than solid wood bookshelves
Internet Service. We agreed with the conclusion of the IFEST inspection report that the
contractor failed to deliver and install the Internet service. The contractor did not provide
54 of the required 68 personal computers and failed to provide the hardware and software
for the installation of the Internet service. We viewed the Library’s computer room and
found that the personal computers provided by the contractor were working as stand-
alone computers with no server connection, as required by the contract. There was no
evidence that any hard-wiring had been installed or that any connections had been
installed from the computers to a server. For an illustration of the stand-alone personal
computers, see Photo 8. For the details of goods and services not provided by the
contractor for Internet service, see Appendix I.
17

Photo 8. Stand-alone personal computers
Conclusion
More than $1.8 million was needlessly disbursed on the project to rehabilitate the
Library. South-Central Region personnel, under the direction of the CPA, did not comply
with applicable guidance and did not properly manage R3P funds provided through
5 contracts, 1 grant, and 33 micro-purchase contracts used to rehabilitate the Library.
Specifically, South-Central Region disbursed approximately $1.6 million for which the
work was not performed. Further, approximately $2.3 million was disbursed although
the total value of the contracts, grant, and micro-purchase contracts awarded for the
Library was approximately $2.1 million.
We reviewed the IFEST inspection reports, the contracts’ solicitations, and the results of
our site visit to quantify the amount of work performed and not performed by the
contractor. Of the more than $2.3 million disbursed, we determined that the amount of
work performed to be more than $.5 million, the amount of work not performed to be
more than $1.6 million, and the amount that exceeded the awarded value for one contract
and the grant to be more than $.2 million. For details on the amounts of cash disbursed,
see the following table.
18

Amount of Cash Disbursed for Contracts, a Grant, and Micro-Purchase Contracts
and for
Work Performed, Work Not Performed, and that
Exceeded the Contracted Amount
d.
e.
Amount
Total
c.
Total
Contracts,
b.
Disbursed
Amount
Amount
Amount
Grant, and
a.
Amount
that
Disbursed
Disbursed
Disbursed
Micro-
Value of
Disbursed
Exceeded
for Work
Purchase
Contract
for Work
the
Needlessly
(Column c.
(Column b.
Not
plus
Actions
Performed
Contracted
plus
Performed
Column e.)
Amount
Column d.)
Contract
DABV01-
$373,400 $310,606 $62,794 $0 $62,794 $373,400
04-M-8339
Contract
DABV01-
$224,010 $94,920 $129,090 $0 $129,090 $224,010
04-M-8343
Contract
DABV01-
$197,500 $85,770 $111,730 $0 $111,730 $197,500
04-M-8342
Contract
DABV01-
$498,900 $30,090 $468,810 $0 $468,810 $498,900
04-M-8345
Contract
DABV01-
$90,000 $0 $90,000 $10,000 $100,000 $100,000
04-M-8353
Grant $210,000 $0 $210,000 $210,000 $420,000 $420,000
33 Micro-
Purchases $535,106 $0 $535,106 $0 $535,106 $535,106
Total $2,128,916 $521,386 $1,607,530 $220,000 $1,827,530 $2,348,916
South-Central Region personnel circumvented guidance by splitting requirements into
more than one contract to avoid having to seek the appropriate funding-level approval or
to avoid required documentation and issued contracts for dollar amounts that exceeded
the requirement documents.
Further, they did not monitor the contracts, the grant, or micro-purchase contracts; did not
make any site visits; did not issue performance reports; did not prepare post-award
assessments; and did not act on the reports that the contractor was not performing to the
standards set in the contracts.
Finally, South-Central Region paid-in-full on the day the contracts, a grant, and micro-
purchase contracts were signed but did not require that progress payments be tied to
project performance.
19

Material Internal Control Weaknesses. The audit identified material internal control
weaknesses. South-Central Region personnel, under the direction of the CPA, did not
comply with applicable guidance and did not properly manage approximately
$2.3 million of R3P funds. Consequently, there was no assurance that fraud, waste, and
abuse did not occur in the management and administration of cash and property used to
rehabilitate the Library.
Indications of Potential Fraud. During this audit, we found indications of potential
fraud and referred these matters to the Assistant Inspector General for Investigations,
Office of the Special Inspector General for Iraq Reconstruction, for action. Related
investigations are continuing.
Recommendations, Management Comments, and Audit
Response
Redirected and Added Recommendations. Since the Coalition Provisional
Authority was dissolved on June 28, 2004, we are addressing the recommendations
to three of the four successor organizations: the Iraq Reconstruction Management
Office, the Joint Contracting Command-Iraq/Afghanistan, and the Joint Area
Support Group-Central.
We added a recommendation to the United States Ambassador to Iraq because additional
information concerning the rescinded grant, including a copy of a bank account showing
that approximately $154,000 remaining on deposit for this particular grant, was made
available subsequent to the issuance of the draft audit report.
1. We recommend that the United States Ambassador to Iraq recover specifically
the $154,000 in rescinded grant funds remaining on deposit, any other funds
related to the rescinded grant, and funds that exceeded the contracted amount
and return the recovered funds to the Iraqi government.
2. We recommend that the Director, Iraq Reconstruction Management Office,
ensure that established policies and procedures for authorizing, awarding, and
consolidating contracts and grants are effectively implemented and followed
and that complete files to support transactions made for contracts and grants are
maintained.
Management Comments. The Director, Iraq Reconstruction Management Office
did not provide written comments to the report but verbally concurred with the
finding and recommendations through a telephone conversation with the Inspector
General.
3. We recommend that the Commanding General, Joint Contracting Command-
Iraq/Afghanistan:
a. Ensure that established policies and procedures for awarding and
consolidating contracts and grants are effectively implemented and followed.
b. Ensure that established policies and procedures for monitoring contract and
grant performance are effectively implemented and followed.
c. Ensure that repairs were completed, purchased equipment and services were
delivered, and work was performed.
20

d. Maintain complete files to support transactions made for contracts and grants.
Management Comments. The Commanding General, Joint Contracting
Command-Iraq/Afghanistan concurred with the finding and recommendations.
4. We recommend that the Commander, Joint Area Support Group-Central, ensure
that established policies and procedures for disbursing funds obtained through
the Development Fund for Iraq for contracts and grants are effectively
implemented and followed, that funds are disbursed for intended purposes, and
that complete files to support transactions made for contracts and grants are
maintained.
Management Comments. The Commander, Joint Area Support Group-Central
concurred with the finding and recommendations.
Audit Response. The Director, Iraq Reconstruction Management Office; the
Commanding General, Joint Contracting Command-Iraq/Afghanistan; and the
Commander, Joint Area Support Group-Central comments’ to all recommendations are
fully responsive.
21

Appendix A. Scope and Methodology
In September 2004, we initiated an audit of cash controls over disbursing officers in
southern Iraq as a result of concerns brought to our attention by staff of the Coalition
Provisional Authority (CPA) Comptroller.
We reviewed the following documents issued by the CPA:
• CPA Regulation Number 2, “Developmental Fund for Iraq,” June 10, 2003
• CPA Regulation Number 3, “Program Review Board,” June 18, 2003
• CPA Memorandum Number 4, “Contract and Grant Procedures Applicable
to Vested and Seized Iraqi Property and the Developmental Fund for Iraq,
Implementation of Regulation Number 3, Program Review Board,”
August 19, 2003
• Combined Joint Task Force-7, Fragmentary Order 89, June 19, 2003
• Combined Joint Task Force-7, Fragmentary Order 1268, December 22, 2003
• Director, Program Review Board, Program Review Board Guidance 01,
“Coalition Provisional Authority Allocation Process,” June 9, 2003, updated
October 4, 2003
• Director, Program Review Board, Program Review Board Guidance 02,
“Program Management Model for the Regions,” July 30, 2003
• Director, Program Review Board, Program Review Board Guidance 03,
“Program Management Assessment,” July 9, 2003
• Director, Program Review Board, Program Review Board Guidance 04,
“Maintaining Project Files,” September 30, 2003
• Director, Program Review Board, Program Review Board Guidance 05,
“Project Monitoring and Evaluation,” September 30, 2003
• Director, Program Review Board, Program Review Board Guidance 06,
“Rapid Regional Response Program Overview,” September 27, 2003
• Director, Program Review Board, Program Review Board Guidance 06.2,
“Rapid Regional Response Program Overview (amended),” December 14,
2003 and January 25, 2004
We expanded the scope of our audit to determine whether contracts and grants were
properly managed by the South-Central Region at specific projects because of
deficiencies identified in Office of the Special Inspector General for Iraq Reconstruction,
Report No. 05-006, “Control of Cash Provided to South-Central Iraq,” April 30, 2005,
and at the request of the Deputy Secretary of Defense. We selected the Karbala Library
(the Library) project for a review of the management of contracts and grants because of
the multiple contracts, grants, and micro-purchase contracts that had been awarded for the
rehabilitation of the Library.
The CPA South-Central Region used Rapid Regional Response Program funds to
rehabilitate the Library, and it awarded 5 contracts in the amount of $1,383,810,
1 grant in the amount of $210,000, and 33 micro-purchase contracts in the amount
of $535,106 for a total of $2,128,916 for this purpose. We reviewed all the
contracts, grants, and micro-purchases for the rehabilitation of the Library that were
awarded from February through June 2004.
22

We reviewed all the contract, grant, and micro-purchase files. Specifically, we reviewed
the contracts, grant, and micro-purchase files for the following documentation: funding
approval, signed agreements, disbursements, and certificates of completion. We
reviewed the Program Review Board minutes to determine whether the South-Central
Region contracts and grant in excess of $500,000 were approved by the Program Review
Board. During the course of our audit, we observed deficiencies in the contract and grant
award documentation and expanded our scope to include the total process of awarding
and monitoring the contracts, grant, and micro-purchases and the disbursement of funds.
We spoke with the contracting officials available at the time of our audit regarding
the status of the projects and examined documentation maintained in the contract,
grant, and micro-purchase files. Those contracting officers primarily were located
at the South-Central Region, now known as the U.S. Regional Embassy Office,
located in Al Hillah, Iraq; but one contracting officer who had previously worked
for the South-Central Region was working for the Joint Contracting Command-
Iraq/Afghanistan.
We performed audit work at two locations to review applicable documentation and
management procedures. At the Joint Area Support Group-Central Comptroller’s Office,
located in the U.S. Embassy, Baghdad, Iraq; we reviewed receipts submitted by South-
Central Region pay agents to confirm disbursements made for the contracts, grant, and
micro-purchases. At the U.S. Regional Embassy Office, we reviewed all other aspects of
the contracts, grant, and micro-purchases. We reviewed the inspection reports completed
by the Iraqi Forward Engineering Support Team and interviewed the lead engineer
regarding his findings.
We visited the Library to determine whether the Iraqi Forward Engineering Support
Team inspection reports accurately documented contractor deficiencies and noted any
deficiencies not captured in the inspection reports. We then calculated the costs of work
not performed by the contractor by identifying the costs within the independent
government estimate or the contractor’s bid proposal to determine the amount of work
and services provided by the contractor. We also interviewed the Library manager to
determine whether the manager or his staff had received any operations training or had
any salaries paid via contracts or grant awarded by the South-Central Region. In
addition, we spoke to the Library manager regarding the receipt of any books from the
South-Central Region.
Finally, we spoke with officials at the Joint Contracting Command-Iraq/Afghanistan
regarding their intentions for further action towards the contractor and the Library.
We conducted this performance audit from September 2004 through September 2005, in
accordance with generally accepted government auditing standards.
Use of Computer-Processed Data. We did not use computer-processed data to perform
this audit.
Prior Coverage. The Special Inspector General for Iraq Reconstruction (SIGIR),
which was formerly the Office of the Inspector General, Coalition Provisional
Authority (CPA-IG), issued eight reports related to controls over cash and the
management of contracts. The U.S. Army Audit Agency also issued a report
related to controls over cash. The reports are listed below and are available at the
indicated website addresses.
23

Special Inspector General for Iraq Reconstruction Reports. Reports can be accessed
on its website at http://www.sigir.mil.
SIGIR Report No. 05-016, “Management of the Contracts and Grants Used To
Construct and Operate the Babylon Police Academy,” October 26, 2005
SIGIR Report No. 05-015, “Management of Rapid Regional Response Program
Grants in South-Central Iraq,” October 25, 2005
SIGIR Report No. 05-019, “Attestation Engagement Concerning the Award of Non-
Competitive Contract DACA63-03-D005 to Kellogg, Brown, and Root Services,
Inc.,” September 30, 2005
SIGIR Report No. 05-006, “Control of Cash Provided to South-Central Iraq,”
April 30, 2005
SIGIR Report No. 05-008, “Administration of Contracts Funded by the
Development Fund of Iraq,” April 30, 2005
CPA-IG Report No. 04-009, “Coalition Provisional Authority Comptroller Cash
Management Controls Over the Development Fund for Iraq,” July 28, 2004
CPA-IG Report No. 04-013, “Coalition Provisional Authority’s Contracting
Processes Leading Up to and Including Contract Award,” July 27, 2004
CPA-IG Report No. 04-007, “Oil for Food Cash Controls for the Office of Project
Coordination in Erbil, Iraq,” July 26, 2004
U.S. Army Audit Agency. Reports can be accessed on its website at
https://www.aaa.army.mil/reports.htm.
U.S. Army Audit Agency Audit Report: A-2005-0095-FFG, “Vested and Seized
Assets, Operation Iraqi Freedom,” February 16, 2005
24

Appendix B. Coalition Provisional Authority
Guidance Applicable to Contracts and Grants
Coalition Provisional Authority (CPA) guidance for the Development Fund of Iraq
(DFI) and for the Program Review Board’s (PRB) operations that are relevant to
contracts and grants is:
Coalition Provisional Authority Regulation Number 2. CPA Regulation
Number 2, “Development Fund for Iraq,” June 10, 2003, described the
responsibilities for the administration, use, accounting, and auditing of the DFI.
This regulation was intended to ensure that the DFI was managed in a transparent
manner for and on behalf of the Iraqi people, consistent with United Nations
Security Council Resolution 1483, and that all DFI disbursements would be for
purposes benefiting the people of Iraq.
Coalition Provisional Authority Regulation Number 3. CPA Regulation
Number 3 “Program Review Board,” June 18, 2003, established the procedures
applicable to the PRB operations. The PRB was responsible for recommending
expenditures of resources from the DFI in a manner that meets the interests of the
people of Iraq, furthers CPA policy objectives, and comports fully with CPA
stewardship and financial management duties under the applicable laws and
regulations, including United Nations Security Council Resolution 1483. The PRB
was not responsible for overseeing the manner in which approved spending
requirements were executed.
Coalition Provisional Authority Memorandum 4. CPA Memorandum
Number 4, “Contract and Grant Procedures Applicable to Vested and Seized Iraqi
Property and the Developmental Fund for Iraq, Implementation of Regulation
Number 3, Program Review Board,” August 19, 2003, defined contracts and grants.
A contract was defined as “A written agreement whereby the CPA or Coalition
Forces acquire goods, services or construction from a person or entity under
prescribed terms and conditions, for the purpose of assisting the Iraqi people or
assisting in the recovery of Iraq.”
A grant was defined as “A written instrument that transfers Iraqi Funds from the
CPA or Coalition Forces to a recipient grantee, in order to carry out a program or
project that directly benefits the Iraqi people or assisting in the recovery of Iraq.”
Department of Defense 3210.6-R. According to Department of Defense 3210.6-R,
“DoD [Department of Defense] Grant and Agreement Regulations,” April 13, 1998, a
grant is:
A legal instrument which, consistent with 31 U.S.C. 6304, is
used to enter into a relationship:
(a) The principal purpose of which is to transfer a thing of
value to the recipient to carry out a public purpose of support or
stimulation authorized by a law of the United States, rather than to
acquired property or services for the Department of Defense’s direct
benefit or use.
25

(b) In which substantial involvement is not expected between
the Department of Defense and the recipient when carrying out the
activity contemplated by the grant.
26

Appendix C. Contracts and Grant Awarded
for the Karbala Library
For the Karbala Library (the Library), the South Central Region awarded five contracts
for building repairs, landscaping, furniture, Internet service, and training for the Library
staff; and one grant to provide salaries for the Library staff. The value of the five
contracts and one grant amounted to $1,593,810. For details of the five contracts
awarded for the Library, see Table 1. For details of the grant awarded for the Library, see
Table 2.
Table 1. Contracts Awarded for the Karbala Library
Contract Number
Date the Contract was
Signed Contract
Amount Scope of Work
DABV01-04-M-8339 March 30, 2004 $373,400 Building Repairs.
DABV01-04-M-8342 April 1, 2004 $197,500 Landscaping.
DABV01-04-M-8343 April 1, 2004 $224,010 Furniture.
DABV01-04-M-8345 April 3, 2004 $498,900 Computers and Internet
Service.
DABV01-04-M-8353 April 5, 2004 $90,000 Training for the Library
Staff.
Total Contracts Amount $1,383,810
Table 2. The Grant Awarded for the Karbala Library
Grant Number
Date the Grant was
Signed Grant
Amount Scope of Work
DABV01-04-M-8020 June 2, 2004 $210,000 Salaries for the Library Staff
Total Grant Amount $210,000
27

Appendix D. Micro-Purchase Contracts
Awarded for the Karbala Library
For the Karbala Library, the South Central Region used 33 micro-purchase contracts to
acquire and ship books. The value of the 33 micro-purchases amounted to $535,106. For
details of the micro-purchase contracts awarded for the Library, see the following table.
Micro-Purchase Contracts Awarded for the Karbala Library
Purchase Amount Purchase Description
$150,000 Books
$50,000 Library Books
$50,000 Karbala Library Books
$50,000 Library Books
$16,000 Karbala Library Books
$14,995 Arabic Books/Children’s Books
$14,940 Books and Encyclopedias
$14,592 Classics and Encyclopedias in Arabic
$12,584 Arabic Encyclopedias
$12,480 Arabic Encyclopedias
$12,340 English Books
$12,048 Scientific Books
$11,970 Arabic/Islamic Books
$9,970 Arabic/International Books
$9,930 Books
$9,620 Books and Encyclopedias
$9,592 International Law Books
$8,600 Books and Encyclopedias
$7,030 Books
$5,300 Books
$4,917 Books
$4,900 Books
$4,860 Books
$4,590 Books
$4,480 Books
$4,455 Books
$4,330 Books
$4,000 Arabic Books
$3,940 Books
$3,560 Books
$3,065 Books
$3,063 Books
$2,955 Books
28

Appendix E. Coalition Provisional Authority
Organizational Responsibilities for Contracts
and Grants
The diagram shown below identifies organizational entities within the Coalition
Provisional Authority (this is not a complete organizational diagram of the Coalition
Provisional Authority) that had oversight and administrative responsibilities for contracts
and grants until it ceased to exist on June 28, 2004.
Administrator
Comptroller
Rapid Regional
Response Program
Coordinator
Head Contracting
Activity
Program
Management
Office
Field
Disbursing Agents
Field
Contracting Agents
29

Appendix F. Present U.S. Government
Organizational Responsibilities for Contracts
and Grants
The diagram shown below identifies the present U.S. government organizational
entities that had oversight and administrative responsibilities for contracts and
grants.
Director,
Iraq Reconstruction
Management Office
Approval
Project and Joint Contracting Joint Area Support
Contracting Office Command-
Group-Central
Iraq/Afghanistan
Requirements Disburse
Award/Monitor
30

Appendix G. Micro-Purchases for Books for
the Karbala Library
The South-Central Region awarded 33 micro-purchase contracts, in the amount of
$535,106, to provide books to the Library. However, South-Central Region personnel
did not follow established policies and procedures for micro-purchases using R3P funds.
Specifically, in some cases the South-Central Region personnel circumvented guidance
by splitting requirements into more than one micro-purchase contract to avoid the small
purchase contracting requirements yet in other cases awarded micro-purchase contracts
that exceed the micro-purchase dollar limitations but did not maintain the required
documentation for the higher dollar amount.
Coalition Provisional Authority CPA Memorandum 4–Micro-Purchases. CPA
Memorandum 4, Section 3, “Definitions,” defines a micro-purchase as “A contract with a
value of US$5,000 or less” and a small purchase as “A contract with a value greater than
US$5,000 and less than or equal to US$500,000.”
Coalition Provisional Authority CPA Memorandum 4–Combining and Dividing
Awards. CPA Memorandum 4, Section 6, “Principles Applicable to Instruments,”
addressed combining and dividing awards, and states that to the “extent practicable,
requirements for a project or related projects may be consolidated into one contract, in
order to reduce the administrative burden of contracting. Requirements may not be split
to avoid the application of these rules.”
A South-Central Region project officer made a series of nine book purchases from the
same contractor for the following amounts: $4,917, $4,900, $4,860, $4,590, $4,480,
$4,455, $4,330, $3,940, and $3,560. It appears that the purchases were split into two or
more disbursements of $5,000 or less to avoid the more stringent contracting
requirements for a small purchase contract. In addition, these actions circumvented the
requirements of CPA Memorandum 4.
Coalition Provisional Authority CPA Memorandum 4–Contract File Requirements.
CPA Memorandum 4, Appendix A, “Contract File Requirements,” listed the contract file
requirements for micro-purchases and small purchases. Micro-purchase files were
required to include (after the award) material contract terms and information that
demonstrated the outcome such as receipts, delivery notices, or contracting officer notes
on contractor performance for services. Small purchases files were required to include
(after the award) a written contract with required terms (when exceeding $10,000) or a
summary of material terms (when less than $10,000), invoices, and verification of
performance. Micro-purchases were considered advantageous because those contracts
were subject to less stringent file requirements than small purchases.
The South-Central Region made 20 book purchases that were in excess of $5,000 each
(totaling $481,991). It appears that purchases exceeded the micro-purchase dollar
limitations but did not maintain the required documentation for the higher dollar amount.
In addition, the files on these 20 separate micro-purchase contracts did not have required
documentation such as solicitation, competition, and correspondence with multiple
vendors’ records. The only documentation was a vendor receipt for books purchased.
31

Appendix H. Contractor Performance at the
Karbala Library
The South-Central Region awarded four contracts, in support of the Library for the
purchase of equipment and the following services:
• building repairs
• landscaping
• furniture
• Internet service
Iraqi Forward Engineering Support Team. The South-Central Region relied on the
Iraqi Forward Engineering Support Team (IFEST) to monitor contractor performance.
The IFEST was comprised of professional Iraqi engineers who worked for the U.S. Army
Corps of Engineers. The IFEST visited Iraqi reconstruction projects sites, such as police
stations, schools, and water plants, because it was easier for them to move about a site
and communicate with Iraqi workers.
IFEST daily reports included such details as quality assessments, the number of people
working at a site, the type of construction taking place, and any safety or security issues
that needed to be addressed.
IFEST personnel visited the Library four times between May 25 and September 20, 2004,
to evaluate the contractor’s performance on the four Library contracts. They recorded
their findings and conclusions in an inspection report, which was provided to the South-
Central Region.
Building Repairs. The justification for Contract DABV01-04-M-8339 was that the
library buildings were in a “general state of disrepair from lack of upkeep and
maintenance.” This contract was awarded on March 30, 2004, in the amount of
$373,400, to repair or replace the following:
• plumbing fixtures
• electrical equipment
• wiring conduits
• window frames and glass
• interior and exterior doors
• ceiling tiles and fixtures
The IFEST visited the Library on September 20, 2004, and its inspection report stated
that the contractor did not perform to the standards of the contract. The IFEST inspection
report stated that the contractor did not provide the following:
• seal around the windows
• Jordanian wooden frames (double) for wooden doors
• 411 square meters of carpet
• 10 ceiling fans
• glass panels
32

• slate board
• D-section end trim
• shelf with support 24”x6”
• shelf with support 24”x10”
• looped slat hook and chrome
Landscaping. The justification for Contract DABV01-04-M-8342 was that the “library
grounds look like a garbage dump.” This contract was awarded on March 31, 2004, in
the amount of $197,500, to perform the following:
• remove trash, cars, and debris from site
• pave parking area and sidewalk
• fence repairs
• remove and plant trees
• plant hedges
• two fountains
• park benches
• landscaping lights
The IFEST visited the Library on September 20, 2004, and its inspection report stated
that the contractor did not perform to the standards of the contract. The IFEST inspection
report cites these deficiencies:
• The solicitation called for the construction of a paved parking area of
42 m x 75 m. Instead, the contractor provided a paved parking area of
30 m x 35 m. The contractor decreased the parking area by 12 m x 40 m;
however, the contractor did not refund a percentage of the funds received.
• The contractor did not provide any hedge plants.
• One fountain was not functional because the pump was inoperable.
• The contractor only provided 22 of the 42 landscaping lights.
• The contractor provided 30 park benches; however, the park benches were
broken.
Furniture. The justification for Contract DABV01-04-M-8343 was that the “library has
very little furniture or fixtures.” The contract also stated that “most of the furniture was
looted near the end of the war and what was left is in a state of disrepair.” The contract
scope of work specified that the materials not be “previously used, recycled, or repaired,”
and shall be the “best quality of material available.” In addition, the bookshelves, desks,
and tables shall be “made of solid wood and one piece construction. Pressed wood and
plywood construction are unacceptable.” The contractor was to provide upholstered
metal frame chairs and glass and wooden frame cases. This contract was awarded on
March 31, 2004, in the amount of $224,010, to furnish and install the following:
• bookshelves
• tables
• computer desks
33

• charging desk with laminate top
• card catalog
• slate board
• rolling ladders
• chairs and desks
The IFEST visited the Library on September 20, 2004, and its inspection report stated
that the contractor did not perform to the standards of the contract. The IFEST inspection
report stated the following discrepancies:
• 138 2M-high, double-face bookshelves, instead of 180
• Zero 4M-high, single-face bookshelves, instead of 30
• Zero rolling ladders instead of 4
• 63 reading tables instead of 110
• 575 PLASTIC chairs instead of 182 upholstered chairs on metal frames
• Zero charging desks instead of 9
• Zero glass and wooden frame library cases instead of 24
• Zero computer tables instead of 8
• 21 previously used swivel chairs instead of 68
• No card catalogs with 60 trays instead of 4
• 14 desks for the computer lab instead of 60
• No desk for the teacher instead of 1
Internet Service. For the details of goods and services not provided by the contractor for
Internet service, see Appendix I.
34

Appendix I. Internet Service at the Karbala
Library
The justification for Contract DABV01-04-M-8345 was that the “library has no existing
internet or computer systems.” The South-Central Region wanted to provide the Library
with Internet service that would be modeled after libraries in the United States. The
contract was awarded on April 2, 2004, in the amount of $498,900, to provide the Library
with the following:
• 68 personal computers
• 68 workstations
• 2 servers - one primary and a backup
• all necessary hardware and software
• installation
The Iraqi Forward Engineering Support Team (IFEST) visited the Library on
September 20, 2004, and its inspection report stated that the contractor did not perform to
the standards of the contract and had not produced the agreed upon goods and services.
The IFEST inspection report stated that the contractor did not “bring any equipment for
internet.”
The South-Central Region did not act until almost two months after the IFEST inspection
report documented that the contractor failed to perform on the Internet service contract.
On November 19, 2004, the South-Central Region issued a Cure Notice to the contractor
for failing to perform the Internet service contract. The Cure Notice provided the
contractor 25 days to cure the conditions noted in the notice. The contractor did not
respond to the notice.
The Joint Contracting Command-Iraq/Afghanistan (JCC-I/A) issued a Show-Cause
Notice to the contractor on February 27, 2005. This notice required the contractor to
respond within 10 days. The contractor responded that he “did not fail to perform under
this contract.” The contractor continued that he “did install internet equipment in Karbala
Library.” The contractor conceded that the “internet subscription was not enabled, but
through no fault” of the contractor. The contractor stated that the service provider
“required a Beneficiary of the contract,” and since the contractor was not the “beneficiary
they could not sign the contract. As the library caretaker did not prove ownership, such a
contract couldn’t be signed.”
The contractor provided a signed affidavit by the contractor’s project manager for the
Internet service. The project manager stated he “personally supervised the installation of
all materials and equipment. Everything, including the electronic systems, were properly
placed and approved by me and the CPA.” The project manager continued that the
“internet service was not provided since I did not receive further instructions from
anyone at CPA or the caretaker of the library.” During the course of our site visit to the
Library, we carefully looked at the computer rooms to determine if any “electronic
systems” had been installed. We did not identify any Internet systems that appeared to be
newly installed. The contract also called for satellite hardware, which was not observed
during our site visit.
35

JCC-I/A personnel stated that there would be no further action with regard to Internet
service. A JCC-I/A legal opinion was that it appeared “we still don’t have good
supporting documentation or evidence to show” that the contractor “did not fully perform
the contract (other than in regard to the Internet connection, which” the contractor
“admits it failed to do but essentially claims ‘impossibility’ due to local requirements).”
JCC-I/A personnel did not believe enough evidence existed to show that the contractor
had failed to perform the contract, even though the contractor admitted, in writing, that
the Internet service was not provided.
For example, the contract required the contractor to provide Internet service provider fees
for 12 months, for which the contractor charged $4,500 per month. Because there was no
Internet service, the contractor was paid $54,000 for services not performed. In another
example, the JCC-I/A did not require the contractor to provide the Internet service and
the contractor was paid at least $145,000 for the installation, software, software tests, and
satellite hardware for services not performed. In a further example, the contractor was
paid for 68 personal computers when he only provided 14. As a result, the contractor was
paid $58,320 for computers not provided.
The contractor’s response stated that the Internet service was not provided because he did
not receive instructions from the CPA or the caretaker of the Library. The JCC-I/A did
not respond to the contactor and did not require that the contractor install the Internet
service.
JCC-I/A personnel stated that they did not plan to pursue completion of the contract or
seek funds reimbursement. The JCC-I/A also stated that “if we can’t obtain or create
some documentation or other evidence to support our position, we may have to move on
without” the contractor to “complete the library project.” This would require the JCC-I/A
to use appropriated funds and solicit another contract for the remaining 54 personal
computers and Internet installation.
As a result of this inaction, the contractor was paid the contracted amount of $498,900,
but only performed work valued at $30,090. The value of the services not performed and
equipment not delivered was $468,810.
36

Appendix J. Acronyms
CPA Coalition Provisional Authority
CPA-IG Coalition Provisional Authority Office of the Inspector General
DFI Development Fund for Iraq
DLA Division Level Agent
IFEST Iraqi Forward Engineering Support Team
JCC-I/A Joint Contracting Command-Iraq/Afghanistan
PRB Program Review Board
R3P Rapid Regional Response Program
RPC Regional Program Coordinator
SIGIR Special Inspector General for Iraq Reconstruction
37

Appendix K. Report Distribution
Department of State
Secretary of State
Senior Advisor to the Secretary and Coordinator for Iraq
U.S. Ambassador to Iraq
Director, Iraq Reconstruction Management Office
Inspector General, Department of State
Department of Defense
Secretary of Defense
Deputy Secretary of Defense
Director, Defense Reconstruction Support Office
Under Secretary of Defense (Comptroller)/Chief Financial Officer
Deputy Chief Financial Officer
Deputy Comptroller (Program/Budget)
Inspector General, Department of Defense
Department of the Army
Assistant Secretary of the Army for Acquisition, Logistics, and Technology
Principal Deputy to the Assistant Secretary of the Army for Acquisition,
Logistics, and Technology
Deputy Assistant Secretary of the Army (Policy and Procurement)
Director, Project and Contracting Office
Commanding General, Joint Contracting Command-Iraq/Afghanistan
Assistant Secretary of the Army for Financial Management and Comptroller
Chief of Engineers and Commander, U.S. Army Corps of Engineers
Commander, Gulf Region Division
Auditor General of the Army
U.S. Central Command
Commanding General, Multi-National Force-Iraq
Commanding General, Multi-National Security Transition Command-Iraq
Commander, Joint Area Support Group-Central
Other Defense Organizations
Director, Defense Contract Audit Agency
38

Other Federal Government Organizations
Director, Office of Management and Budget
Comptroller General of the United States
Inspector General, Department of the Treasury
Inspector General, Department of Commerce
Inspector General, Department of Health and Human Services
Inspector General, U.S. Agency for International Development
Mission Director-Iraq, U.S. Agency for International Development
Congressional Committees and Subcommittees, Chairman and
Ranking Minority Member
U.S. Senate
Senate Committee on Appropriations
Subcommittee on Defense
Subcommittee on State, Foreign Operations and Related Programs
Senate Committee on Armed Services
Senate Committee on Foreign Relations
Subcommittee on International Operations and Terrorism
Subcommittee on Near Eastern and South Asian Affairs
Senate Committee on Homeland Security and Governmental Affairs
Subcommittee on Federal Financial Management, Government Information and
International Security
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia
U.S. House of Representatives
House Committee on Appropriations
Subcommittee on Defense
Subcommittee on Foreign Operations, Export Financing and Related Programs
Subcommittee on Science, State, Justice and Commerce and Related Agencies
House Committee on Armed Services
House Committee on Government Reform
Subcommittee on Management, Finance and Accountability
Subcommittee on National Security, Emerging Threats and International
Relations
House Committee on International Relations
Subcommittee on Middle East and Central Asia
39

Appendix L. Audit Team Members
The Office of the Assistant Inspector General for Auditing, Office of the Special
Inspector General for Iraq Reconstruction, prepared this audit report. The Office of
the Special Inspector General for Iraq Reconstruction staff members who
contributed to the report include:
Angelina Johnston
Robert Murrell
Kevin O’Connor
William Shimp
William Whitehead
40

Management Comments
Commanding General, Joint Contracting Command-
Iraq/Afghanistan
41

42

Management Comments
Commander, Joint Area Support Group Central
43