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SPECIAL INSPE CTOR GENE RAL FOR IRAQ RECONSTRUCTION
October 26, 2005
MEMORANDUM FOR DIRECTOR, IRAQ RECONSTRUCTION MANAGEMENT
OFFICE
COMMANDING GENERAL, JOINT CONTRACTING
COMMAND-IRAQ/AFGHANISTAN
COMMANDER, JOINT AREA SUPPORT GROUP-
CENTRAL
SUBJECT: Management of the Contracts and Grants Used To Construct and Operate
the Babylon Police Academy (Report No. SIGIR 05-016)
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.
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 H.
Stuart W. Bowen, Jr.
Inspector General
400 Army Navy Drive • Arlington, Virginia 22202

Special Inspector General for Iraq Reconstruction
Report No. SIGIR 05-016 (Project No. D2004-DCPAAF-0034.4)
October 26, 2005
Management of the Contracts and Grants Used To
Construct and Operate the Babylon Police Academy
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
11 contracts, 4 grants, and 1 grant modification awarded for more than $7.3 million to
establish and operate the Babylon Police Academy (the Academy).
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 Academy project
because of the multiple contracts and grants that had been awarded to establish and
operate the Academy.
Results. South-Central Region personnel, in the management of contracts and grants
using Rapid Regional Response Program funds to construct and operate the Academy:
• entered into an unauthorized land grant in violation of conflict-of-interest rules
• circumvented guidance by splitting requirements into more than one contract to
avoid seeking the required funding-level approval and needlessly expended funds
because work was not consolidated into a single contract
• did not make site visits, did not issue final performance reports, and did not
properly prepare certificates of completion forms
• disbursed funds before contracts and grants were signed and that were not tied to
performance
• did not establish the required separation of duties as a control over the
disbursement of funds
• did not maintain files that contained accurate or required documentation
South-Central Region personnel, under the direction of the Coalition Provisional
Authority, did not comply with applicable guidance and did not properly manage
approximately $7.3 million of Rapid Regional Response Program funds provided through
11 contracts, 4 grants, and 1 grant modification used to establish and operate the
Academy. Specifically, South-Central Region needlessly expended almost $1.3 million
in contract funds for duplicate construction; equipment not needed, not delivered, and
i

overpriced; and inaccuracies not identified in contract documents. Further, the South-
Central Region could not account for more than $2.0 million of disbursed grant funds.
Although we were able to determine that parts of the project were complete,1 we were
unable to clearly determine that all requirements were accomplished with the remaining
contract funds that amounted to almost $4.0 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 $7.3 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 establish and operate the
Academy.
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.
1. 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.
2. 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. d. Ensure that purchased equipment is delivered and construction is completed.
Maintain complete files to support transactions made for contracts and grants.
3. 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.
1 For example, classrooms and living quarters were built and mobile command posts were delivered.
ii

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 and Grants Used to Construct and Operate
the Babylon Police Academy 5
Appendixes
A. Scope and Methodology 19
B. Coalition Provisional Authority Guidance Applicable
to Contracts and Grants 22
C. Contracts Awarded to Establish and Operate
the Babylon Police Academy 24
D. Grants Awarded to Establish and Operate
the Babylon Police Academy 25
E. Coalition Provisional Authority Organizational Responsibilities
for Contracts and Grants 26
F. Present U.S. Government Organizational Responsibilities
for Contracts and Grants 27
G. Acronyms 28
H. Report Distribution 29
I. Audit Team Members 31
Management Comments
Commanding General, Joint Contracting Command-Iraq/Afghanistan Commander, Joint Area Support Group-Central 32
34

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 11 contracts, 4 grants, and 1 grant modification
awarded for the establishment and operation of the Babylon Police Academy (the
Academy).
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
1

infrastructure. The objectives of the R3P were to create local jobs, support local
industries, and stimulate the economy. The R3P was initially conceived as a civilian
equivalent of the Commanders’ Emergency Response Program fund.2 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.
Babylon Police Academy. The Academy was established in December 2003.3 The
Academy is the leading institution and the focal point for security, training, and the rapid
response of security forces in the South-Central Region. It is essential for ensuring the
growth of the South-Central Region’s police force. It provides instruction and training on
the latest forensic and investigation techniques and coordinates with the Ministry of
Interior on standardizing training and providing first response police personnel.
The South-Central Region awarded 11 contracts in support of the Academy for the
purchase of equipment and the following services:
• demolishing the former Ba’ath Party Headquarters
• building living quarters and classrooms
• installing a water purification system
• providing security walls
• providing mobile command posts
A single contractor competed for the contracts using two different company names and
all 11 contracts were awarded to that single contractor. The 11 contracts are valued at
$5,262,015. Details concerning the 11 contracts are shown in Appendix C.
In addition, the South-Central Region awarded four grants and one grant modification to
provide operating support for the Academy, establish training of elite police forces and
counter-terror teams, and establish a criminal security tracking program. The four grants
2 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.
3 The Academy was located at the former Ba’ath Party Headquarters site in Al Hillah, Iraq.
2

and one grant modification are valued at $2,050,000. Details concerning the four grants
and one grant modification are shown in Appendix D.
The total value of the contracts and grants awarded for the Academy was $7,312,015.
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 organizational responsibilities for
management of contracts and grants, 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 and grants 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.4 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 responsibility5 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
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.
4 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.
5 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

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 Academy
project because of the multiple contracts and grants that had been awarded to establish
and operate the Academy.
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 G. For a
list of the audit team members, see Appendix I.
4

Management of Contracts and Grants Used To
Construct and Operate the Babylon Police
Academy
South-Central Region personnel, in the management of contracts and grants using
R3P funds to construct and operate the Academy:
• entered into an unauthorized land grant in violation of conflict-of-interest rules
• circumvented guidance by splitting requirements into more than one contract to
avoid seeking the required funding-level approval and needlessly expended funds
because work was not consolidated into a single contract
• did not make site visits, did not issue final performance reports, and did not
properly prepare certificates of completion forms
• disbursed funds before contracts and grants were signed and that were not tied to
performance
• did not establish the required separation of duties as a control over the
disbursement of funds
• 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 authorizing, 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 purchased equipment was delivered, construction was completed, and
that funds were disbursed for intended purposes
As a result, South-Central Region personnel, under the direction of the CPA, did not
comply with applicable guidance and did not properly manage approximately
$7.3 million of R3P funds provided through 11 contracts, 4 grants, and 1 grant
modification used to establish and operate the Academy. Specifically, South-Central
Region needlessly expended almost $1.3 million in contract funds for duplicate
construction; equipment not needed, not delivered, and overpriced; and inaccuracies not
identified in contract documents. Further, the South-Central Region could not account
for more than $2.0 million of disbursed grant funds. Although we were able to determine
that parts of the project were complete,6 we were unable to clearly determine that all
requirements were accomplished with the remaining contract funds that amounted to
almost $4.0 million.
6 For example, classrooms and living quarters were built and mobile command posts were delivered.
5

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
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.
The memorandum defined a small purchase as “A contract with a value greater than
US$5,000 and less than or equal to US$500,000.”
6

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.
Authorization of Contracts
South-Central Region personnel did not follow established policies and procedures for
authorizing and awarding contracts using R3P funds. Specifically, the South-Central
Region Chief Operating Officer (also the Division Level Agent) entered into
unauthorized land grant in violation of conflict-of-interest rules.
Coalition Provisional Authority Memorandum 4-Conflicts-of-Interest.
CPA Memorandum 4, Section 6, “Principles Applicable to Instruments,” addressed
conflicts-of-interest and stated that “Persons involved in the contracting process, from the
development of the requirement through the completion of performance, shall not: . . .
knowingly make unauthorized commitments or promises of any kind purporting to bind
the CPA.”
Contract for Land Transfer. On April 22, 2004, the South-Central Region Chief
Operating Officer gave a contractor Iraqi land “seized from the former Saddam Hussein
Government” for a period of 10 years. This land grant was officially recorded as a CPA
letter and was signed by the South-Central Region Chief Operating Officer.
According to the letter, the contractor was “entitled to operate and develop the property
in compliance with its mandate to build the Police Academy and is given the premises
‘free and clear’ of any liens. Taxes shall be exempt for the same ten (10) year period.”
The letter further provided that, at the end of 10 years, the contractor “shall have the right
to exercise an option to remain as ‘title holder’ of the property until such time as the
beneficiary decides to sell the property. In the event of a sovereign Iraq, a simple
signature from the commandant7 (Iraqi) shall suffice to continue this transfer of land.”
The South-Central Region Chief Operating Officer that issued the letter for this land
grant was also responsible for approving 8 of the 11 Academy contracts awarded to the
single contractor and disbursing the funds for all 11 contracts to that contractor.
Rescission of the Land Transfer Letter. South-Central Region personnel subsequently
discovered the letter for the land grant, and the Project and Contracting Office legal
department decided that the letter was not “considered a legally binding instrument.”
Additionally, the Project and Contracting Office legal department stated that “the
individual that signed the document did not have the authority to act in this capacity and
sign this letter.” In July 2004, the South-Central Region Director of Contracting issued a
letter to the contractor stating that the previous letter for the land grant was void and was
rescinded.
7 The letter did not identify who the commandant might be or specify the authority by which the
commandant could continue the transfer of the land.
7

Multiple Contracts
South-Central Region personnel did not follow established policies and procedures for
consolidating contracts and grants 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 and funds
were needlessly expended because work was not consolidated into a single contract.
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), states 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.”
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.
Construction Design Contracts. The design of the Academy called for the
demolition of the former Ba’ath Party Headquarters; construction of living quarters and
classrooms; and the installation of security walls, mobile command posts, power
generators, and a water purification system. The single purpose underlying the creation
of the Academy required the South-Central Region to complete the project as a whole.
However, South-Central Region personnel split the design into 11 separate requirements,
awarded 11 separate contracts, and the single contractor was paid for all 11 contracts.
The records show indications that South-Central Region personnel may have
intentionally split the requirements. For example, eight Funding Request Forms were
submitted for approval to either the South-Central Region Chief Operating Officer or the
Division Level Agent8 within 2 weeks of each other. Those included four requests that
amounted to a total of approximately $1.9 million which were submitted for approval on
the same day, January 22, 2004.
Further, the total cost of the Academy was approximately $5.3 million and each of the
11 contracts was awarded for slightly less than $500,000. For example, five of the
contracts were between $495,000 and $498,600. 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.
8 The individuals in those positions were not authorized to approve projects.
8

Mobile Command Posts Contracts. South-Central Region personnel split the
purchase of 13 mobile command posts for the Academy in order to keep the cost of each
contract under $500,000. A Funding Request Form for seven mobile command posts and
a second Funding Request Form for six mobile command posts and six all-terrain
vehicles were completed on the same day and both contracts were awarded to the same
contractor on the same day. The South-Central Region purchased all 13 mobile
command posts for the same price, $65,000 each, but South-Central Region personnel
were able to circumvent the $500,000 threshold by splitting the requirement for the
13 mobile command posts into 2 contracts.
Academy Grant. A South-Central Region grant to provide operating support to
the Academy also exceeded the discretionary authority level. The grant was initially
awarded in the amount of $150,000. However, 2 months later, the grant was increased to
a total of $600,000 by a $450,000 modification to the grant. The South-Central Region
required the approval of the Regional Program Coordinator because the total grant after
the modification was more than $500,000. A review of the grant file produced only
one Funding Request Form for $450,000, which had not been approved.
Reconciling the Work Solicited, Required, and Performed. South-Central Region
personnel entered into 11 contracts that were issued to the same contractor and this
resulted in the duplication of efforts and unnecessary work. A former South-Central
Region contracting officer9 we interviewed had difficulty reconciling the work solicited,
the work required, and the actual work performed by the contractor because the
requirements for the Academy project were not consolidated into a single contract.
According to this contracting officer, he could locate only 8 of the 11 contracts and it
appeared to him that some of the contracts were written after the work had been
performed. As a result, funds were needlessly expended because work had not been
consolidated into a single contract.
Demolition of the Ba’ath Party Headquarters. The South-Central Region
awarded two contracts for the demolition of the former Ba’ath Party headquarters for the
Academy site. The Funding Request Form for the first contract, awarded in the amount
of $491,000 on January 4, 2004, stated the purpose of the contract was to “restore the
vacant lot into a usable condition for further construction.” This contract was awarded to
“destroy an existing building, level and grade, build a wall around the property, and clear,
grub, and remove trash, brush, and debris from the site.” Further, this contract required
the “structural base material over the entire footprint of the camp.”
The second contract was awarded in the amount of $452,800 on February 19, 2004, to
“destroy all existing buildings from corner to corner, remove, clear, and grub the site of
all trash, brush, and debris.” This contract also called for importing structural base
material over the entire footprint of the camp. The former South-Central Region
contracting officer stated he was told that this contract was for the demolition of
two existing buildings on a different section of the Academy grounds. However, he also
stated that the contract file lacked any documentation to indicate there were two existing
buildings anywhere else on the Academy grounds. The former South-Central Region
contracting officer said that the Academy design documentation was so lacking that he
was not certain if this contract was even necessary and that it may have duplicated other
contracts. In our opinion, this second contract appears to be a duplication of the
9 This South-Central Region contracting officer arrived after all 11 contracts for the establishment of the
Academy had been awarded.
9

first contract. As a result, the contractor was paid for work on the second contract that
duplicated payment for the same work obtained through the first contract.
Further, a third contract, awarded in the amount of $498,235, required the same site
preparation for the living quarters as one of its deliverables that had been required by the
two previous demolition contracts. As a result, the contractor was paid $43,445 for work
in this third contract that duplicated payment for the same work obtained through the
two previous contracts.
Power Generators. The South-Central Region awarded two separate contracts to
purchase power generators for the Academy. It appears from our review that the
Academy required a 500 kilowatt generator and a 1 megawatt generator as power
sources. However, the two contracts were used to purchase three generators for the
Academy-two 500 kilowatt generators and a single 1 megawatt generator. The
first contract, awarded February 1, 2004, included one 500 kilowatt generator valued at
$177,000. The second contract, awarded March 23, 2004, included a second 500 kilowatt
generator and a single 1 megawatt generator valued at a total of $479,550 (the price of
each generator was not stated in the contract).
The former South-Central Region contracting officer we interviewed said there were so
many contracts for the Academy that he was never able to determine just how many
generators were supposed to be there. He also stated that the second 500 kilowatt
generator was “more than likely” contracted for in error. Nevertheless, using a separate
contract to purchase a generator not required resulted in an unnecessary expenditure of
funds (we were unable to determine the value of the second 500 kilowatt generator).
Monitoring Performance
South-Central Region personnel did not use effective procedures to monitor performance
for contracts and grants using R3P funds. Specifically, South-Central Region personnel
did not make site visits, did not issue final performance reports, and did not properly
prepare certificates of completion forms.
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
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
10

• 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 Academy 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 Academy site.
In addition, CPA Memorandum 4 states that the “Contracting Officer shall rely upon
locally available military engineering resources in assessing all repair and construction
projects.” South-Central Region personnel did not use local assets that were at their
disposal to perform monitoring duties. The Iraqi Forward Engineering Support Team
was available to monitor the progress of the Academy contracts.
The Iraqi Forward Engineering Support Team employed Iraqi professional engineers who
worked for the U.S. Army Corps of Engineers and oversaw Iraqi construction sites and
reported on quality assessments. The Iraqi Forward Engineering Support Team was used
by South-Central Region personnel to monitor a contractor’s performance at other
construction activity sites such as the Karbala Library. In that case, the Iraqi Forward
Engineering Support Team found and documented in written reports significant problems
with a contractor’s performance. However, South-Central Region personnel did not
request the Iraqi Forward Engineering Support Team to perform any monitoring duties
for the 11 Academy contracts.
Performance Reports. South-Central Region personnel did not issue any final reports
for the Academy contracts or grants. None of the contract or grant files contained details
regarding the outcome of the contracts and grants or the number of Iraqis directly
benefiting from the use of DFI funds.
In addition, South-Central Region contracting officers did not perform a post-award
assessment of the contractor and grantee to detail the impact the contracts or grants 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.
Certificates of Completion. South-Central Region personnel were required to be at the
construction site to determine whether the contractor was adequately performing or
providing the goods and services required. The contract and grant files were required to
contain performance verification. Of the 11 Academy contract files, 7 contained signed
certificates of completion forms. Of the four grant and one grant modification files, none
contained certificates of completion forms. The certificate of completion form was
designed to document the status of a project, the payment of funds to the contractor, and
comment on the contractor’s work. However, South-Central Region personnel used this
form to document only that the contractor was paid in full instead of using the form to
document the contractor’s project performance. Consequently, the project was
considered “completed” when using this practice.
11

Disbursing Funds
South-Central Region personnel did not use effective procedures to disburse funds for
contracts and grants using R3P funds. Specifically, funds were disbursed before
contracts and grants were signed and were not tied to performance. In addition, the
required separation of duties was not established as a control over the disbursement of
funds.
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. . . .” South-Central Region
personnel made one disbursement to the contractor for Academy work before that
particular contract had been signed. In addition, disbursements not tied to performance
measures were made for two contracts when the contractor came in to sign another
contract.
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. . . .” South-Central Region personnel did
not tie the disbursement of funds to any specific accomplishments for the four Academy
grants. Instead, the South-Central Region disbursed the entire amount of the grants at
one time and, in two instances, prior to the grant being signed by the recipient.
Separation of Duties. PRB Guidance 06 states that "the disbursing authority may not be
involved in the approval process." We identified 10 examples where the South-Central
Region disbursing agent approved the Funding Request Forms for Academy work.
However, those Funding Request Forms should have been approved by the South-Central
Regional Coordinator who was the appropriate approval authority. The disbursing agent
personally authorized and disbursed approximately $4.8 million for contracts and grants
although he did not have the discretionary authority to approve any funding requests. We
could not determine whether this disbursing agent had approved any additional grant
funding because of the lack of documentation in the contract and grant files.
Contract and Grant Documentation
South-Central Region personnel did not maintain complete contract files to support
transactions made for contracts and grants using R3P funds. Specifically, South-Central
Region personnel did not maintain files that contained accurate or required
documentation.
Approval Authority Documentation. PRB Guidance 06 required that “all project
proposals must be justified based upon the criteria in the Program Review Board -01
Funding Request Form.” We reviewed the files for the 11 contracts and 4 grants for the
Academy and none of the files had the required documentation or the proper approval
authority. We could not locate any complete contract files during our review.
Of the 11 contracts and 4 grants, 13 had the required Funding Request Forms but none of
the 13 forms were signed by an appropriate approving authority. Of the 13 Funding
Request Forms in the files, 1 form was unsigned and 12 forms were signed but by South-
Central Region personnel that did not possess the appropriate discretionary authority.
12

Disbursement Documentation. Disbursement documentation for Academy contracts
was available for only 3 of the contracts, worth approximately $1.4 million, even though
the contractor was paid more than $5.3 million for the 11 contracts.
Accuracy of Documentation. In addition, South-Central Region personnel did not
adequately review a contractor’s bid on a contract for Academy work and did not identify
a mathematical error on the contractor’s bid in the amount of $29,600. The total of the
contractor’s costs was actually $441,200, not $470,800, but the contract was awarded and
subsequently paid in the amount of $470,800. As a result, $29,600 was needlessly
expended.
Academy Site Evaluation
We visited the Academy in May 2005, to evaluate the results of the work that was
required by the contracts and grants. South-Central Region personnel did not ensure that
purchased equipment was delivered, construction was completed, and that funds were
disbursed for the intended purposes.
Contracts. We reviewed contracting actions for the Academy to determine whether the
contractor provided the agreed upon goods and services in the 11 contracts and to
determine whether the contractor’s performance was adequate.
Power Generators. We identified three generators that were purchased for the
Academy—two 500-kilowatt generators and a 1-megawatt generator. The total value of
the three generators was $656,550.
We observed the shell of one 500-kilowatt generator which Academy officials stated was
delivered in non-operating condition by the contractor. The contractor had removed the
generator to have it repaired, but as of the date of this report the generator had not been
returned. Photo 1 shows the shell for the 500-kilowatt generator that was undergoing
repairs.
13

Photo 1. Shell for the 500-Kilowatt Generator Undergoing Repairs
Academy officials also stated that the Academy never received the 1-megawatt generator
or the second 500-kilowatt generator. Academy officials identified to us the location in
which the 1-megawatt generator was to be placed, and we determined that the generator
was never delivered to that particular site. Photo 2 shows the site where the missing 1-
megawatt generator was to be located.
14

Photo 2. Site for the Missing 1-Megawatt Generator
The Academy had to rely upon local power, rather the generators, for all of its power
needs because the 500-kilowatt generator was not operable and neither the second 500-
kilowatt generator, nor the 1-megawatt generator were delivered. The Academy was
subsequently expanded in late 2004 to train more students. This Phase II expansion
project used funds provided by the Iraq Relief and Reconstruction Fund. The expansion
project contract10 included the purchase and delivery of two generators11 to provide for
the Academy’s electric needs during local power outages. It appears that the
requirements for generators were duplicative in that two generators would have been
sufficient rather than the five ordered, but contract documentation was insufficient for us
to reach a firm conclusion.
All Terrain Vehicles. Of the 11 contracts, 1 contract called for the delivery of
6 all-terrain vehicles, valued at $108,600, to the Academy. We reviewed the contract file
and could not locate any evidence that the vehicles were delivered. Academy officials
stated that they never received any vehicles and were not aware that they were supposed
to receive any vehicles.
Grants. We reviewed the four grants made to the Academy to determine how the grant
funding was spent. The Academy was the recipient of two grants awarded in March 2004
and two grants awarded in April 2004. The four grants totaled $2,050,000 and were to
help support the following projects:
10 The expansion project contract was awarded to a different contractor than the contractor that was
awarded the first 11 Academy contracts.
11 This subsequent requirement for two generators was in addition to the original requirement for
three generators that were part of the first 11 Academy contracts.
15

• Babylon Police Academy (two separate grants)12
• Babylon Police Community Awareness Project (one grant)13
• Babylon Police Security Tracking Project (one grant)14
Rescission of the Grants. Three15 of the four grants were rescinded by the South-
Central Region on May 13, 2004. The rescission letters stated that the Academy now fell
under the Ministry of the Interior and thus the supporting rationale for the grants ceased.
The first Academy grant in the amount of $150,000 was not rescinded even though the
Academy was placed under the Ministry of the Interior. South-Central Region internal
memoranda indicated that the reason for rescinding the three grants was that the funding
was being used for intelligence gathering purposes. This allegation (allegedly about the
grant recipient) was said to be based upon “numerous receipts” provided by the grant
recipient. However, we did not find those receipts in any of the four grant files. Current
and former South-Central Region personnel stated they do not remember any receipts
presented by the grant recipient. We were unable to determine for what purposes the
$1,450,000 was expended as we could not locate any of the alleged receipts in the grant
files.
Grant Modification. The first Academy grant was modified with an increase of
funding in the amount of $450,000 and totaled $600,000 after the modification. This was
done 13 days after the rescission letter was signed by the contracting officer. The
increase in funding was paid in full to the same individual (the grant recipient) who had
been originally accused of using the funds from the other three grants for intelligence
gathering purposes. In addition, a South-Central Region internal memorandum stated
that the “purpose of the grants was not fulfilled and continuing the term of the grant
would violate the agreement and policy within the guidelines set forth by CPA
requirements.” The memorandum further stated that the South-Central Region had
“instituted corrective actions to return purchased equipment and supplies.” We
interviewed current and former South-Central Region personnel who stated there was no
return of any equipment or money from this grant.
We spoke to the Dean of Instruction at the Academy who stated that the Academy never
received any of the funding disbursed for the four grants. He stated he was unaware that
four grants were even awarded to the Academy. The South-Central Region lost oversight
of $2,050,000 in grants to the Academy because it did not require monthly reports
detailing all expenditures and did not monitor the performance of the grants. The South-
Central Region did not know what happened to the disbursements made for the
four grants. The information obtained during this audit concerning the four grants was
referred to the Assistant Inspector General for Investigations, Office of the Special
Inspector General for Iraq Reconstruction.
12 The first of two grants for the Academy was initially awarded in the amount of $150,000 and a
subsequent modification to the grant added an additional $450,000, for a total award in the amount of
$600,000. The second grant was awarded in the amount of $500,000.
13 This grant was awarded in the amount of $450,000.
14 This grant was awarded in the amount of $500,000.
15 The second Academy grant, the Babylon Police Community Awareness Project grant, and the Babylon
Police Security Tracking Project grant were rescinded. The amount rescinded was a total of $1,450,000.
16

Conclusion
South-Central Region personnel, under the direction of the CPA, did not comply with
applicable guidance and did not properly manage approximately $7.3 million of R3P
funds provided through 11 contracts, 4 grants, and 1 grant modification used to establish
and operate the Academy. Specifically, South-Central Region needlessly expended
almost $1.3 million in contract funds for duplicate construction; equipment not needed,
not delivered, and overpriced; and inaccuracies not identified in contract documents.
Further, the South-Central Region could not account for more than $2.0 million of
disbursed grant funds. Although we were able to determine that parts of the project were
complete,16 we were unable to clearly determine that all requirements were accomplished
with the remaining contract funds that amounted to almost $4.0 million.
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
$7.3 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
establish and operate the Academy.
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 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.
1. 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.
2. 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.
16 For example, classrooms and living quarters were built and mobile command posts were delivered.
17

b. Ensure that established policies and procedures for monitoring contract and
grant performance are effectively implemented and followed.
c. d. Ensure that purchased equipment is delivered and construction is completed.
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.
3. 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.
18

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 chose the Babylon Police
Academy (the Academy) project because of the multiple contracts and grants that had
been awarded to establish and operate the Academy.
The CPA South-Central Region used Rapid Regional Response Program funds to
establish and operate the Academy, and it awarded 11 contracts in the amount of
$5,262,015 and 4 grants and 1 grant modification in the amount of $2,050,000 for a
total of $7,312,015 for this purpose.
We reviewed all the contracts and grants to establish and operate the Academy that
were awarded from January through May 2004 and associated files.
19

We initially reviewed the Program Review Board minutes to determine whether the
South Central Region contracts and grants 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 entire
process.
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
and grant 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
contract and grants 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 and grants. At the U.S. Regional Embassy
Office, we reviewed all other aspects of the contracts and grants. In addition, we
evaluated the results of the work acquired by the contracts and grants by visiting the
Academy to perform an on-site evaluation.
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.
Special Inspector General for Iraq Reconstruction Reports. Reports can be accessed
on its website at http://www.sigir.mil.
SIGIR Report No. 05-020, “Management of the Contracts, Grants and Micro-
Purchases Used To Rehabilitate the Karbala Library,” 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
20

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
21

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.
22

(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.
23

Appendix C. Contracts Awarded to Establish
and Operate the Babylon Police Academy
The South-Central Region awarded 11 contracts, in support of the Academy, for the
purchase of equipment and services. The value of the 11 contracts amounted to
$5,262,015. The amount expended for the 11 contracts amounted to $5,262,015.
Contracts Awarded to Establish and Operate the Babylon Police Academy
Date the Contract
Contract
Contract Number
was Signed
Amount Scope of Work
DABV01-04-M-8016 January 4, 2004 $491,000
Renovate the old Ba’ath
Party Building for use
by the Academy
DABV01-04-M-8064 January 20, 2004 $470,800
Construct eight
classrooms and provide
furniture
DABV01-04-M-8069 January 24, 2004 $475,000 Security walls for the
compound
DABV01-04-M-8070 January 24, 2004 $495,000
Construct two new
conference rooms and
install a waste water
system
DABV01-04-M-8089 January 31, 2004 $455,000 Seven mobile command
posts
DABV01-04-M-8091 January 31, 2004 $498,600
Six mobile command
posts and six all-terrain
vehicles
DABV01-04-M-8092 February 2, 2004 $497,530
Conference and office
structures and one 500
kilowatt generator
DABV01-04-M-8093 February 2, 2004 $498,235
Office and living
structures and install a
waste water system
DABV01-04-M-8167 February 20, 2004 $452,800 Demolition of two
structures
DABV01-04-M-8265 March 15, 2004 $448,500 Security
upgrades
DABV01-04-M-8326 March 25, 2004 $479,550
One 500 kilowatt and
one 1 megawatt
generators
Total Contracts
Amount $5,262,015
24

Appendix D. Grants Awarded to Establish and
Operate the Babylon Police Academy
The South-Central Region awarded four grants and one grant modification to provide
operating support for the Academy, establish training of elite police forces and counter-
terror teams, and establish a criminal security tracking program. The value of the
four grants and one grant modification amounted to $2,050,000. The amount expended
for the four grants and one grant modification amounted to $2,050,000.
Grants Awarded to Establish and Operate the Babylon Police Academy
Date the Grant
Grant
Grant Number
was Signed
Amount Purpose of Grant
DABV01-04-G-8007 March 15, 2004 $150,000 Operating support for
the Academy
DABV01-04-G-8007
P001 (modification) May 26, 2004 $450,000 Operating support for
the Academy
DABV01-04-G-8008 March 15, 2004 $500,000 Operating support for
the Academy
DABV01-04-G-8013 Unsigned $450,000 Community awareness
program
DABV01-04-G-8014 Unsigned $500,000 Security tracking
program
Total Grants
Amount $2,050,000
25

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
26

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
27

Appendix G. Acronyms
CPA Coalition Provisional Authority
CPA-IG Coalition Provisional Authority Office of the Inspector General
DoD Department of Defense
DFI Development Fund for Iraq
PRB Program Review Board
RPC Regional Program Coordinator
R3P Rapid Regional Response Program
SIGIR Special Inspector General for Iraq Reconstruction
28

Appendix H. 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
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
29

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
30

Appendix I. 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
31

Management Comments
Commanding General, Joint Contracting Command-
Iraq/Afghanistan
32

33

Management Comments
Commander, Joint Area Support Group Central
34