The Cable

U.S. can’t produce $1 billion of fuel receipts in Iraq

The U.S. Army Corps of Engineers cannot produce about $1 billion of receipts for fuel and other supplies it bought in Iraq using Iraqi money, a government investigation has found.

The total amount of funds unaccounted for has now reached a staggering $7 billion, officials say -- and they warn that the Iraqi government is likely to demand at least some of that money back.

The United States has been managing billions of dollars of Iraqi money through the U.N.-created Development Fund for Iraq (DFI) since 2003, money that was the result of Iraqi oil and gas sales or was left over from the "oil-for-food" program. The Army Corps of Engineers has been spending that money on energy and infrastructure programs in Iraq, but its recordkeeping was so poor that the Corps cannot prove it actually received goods for about $1 billion of the money it spent, according to the report, which was released Friday by the office of the Special Inspector General for Iraqi Reconstruction (SIGIR).

SIGIR reviewed $1.1 billion of DFI-related transactions by the Corps and found that a key document, the receiving report -- which documents that the goods or services were actually delivered to the intended recipients -- was missing for 95 percent of the transactions.

"Missing receiving reports involved commodities vulnerable to fraud and theft, such as fuel, televisions, and vehicles. SIGIR has not concluded that fraud or theft occurred, but the absence of receiving reports raises questions," the report stated. "Instead of using the required receiving reports to document fuel deliveries in Iraq, USACE officials told us that they maintained a fuel delivery log book. However, the log book is missing. In the absence of receiving reports and the fuel delivery log book, USACE has no evidence that shows whether fuel products paid for with DFI funds were received."

The Corps also didn't have enough trucks with meters to determine how much fuel was being delivered to more than 100 sites around Iraq. Nor has the Corps  completed the required financial audits, so it's impossible to determine the status of all the DFI contracts, SIGIR says.

"Without these audits, USACE cannot close out these contracts and task orders and assess whether the contractor owes the U.S. money, whether the U.S. owes the contractor money, and ultimately, whether the U.S. needs to return unused DFI funds to the [government of Iraq]," the report said.

In an interview with The Cable, Deputy Inspector General Glen Furbish said that even though there's no evidence of fraud, there's a good chance the Iraqi government will try to seek some or all of this money from the U.S. government.

"Our inability to show that goods were received will always leave that question in the minds of the Iraqis as to whether we used their money appropriately," Furbish said. "We've sensed for some time that there is probably going to be an effort to make a claim against the U.S. for the unaccountable funds and this will probably be a piece of that ultimate claim."

This latest report is only the latest in a series of reports that delve into how the DFI money was used, and the total amount of money not properly accounted for is around $7 billion, Furbish said. SIGIR will release a final report on the U.S. government's handling of the DFI funds in January.

"This primarily means that our administrative handling of this money was not good," he said. "[The Iraqi government] may assert that our failure to keep records creates a claim for them."

The SIGIR office also released today a final report on the State Department's handling of Quick Response Funds (QRF), money that was handed out in Iraq, often by Provincial Reconstruction Teams, for projects that may or may not have ever materialized.

The State Department and USAID managed about $258 million in QRF funds but the results of the projects funded are unclear.

"From the available records, we could generally determine how funds were intended to be used, but we could not assess whether all of the goods and services were actually purchased, received, or transferred to beneficiaries," the report stated.

Furbish said that for many of these projects, the money was handed out but nobody ever followed up on the programs, largely because it was too dangerous to check on small reconstruction projects in the middle of the war.

"They have always maintained that we are asking a bit too much for a wartime program, in terms of us being bean counters and asking if people got something for their money," Furbish said. "Call us bean counters if you want, but if you can't show us what you spent the money on, I think you've got a control weakness."

State has made improvements in its handling of the QRF funds going forward, but department officials told SIGIR that it's impossible to go back and figure out what happened to the money spent in the early years on these projects, Furbish said.

"Cash on the battlefield is problematic in so many ways. It probably shouldn't even be allowed," he said.

The Cable

Olsen: I was not reprimanded for calling Benghazi a terrorist attack

When Matt Olsen, director of the National Counterterrorism Center (NCTC) testified on Sept. 19 that the Sept. 11 attack on the U.S. consulate in Benghazi, Libya, was a "terrorist attack," his comments were reported as big news.

"I would say yes, they were killed in the course of a terrorist attack on our embassy," Olsen testified before the Senate Homeland Security Committee, in response to questioning from Chairman Joe Lieberman (I-CT) about the attack that killed Amb. Chris Stevens and three other Americans.

As for who was responsible, Olsen said it appeared there were attackers from a number of different militant groups that operate in and around Benghazi, and said there were already suggestions of al Qaeda involvement.

"We are looking at indications that individuals involved in the attack may have had connections to al Qaeda or al Qaeda's affiliates; in particular, al Qaeda in the Islamic Maghreb," he said.

Even though President Barack Obama had called the Benghazi attack an "act of terror" at least twice in the days after, Olsen's Sept. 19 comment seemed to be of a different tone and emphasis than those of other senior administration officials who were commenting on the attacks around that time.

For example, U.N. Ambassador Susan Rice said Sept. 16 that based on the latest information available, the attack appeared to be a "spontaneous" reaction to an anti-Islam video, and White House Press Secretary Jay Carney said Sept. 18 that "based on what we know now and knew at the time, we have no evidence of a preplanned or premeditated attack." Officials have since pointed out those statements are not necessarily incompatible with the idea it was a terrorist attack.

Fox News reported Wednesday that Olsen was "reprimanded" and told to "tone it down" after his testimony, attributing that information to "congressional sources." Today, in a statement emailed to The Cable, Olsen said that's simply not true.

"These claims are completely false. My comments were entirely consistent with the intelligence available at the time. I received nothing but positive feedback following my testimony," Olsen said. "To suggest that something as important as open testimony regarding the circumstances in which four Americans loss their lives, was not fully coordinated with the Executive Branch and other government agencies, is nonsense."

The White House also shared with The Cable excerpts of private communications between Olsen and two senior officials, Deputy National Security Advisor Denis McDonough and White House Counterterrorism Advisor John Brennan, showing that they praised Olsen for his performance the evening after his testimony.

On Wednesday, Sept. 19, 2012 at 7:43 p.m., McDonough emailed Olsen and wrote, "I think you did an outstanding job. Informative answers that are fully consistent with the reporting...very well done."

On the same day at 7:46 p.m., Brennan wrote to Olsen, "you did an excellent job...You did a much better job than ever could have been done by the first guy who sat in your chair" (a reference to Brennan).

The authenticity of the excerpts was confirmed by two White House officials and two officials at the NCTC.

Asked for comment, National Security Council Spokesman Tommy Vietor offered praise for the intelligence community and its handling of the Benghazi issue.

"Over the last 11 years the tireless work of our intelligence community has foiled countless plots against the homeland, our people and our interests. The intelligence community has been just as dedicated and tireless on Libya, where it has continually pursued all leads and provided in a timely way the best possible intelligence to support policymakers throughout the U.S. government," he said.

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