Auditing in Iraq

Matthew Yglesias is blogging about a Foxnews story on financial auditing of the Coalition Provisional Authority. He makes two points. One, it is inconsistent to say that effective management of Iraq is important one minute and then say this is unimportant the next. Two, this shows how awful a job the CPA has done.

He is at correct on the first point. Effective management is important. Very important. This needs to be followed up. Some heads should roll. The question is who's head. Which brings us two part two.

Is this the CPA's fault as Matthew accuses here?

Suppose that an organization with which you were affiliated had undertaken some venture whose success you strongly believed was vital for the continued success of the organization. Now suppose it was revealed that the management of the organization had taken several billion dollars that had been allocated to the venture and lost them.

The problem here is that I read the Fox News article. It says things like this:

A soon-to-be-released audit will show that at least $8.8 billion in Iraqi money that was given to Iraqi ministries by the former U.S.-led authority there cannot be accounted for, FOX News has confirmed.

And this:

Its handling has already come under fire in a U.N.-mandated audit released last month, which found no evidence of spending fraud by the CPA but said there wasn't enough oversight to ensure money was used for its intended purposes.

Emphasis mine of course.

Its not the CPA that "lost" the money. It is not an organization US taxpayers are directly affiliated with that is having the problems. The problem is that the CPA paid people money for services and support. Those contractors and Iraqi ministries did not keep good account of how they spent the money or refused to release their records (like Halliburton did). So that money is not necessarily gone or funneled into graft and corruption. Spending was simply poorly documented. Parts of Iraq saw fighting all last year and that's not conducive to good documentation. People trashing government buildings left and right burning documents, as also happened, is even worse.

How did this happen? People are greedy. Normally you do a yearly audit to catch it, if my calendar is correct this is what the CPA did. The only problem is what do you do with the information now? The CPA doesn't exist anymore. All the bureaucrats have turned their jobs over to Iraqis. Maybe the audit report will be turned over to the new Iraqi government and they can do something. The ministries in question can be taken to task and contracts can be eliminated for the dishonest or non-compliant contractors. In the here and now I think this will probably be the most effective thing to do.

But all the CPA's fault? Considering it was actively fighting insurgency and rebuilding most of Iraqi society at the same time, is it any wonder they didn't hound their contractors and ministries for accountability? Oh well time for the CPA to pay the piper for their decisions anyway.