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A review of Iraq reconstruction funding revealed that 96 contracts worth $362 million were obligated for payment to "Dummy Vendor," as opposed to a legitimate supplier.

The Special Inspector General for Iraq Reconstruction discovered the contract entries in the Army Corps of Engineers' financial management system during a review of agreements signed under the Iraq Relief and Reconstruction Fund 2, a three-year appropriation that expires Sept. 30. Officials with the IG office determined that the contracts were not properly obligated and will be lost at the end of the month.

In discussions with Army Corps financial managers, investigators learned that the vendor name was used in the contracting system to allow the entry of data where a specific vendor did not exist. That field has since been modified so that Dummy Vendor is not allowed as an entry, they said.

"We do not believe in using this term there was any attempt to mislead on the true status of obligations," the investigators wrote in their report, SIGIR-06-037. The obligations were recorded between November 2004 and August 2006, and none have been used for actual disbursements.

The funds were obligated by the Army Corps' Gulf region division project and contracting office in five categories: contingency; design/build program close out; public works center costs; supervision and administration; and claims and unknown.

Investigators recommended that the Army Corps either act immediately to obligate the funds properly or seek to have them extended legally. But the Army Corps chief financial officer responded last week that the contracting office would be advised to deobligate the funds and return them to the Army, where they would be maintained in a separate expired account. As expired funds, the money would be available for five fiscal years for in-scope modifications, contract close-out and cost overruns.

Doug Garman, an Army Corps spokesman, said that reserve would allow the Corps to move forward with projects that were initiated under IRRF 2 but not finished. Previous inspector general reports have found that many Iraq reconstruction projects have gone over budget and have been delayed, amidst security problems and allegations of fraud, waste and abuse.

In addition to the dummy vendor funds, IRRF 2 includes about $464 million in Army Corps money that has not been obligated, for a total of $826 million, according to the report. Like many agency appropriations, the IRRF 2 balance must be committed before it expires, or it will be lost to new contracts. Garman said the Corps had obligated more than half of the $464 million amount by Monday evening, and is tracking the fund daily to meet the expectation that most or all will be spent by Sept. 30.

COMMENTS

• This is mismanagement beyond belief. How can this happen? And the National Security Personnel System will save the government money? Fix what's broken. GovExec.com reader Posted October 5, 2006 12:49 PM
• There is so much waste in Iraq, this seems like a mere pittance. Take for example, Parsons Corp., who among other things was awarded a contract to build the Baghdad Police Academy. The BPA is so poorly constructed, it is virtually uninhabitable. Yet, despite this failure to perform, instead of terminating the contractor for default, the brilliant powers that be over there, terminated them for the convenience of the government! This means instead of making them pay for their failure to perform, the government owes them yet more money for settlement costs. What good does it do to have the GAO and the IG and others inspecting the fraud, waste and abuse going on there when nothing is ever done about it? No one is ever held accountable. Halliburton overcharged the taxpayers billions and was never held accountable. There are dozens of contractor personnel just standing around over there doing nothing but collecting a check. Where's the outrage? GovExec.com reader Posted September 28, 2006 2:09 PM
• You get "dummy vendors" when you have dummy contracting offices. The Army Corps of Engineers is a bad operation getting worse every day! They cost us millions of dollars a day and no one seems to care! Congress -- get on this in detail and do not let it go. The Army Corps needs to be totally restructured and reorganized and divided into several separate organizations facing different objectives. And do not use the same incompetent people that now "manage" the Army Corps of Engineers! This outfit is one of the worst in government and the public has little view of its operation or organization until they flood New Orleans, drain the Everglades or hand out money in Iraq to "dummy vendors." Taxpayer Posted September 29, 2006 7:15 AM