US agency hid costs of Iraqi projects, report says

WASHINGTON - The US State Department agency in charge of US$1.4 billion ($2.2b) for reconstruction projects in Iraq used an accounting shell game to hide cost overruns and failed to tell Congress about schedule delays, The New York Times has reported.

A report by the independent Special Inspector General for Iraq Reconstruction said the US Agency for International Development listed project overruns as overhead or administrative costs.

USAID is the agency is charge of administering foreign aid and began working on Iraq reconstruction soon after the 2003 invasion began.

The inspector general's report did not give details on all projects being conducted under the US$1.4 billion budget, but noted several examples including a children's hospital in Basra and a power station in Baghdad.

Bechtel, the contractor in charge of the Basra hospital, said in April construction costs would be US$98 million, up from an original budget of $50 million, due to escalating costs for security and other problems. USAID pledged to cut contractor overhead, but the inspector general found no effort to do that.

In a report later that month to Congress, the agency reported the cost as US$50 million with the rest reclassified as "indirect costs."

Bechtel also told USAID in March the project was 273 days behind schedule, but in its April report the agency mentioned no delay problems to Congress.

Joseph A. Saloom, the newly appointed director of the reconstruction office at the US Embassy, said in a letter he would take steps to improve the reporting of the costs of reconstruction projects in Iraq.

- REUTERS