July 29, 2006

State Department hid costs of Iraqi projects: paper

WASHINGTON (Reuters) - The State Department agency in
charge of $1.4 billion 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
reported on Sunday.

A report by the independent Special Inspector General for
Iraq Reconstruction said the U.S. 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 $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 $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 $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 U.S. Embassy, said in a letter he
would take steps to improve the reporting of the costs of
reconstruction projects in Iraq.