Wampum

Generally Accepted Accounting Practices

I once heard a joke about a Saudi Prince who drove his accountant mad. The Prince was in habit of taking large amounts of cash from the palace, spending it, and leaving no paper trial for the accountant to use to reconcile the books.

The accountant had a heart to heart talk with the Prince about the importance of record keeping. The accountant stressed that the money was the Prince’s to spend however he wanted, but that it was essential for the Prince to leave a receipt when he took cash.

Later, the accountant opened the safe and found that the Prince had been receptive to the idea. There was a clear, signed receipt for “two bags of money.”

It appears that the CPA in Iraq needed to have a talk with the Prince’s accountant:

U.S. officials in postwar Iraq paid a contractor by stuffing $2 million worth of crisp bills into his gunnysack and routinely made cash payments around Baghdad from a pickup truck, a former official with the U.S. occupation government says.

Because the country lacked a functioning banking system, contractors and Iraqi ministry officials were paid with bills taken from a basement vault in one of Saddam Hussein's palaces that served as headquarters for the Coalition Provisional Authority, former CPA official Frank Willis said.

Officials from the CPA, which ruled Iraq from June 2003 to June 2004, would count the money when it left the vault, but nobody kept track of the cash after that, Willis said.

"In sum: inexperienced officials, fear of decision-making, lack of communications, minimal security, no banks, and lots of money to spread around. This chaos I have referred to as a 'Wild West,'" Willis said in testimony he prepared to give Monday before a panel of Democratic senators who want to spotlight the waste of U.S. funds in Iraq.

I suspect the amounts involved are significantly more than “two bags of money.”

"This isn't penny ante. Millions, perhaps billions of dollars have been wasted and pilfered," Dorgan, D-N.D., said in an interview ahead of the Senate Democratic Policy Committee's session.

Willis concluded that "decisions were made that shouldn't have been, contracts were made that were mistakes, and were poorly, if at all, supervised, money was spent that could have been saved, if we simply had the right numbers of people. ... I believe the 500 or so at CPA headquarters should have been 5,000."

Without accouting controls, it is inevitable that a large amount of that money found its way into pockets other than those for which it was intended. As President Bush likes to say in a different context, "It's your money."

Posted by Dwight Meredith at February 13, 2005 10:11 PM | TrackBack