Audit finds fund shortage for U.S. projects in Iraq

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The Bush administration got bad news yesterday about its plans for rebuilding Iraq with U.S. taxpayer money when a special audit showed there are not enough funds for more than half of the water resource improvements and for a quarter of electrical projects.

"Although significant progress has been made in developing Iraq's infrastructure, the United States will not complete all of the projects it originally planned to construct," Stuart Bowen Jr., the special inspector general for Iraq's reconstruction, said in the audit. He called the problem a "reconstruction gap," the difference between projects planned in 2003 and what is now actually possible in 2006.

The assessment is a setback for the Bush administration, which counted on more robust rebuilding across Iraq to help deliver the country from a harsh dictatorship to a prosperous democracy. Officials in Mr. Bowen's office say that if the projects are to be completed, Iraq will have to receive more money from donor nations, which have pledged but not fully delivered $13 billion; from the World Bank; and from oil proceeds. The problem is insurgents repeatedly attack Iraq's oil facilities and pipelines, especially one leading to Turkey, depriving Iraq of huge streams of revenue.

Mr. Bowen blamed five setbacks, or shifts in policy, that have caused some of the $24 billion Congress approved in U.S. reconstruction funds to be diverted elsewhere.

The audit cited "plans made without a clear understanding of actual situational conditions" -- a reference to the fact that the Bush administration did not predict the rise of a large insurgency and foreign terror cells when it planned for Iraq after the ouster of Saddam Hussein.

For example, the State Department diverted $5.6 billion from reconstruction to beef up security in the face of the burgeoning insurgency, which threatened to send Iraq into chaos in 2004.

The audit said that $4.3 billion budgeted for water and sanitation in 2003 was decreased to $2.1 billion in 2005. And $5.5 billion for the electricity budget was slashed to $4.3 billion.

The result: Of 136 projects in water sources and sanitation, only 49 will be completed. Of 425 electrical projects, about 300 will be completed with U.S. funds.

The report said the disbanded Coalition Provisional Authority, which ran Iraq in 2003 and 2004, "had significantly underestimated the damage done to the basic infrastructure from decades of neglect and warfare and, as a result, more time and resources are required to stand up and maintain systems than originally thought. The state of Iraq's infrastructure was further degraded by looting and sabotage following the war."

In 2003, Congress authorized $18.6 billion for reconstruction and also added smaller appropriations to bring the total to $24 billion.