From Holden:

Yesterday saw the return of the Friday Night Follies, as the Bush Assministration released poltically devastating information on a Friday Eevening.

Somebody will have to go to jail for the fraud and corruption at the Department of State described in today’s New York Times. Democrats need to pick up and campaign on the corruption and mismanagement in Iraq as well as war-profiteering by major US corporations. And this story has all of the ingredients — a sweet deal for Bechtel gets even sweeter when the demand nearly double their contracted payment. State agrees and hides the true cost from Congress. Then when Bechtel falls way behind schedule – inspite of the extra millions – State covers that up as well.

The State Department agency in charge of $1.4 billion in reconstruction money in Iraq used an accounting shell game to hide ballooning cost overruns on its projects there and knowingly withheld information on schedule delays from Congress, a federal audit released late Friday has found.

The agency hid construction overruns by listing them as overhead or administrative costs, according to the audit, written by the Special Inspector General for Iraq Reconstruction, an independent office that reports to Congress, the Pentagon and the State Department.

Called the United States Agency for International Development, or A.I.D., the agency administers foreign aid projects around the world. It has been working in Iraq on reconstruction since shortly after the 2003 invasion.

Can it get any sweeter? The one of the projects involved was Laura’s pet!

The findings appeared in an audit of a children’s hospital in Basra, but they referred to the wider reconstruction activities of the development agency in Iraq. American and Iraqi officials reported this week that the State Department planned to drop Bechtel, its contractor on that project, as signs of budget and scheduling problems began to surface.

[snip]

The hospital’s construction budget was $50 million. By April of this year, Bechtel had told the aid agency that because of escalating costs for security and other problems, the project would actually cost $98 million to complete. But in an official report to Congress that month, the agency “was reporting the hospital project cost as $50 million,” the inspector general wrote in his report.

The rest was reclassified as overhead, or “indirect costs.” According to a contracting officer at the agency who was cited in the report, the agency “did not report these costs so it could stay within the $50 million authorization.”

From Holden:

Continues…

The report said it suspected that other unreported costs on the hospital could drive the tab even higher. In another case cited in the report, a power station project in Musayyib, the direct construction cost cited by the development agency was $6.6 million, while the overhead cost was $27.6 million.

One result is that the project’s overhead, a figure that normally runs to a maximum of 30 percent, was a stunning 418 percent.

The figures were even adjusted in the opposite direction when that helped the agency balance its books, the inspector general found. On an electricity project at the Baghdad South power station, direct construction costs were reported by the agency as $164.3 million and indirect or overhead costs as $1.4 million.

That is just 0.8 percent overhead in a country where security costs are often staggering. A contracting officer told the inspector general that the agency adjusted the figures “to stay within the authorization for each project.”

The overall effect, the report said, was a “serious misstatement of hospital project costs.” The true cost could rise as high as $169.5 million, even after accounting for at least $30 million pledged for medical equipment by a charitable organization.

The inspector general also found that the agency had not reported known schedule delays to Congress. On March 26, 2006, Bechtel informed the agency that the hospital project was 273 days behind, the inspector general wrote. But in its April report to Congress on the status of all projects, “U.S.A.I.D. reported no problems with the project schedule.”