No oversight of how more than $140 billion is being spent in

WASHINGTON - The chief Pentagon agency in charge of investigating and reporting fraud and waste in Defense Department spending in Iraq quietly pulled out of the war zone a year ago - leaving what experts say are gaps in the oversight of how more than $140 billion is being spent.

The Defense Department’s inspector general sent auditors into Iraq when the war started more than two years ago to ensure that taxpayers were getting their money’s worth for everything from bullets to meals-ready-to-eat.

The auditors were withdrawn in the fall of 2004 because other agencies were watching spending, too. But experts say those other agencies don’t have the expertise, access and broad mandate that the inspector general has - and don’t make their reports public.

That means that the bulk of money being spent in Iraq doesn’t get public scrutiny, leaving the door open for possible waste, fraud and abuse, experts say.

U.S. spending in Iraq falls into two big categories - fighting the war and rebuilding the country. A Special Inspector General for Iraq Reconstruction has a 45-person staff in Baghdad to monitor $18.4 billion in contracts.

In contrast, the Defense Department inspector general, whose responsibility includes reviewing the $142 billion earmarked for the military, doesn’t have a single auditor or accountant in Iraq tracking spending, Knight Ridder has found.

Spokeswoman Lt. Col. Rose-Ann Lynch, of the Defense Department IG’s office, acknowledged Monday that the agency has no auditors in Iraq and that its criminal investigative arm "ceased operations in Iraq in October 2004." Lynch said taxpayers’ interests are served instead by other watchdog agencies, including the Defense Contract Audit Agency and the Government Accountability Office, the investigative arm of Congress.

Since the war in Iraq began, government spending has been tainted by charges of inflated pricing, double billing, bogus shipments of goods and kickbacks.

Investigations of fraudulent contracting practices have focused on the rebuilding effort, where the special inspector general found millions of dollars in cash either missing or unaccounted for.

Much of the criticism of Defense Department spending for military uses has focused on the billing practices of Kellogg Brown & Root, a subsidiary of the engineering giant Halliburton Inc.

A Knight Ridder investigation in the spring of 2004 found that KBR charged the department to move convoys of empty trucks across central Iraq.

The inspector general’s relocation makes finding those kinds of cases more difficult, say government officials and other contracting experts.

"Does Congress have a good view through the eyes of an IG how taxpayer money is being used in Iraq or is there a gap?" said one government audit official, who asked not to be identified for fear of reprisal. "When there’s no presence (of criminal investigators) that kind of lowers the deterrence" against fraud.

Between October 2004 and this month, only one of the 107 audits listed on the Defense Department inspector general’s Web site is about Iraq.

By contrast, the reconstruction inspector general has completed 25 audits and has 60 investigations under way.

Lynch said the Defense Department Inspector General "currently has no specific audits being conducted in Iraq."

At its peak, the Defense Department had 25 auditors in Iraq to help the reconstruction inspector general get started. One person remains from the Pentagon’s IG office, but that official is there to help "develop an anti-corruption process for the Iraqi government," Lynch said.

The issue is likely to be discussed at a hearing Tuesday of the national security subcommittee of the House Government Reform Committee.

"Inspectors general play a vital role in ensuring that taxpayers’ funds are used properly," said Rep. Dennis Kucinich, the ranking Democrat on the subcommittee. "The fact that the DOD has not had an IG on the ground in Iraq for at least six months raises serious questions about the DOD’s priorities and their ability to handle the war spending in an honest and transparent way."

Lynch said taxpayers will be protected nonetheless by the "many different agencies that are required by law to monitor various aspects of the efforts in Iraq."

That’s not good enough, said government watchdog groups.

"Our Iraq presence isn’t going away; the only thing going away is the people watching how the money is being spent," said Keith Ashdown, vice president of Taxpayers for Common Sense. "If you don’t have anyone watching it, the precedent is that the money will be wasted."

Lynch said the Defense Contract Audit Agency - an internal group of auditors in the Defense Department - has issued 622 reports, questioning costs and referring some cases for investigation of possible fraud. But nearly all those reports are classified. Most inspector general reports are public.

In addition, there’s a big difference between the inspector general’s office, which looks for broad issues and fraud, and the Defense Contract Audit Agency, which looks narrowly at specific pricing and contracting issues, experts said.

The inspector general is required to make sure that programs and equipment work properly, such as the quality and existence of armor for vehicles, said former Defense Department Inspector General Eleanor Hill.

"In terms of taxpayer dollars, in terms of efficiency of running the operation, IG audits can do all sorts of things," Hill said. "They shouldn’t be absent in terms of oversight."

Others agree.

"The IG is probably the best-equipped office to look at the broad range of problems and possible misconduct that will arise in Iraq," said Danielle Brian, executive director of the Project On Government Oversight. "It’s really hard to fathom how the IG could have thought how it wasn’t worth having his people on the ground in Iraq scrutinizing the situation."

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