USAID's Top 10 Failures - No. 9: The Iraq Community Stabilization Program – A $600M Boondoggle

Introduction: How to Set Fire to $600 Million in a War Zone

If there’s one thing USAID excels at, it’s taking a bad situation and making it worse—at great expense to the American taxpayer. In part 2 of our 10 part USAID's Top 10 failures project, The Iraq Community Stabilization Program (CSP) was no exception, and comes in at #9. Launched in 2006 as part of the U.S. government’s desperate attempt to stabilize Iraq while its military efforts floundered, CSP was a spectacularly misguided project designed to “reduce incentives for violent conflict” by offering Iraqis jobs, business grants, and youth engagement programs. On paper, it was a nation-building success story in the making. In reality, it was an unmitigated disaster—a $600 million bonfire of bureaucratic incompetence, corruption, and straight-up criminal negligence.

The logic behind CSP was absurdly simplistic: If young Iraqi men were given jobs, they’d be too busy to plant IEDs or join insurgent groups. The problem? USAID had no real control over where the money was going, who was receiving it, or whether anything of value was actually being built. Contractors operated with impunity, funneling cash into ghost projects, handing out no-show jobs, and “accidentally” financing the very insurgents the U.S. was trying to defeat.

By the time CSP was shut down in 2009, USAID’s own auditors couldn’t even determine how much of the money had been stolen or wasted. Entire communities were left with half-finished projects, millions vanished into thin air, and the insurgency in Iraq was stronger than ever. USAID had, in effect, become one of the largest involuntary funders of militant groups in the region.

The Iraq Community Stabilization Program wasn’t just a failure—it was a textbook case of how USAID, time and time again, manages to take American imperial hubris, wrap it in bureaucratic incompetence, and turn it into a giant flaming dumpster of wasted resources and shattered illusions.

Genesis: The Birth of a Bad Idea

By 2006, Iraq was a full-blown disaster. The U.S. had toppled Saddam Hussein, dismantled the Iraqi military by firing almost all its officers, and then stood around looking confused as the country collapsed into insurgency and sectarian warfare. The war effort had morphed from a misguided regime change into an endless cycle of occupation, bloodshed, and failed reconstruction projects. Every attempt at “stabilization” turned into a black hole of wasted money, but USAID, in its infinite wisdom, decided that throwing even more cash at the problem would somehow fix it.

Thus, the Community Stabilization Program (CSP) was born—a scheme designed to bribe Iraqis into submission by offering them jobs, business grants, and “youth engagement” activities (which basically meant handing out soccer balls and hoping kids didn’t turn into insurgents). The theory was as naïve as it was doomed: give people work, and they won’t join the insurgency. What nobody at USAID seemed to grasp was that a paycheck means nothing when your entire neighborhood is rubble, your family has been wiped out by drone strikes, and your options are either taking $100 a month from the Americans or getting paid three times as much to kill them.

To make matters worse, USAID didn’t actually do the work themselves. Instead, they handed everything off to contractors—a collection of corrupt NGOs, shady private security firms, and bloated development consultancies whose primary skills involved siphoning off American tax dollars and disappearing into the night. International Relief and Development (IRD) was one of the biggest players, raking in hundreds of millions before eventually being blacklisted in 2015 for—you guessed it—rampant financial misconduct. Then there was Louis Berger Group, a company with a long and illustrious history of fraud, overbilling, and screwing up reconstruction projects.

From the start, CSP was less about rebuilding Iraq and more about funneling cash into the pockets of well-connected contractors. The result? A program that existed more on paper than in reality, with projects that were either unfinished, nonexistent, or hijacked by local power brokers. By 2007, it was already clear that CSP wasn’t stabilizing anything. It was just another USAID boondoggle, another grotesque display of bureaucratic arrogance and imperial overreach.

The Grift Machine in Motion: CSP’s Program Structure and Its Predictable Collapse

Like every USAID operation, the Community Stabilization Program (CSP) had a glossy brochure filled with corporate PowerPoint nonsense—strategic frameworks, mission statements, and lofty promises of economic revitalization. The reality? It was a free-flowing river of cash that no one actually monitored, administered by contractors who treated the warzone like a money-printing machine.

The program was broken into four main pillars, each of which became a spectacular disaster in its own unique way:

1. Community Infrastructure and Essential Services (CIES): This was supposed to fund the rebuilding of essential public works—roads, schools, utilities. In practice, it became a feeding frenzy for corrupt subcontractors. Projects were greenlit, money was allocated, but the work? Either half-finished or never started at all. In several cases, completed infrastructure was immediately destroyed in insurgent attacks, making the whole effort a real-time money incineration exercise.
2. Employment Generation (EG): The theory: train Iraqis in vocational skills so they wouldn’t join the insurgency. The reality: USAID created thousands of unemployed Iraqis with freshly printed certificates in trades that didn’t exist in a country still actively at war. Many graduates ended up in the only “business” hiring at scale—insurgent militias.
3. Business Development Program (BDP): This was meant to fund small and medium-sized businesses, injecting capital into Iraq’s shattered economy. Instead, it turned into a ghost economy of shell companies and “entrepreneurs” who took the money and vanished. The few legitimate businesses that did receive USAID funds often had direct ties to warlords, insurgent groups, or corrupt government officials.
4. Youth Engagement (Y): Ah, the soccer-ball diplomacy initiative. The plan was to “divert” Iraqi youth away from violence through recreational activities and community projects. The problem? Nobody thought to ask the youth what they actually needed. Instead, USAID contractors literally showed up with crates of soccer balls and left, thinking this would keep 17-year-old kids from picking up an AK-47.

The program targeted young men aged 17-35, the prime recruiting demographic for insurgencies. However, instead of countering recruitment, CSP became a source of easy money for insurgents. USAID unknowingly paid many of the same men who were planting roadside bombs during the night, effectively funding both sides of the war.

The oversight on these programs was nonexistent. Subcontractors operated on a trust-based system, meaning they could bill USAID for anything and rarely had to show proof of work. One internal audit found thousands of “phantom jobs” where money was being allocated for non-existent workers. Even worse, millions in CSP funds were funneled directly into insurgent hands through protection payments and rigged contracts.

By 2008, it was already clear that CSP was a spectacular failure. But instead of shutting it down, USAID kept dumping money into the black hole, hoping it would somehow start working. It didn’t. It only made Iraq’s instability worse.

CSP wasn’t stabilization. It was a bureaucratic money-laundering operation disguised as nation-building—and it was only just getting started.

Implementation: Cash, Chaos, and Contractors Gone Wild

By the time CSP officially launched in May 2006, the insurgency in Iraq was already in full swing. The Bush administration was still peddling the illusion that the U.S. could somehow “win” by turning Iraq into a functional democracy, and USAID was more than happy to play along—provided they could do it with an unlimited budget and zero oversight.

From the get-go, CSP was a logistical nightmare. USAID contracted International Relief and Development (IRD) and Louis Berger Group, two firms that had already built reputations for gross mismanagement, corruption, and overbilling the U.S. government. If the mission was to stabilize Iraq, these companies had a different priority: making sure every dollar of funding found its way into the right pockets—and those pockets sure as hell weren’t Iraqi civilians'.

The Contractors: Who Got Rich Off the Boondoggle?

CSP’s billions flowed through a tangled web of subcontractors, each one slicing off a chunk of cash before the money ever reached the ground. Here’s the lineup of the usual suspects:

• International Relief and Development (IRD):
  • One of USAID’s top contractors, IRD pocketed hundreds of millions of dollars under CSP and later got blacklisted in 2015 for financial misconduct.
  • Audits showed rampant fraud, inflated invoices, and straight-up missing funds—but somehow, they kept getting USAID contracts for nearly a decade.
• Louis Berger Group:
  • Fined $69 million for systematic fraud in Afghanistan and Iraq.
  • Specialized in overbilling USAID for work that never happened and creating fake expenses to pad budgets.
• DynCorp & Blackwater (now Academi):
  • Officially tasked with providing “security” for CSP operations.
  • Spent more time shooting civilians, shaking down contractors, and setting up their own side hustles than actually protecting USAID projects.

These firms had more legal settlements than completed projects, but that didn’t stop USAID from handing them hundreds of millions in new contracts year after year.

Where Did the Money Go? (Short Answer: Nobody Knows)

CSP was supposed to operate in 15 cities across 8 governorates, targeting Baghdad, Mosul, Kirkuk, and Basra—all insurgent hotbeds. USAID threw money at anything that looked like a “stabilization effort”, but no one actually checked whether the projects were legitimate, sustainable, or even real.

• Road projects? Built by companies with zero experience, many of whom took the money and ran.
• Job programs? Thousands of fake jobs were created so contractors could bill USAID.
• Business grants? Many went to ghost businesses or insurgent-linked groups.
• Infrastructure repairs? Many projects were never even started, yet USAID kept cutting checks.

The sheer scale of fraud was mind-boggling. According to a USAID Inspector General report, CSP could not account for over $150 million—and that was just what they actually investigated. The real number was likely much higher.

The “Employment Generation” program in particular became a goldmine for insurgents. Here’s how it worked:

1. Insurgents registered for USAID-funded jobs during the day.
2. They got paid with U.S. taxpayer money.
3. At night, they went right back to planting IEDs and attacking U.S. forces.

In some areas, local USAID administrators knew this was happening but were under pressure to meet “job creation quotas,” so they kept paying insurgents just to hit their targets. This wasn’t “winning hearts and minds.” It was paying the enemy to kill American troops.

The Security Nightmare: Contractors and Insurgents Playing Both Sides

By 2007, CSP’s security situation had completely collapsed. Insurgents extorted protection money from CSP projects, ensuring that a portion of USAID’s funds went directly into their war chests.

• IED attacks skyrocketed near CSP project sites, as insurgents either wanted a cut of the cash or just saw USAID as a convenient source of funding.
• Contractors refused to work in high-risk areas, leaving entire cities without any actual USAID-funded development—even though the money had already been spent.
• Some USAID-funded workers turned on their American handlers, attacking project sites or assassinating USAID officials after taking weeks of American paychecks.

In a particularly insane case, an IED team was busted by U.S. forces—only to be found with CSP payroll records in their pockets. They were literally getting paid by USAID to destabilize the same communities CSP was meant to “stabilize.”

By 2008, Everyone Knew CSP Was a Disaster—But USAID Kept Writing Checks

Despite damning internal audits, contractors vanishing with millions, and clear evidence of funds being siphoned to insurgents, USAID kept the money flowing.

Why? Because shutting CSP down would mean admitting defeat. Instead, USAID doubled down, claiming that “challenges remained” but progress was being made. This was a lie.

By the time CSP finally ended in 2009, it had left behind:

• Millions of dollars in unfinished projects
• A trail of corruption, fraud, and zero accountability
• A strengthened insurgency that had directly benefited from USAID funding

And the contractors? They simply moved on to the next war zone, taking USAID money to repeat the same cycle in Afghanistan, Syria, and beyond.

Final Verdict on CSP’s Implementation?

This wasn’t a development program. It was a grift operation.

USAID turned Iraq into a giant ATM for corrupt contractors, fraudulent NGOs, and insurgents who were smart enough to figure out that fighting America wasn’t nearly as profitable as getting America to pay them directly.

At the end of the day, USAID didn’t stabilize Iraq. It stabilized the bank accounts of war profiteers.

Achievements and Outcomes: Lies, Damned Lies, and USAID Statistics

If you ask USAID, the Community Stabilization Program (CSP) was a massive success. According to their carefully massaged and selectively reported numbers, CSP:

• Created 50,000 jobs
• Supported 10,000 businesses
• Provided vocational training to 40,000 Iraqis
• Engaged 400,000 youths in “social activities”

Sounds impressive, right? Too bad it’s complete bullshit.

Phantom Jobs, Fake Businesses, and The Art of Statistical Fraud

USAID’s job creation figures were pure fiction. The majority of these “jobs” were temporary—as in, “dig a ditch for a few days, collect a paycheck, and never be seen again.” Many workers were hired to do absolutely nothing, just to make the numbers look good.

• Auditors found that thousands of reported jobs never existed—but the checks kept getting cashed.
• Warlords and insurgents exploited the system, setting up fake construction companies to funnel CSP funds into their own pockets.
• Some workers double-dipped, taking USAID pay during the day while moonlighting as insurgents at night.

One contractor billed USAID for repairing 200 miles of roads—except none of the roads existed. Another company claimed to have provided hundreds of microloans—except the businesses were entirely fictional.

Youth Engagement: Soccer Balls vs. Suicide Bombs

USAID patted itself on the back for “engaging” 400,000 Iraqi youths in social programs. The reality? This “engagement” often amounted to dropping off soccer balls in a war zone and driving away.

The logic behind CSP’s youth programs was laughable. USAID genuinely believed that if teenagers in a war-ravaged country had access to art and sports programs, they’d somehow forget about the fact that their homes had been bombed, their families killed, and their cities occupied.

• USAID paid contractors to set up “youth centers,” many of which were abandoned within months.
• The few programs that did operate became recruitment hubs for insurgent groups, since gathering a bunch of disaffected, angry young men in one place is exactly what militant organizations wanted.
• USAID had no mechanism for follow-up, so once funding ran out, the programs collapsed.

By 2008, USAID stopped publishing detailed progress reports on CSP’s youth engagement programs because even they couldn’t spin the numbers into a success story.

The Only Real Outcome: CSP Funded Its Own Enemy

The most damning indictment of CSP? It likely did more to fund the insurgency than to fight it.

USAID and its contractors:
✅ Paid insurgents for “jobs” that didn’t exist.
✅ Funded fake businesses run by warlords.
✅ Lost millions in fraudulent contracts.
✅ Failed to build lasting infrastructure.

By the time CSP was mercifully shut down in 2009, it had achieved nothing of lasting value. The only real impact?

The insurgency in Iraq had more money, more recruits, and more motivation than ever before.

Challenges and Criticisms: The Beginning of the End

If USAID’s Community Stabilization Program (CSP) had been designed as a case study in incompetence, fraud, and financing your own enemy, it couldn’t have gone much better. By 2008, even the people running it knew it was a catastrophic failure—but, true to USAID tradition, the money kept flowing until they could quietly kill the program and pretend it never happened.

At this point, the entire operation had collapsed under the weight of corruption, security failures, and financial mismanagement. The only thing still functioning was the contractors’ ability to invoice USAID for work that was never completed.

Security Failures: When Your Employees Are Also Your Enemies

One of CSP’s biggest flaws was its complete lack of security screening. The program hired thousands of Iraqis with zero vetting, operating under the delusion that any job was better than no job.

• This led to a high number of insurgents being paid directly by USAID, often for doing absolutely nothing.
• In some cases, contractors running CSP projects were actively paying “protection money” to insurgent groups—effectively using USAID cash to bankroll the very people killing American troops.
• USAID’s job sites were prime targets for attacks, with some projects being bombed immediately after completion—sometimes by the same people who had just been paid to build them.

One particularly absurd case involved a group of CSP “workers” who were caught planting IEDs near a USAID-funded road project—on the same day they had collected their paychecks from CSP.

USAID knew this was happening, but the program had no mechanism to actually remove insurgents from the payroll. Contractors refused to investigate their own workers, and local USAID offices were too afraid to report security breaches because it would jeopardize their funding.

The solution? Pretend it wasn’t happening.

Financial Oversight: Millions Down the Drain

USAID’s financial controls were a joke. The agency was handing out hundreds of millions of dollars in grants, contracts, and paychecks, yet there was no system in place to track how much was being stolen, wasted, or redirected to insurgent groups.

• In a 2008 Inspector General audit, USAID couldn’t account for over $150 million—and that was just in the transactions they bothered to review.
• Thousands of CSP’s reported “jobs” were completely fake, with no proof that work was ever performed.
• The Business Development Program (BDP) turned into a slush fund, with warlords and corrupt officials creating phantom businesses to receive USAID money.

One of the most infuriating examples involved a $10 million contract to build water treatment plants. The contractor took the money, dug some holes, and then vanished. USAID kept funding the project for another six months before realizing nothing was being built.

But perhaps the most outrageous case of all?

A single USAID subcontractor paid itself $1.5 million to “assess” a job-training program that didn’t exist. The “assessment” consisted of one written report, and then the company billed USAID another $750,000 to determine why the first report was inaccurate.

IRD’s Suspension: Too Little, Too Late

One of the biggest beneficiaries of CSP’s corruption was International Relief and Development (IRD)—a contractor that received hundreds of millions of dollars from USAID despite an extensive history of fraud, waste, and shady dealings.

• IRD continued to receive USAID funding for years, despite multiple red flags showing financial misconduct.
• In 2015—six years after CSP ended—USAID finally blacklisted IRD for “serious financial mismanagement.”
• The agency never recovered the stolen funds, and IRD’s executives faced no consequences.

This is USAID’s standard playbook:

1. Deny the fraud is happening.
2. Wait until the program is over.
3. Pretend to care by blacklisting the contractors years after the damage is done.
4. Move on to the next country and repeat.

The only real victims of CSP? The Iraqi civilians who never got the infrastructure, jobs, or stability they were promised—and the U.S. taxpayers who footed the bill for a program that did nothing except make the insurgency stronger.

By 2009, USAID Knew CSP Was a Total Failure—But They Kept Quiet

With CSP completely imploding, USAID had two options:

1. Admit the program was a failure and face the political fallout.
2. Quietly phase it out, massage the statistics, and pretend it was a success.

No surprise—they chose Option 2.

USAID stopped conducting audits, stopped issuing detailed reports, and simply let CSP “expire” without ever publicly admitting how much money had been lost or stolen.

To this day, USAID still refers to CSP as a “stabilization success” in its official documents—despite overwhelming evidence that it actually destabilized Iraq.

CSP wasn’t just a failure—it was a fucking embarrassment. And yet, no one was ever held accountable.

Impact on Local Communities: The Fallout of USAID’s Incompetence

By the time USAID finally pulled the plug on the Community Stabilization Program (CSP) in 2009, the damage had already been done. For all the self-congratulatory press releases and bloated success metrics, the reality on the ground told a very different story—one of abandoned projects, stolen funds, and a growing insurgency fueled by American tax dollars.

The Good (A Few Accidental Successes)

Let’s be fair—not every single dollar was wasted. In some areas, CSP did manage to build roads, upgrade electricity grids, and complete small-scale infrastructure projects. A handful of Iraqis received real vocational training that led to long-term employment.

But these successes were rare, and when they did happen, it was in spite of USAID’s incompetence, not because of it. More often than not, the projects that actually benefited Iraqis were the ones least touched by USAID’s labyrinthine bureaucracy—where local leaders took the money and made sure it was used properly before corrupt contractors could get their hands on it.

Even then, many of these improvements didn’t last. Infrastructure deteriorated because USAID had no follow-up plan. Once the CSP funds ran out, so did the repairs and maintenance.

The Bad (A Whole Lot of Nothing)

For most Iraqis, CSP was a joke. It promised jobs but delivered phantom employment. It promised business opportunities but funded non-existent companies. It promised safety but ended up paying off the very groups making the country more dangerous.

• In Baghdad and Mosul, locals reported that USAID-funded projects would start and then be mysteriously abandoned—sometimes just days after ground was broken.
• Schools, medical clinics, and community centers never materialized, despite millions being allocated for them.
• Many of the job training programs USAID bragged about produced workers for industries that didn’t exist in post-invasion Iraq.

At best, CSP was a forgettable blip in the lives of most Iraqis. At worst, it was an insult—a painful reminder of American arrogance and incompetence.

The Ugly (Making Things Worse)

Then there were the directly harmful effects. The worst part of CSP wasn’t that it failed to help—it’s that it actively made things worse.

• CSP turned into a funding source for insurgents. USAID money flowed into the hands of warlords and militia leaders, strengthening the very forces the U.S. was fighting.
• The jobs created by CSP vanished as soon as the program ended, leading to even greater resentment toward the U.S.
• The program deepened corruption, teaching local officials that the best way to get rich wasn’t through governance, but through scamming American aid programs.

USAID didn’t just waste money in Iraq. It left behind a legacy of distrust, corruption, and instability that would last for years.

Lessons Learned and Future Implications: How Not to Rebuild a Country

By the time the Community Stabilization Program (CSP) was finally put out of its misery in 2009, USAID should have learned some hard lessons about how not to conduct stabilization efforts in warzones. But if there’s one thing American foreign aid bureaucracies excel at, it’s never learning a damn thing.

CSP was doomed from the start—not because Iraq was an impossible place to rebuild, but because USAID ran the program with zero accountability, zero strategic foresight, and an infinite tolerance for grift and corruption. The worst part? They’ll do it all again somewhere else.

Lesson #1: Oversight is Not Optional

One of CSP’s biggest failures was that USAID had no real oversight over where the money was going.

• Contractors like IRD and Louis Berger Group billed USAID for work that was never completed—and nobody checked until years later.
• Millions of dollars vanished into the hands of insurgents, corrupt local officials, and fake businesses—and it took USAID nearly a decade to acknowledge it.
• Financial audits were either ignored, delayed, or buried, because no one wanted to admit the program was a colossal failure.

If USAID had bothered to enforce basic accountability measures, CSP could have done some real good. Instead, the agency essentially operated on an honor system—in a country where warlords and insurgents were some of the primary beneficiaries.

Lesson #2: Throwing Money at a Problem is Not a Strategy

USAID has a bad habit of assuming that if they spend enough money, things will magically improve.

• CSP’s entire philosophy was based on the naive belief that insurgents would put down their weapons if given jobs.
• No effort was made to understand Iraq’s local power structures, economic realities, or the long-term sustainability of these projects.
• No plan existed for what would happen after CSP ended, so the few real jobs and businesses it created collapsed as soon as the funding dried up.

The result? CSP wasted $600 million and left Iraq in an even worse state than before.

Lesson #3: Stop Funding Your Own Enemies

This should be obvious, but if USAID is trying to stabilize a country, it probably shouldn’t be financing the people trying to tear it apart.

• CSP directly paid insurgents and warlords under the guise of “employment programs.”
• Millions of dollars in USAID funds were funneled into fake businesses that insurgent groups controlled.
• Contractors routinely paid off local militias for “security”, meaning USAID’s own money was being used to fund attacks on U.S. forces.

This isn’t just incompetence—it’s criminal negligence.

Conclusion: USAID Will Keep Failing, Because Nobody Stops Them

If CSP had been a one-time disaster, it would be bad enough. But USAID has repeated these mistakes in Afghanistan, Syria, and Haiti, with no real consequences.

CSP wasn’t just a failure. It was a warning. And nobody listened.

Conclusion: A Legacy of Failure

The Community Stabilization Program (CSP) was supposed to be USAID’s masterstroke in post-war Iraq—a bold initiative to win hearts and minds, create jobs, and prevent insurgency through economic development. Instead, it became one of the most spectacularly mismanaged aid programs in modern history—a case study in how to burn $600 million and make the situation worse.

Rather than stabilizing Iraq, CSP lined the pockets of corrupt contractors, strengthened insurgent networks, and left Iraqi communities with half-finished projects and broken promises. USAID’s own audits proved what was obvious to everyone on the ground—the money was being stolen, jobs were being faked, and many of the people the U.S. thought they were helping were instead using USAID funds to kill American soldiers.

CSP’s failure was not an accident. It was the inevitable result of USAID’s complete inability to operate in warzones. The agency has spent decades perfecting a formula:

1. Create a massive, overcomplicated aid program.
2. Hand it over to shady contractors with zero oversight.
3. Let fraud, corruption, and incompetence run wild.
4. Ignore every warning sign until the program collapses.
5. Quietly shut it down, pretend it was a success, and move on to the next country.

That’s exactly what happened with CSP. And that’s exactly what USAID would go on to do again in Afghanistan, Syria, Haiti, and anywhere else they could funnel taxpayer money into a bottomless pit of failure.

If USAID had set out to actively sabotage U.S. foreign policy in Iraq, they couldn’t have done a better job. And the worst part? No one was ever held accountable.

USAID doesn’t learn from failure. It institutionalizes it.

If you missed No.10 on the list of USAID's Greatest Failures, check out the story of the The Gomal Zam Dam in Pakistan here!