This audit report discusses the management and payment of interest penalties incurred resulting from provisions of the Prompt Payment Act by U.S. government organizations responsible for the management of the Iraq Relief and Reconstruction Fund. Objective. The objective of this audit was to determine whether expenditures by U.S. government organizations responsible for the management of the Iraq Relief and Reconstruction Fund were made in compliance with the Prompt Payment Act and other applicable policies and regulations. Results. During fiscal year 2005, approximately $1.4 million in interest penalty payments were made by the Army against Iraq Relief and Reconstruction Fund disbursements of about $5.275 billion made by Department of Defense organizations because of late payments of contractor invoices. This amount of interest exceeded an Army management goal, which stipulated that there be no more than $85 in interest penalty payments for every million dollars disbursed; in this case that amount would have been $448,381. However, the $1.4 million in interest penalties paid amounted to about $259 in interest penalties per million disbursed and exceeded the Army goal by 304 percent. As a result, interest penalties paid to contractors from the Iraq Relief and Reconstruction Fund appropriation reduced, dollar-for-dollar, the availability of funds appropriated for the reconstruction of Iraq and for the benefit of the Iraqi people. If the Army achieves the current management goal of no more than $85 in interest penalty payments for every million dollars disbursed, for the remaining Department of Defense Iraq Relief and Reconstruction Fund apportioned funds of approximately $7.0 billion yet to be disbursed, the Army could avoid making interest penalty payments of more than $1.2 million and make better use of those funds to support pressing relief and reconstruction needs.