Iraq Audit Can't Find Billions
Gaps found in spending for reconstruction
by Bryan Bender, Boston Globe, October 16, 2004

WASHINGTON -- About half of the roughly $5 billion in Iraq reconstruction funds disbursed by the US government in the first half of this year cannot be accounted for, according to an audit commissioned by the United Nations, which could not find records for numerous rebuilding projects and other payments.



"The Bush administration cannot account for how billions of dollars of Iraqi oil proceeds were spent. The mismanagement, lack of transparency, and potential corruption will seriously undermine our efforts in Iraq."
--US Rep Henry Waxman (CA), Government Reform Committee

One chunk of the money -- $1.4 billion -- was deposited into a local bank by Kurdish leaders in northern Iraq but could be tracked no further: The auditors reported that they were shown a deposit slip but could find no additional records to explain how the money was used or to prove that it remains in the bank.

Auditors also said they could not track more than $1 billion in funds doled out by US authorities for hundreds of large and small reconstruction projects.

The audit, released yesterday, found serious gaps in how the Development Fund for Iraq -- a pool of money drawn from Iraqi oil revenues and international aid, including some from the United States -- was handled by American occupation officials responsible for funding reconstruction projects and the operations of Iraqi ministries and provincial governments. The development fund is separate from the $18.4 billion in US reconstruction funds set aside last year to rebuild the country.

All the funds -- more than $5 billion -- were spent between Jan. 1 and June 28, 2004, during the period when the US-led Coalition Provisional Authority ran the country.

The audit reported numerous instances of improper disbursement practices by the coalition authority. Among the findings:


--Hundreds of projects worth more than $100 million covered by the Commander's Emergency Response Program, designed to allow US military officers to quickly fund small reconstruction projects around the country, had either no contracts on file, no evidence that bids were obtained through competition, no purchase invoices, or no payment vouchers.

--Weapons were paid for under a buyback program with funds specifically prohibited for such use.

--The coalition authority gave money to the Iraqi Ministry of Finance, which then maintained two different sets of records. The report said a ''reconciliation between these two sets of accounting records was not prepared and the difference was significant."

--Checks were made payable to the coalition authority's senior adviser to the Ministry of Health, rather than to suppliers, raising questions about whether the money was spent for its intended purposes.

--A number of projects were awarded without bids ''without justification" by treasury officials in one Iraqi province.

--The coalition authority could not find an underlying contract or evidence of services rendered for a $2.6 million disbursement earmarked for the Ministry of Oil. The audit said the matter is under investigation by the State Department, which became the primary American presence in Iraq after the coalition authority dissolved.
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- posted by ARYABHATT @ 6:24 pm