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Audit: $9b unaccounted for in Iraq
(Agencies)
Updated: 2005-01-31 13:36
The U.S. occupation authority in Iraq was unable to keep track of nearly $9
billion it transferred to government ministries, which lacked financial
controls, security, communications and adequate staff, an inspector general has
found.
The U.S. officials relied on Iraqi audit agencies to account for the funds
but those offices were not even functioning when the funds were transferred
between October 2003 and June 2004, according to an audit by a special U.S.
inspector general.
The findings were released Sunday by Stuart Bowen Jr., special inspector
general for Iraq reconstruction. Bowen issued several reports on the Coalition
Provisional Authority (CPA), the U.S. occupation government that ruled Iraq from
June 2003 to June 2004.
The official who led the CPA, L. Paul Bremer III, submitted a blistering,
written reply to the findings, saying the report had "many misconceptions and
inaccuracies," and lacked professional judgment.
Bremer complained the report "assumes that Western-style budgeting and
accounting procedures could be immediately and fully implemented in the midst of
a war."
The inspector general said the occupying agency disbursed $8.8 billion to
Iraqi ministries "without assurance the moneys were properly accounted for."
U.S. officials, the report said, "did not establish or implement sufficient
managerial, financial and contractural controls." There was no way to verify
that the money was used for its intended purposes of financing humanitarian
needs, economic reconstruction, repair of facilities, disarmament and civil
administration.
US Pentagon spokesman Bryan Whitman said Sunday the authority was hamstrung
by "extraordinary conditions" under which it worked throughout its mission.
"We simply disagree with the audit's conclusion that the CPA provided less
than adequate controls," Whitman said.
Turning over the money "was in keeping with the CPA's responsibility to
transfer these funds and administrative responsibilities to the Iraqi ministries
as an essential part of restoring Iraqi governance."
The inspector general cited an International Monetary Fund assessment in
October, 2003 on the poor state of Iraqi government offices. The assessment
found ministries suffered from staff shortages, poor security, disruptions in
communications, damage and looting of government buildings, and lack of
financial policies.
Some of the transferred funds may have paid "ghost" employees, the inspector
general found.
CPA staff learned that 8,206 guards were on the payroll at one ministry, but
only 602 could be accounted for, the report said. At another ministry, U.S.
officials found 1,417 guards on the payroll but could only confirm 642.
When staff members of the U.S. occupation government recommended that
payrolls be verified before salary payments, CPA financial officials "stated the
CPA would rather overpay salaries than risk not paying employees and inciting
violence," the inspector general said.
Bremer attacked many of the specific findings. Among his rebuttal points:
- With more than a million Iraqi families depending on government salaries,
there would have been an increased security threat if civil servants had not
been paid until modern pay records were developed.
- U.S. policy was to build up the Iraqi force guarding government facilities,
and it was better to accept an imperfect payroll system than "to stop paying
armed young men" providing security.
- The report was suggesting the CPA "should have placed hundreds of CPA
auditors" in Iraqi ministries, contrary to United States and United Nations
(news - web sites) policy of giving Iraqi ministers responsibility for their
budgets.
- The CPA established a program review board, an independent judiciary and
inspector generals in each agency to fight corruption.
The inspector general's report rejected Bremer's criticism. It concluded that
despite the war, "We believe the CPA management of Iraq's national budget
process and oversight of Iraqi funds was burdened by severe inefficiencies and
poor management."
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