Auditors can't account for funds spent in Iraq

WASHINGTON -- U.S. and Iraqi officials doled out hundreds of millions of dollars in oil proceeds and other moneys for Iraqi projects earlier this year, but there was little effort to monitor or justify the expenditures, according to an audit released Thursday.

Files that could explain many of the payments are missing or nonexistent, and contracting rules were ignored, according to auditors working for an agency created by the United Nations.

"We found one case where a payment ($2.6 million) was authorized by the CPA (Coalition Provisional Authority) senior adviser to the Ministry of Oil," the report said. "We were unable to obtain an underlying contract" or even "evidence of services being rendered."

In a program to allow U.S. military commanders to pay for small reconstruction projects, auditors questioned 128 projects totaling $31.6 million. They could find no evidence of bidding for the projects or, alternatively, explanations of why they were awarded without competition.

The report was released by Rep. Henry Waxman of California, ranking Democrat on the House Government Reform Committee and a leading critic of reconstruction spending to rebuild Iraq.

"The Bush Administration cannot account for how billions of dollars of Iraqi oil proceeds were spent," Waxman said. "The mismanagement, lack of transparency, and potential corruption will seriously undermine our efforts in Iraq. A thorough congressional investigation is urgently needed."

The audit was performed by the accounting firm KMPG for the International Advisory and Monitoring Board, created by the United Nations to monitor the stewardship of Iraqi funds.

The report monitored spending by the Coalition Provisional Authority, the U.S.-run governing agency which went out of existence in June; Iraqi ministries; the Kurdish Regional Government and Iraqi provisional governments. It covered the period from January to June this year.

In the CPA programs, "We found 37 cases where contracting files could not be located," the auditors said. The cost of the contracts: $185 million. In another 52 cases, there was no record of the goods received for $87.9 million in expenditures.

In a military commanders' program to buy back weapons, $1.4 million was spent from a fund that specifically prohibited such expenditures, auditors said.

Iraq's Ministry of Finance maintained two sets of accounting records, one manual and one computerized.

"A reconciliation between these two sets of accounting records was not prepared and the difference was significant," the report said.

Auditors questioned why checks were made payable to a U.S. official -- a senior adviser to the Iraqi ministry of health -- rather than to suppliers.

Other questions were raised about funds provided by the U.S.-run governing authority to Kurdish officials in northern Iraq. In one instance, auditors were given a deposit slip that showed the transfer of $1.4 billion to a Kurdish bank. Auditors said they were denied access to accounting records and were unable to verify how -- or if -- the money was spent.

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On the net: Report is on the House Government Reform Committee Democratic site:

http://www.democrats.reform.house.gov/