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BAGHDAD — Because of poor record keeping and lax oversight, the
Defense Department cannot account for how it spent $2.6 billion that
belonged to the Iraqi government, according to the inspector general for
Iraq reconstruction.
An audit of a $9.1 billion fund of Iraqi oil proceeds showed that
most American military agencies entrusted with spending the money on
reconstruction projects failed to adhere to US rules on how such money
must be tracked and spent, the inspector general found.
US officials failed to create bank accounts for $8.7 billion in the
Development Fund for Iraq, as mandated by the Treasury Department,
creating “breakdowns in controls [that] left the funds vulnerable to
inappropriate uses and undetected loss,’’ according to the report, which
is scheduled to be released today.
The audit is the latest probe to fault the US government for
mismanagement of Iraqi funds in the years following the US-led invasion
in March 2003, which led to an insurgency and a yearslong occupation.
“Weak oversight is directly correlated to increased numbers of cases of
theft and abuse, with the majority of convictions to date being
traceable to the 2003-2004 time-frame where accounting practices were
weakest,’’ Stuart Bowen, the special inspector general for Iraq
reconstruction, said in an e-mail.
The report also said the US military continues to hold at least $34.3
million of the fund, even though it was required to return it to the
Iraqi government in December 2007.
In a written response to a draft of the audit, the Pentagon vowed to act
on the inspector general’s three recommendations to strengthen
accounting mechanisms and dispose of the Iraqi money not yet
relinquished.
The Defense Department comptroller promised to report back to the
inspector general’s office by November on progress made.
“We look forward to seeing real results,’’ Bowen said.
The alleged mismanagement of the fund has angered Iraqi officials, who
have raised the possibility of taking legal action against the United
States, Bowen said.
American officials with the Coalition Provisional Authority, the US-led
occupation administration, took control in 2003 of $20 billion of Iraqi
government funds and obtained permission through a UN Security Council
resolution to use the money for humanitarian assistance and
reconstruction.
After the June 2004 dissolution of the authority, the Iraqi government
agreed to let the US military control the remaining funds.
It revoked the authority on Dec. 31, 2007.
The inspector general in 2005 criticized the CPA’s management of an $8.8
billion fund that belonged to the Iraqi government. A criminal probe
conducted by the inspector general then led to the conviction of eight
U.S. officials on bribery, fraud and money-laundering charges.
The latest audit does not include allegations of criminal conduct.
The United States also has spent more than $50 billion in taxpayer money
for reconstruction projects in Iraq.
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