US audit finds weakness in Pentagon controls for Iraq funds; $8.7 billion missing

Audit: US can’t account for $8.7B in Iraqi funds

BAGHDAD — The U.S. Defense Department is unable to properly account for over 95 percent of $9.1 billion in Iraqi oil money tapped by the U.S. for rebuilding the war ravaged nation, according to an audit released Tuesday.

The report by the U.S. Special Inspector General for Iraq Reconstruction offers a compelling look at continued laxness in how such funds were being spent in a country where people complain basic services like electricity and clean water are sharply lacking seven years after the U.S.-led invasion that toppled Saddam Hussein.

The audit found that shoddy record keeping by the Defense Department left the Pentagon unable to fully account for $8.7 billion it withdrew between 2004 and 2007 from a special fund set up by the U.N. Security Council. Of that amount, Pentagon “could not provide documentation to substantiate how it spent $2.6 billion.”

The funds are separate from the $53 billion allocated by Congress for rebuilding Iraq.

The report comes at a critical time for Iraq, which four months after inconclusive elections squabbling political factions have still not agreed on a new government.

Despite security gains made since 2008, bombings remain near a daily occurrence that compound the frustrations and fears of Iraqis increasingly weary of the political crisis — one many say reflects how the country’s politicians are more interested in their own interests than those of the nation.

The continuing impasse was highlighted on Tuesday when Iraqi lawmakers gathered for the second time this month only to indefinitely postpone the parliamentary session because there was still no decision on the new government.

Acting speaker Fouad Massoum told reporters that the postponement was designed to give the political blocs more time to discuss contentious issues and agree on the distribution of positions in the new government.

“With every delay, the suffering of the Iraqi people and security risks are increasing,” lawmaker Salman al-Jumaili told reporters, criticizing the move.

The U.S. audit is unlikely to do anything but further stoke that frustration felt by Iraqis who continue to suffer from poor infrastructure despite the billions spent.

The audit cited a number of factors behind the inability to account for most of the money withdrawn by the Pentagon from the Development Fund for Iraq.

It said most of the Defense Department organizations that received DFI money failed to set up Treasury Department accounts, as required.

In addition, it said no Defense Department organization was designated as the main body to oversee how the funds were accounted for or spent.

“The breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss,” the report said.

Calls to Iraqi officials for comment went unanswered.

The Defense Department, in responses attached to the audit, said it agreed with the recommendations laid out in the report about establishing better guidelines for monitoring such funds, including appointing an organization to be responsible for overseeing such funds mostly likely by November.

The audit found that the U.S. continues to hold about $34.3 million of the money even though it was required to return it to the Iraqi government.

The audit did not indicate that investigators believed there were any instances of fraud involved in the spending of these funds.

The DFI includes revenues from Iraq’s oil and gas exports, as well as frozen Iraqi assets and surplus funds from the now-defunct, Saddam Hussein-era oil-for-food program.

With the establishment of the Coalition Provisional Authority, which ran Iraq shortly after the start of the U.S. invasion in 2003 until mid-2004, about $20 billion was placed into the account.

The Iraqi government had agreed to allow the U.S. continued access to the funds after the CPA was dissolved in 2004, but it revoked that authority in December 2007.

In other developments, seven people were killed in a series of bombings and apparent assassinations in Baghdad and Mosul, a northern city where al-Qaida is believed to still have a strong presence. Among those killed were two women shot dead in their home by gunmen and a Baghdad electricity official who died of wounds sustained after a morning roadside bombing.