Iraq funds untracked, audit finds

BAGHDAD — BAGHDAD - A U.S. audit has found that the Pentagon cannot account for more than 95 percent of $9.1 billion in Iraq reconstruction money, spotlighting Iraqi complaints that there is little to show for the funds pumped into their cashstrapped, war-ravaged nation.

The $8.7 billion in question was Iraqi money managed by the Pentagon, not part of the $53 billion that Congress has allocated for rebuilding. It’s cash that Iraq, which relies on volatile oil revenue to fuel its spending, can ill afford to lose.

“Iraq should take legal action to get back this huge amount of money,” said Sabah al-Saedi, chairman of the Parliamentary Integrity Committee.The money “should be spent for rebuilding the country and providing services for this poor nation.”

The report by the Special Inspector General for Iraq Reconstruction accused the Defense Department of lax oversight and weak controls, though not fraud.

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

The Pentagon has repeatedly come under fire for apparent mismanagement of the reconstruction effort - as have Iraqi officials themselves.

Seven years after the U.S.-led invasion, electricity service is spotty, with generation capacity falling far short of demand. Fuel shortages are common, and unemployment remains high.

Complaints surfaced from the start of the war in 2003, when soldiers failed to secure banks, armories and other facilities against looters. Since then the allegations have only multiplied, including investigations of fraud, awarding of contracts without the required government bidding process, and allowing contractors to charge exorbitant fees with little oversight or oversight that came too late.

But the latest report comes at a particularly critical time for Iraq. Four months after inconclusive elections, a new government has yet to be formed, raising fears that insurgents will tap into the political vacuum to stir sectarian unrest.

At least six people were killed and dozens more wounded when a female suicide bomber blew herself up near a checkpoint in the holy city of Karbala, local police said. They spoke on condition of anonymity because they were not authorized to speak to the media.

Lawmakers met Tuesday but, for the second time this month, failed to convene a parliamentary session, leaving wide open the question of when the new government will take shape.

The $9.1 billion in question came from the Development Fund for Iraq, which was set up by the U.N. Security Council in 2003. The fund includes revenue from Iraq’s oil and gas exports, as well as frozen Iraqi assets and surplus funds from the defunct, Saddam Hussein-era U.N. 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 $9.1 billion audited by the Iraq reconstruction inspector general were funds withdrawn from that account between 2004and 2007.

Tracing the rest of the money is difficult because of a combination of lax financial controls and management, the failure to designate an organization to oversee the spending, and the failure to set up and deposit the funds in special accounts, as required by the Treasury Department.

The Defense Department, in responses attached to the audit, said it agreed with the report’s recommendations to establish better guidelines for monitoring such funds, including appointing an oversight organization mostly likely by November.

The United Nations inspector who led an unfruitful hunt for weapons of mass destruction in Iraq told Britain’s inquiry into the 2003 invasion Tuesday that the U.S. and United Kingdom relied on flawed intelligence and showed dubious judgment in the buildup to war.

Hans Blix, the 82-year-old former chief U.N. weapons inspector, said Washington was “high on military” action in the aftermath of the Sept. 11, 2001, attacks on the United States and refused to heed concerns over the paltry threat posed by Saddam’s regime.

Blix told the panel, set up by the British government to examine the case for the war and errors in planning for postconflict reconstruction, that he had warned British Prime Minister Tony Blair in a February 2003 meeting - as well as U.S. Secretary of State Condoleezza Rice during separate talks - that Saddam might not have weapons of mass destruction.

Information for this article was contributed from Baghdad by Mazin Yahya and from London by David Stringer of The Associated Press.