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Development Fund for Iraq
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<h2 id="audits">Audits</h2> <p>There have been several audits of the disbursement from the DFI during the CPA's stewardship. The first was performed by international accounting firm KPMG. <a href="/facts/United_States_Congress/mJlU46K7">United States Congressman</a> <a href="/facts/Henry_Waxman/Fk1Eh99e">Henry Waxman</a> had the staff of the <a href="/facts/Committee_on_Government_Reform/L5rcMCbK">Committee on Government Reform</a> to perform another audit of DFI's expenditures. </p> <h3>KPMG audit</h3> <p>International <a href="/facts/Auditor/123KLyL3">auditors</a> KPMG were chosen by the Coalition Provisional Authority and the <a href="/facts/International_Advisory_and_Monitoring_Board/KRLeTpUk">International Advisory and Monitoring Board</a> to perform external audits of the Coalition's expenditures from the <a href="/facts/Humanitarian/lq8n2I4x">humanitarian</a> Development Fund for Iraq. The IAMB started negotiating with the CPA to appoint an external auditor in December 2003. KPMG was appointed in April 2004, to audit the CPA's expenditures from Iraq's oil revenue in 2003. On July 15, 2004 KPMG released <a href="http://www.iamb.info/dfiaudit.htm">audit documents</a> that highlighted several dozen serious accounting discrepancies. Note particularly <a href="http://www.iamb.info/auditrep/r052203a.pdf">the appendix devoted to <i>Matters noted involving internal controls and other operational issues during the audit period of the Fund For the period to 31 December, 2003</i></a> </p><p><a href="/facts/UN_Security_Council_Resolution_1483/RyxwBxdW">United Nations Resolution 1483</a> transferred the authority to authorize expenditures from <a href="/facts/Iraq/pqYSFJw8">Iraq</a>'s oil revenue from the <a href="/facts/United_Nations/fgXLnmgT">United Nations</a> to the Coalition Provisional Authority. </p><p>It also created an international body to monitor the Coalition's expenditures from Iraq's oil revenue, the IAMB. The Coalition's authority to expend Iraq's oil revenue was conditional. The Coalition was only authorized to expend those funds for the benefit of the Iraqi people. Those expenditures were only authorized if they were made in an open and transparent manner. The Coalition was only authorized to expend funds so long as they cooperated in the IAMB's oversight of those expenditures. The Coalition was charged with the obligation to make those expenditures with meaningful Iraqi input. </p><p>Paragraphs 12 and 20 of UN resolution 1483 specified that an external auditor would be appointed to audit the expenditure made from Iraq's oil revenue. </p><p>The auditors identified dozens of serious ways in which the CPA failed to meet its obligations: </p> <ul><li><i>Lack of cooperation with the auditors</i>. CPA administrator <a href="/facts/Paul_Bremer/zCI7UhCh">Paul Bremer</a> has complained that the independent Inspector General <a href="/facts/Stuart_Bowen/F7ApnqQR">Stuart Bowen</a>, whom the Congress appointed, never met with him. In contrast the KPMG auditors say Mr Bremer never scheduled a meeting with them, prior to the official hand-over, and surprised everyone by leaving Iraq early immediately after his early handover of authority to the Interim government. <a href="/facts/George_Wolfe_(CPA)/SsCxuS14">George Wolfe</a>, the chairman of the <a href="/facts/Coalition_Provisional_Authority_Program_Review_Board/A81UMmaL">Program Review Board</a>, Iraq's de facto Treasurer "was unable to acknowledge the fair presentation of the statement of cash receipts and payments, the completeness of significant contracts entered into by the DFI and responsibilities for the implementation and operations of accounting and internal control systems, designed to prevent and detect fraud and error."</li> <li><i>Internal auditor</i>. In the <a href="https://web.archive.org/web/20040701201942/http://iraqcoalition.org/regulations/20030615_CPAREG_2_Development_Fund_for_Iraq.pdf">CPA Administrator's second regulation</a>[<i>usurped</i>], of 10 June 2003, Bremer committed the CPA to "obtain the services of an independent certified public accounting firm to support the objective of ensuring that the Fund is administered and used in a transparent manner for the benefit of the people of Iraq, and is operated consistent with Resolution 1483. The accountants performing this function shall be separate from those public accountants (auditors) approved by the International Advisory and Monitoring Board." But Bremer never obtained the services of an internal auditor. Instead the CPA hired a consulting firm, to set up a bookkeeping system – incomplete at the time of the handover.</li> <li><i>Double entry bookkeeping</i>. The CPA did not use a <a href="/facts/Double-entry_bookkeeping_system/oa8hmDYK">double-entry bookkeeping system</a>. Instead, it used what that auditors called a single entry, cash-based, transaction list—$20 billion of <a href="/facts/Petty_cash/0en3aHMH">petty cash</a>. The CPA did not do a cash-reconciliation until April 2004, eleven months into its administration. At that point, the CPA had disbursed $6 billion in $100 bills.</li> <li><i>Metering Iraq's oil</i>. Iraq's oil infrastructure was damaged when the CPA took over. The CPA effected selected repairs. But the IAMB found that the CPA had chosen not to repair the meters on the pipelines. The IAMB told the CPA that they were concerned that the lack of metering made auditing Iraq's oil exports unreliable – making it impossible to detect fraud, deception or smuggling. The minutes of the IAMB meeting make clear that the CPA had assured the IAMB that they were in the process of repairing the meters – in bad faith. The CPA's authority came to an end with the meters unrepaired. Estimates of how much oil revenue was siphoned off during the year of the CPA's administration go as high as $4 billion – comparable to the amount Saddam Hussein is suspected of stealing during the entire duration of the oil-for-food program.</li> <li><i>Record-keeping</i>. The auditors found that the Program Review Board failed to keep proper minutes: <ul><li>The PRB minutes did not always keep minutes of its meetings.</li> <li>The PRB minutes almost never recorded the wording of minutes, or the vote tallies.</li> <li>The auditors felt that the minutes did not record enough details for later readers to understand the reasons why the Board made their decisions.</li> <li>The PRB minutes sometimes did not even record the who attended the meetings.</li> <li>The auditors found that CPA staff responsible for overseeing programs were often unable to find their program files. They could not be counted on to be familiar with the programs they were responsible for.</li></ul></li></ul> <h3>Waxman audit</h3> <p>On June 20, 2005 the staff on Congressman Waxman's Committee on Government Reform released <a href="https://web.archive.org/web/20061227183442/http://www.democrats.reform.house.gov/story.asp?ID=873&Issue=Iraq+Reconstruction">a highly critical report</a>. </p><p>In their <a href="/facts/International_Advisory_and_Monitoring_Board/KRLeTpUk">International Advisory and Monitoring Board</a>'s <a href="http://www.iamb.info/pr/pr062204.htm">press release of June 22, 2004</a> states: </p> <i>"The IAMB was also informed by the CPA that contrary to earlier representations the award of metering contracts have been delayed and continues to urge the expeditious resolution of this critical issue."</i> <p>The CPA was shipping Iraqi oil through a pipeline system with non-functioning meters. The actual amount of oil being shipped would have had to be estimated. The Iraqi people were left in the position where they had to trust that the CPA's estimates were honest. </p> <h2 id="criticism">Criticism</h2> <h3>Lack of transparency</h3> <p>The Development Fund for Iraq receives 95 percent of the government proceeds from Iraqi oil sales. The 2003 budget also noted that the Development Fund will provide $1.2 billion for the budget. However, the relationship between the DFI and the budget has not been made clear—the budget anticipated oil revenues of $3.4 billion—much greater than the amount in the DFI then. Moreover, only the Provisional Authority Administrator could authorise spending from the DFI. Little information has been made public about the DFI. The Coalition Provisional Authority excluded information on its web site about any transfer of assets into and out of the DFI.<a class="footnote-ref" id="fnref:7" href="#fn:7"><sup>7</sup></a> </p> <h2 id="notes-and-references">Notes and references</h2> <h2 id="see-also">See also</h2> <ul><li><a href="/facts/International_Advisory_and_Monitoring_Board/KRLeTpUk">International Advisory and Monitoring Board</a></li> <li><a href="/facts/Dover_test/GNtF8tF7">Dover test</a></li> <li><a href="/facts/Special_Inspector_General_for_Iraq_Reconstruction/xBKbMzuy">Special Inspector General for Iraq Reconstruction</a></li></ul> <h2 id="external-links">External links</h2> <ul><li><a href="https://www.washingtonpost.com/wp-dyn/articles/A48543-2004May22.html">In Iraq, the Job Opportunity of a Lifetime: Managing a $13 Billion Budget With No Experience</a> <i><a href="/facts/The_Washington_Post/dRvzvqJc">The Washington Post</a>, May 22, 2004</i></li> <li><a href="https://web.archive.org/web/20040707094200/http://www.baltimoresun.com/news/nationworld/iraq/bal-te.money03jul03,0,5386955.story">U.S. accused of depleting Iraq fund : Money is intended for rebuilding use; international board plans to do audit</a>, <i>Baltimore Sun, July 3, 2004</i></li> <li><a href="https://web.archive.org/web/20181118175013/https://www.washingtonpost.com/ac2/wp-dyn/A26310-2004Jul3/?language=printer">U.S. Funds for Iraq Are Largely Unspent</a>, <i>The Washington Post July 4, 2004</i></li> <li><a href="https://www.washingtonpost.com/wp-dyn/articles/A53164-2004Jul15.html">U.S. Won't Turn Over Data for Iraq Audits</a>, <i>The Washington Post July 15, 2004</i></li> <li><a href="https://www.washingtonpost.com/wp-dyn/articles/A53164-2004Jul15.html">U.S. Won't Turn Over Data for Iraq Audits</a> <i>The Washington Post, July 16, 2004</i></li> <li><a href="https://www.washingtonpost.com/wp-dyn/articles/A25914-2004Jul29.html?referrer=email">Audit Finds Fraud, Other Abuses in Iraq Contract Awards</a>, <i>The Washington Post July 30, 2004</i></li> <li><a href="https://www.washingtonpost.com/wp-dyn/articles/A14333-2004Oct31.html?nav=headlines">U.S. Spends Only Small Part Of Funds to Help Rebuild Iraq</a>, <i>The Washington Post November 1, 2004</i></li> <li><a href="http://www.ftimes.com/main.asp?SectionID=1&SubSectionID=1&ArticleID=25316&TM=74844.16">Audit: $9 Billion Unaccounted for in Iraq</a>[<i>permanent dead link</i>] <i>Frankfort Indiana Times, January 31, 2005</i></li> <li><a href="https://www.washingtonpost.com/wp-dyn/articles/A21663-2005Feb13.html">Iraq Authority Made Millions In Cash Payments: Former Official Says Chaos Created 'Wild West' Scene</a> <i>The Washington Post, February 14, 2004</i></li> <li><a href="http://www.latimes.com/news/nationworld/nation/la-na-corrupt15feb15,1,6647055.story?coll=la-headlines-nation&ctrack=1&cset=true">Poor Oversight of Iraq Funds Blamed on Coalition Policy</a>, <i><a href="/facts/Los_Angeles_Times/jFHbcmb9">Los Angeles Times</a>, February 15, 2005</i></li> <li><a href="http://news.bbc.co.uk/2/hi/americas/4266231.stm">Iraq agency 'run like Wild West'</a>, <i><a href="/facts/BBC/qFateIz8">BBC</a>, February 15, 2005</i></li> <li><a href="https://web.archive.org/web/20050525203106/http://www.latimes.com/news/nationworld/world/la-fg-lastdays20may20,0,2663283,print.story?coll=la-home-headlines">Rules and Cash Flew Out the Window</a> <i>Los Angeles Times, May 20, 2005</i></li> <li><a href="https://www.theguardian.com/Iraq/Story/0,2763,1522983,00.html">So, Mr Bremer, where did all the money go?</a>, <i><a href="/facts/The_Guardian/H84wwJYM">The Guardian</a></i>, July 7, 2005</li> <li><a href="http://news.bbc.co.uk/2/hi/middle_east/4675902.stm">http://news.bbc.co.uk/2/hi/middle_east/4675902.stm</a> US official admits Iraq aid theft, By Adam Brookes, BBC News, February 2, 2006</li> <li><a href="http://www.corpwatch.org/article.php?id=12894">http://www.corpwatch.org/article.php?id=12894</a> <a href="https://web.archive.org/web/20060316150605/http://corpwatch.org/article.php?id=12894">Archived</a> 2006-03-16 at the <a href="/facts/Wayback_Machine/nmQ3a6JC">Wayback Machine</a> IRAQ: US Army officer Charged in Iraq Fraud Scam, Reuters, December 15, 2005</li> <li><a href="http://www.iamb.info/dfiaudit.htm">Audit documents</a></li> <li><a href="http://www.iamb.info/auditrep/r123103.pdf">Appendix to the audit of the Development Fund for Iraq – Matters noted involving internal controls and other operations issues during the audit of the Fund for the period to 31 December 2003 </a></li> <li><a href="https://web.archive.org/web/20050729180005/http://voanews.com/english/2005-06-21-voa67.cfm">Congress Wants Pentagon Documents on Iraq Development Funds</a>, <i><a href="/facts/Voice_of_America/PrTjgDn7">Voice of America</a>, June 21, 2005</i></li> <li><a href="https://web.archive.org/web/20050713090336/http://seattletimes.nwsource.com/html/nationworld/2002357082_iraqspend04.html">Iraq reconstruction riddled with waste, audits find</a>, <i><a href="/facts/The_Seattle_Times/NDbXsb3k">The Seattle Times</a>, July 4, 2005</i></li> <li><a href="https://www.theguardian.com/Iraq/Story/0,2763,1522983,00.html">"So, Mr Bremer, where did all the money go?"</a>, <i>The Guardian</i>, July 7, 2005</li></ul> <h2 id="references">References</h2> <ol> <li id="fn:1"><p>The Coalition Provisional Authority (2006-07-07). "THE DEVELOPMENT FUND FOR IRAQ". <a href="/wiki/Coalition_Provisional_Authority" target="_blank">/wiki/Coalition_Provisional_Authority</a> <a href="#fnref:1" class="footnote-back-ref">↩</a></p></li> <li id="fn:2"><p>"SIGIR report". January 2005. Archived from the original on 2007-04-10. Retrieved 2007-04-09. <a href="https://web.archive.org/web/20070410220443/http://www.sigir.mil/reports/quarterlyreports/Jan05.aspx" target="_blank">https://web.archive.org/web/20070410220443/http://www.sigir.mil/reports/quarterlyreports/Jan05.aspx</a> <a href="#fnref:2" class="footnote-back-ref">↩</a></p></li> <li id="fn:3"><p>"Fuelling suspicion:the coalition and Iraq's oil billions" (PDF). 2004-06-28. Archived from the original (PDF) on 2007-02-03. Retrieved 2007-03-16. <a href="https://web.archive.org/web/20070203050443/http://www.christianaid.org.uk/indepth/406iraqoilupdate/Fuelling_Suspicion.pdf" target="_blank">https://web.archive.org/web/20070203050443/http://www.christianaid.org.uk/indepth/406iraqoilupdate/Fuelling_Suspicion.pdf</a> <a href="#fnref:3" class="footnote-back-ref">↩</a></p></li> <li id="fn:4"><p>"REPORT OF THE INTERNATIONAL ADVISORY AND MONITORING BOARD OF THE DEVELOPMENT FUND FOR IRAQ" (PDF). Archived from the original (PDF) on 2007-02-06. Retrieved 2007-03-16. <a href="https://web.archive.org/web/20070206225228/http://www.iamb.info/pdf/IAMBreport.pdf" target="_blank">https://web.archive.org/web/20070206225228/http://www.iamb.info/pdf/IAMBreport.pdf</a> <a href="#fnref:4" class="footnote-back-ref">↩</a></p></li> <li id="fn:5"><p>Global Policy Forum. "Development Fund For Iraq". {{cite web}}: |author= has generic name (help) <a href="/wiki/Global_Policy_Forum" target="_blank">/wiki/Global_Policy_Forum</a> <a href="#fnref:5" class="footnote-back-ref">↩</a></p></li> <li id="fn:6"><p>International Advisory and Monitoring Board for Iraq. "Propose". <a href="/wiki/International_Advisory_and_Monitoring_Board" target="_blank">/wiki/International_Advisory_and_Monitoring_Board</a> <a href="#fnref:6" class="footnote-back-ref">↩</a></p></li> <li id="fn:7"><p>"DFI and budget revenues do not tally (pdf)" (PDF). Archived from the original (PDF) on 2008-08-07. Retrieved 2008-08-08. <a href="https://web.archive.org/web/20080807120352/http://www.iraqrevenuewatch.org/reports/080503.pdf" target="_blank">https://web.archive.org/web/20080807120352/http://www.iraqrevenuewatch.org/reports/080503.pdf</a> <a href="#fnref:7" class="footnote-back-ref">↩</a></p></li> </ol>