AGENCIES THAT OVERSEE SPENDING ON IRAQI RECONSTRUCTION
An Iraq Revenue Watch Backgrounder
June 2004

International Advisory and Monitoring Board (IAMB)

The International Advisory and Monitoring for Iraq (IAMB) was created under UN Resolution 1483, which was passed on May 22, 2003 to ensure transparency in the Development Fund for Iraq's (DFI) allocation and dispersal of Iraq's oil revenues. The IAMB is comprised of members representing the UN, IMF, Arab Fund for Economic and Social Development, and the World Bank. These members have worked in partnership with the Coalition Provisional Authority to hire an independent accounting firm, KPMG Audit & Risk Advisory Services, to conduct a full audit of the DFI from the Fund's inception last May. Preliminary findings by KPMG indicated serious accounting weaknesses and opportunities for corruption, as well as obstacles to the auditors' access to needed documents and people.
http://www.iraqrevenuewatch.org/reports/062404.pdf

KPMG was also appointed by the Iraqi Governing Council to audit the United Nations Oil-for-Food program in April 2004, but its work was immediately halted when Ambassador Bremer ordered the contract to be awarded through public tender. The IAMB announced in March that it is also considering ordering a special audit of money from the Development Fund used to award contracts to Halliburton Co. without competitive bidding in 2003. As of June 2004 $20.2 billion has been taken in by DFI mostly through the Oil-for-Food program and proceeds from oil exports. $9 billion has been spent so far on DFI projects with an additional $4.6 billion in commitments not yet paid.
Link: www.iamb.info
Reports: Due to be completed by June 30th and made public by mid-July.

Coalition Provisional Authority Office of the Inspector General (CPA-IG)

The Coalition Provisional Authority Office of the Inspector General (CPA-IG) was established in Public Law 108-106 by the U.S. Congress on November 6, 2003, to serve as "as an independent, objective evaluator of the operations and activities of the CPA," according to the official website. The CPA-IG reports directly to Administrator Bremer, although it has independent authority to conduct audits and investigations without the CPA Administrator's approval. The CPA-IG delivers quarterly congressional reports, which can be found on the agency's website. By April 30, 2004, the CPA had disbursed a total of $7.9 billion from the Development Fund for Iraq. According to the CPA-IG, $4.8 billion in DFI funds is currently committed to projects, and $5.5 billion is obligated toward projected 2004 budget items. The CPA has projected that the Fund will receive $14.5 billion in additional Iraqi oil export revenues by the end of FY04. The CPA has also coordinated the spending of U.S. reconstruction aid to Iraq. As of June 1, of the $18.4 billion appropriated by the U.S. Congress for 2004, the CPA has disbursed only $3.7 billion of this aid package. Major contractors include Motorola, Halliburton via its Kellog, Brown and Root (KBR) subsidiary, Parsons Information, Technology Group, the Parsons Iraq Joint Venture and IAP Worldwide among others. No audits of individual contract awards have been released to this point.
Link: www.cpa-ig.org
Reports: http://www.cpa-ig.org/reports.html

General Accounting Office (GAO)

The General Accounting Office is a US federal agency responsible for evaluating the programs and expenditures of the US government, at the request of Congress, to foster accountability and efficiency. Recently, the GAO issued a report concerning the state of Iraqi assets after the ouster of Saddam Hussein. The report estimates that the former government took control of over $10 billion in oil assets and diverted funds intended for humanitarian efforts. Other reports investigate alleged mismanagement in the UN Oil for Food program and the effectiveness of sanctions against Iraq during the pre-war period.

Link: www.gao.gov
Reports: http://www.gao.gov/docsearch/featured/oif.html - Operation Iraqi Freedom and Its Aftermath
http://www.gao.gov/new.items/d04579t.pdf - Recovering Iraq's Assets
http://www.gao.gov/new.items/d04730t.pdf - Oil for Food Report
http://www.gao.gov/new.items/d04562t.pdf - Military prepositioning in Iraq
http://www.gao.gov/new.items/d03792r.pdf - Rebuilding Iraq (2003)
http://www.gao.gov/new.items/d02625.pdf - UN Sanctions on Iraq (2003)

Independent Inquiry Committee into the Oil for Food Program (Volcker Commission)

The Volcker Commission was established by UN Secretary General Kofi Annan on April 21, 2004 to investigate allegations of abuse involving the UN Oil-for-Food program in Iraq. The Commission is headed by former Chairman of the US Federal Reserve Paul Volcker. He is joined by South African Constitutional Court Justice Richard Goldstone, and Mark Pieth, an international money-laundering expert with the Organization for Economic Cooperation and Development. Although the Commission does not have subpoena power, the Secretary General has publicly stated that the Commission will have the full cooperation of the UN during its investigation. The GAO report investigating alleged abuses found that reported costs for humanitarian assistance under the UN-administered Oil-for-Food program were inflated by 10%. This allowed the Iraqi government to oversell oil to meet the artificially inflated need, and pocket the profit.

Link: www.iic-offp.org
Reports: http://www.iic-offp.org/documents/Report.pdf
Also see:http://www.economist.com/agenda/displayStory.cfm?story_id=2618260
http://www.un.org/apps/news/infocusRel.asp?infocusID=97&Body=Oil-for-Food&Body1=inquiry

The US Agency for International Development - Office of the Inspector General (USAID-IG)

The US Agency for International Development - Office of the Inspector General is charged with oversight duties for all USAID activities and allocations. USAID was granted $335 million in supplemental appropriations in addition to $1.8 billion allocated to the agency in 2003 for Iraqi reconstruction activities. USAID-IG has investigated the process of competitive bidding for these contracts. In doing so, it has conducted an internal investigation and reported the findings to Congress and to the general public. These reports also cover USAID's compliance with federal regulations during the award process. USAID-IG reports generally revolve around a specific contract, project or partner. As of the end of February, about $660 million had been spent on reconstruction activities operated in conjunction with the CPA. While audits are ongoing, investigations have already been completed on some contractors such as Bechtel National, Inc. USAID-IG has concluded that although the awards process had been "less than full and open," this was justified given the priority of the reconstruction effort, and fell within federal regulations. The USAID-IG recommended a number of improvements to future contracts, including the use of a standard checklist of contracting steps that must be followed, and use of a standardized illustrative budget and cost proposal format.
Link: www.usaid.gov/oig
Reports: http://www.usaid.gov/oig/iraq_reports.html - All reports
http://www.usaid.gov/oig/iraq_doc/memo04_006.pdf - Bechtel National, Inc. contract
http://www.usaid.gov/oig/iraq_doc/memorandum_04_0051.pdf - BearingPoint, Inc. contract
http://www.usaid.gov/oig/public/fy04rpts/e-266-04-001-p.pdf - Education audit for Iraq
http://www.usaid.gov/oig/iraq_doc/memorandum_04_004.pdf - SSA Marine contract

Department of Defense - Office of the Inspector General (IG DOD)

The Department of Defense - Office of the Inspector General (IG DOD) operates in a similar capacity to USAID-IG with regard to DOD matters. The IG DOD is responsible for all auditing activities relating to the Department of Defense. Since the reconstruction efforts in Iraq have begun, the IG DOD has investigated contracts awarded for humanitarian assistance. Overall the DOD has been awarded the lion's share of 2004 U.S. allocations for relief and reconstruction, totaling $5.3 billion, to be distributed in conjunction with the CPA. These contracts have been awarded to Halliburton subsidiary KBR, SAIC and Northrup-Grumman among others. To date, few investigations have been conducted into the state of DOD contract awards in Iraq. However, in the report linked below, numerous errors were reported in the contract award process, including price reasonableness determinations being ignored in nearly all of the contracts surveyed. The DOD is also probing Halliburton directly after it was discovered that the company overcharged the government $61 million for gasoline costs in Iraq.

Link: http://www.dodig.osd.mil
Reports: http://www.dodig.osd.mil/Audit/reports/FY04/04057sum.htm - Investigation of humanitarian assistance contracts