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DISORDER, NEGLIGENCE AND MISMANAGEMENT: HOW THE CPA HANDLED IRAQ RECONSTRUCTION FUNDS
September 2004
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NEW YORK, September 28, 2004-Recent audits expose serious
failures in American oversight of Iraq's revenues and U.S.
reconstruction funds, said a report by the Open Society Institute's
Iraq Revenue Watch project.
The audits-released in late July by the Coalition Provisional
Authority Inspector General (CPA-IG)-paint a picture of disorder
and negligence. Contractors made little effort to control
costs, while the Coalition Provisional Authority, which was
in charge of managing Iraqi reconstruction funds, failed to
adhere to federally mandated procedures for awarding and overseeing
contracts.
"The CPA did not do its job regarding the oversight
of reconstruction funds," said Svetlana Tsalik, director
of the Revenue Watch project. "It failed to stop the
misuse and waste of money that belonged to the Iraqi people
and American taxpayers."
An analysis of the data suggests that of $1.5 billion in
contracts, the CPA awarded U.S. firms 74 percent of the value
of all contracts paid for with Iraqi funds. Together with
its British allies, U.S. and U.K. companies received 85 percent
of the value of all such contracts. Iraqi firms, by contrast,
received just 2 percent of the value of contracts paid for
with Iraqi funds. "Government favorites such as Kellogg,
Brown and Root benefited at the expense of Iraqi companies
whose workers badly need jobs," said Tsalik.
The report finds that 60 percent of the value of all contracts
paid with Iraqi funds went to Halliburton subsidiary Kellogg,
Brown & Root (KBR)-the same company that Pentagon auditors
in December 2003 found had overcharged the U.S. government
for as much as $61 million for fuel imports into Iraq. A criminal
investigation of KBR was launched by the Department of Defense
in February 2004.
The CPA-IG audits confirm the findings of previous ones.
A report released in July 2004 by the International Advisory
and Monitoring Board, the watchdog body set up by the United
Nations, found numerous problems in the CPA's control and
use of Iraqi oil assets during the occupation. These include
the absence of oil metering to control theft, poor record-keeping
on oil sales, an absence of oversight of spending by the Iraqi
ministries, the use of noncompetitive bidding procedures for
some contracts, and the CPA's refusal to transmit crucial
information to the UN-mandated body.
A recent Pentagon audit of KBR's billing system, which shows
that systematic deficiencies in the company's accounting and
billing procedures incurred significant costs to U.S taxpayers
and to Iraqi oil revenues, is further proof of mismanagement.
Following the model of its American predecessor, the Iraq
interim government to date has provided scant information
about how it is managing Iraq's oil revenues.
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