Legislative Call:
IRAQ SUPPLEMENT REQUIRES TRANSPARENCY
Open Society Policy Center
September 30, 2003

Legislative Action

Congress must insist that clearly defined standards of transparency are incorporated into the $87 billion appropriation for Iraq. Congress must require the President to submit at minimum a quarterly report, detailing the processes by which US funds are disbursed in Iraq, under the conditions elaborated below.

Recommended Legislative Language:
No competitive or non-competitive contracting or purchase activities may be undertaken using any of these funds unless the President certifies that the International Advisory and Monitoring Board mandated by Resolution 1483 has been established, and submits a quarterly report detailing:

• The extent of Iraqi consultation and participation in the contracting and purchase agreement process.
• Actions taken to be in compliance with the transparency obligations of UN Resolution 1483.
  An independent cost and capacity estimate of the activity in question.
• In cases where non-Iraqi sources are awarded contracts, an explanation demonstrating that Iraqi companies lack the necessary resources and experience to perform the service at the independently estimated cost, and/or within a reasonable time frame.
• In cases where a no-bid contracting process is employed, a detailed justification for the non-competitive tender, including a demonstration that this justification was made available to the Iraqi public.

(An Iraqi Public Finance Oversight Board should be established as a formal channel to achieve an acceptable level of Iraqi consultation for all large-purchase contracting activities undertaken with these funds. The International Advisory and Monitoring Board, as mandated under Res. 1483, should be empowered to audit all aspects of Development Fund for Iraq. The international community considers this condition essential to any expenditure on Iraq's Reconstruction. UN Resolution 1483 mandates that the Coalition Provisional Authority manage Iraqi Funds in a transparent manner to meet the humanitarian needs of the Iraqi people, for the economic reconstruction and repair of Iraq's infrastructure, for the continued disarmament of Iraq, and for the costs of Iraqi civilian administration, and for other purposes benefiting the people of Iraq. Actions should be taken by the Coalition Provisional Authority to ensure that all contracting and purchase activity is undertaken in the most cost-effective and efficient manner.)

Background

On September 8, the White House requested an additional $87 billion of funding to cover the continued occupation and reconstruction of Iraq and Afghanistan in 2004. Of this $87 billion, $66 billion will be for military operations, and $21 billion will be for reconstruction in Iraq.

It has become clear that the reconstruction of Iraq will remain a heavy burden for the American taxpayer into the foreseeable future. Administration officials have acknowledged that the $21 billion is far short of the estimated $50-$100 billion needed for reconstruction in Iraq over the next few years. The President's request assumes the shortfall will be covered by $40 billion in international contributions at the donors' conference scheduled for late October in Madrid. However, best estimates are that international contributions will at most, total $2-3 billion.

The need for transparency
Transparency is needed both as a matter of standard Congressional oversight, and to address international and Iraqi skepticism about the US occupation of Iraq. This is necessary part of building the trust needed to create a democratic free Iraq.

As the occupying power, the US-led Coalition currently wields executive authority over all decisions relating to the control of Iraq's oil and natural resources, as well final say in all large purchase contracting agreements, and privatization of Iraq's industries. Failure to be transparent with regard to these decisions risks undermining Iraqi support for the US-led transition to democracy.

Potential donors have also made it clear that their military and economic support is contingent on a UN Security Council resolution mandating a multi-national security force in Iraq, and transfer of substantive political control to an interim Iraqi government. These nations have indicated their unwillingness provide aid to the Development Fund for Iraq, mandated by UN Resolution 1483, unless the US demonstrates markedly greater transparency in its management of Iraqi assets.

For these reasons it is essential that the US Congress hold the Coalition Provisional Authority to the highest standards of transparency.

Congressional Oversight Reccommendations for Iraq

Congress must insist that the following standards of transparency are incorporated into the Administration's $87 billion request before it is approved:

Transparent Governance of Iraqi finances

• The Coalition Provisional Authority (CPA) has not lived up to its promise of transparency in the management of Iraq's public finances. Flows to and from the Development Fund for Iraq should be made public as required by the transparency obligations in UN Resolution 1483.
• The Program Review Board, which determines Iraqi expenditures, should make its meeting minutes public, as required by its founding order.
• Full information about the execution of Iraq's 2003 budget and a draft of the 2004 budget should be made public.
• Contracts made under the authority of the CPA should be made public. Congress should require information about which companies will profit from US reconstruction spending. The lack of transparency of reconstruction contracts creates the potential for abuse of taxpayer money, and also risks tarnishing America's image as liberator of Iraq.
• The Administration must ensure that reconstruction spending is transparent; that contract opportunities are widely publicized and open to all bidders, that winners are selected on the basis of providing the highest and speediest quality service at the lowest cost, regardless of nationality; and that Iraqis are actively involved in and increasingly in charge of their country's reconstruction. Increased Iraqi involvement will likely lower the cost to the US.
• The balance held in the Development Fund for Iraq should be made public and updated at regular intervals.

Full Iraqi Participation

• Iraqis should be given membership on the International Advisory and Monitoring Board that oversees Iraq's Development Fund. They should be included on the 11 member Program Review Board beyond their current one member presence. And they should be represented with voting power on every evaluation committee that awards tenders.
• Iraqis should also be given an opportunity to comment extensively on the Iraqi budget for 2004, just as we expect the chance to debate our own US budget.
• US taxpayers should be provided with an overall timeline for transition to Iraqi self-governance, including a plan for handing over progressively more fiscal authority to the Iraqi Governing council and Cabinet.

A Political Map for International Involvement

The terms of reference for the International Advisory and Monitoring Board (IAMB), mandated by UN Resolution 1483 to monitor Coalition management of Iraq's revenue, should be completed so that it can begin its work. These terms of reference should ensure that the IAMB has Iraqi voting members and that there is a plan to transfer the Board's responsibilities to an elected Iraqi successor government.