Pentagon can’t account for $8.7 billion in Iraqi funds


BAGHDAD — The Defense Department is unable to properly account for $8.7 billion out of $9.1 billion
in Iraqi oil revenue entrusted to it between 2004 and 2007, according
to a newly released audit that underscores a pattern of poor
record-keeping during the war.

Of that amount, the military failed to provide any records at all for $2.6 billion
in purported reconstruction expenditure, says the report by the Special
Inspector General for Iraq Reconstruction, which is responsible for
monitoring U.S. spending in Iraq.
The rest of the money was not properly deposited in special accounts as
required under Treasury Department rules, making it difficult to trace
how it was spent.

Although there is no apparent evidence of fraud,
the improper accounting practices add to the pattern of mismanagement,
reckless spending and, in some instances, corruption uncovered by the
agency since 2004, when it was created to oversee the total of $53 billion in U.S. taxpayer money appropriated by Congress for the reconstruction effort.

“The breakdown in controls left the funds
vulnerable to inappropriate uses and undetected loss,” notes the audit
report, a copy of which was obtained Monday by the Los Angeles Times.

Special Inspector General Stuart Bowen,
who heads the agency, said repeated investigations have shown that
“weak oversight is directly correlated to increased numbers of cases of
theft and abuse.”

In this instance, the audit focused on Iraqi
revenue earmarked for reconstruction under a 2004 arrangement granting
the Defense Department access to Iraq’s
oil proceeds at a time when the country did not have a fully
functioning government and was unable to undertake urgently needed
projects. The revenue was deposited in a special account in New York, called the Development Fund for Iraq.

The report comes as Iraqis are increasingly
frustrated with their own government’s inability to provide basic
services, or to explain how tens of billions of dollars’ worth of oil
revenue has been spent since 2007. The alleged U.S. mismanagement of
Iraqi money is certain to revive grievances against the U.S. for
failing to make a big dent in the country’s reconstruction needs
despite massive expenditures.

Iraqis are still angry about the failure to account for a separate $8.8 billion in Iraqi oil revenue spent by the U.S.-led Coalition Provisional Authority in 2003 and 2004.

If more money is found to be missing, “Iraq will definitely try to get it back,” said Ali Musawi, a media adviser to Prime Minister Nouri al-Maliki.

Most of the money covered in the latest audit has been spent, but the study found $34.3 million that should legally have been returned to Iraq in 2007, when Iraq’s government assumed responsibility for its finances.

The Defense Department has not said what it intends to do with the money, which is “at risk” of being spent, the audit said.

In response to the audit findings, the Defense
Department concurred with recommendations that it establish better
guidelines for managing such funds. But a letter from U.S. Central
Command emphasized that failure to establish deposit accounts for the $8.7 billion does not mean it all cannot be accounted for.

The U.S. reconstruction effort is winding down as
the military withdraws, and no more new U.S. funds are expected to be


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