Monday July 19, 2004 - While this country was digesting the findings of Lord Butler's report on intelligence findings in the run-up to the invasion of Iraq, a more damning account of intelligence failings in Iraq was being unveiled in Washington - failings that occurred since the war, under the aegis of the occupiers, and involving billions of dollars. Last week's report by the International Advisory and Monitoring Board on Iraq, responsible for overseeing the nearly $20bn of funds accruing to the Iraqi people from oil revenues since the occupation, shed some light on what has happened to much of that money. While the board's auditors said they had found no evidence of fraud by the US-backed Coalition Provisional Authority, they did find a disturbing pattern of lax controls, inadequate or absent records, and a lack of transparency. In war now being justified on the grounds of democracy and stability for the people of Iraq, the findings suggest a dangerous template for the country's future.
The monitoring board was established in May 2003 by the UN security council, to guard against accusations that Iraq's oil wealth was open to abuse by the US-led coalition. The CPA was authorised by the council to use the oil revenues for repairing oil facilities, construction and vital imports, as well as goodwill projects requested by the military. The monitoring board itself includes representatives from the UN, the World Bank and the International Monetary Fund - hardly a hostile group. Yet the audit conducted for the board by the accounting firm KPMG recorded a deeply concerning lack of cooperation from the US authorities.

The auditors complained that visits to Iraqi ministries were so difficult that they managed to meet only one. CPA staff resisted their efforts to gather information or documents - citing lack of time and other priorities - and made it difficult for the auditors to even receive entry passes to the "green zone", the heavily fortified area in Baghdad where the CPA and government are based. When they did manage to get in, the auditors found primitive and unreliable book-keeping, along with "critical deficiencies" in the way oil production and sales were recorded. The report also found a lack of oversight and missing details involving the emergency and regional response programmes - discretionary funds given to military commanders, allowing them to hand out dollars to keep the peace. This "greatly diminishes the transparency of the expenditures made," according to the auditors, and left it "open to fraudulent acts".

But the report's concerns also lead back to the US company that has become inextricably linked with the occupation: Halliburton. Given that the US vice president Dick Cheney was previously chief executive of Halliburton, the potential conflict of interest over its business dealings in Iraq were always going to be a focus of concern. Yet when the monitoring board's auditors asked for details of contracts involving Halliburton being paid for out of the oil funds, the Pentagon repeatedly refused. At issue are three contracts, worth a total of $1.4bn, awarded in noncompetitive tenders - meaning Halliburton was the sole bidder. The monitoring board rightly concluded that further investigation is required.

While the Butler report was couched in the language of the mandarin, the auditor's report was written in the language of accounting. But it is no less damning for that. When accountants say, as KPMG did, "financial controls were insufficient to provide reasonable assurance" that funds were properly spent, alarm bells should ring. Were the CPA a company listed on the New York stock exchange, a report such as this would see it in serious trouble. But since the CPA handed authority to the Iraqi government, the great danger is that Iraq's new rulers can simply continue where the CPA left off.

http://www.guardian.co.uk/leaders/story/0,3604,1264047,00.ht
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