Audit finds all UN Oil-for-Food money was properly transferred to new Iraq fund

All known oil proceeds, reported frozen assets and transfers from the now-defunct United Nations Oil-for-Food programme have been "properly and transparently accounted for" in the coalition-managed Development Fund for Iraq (DFI), according to findings released today based on an audit by the firm KPMG.

The announcement was made by the International Advisory and Monitoring Board for Iraq (IAMB), a body which brings together Iraq, the UN and other international partners to ensure the appropriate use of the DFI.

Releasing a report based on the KPMG audit, the IAMB noted that the firm had qualified its opinions of DFI statements of cash receipts and payments because of weaknesses in control over the process of oil extraction, including the absence of metering. In addition, there were control weaknesses in the administration of resources handled by the Coalition Provisional Authority (CPA), which ran the country before an interim Iraqi administration was set up in June.

The report also identified inadequate controls at Iraqi ministries, citing "the absence of reconciliation procedures, insufficient payroll records, deviation from tendering procedures and inadequate contract monitoring by the CPA."

The IAMB was informed by the CPA that some of Iraq's oil resources were not accounted for and had been smuggled. Welcoming controls put in place to stem the problem, the Board called on the Baghdad Government "to enhance these measures so as to curtail smuggling."

One key concern voiced by the Board in previous reports relates to the use of sole-sourced contracts. The IAMB noted, at its March meeting, that some contracts using DFI funds had been awarded to a subsidiary of Halliburton without competitive bidding. In April, the IAMB asked the CPA for additional information on the matter, including access to audits of the sole-sourced contracts that had been conducted by the United States Defense Contract Audit Agency (DCAA).

Edited copies of the DCAA reports were provided to the IAMB in October. "The US observer informed the IAMB that portions of the reports had been redacted by the DCAA to safeguard proprietary information of the concerned parties." The versions received by the IAMB "highlight many shortcomings, including: non-completion of the required technical evaluations, unsupported costs and overstated costs."

The IAMB has agreed to a recent US Government proposal to conduct a special audit of sole-sourced contracts. That review, due to be conducted early next year, will ultimately produce a public report.