WASHINGTON -- The US occupation authority in Iraq was unable to keep track of nearly $9 billion it transferred to government ministries, which lacked financial controls, security, communications, and adequate staff, an inspector general has found.
The US officials relied on Iraqi audit agencies to account for the funds, but those offices were not even functioning when the funds were transferred between October 2003 and June 2004, according to an audit by a special US inspector general.
The findings were released yesterday by Stuart Bowen Jr., special inspector general for Iraq reconstruction. Bowen issued several reports on the Coalition Provisional Authority, the US occupation government that ruled Iraq from June 2003 to June 2004.
The official who led the authority, L. Paul Bremer III, submitted a blistering written reply to the findings, saying the report had "many misconceptions and inaccuracies" and lacked professional judgment.
Bremer said the report "assumes that Western-style budgeting and accounting procedures could be immediately and fully implemented in the midst of a war."
The inspector general said the occupying agency disbursed $8.8 billion to Iraqi ministries "without assurance the moneys were properly accounted for."
US officials "did not establish or implement sufficient managerial, financial, and contractual controls," the report said. There was no way to verify that the money was used for its intended purposes of financing humanitarian needs, economic reconstruction, the repair of facilities, disarmament, and civil administration.
Bryan Whitman, a Pentagon spokesman, said yesterday that the authority was hamstrung by the "extraordinary conditions" under which it worked throughout its mission.
"We simply disagree with the audit's conclusion that the [authority] provided less than adequate controls," Whitman said.
Turning over the money "was in keeping with the [authority's] responsibility to transfer these funds and administrative responsibilities to the Iraqi ministries as an essential part of restoring Iraqi governance."
The inspector general cited an International Monetary Fund assessment in October 2003 on the poor state of Iraqi government offices. The assessment indicated ministries suffered from staff shortages, poor security, disruptions in communications, damage and looting of government buildings, and lack of financial policies.
Authority staff learned that 8,206 guards were on the payroll at one ministry, but only 602 could be accounted for, the report said. At another ministry, US officials indicated there were 1,417 guards on the payroll but could confirm only 642. When staff members of the US occupation government recommended that payrolls be verified before salary payments, authority financial officials "stated the [authority] would rather overpay salaries than risk not paying employees and inciting violence," the inspector general said.
Among Bremer's rebuttal points:
With more than a million Iraqi families depending on government salaries, there would have been an increased security threat if civil servants had not been paid until modern pay records were developed.
US policy was to build up the Iraqi force guarding government facilities, and it was better to accept an imperfect payroll system than "to stop paying armed, young men" providing security.
The report was suggesting the authority "should have placed hundreds of [authority] auditors" in Iraqi ministries, contrary to US and UN policy of giving Iraqi ministers responsibility for budgets.