- The Washington Times - Sunday, January 30, 2005

ASSOCIATED PRESS

The U.S. authority in Iraq was not able 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.

U.S. officials relied on Iraqi audit agencies to account for the funds, but the offices were not functioning when the money was transferred from October 2003 to June 2004, according to an audit by Stuart Bowen Jr., special inspector general for Iraq reconstruction.

The findings were released yesterday among several reports Mr. Bowen issued on the Coalition Provisional Authority, the U.S. overseer of Iraq from June 2003 to June 2004.

Former CPA chief L. Paul Bremer criticized the report, saying it had “many misconceptions and inaccuracies,” and lacked professional judgment.

Mr. 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 CPA disbursed $8.8 billion to Iraqi ministries “without assurance the moneys were properly accounted for.”

U.S. officials, the report said, “did not establish or implement sufficient managerial, financial and contractural controls.” There was no way to verify that the money was used for the intended purposes of financing humanitarian needs, economic reconstruction, repair of facilities, disarmament and civil administration, it said.

Pentagon spokesman Bryan Whitman said yesterday that the authority was hamstrung by the “extraordinary conditions” under which it worked.

“We simply disagree with the audit’s conclusion that the CPA provided less-than-adequate controls,” Mr. Whitman said.

Turning over the money “was in keeping with the CPA’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 of Iraqi government offices. The assessment found that ministries suffered from staff shortages, poor security, disruptions in communications, damage and looting of government buildings, and lack of financial policies.

Some of the transferred funds may have paid “ghost” employees, the inspector general found.

CPA 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, U.S. officials found 1,417 guards on the payroll but could confirm 642.

When CPA staff members recommended that payrolls be verified before salary payments, its financial officials “stated the CPA would rather overpay salaries than risk not paying employees and inciting violence,” the inspector general said.

Mr. Bremer attacked many of the findings. Among his rebuttal points:

U With more than 1 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.

U.S. 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 suggested the CPA “should have placed hundreds of CPA auditors” in Iraqi ministries, contrary to the policy of the United States and the United Nations of giving Iraqi ministers responsibility for their budgets.

The CPA established a program review board, an independent judiciary and inspector generals in each agency to fight corruption.

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