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UN panel reports U.S. irregularities in Iraqi oil sales

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UN panel reports U.S. irregularities in Iraqi oil sales


12/15/2004 8:00:00 AM GMT


A UN audit board reported widespread mismanagement in Iraq’s oil exports under the United States-led occupation authorities between May 2003 and June 2004, including the use of non-competitive bidding, financial irregularities, failure to curb smuggling, barter transactions and inadequate controls of extraction.


The watchdog panel, the International Advisory and Monitoring Board of the Development Fund for Iraq (IAMB), also said in its report, published Tuesday, that separate audits on sole-sourced contracts from the U.S. Defense Contract Audit Agency were delayed.


It added that it received some documents, that were censored "to safeguard proprietary information of the concerned parties," for five contracts totaling $812 million, which it said showed many shortcomings, among them inadequate technical assessments and overstated costs.


The panel also said that it had demanded the "special audits" after finding that "some contracts using DFI (Development Fund for Iraq) funds had been awarded to a Halliburton subsidiary without competitive bidding."


The DFI manages the proceeds of oil export sales from Iraq, surplus funds from the Oil-for-Food Program, and Iraqi assets frozen abroad.


Since the U.S. invasion of Iraq in March 2003, Halliburton, the Texas-based oil services giant once headed by the U.S. Vice President Cheney, has handled some 10 billion dollars in contracts to restore Iraqi oil, feed, house and care for U.S. forces in Iraq, but has been accused of overcharging, cost overruns, accounting problems and preferential treatment.


Control weaknesses


The IAMB was appointed by the UN in October 2003 to monitor the DFI. It includes officials from the United Nations, the Arab Fund for Economic and Social Development, the International Monetary Fund and the World Bank.


It hired the independent auditing company of KMPG, an international accounting cooperative based in Switzerland, in March 2004. KMPG released two reports in 2004 covering the period from May 22, 2003 to June 28, 2004. According to IAMB, the audit reported "a number of important weaknesses in the overall financial management system."


The irregularities included "an absence of control over oil extraction," repeated accounting inadequacies, lax financial controls, and improper contracting procedures "in particular the use of single-source contracting."


IAMB also said that KPMG reported "that the CPA believes that an unknown quantity of petroleum and petroleum products was smuggled out of Iraq, especially in the early months of post-hostilities."


"The control weaknesses identified in the KPMG reports all require follow-up and attention, and the external auditor should have access to all ministries," IAMB said in its report, which also suggests a list of recommendations.


"The Interim Government of Iraq has formed a committee to follow-up on the recommendations and to report progress on implementation to the IAMB," the report said.


Al Jazeera

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