Past and present management of Iraq's oil revenue continues to be questioned by international watchdog groups.
The International Advisory and Monitoring Board, the United Nations-mandated agency charged with monitoring US spending of Iraqi oil revenue, criticized the Coalition Provisional Authority June 22 for not furnishing information in a timely manner to independent auditor KPMG International.
The Development Fund for Iraq uses petrodollars to fund rebuilding projects; CPA manages revenues, disbursements, and account balances in consultation with the Iraqi Governing Council, the Iraqi minister of finance, and the governor of the Central Bank of Iraq.
"The IAMB regrets, despite its repeated requests, the delay in receiving reports on audits undertaken by various agencies, on sole-sourced contracts funded by the DFI," the group said last week after meeting in Paris.
IAMB also said that it was informed by CPA that metering contract awards have been delayed. IAMB further complained about the CPA dragging its feet on providing information needed to complete audits of the State Oil Marketing Organization.
KPMG expects to issue a final audit report by July 14, which will be nearly 2 weeks after CPA formally transfers control to a US-endorsed interim government that will remain in place until elections are held, possibly next year. IAMB is tentatively scheduled to meet July 14-15 and then again Sept 7-8.
IAMB's comments came about a week after human rights group Open Society Institute criticized how the US is spending oil revenues before the June 30 government transition date. OSI had specific worries about a DFI board approving nearly $2 billion in Iraqi funds for reconstruction projects this month.
Svetlana Tsalik, director of OSI's Revenue Watch, alleged that the money coming out of DFI is going to the same places the US Congress has already earmarked US taxpayer funds. For example, DFI allocated $500 million for Iraqi security forces, even though Congress allocated $3.2 billion for the same purpose, and $315 million for the electric power sector despite a $5.5 billion US appropriation for the same sector. As OGJ went to press last week, CPA officials could not be reached for comment.
A June 8 UN Security Council resolution requires the new interim government to satisfy all outstanding obligations against DFI made before June 30.
Scrutiny of UN
Concerns by IAMB and others over the US's current oil revenue management come at a time when the UN is coming under its own scrutiny for past involvement in the Oil-for-Food program, established in 1996 to allow former Iraqi Pres. Saddam Hussein's government to use oil sales to pay for food, medicine, and infrastructure maintenance while international sanctions remained in place.
A recent General Accounting Office report estimated that during 1997-2002 the former Iraqi regime acquired $10.1 billion in illegal revenues, including $5.7 billion from smuggled oil exports, and $4.4 billion from oil sale surcharges and other illicit commissions from suppliers selling goods to Iraq under the UN program.
The UN Security Council, which includes the US, allowed the Iraq government to negotiate oil contracts directly with oil companies and traders, but a UN office was responsible for examining the contracts for price and value. GAO said it remains unclear how that function was performed; UN external audits have found no evidence of program fraud.
Meanwhile, the US Attorney for the Southern District of New York is in the process of issuing subpoenas to companies that bought oil from the now-defunct UN program. Companies have not been accused of wrongdoing but have been asked to supply documents related to those oil sales. Companies who have already been issued subpoenas include ExxonMobil Corp., ChevronTexaco Corp., Valero Energy Corp., and Premcor Inc.