Global Policy Forum

By Emad Mekay

Three U.S. senators have called on Defense Secretary Donald Rumsfeld to account for 8.8 billion dollars entrusted to the Coalition Provisional Authority (CPA) in Iraq earlier this year but now gone missing. In a letter Thursday, Senators Ron Wyden of Oregon, Byron L Dorgan of North Dakota and Tom Harkin of Iowa, all opposition Democrats, demanded a "full, written account" of the money that was channeled to Iraqi ministries and authorities by the CPA, which was the governing body in the occupied country until Jun. 30.

The loss was uncovered in an audit by the CPA's inspector general. It has not yet been released publicly and was initially reported on the website of journalist and retired U.S. Army Col David Hackworth. The CPA was terminated at the end of July to make way for an interim Iraqi government, which is in turn scheduled to be replaced by an elected body early in 2005. "We are requesting a full, written account of the 8.8 billion dollars transferred earlier this year from the CPA to the Iraqi ministries, including the amount each ministry received and the way in which the ministry spent the money," said the letter.

The senators also requested that the Pentagon designate a date by which it will install adequate oversight and financial and contractual controls over money it spends in Iraq. They accused the CPA of transferring the "staggering sum of money" with no written rules or guidelines to ensure adequate control over it. They pointed to "disturbing findings" from the inspector general's report that the payrolls of some Iraqi ministries, then under CPA control, were padded with thousands of ghost employees. They refer to an example in which CPA paid the salaries of 74,000 security guards although the actual number of employees could not be validated.

The report says that in one case some 8,000 guards were listed on a payroll but only 603 real individuals could be counted. "Such enormous discrepancies raise very serous questions about potential fraud, waste and abuse," added the letter. This is not the first time that U.S. financial conduct in Iraq has come under fire, specifically over funds slated for reconstruction after the U.S.-led attack in March 2003, which then went unaccounted for.

In June, British charity Christian Aid said at least 20 billion dollars in oil revenues and other Iraqi funds intended to rebuild the country have disappeared from banks administered by the CPA. Watchdog groups have complained before about the opaque nature of the CPA's handling of Iraqi money and the lack of transparency of U.S. and Iraqi officials.

Halliburton, a giant U.S. company that has been awarded 8.2 billion dollars worth of contracts from the Defense department to provide support services such as meals, shelter, laundry and Internet connections for U.S. soldiers in Iraq, has been targeted for allegedly overcharging for those services. "Continued failures to account for funds, such as the 8.8 billion dollars of concern here - and the refusal, so far, of the Pentagon to take corrective action are a disservice to the American taxpayer, the Iraqi people and to our men and women in uniform," the senators wrote.

Groups critical of the lack of transparency in the CPA's spending have been particularly angry that the authority used Iraqi money to pay for questionable contracts -- some awarded without a public tendering process -- with U.S. companies. Washington initially restricted the most lucrative reconstruction contracts in Iraq to gigantic U.S. firms that appeared able to reap huge profits, fueling accusations the Bush administration was seeking to benefit a select few U.S. companies rather than find the best, and possibly the cheapest, options to help rebuild Iraq.

After loud complaints, the contracting process was officially opened to firms from other nations, but many of them still insist they are not competing on a level playing field with U.S. businesses. A Pentagon spokeswoman told IPS that the CPA administered the money transparently and that Iraqi ministries used the eight billion dollars in ways that directly "benefited the people of Iraq."

"The CPA provided these funds to Iraqi ministries from the Development Fund for Iraq through a transparent and open budget process," said Lt Col Rose-Ann L Lynch of the Office of the Assistant Secretary of Defense for Public Affairs. "This is Iraqi money -- revenue from such sources as oil sales -- not U.S. funds."

The official added that the money was used to pay the salaries of hundreds of thousands of government employees, teachers, health workers, administrators and government pensioners, as well as to fund the Iraqi Defense ministry and police forces.