Monday, January 31, 2005

An open letter to critics of the U.N. and the "Food for Oil" programme in Iraq...

Every time the subject of Iraq and the UN comes up in the same breath, there are many who immediately point up the "graft and corruption" of the UN in relation to the "Iraq Oil for Food Programme."

Now I am not a believer in "two wrongs making a right", except in political standing. The only thing that "two wrongs" can make in the real world is a bigger mess than just one wrong.

For all that, this article at Reuters did catch my eye this evening.

U.S Did Not Safeguard $8.8 Bln of Iraq Money -Audit
Sun Jan 30, 2005 04:36 PM ET

By Sue Pleming

WASHINGTON (Reuters) - The U.S.-led authority that governed Iraq after the 2003 invasion did not properly safeguard $8.8 billion of Iraq's own money and this lack of oversight opened up these funds to corruption, said a U.S. audit released on Sunday.

The U.S. Special Inspector General for Iraq Reconstruction was scathing in criticism of how the Coalition Provisional Authority handled Iraqi money until it handed over power last June to Iraq's interim government.

"The CPA provided less-than-adequate controls for approximately $8.8 billion in DFI (Development Fund for Iraq) funds provided to Iraqi ministries through the national budget process," said the report, released on the same day Iraqis voted in elections.

"We believe the CPA management of Iraq's national budget process and oversight of Iraqi funds was burdened by severe inefficiencies and poor management," it said.

DFI is made up of proceeds from Iraqi oil sales, frozen assets from foreign governments and surplus from the U.N. Oil for Food Program. Its handling has already come under fire by several U.N.-mandated audits.

The report said the CPA failed to ensure funds were not used to pay "ghost" employees and cited one example where CPA officials authorized payment for about 74,000 guards but only a fraction of these could later be validated.

The audit said there was no assurance that the funds were used for purposes mandated by United Nations resolutions. U.N auditors have also accused the CPA of sloppily managing billions of dollars of Iraqi oil money.

So, there are the charges.


Former CPA chief Paul Bremer, who received a Presidential Medal of Freedom last month for his work in Iraq, rejected the U.S. audit's findings and said it did not "meet the standards that Americans have come to expect of the Inspector General."

"The draft report assumes that Western-style budgeting and accounting procedures could be immediately and fully implemented in the midst of war," said Bremer in a written reply to auditors when he received the first draft.

Bremer said any delays in paying Iraqi public servants' salaries would have raised the security threat to Iraqis and Americans and cost more lives.

In addition, Bremer said the Iraqi ministries had no regular payroll systems and the "system had been corrupted beyond repair by decades of cronyism and ad hoc fixes."

Pentagon spokesman Bryan Whitman also disagreed with the audit's findings and said the CPA had instituted a series of reforms, including actions to fight corruption.

"The CPA was operating under extraordinary conditions from its inception until mission completion. Throughout, the CPA strived earnestly for sound management, transparency, and oversight," said Whitman in E-mailed comments to Reuters.

The auditors said they understood the CPA was working in a dangerous environment but it had a responsibility to ensure Iraqi ministries had basic financial controls before they were entrusted with handling such large amounts of money.

"The fact that the Iraqi ministries ceased to or had never functioned, lacked basic tools and operated in a cash economy was precisely why the CPA should have provided oversight of the financial management of the funds."

A review of 10 payments made by the CPA Comptrollers Office between October 2003 and June 2004 found none of these -- ranging between $120 million and $900 million -- included documentation such as budget spending plans.

Well, that seems to wrap up for the defence.

I can understand Bremer's response from the point of view of both pure accounting and the specific difficulties being encountered in Iraq.

But the point I want to address directly to the critics of the UN is this -

How come such difficulties can "justify" the situation faced by Bremer and the US administration (No it was NOT Iraqi) in Iraq?

Why is it that the UN administration is called "corrupt" when the UN was facing very similar problems with corrupt and unscrupulous locals - not the least of whom was the armed thug in charge at the time?

The report concludes...

In another example, about $1.5 billion in cash allocations was made to Iraqi banks between January and April 2004 for operating expenses, yet spending plans supported only about $498 million in these expenses.

One of the main benefactors of Iraq funds was Texas-based firm Halliburton, which was paid about $1.7 billion dollars out of those funds to bring in fuel for Iraqi civilians. U.N. auditors have asked for a full accounting of these funds.

Halliburton has been paid USD1.7B to import fuel (not wood I will guarantee...) into Iraq?

Explain that for me please?


Dave Justus said...

In regards to importing of fuel, it is likely they are talking about gasoline or some other refined petroleum product. Just because you are pumping oil domestically doesn't necessarily mean you are refining fuel. This would be especially true when a war is going on.

As to the U.N. and the charges of corruption in relation to CPA funds there are a few differences.

First off, and perhaps most significantly, the report you are quoting was generated by the U.S. government. We did audit the money and came up with criticism when the program failed. The U.N. in contrast denied any corruption and then stonewalled when calls for an investigation were made. That is, in my opinion, a significant difference.

Second, the charges against the CPA was that they didn't accurately insure that Iraqi ministries who recieved the money wouldn't cook the books and could ensure that the money they were letting out went to the proper purposes. The charges against the U.N. are that they were willing accomplices in a worldwide bribery and corruption scandal. As far as I know, no one is suggesting that Bremer or any of his family profited from this scandal, while Kofi Annan's son and other U.N. personnel seem to have profited greatly.

Lastly, the U.N. claimed that it COULD ensure that oil would be sold to provide humanitarian assistance to the Iraqi people and that it would not be used for other purposes. That was the entire point of the program and the reason that it was put in place to begin with. The CPAs job was to rebuild a country as quickly and efficiently as possible as well as transfer power to the Iraqi people as quickly as possible. Certainly avoiding corruption is desirable in this, but it isn't the only, or even the main point of what they were supposed to do.

There are plenty or things that the CPA can be criticized about. Indeed, it may be that they were remiss in this situation. There are other things that were done that I think were mistakes as well. However, the two situtions you are trying to equate are not the same at all.

MacBoar said...

Well done, Dave. There's not much I can add. I think the UN fiasco was more of a conspiracy to rake in the dough for the elite while I think the price of keeping the peace and re-enforcing the Shia is called baksheesh...

And while I hate to defend Haliburton... they responded to this over a year ago...

Once again, well done Dave. As ugly as democracy is sometimes, it's a whole lot better when we show we can criticize our own govt instead of being called out by others.