Development Fund for Iraq

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In May 2003, following the invasion of Iraq in March of that year, the Central Bank of Iraq-Development Fund for Iraq (DFI) account was created at the U.S. Federal Reserve Bank of New York at the request of the Coalition Provisional Authority (CPA) Administrator. A part of the fund has been transferred to Baghdad and Iraq, and the DFI-Baghdad account was opened at the Central Bank of Iraq "for cash payment requirements".[1] The fund also eventually received money (US$1.724 billion) from seized and "vested" Iraqi bank accounts and funds seized by coalition forces ($926.7 million).[2] (This money was also used during the transition period before the DFI was set up.) The DFI have been disbursed mainly for “the wheat purchase program, the currency exchange program, the electricity and oil infrastructure programs, equipment for Iraqis security forces, and for Iraqi civil service salaries and ministry budget operations”. [3]

The DFI was put under the control of the Coalition Provisional Authority and the administrative arm of the US-UK occupation forces. International Advisory and Monitoring Board (IAMB) was created in United Nations Security Council Resolution 1483 (2003). IAMB is an independent oversight body for DFI and its principal role is to ensure transparency and financial accountability of the DFI. The IAMB was operated from the establishment of the DFI on May 22, 2003 until the dissolution of the CPA on June 28, 2004.[4]

In October 2004, the audits conducted by IAMB and KPMG revealed the CPA’s inadequate accounting system. IAMB failed its oversight process for several months because of procedural disputes and US manipulation. During this time illegal export of petroleum was conducted secretly from Iraq, and a large amount of funds for DFI were disbursed without accountability. According to the audits conducted by the Special Inspector General for Iraq Reconstruction (SIGIR), US$8.8 billion of the US$23 billion of Iraqi money disbursed for DFI has not been accounted the use.[5]

After June 28, 2004, the Iraqi Interim Government had administered the DFI under the IAMB’s oversight following to United Nations Security Council Resolution 1546 until December 31, 2006.[6]

Paul Bremer led the Coalition Provisional Authority. During his administration Ambassador Bremer was criticized by some for spending down over 90% of the Development Funds for Iraq. Less than 5% of the $18 billion Congress had set aside for reconstruction were spent during that period. These funds make up the Iraq Relief and Reconstruction Fund, which is largely managed by the Iraq Reconstruction Management Office. USAID also plays a role in managing these funds. Since the transfer of sovereignty in June 2004, the Development Fund for Iraq has been managed by the Iraqi Transitional Government.

Contents

[edit] Audits

See also: KPMG audit of the Development Fund for Iraq

There have been several audits of the disbursement from the DFI during the CPA's stewardship. The first was performed by international accounting firm KPMG. United States Congressman Henry Waxman had the staff of the Committee on Government Reform to perform another audit of DFI's expenditures.

On July 15, 2004 KPMG released audit documents that highlighted several dozen serious accounting discrepancies. Note particularly the appendix devoted to Matters noted involving internal controls and other operational issues during the audit period of the Fund For the period to 31 December, 2003

On June 20, 2005 the staff on Congressman Waxman's Committee on Government Reform released a highly critical report.

In their International Advisory and Monitoring Board's press release of June 22, 2004 states:

"The IAMB was also informed by the CPA that contrary to earlier representations the award of metering contracts have been delayed and continues to urge the expeditious resolution of this critical issue."

The CPA was shipping Iraqi oil through a pipeline system with non-functioning meters. The actual amount of oil being shipped would have had to be estimated. The Iraqi people were left in the position where they had to trust that the CPA's estimates were honest.

[edit] Criticism

[edit] Lack of transparency

The Development Fund for Iraq receives 95 per cent of the government proceeds from Iraqi oil sales. The 2003 budget also noted that the Development Fund will provide $1.2 billion for the budget. However, the relationship between the DFI and the budget has not been made clear — the budget anticipated oil revenues of $3.4 billion — much greater than the amount in the DFI then. Moreover, only the Provisional Authority Administrator could authorise spending from the DFI. Little information has been made public about the DFI. The Coalition Provisional Authority excluded information on its web site about any transfer of assets into and out of the DFI.[7]

[edit] Notes and references

  1. ^ The Coalition Provisional Authority (2006-07-07). "THE DEVELOPMENT FUND FOR IRAQ".
  2. ^ "SIGIR report" (January 2005).
  3. ^ "Fuelling suspicion:the coalition and Iraq’s oil billions" (2004-06-28).
  4. ^ "REPORT OF THE INTERNATIONAL ADVISORY AND MONITORING BOARD OF THE DEVELOPMENT FUND FOR IRAQ".
  5. ^ Global Policy Forum. "Development Fund For Iraq".
  6. ^ International Advisory and Monitoring Board for Iraq. "Propose".
  7. ^ DFI and budget revenues do not tally (pdf)

[edit] See also

[edit] External links

Retrieved from "http://en.wikipedia.org/wiki/Development_Fund_for_Iraq"
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