U.S. Won't Turn Over Data for Iraq Audits

By Colum Lynch

http://www.washingtonpost.com/wp-dyn...2004Jul15.html

UNITED NATIONS, July 15 -- The Bush administration is withholding
information from U.N.-sanctioned auditors examining more than $1
billion in contracts awarded to Halliburton Co. and other companies in
Iraq without competitive bidding, the head of the international
auditing board said Thursday.

Jean-Pierre Halbwachs, the U.N. representative to the International
Advisory and Monitoring Board (IAMB), said that the United States has
repeatedly rebuffed his requests since March to turn over internal
audits, including one that covered three contracts valued at $1.4
billion that were awarded to Halliburton, a Texas-based oil services
firm. It has also failed to produced a list of other companies that
have obtained contracts without having to compete.

The Security Council established the IAMB, which includes
representatives from the United Nations, the World Bank and the
International Monetary Fund, in May 2003 to ensure that Iraq's oil
revenue would be managed responsibly during the U.S. occupation. The
council extended its mandate in July so it could continue to monitor
the use of Iraq's oil revenue after the United States transferred
political authority to the Iraqis in June.

The dispute comes as the board released an initial audit by the
accounting firm KPMG on Thursday that sharply criticized the U.S.-led
coalition's management of billions of dollars in Iraqi oil revenue.
The audit also raised concerns about lax financial controls in some
Iraqi ministries, citing poor bookkeeping and duplicate payments of
salaries to government employees.

The Pentagon did not specifically answer questions about withholding
information to auditors, but released a statement saying the Coalition
Provisional Authority worked hard to manage Iraq's oil resources.

"In a very challenging environment, the CPA made every effort to bring
sound management transparency and oversight to the Development Fund
for Iraq while at the same time improving the quality of life for the
Iraqi people," said Lt. Cmdr. Flex Plexico, a Pentagon spokesman. "The
CPA supported the efforts of the auditors. KPMG's comments and
recommendations will be passed on to the Iraqi interim government for
their use."

The audit, which covers May 2003 to December 2003, asserts that the
coalition's management of Iraq's oil was plagued by "inadequate"
bookkeeping and accounting systems, high turnover among coalition
finance officials and a disregard for procedures designed to ensure
competitive bidding for contracts. KPMG is planning to produce a
second audit that covers the coalition's management of the program
through June 2004.

The IAMB concluded that more than $10 billion in Iraq's oil proceeds
and frozen assets had been "properly and transparently accounted for"
after they were deposited in the U.S.-controlled Development Fund for
Iraq. But it asserted that "financial controls were insufficient to
provide reasonable assurance" that the money was properly spent.

"KPMG has not reported to us any evidence of fraud," Halbwachs told
reporters before the audit was released. "There are weaknesses that
could lead to fraudulent activities. It makes it easier to defraud the
system if the controls are weak."

In a written response to the criticism included in the report, the
U.S.-led coalition said management of Iraq's oil industry was hampered
by ongoing violence.

"Although the auditor encountered difficulties, they are generally the
result of the challenging work environment and the precautions the
security conditions demanded," according to a statement included in
the audit. "For example, retrieving a simple bank statement from the
Central Bank of Iraq, or a meeting with Ministry of Oil officials,
presented significant security issues, as these facilities required a
security detail of at least six persons."

KPMG outlined a series of other shortcomings, including the
coalition's failure to install meters on Iraq's Persian Gulf export
loading platforms, making it impossible to determine how much oil Iraq
was exporting. KPMG said that it was unable to verify independently
the value of crude oil Iraq bartered for Syrian electricity.