No Evidence of Fraud in Iraq Oil Funds -- Watchdog

WASHINGTON (Reuters) - An international audit released on Thursday showed no evidence of fraud in the spending of Iraq's oil money by the U.S.-led authority that ran the country after last year's invasion.

But the interim audit said controls by the Coalition Provisional Authority over Iraq's oil revenues were not sufficient to ensure that all spending was made for the purposes intended.

The audit was requested by the International Advisory and Monitoring Board (IAMB), which includes the United Nations, the World Bank and the International Monetary Fund, was part of its U.N.-mandated task of watching over Iraq's oil revenues.

The IAMB said despite repeated requests it had not had access to US audits of noncompetitive bids handed out by the U.S-led authority to Halliburton, the Texas oil services firm once headed by Vice President Dick Cheney, and other firms.

It said it planned a special study of the contracts, which will be part of the next stage of the audit carried out by US accounting firm KPMG.

Under international law, the provisional authority could use the oil money only for the benefit of Iraqi people. Some UN and US officials and private aid groups have expressed concern that the CPA operated with excessive secrecy.

"We have not seen, or KPMG has not reported to us, any evidence of fraud," Jean-Pierre Halbwachs, chairman of the monitoring board and UN assistant secretary-general, told a news conference.

"The fact that there are weaknesses could lead to fraudulent activities. It makes it easier if somebody wants to defraud any operation if controls are weak," he added.

The provisional authority had oversight over about $10 billion in the Development Fund for Iraq, which included $5.6 billion from the U.N. Oil for Food Program, $3.7 billion from oil sales and $757.500 in deposits from foreign assets frozen outside Iraq.

The monitoring board, which requested the audit, said KPMG concluded that all known oil proceeds in the fund had been properly and openly accounted for.

But it added: "Based on a review of the KPMG reports, the IAMB believes that controls were insufficient to provide reasonable assurance for the completeness of export sales of petroleum and petroleum products for the period from May 22, 2003 to December 31, 2003, and whether all DFI disbursements were made for the purposes intended."

The board said it had pointed out to the provisional authority the absence of metering of oil production, a procedure necessary for properly accounting for how much oil is extracted and sold.

The board said the provisional authority believes unknown quantities of oil and other petroleum products were smuggled from Iraq, especially in the early stages of the occupation.

Board members said the US had tried to reinforce controls of the oil flow by patrolling harbors but had not yet put in place a comprehensive mechanism for monitoring oil losses.

The audit found that the three Iraqi ministries visited by KPMG lacked adequate controls of accounting records, payrolls were insufficient and there were deviations from tendering procedures designed to ensure competitive bidding.

Board representatives said it was a high priority for international organizations to ensure that Iraqi ministries had proper accounting procedures in place to allow for future audits.

"While we have no evidence of misappropriations, there are strong indications in the report that the controls in the spending ministries are very weak," said Bert Keuppens, the IMF's member on the board.

Media bias example nr 5,842 and counting... the headline's vagueness lends itself as much to interpretation that it refers to the UN oil for food scandal as it might refer to the actual content. Iow, no active mention that it refers to the debunking of the trumped up shrill charges levied against the coalition two weeks ago. Nor is this the only example; just look at the attacks mounted by the Richard Clarkes, Joe Wilsons of the world - they have two things in common; all were given the utmost air time and media exposure upon their launchings, and now that they have been discredited, they all share the same conspicuous media silence (when they should be acknowledging thier discreditings).

Do you see how insidious our enemy within is? It is not just the outrageous assaults from a fat-pig murderer like ted kennedy spouting his lies, it is in the steady, drip-drip continual denial of credit to our actions and integrity on even the apparently small things.

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