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Iraq

Answer

United Nations Security Council Resolution (UNSCR) 1483 (22 May 2003) established the Development Fund for Iraq (DFI) and the International Advisory and Monitoring Board (IAMB) to oversee it. All revenues from the export of Iraq's oil are transferred into the DFI account, with the exception of 5 per cent. of revenues, which are deposited in a fund used to finance legitimate claims for compensation following Iraq's unlawful invasion and occupation of Kuwait in 1990. UNSCR 1483 authorised the coalition provisional authority (CPA) to act as the administrator of the DFI. The CPA performed this role until 28 June 2004, when control of the DFI was transferred to the sovereign Government of Iraq. Our information indicates that between July 2003 and June 2004 the CPA allocated approximately $6.9 billion in contract awards.Media reporting has focused on recent reports by the US Office of the Special Inspector General for Iraq Reconstruction (SIGIR) and the external auditor KPMG. SIGIR was established under the CPA to provide oversight of CPA operations and programmes.SIGIR's report on the period 22 May 2003 to 28 June 2004 examines whether the CPA established and implemented adequate controls over disbursements made to Iraqi ministries. SIGIR found ‘less than adequate controls' for approximately $8.8 billion funds in the Development Fund for Iraq (DFI) allocated to Iraqi ministries by the CPA.Although procedures did not meet the standards of western Governments, we feel the SIGIR report fails to take account of two important factors.Firstly, there was an imperative to get ministries up and running quickly against the background of a chaotic bureaucratic legacy bestowed by the Ba'athist regime. This meant relying on the ability of the Iraqi civil service to get ministries functioning and reconstruction projects started. The alternative would have been to institute a system that could have delayed expenditure for months.Secondly, the SIGIR report fails to take account of the progress made by the CPA to improve financial management in Iraqi ministries and of the budget process. Under the former regime, budgets and economic data were kept secret. In contrast, the CPA published the Iraqi national budgets for 2003 and 2004 and designed a transparent framework for management of the national budget. It also took measures to improve reporting and record keeping.We and coalition partners continue to work with the Iraqi Government, the International Monetary Fund and the World Bank to ensure transparency and accountability in Iraqi public finances.US funding for reconstruction in Iraq is managed by the Iraq Reconstruction Management Office (IRMO). IRMO was established in May 2004 to co-ordinate the US reconstruction programme in Iraq, in co-operation with the Iraqi Government. Accounting for the financial management of US funds in Iraq is a matter for the US Government.

Secondary information

Type

Written question

Reference

25935; 439 c745-6W;439 c745-6W

Session

2005-06

Subjects

Iraq Oil Politics and government

Link

View this Written question on www.publications.parliament.uk