WASHINGTON, July 9, 2004 (HalliburtonWatch.org) - The U.S. Coalition Provisional Authority (CPA) maintained an accounting system for Iraq's oil revenues that was "open to fraudulent acts" and "prone to error," independent accounting firm KPMG reported today in a preliminary audit. KPMG said the CPA's failure to adequately monitor oil revenues "greatly diminishes the transparency of the expenditures made." The CPA, which administered Iraq's oil revenues from May 2003 through June 2004, is under criticism for refusing to release documents regarding payments it made to Halliburton and other private contractors.

The audit was released today by Rep. Henry Waxman (D-CA) along with a letter he wrote to Rep. Tom Davis (R-VA), the chairman of the House Government Reform Committee. In the letter, Waxman criticized the Bush administration for refusing to release CPA documents regarding expenses paid from the Development Fund for Iraq (DFI), a fund established by the United Nations to hold Iraq's oil revenues. Halliburton was paid $1.5 billion from the DFI after the CPA awarded the company three sole-source contracts. Critics have charged that the CPA preferred to pay Halliburton with Iraqi oil revenues, rather than U.S. revenues appropriated last year, in order to avoid strict contracting regulations imposed by Congress for U.S. funds. So far, only two percent of U.S. aid appropriated for Iraq last October has been spent. Avoiding U.S. contracting regulations also made it easier for the CPA to award Halliburton more no-bid contracts.

The International Advisory and Monitoring Board (IAMB), a watchdog established by the UN to monitor U.S.-control of Iraq's oil revenue, complained that the CPA refuses to release documents on contracts awarded to private firms. In his letter, Rep. Waxman said "the [Bush] Administration has failed to comply with numerous IAMB requests for U.S. government reports about the payment of approximately $1.5 billion in DFI funds to Halliburton," who is the "single largest private recipient of Iraqi oil proceeds." He also cited IAMB minutes of a March meeting in which it said "some contracts using DFI funds were awarded to Halliburton without competitive bidding." It later instructed KPMG "to pay special attention" to this issue during its audit of CPA documents. The IAMB is comprised of representatives from the World Bank, the International Monetary Fund, the United Nations and the Arab Fund for Social and Economic Development.

In its audit report, KPMG had also complained that the CPA and the Bush administration had obstructed its efforts to audit the DFI. During its audit, KPMG said it "encountered resistance from CPA staff (including the contracting unit) regarding the submission of information required to complete our procedures."

UN Security Council Resolution 1483 requires the IAMB to guarantee that the spending of Iraq's oil revenues by the United States be done "in a transparent manner." However, Waxman claims "there has been virtually no oversight of how these funds have been spent." He called for a congressional investigation into the CPA's expenses from the DFI and the Bush administration's refusal to release internal documents on CPA payments to private corporations.

The DFI has received $20.2 billion as of June 17, 2004 -- $8.1 billion from the UN's oil-for-food program, $10.8 billion from the sale of Iraqi oil since May 2003 and the remainder from repatriated funds, vested assets and donations.

More Information:

KPMG's preliminary audit (pdf file)

IAMB's request to the CPA for documents on Halliburton's no-bid contracts (pdf file)

Statement of Congressman Henry Waxman (pdf file)

HalliburtonWatch: Vast sums of Iraq oil revenues have been stolen

Reuters: Audit Faults U.S. Accounting for Iraqi Oil Funds