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Officials Work to Clear Up Misconceptions About Funding in Iraq

By Terri Lukach
American Forces Press Service

WASHINGTON, June 22, 2005 – Money dispersed by the Coalition Provisional Authority from the Development Fund for Iraq were properly distributed to the new Iraqi government in an open and transparent manner, Defense officials told Congress June 21.

The DFI is the successor to the United Nations Oil for Food Program. Under U.N. Security Council Resolution 1483, the United States was charged with ensuring that the more than $8 billion remaining in the Oil for Food program would be used to maintain essential services for the Iraqi people, repair and rebuild Iraq's crumbling infrastructure, and establish a civilian administration in an open and transparent manner.

Deputy Undersecretary of Defense for Resource Planning and Management David Norquist, DoD Special Inspector General for Iraq reconstruction Stuart W. Bowen Jr., and other Defense Department officials sought to clear up several misconceptions surrounding $8.8 billion in DFI funds in testimony June 21 before the national security subcommittee of the House Committee on Government Reform.

Among the issues addressed were concerns that funds dispersed by the Coalition Provisional Authority for the repair and reconstruction of Iraq were lost or unaccounted for, that the Department of Defense sought to withhold information regarding contracts and sources, and that money dispersed from the Development Fund for Iraq were U.S. taxpayer dollars.

"First, let me point out that DFI is Iraqi money, not U.S. money," Bowen said. "It is comprised of Iraqi oil revenues primarily, as well as other assets accumulated for the rebuilding of Iraq."

As inspector general, Bowen conducted an audit of the CPA's oversight of DFI funds provided to ministries of the Iraqi Interim Government. "There have been some misinterpretations about exactly what (the audit) said," he continued, "so let me be clear about what it did not say.

"It did not say the money was lost. It did not say the money was stolen. It did not say that it was fraudulently dispersed by U.S. authorities." It did say there were "less than adequate controls over DFI funds," he said.

"One of my goals," Bowen said, "is when I find problems to bring them to management's attention and to correct them so that taxpayers' money is saved today.

"I think we succeeded and will continue to succeed in that regard," he said. "Our last quarterly report had 28 findings, virtually all of them resolved."

Norquist told the committee that there was no attempt on the part of the Department of Defense to withhold information on DFI-funded contracts from the International Advisory and Monitoring Board.

Norquist said that when the DoD's office of chief counsel was consulted about the release of proprietary data outside of official U.S. government channels, he was advised that such information could not be released without the contractor's consent. The contractor did not consent, citing the Trade Secrets Act, which protects proprietary information.

"It was our intent to see that the IAMB receive as full an answer as possible, consistent with the law." Norquist said.

He said the department asked the contractor to review the reports and redact any information they believed was protected under the Trade Secrets Act and suggested that a third party review an unredacted audit and report the findings to the IAMB. Ultimately, Norquist said, the department suggested to the IAMB that DoD commission a special audit of sole-source contracts. With the auditor working for DoD, he said, there would be no issues of his ability to gain access to unredacted audits and any other government information.

"This audit is now in progress," Norquist said.

The CPA's reliance on cash rather than electronic transfers was another concern that raised suspicions of impropriety, particularly with the way the money was secured, Bowen explained. "There were issues connected with the management of the safe, security of the keys to those safes, and general procedures connected with cash security," he said. "We brought those to the comptrollers' attention, and they changed the way they did business as a result.

"I'm confident that, since then, there are proper security measures in place, because, frankly, the environment hasn't changed that much with respect to cash," he added. "It's still a cash economy. It's still a cash operation, for the most part. Electronic funds transfers -- that's still an idea in Iraq.

"This was an enormously challenging situation, to stand up from destruction a new Iraqi government, to help begin the reconstruction of a nation, both structurally with its government and structurally as part of its infrastructure. I know, I was there," Bowen said.

"There were inefficiencies, and we found them. As I said when I started this job, we will let our audits and our investigations speak for themselves, and they have," Bowen said.

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