Development Fund for Iraq

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On May 22, 2003, the United Nations Security Council unanimously adopted Resolution 1483, which ended sanctions and endorsed the creation of the Development Fund for Iraq, to be overseen by a board of accountants, including repesentatives from the United Nations, World Bank, and International Monetary Fund (IMF). It endorsed the transfer of over $1 billion (of Iraqi oil money) from the Oil-for-Food Program into the Development Fund. All proceeds from the sale of Iraqi oil and natural gas are also to be placed into the fund.

The fund, controlled by U.S. viceroy L. Paul Bremer III, has swelled to $7 billion, thanks to a $3.1 billion contribution from the U.S. Congress, and billions of dollars more in seized assets of the Iraqi government. And to whom have the occupying powers pledged these riches? The UN resolution states that the fund "shall be used in a transparent manner to meet the humanitarian needs of the Iraqi people." John Negroponte, the U.S. representative at the United Nations, told reporters after the vote that "the intent is to use Iraq's resources and to dispose and dispense Iraq's resources to the benefit of the people of Iraq." That paternalism towards Iraq's people is mighty white of Ambassador Negroponte.

According to the October 23, 2003, report by "Christian Aid" titled "Iraq: the missing billions",

  • "...billions of dollars of oil money that has already been transferred to the US-controlled Coalition Provisional Authority (CPA) has effectively disappeared into a financial black hole. For all the talk of freedom and democracy for the Iraqi people - before, during and after the war which toppled Saddam Hussein - there is no way of knowing how the vast majority of this money has been spent."
  • "This situation is in direct violation of the UN resolution (1483) that allowed Iraqi assets to be transferred to the CPA. Indeed, the body that is supposed to oversee how Iraq's assets are used (International Advisory and Monitoring Board) has not even been set up yet."

Note: there is good content in the report referenced above, including some detail of why the IAMB is not operational, which could beneficially be added to their article here.


Henry Waxman, senior Democrat on the House of Representatives' government reform committee, wrote to the Republican chairman of the reform committee on July 9, suggesting there was a serious case to answer. Subpoenas should be issued, he said, "to investigate potential mismanagement of the Development Fund for Iraq (DFI) by the United States". -- Published on Tuesday, July 20, 2004 by the Guardian/UK

In particular, Mr Waxman is curious about "the [Bush] administration's last-minute 'draw-down' of billions of dollars from the DFI for unspecified expenses" prior to last month's transfer of sovereignty. "For example, $1bn [about £550m] was withdrawn from the DFI during the last month of the CPA's existence for unspecified 'security' purposes."
He is concerned about apparent attempts by the then CPA chief, Paul Bremer, to mandate and direct the spending of a further $4.6bn in Iraqi oil funds after the handover.
He is also exercised by the results of a belated audit of the DFI's accounts that concluded they were "open to fraudulent acts" and lacked "transparency". In all, the CPA earmarked more than $6bn of Iraqi funds in the last two months of its existence.
He wants to know whether CPA officials obstructed the auditors, KPMG, who were employed by the UN-created International Advisory and Monitoring Board (IAMB).
And he also asks why the White House has "failed to comply with numerous IAMB requests [for information about] payments of approximately $1.5bn in DFI funds to Halliburton" - the Texas-based oil services company formerly headed by the vice-president, Dick Cheney.

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Notes for further incorporation

Meanwhile, the Bank's Board of Executive Directors approved the appointment of a Bank representative to serve on the International Advisory and Monitoring Board (IAMB) of the Development Fund for Iraq. The IAMB was established as part of UN Security Council Resolution 1483, approved last week, which lifts sanctions on the country, phases out the UN Oil-for-Food Program, and aims to meet the humanitarian and reconstruction needs of the Iraqi people. The IAMB is expected to appoint independent public accountants to audit the development fund established with future Iraqi oil revenues. [1]

Accountancy Age Timeline

Accountancy Age is a UK based trade publication directed at accountants. The folowing is a timeline of The Coallition Provisional Authority's handling of the Development Fund for Iraq, as seen from their perspective.

May 29, 2003 - Auditors to supervise Iraqi oil revenues - by Liesbeth Evers 
The United Nations is looking to appoint auditors to an international monitoring board to supervise use of Iraqi oil revenues to pay for rebuilding the country.
June 26, 2003 - Iraq oil exports resume without auditor - by Liesbeth Evers 
Iraqi oil exports resumed on Sunday amid uncertainty about whether there was an independent auditor in place to ensure revenues are used to get the war-torn country back on its feet.
October 24, 2003 - Iraqi coalition finances come under fire - by Paul Grant 
Christian Aid has accused the US-led Coalition Provisional Authority in Baghdad of improperly accounting for £2.4bn of Iraqi assets, adding its voice to a barrage of calls for a separate fund administered by the World Bank and the United Nations.
October 29, 2003 - 'Clear audit trail' needed for Iraq funds - by Accountancy Age Parliamentary Staff 
A former Foreign Office minister has joined the European Union and aid agencies in calling for transparent accounting procedures to ensure the spending of aid money donated to Iraq is monitored.
February 11, 2004 - E&Y to reopen Iraq office - by Larry Schlesinger 
Big Four Firm Ernst & Young is to reopen its office in Baghdad, 80 years after it first began Middle East operations.
February 19, 2004 - Firms urged to join rush for Iraqi 'gold' - by Brian Moher 
Accountancy firms are being encouraged to set up shop in Iraq to take part in what was last week billed as a modern-day 'gold rush'.
March 16, 2004 - Ernst & Young wins Iraq contract - by Paul Grant 
Big Four firm Ernst & Young has won a contract with Iraq's ruling Coalition Provisional Authority to help trace the country's loan contracts and reconcile who is owed money from its estimated $120bn (£66bn) debts.
April 15, 2004 - Pressure on Big Four to halt Iraq plans - by David Rae 
Pressure is mounting on the Big Four accountancy firms to halt their plans to re-enter Iraq, following the recent spate of kidnappings and violence in the region.
May 6, 2004 - KPMG forced to halt Iraq work - by Gavin Hinks 
Confusion this week surrounds KPMG's efforts to retain a multimillion-pound contract to undertake forensic accounting work on the controversial Iraqi oil for food programme.
May 11, 2004 - Firms square-up over Iraq debt - by Larry Schlesinger 
BDO Stoy Hayward and Ernst & Young are likely to face each other on opposite sides of the fence as they attempt to unravel Iraq's long-term debts.
May 12, 2004 - KPMG hopeful of completing Iraq work - by Gavin Hinks 
The experts at KPMG called in to find the missing £5.6bn from the Iraqi oil-for-food programme remain confident they can still do the job despite being pulled off the project by the senior US official in Baghdad.
May 12, 2004 - Profile: Adam Bates: Tracking down the oil money. - by Rachel Fielding 
It's surely not the first time that Adam Bates, global head of forensic accounting at KPMG, has encountered obstructions as he goes about his daily work. But the confusion surrounding his firm's multimillion-pound contract to investigate the corruption-riddled Iraqi oil for food programme must take the biscuit.
May 14, 2004 - E&Y handed Iraq investigation work - by Larry Schlesinger 
It is understood that Ernst & Young has been awarded the contract to investigate the missing £5.6bn from the Iraqi oil-for-food programme, following a public tender.
May 12, 2004 - Essential role for Big Four in Iraq - Accountancy Age leader 
Iraq has turned into a nasty quagmire for the US, the British and - ever since news broke about the corruption at the heart of the oil for food programme - the United Nations as well.
May 21, 2004 - Iraq needs accountants to win the peace - by David Harding 
Log on to the Coalition Provisional Authority of Iraq's website and you will discover something interesting.
May 24, 2004 - Congressman queries E&Y Iraq contract - AccountancyAge.com 
The decision to hand the UN oil-for-food programme investigation to Ernst & Young after it was originally handled by KPMG has been questioned by a US Republican congressman
June 22, 2004 - Iraq coalition blocks UN auditors - by Larry Schlesinger 
Auditors from KPMG working in Iraq on behalf of the United Nations say they are being hampered in their efforts to do their job by the US-led coalition.
July 21, 2004 - KPMG report on Iraq criticises CPA - by Brian Moher 
A report by KPMG on the handling of $20bn (£10.8bn) of Iraqi funds has prompted severe criticism of the Coalition Provisional Authority that was until recently running Iraq.
July 27, 2004 - Iraq oil monitoring system a year off - AccountancyAge.com 
It may take up to a year to establish a system to track how much oil is being produced in Iraq, the controller of the audit oversight body looking after the country's oil exports, has told the United Nations.