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Last Updated: Sunday, 30 January, 2005, 20:52 GMT
Iraq reconstruction funds missing
Iraqi oil pipeline at Basra, 1999
The missing $8.8bn is more than 40% of Iraq's oil revenues
Almost $9bn (4.7bn) of Iraqi oil revenue is missing from a fund set up to reconstruct the country.

The BBC's File On 4 programme has learnt that out of over $20bn raised in oil revenues during US-led rule, the use of $8.8bn is unaccounted for.

US government auditors criticise the Coalition Provisional Authority for failing to manage the money properly.

In one case, auditors say the key to a safe holding millions of dollars was kept in an open backpack in an office.

"There was insufficient internal control to assure that money was spent for the benefit of the Iraqis, as the UN Security Council resolution mandated," said the auditors' chief of staff, Ms Ginger Cruz.

'Bribes demanded'

"We contend that since the CPA was in control and did have a responsibility to be an effective steward of those monies, that it was to be expected that there was more supervision of what happened to that money," she said.

Even allowing for the chaos in the aftermath of war, the auditors still believe the management of the money should have been a great deal tighter.

An earlier auditors' report from last year revealed evidence of wholesale carelessness with large amounts of cash.

On one occasion, $1.4bn had to be transported to a bank in three helicopters, as it weighed 14 tons, but no deposit slip was obtained when it was paid in.

It [the liberation of Iraq] was such a key moment and a great opportunity was lost by the way it was handled
Claude Hankes-Drielsma

The CPA has also come under attack for failing to prevent widespread fraud.

One US company is accused of massively inflating its profits by setting up sham companies to send fake invoices which the coalition paid.

Others are alleged to have demanded dubious commissions which then came out of Iraqi funds.

Even some Coalition officials are said to have openly demanded bribes of up to $300,000 in cash.

File On 4 reporter Gerry Northam explained: "Many Iraqis are angry at the way the Coalition handled funds, particularly the money from their own oil, and especially where inexplicable amounts ended up in the hands of foreign businesses."

Context 'misunderstood'

Claude Hankes-Drielsma, a former British advisor to the Iraqi Governing Council, which worked alongside the Coalition, said the lack of control of funds was a further blow to the United States.

"It is most unfortunate, given that the liberation of Iraq was a great achievement. It was recognised as such by the Iraqi people, but the subsequent handling of events was a disaster.

"It was such a key moment and a great opportunity was lost by the way it was handled."

In response to the report, the former head of the coalition, Ambassador Paul Bremer, said the auditors had failed to understand the context in which the Authority was operating.

Western accounting standards could not be applied in the midst of a war, he said.

File On 4: BBC Radio 4,Tuesday 1 February, 2005 at 2000 GMT.

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04 Feb 05 |  File on 4

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