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Last Updated: Thursday, 5 May, 2005, 09:14 GMT 10:14 UK
'$100m gap' in US Iraq spending
Stagnant water and litter on the streets of Baghdad
US handling of reconstruction has been heavily criticised
US civilian authorities in Iraq have been unable to account properly for nearly $100m (53m) earmarked for rebuilding, US financial auditors say.

Two audits found signs of potential fraud regarding the money, which includes oil revenue and assets seized from Saddam Hussein's government.

A third questioned the use of almost $18bn in US taxpayers' money for reconstruction projects in Iraq.

The audits found "no assurance that fraud, waste and abuse did not occur".

The US risks fostering a culture of corruption in Iraq
Senator Russ Feingold
Distribution of the funds was first the responsibility of the US-led Coalition Provisional Authority, and later of an organisation managed by the US embassy in Iraq.

It was subjected to examination by the US Special Inspector General for Iraqi Reconstruction (Sigir).

The BBC's Ian Pannell in Washington says this is the first time US government officials have been investigated in this way.

A spokesman for the Iraq Project and Contracting Office, which handles most of the US-funded contracts in Iraq, said the office had taken "many corrective actions".

'Washing accounts'

According to the Sigir, of nearly $120m in cash paid out in south-central Iraq more than $7m is unaccounted for and payments worth $89m do not have the proper paperwork.

It refers to significant problems, accusing managers of "simply washing accounts" to try to make the books balance.

Examples of failures include:

  • More than 600 transfers of more than $23m using the wrong form

  • A contractor being paid twice for the same job

  • Ten payments of more than $300,000 submitted for cancelled contracts

  • Two payment officers leaving Iraq with balances of more than $700,000 without clearance.

One US senator criticised the "sloppy" management of the funds.

"Billions of dollars, the success of the stabilisation mission, and US credibility are at stake, and these reports inspire very little confidence in the competence and transparency of US efforts to date," said Democrat Russ Feingold.

"The US risks fostering a culture of corruption in Iraq."


An audit spokesman insisted they were not assuming the money had been lost, just that it was unaccounted for.

Even so, our correspondent says, this will be an embarrassment in Washington where the administration's handling of Iraq's reconstruction has already been heavily criticised.

The new revelations come amid an upsurge in violence on the ground in Iraq, where at least 80 people were killed in a series of attacks on Wednesday and Thursday.

Correspondents say insurgents have been emboldened by delays in the formation of a new government.

Several posts are still vacant as negotiations continue over the inclusion of Sunni Arabs in the cabinet.

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