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Last Updated: Monday, 30 July 2007, 14:51 GMT 15:51 UK
Corruption 'mars Iraq rebuilding'
Construction site in Iraq
Reports of widespread fraud and waste of funds in Iraq

The US agency overseeing reconstruction in Iraq has told the BBC that economic mismanagement and corruption there are equivalent to "a second insurgency".

The chief auditor assigned by Congress, Stuart Bowen, said the Iraqi government was failing to take responsibility for projects worth billions of dollars.

Mr Bowen also said his agency was investigating more than 50 fraud cases.

Meanwhile, nearly a third of Iraq's population is in need of emergency aid, a report by Oxfam and Iraqi NGOs says.

The report said the Iraqi government was failing to provide basic essentials such as water, food, sanitation and shelter for up to eight million people.

It warned that the continuing violence was masking a humanitarian crisis that had escalated since the US-led invasion in 2003.

On Monday, six people were killed and at least 12 injured in a car bomb attack in Baghdad. The US military also announced the deaths of three of its soldiers in the western province of Anbar.

'Troubling'

US Special Inspector General for Iraq Reconstruction Stuart Bowen was appointed to audit $44bn (22bn) allocated since 2003, after reports of widespread fraud and waste.

The agency publishes quarterly reports on the situation, most of which have complained about a serious lack of progress. Monday's report was no different.

Iraqis try to get the attention of a US soldier giving out boxes of food and blankets in Baghdad
Millions of Iraqis have been forced to flee the violence, either to another part of Iraq or abroad - many of those are living in dire poverty
Jeremy Hobbs
Director of Oxfam International

In an interview with the BBC, Mr Bowen said corruption was endemic and described it as "an enemy of democracy".

He added: "We have performed 95 audits that have found instances of programmatic weakness and waste, and we've got 57 ongoing cases right now, criminal cases, looking at fraud."

Mr Bowen said the transfer of projects to Iraqi government control was "troubling", and expressed concern about delays and cost overruns.

The report gave the example of the Doura power station, rebuilt with tens of millions of US dollars, which fell into disrepair once it was transferred to Iraqi control.

Mr Bowen also said Iraqi ministries were struggling to administer funds.

Last year, Prime Minister Nouri Maliki's government only spent 22% of its budget on vital rebuilding projects, while spending 99% of the allocation for salaries, he said.

He said "a pathway towards potential prosperity" could be found only if oil production was brought up to optimal levels, and security and corruption effectively managed.

'Ruined by war'

The Iraqi parliament has now adjourned until 4 September, despite US calls for it to remain in session and pass already-delayed legislation.

The recess means parliament will reconvene just days before America's top commander in Iraq, Army Gen David Petraeus, reports to Congress on the US troop "surge" strategy.

OXFAM/NCCI REPORT IN FULL
Most computers will open PDF documents automatically, but you may need to download Adobe Acrobat Reader.

His assessment will likely provide the backdrop to the next round of war spending.

The BBC's Nicholas Witchell in Baghdad says the report by the UK-based charity and the NGO Co-ordination Committee in Iraq (NCCI) makes alarming reading.

The survey recognises that armed conflict is the greatest problem facing Iraqis, but finds a population "increasingly threatened by disease and malnutrition".

It suggests that 70% of Iraq's 26.5m population are without adequate water supplies, compared to 50% prior to the invasion. Only 20% have access to effective sanitation.

Nearly 30% of children are malnourished, a sharp increase on the situation four years ago. Some 15% of Iraqis regularly cannot afford to eat.

The report also said 92% of Iraq's children suffered from learning problems.

It found that more than two million people have been displaced inside the country, while a further two million have fled to neighbouring countries.

On Thursday, an international conference in Jordan pledged to help the refugees with their difficulties. Oxfam has not operated in Iraq since 2003 for security reasons.

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Oxfam report says basic services not being provided



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