Coalition Provisional Authority - Criticism of Financial Management

Criticism of Financial Management

The numbers are so large that it doesn't seem possible that they're true. Who in their right mind would send 363 tonnes of cash into a war zone?

In May 2003, the CPA took over the responsibility for administering the Development Fund for Iraq (DFI). Established from the earlier UN oil-for-food program, the CPA was authorized to manage the DFI, which took in approximately $20 billion in the year after the invasion. The CPA also administered $18.4 billion that the United States Congress allocated for Iraqi reconstruction in November 2003, known as the Iraq Relief and Reconstruction Fund (IRRF). By June 2004, the CPA had spent, or allocated, $19.1 billion of the DFI funds—while spending only $400 million from the IRRF. Critics suggest that Bremer selectively spent from the DFI because it was more free from accounting oversight by the Government Accountability Office (GAO).

This balance between DFI and IRRF expenditures might be justifiable by the argument that the IRRF was not intended to finance the Iraqi government ministries or the Public Distribution System (state food rations from the Oil-for-food program), which the DFI was intended to cover. The $18.4 billion dollars authorized by the U.S. congress was intended to finance large reconstruction projects such as power and sewage plants, not to provide the day-to-day operating expenses of the Iraqi government. Expenditure on the IRRF projects could be seen as delayed by the projects being in their planning and early site preparation stages and it could be said that it is not surprising that little money had been disbursed at that point, or that so much of the Development Fund for Iraq had been expended as that fund was the primary source of revenue the Iraqi government had. However, by reviewing reports from Special Inspector General for Iraq Reconstruction (SIGIR) and other reviews and audits, it becomes clear that DFI funds were expended on projects that clearly would have been appropriate for management under IRRF. What has been troubling to auditors and inspectors general is that large amounts of DFI funding is as yet unaccounted for and was expended in reconstruction projects that failed to provided a return on investment for the Iraqi people. By funding projects under DFI the CPA avoided legal requirements to comply with US Federal Acquisition Regulations (USFARS) as required for the administration of IRRF and other US taxpayer provided funding. It is also pertinent that expenditures under IRRF were also not administered strictly according to USFARS thereby causing severe waste, fraud and abuse as documented by SIGIR and other auditing agencies.