US audit traces Iraq's 'missing' aid billions

Pentagon audit traces missing US$6.6 billion to the Central Bank of Iraq.

WASHINGTON // A Pentagon audit resolved a lingering Iraq-war mystery, concluding that US$6.6 billion of US-controlled reconstruction money was transferred to the Central Bank of Iraq, not lost or stolen.

The Coalition Provisional Authority, created by the US to run Iraq after the invasion, controlled more than $20.7bn (Dh76bn) during its 14-month life, including $6.6bn held when it was dissolved on June 28, 2004.

"That money is not missing," said the inspector general, Stuart Bowen.

A 2010 audit by Mr Bowen could not account for the money. Yesterday's report says "sufficient evidence exists showing almost all" the $6.6 billion was transferred to the central bank.

The inability to account for the money led to suspicion in Iraq that the funds had been stolen. The Iraqi parliament's Integrity Committee wrote to the United Nations in June that "all indications are that the institutions of the United States of America committed financial corruption by stealing money".

"That's not true," Mr Bowen said. "This report answers the question about the 6.6 billion dollars. We conclude it properly was accounted for by the Federal Reserve Board Bank of New York and Central Bank of Iraq."

Any doubts about how the money was handled after it left US control is an Iraqi - not US government - question, Mr Bowen said.

Still, the audit raised questions about the CPA's financial management. It identified three instances when about $4.3bn was deposited in the Iraqi bank "in a manner that varied" from that interim government's written policies and procedures.

The inspector general was unable to locate all required documents needed to show how and when the money was transferred - a problem that Mr Bowen found to be "of concern, given the massive amounts of money involved", the report said.

Mr Bowen's report also questions what authority the US defence department had when it took control over $217.7 million stored in a presidential palace vault.

* Bloomberg News