UN oil-for-food audits find laxity, no fraud

January 11, 2005

New York: Audit reports released by a U.N.-sanctioned commission into the multibillion-dollar oil-for-food program in Iraq showed lax oversight, understaffing and widespread inefficiencies throughout the system, but no evidence of fraud or corruption.

Further problems within the program are expected to be disclosed when the commission, headed by former Federal Reserve Board Chairman Paul Volcker, releases an interim report at the end of the month.

Administrators of the 1996-2003 oil-for-food program (OFFP) appear to have been easily misled by contractors, banks and key suppliers, according to the internal audits conducted since 1998 by the U.N. Inspector General’s Office. U.N. agencies operating in Iraq paid for ghost employees, failed to properly account for currency fluctuations and apparently lacked the expertise to properly draft or negotiate a contract, all of which cost the program millions of dollars.

“The audit reports describe inadequate procedures, policy, planning, controls and coordination across numerous areas of activity,” the panel wrote.

“The reports offer a picture of several organizations debilitated by stress and insufficient resources that too frequently operated in an ineffective, wasteful and unsatisfactory manner.”

The Independent Inquiry Committee, as the Volcker panel is formally known, late Sunday released 58 internal audits conducted over the life of the seven-year program.

In its forwarding remarks, the panel said the office responsible for the audits, the U.N. Office of Internal Oversight Services, or OIOS, generally did a good, if slow, job of monitoring the program, but noted that its mandate was far too narrow.

“Both prior to and during the OFFP, the potential use of oil and humanitarian contracts by the former Iraqi regime as a mechanism to gather illicit payments was a major concern of outside observers of the U.N., as well as members of the Security Council,” the panel wrote.

The report also faults OIOS and the Internal Audit Division for failing to conduct much diligence in the program’s early years, and for concentrating their oversight in Iraq and Geneva, instead of in New York.

U.S. lawmakers conducting their own inquiries into oil-for-food irregularities for months have sought the release of the documents.

Former Iraqi strongman Saddam Hussein is suspected of skimming billions of dollars from the program, which was designed to ease the effect of sanctions by allowing Iraq to export oil and use the proceeds to import humanitarian goods.

On Capitol Hill yesterday, lawmakers generally welcomed the release of the documents, even as they lamented their limited scope.

Rep. Henry J. Hyde, Illinois Republican and chairman of the House International Relations Committee said his committee is reviewing the audits.

“It would appear that they show a systemic failure on the part of the U.N. to responsibly administer the oil-for-food program,” Mr. Hyde said.

“It is very helpful that these reports have been released, and they will be useful as we pursue our investigation,” he said.

But privately, Capitol Hill staffers said they hoped to continue interviewing people, investigating leads and holding more public hearings.

One House investigator said the audit reports show a pattern of mismanagement in the United Nations’ dealings with contractors.

“It’s breathtaking,” the investigator said. “This just adds to our understanding and provides untold numbers of leads and questions to ask and peruse.”

According to reports, key contractors Saybolt and Cotecna were hired by the United Nations as consultants and monitors of Iraq’s oil industry and its borders, respectively.

The U.N. Compensation Commission, which doled out restitution to individuals, corporations and countries that suffered losses from Iraq’s 1990 invasion of Kuwait, found numerous examples of double compensation, currency-exchange mistakes, and calculation errors.

Bill Gertz in Washington contributed to this report.

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