The 5-Minute Briefing: Iraq's missing millions

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The US government has opened an investigation into the possible embezzlement of $100m in Iraq. How serious is the case?

The US government has opened an investigation into the possible embezzlement of $100m in Iraq. How serious is the case?

A criminal inquiry has been launched into the conduct of US officials - rather than Iraqis or private contractors - involved in the disbursement of funds for reconstruction. The money came from the so-called Development Fund for Iraq, consisting of money from Iraqi oil sales, revenue from the remnants of the now dismantled oil-for-food programme, and repatriated Iraqi assets after the fall of Saddam Hussein. The funds were handled by the US embassy in Baghdad. Government auditors found that a total of $96.6m (£51m) could not be accounted for. Some of the discrepancy is due to poor record-keeping, but a report by the Special Inspector-General for Iraq Reconstruction (SIGIR) also speaks of "indications of fraud".

When did the money disappear?

Most of the problems apparently relate to mid-2004, when the rebuilding of the country was stalling and the insurgency was growing, just before the former Coalition Provisional Authority handed over power to a new government in Baghdad on 28 June 2004. Officials rushed to spend the funds before control passed to the new Iraqi administration. According to the office in overall charge of the funds, "extensive corrective actions have been taken".

Will this be enough to end the problem?

Incidents of this type are probably bound to occur, given the disorganisation in Iraq. But the sum in question is a tiny fraction of the $18bn earmarked for Iraqi reconstruction. If fraud is confirmed, however, it will send a very unfortunate signal just as the US is trying to ensure that post-Saddam Iraq defies tradition and is relatively corruption-free. The report is the latest of several outlining mismanagement of resources in Iraq. Pentagon audits this year have identified more than $200m of questionable costs under no-bid contracts secured by Halliburton, the oil services group once chaired by Vice-President Dick Cheney. Other investigations have found a lack of proper oversight of major projects.

Could the disclosures hurt President George Bush?

Probably not greatly. The revelations may reinforce the impression that the post-war occupation was shockingly badly planned and poorly organised, but that much has long been taken for granted.