The Missing $6.6 Billion In Iraq Reconstruction Funds

Recent headlines have been filled with stories of $6.6 billion missing from Iraq’s reconstruction funds. Many reports have been focusing upon the money going into the pockets of corrupt officials. While that likely did happen with some of the funds, the vast majority probably disappeared through poor bookkeeping, which was a hallmark of the early years of the U.S. occupation of Iraq.

The Special Inspector General for Iraq Reconstruction’s April 2011 “Quarterly Report to the United States Congress,” reported that $6.6 billion was missing from the Development Fund for Iraq (DIF). In mid-June, the Special Inspector General Stuart Bowen, began talking to the media about the case.

In May 2003, the Development Fund for Iraq (DFI) was created by United Nations Resolution 1483. The Fund collected the majority of Iraq’s petroleum revenues, which were being held at the Federal Reserve Bank of New York under the Oil for Food Program that was created in 1995. The DFI was put at the disposal of the Coalition Provisional Authority (CPA), and was used to pay the salaries and pensions of Iraqi government workers, and for reconstruction projects. During the CPA era, the United States began flying in stacks of $100 bills from the Federal Reserve Bank to Baghdad on C-130 transport planes. From May 2003 to May 2004 21 flights delivered $12 billion in cash to Iraq. The money was haphazardly delivered to Iraq’s ministries, and then used for development plans. The Bush administration had no infrastructure or bureaucracy in place to handle what became the largest reconstruction project in American history, and therefore had to deal with the task on an ad hoc basis with little to no oversight.

When the CPA ended its mandate in mid-2004 was when the missing $6.6 billion was first noticed. On June 28, 2004, just as the CPA was finishing up its work in Iraq, it issued a document, which said that it had $6.6 billion remaining from the DFI. $4 billion was in outstanding commitments, and $2.6 billion was on hand assets. The money was then supposed to be transferred to the Pentagon. On July 11, a Defense Department comptroller sent an email from Baghdad that the $6.6 billion was still on the books. There are no records of the money being transferred to Defense however. The Pentagon comptroller who took charge of the DFI in July 2004 said he never received the six billion. Since then, Defense has claimed that it could find the money if given enough time, but it so far has failed to do so.

If the missing money wasn’t bad enough, in June 2011 Stuart Bowen gave an interview with the Los Angeles Times. The Times reported that auditors thought that some of the money could have been stolen, and that Iraqi officials were the prime suspects. That set off a flurry of news stories that $6.6 billion went missing because of corruption. Bowen then tried to clarify the issue, by saying that he only answered a hypothetical question about the funds being stolen by the Los Angeles Times reporter, but it was largely too late. The media ran with the first account, which largely shaped public opinion about the matter despite what Bowen said later on.

While greedy contractors or U.S. or Iraqi officials could have taken some of the money, the vast majority of the $6.6 billion probably disappeared due to the horrible record keeping that was the norm with the CPA and Pentagon at the time. As the Special Inspector General has been noting for the past several years, the United States was not ready to manage the rebuilding of Iraq. There was a total lack of coordination and planning within the Bush White House before the invasion, and when the CPA was created after the overthrow of Saddam Hussein the problems did not end. The new American administration dished out a huge amount of money in a very short period of time in cash to deal with one crisis after another, with very little bookkeeping or oversight. When the CPA ended and the U.S. military took over control of Iraq, these issues continued. It should be no surprise then that such a large amount of money should turn up unaccounted for. In fact, a large amount was probably spent in Iraq keeping the government running, but its exact destination will likely never be known because of the dearth of paper work at the time.

SOURCES

CBS News, “$6.6 billion sent to Iraq likely stolen,” 6/14/11

Fox News, “Auditor Disputes Report About Money $6.6 billion in Iraq Being Stolen,” 6/14/11

Pallister, David, “How the US sent $12bn in cash to Iraq. And watched it vanish,” Guardian, 2/8/07

Richter, Paul, “Missing Iraq money may have been stolen, auditors say,” Los Angeles Times, 6/13/11

Special Inspector General For Iraq Reconstruction, “Hard Lessons,” 1/22/09
- “Quarterly Report to the United States Congress,” 4/30/11

Todd, Brian, “Feds probe -- for a 3rd time -- loss of billions in Iraqi funds,” CNN, 6/13/11

Werman, Marco, “The Case of Missing $6 Billion in Iraq,” The World, 6/14/11