IE 11 is not supported. For an optimal experience visit our site on another browser.

Iraq: What happened to $17 billion in reconstruction funds?

/ Source: The Associated Press

Iraqis are demanding to know what happened to $17 billion in Iraqi money that was part of a U.S.-administered fund for rebuilding the country after years of war and sanctions that now cannot be accounted for properly.

But U.S. officials trying to trace the funds say the Iraqi government is not cooperating and has so far not allowed them access to bank records they need to determine if any of the money was misused.

The use of reconstruction money has been a constant sore point for Iraqis, who despite the billions spent here still suffer from electricity outages, hospitals without the proper equipment and a lack of schools.

The United States was responsible for administering the Development Fund for Iraq, which was set up after the 2003 invasion with money from Iraqi oil sales, frozen Saddam Hussein-era assets and money left over from the U.N. oil-for-food program.

The money from the development fund was generally disbursed through Iraqi government agencies, raising questions about their own role in supervising the money trail.

Separately, the U.S. also spent billions of its own money on Iraq reconstruction projects.

The U.S. Special Inspector General for Iraq Reconstruction, the American watchdog for reconstruction funds, has issued two reports about the use of money from the Development Fund for Iraq showing that as much as $17 billion cannot be accounted for properly.

The Iraqi parliament's integrity committee has been investigating how the money was spent and in recent weeks received reports from the Iraqi Supreme Auditing Board indicating huge irregularities.

"In some cases, we went to see some projects on the ground, but we were shocked to see that they do not even exist and there is only empty fields," said the head of parliament's integrity committee, Bahaa al-Araji.

Parliament Speaker Osama al-Nujaifi was to meet Wednesday with Vice President Joe Biden. One of the subjects of discussion is expected to be the fate of the Iraqi money in the development fund.

In a statement Wednesday, Iraqi government spokesman Ali al-Dabbagh said a committee to be headed by one of the country's deputy prime ministers will investigate all money spent under the Coalition Provisional Authority, the U.S. body that ran Iraq for a year after the invasion. Al-Dabbagh told The Associated Press that the Iraqi government intends to start talks with U.S. officials regarding the fate of the money in the development fund.

The U.S. inspector general for Iraq reconstruction, Stuart W. Bowen Jr., said to figure out what happened to the money, his office needs access to bank records at the New York Federal Reserve Bank, which held the development funds, and the Central Bank of Iraq. But it has yet to get the Iraqi government's approval.

"We need the government of Iraq's cooperation regarding the bank records that will reveal the use of this part of the DFI," he said. "We have not been provided access to the records, and we have asked."

Bowen said his office is carrying out a third audit of the DFI funds that it expects to complete by September.


Yacoub reported from Amman, Jordan. Rebecca Santana contributed to this report.