U.N. audits ignite debate over oil for food

/ Source: The Associated Press

Over 50 internal U.N. audits of the Iraq oil-for-food program flesh out a picture of widespread mismanagement of the program, adding a new dimension to a scandal that has shaken the United Nations.

The reports, released Sunday, detail how U.N. agencies working under the oil-for-food program squandered millions of dollars through suspect overpayment to contractors, mismanagement of purchasing and assets, and fraud by its employees.

The audits, which were carried out from 1996 to 2003 by an internal U.N. watchdog, the Office of Internal Oversight Services, have been a source of contention between the United Nations and members of Congress examining allegations of corruption in the humanitarian program.

An independent panel led by former Federal Reserve Chairman Paul Volcker, who was appointed in April by U.N. Secretary-General Kofi Annan to investigate the allegations in the oil-for-food program, was given access to the files.

But the reports achieved a wider circulation in recent days after they were distributed to congressional investigators by Volcker’s panel and released to the media. The panel posted the audits along with its own report on its Web site on Sunday, a day earlier than originally planned.

In its report, the panel mostly praised the U.N. auditors but noted that they did not focus on administration from U.N. headquarters and on oil purchase and humanitarian aid contracts. The panel implied that the auditors’ focus missed exposing corruption, which allowed the Iraqi government to skim at least hundreds of millions of dollars from the program.

Widespread mismanagement
Five of the reports, including an audit of a U.N. program that was working to help secure humanitarian goods purchased under the oil-for-food program in the Kurdish-controlled Northern Iraq, showed widespread mismanagement.

The oversight agency blasted the U.N. Habitat Settlement Rehabilitation Program for mishandling contracts and failing to implement the urgent recommendations of earlier audits. The report said that the problems resulted in a possible loss of $12 million through flawed contracts that exposed the agency to drastic currency fluctuations.

UN-Habitat was one of nine U.N. agencies that helped implement humanitarian aid in Iraq under the $60 billion oil-for-food program that was created as a humanitarian exemption to sanctions imposed on Iraq after the 1990 invasion of Kuwait, which led to the 1991 Gulf War. Beginning in 1996, it allowed Saddam Hussein’s government to sell oil and use the proceeds to buy food, medicine and other items.

Two other audits examined irregularities that included overcharging by two companies that were hired to monitor Iraqi oil sales and the country’s purchase of humanitarian goods under the program. Another audit detailed financial mismanagement by a U.N. agency administering humanitarian aid under the program.

U.N. defends oversight
The United Nations conceded that the audits illustrate negligent management of contracts but said they also show that the world body was monitoring itself during the oil-for-food program.

“These audits do show that this was a program that was highly audited with a great level of oversight by the U.N.,” spokesman Stephane Dujarric said Saturday.

In an interview with The New York Times published Friday, Volcker downplayed the importance of the audits. “There’s no flaming red flags in this stuff,” he said.

But investigators from two of the congressional panels working in parallel to Volcker disagreed.

The audits of the two companies hired by the United Nations reveal “overpayments, a total lack of U.N. verification of contractor duties performed, and no-bid procedures for additional contracts and extensions,” a spokesman for the House International Relations Committee told the AP on condition of anonymity.

In most of the reports, it was unclear what steps the United Nations took to correct the mismanagement uncovered in the reports and to demand repayment from the companies recommended by the auditors.

But the report issued by Volcker’s panel also criticized the management of the U.N. program for failing to correct many of the mistakes raised by the auditors.

“It appears the OFFP management was not quick to react to criticism and was either unable or unwilling to address issues raised,” the report stated referring to the oil-for-food program.

The U.N. emphasized that program executive director Benon Sevan, who is the target of several of the ongoing investigations, commissioned some of the audits in order to improve the execution of the program. Sevan has repeatedly denied any wrongdoing.

“Some of these audits were done by U.N. internal auditors at the request of the program director,” said Dujarric. “The reports are management tools.”

Delayed action criticized
But in the case of UN-Habitat, the auditors specifically took the agency to task for failing to implement earlier recommendations.

“The audit found a situation of mismanagement, which requires urgent attention,” the audit report, dated June 30, 2003, stated. “Of particular worry is the blatant neglect of UN-Habitat to implement previous audit recommendation (sic) made by the OIOS and the Board of Auditors, even though UN-Habitat senior management had accepted them.”

According to the United Nations, the problems at the agency arose because its involvement with the oil-for-food program more than doubled its operations.

“There were obvious growing pains working in a politically difficult environment,” Dujarric said Sunday. “Through the years, as the program evolved, better coordination mechanisms in terms of oversight were implemented.”

Another audit dated July 3, 2002, and addressed to Sevan examined contracts with Saybolt International BV, a Dutch company that was hired to monitor oil exports from Iraq under the humanitarian program.

The report detailed billing by the company exceeding $2 million. The company inflated invoices, charged for accommodation of workers provided by the Iraqi government and exaggerated staffing and other expenses. For example, the report found that the United Nations was billed several years for 31 days of work in June, which only has 30 days.

Telephone messages left at offices of Saybolt were not returned.

The contention over access to the audits led some congressional investigators to accuse the United Nations of stonewalling outside investigations of alleged corruption at the program. At least five congressional probes are running separately from Volcker’s.

In November, Sen. Norm Coleman, R-Minn., accused Annan of trying to cover up the extent of fraud at the program and called for his resignation.