Is U.S.Taxpayer Money Funding Iraq Reconstruction?

The Democratic chairman and Republican former chairman of the Senate Armed Services Committee have asked government auditors to determine what Iraq is doing with the billions of dollars in oil revenue it generates.

"We believe that it has been overwhelmingly U.S. taxpayer money that has funded Iraq reconstruction over the last five years, despite Iraq earnings billions of dollars in oil revenue over that time period that have ended up in non-Iraqi banks," Sens. Carl Levin, D-Mich., and John Warner, R-Va., said Friday in a letter to the head of the Government Accountability Office.

"At the same time, our conversations with both Iraqis and Americans during our frequent visits to Iraq, as well as official government and unofficial media reports, have convinced us that the Iraqi government is not doing nearly enough to provide essential services and improve the quality of life of its citizens," they said.

The senators estimated that Iraq will realize "at least $100 billion in oil revenues in 2007 and 2008."

They asked specifically that the GAO determine:

- Estimated oil revenues from 2003-2007.

- How much the U.S. and Iraq each have spent annually during that period on training, equipping and supporting Iraqi security forces as well as reconstruction, governance and economic development.

- Projected oil revenue and spending for 2008.

- The amount of unspent revenue from 2003 to 2007 and the expected estimate at the end of 2008.

- How much money the Iraqi government has deposited and in which banks.

- Why the Iraq government has not spent more of its oil revenue on its own country.

The GAO concluded in a January report that the Bush administration used questionable financial data to assert that the Baghdad government was making progress in managing its budget.

The study focused specifically on whether Iraqis were spending money for infrastructure needed to boost the country's lagging economic growth and to improve poor public services.

The administration reported in September that Iraq's central government ministries had spent 24 percent of their 2007 capital projects budget as of July 15, 2007. "This report is not consistent with Iraq's official expenditure reports," which show that the central ministries had spent only 4.4 percent of their investment budget as of August, the GAO said. It said capital projects are 90 percent of Iraq's investment budget.

The benchmark report submitted by the administration was ordered by Congress to measure Baghdad's progress in 18 areas including political and economic activities. It was aimed at judging whether Iraqis were working hard enough at reconciliation and other issues to warrant continued American support.

Iraqis have been slow to execute their capital budgets partly because violence and sectarian strife have reduced the number of contractors willing to bid on projects, the GAO said in January. Also, their procurement and accounting systems are weak and many professionals and skilled workers have fled the country, the GAO report noted.

The January report recommended that the Treasury Department work to improve its "ability to report accurate and reliable expenditure data from the ministries and provinces" in Iraq.