NEW YORK – Internal audits conducted by the United Nations of its Oil-for-Food (search) program revealed lapses in U.N. oversight that allowed contractors to overcharge by hundreds of thousands of dollars, according to copies obtained by The Associated Press.
Two of the audits examined irregularities including overcharging by two companies who were hired to monitor oil sales and the import of humanitarian goods under the program. Another detailed financial mismanagement by a U.N. agency administering humanitarian aid under the program.
An independent panel led by former Federal Reserve Chairman Paul Volcker (search), who was appointed in April by U.N. Secretary-General Kofi Annan (search) to investigate corruption at the Oil-for-Food program, was set to release 400 pages of the audits on Monday.
But the panel distributed the documents to congressional investigators two days early. A congressional aide provided the AP with copies of three of the 56 audits, including one that found that the United Nations was billed over several years for 31 days of work in June, which only has 30 days.
The $60 billion Oil-for-Food program was created as a humanitarian exemption to sanctions imposed on Iraq after the 1990 invasion of Kuwait, which led to the 1991 Gulf War (search). Beginning in 1996, it allowed Saddam Hussein's government to sell oil and use the proceeds to buy food, medicine and other items.
The series of audits, which were carried out from 1996 to 2003 by the 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 program.
The United Nations had refused to release them while Volcker's panel conducts its investigation, although the world body passed a resolution in December making OIOS reports available to member states who request them.
Though the audits illustrate negligent U.N. management of contracts, a U.N. spokesman said that they also show that the United Nations was monitoring itself during the course of 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 congressional panels also looking into corruption at the program disagreed.
"What these reports show is a real lack of U.N. oversight and coordination of the Oil-for-Food program," a spokesman for the House International Relations Committee said on condition of anonymity.
The spokesman said 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."
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.
One audit dated July 3, 2002, 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.
Another report from July 21, 1999, detailed possible overpayments of more than $3 million to London-based Lloyd's Register Inspection Ltd., which was hired to inspect and monitor humanitarian goods as they were imported into Iraq.
The audit noted that the company billed the United Nations for agents deployed in December 1996, two months before the first contracts for the import of humanitarian supplies were issued.
"The contractor without consultation took the decision to deploy all the agents," the report states, costing the United Nations an estimated $1.97 million.
The company also was able to renegotiate inflated renewals of its contract because U.N. administrators neglected to consider competitors in time.
"It appears that the contractor was fully aware that the (United Nations) was unprepared or unwilling to undertake fresh bidding for the service," the report stated. "Negotiations with Lloyd's were always conducted just before the expiry of the contract."
In 1998 Lloyd's Register pulled out of the contract and was a replaced by another company, Cotecna Inspection S.A., a Swiss company, which has also been the subject of investigations of the U.N. program.
Telephone messages left at offices of Saybolt and Lloyd's Register on Saturday were not immediately returned.
A third audit on April 20, 1999, of the U.N. Office of the Humanitarian Coordinator for Iraq, the agency responsible for the implementation of humanitarian aid under the program, also revealed discrepancies in the procurement of equipment including cars, computers and furniture.