HL Deb 24 January 2005 vol 668 cc130-1WA
The Earl of Sandwich

asked Her Majesty's Government:

What is their response to the latest report of the International Advisory and Monitoring Board on the Development Fund for Iraq; and whether the United Kingdom has a moral as well as financial obligation to account for Iraqi funds accrued and disbursed in the period that the United Kingdom formed part of the Coalition Provisional Authority. [HL683]

Baroness Symons of Vernham Dean

The latest report by the International Advisory and Monitoring Board (IAMB) is based on two audit reports conducted by KPMG, covering Coalition Provisional Authority (CPA) management of the Development Fund for Iraq (DFI) from 22 May 2003 to 28 June 2004. Both audit reports conclude that, with the exception of smuggling, "the DFI Statement of Cash Receipts and Payment presents fairly, in all material respects, the receipts and payments of the DFI". The IAMB report recognises that "all known oil proceeds, reported frozen assets, and transfers from the Oil for Food Programme have been properly and transparently accounted for in the DFI".

Nevertheless, we acknowledge the concerns raised by the IAMB and its auditors. These concerns arose in large part due to the difficult operating conditions in Iraq after military action in April 2003. To address these difficulties the CPA took a number of steps to improve financial management and control over oil resources. These included:

measures to tackle smuggling, including seizing ships and persuading leading clerics to condemn smuggling;

a new framework for budgets in the Financial Management Law which enshrined transparency as one of the fundamental principles; and

improved financial reporting and record keeping.

The UK continues to help the Iraqi Government to ensure efficient and transparent financial management through a Department for International Development funded team seconded to advise the Ministry of Finance.

Under United Nations Security Council Resolution 1483 of 22 May 2003, the occupying powers shared joint responsibility for the actions of the CPA, including management of the DFI. The UK supported the establishment of the IAMB, an independent international board to oversee the auditing of Iraq's oil revenues and their management, so that the coalition was seen to discharge its financial responsibilities as occupying power properly.