U.S. Funds for Iraq Are Largely Unspent

"They wanted to do things their way before they left," the official said.

The CPA appears to have earmarked more than $6 billion of the Iraqi funds over the past two months alone, as it prepared to hand over political authority -- and control over the development fund -- to the interim Iraqi government. As of May 6, the CPA had earmarked only $13 billion from the fund, according to a GAO report released this week.

Allocations and disbursements from the development fund were made by the 12-member Program Review Board, a committee composed of Americans representing the CPA, Iraqis from the U.S.-appointed government and officials from the governments of Britain and Australia. Most of the voting members were non-Iraqis.

"It was a CPA-run thing," the senior Iraqi official said. "There was lots of talk about taking input from the Iraqis, but in the end, they made all the decisions."

At a meeting on May 15, the board allocated $2 billion, according to minutes of the session posted on the CPA's Web site. Among the commitments were $500 million for Iraqi security forces, $315 million for electricity repairs, $460 million to rehabilitate the oil industry and $180 million to fund a property-claims commission.

It was not clear what specific projects would be funded in the security, electricity and oil sectors. The CPA had already earmarked $3.2 billion for security, $5.5 billion for electricity and $1.7 billion for the oil industry from the $18.4 billion aid package, although little of that money has been spent.

The development fund, at least until May 6, was used largely to bankroll day-to-day Iraqi government operations. More than $7.5 billion was withdrawn to pay for operational expenses -- principally employee salaries -- at ministries and government agencies.

From July 2003 to May 2004, the CPA allocated about $4.8 billion from the development fund for relief and reconstruction projects and services. But as with the U.S.-funded aid package, the CPA had trouble actually spending money to address those needs, disbursing only about $1.8 billion of the $4.8 billion.

Of the $972 million allocated for repairs to electric-power infrastructure before May 6, only $157 million was disbursed, according to the GAO report. Of the $842 million allocated to address increased security needs, only $2 million was spent, the GAO said.

One of the principal beneficiaries of the development fund money was Halliburton Co., which was paid hundreds of millions of dollars to truck gasoline and other fuels into Iraq -- a country with the world's second-largest oil reserves -- because of problems with Iraq's refineries.

According to the GAO report, $1.1 billion of the $1.9 billion allocated for fuel imports was disbursed. Although it is not clear how much went to Halliburton, a firm formerly chaired by Vice President Cheney, U.S. officials familiar with spending patterns said a majority of those funds went to Halliburton and other non-Iraqi firms.

The Defense Department has been investigating a Halliburton subsidiary for allegedly overcharging for imported fuels.

Two former CPA officials involved in contracting issues said the CPA spent money from the development fund faster because it was not governed by the same rules requiring competitive bidding as the money from Congress was. The CPA has not identified how many noncompetitive contracts were awarded.

U.S. officials have said that Halliburton was among the firms to receive no-bid contracts from the Program Review Board.

Although the Security Council created a monitoring board composed of representatives from the United Nations, the World Bank, the International Monetary Fund and the Arab Fund for Economic and Social Development to oversee the CPA's spending, its efforts to audit the process were stymied by the CPA, according to other officials, who spoke on condition of anonymity.

The monitoring board has not received many documents it has sought from the CPA pertaining to uncompetitive contracts. "Transactions worth billions of dollars in Iraqi funds have not been independently reviewed," the GAO wrote in its report.

The slow rate of spending of the U.S. aid package has dismayed several members of Congress who worked to speed passage of the White House's supplemental budget request last year.

"It's unacceptable for this to have taken so long," said Sen. Joseph R. Biden Jr. (Del.), the ranking Democrat on the Foreign Relations Committee.

Biden, who recently returned from Iraq, said he had "learned from our military commanders that these projects have a direct bearing on their ability to defeat the insurgency."