U.N. Asks Agencies to Release Iraq Funds

August 30, 2005
The New York Times
http://www.nytimes.com/aponline/international/AP-UN-Oil-for-Food.html

UNITED NATIONS (AP) -- The United Nations asked nine U.N. agencies involved in the oil-for-food program to pay Iraq about $40 million in oil proceeds they set aside in 2003 to finish their work but never spent, according to U.N. officials and excerpts of a letter obtained Tuesday.
A U.N.-backed probe of the scandal-tainted operation, led by former U.S. Federal Reserve Chairman Paul Volcker, had been investigating the nine agencies and their handling of the money.
Volcker was expected to recommend in a report to be released next week that the agencies pay Iraq the money, officials at three of the agencies said.
They also said they had agreed to relinquish the funds, speaking on condition of anonymity because they were not authorized to discuss the Volcker team's findings before they are released.
The oil-for-food program, launched in December 1996 to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait, was one of the largest humanitarian programs in history. It was a lifeline for 90 percent of the country's population of 26 million.
After the U.S.-led invasion of Iraq in 2003, the program was given six months to shut down. The U.N. Security Council set aside 1 percent of the value of ongoing projects for the nine U.N. agencies doing work in northern Iraq to help them wrap up their work.
Volcker's Independent Inquiry Committee has concluded that some of that money -- between $33 million and $45 million -- was never spent and has not been returned. The projects were funded from Iraqi oil revenues.
U.N. controller Warren Sach sent a letter to the agencies earlier in August asking them to return any money, after Volcker's investigators informed him of the findings.
According to the letter, excerpts of which were read to AP, the Volcker committee told Sach that the ''one-percent agreed agency fee may have been in excess of the actual direct and indirect costs incurred'' in completing their work.
Sach then asked that the nine agencies assess how any ''unspent balance'' was used and return any remaining funds. The money is to be deposited into an escrow account and given to the Development Fund for Iraq, which replacement the oil-for-food program.
Iraq's Deputy U.N. Ambassador Feisal Istrabadi said he had not been told about Sach's letter but that the move was good news. Iraq has long demanded that the United Nations transfer all money remaining in its oil-for-food accounts.
''Obviously we would welcome it as a positive development,'' he said.
The nine agencies involved are: the U.N. Development Program; UNESCO; the World Food Program; the Food and Agriculture Program; the World Health Organization; U.N. Habitat; the U.N. Office for Project Services; the International Telecommunication Union; and the U.N. Children's Fund.
One of the officials said the agencies had long been conscientious about the Iraqi money. For example, the official said, the U.N. Security Council in 2003 had initially said they should be given 3 percent of proceeds for their costs, but the agencies thought that was too high and lowered it to 1 percent.
They have defended their work under the program. Nick Parsons, spokesman for the Rome-based Food and Agriculture Organization, said his agency wasn't aware of any ''suggestion or accusation'' that it misspent money.
''We did a good job and we don't believe we have anything to apologize for,'' he said.
Volcker spokesman Mike Holtzman refused to comment on the upcoming report, saying only that the committee was ''getting to the bottom of all aspects'' of the program.
''As we have maintained, we will offer a series a recommendations -- some specific and some broader -- to protect the interests of those the program was meant to serve,'' Holtzman wrote in an e-mail to AP.