Accounting for Iraq's "food revenues"

After the Gulf War, the UN imposed sanctions on Iraq: they could not sell oil on the open market until they demonstrated they had no weapons of mass destruction. The lone exception was that they could sell oil so long as the revenues generated by the sales were used for food for the Iraqi population -- it was not the intent of the sanctions to hurt the population.

The accounting system used to see where the oil revenues actually went was thin at best. Since the Iraqi war, there have been many calls for an investigation into the "oil for food" program revenues. Here is a recent comment on some of the information discovered by these investigations:

Today, evidence suggests U.N. officials abused the program, enriching themselves, Saddam and favored foreign companies. The Iraqi Governing Council has hired accountants and lawyers to investigate Iraqi documents it says provide proof of corruption and fraud in the oil-for-food program.

Iraq's media have cited at least 270 suspects, including French and Russian firms, a senior U.N. official and a company linked to the son of U.N. Secretary-General Kofi Annan. Last month, a U.S. congressional investigation estimated that Saddam siphoned $10 billion or more from the program in kickbacks and bribes.

The oil-for-food corruption scandal raises serious questions about how the U.N. would handle that daunting job [of aiding the establishment of democracy in Iraq]. And it focuses attention on the potential for abuse in any massive government reconstruction program. Indeed, charges have surfaced in Iraq that some members of the governing council are profiting from rebuilding contracts.

The investigation identifies several reasons for abuse of the program and large-scale theft from the Iraqi people:

Lax accounting. Proper oversight could have caught abuses in the oil-for-food program. The Iraqi Governing Council's investigation shows the way to prevent future problems: Hire credible auditors to monitor the U.N. as they would private businesses.

Bloated bureaucracy. The oil-for-food program - involving nine separate agencies, projects and funds - was a classic example of the bureaucratic jumble that has been a U.N. hallmark.

Poor policing. Saddam was allowed to choose the companies and countries the oil-for-food program did business with - a clear invitation to pick those open to bribery.

While public discussions often treat business as somehow at odds with humanitarian activities, if not their antithesis, this flagrant thievery of food-funds which is tantamount to statistical murder could have been mitigated at least to some extent by good business practicies: good accountants to set up the accounting processes, good auditors and audit procedures, a contracting process that does not incent dishonesty or allow easy cover-ups of system abuse for personal gain.

It is great to have those who campaign for justice and identify abuse. It is also great, once the abuse has been discovered, to have those with the accounting, auditing, and business-processes skills -- and quality of character -- available to provide fixes to the process that mitigate these abuses in the future. This is as true for humanitarian efforts like the U.N.'s oil-for-food program as it is for Enron.