Critical Perspectives on Accounting 20 (2009) 716–734

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Critical Perspectives on Accounting

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US imperialism in actionAn audit-based appraisal of the Coalition Provisional Authority in Iraq

Christine Coopera,∗, Lesley Catchpowleb

a University of Strathclyde, Department of Accounting and Finance, Curran Building, 100 Cathedral Street, Glasgow, G4 0LN, Scotland, United Kingdomb University of Greenwich, United Kingdom

a r t i c l e i n f o

Article history:Received 6 April 2007Received in revised form10 September 2008Accepted 17 December 2008

Keywords:Iraq warCoalition Provisional AuthorityImperialismAudit

a b s t r a c t

This paper drawing from audit reports reflects upon the post-Iraq war administration theCoalition Provisional Authority (CPA). It argues that the CPA’s compliance with basic lev-els of decent public administration were akin to Guantanamo’s compliance with basiclevels of natural justice. The audit reports demonstrate that the CPA was a chaotic admin-istration which spent billions without proper controls or procedures and left preciousIraqi oil revenues open to fraudulent acts. The CPA failed to comply with its obligationsunder UN resolutions. It identifies the geopolitical/economic implications of the US gov-ernment which was partly motivated by economic concerns but it was also motivatedby political concerns—the imposition of US hegemony. It then turns to the broader eco-nomic imperatives of the falling rate of profit and the imposition of neoliberalism (marketfundamentalism).

Crown Copyright © 2009 Published by Elsevier Ltd. All rights reserved.

. . .endless capital accumulation implies that the neoliberal regime of rights must be geographically expanded acrossthe globe by violence (as in Chile or Iraq), by imperial practices (such as those of the world Trade Organisation, the IMF,and the World Bank) or through primitive accumulation (as in China and Russia) if necessary. By hook or by crook, theinalienable rights of private property and the profit rate will be universally established. This is precisely what Bushmeans when he says the US dedicates itself to extend the sphere of freedom across the globe. . . .. . .. these freedoms,we are told, are worth dying for in Iraq and the US as the ‘greatest power on earth’ has ‘an obligation’ to help spreadthem everywhere.” Harvey (2005, p. 181 and 184)

“. . .I met Adel Abdel-Mahdi. . .I asked him what the CPA’s mistake had been.” He didn’t hesitate. “The biggest mistakeof the occupation,” he said, “was the occupation itself”.... Freed from the grip of their dictator, the Iraqis believed thatthey should have been free to chart their own destiny, to select their own interim government, and to manage thereconstruction of their shattered nation. . .. . . Iraqis needed help – good advice and ample resources – from a supportcorps of well-meaning foreigners, not a full scale occupation with imperial Americans cloistered in a palace of thetyrant, eating bacon and drinking beer, surrounded by Ghurkhas and blast walls (Galbraith, 2006, p. 323).

In January 2002, at the Annual State of the Union Speech to Congress, President George Bush announced that he would beinvading Iraq. He explained that Iraq had become a legitimate focus for his ‘War on Terror’, and Saddam – a tyrant despisedby his people – would be removed.1 The US-led invasion of Iraq was bloody and swift. As coalition troops poured intoIraq on 20 March 2003, the Iraqi Army simply buckled under the sheer force of the superior, trained and equipped, coalition

∗ Corresponding author.E-mail address: c.cooper@strath.ac.uk (C. Cooper).

1 For readers interested in White House spin please see Fritz et al. (2004).

1045-2354/$ – see front matter. Crown Copyright © 2009 Published by Elsevier Ltd. All rights reserved.doi:10.1016/j.cpa.2008.12.003

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troops. After the war, Iraq was ruled for a short while by a team of former US military and other government agency personnel,humanitarian workers and Iraqi experts assembled under the Office of Reconstruction and Humanitarian Assistance (ORHA).Within weeks OHRA was replaced by the Coalition Provisional Authority (CPA) which governed Iraq from April 2003 to June2004.

As a direct result of the war Iraq reached a state of advanced social breakdown. It is estimated that, in the 3 years afterthe 2003 invasion approximately 655,000 Iraqis died above the number that would be expected in a non-conflict situation(Burnham et al., 2006).2 Ethnic cleansing now occurs on a regional, neighbourhood and even street by street basis. More than2 million people have fled their homes to escape violence that is segregating the country on sectarian lines (UNAMI, 2006).It has been argued that the spread of sectarianism is a direct result of the CPA’s de-Baathification policy (Chandrasekaran,2006, p. 78).3

While millions of people throughout the world marched in protest against the invasion of Iraq, the Bush/Blair rhetoriccontinued unabated as did the invasion. However, after the war, many things turned out to be very different from whatwas purported before it. There were no weapons of mass destruction and no clear link between Al-Qaeda and Iraq. Thefinancial cost of the war has also turned out differently. The cost to the US was estimated by Secretary of Defence Rums-feld to be in the range of $50–60 billion before the war, whereas, the true cost of the war could exceed a trillion dollars(Bilmes and Stiglitz, 2006). This paper is also a post-war reflection. It considers the activities of the US command inIraq, mainly through KPMG’s audit reports, in the immediate post-war period in order to reflect upon the US’s inten-tions. The KPMG reports are supplemented by more contextual information which could not have been provided in theaudit reports.

While it certainly could be argued that the CPA administration faced a daunting task—the implementation of marketreforms in a crumbling economy, this paper will argue that the CPA’s compliance with very basic levels of decent publicadministration were akin to Guantanamo’s compliance with basic levels of natural justice. The audit reports from Iraqdemonstrate that the CPA was a chaotic administration which spent billions without proper controls or procedures andleft precious Iraqi oil revenues open to fraudulent acts. Although the appointment of independent auditors was a legalrequirement of the CPA, they were not appointed until April 2004; a year after the CPA was created. On their appointmentCPA officials were reluctant to cooperate with the auditors.

The CPA’s activities were illegal in that it failed to comply with its obligations under UN resolutions that governed occu-pations. It has been argued that the illegal administrative failings of the CPA were institutionalised into post-election Iraqalongside its market reforms.

The institutionalisation of corporate corruption that followed the invasion can only be understood within the contextof the coalition forces’ contempt for universal principals of international law enshrined in The Hague and Genevatreaties (Whyte, 2006, p. 1).

The consequences of this are devastating. Iraq’s deputy Prime Minister Barham Salih recently said that the uncontrolledlevels of corruption in Iraq are fuelling the country’s sectarian conflict and creating a “political economy” of violence.

The political economy of this conflict is very much rooted in the alarming levels of corruption that we’re dealingwith. . . a lot of the money from many sectors of the economy is diverted to sustain the violence” (Negus, 2006b)

The war and the post-war US administration of Iraq have wrought massive destruction and terror upon the country.This has cost many Iraqi, US and other lives and less importantly, significant amounts of money. The paper will arguethat the implementation of progressive regime change was never an intention of the US or the UK when they wentto war.

The paper is structured as follows. The next section considers the involvement in and use of the accounting profession andaccounting practice in war and imperialism. This literature highlights accounting’s use as the “calculative knowledge” of bothwar and imperialism. It also explains how the accounting profession (as with colonising powers) meshed with local elites tothe benefit of both. Paradoxically, the CPA set about destroying local elites, arguably fuelling the sectarian violence which ishampering post-war reconstruction. This leads to questions surrounding the motives for war. For example, did the US intendto colonise Iraq, in which case why did the CPA not work with local elites? Thus the following section considers some ofthe motives for going to war. It briefly examines four highly interrelated explanations—political, ideological, economic andimperialist. The paper then turns in detail to the activities of the CPA in order to reflect upon the reasons for war outlined inthe paper. Finally, the paper presents some tentative conclusions.

1. Accounting, imperialism and war

The accounting literature has charted how accounting practice has been used in wars and imperialist expansion. It hasalso considered the way in which the accounting profession has used both imperialism and war for its own ends.

2 This Lancet study reported that the minimum value of their confidence interval was 392,979 and their maximum value was 942,636. The Iraqi HealthMinistry estimated that between 100,000 and 150,000 had died since early 2004 (Negus, 2006a).

3 There were those before the war that warned that the invasion could proliferate Jihadism (Gardner, 2006).

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1.1. Accounting and imperialism

Much of the work on accounting and imperialism is concerned with the related arenas of the development of the account-ing profession in former British colonies and how the techniques of accounting were used to facilitate British imperialisticexpansion. The act of engaging in colonialism is an imperialistic act although imperialism does not always take on the formof colonialism. Colonialism is a practice of domination, which involves the subjugation of one people to another. In prac-tice of colonialism usually involves the transfer of population to a new territory, where the new arrivals live as permanentsettlers frequently building alliances with extant ruling elites while maintaining political allegiance to their country of ori-gin. Imperialism involves one country exercising power over another, whether through settlement, sovereignty, or indirectmechanisms of control. The role of accounting in enabling colonial powers to translate their objectives into practice made ita “calculative knowledge of imperialism” (Davie, 2000).

Researchers have poignantly charted accounting’s imperialistic functions throughout the world, for example in Trinidadand Tobago (Annisette, 2000), Jamaica (Bakre, 2005, 2008), Fiji (Davie, 2000), Australia, Canada, South Africa (Chua andPoullaos, 2002), New Zealand (Gallhofer et al., 1999; Kim, 2004; McNicholas et al., 2004), Canada (Neu, 2000a, 2000b), thePhilippines (Dyball et al., 2007) and the British West Indies (Tyson et al., 2004).

While the practice of accounting was used in Britain’s imperialistic project, the British accounting profession bene-fited from imperialism. Annisette (2000) and Bakre (2005, 2008) considered the contemporary and historic role of ACCA inTrinidad and Tobago (Annisette, 2000) and Jamaica (Bakre, 2005, 2008). From a historical perspective the interests of ACCAintermeshed with those of the local accounting elites. This intermeshing of the indigenous and the external constitutes the“internal logic of imperialism” (Annisette, 2000). In a similar vein Bakre (2008) argued that in Jamaica, financial report-ing techniques and practices supported, sustained and legitimised the expansion, maintenance and control of the triangularrelationship of colonialism, capitalism and imperialism. Furthermore Bakre (2005) argued that the ACCA hindered the devel-opment of an independent Institute of Chartered Accountants of Jamaica. Work on the enrolment of accounting in imperialexpansion in Fiji (Davie, 2000) also found an intermeshing of local elites and imperialist forces.

Several papers highlight the continuing legacy of western accounting as a form of insensitive cultural imperialism forcedupon minorities as they struggle to gain a foothold on the accounting career ladder (Gallhofer et al., 1999; Kim, 2004;McNicholas et al., 2004).

While the UK accounting profession and bodies like the ACCA were clearly exemplars for emergent accounting associationsin British colonies, the new associations were not compliant clones but hybrids (Chua and Poullaos, 2002).4

Other accounting papers which have focussed on imperialism have considered the strong links between economic impe-rialism and positive accounting theory (Reiter, 1998); the failure of traditional critical theories in terms of their ability toencompass International Financial Institutions’ ability to operate outside of democratic control and scrutiny (Murphy, 2008);the role played by the accounting profession in the imperial project from a gender perspective (Dwyer and Roberts, 2004);and how theories of identity and nationalism can help in explaining the detailed mechanisms of imperialism in the formersoviet union (Cooper et al., 1998).

For the purposes of this paper the literature on imperialism demonstrates an important distinction between imperialismand colonialism. It seems that while Britain through its colonialist expansion did in many cases brutally impose its hegemonyon indigenous peoples, at the same time it imposed a certain “order” and, from a capitalist perspective, “efficient” albeitWestern-centric administration which served the interests of emerging capitalists and local elites. As we will demonstratelater in the paper, US imperialist activities in Iraq directly after the war did not appear to be concerned with order and efficientadministration. Indeed, paradoxically, decent administrative accounting controls were actively shunned by the CPA. This doesnot mean that accounting calculations do not serve the interests of imperialism. But that transparency and accountabilitydid not suit the interests of the CPA, nor the Bush regime.

1.2. Accounting and war

The literature on accounting and war in many ways mirrors that of accounting and imperialism. This research demon-strates how accounting techniques are employed to facilitate the expansion of the military industrial complex in the sameway as they enabled imperialist expansion (Chwastiak, 1996, 2001, 2006, 2008; Chwastiak and Young, 2003). Moreover,accounting numbers have served to “dehumanise” war (Chwastiak, 2001, 2006; Funnell, 1998). This is not to suggest thataccounting techniques have enabled the military to be more “efficient” in a business sense (Chwastiak, 1996; Funnell, 2006).Rather that accounting has a conflict enhancing potential (Gallhofer and Haslam, 1991).

Chwastiak (1996) demonstrates that rather than accounting control techniques being used to benefit society by helping toensure that resources are used in an efficient manner, they were in fact used by various components of the military–industrial-complex to maintain or extend their decision making power and to re-rationalize defence spending during periods of socialcrises, not to promote the efficient use of national resources. By documenting a history of the control systems used for

4 Although at least one accounting association took a slightly different direction. Dedoulis and Caramanis (2007) showed that in the formation of theGreek institution of auditing in the aftermath of WWII, despite “Western imperialist” influences, a corporatist auditing body was set up as a means of betterserving state policy priorities.

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defence acquisition during the first phase of the Cold War, the period 1950–1972, Chwastiak implicates accounting’s rolein producing social inefficiencies and waste. Chwastiak (2008) has also demonstrated how accounting has been used bypoliticians in their own interests when budgeting for war. Her paper examines what costs are included and which areexcluded from a war budget and why it is in the best interests of the US political elite to under-cost warfare. Correspondingly,Chwastiak (2001) shows how Planning, Programming and Budgeting (PPB) assisted with normalizing the preparation fornuclear war by converting the “unthinkable” into a technical and mundane resource allocation problem. This paper alsodemonstrates how PPB was purposefully deployed by the Secretary of Defence for resource allocations within his office.Yet again examining PPB, Chwastiak (2006), demonstrates the role PPB played in changing visibilities in the Department ofDefence in such a way that the US leaders believed that the Vietnam War could be won through the proper managementof resources. Thus accounting cannot impose control over the turmoil of war but it has served to distort the view of theproliferation of nuclear weapons and defence spending in general.

The historical antecedents for the belief that accounting technologies could be somehow used to help win wars perhapsdates back to the South African War (1890–1902) (Funnell, 2006). Costly administrative failures during the South African Warwere shown by several official investigations to be associated with ineffective and deceptive accounting systems administeredfrom the War Office. To retrieve “Britain’s greatness” a movement of national efficiency sought to raise efficiency levels.Fundamental to the reforms that they advocated were a strong British empire and an efficient army. Military administratorswere urged to apply the methods of commerce to the business of war. Amongst the most innovative strategies to increasethe commercial awareness and accounting expertise of army administrators were the Army Class at the London School ofEconomics and Political Science (LSE) between 1906 and 1932 and the army cost accounting experiment (1919–1925) inwhich the LSE also played a role.

Research into the early accounting profession’s ethical approach to war finds it wanting. By examining this earlier period(Neu and T’aerien, 2000) provide a curative to the nostalgia about the Canadian CA’s mythic ethical past. They argue that,during their formative period, ethics was narrowly defined with minimal ethical deliberation about the role of accountantsin relation to important societal issues of the day such as World War I. With respect to British accountants, Walker (2000)reveals that in 1936 a committee of British accountants chose Nazi Germany as the venue for the Fifth International Congresson Accounting. Walker (2000) examines the reasons why the professional elite in Britain patronised a regime whose racistfoundations were transparent and where the vocation of accountancy was being reprofessionalised on the basis of arayani-sation and party-state control. One of the drivers behind the choice of venue was the protection of advances into the Germanmarket for professional services by some of the major British and American accounting firms. In attending the Congress in1938 the accounting community entered a highly politicised arena, fraternised with future war criminals, succumbed to Nazipropaganda, and, during the zenith of ‘appeasement’, made utterances which appeared to condone the activities of the fas-cist state in the realm of accounting and economics. The emergent accounting profession perhaps reflecting its imperialisticexemplars failed to deal with ethical problems concerning war (Neu and Graham, 2004; Neu and T’aerien, 2000; Walker,2000).

There are four important themes in the accounting literature in terms of the aftermath of the war with Iraq. These are theuse of accounting as “the calculative knowledge of imperialism”; the way in which the accounting profession (and indeedthe colonisers) meshed with local elites for the benefit of both; the way in which PPB changed visibilities by converting the“unthinkable” into a mundane technical problem; and the concern about the accounting profession’s ethical stance on war.

Before analysing the activities of the Coalition Provisional Authority through the audit reports in more detail the paperwill firstly consider some of the potential reasons behind the US invasion of Iraq. This analysis will help to use the officialaudit reports on the war to better reflect upon the activities of the US in Iraq after the war.

2. The potential US motivations behind the Iraq war

The drivers behind the US decision to invade Iraq are multiple and complex5 and to properly understand them meansgrappling with the complex historical developments in the region vis-à-vis Western interventionism in the Middle East andPersian Gulf (Ahmed, 2003, see also Fisk, 2008) which is beyond the scope of this paper. However, there is a large literatureexplaining how the invasion was not concerned with weapons of mass destruction nor was it a war on terror (see for example,Bamford, 2005; Blix, 2004; Bugliosi, 2008; Carter, 2005; Drogin, 2007; Dyer, 2003; Harvey, 2005; Key and Hill, 2007). Withouta deeper historical analysis of the reasons for going to war various interrelated perspectives can be drawn upon to shed lighton the reasons for war. In this paper four perspectives are briefly drawn upon—geopolitical, neo-conservative ideological,economic and imperialist.

The fact that Iraq has oil makes the country an attractive proposition to any occupying force6 (Phillips, 2006). However,Dyer (2003) argues that oil was not a motivating factor in the invasion, since military occupation is not the most cost-effectiveway to obtain oil. While this may be the case, as we will see below, for ideological reasons, the Bush administration was morewilling to spend on military expansion rather than more peaceful means to meet its energy requirements. Furthermore, it has

5 See for example, The Research Unit for Political Economy (2003).6 Kevin Phillips is a Republican strategist. In his 2006 book he argues that on of the biggest threats to the US is its reckless dependency on shrinking oil

supplies.

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been argued that middle-eastern oil, although essential to the American economy, is more important to the US as a ‘strategiccommodity’ (Heinberg, 2003). The strategic importance of oil is the geopolitical explanation for the US’s invasion. Controlover world oil is crucial if it is to retain global leadership, especially as other centres of industry – Japan, Europe and China– remain dependent on oil (Bromley, 1991; Neale, 2004). McQuaig (2006) wrote that Iraq with its massive reserves of oilrepresented the alluring prospect of future energy security for the US as its own oil reserves were dwindling.7 But, SaddamHussein had made deals with oil companies from other nations, including America’s rivals: China, Russia and France. TheBush administration’s election was heavily financed by the oil industry and very quickly after the election it set up a taskforce to consider how to gain control of Iraq’s massive oil reserves.8

From both a geopolitical and an economic perspective, it could be argued that it is Saudi Arabia (and not Israel) thatis the most critical to US. Saudi has oil and it bought billions of dollars of military equipment from the US. The Saudi royalgovernment may be a corrupt dictatorship, but its oil reserves ensure continued support from the Washington regime (Neale,2004). The US’s close relationship with the Saudi Monarchy is reflected in its continued military presence in the country sincethe first Gulf War. After this war, the Saudis proceeded to increase their production of oil, and therein their market share. Thiswas largely achieved with the support of the Americans, who allowed the Saudis to absorb the previous quotas of Kuwaitand Iraq. The Saudi’s were running a tremendous deficit, the war having cost them $64 billion. Maintaining their marketshare was therefore essential, and producing ‘flat out’ meant they could undercut everyone else, maintain their position, anduse the revenue to offset their war-time losses. The USA welcomed the high oil production, for it not only lowered gasolineprices at the US pumps and kept fuel bills down, but also assisted Bush’s re-election bid.

The Saudi’s entered into two large defence contracts with the US worth $14.3 billion (Pelletiere, 2004). But as early as 1992Saudi ran into financial problems. Since the Gulf had become the mainstay of the military/industrial complex (from 1990 to1993 the Saudi’s spent more on American arms than the post-Cold War Pentagon), the implications for the US industry andeconomy were potentially ruinous. In 1996 Saudi increased the price of oil and in 1999 declared an intention to cut defencespending. This served as a serious threat of an economic-downturn in the US. This should be set in the context that since theearly 1970s industrial profits have been falling in all the rich countries (Brenner, 2002, 1998).

In part the US economy avoided an economic down-turn by the use of military Keynesianist policies (Pollin, 2005). MilitaryKeynesianism is basically the same as “traditional” Keynesianism except that government spending is concentrated on themilitary. This spending creates a multiplier effect on general consumer spending as with other Keynesian policies. One of thedrivers behind the war was the demands of the military industrial complex for increased government expenditure on themilitary; this took the form of promoting a campaign against Iraq and taking the US to war (Pelletiere, 2004; Pollin, 2005).

One may ask why the Bush regime pursued “military” rather than “traditional” Keynesian policies.9 It is at this juncturethat ideology becomes important. From an ideological perspective neo-conservatives were a key constituent of the Bushgovernment’s ideological apparatus (Glazer, 2005; Murphy, 2006).10 Neo-conservatism is an economic ally of neoliberalismin the sense that both support the “free-market” but neo-conservatism also supports a strong military, expansionist foreignpolicy, and the promulgation of moral standards by the state.11 It is opposed to internationalism (Fukuyama, 2004). Dyer(2004) makes the argument that the US “neo-conservative agenda” included the invasion of a country as a demonstrationof US military power and a new willingness to operate in defiance of international cooperation and the UN

The US invaded Iraq without broad international support and more significantly, for the purposes of this paper, with strongsuspicions against any encumbrances on US actions (see Project for the New American Century12 2008, Murphy, 2006). Ineffect this meant that the neo-conservative foreign policy elite in the US which had Bush’s ear had no regard for the manyvoices which expressed reservations about the invasion.

But why is US domination so important to neo-conservatives? One economic reason for this is that the foreign debt ofthe US government and corporations are far greater than the foreign debt of any other country. This makes it imperative forthe US to be in a dominant hegemonic position in order to protect the dollar. For while the US remains the dominant powerin the world, rich individuals and corporations are prepared to continue lending money to the US (Neale, 2004).

By invading Iraq, the US was acting for a mixture of economic and geopolitical reasons; some of these were intensivelyideological, while others were simply for the sake of basic economics and profits. Moreover, the US was acting as an imperialist.Imperialism means that capital accumulation and exploitation can expand beyond the narrow confines and boundaries ofnation states (see Hellyer, 2003). Marxists argue that imperialism is neither a universal feature of human society nor aparticular policy but ‘a special stage in the development of capitalism’, indeed as the title of Lenin’s famous pamphletdeclares it is ‘the highest stage of capitalism’. Bukharin (1972) clarified this theory when he argued that the geopoliticalrivalries among states and economic competition between their respective capitals have increasingly merged since the 19th

7 The potential profits, were in the range of $100 billion a year.8 It is documented that this concern was being considered much earlier. Brzezinski (1998) was the conservative military advisor to presidents both

Democrat and Republican. His book sets out America’s military plan to dominate the world to control the remaining oil reserves.9 Chwastiak (1996) gives an account of accounting’s role in increased military expenditure at the expense of social expenditure in the Cold War period

1950–1972.10 Glazer, a self-confessed neoconservative argues that it is difficult to know how neoconservatives moved into the realm of foreign policy.11 To see the neoliberal case for war, see Frum and Perle (2003).12 The project’s fundamental propositions are that American leadership is good both for America and for the world; and that such leadership requires

military strength, diplomatic energy and commitment to moral principle. http://www.newamericancentury.org/ (accessed 27th August, 2008).

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century. In other words large public companies have expanded their markets and profit making potential on the back of“their own” nation states. One can see this quite clearly in the case of Halliburton and Bechtel. Imperialism is another theorythat offers an explanation as to why the US invaded Iraq (Callinicos, 2002; Chomsky, 2004; Chomsky and Barsamian, 2005).

Thus far we have put forward various theories and explanations for the US invasion of Iraq. In order to reflect upon thesefurther the next sections draw upon accounting reports to examine the activities of the US administration after the war.KPMG’s audit reports were one of the few sources of independent information that came out of Iraq during the reign of theCPA. This was in part due to the fact that while the majority of reporters were embedded within the “Green Zone” with theCPA staff and the US military, KPMG staff were kept on the outside. The “Green Zone” is a 10 km2 (4 mile2) area in centralBaghdad in which housed the US command. It was heavily protected and unlike the rest of Iraq had permanent electricityand water, swimming pools and so on. In many ways the living in the green zone was more like living in the US. Reportersrarely left the green zone, and if they did they were mainly accompanied by the US military. Consequently reporters received“information” from the military or the CPA. KPMG auditors had difficulty obtaining entrance to the Green Zone. One reasonfor this was the hostility showed by the CPA to anyone deemed to be “interfering”. Another reason may be that the KPMGstaff came from the Bahrain office and may not have been white Anglo-Saxons.

3. Coalition Provisional Authority (CPA)

In the aftermath of the war it was not immediately clear how Iraq was to be run. Galbraith (2006, p. 117) suggested thattwo diametrically opposed policies were being pursued by various US factions

1 a rapid turnaround to selected Iraqis;2 a robust occupation.

At first Iraq was ruled by a 200-strong team of former US military and other government agency personnel, humanitarianworkers and Iraqi experts assembled under the Office of Reconstruction and Humanitarian Assistance (ORHA). The man incharge was retired American General Jay Garner. On 5th May 2003 Garner announced that he would form the nucleus of aninterim Iraqi government within 10 days (policy 1). The Pentagon, for whom Garner worked, wanted to hand power over tothe Iraqis as quickly as possible. However, the Bush administration had not decided if they wanted an interim government.Galbraith (2006) argued that there was an ideologically charged (neo-conservative) faction within the administration thatwanted the new Iraq to have a free market economy, a flat-tax, privatised industry, a privatised oil sector, a new educationalsystem, a NATO-style military, and a non-ethnic, non-sectarian democratic government (Galbraith, 2006). It is unlikely thatall of these reforms would have been immediately pursued if power had been given straight to the Iraqis. So the Bushadministration opted for the second option and formed the Coalition Provisional Authority (CPA). ORHA was dissolved. TheCPA enacted laws, printed currency, collected taxes, deployed the police and the military and spent Iraq’s money. At its height,it had 1500 mostly US employees (Chandrasekaran, 2006).

L. Paul Bremer III arrived in Iraq 2 weeks after being asked to head the CPA (Bremer and McConnell, 2006). He had verysolid Republican credentials, had never been to Iraq, did not speak Arabic, had never served in a post-conflict society and hadno experience in nation building. For a full year before the war the State Department had spent millions of dollars workingwith Iraqi exiles and experts to prepare a 15 volume blueprint for how Iraq might be governed after the war. The DefenceDepartment (for whom Bremer worked and who gave him his briefings) did not tell him about this document (Galbraith,2006). Although Bremer did have a blueprint—it was a profoundly neo-conservative one (Chandrasekaran, 2006; Galbraith,2006).

Many of the post-war accounts of the CPA (e.g. Chandrasekaran, 2006; Galbraith, 2006; Gordon and Trainor, 2006; Jamail,2007) suggest that the vast majority of CPA staff were, like Bremer, not qualified for the task at hand. Chandrasekaran (2006)reported that they were appointed because of their strong ideological commitment to neo-conservatism. Many experiencedORHA staff were replaced by “more solid republicans”. For example, in April 2003, the Bush administration replaced ORHA’sprincipal health official, Dr. Frederick Burkle, a medical doctor with close working relationships with humanitarian organisa-tions and long experience in conflict zones, with James Haverman, who was a political crony of Michigan’s former Republicangovernor and did not have a medical degree (Galbraith, 2006).

It seems that cronyism was rife in the CPA (Hartung, 2003). Galbraith (2006) recounts how Tom Foley, a top Bush fundraiserwith no experience in handling economic transactions (and no knowledge or Iraq), was put in charge of privatizing Iraq’sindustry. He was replaced by Michael Fleischer, a brother of Bush’s first press secretary. In an interview with the ChicagoTribune he stated that he had got the job in Iraq through his brother Ari. Then, without any apparent irony, he said thatthe Americans were going to teach the Iraqis a new way of doing business. “The only paradigm they know is cronyism.”(Galbraith, 2006, p. 126)

Interestingly there have been several articles and sections of books devoted to the CPA staff who were involved in theCPA administration of interest to this study (Chandrasekaran, 2006; Galbraith, 2006; Washington Post, 23/3/04).13 It seems

13 Ariana Eunjung Cha In Iraq, the job opportunity of a lifetime: managing a $13 billion budget with no experience, Washington Post, 23 May 2004, p. 1.

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that out of the blue, six young people received e-mails from the defence department asking if they wanted to serve with theCPA in Iraq. This was a surprise to each of the six since they had never expressed interest in going to Iraq nor had relevantexperience. They were hired without security clearances and were supposed to take relatively low-level positions in the CPAbudget office, but because the CPA did not recruit qualified senior people, they ended up responsible for spending Iraq’sbudget. According to the post, the group, which included the daughter of a prominent conservative activist, could not figureout how they had been selected. Finally the young people realised that the one thing they had in common was that theyposted their resumes at the Heritage Foundation, a conservative Washington think tank. In all the Pentagon hired 11 peopleoff the Heritage Foundation Web site.

Thus after the military invasion came a neo-conservative one. This invasion had sweeping plans, to establish a freemarket economy, including the privatisation of state owned assets and the formation of a stock-exchange.14 Whatever couldbe outsourced was. For example, the job of setting up town and city councils was outsourced to a North Carolina firm for$236 million (Chandrasekaran, 2006). On 19th September 2003, the CPA promulgated four orders that included “the fullprivatization of public enterprises, full ownership rights by foreign firms of Iraqi businesses, full repatriation of foreignprofits. . .the opening of Iraq’s banks to foreign control, national treatment for foreign companies and the elimination of alltrade barriers” (Juhasz, 2004 cited in Harvey, 2005). The orders applied to all areas of the economy including public services,the media, manufacturing, services, transportation, finance and construction. Oil was exempt because of UN Resolution 1483(May 2003) which stated that Iraq’s oil revenues were to be paid into the Development Fund for Iraq for the benefit of theIraqi people. Strict regulations too were passed on the labour market. Strikes were effectively forbidden in key sectors andthe rights to unionize restricted. A regressive flat tax was also imposed (Harvey, 2005).

Klein (2003) argued that the CPA reforms were illegal, because they violated the international convention governing thebehaviour of occupying forces, namely the Hague regulations of 1907 – the companion to the 1949 Geneva convention – bothratified by the US government and the US army’s own code of war. The Hague regulations state that all occupying powersmust respect “unless absolutely prevented, the laws in force in the county”. Iraq’s constitution outlaws the privatisation ofkey state assets, and bars foreigners from owning Iraqi firms. Yet the CPA in 19 September 2003 proceeded unilaterally to dothis. Order 39 allowed 200 Iraqi state companies to be privatised, with foreign companies retaining 100% ownership of Iraqibanks, mines and factories, and allowing these banks to move 100% of their profits out of the country. The Hague regulationsalso regard an occupying power ‘as administrator and usufructuary15 of public building, real estate, forests and agriculturalestates belonging to the hostile state, and situated in the occupied country’. This means that an occupying force can derivea benefit from the others’ property but it cannot alter “the substance of the thing”, yet this according to Klein (2003) wasprecisely what happened in Iraq—by converting public assets into private ones, a substantial alternation was being made.The US army’s law on Land Welfare, reflecting The Hague regulations state that occupying forces do not have “the right ofsale or unqualified use of [non-military] property” (Klein, 2003).

Whether or not the CPA’s new laws were illegal when imposed, they would become legal if confirmed by a “sovereign”government. The interim government appointed by the US in June 2004 was declared “sovereign”. This new government,however, only had the powers to confirm existing laws. The task facing the occupying forces in the aftermath of the war wasimmense, the aim being to privatise a country where 30% of its workforce was employed by the state, and its impoverishedpopulation was only just surviving on food rations and cheap petrol (Vulliamy and Islam, 2003).

Before the handover to the interim government in June 2004, the CPA multiplied the number of laws to specify free-market and free-trade rules in minute detail, expressing the hope that these institutional arrangements would “take on alife and momentum of their own” (Juhasz, 2004 cited in Harvey, 2005).

The huge range of projects being opened up to privatisation simply reflected the immense task of rebuilding Iraq’sshattered infrastructure, including the reconstruction of its oil industry, its buildings, roads, water, power, health, schools,mosques, security forces, mobile phone industries, accounting and insurance companies, to name just a few (Ismael andIsmael, 2004). As a consequence the US regime began energetically wooing private sector capital with promises of a free-market bonanza. But – as the example of the ex-Soviet Union states has shown – simply imposing neo-liberal economicorthodoxy is not enough for a vibrant free market to appear. The privatisation of heavily subsidised state assets meansincreasing prices and rationalising staff if the private companies are to become profitable, which almost certainly translatesinto unemployment, and inflation for the local population.16 It might have been expected that such reforms would face someresistance on the part of Iraqi workers. It is certainly the case that many Iraqi’s perceived the Americans to be an occupyingforce and resented their presence enormously. But how did the CPA treat the Iraqi people and their property? It is clearthat a neo-conservative blueprint was imposed on Iraq. But was the CPA simply a plundering imperialist force or was therea plan to colonise Iraq? Did the activities of the CPA herald in a US friendly regime on a geopolitical level? How were thetechnologies of accounting used? The following sections attempt to provide answers to these questions.

Most of our research is based upon primary data in the form of reports and other audit documents issued by KPMG,supplemented by reports and audit documents from the International Advisory and Monitoring Board (IAMB),17 Christian

14 Leading article (9/6/03) ‘Iraq’s companies head for sell-off’, BBC News World Edition, http://news.bbc.co.uk/2/hi/business/2975186.stm.15 ‘Usufructuary’ is a technical term in law for a person who has the right to enjoy the products of property he does not own.16 Guardian Leader (2003) ‘Say no to privatisation’ 23rd September, http://www.guardian.co.uk/Iraq/Story/0,2763,1047638,00.html.17 Set up by the United Nations to monitor the use of Iraq’s money by the CPA.

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Aid (2004), Amnesty International (2003), the CPA’s own Inspector General and other investigative sources. These reportswhile frequently couched in rather circumspect language, paint a picture of a catalogue of mal-administration potentiallyleading to significant corruption. Perhaps unsurprisingly, the CPA and the US government demonstrated extreme reluctanceto lay its financial administration open to scrutiny. In the next section we outline the appointment and activities of thevarious auditors from whose reports we have drawn much of our evidence.

4. Transparency and accountability—the auditors

From its inception, the CPA had significant power over the resources of Iraq and scant formal accountability. In its recon-struction of Iraq the CPA had two main sources of money to draw on. The first was the $18.4 billion allocated from the UScongress, which will be discussed later.18 The second element, on which we will concentrate here, was the DevelopmentFund for Iraq (DFI). In essence, the DFI in terms of its revenues was a mixture of Iraqi funds from the sale of oil, governmentbanks accounts frozen since 1991 and funds left over from the oil for food programme. UN Resolution 1483 of May 2003 saidthat Iraq’s oil revenues should be paid into the Development Fund for Iraq (DFI), and that this money should be spent in theinterests of the Iraqi people, and be independently audited. Basically, the DFI consisted simply of bank accounts. The DFI didnot have employees but relied upon CPA staff to operate and control the fund.19 The UN resolution called for an InternationalAdvisory and Monitoring Board (IAMB) to be set up to monitor the CPA’s use of the Development Fund for Iraq (DFI) untilthe country had a sovereign government.

Five months after the passing of this UN resolution, the IAMB’s constituent members – the IMF, the World Bank, the UN,and the Arab Development Fund – were still arguing about what its role should be. It was reported that Washington wasattempting to limit its remit so that it would have no real power.20 When the IAMB was given its powers, it was not giventhe power to sanction the CPA for financial mismanagement, nor to compel it to cooperate in its investigations. This meantthat the IAMB had little power over the CPA in terms of its financial accountability.

For many months after its inception the CPA was without an inspector general. Indeed the Inspector General of the CPAdid not arrive in Baghdad until February 2004. The Inspector General was Stuart Bowen, a long-time lawyer for George Bushand a White House aid. A later audit report stated that

US Public Law 108–106 established an Inspector General (IG) function for the CPA on 6th November 2003, while the CPAwas established in May 2003. This law stated that the IG would be appointed within 30 days thereafter, however, the IGwas appointed only on 20th January 2004. The IG initially visited Baghdad in Feb 2004 and additional IG staff mobilizedduring March 2004. The delay in appointment of the IG may have resulted in the loss of performance improvementopportunities. The IG informed us that work had commenced and no reports have been completed to date.21

Under its own rules the CPA was required to hire an independent auditing firm to assist in the accounting of the Iraqifund. But the firm appointed, at a cost of $1.4m, was not a certified public accountant but rather a consulting firm. It nevercarried out the job, as was demonstrated by the KPMG findings.

1.3.1 in accordance with CPA Regn 2 dated 15th June 2003, the CPA was required to obtain the services of an independent,certified public accounting firm to assist in the accounting function of the DFI. A firm was appointed in Oct 2003, andbegan their work during November 2003. The lead consultant represented to us that they are not a certified publicaccounting firm but a consulting firm.21

There was much controversy surrounding the appointment of auditors to audit the DFI. The US government had to agreeon the audit firm appointed. It was not until 5th April 2004 that an announcement was made by the CPA – with the approvalof the IAMB – that it had selected the accountancy firm KPMG in Bahrain as the auditor of the DFI.

KPMG did not find their audit easy to carry out.22 Aside from more obvious and expected problems with carrying out anaudit in Iraq, KPMG reported that it had encountered “resistance from CPA staff.” The company said they faced bureaucratichurdles getting passes for the green zone.

1.2.2 During the course of our audit work we encountered difficulties in performing our duties and meeting with keyCPA personnel. These included a lack of documented defined roles and responsibilities of CPA personnel, the rotationof key CPA personnel, limited access to the CPA Senior Advisor to the Ministry of Finance, in the absence of the CPAAdministrator and the dissolution of the CPA on 28 June 2004.21

18 This amount is significantly short of the amount which the World Bank estimated would be needed to rebuild Iraq. Leading article (3/10/03) ‘RebuildingIraq ‘will cost $55bn’, BBC News UK Edition, http://news.bbc.co.uk/1/hi/business/3160800.stm.

19 DFI appendix matters noted involving internal controls and other operations issues during the audit of the fund for the period to 31st December 2003,KPMG.

20 “Monitoring panel for Iraq spending yet to start work”, FT, 5th February 2004.21 DFI appendix matters noted involving internal controls and other operations issues during the audit of the fund for the period to 31st December 2003.

Dated 29th June 2004.22 There is little doubt that the auditors faced certain dangers in Iraq. See for example, leading article (3/7/04) ‘Bomb kills oil-for-food auditor’ BBC News

World Edition, http://news.bbc.co.uk/2/hi/middle east/3863917.stm.

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6.2 Further to the transfer of power from the CPA to the new Interim Government of Iraq, most CPA Senior Advisors andtheir staff left Iraq. Consequently in certain cases we encountered difficulties in gathering evidence for the completionof our procedures, including obtaining supporting documentation for funding programs, projects or contracting files,and meeting with former staff responsible for these programs.23

5.2.1 We performed procedures at the MOF,24 five other Iraqi Ministries [Electricity (MOE), Health (MOH), Oil (MOO),Trade (MOT) and Construction and Housing (MOC)] and the OPC. We were only able to obtain approval from the IraqiGovernment to access the Iraqi Ministries on 16 August 2004 and were denied access by the KRG [Kurdish RegionalGovernment] to their accounting records.23

If KPMG only gained access to the Iraqi ministries on 16 August and their report was dated September 2004, this meantthat they only had a few weeks to carry out their audit of the Iraqi ministries.

Due to security issues, we were unable to perform procedures at the Ministry of Education and Interior. Additionallyour procedures at the Ministry of Electricity were limited due to security threat. Other problems encountered at theIraqi Ministries included limited resources due to security issues and limited working hours. These obstacles furtherlimited our procedures.

The most difficult arena to gain access to was to the records of the Kurdish Regional Government (KRG).

2.2.5 . . ..During our procedures in Erbil, we were denied access by the Kurdish Regional Government (KRG) to theiraccounting records.23

The timeframe within which the auditors could audit the CPA began in April 2004, a year after the CPA begun its work.Since the CPA was to be disbanded in June 2004, this left only a matter of weeks for the auditors to go through the booksbefore the CPA was disbanded. Given the extreme conditions the auditors were working under, it seems from their reportsthat they did a remarkable job in many ways. Their findings must have been affected by their tardy appointment, lack ofcooperation, poor record keeping and denial of access to the ministries. For example, the auditors noted that 1.2 millionemployees were paid through the Iraqi budget. Yet the auditors did not appear to have the time or the resources to be ableto take a very large sample of them. For the first 6-month period of the CPA, they sampled 15 employees for 3 months andwere not able to verify staff grades for 5 employees at the Ministry of Health.25

Iraq Revenue Watch director Svetlana Tsalik is reported as saying that “There is not enough time left to cram in an auditof more than a year’s worth of expenditures, many of which have not been accounted for.”26 A UK Foreign Office spokesmansaid that the question of liability for the CPA is “messy” and that it would be very hard to bring it to account after 30th June(Christian Aid, 2004, p. 8). On the 28th June, senior CPA officials appeared to abrogate all responsibility. Indeed, the auditorsnoted the sudden departure of the CPA Administrator made it difficult to find someone to approve the DFI’s statement ofcash receipts and payments

Without further qualifying our opinion, due to the sudden departure of the CPA Administrator on 28 June 2004, thestatement of cash receipts and payments was approved by Mr Nash, manager of the Iraq Reconstruction ManagementOffice,27

1.2.3 The CPA Senior Advisor to the Ministry of Finance, who is also the Chairman of the Program Review Board (PRB),was unable to acknowledge the fair presentation of the statement of cash receipts and payments, the completenessof significant contracts entered into by the DFI and his responsibilities for the implementation and operations ofaccounting and internal control systems, designed to prevent and detect fraud and error.

There appeared to be a rather hostile and tardy approach to the appointment of auditors. Once auditors were appointed,they faced resistance and hurdles by both CPA staff and the various ministries. KPMG considered that the uncertainty anddelay caused by the decision to put the audit contract out to tender may have resulted in the loss of valuable evidence.28 Manydocuments were already feared missing—supposedly amid rumours that paper-shredding machines were busy (Fielding,2004; Hinks, 2004). In terms of money, the largest item which KPMG had to audit was the oil revenue. In the next sectionwe consider oil revenue and how it was left open to corruption.

5. Revenues of the DFI

The main source of revenue for the DFI was Iraqi oil. Astonishingly, KPMG discovered that it was impossible to knowexactly how much oil was being produced and sold because oil extraction had not been metered and there was not enough

23 DFI report of factual findings in connection with disbursements for the period from 1 January 2004 to 28 June 2004.24 Ministry of Finance.25 The Iraqi Board of Supreme Audit (BSA) carried out their own audit and reported that employees names are repeated and disbursements are duplicated

and that retired employees received payments from their original department and the retirement department duplicating disbursements. 5.2.2, 5.2.5, 5.2.6DFI Agreed-Upon Procedures Report 22 May–31 December 2003 (disbursements).

26 http://www.iraqrevenuewatch.org/reports/041904.shtml.27 Development funds for Iraq, statement of cash receipts and payments, 22 May–31 December 2003.28 Technically, the approach of the auditors was more compliance rather than risk based.

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information available about the contracts for its sale. Given the literature which strongly suggests (Bromley, 1991; Brzezinski,1998; Heinberg, 2003; McQuaig, 2006; Neale, 2004) that oil (or at least control of it) was a driver behind the war, this maybe surprising. However, as stated earlier, oil was not to be privatized (UN Resolution-1483) and the sale of it was to be used“for the benefit of the Iraqi people”. Perhaps more importantly for the US, oil was no longer under the control of SaddamHussein.

KPMG, in an interim report relating to the DFI, stated that

3.2.5 The CPA believes that an unknown quantity of petroleum and petroleum products was illegally exported fromIraq (smuggling), especially in the early months post-hostilities, by-passing the authorized process of marketing, salesand cash collection. . . . the CPA is unable to reliably estimate the amounts of petroleum and petroleum products thatwere illegally exported for the period to 31 December 2003.29

Metering was still not in place during the second period of the CPA’s administration.

3.2.2. . . ..The CPA believed that an unknown quantity of petroleum and petroleum products was illegally exportedfrom Iraq (smuggling) by-passing the authorized processes of marketing, sales and cash collection. . . . the CPA alsobelieved that internal control systems over the Iraqi oil industry were insufficient to ensure that all petroleumand petroleum products were accounted for in the absence of a metering system. The CPA was unable to reli-ably estimate the amounts of petroleum and petroleum products that were illegally exported from 1 Jan 2004 to28 June 2004.30

It was estimated that between 10 and 25% of Iraq’s refined oil was being smuggled abroad.31 This created an environmentripe for corruption. The auditors highlighted ‘weaknesses in controls over oil extraction’, such as the absence of metering, aswell as insufficient record keeping of oil transactions. A bald figure, updated every few days, was given for Iraq’s cumulativeoil earnings since the CPA had been running in Iraq. But two different CPA documents gave different figures for the oilrevenue at the end of May 2004. Chandrasekaran (2006) suggests that many figures produced by the CPA were fictitious.In its updated basic income and expenditure statements, the CPA gave the oil revenue figure as $10 billion. However, the“CPA Administrator’s Weekly Report” gave the figure of $11.5 billion for the same period. Christian Aid attempted its owncalculation and came up with a potential $13 billion.

The CPA, should have shown how it calculated its figures, by providing production and export figures, prices and costs. Oilmetering is essential to ensure accountability over oil revenues. Yet even as late as April 2004, a CPA meeting acknowledgedthat metering was nonexistent. The IAMB meeting minutes of March and April 2004, hint at strong concerns about the lackof metering. On 25 and 26 May, the CPA told the IAMB that two contracts to install meters across Iraq had been issued andthat this would take 12–18 months. Thus it could be argued that a conservative estimate of $3 billion was “lost” in terms ofoil revenues from Iraq during the reign of the CPA.

Another serious concern in terms of the revenue streams of the CPA was that for the period to 31 December 2003, allexport sales of petroleum products (residual fuel oil) were undertaken through barter transactions.32 The IAMB has previouslyannounced its concern about inadequate controls over Iraqi oil and other aspects of the DFI’s operations. In particular, theIAMB has repeatedly raised the following issues with the CPA:

• The absence of oil metering. The IAMB recommended in March 2004 the expeditious installation of metering equipmentin accordance with standard oil industry practices. Contrary to earlier representations by the CPA, the award of meteringcontracts has been delayed and it is therefore impossible to ascertain that all oil extraction is properly accounted for.

• The use of barter transactions for certain oil sales. The IAMB has been concerned that barter transactions are not reflected inthe DFI as required by UNSCR 1483. The IAMB understands that some bartering of oil for electricity with a neighbouringcountry continues. The use of barter transactions makes it difficult to determine whether fair value has been received forIraq’s oil revenues.33

As late as 2007 oil still was not metered in Iraq. Barham Salih (Deputy Prime Minister) stated that militias and insurgentgroups are suspected of using money taken from the billions of dollars generated by petroleum production in Iraq (Negus,2006b). There have been no explanations given as to why oil metering was not given greater priority in the aftermath of thewar. If Salih’s beliefs about oil smuggling being a source of funds for extremists, then it surely would have been worthwhileputting resources into metering at the beginning of the CPA’s administration. Failure to adequately administer oil saleswas a significant failing of the CPA, however, it was not the only one; the next section looks further at the CPA’s financialcontrols.

29 Development fund for Iraq agreed-upon procedures report 22 May–31 December 2003 (export sales), KPMG.30 Findings in connection with export sales for the period from 1 January 2004 to 28 June 2004, KPMG.31 http://www.iraqpress.org/english.asp?fname=ipenglish\2004-01-14\0.htm.32 DFI agreed-upon procedures report 22 May–31 December 2003 (export sales).33 Statement by The International Advisory and Monitoring Board in Iraq—release of the KPMG audit reports on the development fund for Iraq 15 July

2004.

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6. Financial controls of the CPA

In terms of its controls on expenditure, the auditors found significant control weaknesses both in terms of the CPA and interms of the Iraqi spending ministries. The auditors reported that there was not enough control of the spending to be surethat the DFI was being spent ‘for the purposes intended’. Also the KPMG interim report stated that the DFI was “open tofraudulent acts”. In part this was due to the poor record keeping and basic financial management at the CPA. The auditorscriticized the CPA’s bookkeeping methods, saying they were open to fraudulent acts and prone to error because they usedspreadsheets and tables maintained by a single accountant rather than a double-entry system.

1.3.2 The CPA had originally implemented spreadsheet-based accounting records that became rapidly insufficientto meet the requirements of the Fund. The revised accounting system consists of excel spreadsheets and pivot tablesmaintained by one individual by the consulting firm. The accounting system designed and implemented is a cash-based,single entry transaction listing rather than an accrual based, double-entry bookkeeping system.21

The auditors also felt that the CPA violated the basic principal of segregation of duties

1.7 The CPA Comptroller’s office was responsible for recording DFI transactions, having signatory authority over DFIbank accounts and custody of cash with coalition forces. A separate department such as a treasury department shouldbe responsible for the custody of cash to ensure a clear and adequate segregation of duties.21

Aside from criticisms of the CPA’s basic bookkeeping and accounting controls, KPMG warned that “The CPA does not haveeffective controls over the ministries’ spending of their individually allocated budgets, whether the funds are direct from theCPA or via the ministry of finance.”

In spite of the CPA’s poor book and record keeping, and their staff being unavailable, the auditors found many deviationsfrom compliance with the key internal controls, for example, the auditors noted that

We found 34 cases where disbursements and advance payments had been made to the United States Army Corps ofEngineers (USACE) for imports of petroleum products ($983,704,969), restoration of oil infrastructure ($67,573,813),restoration of Iraqi electricity ($606,739,525) and other projects ($41,482,614).We had limited access to contracting procedures and documentation for contracts awarded by the USACE.

It is astonishing that it was the CPA were not more careful about following their own guidelines with the contracts withUSACE especially given the political sensitivities surrounding the US involvement in Iraq.

There was no electronic banking in post-war Iraq. This meant that many transactions were for cash or letters of credit.Basic controls in these arenas were extremely poor. In their sampling of letters of credit (LC), KPMG noted that

The sample comprised of 91 disbursements from the CPA to JP Morgan for 346 LCs ($1,183,207,635). Each LC has acorresponding contract. We noted the following deviations:

• We were unable to obtain contract or Approval of Funds, at the CPA, for 90–91 disbursements.

However, we performed additional procedures at the Trade Bank of Iraq. We were unable to obtain 14 contracts($209,088,466) for our sample of 81 ($1,072,316,434) from 346 contracts.

The CPA’s lack of control of cash was serious, some $800 million was said to have been given to US commanders, withoutbeing counted or weighed.34 The CPA’s basic financial procedures violated even the most rudimentary accounting practice.Thus far we have set out serious problems relating to the monitoring of the main DFI revenue source and the basic financialcontrols. The next section looks at how Iraqi funds were spent.

7. The allocation of funds by the CPA and the bidding process—the Program Review Board

To handle the growing number of requests for funding, the CPA set up the Program Review Board (PRB). The PRB had a fewbasic rules concerning the number of attendees at meetings and the number of tenders it should receive. On some occasions,the PRB deemed that it was acceptable to have only one bidder. However, even these basic rules were violated.

The auditors expressed concerns about the poor record keeping of the PRB.

2.2.1 we noted PRB minutes did not always contain detailed, complete or clear documentation to obtain an under-standing of discussions and issues.2.2.2 additionally, we found that PRB minutes did not include voting details for each PRB program recommended orrejected and justification of the decision.21

34 File on four: BBC Radio 4, 1/2/05.

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Record keeping when there are high levels of staff turnover, as there was with the CPA, was a serious issue. How would amember of the CPA staff know whether to pay for an invoice when it arrived if it could not be matched to a contract? KPMGnoted that progress payments may have been made to contractors on the basis of invoices issued rather than on performanceof the contract.

We found four cases where advance payments had been made to the Defence Energy Support Centre (DESC) for fuelimports ($645,000,000). We were not provided with access to contracting procedures, documentation or details ofmonitoring for contracts awarded by DESC.We found 37 cases where contracting files could not be located ($185,039,313).We found one case where we were unable to obtain evidence of a tendering process (contract value $95,560,000).We were informed by the PCO (Project Contracting Office) that this contract was originally solicited on an openlycompetitive basis by the CPA in Washington DC, using Appropriated Funds.

We found two cases where documentation of the contract award decision was not available in the contract file($97,574,185).

The review board was designed to ensure that spending was transparent and in the interests of the Iraqi people, asrequired by the UN resolution. However, PRB meetings often failed to attract the eight voting members required to approve aproject.

2.2.3 CPA regulation 3 states that PRB may take official action only in formal sessions at which no fewer than 70%of the eleven voting members of the board are present. We noted one case when a program funded by the DFI wasrecommended by only four voting members present; one case by only six voting members present and eight cases byonly seven voting members present. The PRB should follow the CPA regulation to ensure that the PRB process remainstransparent.21

The 10 cases where programs funded for approval with less than 70% of the members present were from theaudit sample of 14 funding plans (programs), which included 21 contracts out of 44 contracts or 98% of the totalvalue.35 Of the other programs, one was awarded prior to recommendation by the PRB, one was approved outsidethe formal meetings and not reflected in the formal minutes and two were approved without clarifying the source offunding.36

An Iraqi representative was supposed to sit in on the meetings but apparently he was present at just two of the 43 boardmeetings held in 2003.

2.3 Iraqi involvement We noted PRB voting members consisted of ten CPA officials and one official from the Iraqiministry of finance. Of the 43 PRB meetings held during the period 31 Dec 2003, we noted the Iraqi official attendedtwo meetings.

In one case, a contract was entered into in spite of objections from the Iraqi representative to the Program Review Board.The audit report noted.

We found one case where a contract was entered into despite the specific objections of the Iraqi representative tothe PRB. No evidence of the bidding process was available, the contract was inappropriately signed by the CPA SeniorAdvisor (rather than a contracting officer) and an advance payment of ($2,915,000) was paid without justification. Thecontract was later cancelled and the CPA Senior Advisor subsequently left the CPA.

Contracts were supposed to have three bidders but frequently contracts did not appear to have been competitivelytendered, for example

We found one contract where only two bids were received. We found that the CPA Contracting Officer was not awareof key elements of CPA Memorandum 4, notably the restrictions regarding a minimum of three bids on contracts($84,357,625).

KPMG expressed concerns that the deadline given to contractors to prepare contracts was very short, noting a number ofRequests for Proposal (RFP) with deadlines of less than 5 days.

We found two cases where the request for Proposal was publicized with a short deadline (less than five working days),resulting in only two bids being received.

The auditors were also concerned that when contracts went to sole sourced bidders that justification was not alwaysrecorded in the contract file in accordance with the CPA’s contracting procedures. Indeed due “to a high level of staff turnover,lack of organization in the CU and missing files, we were unaware whether certain contracts were sole sourced or had beentendered for. All sole source contracts should be clearly documented in the contract file.”37 A British adviser to the Iraqi

35 DFI agreed-upon procedures report 22 May–31 December 2003 (disbursements).36 2.4.2 and 2.4.2 DFI appendix to 31 December 2003.37 3.4 appendix to 31 December 2003.

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Governing Council informed the BBC in an interview, that officials in the CPA were demanding bribes of up to $300,000 inreturn for awarding contracts.38

The Open Society Institute (Soros) reported that 73% of the contracts worth more than $5 million were not competitivelybid. The PRB was basically a rubber stamp (Catan et al., 2004).

The auditors were concerned that reconstruction contracts had been awarded without competitive bidding to the UScompany Halliburton which received in the region of $1.4 billion in contracts (Catan et al., 2004). The Pentagon’s auditorscited deficiencies in Halliburton’s work in Iraq, which had led to significant overcharging—one contract alone was allegedto have overcharged by $61 million for imported fuel. Halliburton was also criticised for bills like $100 per bag for laundryservice. Further allegations were made by a group of former Halliburton employees, who complained about the companieswasteful practices in Iraq. They offered details of $85,000 trucks being abandoned on road sides because of flat tyres, andworkers being paid for 12 h shifts when there was clearly no work to be done. One employee, who reported rampant theftof company trucks to his superiors later found himself dismissed (Chaffin, 2004). The employees’ accusations were in partat least verified in an Inspector General report39 which concluded that Halliburton through its subsidiary Kellogg Brownand Root (KBR) did not effectively manage government property and that its asset register was not sufficiently accurate oravailable to properly account for CPA property items. The Inspector General projected that property valued at more than$18.6 million was not accurately accounted for or missing. Specifically

• Halliburton could not account for 6975 (34%) of property items from an inventory of 20,531 records valued at over $61.1million.

• The missing items included two generators valued at more than $878,000 and 18 vehicles valued at more than $1.1 million.

The IG report also raised serious questions about the accuracy of the property record books maintained by the CPA.Inconsistency between property listings maintained by the CPA and those maintained by Halliburton led the IG to warn thatthere is a “possibility that property records were removed from the property book without . . . knowledge or approval.”

Although, Halliburton’s chief executive, and the Company Head of Kellogg Brown & Root (division of Halliburton) werelatter called to a hearing to answer these charges, the company was nonetheless already in receipt of more than $7 billionIraqi contracts, by June 2004.

It was only in April 2004 that the CPA began belatedly to reserve any contract from the DFI worth less than US$500,000for Iraqi companies. With unemployment levels running at 50%, the award of contracts to local employers was extremelyimportant. Because it does not provide lists of companies that have won contracts, it was impossible to see if this policy wasbeing implemented. While the Christian Aid Report notes that some foreign help is needed to rebuild the country, it alsonotes that

..with US companies charging up to ten times as much as Iraqi companies, reports of corruption at every level in thecontracting process, and with Iraqi unemployment running at more than 50 per cent, Iraqis need to be able too seetheir money is being put to its best use.

Thus far we have looked directly at the book-keeping and financial controls of the CPA and the PRB, the next sectionconsiders the audit reports of the Iraqi ministries who were given large sums of DFI money.

8. Control weaknesses by Iraqi spending ministries

The auditors found significant control weaknesses in terms of the Iraqi spending ministries. The ministries had their ownCPA Senior Advisors. Some of these advisors too came in for criticism in the audit reports.

8.1. The Ministry of Health

One of the ministries which the auditors did have access to was the Ministry of Health (MoH) which was headed by JamesHaveman, who, as noted earlier, was a Bush appointee.

The MoH did not comply with even the most rudimentary accounting control procedures. Haveman appeared, from theauditors’ report, personally to have controlled hundreds of millions of dollars in Iraqi cash, granted contracts on his ownauthority, circumvented procurement rules and failed to keep adequate records. Auditors found that Haveman controlledthe bank account that held the ministry’s cash—nearly $5 million at the time of the handover. The ministry’s records wronglyrecorded the asset as an expense.

5.2.4. . .. . . We were informed by the MOH that cash was held with an Iraqi bank ($4,988,086 as at 28 June 2004) topay international suppliers. This account was funded by the MOH, managed by the CPA Senior Advisor to the MOH,but was recorded as an expenditure in the MOH accounting records.23

38 File on four: BBC Radio 4, 1/2/05.39 CPA IG report number 04-011.

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Records of transfers made between the DFI and health ministry were out by $610,000 and the ministry’s trial balance wasout by $1.3 million.

4.3.1. . .. . . Disbursements from the MOF to the MOH for the period from 1 Jan 2004 to 28 June 2004 were lower thanreceipts recorded by the MOH (Ministry of Health) by $610,000.

We found that the MOH’s trial balance did not balance by approximately $1,300,000 at 28 June 2004.23

In three cases, contracts granted by the ministry were not publicly tendered, nor were they authorised through the properchannels.

5.2.4. . .. MOH—We found three cases where contracts were not publicly tendered. In two cases, we were informed bythe MOH that bids were sent to the CPA Senior Advisor to the MOH rather than the MOH.

They also found that cheques were made out personally to Mr. Haveman, instead of contractors.

5.2.4 . . . MOH—We found that checks were made payable to the CPA Senior Advisor to the MOH, rather than suppliers.Reconciliations between payments made and contracts or evidence of goods received were not provided to us.23

Millions of dollars in contracts were supported only by a letter from Mr. Haveman.

. . .we found 9 payments amounting to $2,300,000 made by the Ministry of Health were supported only by a letterfrom the CPA Advisor to the Ministry of Health. To date, additional supporting documentation has not been providedto us.40

The ministry refused to explain the accounting discrepancies or provide auditors with any tender documents. Mr. Havemandeclined to be interviewed about the discrepancies detailed by the auditors (Catan et al., 2004).

8.2. Other ministries

In its report on disbursements for the second half of the CPA administration, KPMG performed procedures coveringapproximately $577 million of disbursements made by the ministries. The auditors found that a contract issued by theMinistry of Electricity for $339 million was not tendered (more than half of the dollar amount considered by the auditors).

The auditor’s reports suggest that the Ministry of Finance (MOF) had computerized records yet switched to manual recordsin the period post-hostilities. A reconciliation between the two was not prepared and the difference was significant.41

The auditors also found that reconciliations between amounts transferred from the MOF and amounts received by Iraqiministries were not prepared. They performed reconciliation procedures at the Ministry of Electricity and noted that sevendisbursements were recorded incorrectly at the MOF with an absolute value of $45,000,000.42 Bank reconciliations were notcarried out. The auditors noted that the two MOF bank accounts, denominated in US dollars and Iraqi dinars at the CBI, andthe main accounts at Al-Rasheed and Al-Rafidain banks, were not reconciled to the accounting records and the differenceswere significant.23

Catan et al. (2004) report that in the case of a $2.6 million payment authorized by the CPA’s senior adviser to the Ministryof Oil, IAMB auditors were unable to find a contract, evidence of tender procedures or evidence of any service rendered.

We found one case where a payment ($2,600,000) was authorised by the CPA Senior Advisor to the Ministry of Oil.We were unable to obtain an underlying contract, evidence of the tendering procedures or evidence of services beingrendered. We have been informed by the PCO that this matter is under investigation.

Overall, the audit reports set out a catalogue of poor administration in many areas of the CPA. While much administrationtook place within the luxury of the green zone, by a team of young staff who hardly left the zone, the activities of the CPA werehaving a significant impact on the people of Iraq. Thus, although the financial information provided by the CPA was in manyways totally uninformative, the Iraqi people would have been aware of many of the activities of the CPA. The accounts of theDFI were simple Summaries of Cash Receipts and Payments. A senior UN diplomat told Christian Aid that “We only have thetotal amounts and movements in and out of the Development Fund for Iraq (DFI). We have absolutely no knowledge of whatpurposes they are for, and if these are consistent with the Security Council resolution.” (Christian Aid Report, 2004, p. 4).

The auditors did not seem to find the CPA budgets any more illuminating

2.2.13. The 22 June 2004 disbursement made by the CPA for $1,400,000,000 was allocated to the MOF (Ministry ofFinance) operating budget line item “transfer payments”, as approved by the CPA Senior Advisor to the MOF. We wereunable to obtain further analysis or information regarding the intended utilization of this budget line item.23

Thus far we have explained how the CPA resisted legitimate forms of accountability through the audit process. Moreover,despite having to work under very difficult circumstances, the KPMG audit reports revealed poor administration by the CPA

40 5.2.7 DFI agreed-upon procedures report 22 May–31 December 2003 (disbursements) 5.41 4.3.1 DFI report of factual findings in connection with disbursements for the period from 1 January 2004 to 28 June 2004.42 4.3.1 DFI report of factual findings in connection with disbursements for the period from 1 January 2004 to 28 June 2004.

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from basic book-keeping, record keeping and financial controls through to failure to prevent the disappearance of billions ofdollars of Iraqi oil. In the next section we briefly look at the treatment of US funds in comparison to Iraqi funds.

9. The rather different treatment of US money

As was explained earlier, in its reconstruction of Iraq the CPA had two main sources of money to draw on. The first wasthe $18.4 billion allocated from the US congress. The second was the DFI. Also at the Americans’ disposal were millions ofdollars worth of cash, rugs, jewels, and other assets seized by US soldiers from Baathist properties.

There were totally different accountability mechanisms in place for US funds allocated for construction in Iraq. There wereno less than four separate audits of their use. The US Government Accountability Office, the Defence Contract ManagementAgency the Defence Contract Audit Agency and the CPA’s Inspector General. Unlike DFI project expenditure, it is possible,with larger contracts, to find lists of jobs, contract values and which companies were awarded them. Thus the lack of auditingof Iraq’s money is in stark contrast to the money donated by the US taxpayer.

The $18.4 billion US money was grossly inadequate even for its own purposes. When the CPA begun assembling a nationalbudget for Iraq, it discovered that the country’s income was nowhere near enough to pay for its expenses. David Oliver, theCPA’s budget officer, calculated that Iraq needed to invest between $5 billion and $10 billion in its infrastructure if foreigninvestment (privatisation) was to happen. In order to make up for Saddam’s underinvestment Iraq needed $55 billion over 4years. Somehow, this was reduced to $18 billion. A large part of this $18 billion ($5.7 billion) was earmarked for electricity.Steve Browning a US Army Corps of Engineers emergency response specialist believed that this money should be used tobuild small local power stations on the basis that if they were attacked less people would be affected than would be thecase if large power stations provided electricity. Furthermore he felt that local people would feel motivated to protect “their”power stations. But more senior CPA officials wanted large stations built by US contractors (Chandrasekaran, 2006).

By the time the CPA was dissolved in June 2004, the CPA had spent or committed virtually all of the funds that had passedthrough the DFI. In contrast, the authority had spent just $366 million of the US funds on reconstruction, and earmarkedaround $5 billion for projects. Part of the reason was the different audit procedures. Bremer complained that the pentagon hadtaken control of US reconstruction funds and was reluctant to let them spend the money (Catan et al., 2004). It is interestingto note that US reconstruction funds were supposed to pay for Halliburton’s contract. But the US congress refused to pay forcontracts that had not been subject to competitive bidding, so Halliburton received the money from the DFI.43

The relentless (ab)use of Iraqi money seemed to intensify at the end of the CPA’s administration.

10. The last few months of the CPA—a spending spree

In the run-up to the handover, nearly $2 billion of Iraq’s money was hastily allocated to projects that did not appear tohave been properly planned. The new Iraqi government was committed to these spending decisions. The CPA in its final 2months of existence sent nearly $1.8 billion in cash (from the DFI) to the Kurdish regional government, over and above itsregular financing to the region. The auditors found that payments made to the KRG were approved by the CPA senior advisorto the Ministry of Finance rather than the CPA Administrator. The Kurds refused to provide KPMG with access to their records.The auditors did meet with the KRG minister of Finance from Erbil and were informed that there were no disbursementsfrom the $1.4 billion transferred to the KRG on 22 June 2004. The CPA shipped the money in three helicopters filled withshrink-wrapped blocks of $100 notes (14 tonnes). However, KPMG were not provided with documentation to verify thesefunds remained unspent.

Behind the scenes, the Kurds were in talks with several international banks to ship part of that money to Switzerland,guided by a Washington lobbying firm with close ties to the US Republican party (Catan et al., 2004). This may or may notbe perfectly legal; the problem is one of lack of transparency.

11. Other audit reports

The CPA’s Inspector General (Bowen) found similar accounting failures to KPMG. Bowen found that the CPA did not issueany standard operating procedures or develop an effective system to monitor or review contracts. Files were often missing orincomplete, hindering the CPA’s ability to “demonstrate the transparency required of . . .contracts using DFI funds”. Bowenwas critical of the way Iraqi money was handled. Iraq had no functioning banking system, so making local payments meantmoving convoys of cash around the country. Hundreds of millions of dollars in cash was kept in a vault in a Baghdad palace.However investigators working for the inspector-general watched in surprise as a CPA official left the open vault unattended.When locked, the key was placed in an unsecured backpack. The CPA did not keep a proper inventory of valuables seized byUS soldiers from former regime officials, the inspector-general found, so it was unable to “ensure that non-cash assets wouldbe available for the use and benefit of the Iraqi people”.

43 Halliburton gets more business in Iraq, Reuters, 15 December, 2003, quoted in Revenue Watch Report No. 6. Racing the deadline: the rush to accountfor Iraq’s public funds, April 2004, p. 3.

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As the occupying forces (CPA) handed over power to a new Iraqi government at the end of June 2004, Christian Aid releaseda report saying that the coalition was in breach of a UN resolution for failing to report how it spent up to $20 billion of Iraq’soil revenues. For an entire year the CPA had been in power in Iraq, and during that time, it was impossible to tell with anyaccuracy what the CPA had been doing with Iraq’s money. A US official is reported as saying “I don’t think that we sustainedour obligations..We just threw the money over the fence (Catan et al., 2004).”

Paul Bonner’s subsequent response in January 2005, to reports that nearly $9 billion transferred by the CPA Iraqi ministriesremained unaccounted for, was there was an urgent need to spend the money and the CPA could not wait for Western-styleaccounting standards before spending billions of dollars on reconstruction. He explained, “I don’t know what was on theminds of accountants sitting in front of spreadsheets in Washington D.C., but I was in Baghdad where there was a war goingon and the economy was in a depression” (Business Custom Wire, 2005).44 Nevertheless, such comments did not seem tohave convinced the accountants, especially as KPMG stated that there was no shortage of accountants volunteering to goto Baghdad, especially as ‘people want to work on jobs of historical importance where you are trying to establish the truth’(Hinks, 2004).

With hindsight, it is possible to argue that it was a mistake for the CPA to treat issues of accountability and transparencywith such flagrant disregard. It would certainly be possible to argue that aside from the CPA’s de-Baathification policy, one ofthe drivers behind the escalating post-war unrest in Iraq could be the CPA’s mal-administration which appeared to legitimatecorruption on a grand scale. Christian Aid expressed this concern as early as 2004. Their warning should have been takenmore seriously

“security is the most pressing priority in Iraq at present. . .it is vital that the CPA demonstrates complete openness overits handling of Iraq’s money. Mistrust of the CPA’s behaviour and motives can only make the situation worse, providingas it does a grievance for those seeking to stoke the violence. Attacks have now turned to the oil pipelines that carry95 per cent of the country’s income, threatening Iraq’s revenues and its long term recovery and reconstruction” (2004,p. 3).

Moreover, the Christian Aid Report went on to argue that the CPA’s failure to demonstrate openness would set a badexample for the newly elected Iraqi government when it came to power. Indeed the most recent reports coming out or Iraqare strangely reminiscent of audit reports of the CPA’s administration. It seems as if the new Iraqi government has indeedfollowed in the CPA’s footsteps.

Earlier work by Christian Aid (CA) had demonstrated that while transparency is essential in any democracy, it is imperativein countries which are rich in natural resources, particularly those with oil. They outlined how too many oil-rich countrieshave taken the path of unaccountable government, riches for the few and poverty for the many. CA argued that when agovernment earns a significant proportion of its income from a natural resource, such as oil (95% of Iraq’s foreign earningscome from oil), it removes the need for it to be accountable to its population. It does not need their taxes, and so people’sstake in society is reduced. The combination of large amounts of money washing about and scant accountability is the perfectbreeding ground for corruption, which enriches the few and keeps the many in poverty. In order to try to prevent this, theCPA should not have reverted to the secrecy of the Saddam era. CA saw an essential part of the solution as transparency.

12. Conclusions

Extant accounting research suggests that accounting technologies provide the calculative knowledge of imperialism andwar. While it is clearly beyond the scope of this paper to consider the use of accounting by the US Department of Defenceand so on in the lead-up to war, there is nothing to suggest that Chwastiak’s (1996, 2001, 2006) findings would not pertainto the Iraq war. This paper demonstrates how, in the aftermath of war, the accounting technology of auditing was used ina more positive sense of providing an (albeit imperfect) independent account of the activities of the CPA. KPMG’s accountswere imperfect, not least, because they could not tell the truly ghastly story of the impact of the CPA’s failures and the US-ledinvasion on the Iraqi people.45

The actual accounts of the CPA—the uninformative lists, the single-entry accounts, lack of financial controls and so on,are in many ways a reflection of the regime they were produced under. On a practical level, the accounts were produced byyoung, inexperienced and transitory staff. While their work was criticized by KPMG, the real culprit was the US government.On a more systematic level, senior figures in the CPA resisted transparency and accountability and appeared to prioritize thesetting up of a neo-liberal state. Moreover, the PRB rubber-stamping systems meant that large US corporations profited fromIraqi oil money, while smaller Iraqi companies did not.

The accounting literature has not discussed the possibility of using accounting controls in a post-war situation. Chwastiak(2006) explains that accounting technologies cannot impose control during the turmoil of war. However, it is the con-

44 Business Custom Wire (2005). ‘DJ US Bremer: Couldn’t wait for accounting standards in Iraq’, 31st January, http://web21.epnet.com/citation.asp?tb=1&ug=sid+90B00C04%2D07E9%2D4FAD%2D80F6%2D (accessed 11 March 2005).

45 Nor would the “healthy accounts” which would have been produced by companies like Bechtel or Halliburton, as a direct result of war, portray theheart-rending human costs. For example, Bechtel’s accounts would not portray the horrifying impact of its failure to deliver on its $2.3 billion contracts tobuild portable water supply and delivery systems (Jamail, 2007).

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tention of this paper that accounting controls could have had a positive impact on the lives of the Iraqi people afterthe war. We do not in any sense believe that decent control systems would have either “made-up” for the invasion, orwould have served as a panacea to the massive problems involved in post-war reconstruction. However, if the US hadput appropriate resources into post-war governance and reconstruction, $3 billion of oil revenues might have swelled thereconstruction coffers; money may have been diverted away from insurgents; contracts may have been awarded to morecost effective suppliers (perhaps Iraqi ones); and the beginnings of a transparent and accountable regime could have beenengendered.

The findings in the paper add complexity to the literature which looks at the accounting profession’s historic ethicalstance on war (Neu and Graham, 2004; Neu and T’aerien, 2000; Walker, 2000). There is evidence that the auditors carriedout their work under extremely dangerous conditions. Moreover, their reports, while perhaps not reflecting the full impact ofthe CPA’s activities, could not be described as a “cover-up”. This is not to suggest that the “ethical” position of the accountingprofession has changed; nor have the technologies of accounting.

In short, the audit reports and accounts of the CPA are reflective of the daily operations of the CPA and the wider US regimeunder which it operated. What lessons could be learned from looking at the activities of the CPA in terms of understandingthe reasons behind the US invasion?

The imperialistic reasons for going to war – expanding the possibilities for capital accumulation beyond the boundariesof nation states – does appear to be one clear driver behind the invasion. The accounting systems enabled large profits to bemade by US corporations. Moreover, the legal changes enacted by the CPA were specifically designed to help the interests ofcapital expansion and accumulation. However, on the face of it the US did not pursue the historic colonialist policy of workingwith local elites and the extant state apparatuses (Annisette, 2000; Bakre, 2005, 2008). Perhaps the US did not intend tocolonize (and administer) Iraq in the face of the UN mandate which stated that oil was not to be privatized and oil revenuesshould be used for the benefit of the Iraqi people leaving little incentive for the CPA to monitor oil production.

In terms of colonization, the audit reports revealed no efforts by the CPA to work with local elites. Of the 43 ProgramReview Board Meetings, only two were attended by the Iraqi official. Moreover, for the majority of the CPA’s reign, evenfairly small contracts were not given to Iraqi companies. One possible reason for the lack of intermeshing with Iraqi elitesis that this may well have involved compromising on, or abandoning neo-conservative principles. Moreover, there may besomething deep within neo-conservative ideology which would resist working with the Iraqis. Neo-conservatives may feelmore at home confronting enemies than with making friends.

For the CPA, the problem with trying to bring about a neo-conservative revolution in Iraq (instead of forming compro-mises with local elites) was that it would be incredibly expensive. It is very clear from the accounts that the administrativeresources of the CPA were very stretched. While the US remains a super-power, it is not as economically powerful as itonce was.

In terms of geopolitics and the control of oil, the invasion did rid Iraq of Saddam Hussein and leave the potential for theinstallation of a US friendly regime. The desire to rid Iraq of all “unfriendly” elements was part of the rationale behind theCPA’s de-Baathification policy. Moreover, the US at the time of writing maintains a strong foot-hold in Iraq.

Military Keynesianist expenditure did allow the US economy to have undergo a short-lived economic up-turn. During thesecond quarter of 2003, when the war in Iraq was in full swing, some 60% of the US 3.3% GDP growth rate was attributableto military spending (Gumball, 2004). But in the long run, the war has cost the US as much as a trillion dollars. Given theamount of money which the US have spent on the war Bilmes and Stiglitz (2006) ask why a type of Marshall plan was notused in Iraq to bring about regime change and to “fight the war on terror”. Moreover, such a massive amount of spendingwill probably ensure that the level of US debt will increase thus making the dominant hegemonic position of the US harderto maintain (Gumball, 2004).

The Iraqi War was justified by George Bush and Tony Blair on the grounds that Iraq posed an imminent threat to worldsecurity, that it had weapons of mass destruction and harboured Al-Qaeda terrorists. Bush and Blair have also stated thatthey went to war “to free the Iraqi people” from a tyrannical dictator.

More than half a million people have died because of the war and millions have been forced from their homes. The everydaylife of Iraqis is soul-destroying—constant fear, severe shortages of water, electricity and work, and no sign of improvement.Bush and Blair still maintain that it was worth paying this horrendous price for freedom. What they did not say is that theirfreedom embodies the interests of US hegemony, multinational corporations and financial capital, not the freedom to goto the local market to buy bread or to take a walk after dinner in the cool of the evening. The Iraqi people have sufferedenormously as have the military families who have lost their loved ones.46

It is clear from the audit reports that the CPA’s and the US’s dominant concern was not with the welfare of the Iraqi people.

Acknowledgments

We would like to acknowledge the support of Maureen Barrett, Betty Catchpowle and Julia Cooper-Perks and to thankour reviewers and David Cooper for constructive thoughtful comments.

46 It is well documented that many UK soldiers have been killed or maimed due to lack of simple equipment.

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