a

GAO

United States Government Accountability Office

Report to Congressional Committees

April 2006 UNITED NATIONS 

Lessons Learned from 

Oil for Food Program 

Indicate the Need to 

Strengthen UN 

Internal Controls and 

Oversight Activities

GAO-06-330

The electronic version of this report was reposted on May 9, 2006, due to the Department 

of State’s request that we delete a sentence from its agency comment letter. A statement 

referencing the section and page number of the report modification will be included with 

all printed copies of this report.
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

UNITED NATIONS

Lessons Learned from Oil for Food 

Program Indicate the Need to Strengthen 

UN Internal Controls and Oversight 

Activities 

Highlights of GAO-06-330, a report to 

congressional committees 

In 1996, the United Nations (UN)

Security Council and Iraq began the 

Oil for Food program to address

Iraq’s humanitarian situation after

sanctions were imposed in 1990.

More than $67 billion in oil revenue

was obtained through the program,

with $31 billion in humanitarian 

assistance delivered to Iraq.

The 2005 Defense Authorization Act 

mandated that GAO review the Oil

for Food program. GAO reviewed

how the UN adhered to five key 

internal control standards in its 

stewardship of the program. GAO 

assessed (1) the program’s control 

environment and (2) key elements

of the other internal control 

standards. GAO also reported on

the UN Compensation

Commission’s progress in paying 

reparations from Iraq’s invasion of 

Kuwait. 

What GAO Recommends

GAO recommends that the

Secretary of State and the 

Permanent Representative of the 

U.S. to the UN work with member

states to encourage the Secretary 

General to (1) ensure that UN 

programs with considerable

financial risk apply internationally 

accepted internal control standards 

and (2) strengthen internal controls 

throughout the UN, based on

lessons from the Oil for Food 

program. State and the UN

responded that they are taking 

steps to strengthen internal

controls at the UN. 

The UN Oil for Food program would have benefited from an internationally 

accepted internal control framework to provide reasonable assurance in 

safeguarding assets and meeting program objectives. Although the program 

averted a humanitarian crisis while limiting Iraq’s ability to purchase 

military-related items, internal control problems allowed the former Iraqi 

regime to manipulate the program and circumvent sanctions to obtain 

billions of dollars in illicit payments. In particular, weaknesses in the control 

environment of the Oil for Food program compromised oversight and made 

it vulnerable to fraud and abuse. For example, Iraq negotiated contracts 

directly with companies purchasing its oil and selling commodities. In the 

absence of UN oversight, Iraq manipulated contract terms and obtained 

kickbacks. Moreover, the program had a complex structure with unclear 

lines of responsibility and authority. This diffusion among various entities 

meant that no single entity was accountable for the program in its entirety.

The Oil for Food program also had weaknesses in the four key internal 

control standards—risk assessment, control activities, information and 

communication, and monitoring—that facilitated Iraq’s ability to obtain illicit 

revenues ranging from $7.4 billion to $12.8 billion. In particular, the UN did 

not provide for timely assessments to address the risks posed by Iraq’s 

control over contracting and the program’s expansion from emergency 

assistance to commodities for 24 sectors.

Internal Controls Framework in the Oil for Food Program 

Source: GAO.

Risk

Assessment • No assessments

to address

challenges posed 

by Iraqi contracting and program 

expansion

Control Activities • Mitigated import of 

military items and illicit 

oil surcharges

• Did not prevent 

smuggling or kickbacks

Information and

Communication

• Lack of disclosure 

on kickback 

schemes

• Poor coordination 

among UN agencies

hindered projects

Monitoring • No internal audits

of commodity 

contracts

• Audit findings not 

fully addressed

• Concessions to Iraq limited UN oversight

• Diffuse structure with unclear accountability

Control Environment

The UN Security Council established the UN Compensation Commission 

(UNCC) in 1991 to process claims and pay victims of Iraq’s invasion of 

Kuwait. Security Council resolution 986 provided that a portion of proceeds 

from Iraq oil sales would go to the compensation fund. The commission 

approved awards of $52.5 billion to more than 1.5 million claimants and has 

paid more than $20 billion of this amount; however, Iraq still owes almost 

$32.2 billion in unpaid awards. Future payments for these awards could 

extend through 2020. These unpaid awards are in addition to the $51 billion 

that Iraq owes to international creditors. 

www.gao.gov/cgi-bin/getrpt?GAO-06-330.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Joseph 

Christoff at (202) 512-8979 or 

christoffj@gao.gov. 
Contents 

Letter 1

Results in Brief 3 

Background 6

Early Compromises in Program Structure and Widely Diffused 

Management Responsibilities Led to Weak Control Environment 10 

Oil for Food Program Fell Short of Additional Internal Control 

Standards 20

UNCC Has Paid More than $20 Billion in Compensation Claims, but 

Remaining Payments of More than $32 Billion May Take until

2020 30

Conclusion 35

Recommendation for Executive Action 36 

Agency Comments and Our Evaluation 36 

Appendix I Scope and Methodology 40 

Appendix II Oil for Food Program Processes 45 

Appendix III Estimates and Ranges of Iraq’s Illicit Revenues 

and Payments during the Oil for Food Program 48 

Appendix IV UNCC Organization and Its Claims Categories 

and Amounts 51 

Appendix V Comments from the Department of State 54 

GAO Comments 59 

Appendix VI Comments from the UN Compensation Commission 62 

GAO Comments 67 

Appendix VII GAO Contacts and Staff Acknowledgments 69 

Page i GAO-06-330 Oil for Food
Related GAO Products 70 

Tables 

Table 1: Estimates of Iraq’s Illicit Revenues during the Period of the 

Oil for Food Program, by Source 48 

Table 2: Ranges of Iraq’s Illicit Revenues during the Oil for Food 

Program 48

Table 3: UNCC Claims Categories 52 

Figures 

Figure 1: Programs and Activities Authorized by Security Council 

Resolution 986 9 

Figure 2: Internal Control Standards Related to UN Sanctions 

against Iraq and the Oil for Food Program 12 

Figure 3: Multiple Organizations Managed the Oil for Food Program 

and Enforced UN Sanctions 16 

Figure 4: Claims Received and Awarded by Category 53 

Abbreviations 

IMF International Monetary Fund 

OIOS Office of Internal Oversight Services 

OIP Office of the Iraq Program 

SOMO State Oil Marketing Organization 

UN United Nations 

UNCC United Nations Compensation Commission 

UNOHCI United Nations Office of the Humanitarian Coordinator for 

 Iraq 

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Page ii GAO-06-330 Oil for Food
United States Government Accountability Office

Washington, DC 20548 

April 25, 2006

Congressional Committees: 

In 1996, the United Nations (UN) Security Council and Iraq began the Oil 

for Food program to address growing concerns about Iraq’s humanitarian 

situation after international sanctions were imposed in 1990. Authorized 

by Security Council resolution 986, the intent of the program was to allow 

the Iraq government to use the proceeds of its oil sales to pay for food, 

medicine, and infrastructure maintenance and—at the same time—prevent 

the regime from obtaining goods for military purposes. Resolution 986 also

provided that a portion of the oil sales be used for a separate program to 

pay compensation through the UN Compensation Commission (UNCC) to 

victims of Iraq’s invasion of Kuwait in 1990. Iraq obtained more than $67 

billion in oil revenues through the program; as of November 2003, about 

$31 billion in commodities and humanitarian assistance had been 

delivered to Iraq. Four key entities were responsible for most of the 

program’s operations—(1) the Security Council’s Iraq sanctions 

committee, (2) the UN Secretariat’s Office of the Iraq Program, (3) nine 

UN agencies with separate programs in northern Iraq, and (4) the Iraqi 

government under Saddam Hussein. Allegations of corruption and 

misconduct within the UN Oil for Food program and the overall 

management of the humanitarian program have prompted a number of 

investigations. The 2005 Defense Authorization Act mandated that GAO 

review the Oil for Food program.1

In 1996, the United Nations (UN) Security Council and Iraq began the Oil 

for Food program to address growing concerns about Iraq’s humanitarian 

situation after international sanctions were imposed in 1990. Authorized 

by Security Council resolution 986, the intent of the program was to allow 

the Iraq government to use the proceeds of its oil sales to pay for food, 

medicine, and infrastructure maintenance and—at the same time—prevent 

the regime from obtaining goods for military purposes. Resolution 986 also

provided that a portion of the oil sales be used for a separate program to 

pay compensation through the UN Compensation Commission (UNCC) to 

victims of Iraq’s invasion of Kuwait in 1990. Iraq obtained more than $67 

billion in oil revenues through the program; as of November 2003, about 

$31 billion in commodities and humanitarian assistance had been 

delivered to Iraq. Four key entities were responsible for most of the 

program’s operations—(1) the Security Council’s Iraq sanctions 

committee, (2) the UN Secretariat’s Office of the Iraq Program, (3) nine 

UN agencies with separate programs in northern Iraq, and (4) the Iraqi 

government under Saddam Hussein. Allegations of corruption and 

misconduct within the UN Oil for Food program and the overall 

management of the humanitarian program have prompted a number of 

investigations. The 2005 Defense Authorization Act mandated that GAO 

review the Oil for Food program.1

Policymakers and program managers are continually seeking ways to 

better achieve agencies’ missions and program results and improve 

accountability for results. A key factor in helping to achieve such 

outcomes is to implement appropriate internal controls. Internal controls, 

if properly designed and implemented, provide reasonable assurance that 

objectives are being met; they also serve as the first line of defense in 

safeguarding assets and preventing fraud, waste, and abuse. A general 

framework for internal controls is widely accepted in the international 

audit community and has been adopted by leading accountability 

organizations, including the International Organization of Supreme Audit 

Policymakers and program managers are continually seeking ways to 

better achieve agencies’ missions and program results and improve 

accountability for results. A key factor in helping to achieve such 

outcomes is to implement appropriate internal controls. Internal controls, 

if properly designed and implemented, provide reasonable assurance that 

objectives are being met; they also serve as the first line of defense in 

safeguarding assets and preventing fraud, waste, and abuse. A general 

framework for internal controls is widely accepted in the international 

audit community and has been adopted by leading accountability 

organizations, including the International Organization of Supreme Audit 

 1

Public Law 108-375, Ronald W. Reagan National Defense Authorization Act for Fiscal Year 

2005, October 2004. 

Page 1 GAO-06-330 Oil for Food
Institutions, the U.S. Office of Management and Budget (OMB), and GAO.2

The first standard within this framework is the control environment, 

which provides the structure, discipline, and ethical tone for implementing 

an internal control system. Other standards focus on employing 

assessments of the external and internal risks an organization faces; 

establishing policies and procedures to enforce directives (control 

activities); providing relevant, timely, and reliable information and 

communication; and monitoring performance and adhering to audit 

findings. 

Our report uses this internal control framework to identify the key 

weaknesses in enforcing sanctions against Iraq and implementing the Oil 

for Food program. Specifically, we assessed (1) aspects of the control 

environment—the foundation for all internal control standards—that the 

UN developed and implemented for the Oil for Food program and (2) key 

elements of the remaining internal control standards—risk assessment, 

control activities, information and communication, and monitoring. In 

addition, we report on the activities and progress of UNCC. 

To address these objectives, we met with officials from the Departments 

of State, Defense, Commerce, and Treasury who were responsible for 

managing the U.S. participation in the Iraq sanctions and Oil for Food 

program; we also reviewed relevant documents provided by State. We met 

with UN officials who had worked in the UN Office of the Iraq program 

(OIP) (the key UN organization responsible for administering the 

program), UN officials representing several UN specialized agencies, and

with UNCC officials in Geneva, Switzerland. We reviewed and analyzed 

documents related to management and oversight, including audits 

conducted by the UN Office of Internal Oversight Services (OIOS). We 

reviewed independent reports, including publications by the UN 

Independent Inquiry Committee and the Iraq Survey Group. 

We conducted our review from February 2005 through January 2006 in 

accordance with generally accepted government auditing standards. 

(App. I provides detailed information on our scope and methodology.) 

 2

Committee of Sponsoring Organizations of the Treadway Commission, Internal ControlIntegrated Framework, September 1992. 

Page 2 GAO-06-330 Oil for Food
UN sanctions and the Oil for Food program averted a humanitarian crisis 

while limiting Iraq’s ability to purchase military-related items, but internal

control problems allowed the former Iraqi regime to manipulate the 

program and circumvent sanctions to obtain illicit payments ranging from 

$7.4 billion to $12.8 billion.3

 In particular, weaknesses in the control 

environment compromised the oversight of the Oil for Food program and 

made it vulnerable to fraud and abuse. First, in the mid-1990s, as Iraq’s 

humanitarian situation worsened, the Security Council and Secretariat 

made concessions to the Iraqi regime that allowed it to negotiate contracts 

directly with companies purchasing oil and selling commodities. In the 

absence of UN oversight of these contracts, Iraq manipulated contract 

terms and obtained kickbacks. In addition, the Security Council was aware 

that Iraq smuggled oil to neighboring UN member states in violation of the 

sanctions but did little to prevent the smuggling, thus allowing Iraq to 

obtain revenues not authorized by the Oil for Food program. Second, the 

Oil for Food program had a highly complex organizational structure with 

unclear lines of responsibility and authority, which contributed to an 

ineffective control environment. The diffusion of responsibility among 

numerous entities meant that no single entity was accountable for the 

program in its entirety. In addition, each entity had weaknesses in its 

fragmented responsibilities that further undermined management and 

oversight of the program. Despite this difficult environment, the Oil for 

Food program averted a major humanitarian crisis by raising the food 

intake of the Iraqi population and decreasing malnutrition. 

Results in Brief 

The Oil for Food program also had key weaknesses in the key four internal 

control standards—risk assessment, control activities, information and 

communications, and monitoring—that facilitated Iraq’s ability to obtain 

illicit revenues. 

• Risk assessment identifies the internal and external risks an organization 

faces, determines the likelihood of their occurrence, and forms the basis 

for a plan to manage those risks. However, the UN conducted no timely 

assessments to identify and address high-risk areas and prevent fraud, 

even as the Oil for Food program expanded from the short-term delivery 

of emergency food and medicine to a multiyear program that included 

building and repairing infrastructure in 24 civilian sectors. Moreover, in 

2000, the Office of the Iraq Program rejected a proposal from the UN’s 

 3

See appendix III for further information on Iraq’s illicit revenues during the Oil for Food 

program. The ranges given represent estimates developed by GAO, the Independent Inquiry

Committee, and the Iraq Survey Group for 1997 through about early 2003. 

Page 3 GAO-06-330 Oil for Food
internal audit office to conduct a risk assessment of the Program 

Management Division. Timely and comprehensive risk assessments might 

have identified the lack of systematic reviews of the reasonableness of the 

prices that the Iraqi government had negotiated with the companies 

supplying goods and services. Such assessments may also have exposed

the lack of clear responsibility and reporting lines among the numerous 

UN entities managing the program. 

• Control activities are the policies and procedures that help ensure that 

management’s directives are carried out and risks are addressed. Some 

control activities were effective and others were not. For example, an 

insufficient number of oil experts reviewing oil contracts, the lack of oil

metering equipment, and limited review of contract prices helped enable 

Iraq to smuggle oil and levy surcharges and kickbacks on its contracts. In 

contrast, oversight by the Security Council’s Iraq sanctions committee—

particularly by U.S. and United Kingdom (U.K.) members—mitigated Iraq’s 

efforts to obtain military equipment by preventing Iraq from importing 

dual-use items. In addition, the sanctions committee eventually 

constrained Iraq’s ability to impose up-front surcharges on oil contracts by 

setting prices for Iraqi oil after the oil was delivered to the buyer. 

• Information and communication that is relevant, reliable, and timely is

needed for an organization to control its operations. However, the Office 

of the Iraq Program did not inform the sanctions committee of suppliers’ 

allegations that Iraq demanded contract kickbacks and hidden fees and 

did not disclose information on Iraq’s oil smuggling through Syria. 

Moreover, none of the Secretariat’s required 90- or 180-day reports to the 

Security Council mentioned illicit payment demands in connection with oil 

or commodity contracts. In addition, poor communication and 

coordination among UN agencies led to delays in completing housing 

projects in northern Iraq.

• Monitoring assesses performance over time and ensures that the findings 

of audits and other reviews are promptly resolved. OIOS identified more 

than 700 problems with the Oil for Food program and compensation fund.4

However, limitations on the auditors’ reporting scope and resources 

hindered their effectiveness as an oversight tool. For example, OIOS only 

had two to six auditors assigned to the Oil for Food program and did not 

review commodity contracts for central and southern Iraq, which 

 4

GAO, United Nations: Oil for Food Program Audits, GAO-05-346T (Washington, D.C.: 

Feb. 15, 2005). 

Page 4 GAO-06-330 Oil for Food
comprised 59 percent of the program. Nonetheless, OIOS audits of the Oil 

for Food program in northern Iraq found more than 400 recurring 

problems in procurement, cash and asset management, planning and 

coordination, and personnel. The recurring nature of these problems over 

the course of the program demonstrated that systemic weaknesses were 

not fully addressed. 

In addition to the Oil for Food program, UN Security Council resolutions 

required Iraq to reserve up to 30 percent of its oil proceeds to compensate 

victims of its invasion of Kuwait; this amount was reduced to 5 percent in 

2003. UNCC has approved awards totaling $52.5 billion to more than 1.5 

million claimants and paid about $20.3 billion of this amount to individuals 

and families with smaller claims. However, Iraq owes corporations, 

governments, and international organizations almost $32.2 billion in 

unpaid awards. Depending on the growth of Iraq’s oil revenues, it may take

nearly 14 years to pay the remaining compensation awards. These unpaid

awards are in addition to the estimated $51 billion that Iraq owes to 

international creditors.5

We are recommending that the Secretary of State and the Permanent 

Representative of the United States to the UN work with other member 

states to encourage the Secretary General to (1) ensure that UN programs 

with considerable financial risks establish, apply, and enforce the 

principles of internationally accepted internal control standards, with 

particular attention to comprehensive and timely risk assessments and (2) 

strengthen internal controls throughout the UN system, based in part on 

the lessons learned from the Oil for Food program. 

We provided a draft of this report to the Secretary of State, the UN Deputy 

Secretary General, and the UN Compensation Commission for comment. 

We received written responses from State and UNCC and oral comments 

from the UN. However, State commented that our first recommendation 

would apply only to future sanctions programs similar to the Oil for Food 

Program. We have modified our recommendation to clarify that the 

principles of oversight and control should apply to future UN programs 

with considerable financial risk, not merely programs similar to the Oil for 

Food program. The UN concurred with our recommendations and noted 

 5

International Monetary Fund, Iraq: Request for Stand-By Arrangement (Washington,

D.C.: Dec. 7, 2005). 

Page 5 GAO-06-330 Oil for Food
that it is taking steps to strengthen internal control throughout the 

organization.

Regarding our findings, State noted that our report (1) does not clearly 

distinguish between the responsibilities and actions of the Secretary 

General and the Security Council, (2) does not highlight the Security 

Council’s inaction on corruption in the sanctions regime, (3) overstates the 

case that no single entity was in charge of the program, and (4) overly 

focuses on internal controls which would not have corrected the problems 

without political will. We disagree. Our report distinguishes between the 

responsibilities and actions of the Secretary General and the Security 

Council; when both entities are responsible, our report refers collectively 

to the UN. We also fully discuss how the Security Council’s inaction 

facilitated oil smuggling to neighboring states in violation of UN sanctions. 

Moreover, the diffusion of responsibility among multiple UN entities was a 

major structural weakness of the program and contributed to unclear 

authority, manipulation, and weak oversight. We also believe that State 

underestimates the importance of a control framework that, if in place, 

would have identified the program’s vulnerabilities and established clear 

lines of authority for responding to the program’s mismanagement and 

corruption. 

UNCC stated that we should not include it in our report because it would 

unfairly taint UNCC with the problems ascribed to the Oil for Food 

Program. We have modified the report to distinguish the roles and 

responsibilities of UNCC from those of the UN Oil for Food program. 

UNCC also commented that our report does not adequately describe its 

organization and its relationship with the internal auditors; we have added 

more information about these topics.

In 1990, Security Council resolution 661 imposed economic sanctions on 

Iraq in response to its invasion and occupation of Kuwait, thereby 

prohibiting all countries from buying Iraqi goods and selling most 

commodities to Iraq. In 1995, in response to growing international concern 

over the impact that sanctions were having on the humanitarian situation 

in Iraq, Security Council resolution 986 authorized Iraq to sell up to $1 

billion worth of oil every 90 days to pay for food, medicine, and 

humanitarian goods. Iraq first exported oil under the Oil for Food program 

in December 1996, and the first shipments of humanitarian goods arrived 

in March 1997. The Security Council subsequently increased the amount of

oil that Iraq could sell and expanded the types of humanitarian goods that

it could import. In 1999, the Security Council removed all restrictions on 

Background 

Page 6 GAO-06-330 Oil for Food
the amount of oil Iraq could sell to purchase civilian goods. The Security 

Council implemented the program in 13 6-month phases. In May 2003,

Security Council resolution 1483 requested the UN Secretary General to 

transfer the Oil for Food program to the U.S.-led Coalition Provisional 

Authority by November 2003. At that time, the Coalition assumed 

responsibility for managing Iraq’s oil proceeds and outstanding commodity 

contracts. 

In addition to UN sanctions, the Security Council established UNCC in 

1991 to pay compensation for damages and losses resulting from Iraq’s 

invasion and occupation of Kuwait.6

 Advances from the UN Working 

Capital Fund; voluntary contributions from governments; and proceeds, 

from Iraqi oil sold after the invasion of Kuwait, that had been frozen by 

various governments funded the UNCC for several years after its 

establishment. With the adoption of Security Council resolution 986 in 

1995, UNCC received 30 percent of Iraqi oil proceeds to fund the 

compensation program. Subsequent resolutions in 2000 and 2003 reduced 

the amount of oil proceeds the UNCC received to 25 and 5 percent, 

respectively.

At the time UNCC was receiving 25 percent of Iraqi oil proceeds, the UN 

allocated 59 percent of proceeds for humanitarian assistance in the 15

central and southern governorates, 13 percent for assistance to the three 

northern Kurdish governorates, and 3 percent for UN administrative costs. 

Figure 1 illustrates the programs and activities funded by Iraq’s oil 

proceeds in accordance with Security Council resolution 986. Iraq’s stateowned marketing company negotiated the oil contracts, and the Security

Council’s Iraq sanctions committee approved these contracts and oil 

prices, on the basis of advice from independent oil experts. Once the oil 

was shipped, the purchasing company deposited the proceeds into a UNcontrolled escrow account. Iraq negotiated contracts for the commodities 

it purchased for the central and southern governorates as well as bulk 

food and medicine contracts for the entire country. The suppliers, through 

their national governments, sent contracts to OIP and the sanctions 

committee for approval. When the items arrived in Iraq, inspectors verified 

them against appropriate documentation and notified the UN treasurer 

that it could pay the supplier from the escrow account. In northern Iraq, 

 6

Security Council resolution 687 of April 3, 1991, states that Iraq is liable, under 

international law, for any direct loss or damages, including “environmental damage and the 

depletion of natural resources, or injury to foreign Governments, nationals and 

corporations.”

Page 7 GAO-06-330 Oil for Food
UN agencies distributed the food and medicine purchased by the central 

government and implemented projects in several sectors. Appendix II 

contains additional information on processes related to oil sales, 

commodity purchases, and the program in northern Iraq. 

Page 8 GAO-06-330 Oil for Food
Figure 1: Programs and Activities Authorized by Security Council Resolution 986 

$

Iraq negotiates oil contracts.

UN oil overseers review contracts.

Sanctions committee sets oil price/

approves contracts.

Oil inspectors verify quantity exported.

Oil shipped.

Governments submit 

claims to UNCC 

Secretariat. 

Panels review claims and

recommend payments.

Governing Council

approves Commissioners’ 

recommendations.

Secretariat transfers award to

claimants’ governments.

Governments or international 

organizations distribute 

compensation to claimants.

Secretariat prepares

claims for the 

Commissioner Panels.

Revenue to

UN escrow 

account

25%

3%

Central and southern Iraq

Humanitarian 

assistance 

programs

UNCC

claims

settlement 

process

Oil sales process

Northern Iraq

Administration

and weapons

inspectors

Committee reviews contracts for dual-use items and approves

or holds contracts.

If approved, Iraq requests the bank to issue a letter of credit to supplier.

UN contractors at entry points into Iraq authenticate shipments.

OIP authorizes bank to pay supplier from escrow account.

Iraq submits distribution plan to UN.

Iraq negotiates contracts with suppliers; 

UN agencies contract for projects in northern Iraq. 

OIP reviews and submits contracts to Security 

Council’s sanctions committee approval.a

Suppliers apply to the UN OIP through their respective governments.

Nine UN agencies implement 

projects in several sectors.

UN agencies distribute food 

and medicine.

Iraq government distributes commodities to warehouses.

UN monitors observe whether commodities are 

distributed according to plan.

13%

59%

Sources: GAO and UN (data); Art Resources (clip art).

a

The Security Council shifted more approval authority for humanitarian items to OIP in 1999 and 

2002. 

Page 9 GAO-06-330 Oil for Food
The Committee of Sponsoring Organizations of the Treadway Commission

developed the internationally accepted and widely used framework and 

standards for internal control used in this report. These standards were 

used as a basis for the internal control standards and guidance issued by 

(1) GAO,7

 (2) the International Organization of Supreme Audit Institutions 

(INTOSAI),8

 and (3) OMB Circular A-123, “Management’s Responsibility 

for Internal Control.” According to these standards, internal controls, if 

properly designed and implemented, provide reasonable assurance that 

objectives are being met and serve as the first line of defense in 

safeguarding assets and preventing fraud. Within this framework, 

• the control environment establishes and maintains an environment that 

sets a positive and supportive attitude toward internal control, 

• risk assessment identifies and analyzes internal and external risks and 

forms a basis for determining how these challenges should be managed, 

• control activities are the policies and procedures that help ensure that 

management directives are followed, 

• information and communication are timely and help enable managers and

others to perform their internal control responsibilities, and 

• monitoring assesses performance over time and helps to ensure that audit 

findings and other issues are promptly resolved. 

The Oil for Food program suffered from two key weaknesses in the 

control environment that led to weak oversight and enabled the former 

Iraqi regime to circumvent the sanctions and obtain billions of dollars in 

illicit contract revenues. First, the UN Secretariat negotiated and the 

Security Council approved an agreement that allowed the Iraqi 

government, a country under international sanctions, to negotiate 

contracts directly with purchasers of Iraqi oil and suppliers of 

commodities and to control the internal distribution of its imported items. 

The UN was under considerable pressure at this time to respond to Iraq’s 

humanitarian crisis. Nonetheless, this structure was an important factor in

Early Compromises in 

Program Structure 

and Widely Diffused 

Management 

Responsibilities Led 

to Weak Control

Environment 

 7

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999). 

8

INTOSAI, Guidelines for Internal Control Standards for the Public Sector (Vienna, 

Austria: 2004). 

Page 10 GAO-06-330 Oil for Food
enabling Iraq to manipulate contracts. In addition, the Security Council 

was aware that Iraq smuggled oil to neighboring UN member states in 

violation of the sanctions but did little to prevent the smuggling. The 

Security Council relied on these neighboring states to enforce the 

sanctions against Iraq that were related to military and dual-use items but 

allowed these countries to continue illicit trade with Iraq, thus enabling 

the regime to obtain illicit funds. 

Second, management and oversight of the program were diffused among 

more than a dozen UN and international entities, with no single entity in 

charge of and accountable for the program. Figure 2 summarizes the 

internal control weaknesses in the Oil for Food program, including the 

control environment. Subsequent sections of this report will discuss the 

additional control standards. 

Page 11 GAO-06-330 Oil for Food
Figure 2: Internal Control Standards Related to UN Sanctions against Iraq and the Oil for Food Program 

Establish and maintain an environment 

throughout that sets a positive and 

supportive attitude toward internal 

control and conscientious management.

Control environment

Internal controls

Risk assessment Control activities

Information

and communication Monitoring

Internal control should 

provide for an assessment 

of the risks faced from both 

external and internal sources.

Effective and efficient 

control activities help 

ensure that management 

directives are followed.

Timely Information should be 

communicated to those who 

need it in a form that enables 

them to carry out their 

responsibilities.

Monitoring should assess the 

quality of performance over time 

and ensure that issues identified 

are promptly resolved.

Environment is affected by the manner 

in which authority and responsibility for 

operating activities are delegated.

UN concessions that allowed Iraq to 

negotiate contracts for oil sales and 

commodity imports and to distribute 

goods led to Iraq’s manipulation of 

the program. 

Organizational structure must have 

clearly defined key areas of authority 

and responsibility.

Numerous entities shared key 

responsibilities, but no clear 

leadership was defined.

Risk assessment 

identifies and analyzes 

relevant risks associated 

with achieving program 

objectives and managing 

change.

UN did not undertake 

risk assessments to 

identify and address

vulnerabilities despite 

risks posed by Iraqi 

control over contracting

and expansion of the 

program to 24 sectors.

Control activities help 

ensure that transactions and 

events are accurately 

recorded.

Control activities

mitigated illicit oil 

surcharges and the import 

of dual-use Items.

They did not prevent 

smuggling, kickbacks, or 

poor asset management 

due to inadequate controls

over oil exports, contract 

pricing, and assets.

Managers need information 

to make decisions, 

safeguard resources, 

determine compliance, and 

monitor performance.

Secretariat’s Iraq office 

did not disclose 

information on Iraq’s illicit 

revenue schemes to the 

Security Council’s

sanctions committee.

Poor communication and 

coordination hindered UN 

activities in northern Iraq.

Internal controls should ensure 

ongoing monitoring in the course 

of normal operations.

Limitations on internal audit 

reporting and resources

compromised its ability to 

provide effective oversight.

Audit findings should be 

promptly resolved. 

Internal audits found 

numerous problems in UN 

management of program in 

northern Iraq but issues were 

not fully addressed.

Source: GAO.

• Surcharges

• Kickbacks

• Smuggling

• UN sanctions and the Oil for Food program averted a humanitarian 

crisis while limiting Iraq’s ability to purchase dual-use items, but 

internal control problems allowed Iraq to manipulate the program 

and circumvent sanctions to obtain illicit revenues ranging from 

 $7.4 billion to $12.8 billion. 

The Oil for Food Program 

Included Compromises 

that Limited UN Oversight 

In establishing the Oil for Food program, the UN made two major 

concessions to the former Iraqi regime that allowed it to (1) retain control 

over the negotiation of contracts and the distribution of imported goods 

and (2) trade with neighboring countries outside the Oil for Food program. 

When the UN first proposed the Oil for Food program in 1991, it 

recognized the vulnerability inherent in allowing Iraqi control over the 

Page 12 GAO-06-330 Oil for Food
contracting process. At that time, the Secretary General proposed that the 

UN, an independent agent, or the Iraqi government be given the 

responsibility to negotiate contracts with oil purchasers and commodity 

suppliers. However, the Secretary General subsequently concluded that it

would be highly unusual or impractical for the UN or an independent 

agent to trade Iraq’s oil or purchase commodities and recommended that

Iraq negotiate the contracts and select the contractors. Nonetheless, he 

stated that the UN and Security Council must ensure that Iraq’s 

contracting did not circumvent the sanctions and was not fraudulent. 

Accordingly, the Security Council proposed that UN agents review 

contracts and compliance at Iraq’s oil ministry. Iraq refused these 

conditions. 

In April 1995, as humanitarian conditions worsened, the Security Council 

passed resolution 986 to permit Iraq to use its oil sales to finance 

humanitarian assistance. The UN reported that the average Iraqi’s food 

intake was about 1,275 calories per day, compared with the standard 

requirement of 2,100 calories. Against a backdrop of pressure to maintain

sanctions while addressing emergency humanitarian needs, the UN 

conceded to Iraq’s demand that it retain independent control over contract 

negotiations. Accordingly, a May 1996 memorandum of understanding9

between the UN and Iraq allowed Iraq to directly tender and negotiate

contracts without UN oversight and to distribute imported goods to the 

intended recipients. 

When the Oil for Food program began, the UN was responsible for 

confirming the equitable distribution of commodities, ensuring the 

effectiveness of program operations, and determining Iraq’s humanitarian 

needs. According to the memorandum of understanding, the Iraqi 

government was to provide UN observers with full cooperation and access 

to distribution activities. However, observers faced intimidation and 

restrictions from Iraqi regime officials in carrying out their duties. 

According to a former UN official, observers could not conduct random 

spot checks and had to rely on distribution information provided by 

ministry officials, who then steered them to specific locations. The 

 9

Memorandum of Understanding between the Secretariat of the United Nations and the 

Government of Iraq on the Implementation of Security Council Resolution 986 (1995), 

May 20, 1996. 

Page 13 GAO-06-330 Oil for Food
Independent Inquiry Committee10 reported that observers were required to

have government escorts and cited various instances of intimidation and 

interference by Iraqi officials. The committee concluded that limits placed 

on the observers’ ability to ask questions and gather information affected 

the UN Secretariat’s ability to provide full and complete field reports to the 

sanctions committee. 

Concessions to regional trade activity further affected the control 

environment and allowed the Iraqi regime to obtain revenues outside the 

Oil for Food program. Although oil sales outside the program were 

prohibited, the Security Council’s Iraq sanctions committee did not 

address pre-existing trade between Iraq and other member states. Illicit oil

sales were primarily conducted on the basis of formal trade agreements. 

For example, trade agreements with Iraq allowed Jordan—a U.S. ally 

dependent on Iraqi trade—to purchase heavily discounted oil in exchange 

for up to $300 million in Jordanian goods. Members of the sanctions 

committee, including the United States, took note of Iraq’s illicit oil sales 

to its neighbors, but took no direct action to halt the sales or punish the 

states or entities engaged in them. In this regard, the UN relied on Iraq’s 

neighboring countries to enforce the sanctions prohibiting Iraq from 

obtaining military and dual-use items. However, these states formally 

protested the economic sanctions, citing commercial harm to their 

economies. Successive U.S. administrations also issued annual waivers to 

Congress exempting Turkey and Jordan from unilateral U.S. sanctions for 

violating the UN sanctions against Iraq. 

According to U.S. government officials and oil industry experts, Iraq 

smuggled oil through several routes. Oil entered Syria by pipeline, crossed 

the borders of Jordan and Turkey by truck, and was smuggled through the 

Persian Gulf by ship. Syria received up to 200,000 barrels of Iraqi oil a day

in violation of the sanctions. Oil smuggling also occurred through Iran. The 

Security Council authorized the Multinational Interception Force in the 

 10In April 2004, the UN established the Independent Inquiry Committee, headed by Paul 

Volcker, the former Chairman of the U.S. Federal Reserve, to investigate the administration 

and management of Oil for Food program. Its scope included investigating allegations of 

fraud and corruption on the part of UN officials, personnel, and agents that entered into

contracts with the UN or with Iraq under the program.

Page 14 GAO-06-330 Oil for Food
Persian Gulf; but, according to the Department of Defense, it interdicted 

only about 25 percent of the oil smuggled through the Gulf.11

Numerous Entities Shared 

Key Responsibilities, but 

Authority and 

Accountability Were Not 

Clearly Defined 

Both OIP, as an office in the UN Secretariat, and the Security Council’s 

Iraq sanctions committee were responsible for the management and 

oversight of the Oil for Food program. The Iraq government, other UN 

agencies, UN member states, the interdiction force in the Persian Gulf, 

inspection contractors, and internal and external audit offices also played 

specific roles. However, no single entity was accountable for the program 

in its entirety. (See fig. 3 for an illustration of these entities and their 

roles.) In 2005, the Independent Inquiry Committee reported that the 

Security Council had failed to clearly define the program’s broad 

parameters, policies, and administrative responsibilities and that neither 

the Security Council nor the Secretariat had control over the entire 

program. The absence of clear lines of authority and reporting were 

important structural weaknesses in a program that allowed the sanctioned

Iraq regime initiative and control over program design and 

implementation. In addition, each entity had weaknesses in their 

fragmented responsibility that further undermined oversight and 

management of the Oil for Food program. 

 11GAO, Weapons of Mass Destruction: UN Confronts Significant Challenges in

Implementing Sanctions Against Iraq, GAO-02-625 (Washington, D.C.: May 23, 2002). 

Page 15 GAO-06-330 Oil for Food
Figure 3: Multiple Organizations Managed the Oil for Food Program and Enforced UN Sanctions

I r a q

Turkey

Syria

Jordan

Saudi Arabia

Kuwait

Iran

Umm

Qasr

Oil pipeline exit point

UN commodity entry point

Caspian

Sea

Trebil

Al-Waleed

Dohuk

Suleimaniyah

Erbil

Zakho

Baghdad

Persian 

Kuwait Gulf Road

0 50 100 100 Miles 25 50

Sources: GAO (data) and United Nations (map).

Secretariat

working through

9 UN agencies

coordinated by UNOHCI

Other key players

• Office of the Iraq Program

 (New York) 

• UN Office of the Humanitarian 

Coordinator for Iraq

 (UNOHCI) (Iraq)

• Commodity inspection contractors

 - Lloyd’s: 1996-1998

 - Cotecna: 1999-2004

• Oil overseers (appointed by Secretariat)

• Oil inspection contractor: Saybolt: 1996-2003

Multinational 

Interception Force (MIF)

... a U.S. led naval unit that 

patrolled the Persian Gulf.

Responsibility

1. Account for the program’s finances. 

2. Monitor oil exports under the 

program.

3. Review and approve Iraq’s

 commodity distribution plan.

4. Review commodity contracts.

5. Monitor Iraq’s purchases of 

commodities and delivery of goods.

UN Security Council 

working through Sanctions committee

UN member states,

particularly in region

1. Monitor the implementation of sanctions.

2. Screen contracts to prevent the purchase of

 items that could have military uses.

3. Approve Iraq’s oil and commodity contracts.

1. Distribute food and medicine in 

northern Iraq.

2. Monitor Iraq’s distribution of goods

in accordance with 6-month 

distribution plan.

3. Other activities included 

constructing or rehabilitating 

schools, health clinics, 

power generation 

facilities, and houses. 

Responsibility

Responsibility

Responsibility

Key players

Enforce sanctions to ensure 

that Iraq did not sell oil or 

purchase goods outside the 

Oil for Food program.

Responsibility

1. Ensure that Iraq used only the 

approved export routes.

2. Police illicit exportation of oil.

Audit entities

• Internal auditors

• External auditors

- UN Office of Internal Oversight

Services

- UN agencies’ audit offices

- UN Board of Auditors

Responsibility

Government of Iraq

1. Tender and negotiate all contracts for selling oil, 

procuring goods for central and southern Iraq, and 

procuring bulk food and medicine for all of Iraq.

2. Prepare 6-month distribution plan for all goods it 

 was to procure.

3. Distribute goods in accordance with the distribution plan.

Page 16 GAO-06-330 Oil for Food
• In October 1997, the UN Secretariat created the Office of the Iraq Program 

to administer the Oil for Food program. OIP’s responsibilities included key 

oversight aspects of the program, including (1) accounting for the 

program’s finances, (2) monitoring oil exports under the program, (3) 

approving Iraq’s plans for distributing imported commodities, (4) 

reviewing commodity contracts, (5) monitoring Iraq’s purchases of 

commodities and delivery of goods, and (6) reporting to the Security 

Council every 90 and 180 days. In 2005, the Independent Inquiry 

Committee reported that the Secretariat had not clearly defined OIP’s 

responsibilities and that OIP had lacked clear authority to reject contracts 

based on pricing concerns. 

• The UN Office of the Humanitarian Coordinator for Iraq (UNOHCI) 

administered OIP’s field operations in Iraq. The field unit’s functions 

included monitoring and reporting, ensuring the efficient and equitable

distribution of goods within Iraq, and overseeing the separate Oil for Food 

program in northern Iraq. However, the Independent Inquiry Committee 

found that OIP had not clearly defined the responsibilities and reporting 

lines of UNOHCI’s and OIP’s Program Management Division, which served 

as a headquarters liaison to the field. The lack of clarity led to confusion 

over the division’s role in coordinating field activities and diminished its 

ability to provide quality control over the field’s observation and reporting 

mechanisms. 

• The Secretariat also contracted inspection companies to inspect 

humanitarian supplies imported into Iraq at three entry points. However, 

the inspectors’ duties were mostly limited to comparing letters of credit 

for commodities to the shipping documents supplied at the border and 

visually inspecting about 7 to 10 percent of the goods. They only inspected 

goods presented by the transporter and did not inspect goods arriving in 

non-Oil for Food lanes.

• The UN Security Council shared key oversight responsibilities through its 

Iraq sanctions committee, which was comprised of representatives from 

the 15 Security Council members. The sanctions committee was first 

created in 1990 as part of Security Council resolution 661 to monitor 

compliance with UN sanctions against Iraq. In 1995, resolution 986 

directed the sanctions committee to also monitor the Oil for Food 

program. The committee was responsible for (1) monitoring the 

implementation of sanctions, (2) screening commodity contracts to 

prevent the purchase of items that could have military uses, and (3) 

approving Iraq’s oil and commodity contracts. The committee’s review of

commodity contracts focused on whether the contracts contained items of 

potential military use, or so-called dual-use items. It did not review 

Page 17 GAO-06-330 Oil for Food
contracts for price and value. In addition, it operated by unanimous 

consensus, which, according to the Independent Inquiry Committee, 

weakened its ability to undertake investigations of illicit activity or take 

remedial action. The Independent Inquiry Committee also noted that, 

although the sanctions committee was a monitoring body, its rules did not 

require it to take action in response to reports of sanctions or Oil for Food 

program violations, except for information indicating illegal arms 

trafficking. 

The Iraq sanctions committee’s responsibilities for reviewing commodity 

contracts lessened over time. From the beginning of the program until 

1999, the committee was responsible for approving all contracts. However, 

in 1999, the Security Council shifted more approval responsibilities to OIP. 

Due to concerns about the humanitarian situation in Iraq and pressure to 

expedite the review process, Security Council resolution 1284 in 

December 1999 directed the sanctions committee to accelerate the review

process. The committee subsequently allowed OIP to approve contracts 

for food, medical supplies, and equipment for the agricultural, water and 

sanitation, housing, and electricity sectors. 

However, political pressure on the UN continued, and U.S. officials 

asserted that support for international sanctions enforcement was 

collapsing. According to a congressional report,12 the United States 

proposed targeted sanctions in early 2001 to reduce criticism by other 

Security Council members of continuing the sanctions and to help rebuild

consensus on containing Iraq. In May 2002, OIP began approving contracts 

if they did not contain any items on a list of dual-use items known as the 

goods review list.13 

The rules of the Iraq sanctions committee provided for four oil experts to

assist the committee. The oil overseers were responsible for ensuring that 

oil sales contracts complied with program requirements and helped the

committee determine oil prices. However, for a 14-month period in 1999 

and 2000, only one overseer reported to the sanctions committee. In 

 12Congressional Research Service, Iraq: Oil-for-Food Program, Illicit Trade, and

Investigations, RL30472 (Washington, D.C.: Jan. 9, 2006). 

13Two UN inspection bodies assigned to monitor Iraq’s military and weapons of mass 

destruction programs—(1) the UN Monitoring, Verification, and Inspection Committee and 

(2) the International Atomic Energy Agency—examined commodity contracts to see if they 

contained items on the goods review list. Items that were covered by the goods review list, 

not entire contracts, were forwarded to the sanctions committee for further review. 

Page 18 GAO-06-330 Oil for Food
addition, the Secretariat contracted with Saybolt Eastern Hemisphere B.V. 

to oversee the export of oil and oil products from Iraq through approved

export points. The agents were expected to monitor oil leaving Iraq under 

the Oil for Food program and were authorized to stop shipments if they 

found irregularities. However, they were not required to monitor or report 

on oil smuggled outside the Oil for Food program in violation of 

international sanctions. 

• Nine UN agencies,14 ran the Oil for Food program in northern Iraq. They 

were responsible for distributing food rations and medicine in the three 

Kurdish governorates and for other activities, such as constructing or 

rehabilitating schools, health clinics, power generation facilities, and 

houses. However, the Independent Inquiry Committee and OIOS reported 

numerous instances of poor coordination and communication among the 

agencies and UNOHCI as well as problems with procurement and financial 

and asset management.

• Other entities involved in the sanctions program included UN member 

states and the Multinational Interception Force. UN member states, 

particularly those in the region, were responsible for enforcing the 

sanctions to ensure that Iraq did not sell oil or purchase goods outside the 

Oil for Food program, but oil smuggling and trade with Iraq’s neighbors 

outside the program occurred. The U.S.-led Multinational Interception 

Force, a naval unit that patrolled the Persian Gulf to prevent illicit oil 

exports, was responsible for ensuring that Iraq used only approved export 

routes, but it only interdicted about 25 percent of the oil smuggled through 

the Persian Gulf. 

• The Iraqi government tendered and negotiated contracts for selling its oil

and procuring goods for the 15 central and southern governorates and also

procured bulk food and medical supplies for all of Iraq, including the three 

northern governorates. It was also responsible for developing a 

distribution plan every 6 months for the commodities it planned to procure 

and for ensuring the distribution of these commodities in accordance with 

the plan. Iraqi control over the contracting and distribution processes 

allowed it to manipulate contract terms for illicit revenues and to restrict 

the efforts of UN observers responsible for monitoring the distribution of 

humanitarian goods. 

 14Agencies included the Food and Agricultural Organization; International Labor

Organization; World Food Program; World Health Organization; UN Children’s Fund; UN

Development Program; UN Educational, Scientific, and Cultural Organization; UN-Habitat; 

and the UN Office for Project Services. 

Page 19 GAO-06-330 Oil for Food
• OIOS, the internal oversight office within the Office of the Secretariat, 

conducted audits of the Oil for Food program and the separate UNCC 

program and reported the results to OIP’s executive director and the 

UNCC’s executive secretariat, respectively. OIOS issued 55 audits and two 

summary reports and have several ongoing audits at UNCC. Although 

OIOS identified more than 700 problems in all these reports, including 430

in more than 20 audits of program activities in northern Iraq, its 

effectiveness as an accountability tool was compromised by lack of 

resources and its limited scope. In addition to OIOS, UN external auditors

conducted audits on the condition of the escrow account holding Iraq’s oil 

proceeds, and the internal auditors of the UN agencies implementing the

program in northern Iraq conducted audits of their agencies’ Oil for Food 

activities.15 The audit units of these UN agencies conducted 66 audits of 

the program. According to the Independent Inquiry Committee, these 

reports identified weaknesses and made several recommendations for 

improvement. 

Despite the difficulties posed by fragmented implementation and unclear 

oversight, the Oil for Food program did provide emergency humanitarian 

relief to the Iraqi people. The Independent Inquiry Committee reported 

that the food provided through the Oil for Food program reversed a 

serious and deteriorating food crisis, preventing widespread hunger and 

probably reducing deaths in which malnutrition was a factor. The UN also 

reported that average daily caloric intake almost doubled, and

malnutrition rates for children under age 5 fell by more than half during 

the program. 

The Oil for Food program and the Iraq sanctions fell short in the remaining 

four key internationally accepted standards for internal control—

conducting risk assessments, implementing control activities, ensuring 

adequate information and communication, and monitoring. The lack of 

fundamental controls—particularly in light of the vulnerabilities inherent 

in the control environment—facilitated the regime’s ability to obtain illicit 

payments ranging from $7.4 billion to $12.8 billion. Figure 2 summarizes 

some of our key findings about the UN’s internal controls within these 

standards. 

Oil for Food Program 

Fell Short of 

Additional Internal 

Control Standards 

 15With the exception of UN-Habitat, all UN agencies had their own internal audit functions.

UN-Habitat’s activities were audited by OIOS. 

Page 20 GAO-06-330 Oil for Food
Risk assessment is used to identify and manage internal and external risks 

that can affect a program’s outcomes and accountability, including those 

risks that emerge as conditions change. The Oil for Food program 

expanded rapidly as it evolved from an emergency 6-month measure to 

provide humanitarian needs to a program that delivered about $31 billion 

in commodities and services in 24 sectors for more than 6 years. When the

international community was not satisfied with Iraq’s compliance with 

weapons inspections, the Security Council continued the sanctions and 

expanded its initial emphasis on food and medicines to include 

infrastructure rehabilitation and activities in 14 sectors. These sectors 

included food, food handling, health, nutrition, electricity, agriculture and 

irrigation, education, transport and telecommunications, water and 

sanitation, housing, settlement rehabilitation for internally displaced 

persons, demining, a special allocation for vulnerable groups, and oil 

industry spare parts and equipment. In June 2002, the Iraqi government 

introduced another 10 sectors, including construction, industry, labor and 

social affairs, youth and sports, information, culture, religious affairs, 

justice, finance, and the Central Bank of Iraq. 

The Security Council and UN Secretariat did not assess the risks posed by 

this expansion, particularly in light of the fact that they had relegated

responsibility for the contracting process to Iraq. OIOS was the only entity 

that attempted to assess the enormous risks in the Oil for Food program, 

but OIP blocked that attempt. In August 2000, the Under Secretary General 

for OIOS proposed an overall risk assessment to the Deputy Secretary 

General to improve the program by identifying the factors that could 

prevent management from fulfilling the program’s objectives. The proposal 

noted that this assessment could be a model for other UN departments and 

activities. OIOS considered the Oil for Food program a high-risk activity 

and decided to focus on an assessment of OIP’s Program Management 

Division. This unit was responsible for providing policy and management 

advice to OIP’s executive director and for supporting UNOHCI in its field 

implementation and observation duties. In May 2001, OIP’s executive

director refused to fund the risk assessment, citing financial reasons and 

uncertainty over the program’s future. However, the Independent Inquiry 

found that, about the same time, OIP moved to a new office in New York 

with increased rental costs and refurbishments totaling about $3 million. 

In July 2003, OIOS issued an assessment of OIP’s Program Analysis, 

Monitoring, and Support Division—formerly the Program Management 

Division—that identified a number of organizational, management, and 

administrative problems, including poor communication and coordination, 

unclear reporting lines among OIP headquarters units and the field, and 

Key Weaknesses and 

Challenges Were Not 

Addressed Due to Absence 

of Risk Assessments 

Page 21 GAO-06-330 Oil for Food
the lack of approved work plans. However, by this date, the UN was 

preparing for the November 2003 transfer of the program to the Coalition 

Provisional Authority, and the report was of limited usefulness for 

addressing high-risk areas. Timely risk assessments might have identified

the internal control weaknesses—such as inadequate contract pricing 

reviews—that facilitated Iraq’s ability to levy illicit contract revenues and

the structural management weaknesses that led to ineffective

communication and coordination within the program. 

Control activities are those activities that help provide assurance that 

management’s directives are carried out and that risks are addressed and 

include the policies and procedures established to ensure accountability. 

The Security Council’s sanctions committee established some control 

activities, such as retroactive pricing and review of contracts for items 

having potential military use, which helped address problems resulting 

from Iraq’s control over the contracting and distribution processes. 

However, other important control activities for monitoring oil exports and

assessing the reasonableness of the prices that Iraq was negotiating were 

limited or nonexistent, which helped enable Iraq to smuggle oil and levy 

surcharges and kickbacks on its contracts. In addition, physical control 

over vulnerable assets is a key control activity, particularly in 

environments lacking adequate security. However, in northern Iraq, cash 

and asset management policies were compromised due to the failure to 

maintain inventory systems or secure cash in UN offices and during 

transport. 

A limited role for contractors overseeing oil exports and the lack of oil 

meters facilitated Iraq’s ability to obtain revenues from smuggling that 

ranged from $5.7 billion to $8.4 billion during the course of the Oil for 

Food program. In 1996, the Secretariat contracted with Saybolt to oversee 

the export of oil from Iraq through selected export points. The inspectors 

were to monitor the amount of oil leaving Iraq under the Oil for Food 

program at these locations and to stop shipments if they found 

irregularities. The inspectors worked at two locations—the Ceyhan-Zakho 

pipeline between Iraq and Turkey and the Mina al-Bakr loading platform in 

southern Iraq. In 2005, a Saybolt official testified that Saybolt’s mandate 

did not include monitoring all oil exports leaving Iraq from other locations 

Control Activities 

Mitigated Questionable Oil 

Pricing and the Import of 

Dual-Use Items but Did 

Not Prevent Smuggling, 

Contract Kickbacks, or 

Poor Asset Management 

Inadequate Control of Oil 

Shipments and Oil Export 

Contracts Facilitated 

Smuggling and Illicit 

Surcharges 

Page 22 GAO-06-330 Oil for Food
or acting as a police force.16 As a result, the contractors did not monitor oil 

that was smuggled outside the Oil for Food program. 

Further, because the Iraqi government did not install functioning oil 

meters at the port, inspectors could not accurately confirm the volume of

oil loaded onto vessels. The lack of functioning meters enabled the Iraqi 

government to smuggle oil undetected by inspectors. A Saybolt employee 

testified that the company notified UN officials of the problems posed by 

the lack of functioning meters at the beginning of the program.17 He also 

testified that the lack of metering equipment allowed the two “topping off”

incidents involving the oil tanker Essex, in which the tanker loaded 

additional oil after the inspectors had certified the loading and left the 

vessel. In November 2001, a Saybolt representative noted that Iraq’s 

distribution plans18 provided for the installation of a meter at the Mina alBakr port, and a U.S. official called for OIP to develop a plan to prevent 

unauthorized oil sales that would include installing a meter at the port. 

However, Iraq did not tender a contract for the meter. As of March 2006, 

the Iraqi government had not yet installed oil meters at Mina al-Bakr. 

In the absence of metering, Saybolt measured the onboard quantity of the 

vessel before loading. After loading, an inspector measured the amount by

which the vessel tank fell short of being full and the oil temperature. 

Inspectors analyzed these data using the vessel’s calibration chart to 

determine how much oil had been loaded onto the vessel. While this is an 

alternative method accepted in the inspection industry for situations in 

which reliable metering equipment is not available, a U.S. official noted

that meters are a more consistent method for measuring oil loading and 

encouraged their incorporation into a plan for preventing unauthorized oil 

sales. The Saybolt representative also testified that this method was not as 

accurate or foolproof as using a meter. 

In addition, the sanctions committee relied on the advice of independent

oil overseers to approve oil sales contracts. The overseers reviewed Iraq’s 

oil sales contracts to determine compliance with program requirements 

and whether the prices that Iraq negotiated for its oil were fair and 

 16Testimony of John Denson, General Counsel, Saybolt Group, before the Permanent 

Subcommittee on Investigations, Committee on Governmental Affairs, U.S. Senate 

(Washington, D.C.: Feb. 15, 2005). 

17Ibid. 

18For program phases IX and X—Dec. 6, 2000, through Nov. 30, 2001. 

Page 23 GAO-06-330 Oil for Food
reflected market pricing. However, the inadequate number of overseers 

monitoring Iraq’s oil pricing over a 14-month period may have been a 

factor in Iraq’s ability to levy illicit surcharges on oil contracts. From June 

1999 to August 2000, only one oil overseer was responsible for monitoring

billions in Iraq’s oil transactions, contrary to the sanctions committee’s 

requirements for at least four overseers. Four overseers were hired at the 

beginning of the program but three had resigned by June 1999. Political 

disputes among sanctions committee members prevented the committee 

from agreeing on replacements. According to the Independent Inquiry 

Committee, the sanctions committee demonstrated weak program 

oversight in its inability to fill the vacant positions. 

In October 2001, the Security Council’s sanctions committee imposed a 

positive control activity—retroactive oil pricing—to prevent Iraqi officials 

from adding illegal oil surcharges to contracts. In November 2000, UN oil 

overseers reported that Iraq’s oil prices were low and did not reflect the 

fair market value. The overseers also reported in December 2000 that Iraq

had asked oil purchasers to pay surcharges. In early 2001, the United 

States informed the sanctions committee about its concerns regarding 

allegations that Iraqi government officials were receiving illegal surcharges 

on oil contracts. Because the committee operated by consensus, the 

United States could delay oil pricing by not approving a specific price per 

barrel until the oil was delivered to the refinery. The Iraq government thus 

signed contracts with suppliers without knowing the price it would have to 

pay until delivery. This practice, known as retroactive pricing, curbed the

ability of the Iraqi government to levy illicit surcharges on its oil sales 

contracts. Prior to retroactive pricing, estimates of Iraq’s illicit revenues 

from surcharges on exported oil ranged from about $230 million to almost 

$900 million. 

According to a report by defense contract experts, in a typical contract 

pricing environment, fair and reasonable commodity prices are generally 

based on prevailing world market conditions or competitive bids among 

multiple suppliers.19 Ensuring a fair and reasonable price for goods can 

mitigate the possibility of overpricing and kickbacks. The sanctions 

committee and OIP were responsible for reviewing commodity contracts 

under the Oil for Food program, but neither entity conducted sufficient 

Retroactive Pricing Helped 

Limit Illicit Oil Surcharges 

Contract Examination

Procedures Emphasized DualUse Items—Not Price and 

Value 

 19Report on the Pricing Evaluation of Contracts Awarded under the Iraq Oil for Food

Program, submitted by the Joint Defense Contract Audit Agency and Defense Contract 

Management Agency OFF Pricing Evaluation Team (Washington, D.C.: Sept. 12, 2003). 

Page 24 GAO-06-330 Oil for Food
reviews of commodity pricing and value. As a result, Iraq was able to levy

illicit commissions and kickbacks ranging from about $1.5 billion to about

$3.5 billion.

The sanctions committee was responsible for screening contracts for 

items that could have military uses and for approving commodity 

contracts; any member had the authority to block or hold specific items. 

The committee focused on limiting Iraq’s ability to import dual-use items 

rather than examining contracts for price and value. The United States, as

a member of the sanctions committee, devoted resources to this contract

oversight—about 60 staff from several U.S. government agencies reviewed 

the contracts for compliance with dual-use restrictions and made their 

recommendations to the U.S. mission to the UN. However, although the 

United States accounted for about 90 percent of the sanctions committee’s 

holds, few contracts were held based solely on price and value concerns. 

While OIP was to examine each contract for price and value before 

submitting it to the sanctions committee, the Independent Inquiry 

Committee found that OIP lacked clear authority to reject contracts on 

pricing grounds and did not hire customs experts with the requisite 

expertise to conduct thorough pricing evaluations. OIP stated that it 

informed the sanctions committee if it found pricing irregularities and that 

it was up to the sanctions committee to approve or hold contracts. 

However, the Independent Inquiry Committee found that few of the 

customs reports submitted to the sanctions committee included any

quantitative or qualitative assessment beyond a general notation that 

pricing appeared high or was higher than in previous applications for 

similar goods. An OIP official also stated that OIP found that about 70 out 

of a total of approximately 30,000 contracts in the OIP database had 

specific price and value issues. OIP directly approved more than half of 

these 70 contracts as a result of Security Council decisions in 1999 and 

2002 that shifted additional approval responsibilities to OIP. We did not 

have access to OIP’s decisions to determine the extent to which OIP may 

have held contracts for price and value concerns. 

The Secretariat’s contract for inspecting humanitarian supplies at three 

entry points in Iraq required inspection agents to “authenticate” goods, but 

the agents’ responsibilities fell short of a previous proposal to include 

more rigorous reviews of commodity price and quality. Under the Oil for 

Food program, inspection agents compared appropriate documentation, 

including UN approval letters, with the commodities arriving in Iraq; 

visually inspected about 7 to 10 percent of the goods; and tested food 

items to ensure that they were “fit for human consumption.” However, 

Earlier Proposal for Price and 

Quality Review Was Not 

Included in Final Inspection 

Contract 

Page 25 GAO-06-330 Oil for Food
inspection agents were not required to (1) verify that food items were of 

the quality contracted, (2) assess the value of goods shipped, (3) interdict

prohibited goods, (4) inspect goods that were not voluntarily presented by

transporters, or (5) select the items and suppliers or negotiate contracts. 

According to Cotecna, the inspections contractor from 1999 to 2004,20

“authentication” is not a standard customs term or function. The UN 

created the term for the Oil for Food program and did not include 

traditional customs inspection activities, such as price verification and 

quality inspection. In 1992, the UN selected Cotecna for a proposed 

program, which was not implemented, that would have been similar to the 

Oil for Food program. Under that proposal, Cotecna would have verified 

fair pricing and inspected whether the quality of the items conformed to 

contract requirements. 

Control activities that ensure accountability include cash management 

policies and procedures that provide for physical control over vulnerable 

assets and other resources. OIOS and the Independent Inquiry Committee 

reported specific instances in which the UN offices involved in

administering the Oil for Food program in northern Iraq lacked such 

controls. For example, in 2002, OIOS found that UN-Habitat lacked a 

proper asset inventory system and that no policies and procedures 

governing asset management were evident. In one case, $1.6 million in 

excess construction material remained after most projects were complete. 

OIOS also reported that some funds were not used for the purpose 

intended, thus subjecting project funds misuse. In a March 2000 audit, 

OIOS reported that the UN Development Program country office used 

$500,000 in project funds for office expenses without authorization or 

proper documentation. A February 2002 audit found that the UN-Habitat 

office in Erbil put at risk $600,000 to $800,000 in cash due to a lack of cash 

management policies. In addition, the Independent Inquiry Committee 

reported thefts from several UN offices or persons, including $300,000 

from the UN Educational, Scientific, and Cultural Organization’s Erbil 

office; $64,000 from a World Health Organization suboffice; and $40,000 

from the Food and Agricultural Organization when an automobile carrying 

more than $100,000 from Baghdad to Erbil was involved in an accident. 

Program in Northern Iraq Had 

Inadequate Asset and Cash 

Management Controls 

 20The Coalition Provisional Authority used Cotecna from November 2003, when it assumed 

responsibility from the UN for remaining Oil for Food contracts, until October 2004, when 

the Iraqis no longer used independent inspection agents. 

Page 26 GAO-06-330 Oil for Food
Information should be communicated to those who need it within time 

frames that allow them to carry out their oversight responsibilities; 

however, OIP did not disclose to the sanctions committee all appropriate 

information that may have mitigated Iraq’s ability to obtain illicit revenues, 

according to the Independent Inquiry Committee. For example, in 

December 2000, OIP’s Program Management Division director informed 

the OIP director of alleged contract kickback schemes by the Iraqi 

government and recommended that OIP inform the sanctions committee 

of these allegations. The U.K. member of the sanctions committee asked

for a written report of these allegations, but the Independent Inquiry 

Committee found no evidence that the report was submitted. In October 

2001, OIP’s customs chief—the person responsible for OIP’s price and 

value reviews—prepared a written summary of the kickback incidents, 

including documentation of illicit side agreements with the Iraqi regime, 

and presented it to OIP senior management. However, the Independent

Inquiry Committee found no evidence that this information was provided 

to the sanctions committee. Moreover, none of the Secretariat’s 90-day or 

180-day reports to the Security Council mentioned illicit payment demands 

in connection with oil or commodity contracts. Further, while both the 

Security Council and Secretariat were aware of smuggling activities 

outside of the program, OIP and the Secretariat had specific information 

from the Saybolt oil inspectors about the Syrian pipeline that was not 

disclosed to the sanctions committee.

In addition, poor communication and coordination among UN agencies in 

northern Iraq had a negative impact on some projects. In one instance, in 

2004, OIOS reported that UN-Habitat had not adequately coordinated with 

other UN agencies in providing essential services for its housing projects. 

UN-Habitat provided high-capacity generators but had not contacted the 

UN Development Program—the entity responsible for the power sector—

to provide electric power connections. In another instance, OIOS found 

that about 3,200 houses were unoccupied for extended periods due to a 

lack of coordination among agencies providing complementary services.

The Independent Inquiry Committee’s investigation also revealed 

problems with coordination among UN agencies, which was exacerbated 

by poorly defined relationships among those agencies, the Iraqi 

government, and the local authorities in the three northern governorates.

Monitoring is an internal control standard that assesses program 

performance on an ongoing basis and helps provide assurance that the 

findings of audits and other reviews are resolved. We identified monitoring 

weaknesses that compromised the Secretariat’s internal oversight of the 

Poor Information and 

Communication 

Compromised Disclosure 

of Iraq’s Illicit Revenue 

Schemes and Hindered UN 

Activities in Northern Iraq 

Monitoring Activities Did 

Not Ensure Adequate 

Internal Oversight 

Page 27 GAO-06-330 Oil for Food
program. While OIOS conducted numerous audits and identified hundreds 

of problems, it did not review OIP’s oversight of the commodity contracts 

for central and southern Iraq. Nonetheless, its review of UN activities in 

northern Iraq led to more than 400 findings. Although OIP attempted to 

implement OIOS’ recommendations, OIOS and the Independent Inquiry 

Committee reported that some systemic issues remained unresolved. 

Although OIOS conducted more than 50 audits of the Oil for Food program 

and the separate compensation fund and identified more than 700 

problems, the office did not review key aspects of the Oil for Food 

program and operated with low numbers of staff, given the program’s size. 

Except for audits of OIP’s inspection contracts, OIOS did not review 

whether OIP was adequately monitoring and coordinating the Oil for Food 

program, including OIP’s role in assessing commodity pricing. OIOS did 

not examine certain headquarters functions, particularly OIP’s oversight of 

the commodity contracts for central and southern Iraq, which accounted

for 59 percent or almost $40 billion in Oil for Food proceeds. According to 

the Independent Inquiry Committee, OIOS believed that it did not have the 

authority to audit humanitarian contracts because the sanctions 

committee was responsible for their approval, and OIOS did not review 

OIP’s relationship with the sanctions committee. In contrast, OIOS took an 

aggressive stance in reviewing UNCC decisions on compensation awards, 

despite the challenges to its authority from UNCC and the UN Office of 

Legal Affairs.

OIP management also steered OIOS toward program activities in northern 

Iraq rather than headquarters functions where OIP reviewed the 

humanitarian contracts. The Independent Inquiry Commission further 

noted that the practice of allowing the heads of programs the right to fund 

internal audit activities led to excluding high-risk areas from internal audit 

examination. We also found that UN funding arrangements constrain 

OIOS’s ability to operate independently as mandated by the General 

Assembly and required the international auditing standards to which OIOS 

subscribes. 21 Because OIOS did not review commodity contracts, it was 

difficult to quantify the extent to which the Iraqi people received the 

humanitarian assistance funded by its government’s oil sales.

Limitations on OIOS Reporting 

and Resources Compromised 

Its Ability to Provide Effective 

Oversight 

 21GAO, United Nations: Funding Arrangements Impede Independence of Internal 

Auditors, GAO-06-575 (Washington, D.C.: Apr. 25, 2006). 

Page 28 GAO-06-330 Oil for Food
In addition, the number of OIOS staff assigned to the Oil for Food program 

was low compared with the level of staff providing oversight of 

peacekeeping operations, according to the Independent Inquiry 

Committee. Although OIOS had only 2 to 6 auditors assigned to cover the 

Oil for Food program. The UN Board of Auditors indicated that the UN 

needed 12 auditors for every $1 billion in expenditures. The committee 

concluded that the Oil for Food program should have had more than 160 

auditors at its height in 2000. However, the committee found no instances 

in which OIOS communicated broad concerns about insufficient staff to 

UN management. 

OIOS also encountered problems in its efforts to widen the distribution of 

its reporting beyond the head of the agency audited. In August 2000, OIOS 

proposed to send its reports to the Security Council. However, the OIP 

director opposed this proposal, stating that it would compromise the 

division of responsibility between internal and external audit. In addition, 

the UN Deputy Secretary General denied the request, and OIOS 

subsequently abandoned any efforts to report directly to the Security 

Council. 

We did not have access to the internal audit reports conducted by eight of

the nine agencies managing the program in northern Iraq. However, our 

February 2005 analysis of 25 OIOS audits on Oil for Food activities in 

northern Iraq identified about 430 problems in program management and 

monitoring and about 420 recommendations to correct these deficiencies.22

In one instance, OIOS reported in 2004 that UN-Habitat had not adequately 

coordinated with other UN agencies in providing essential services for its 

housing projects. An August 2000 report noted a lack of planning that 

resulted in the questionable viability of some projects, including a health 

facility subject to flooding and diesel generators procured for an area in 

which diesel fuel was not readily available. In November 2002, OIOS 

reported that almost $38 million in equipment procurement was not based

on a needs assessment—resulting in 51 generators not being used from 

September 2000 to March 2002—and that 11 purchase orders totaling 

almost $14 million showed no documentary evidence supporting the 

requisitions. In April 2002, OIOS reported that OIP and UNOHCI had made 

serious efforts to implement audit recommendations. However, it also 

noted that a number of issues had not been resolved, including efforts to 

improve the procurement, planning, coordination, and monitoring of 

OIOS Found Numerous

Problems in UN Management 

of Program in Northern Iraq, 

but Issues Were Not Fully 

Addressed 

 22GAO-05-346T. 

Page 29 GAO-06-330 Oil for Food
projects in northern Iraq. The Independent Inquiry Committee also found 

that a lack of attention to addressing systemic problems hindered the 

effectiveness of the Oil for Food program in the north. The recurring 

nature of these problems over the course of the program demonstrated 

that systemic weaknesses were not fully addressed. 

The UN Security Council established UNCC in 1991 under Security 

Council Resolution 692 to process claims and pay compensation for 

damages and losses resulting from Iraq’s invasion and subsequent 

occupation of Kuwait. UNCC is a subsidiary organ of the UN Security 

Council, with its Governing Council acting as the policy-making body. 

With the adoption of Security Council resolution 986, UNCC, along with 

UN-sponsored humanitarian programs in Iraq, received funding from the 

profits from Iraqi oil sales. (App. IV provides more information on the 

organization of UNCC and its claims process.) 

UNCC approved awards of almost $52.5 billion to more than 1.5 million 

claimants and, as of January 2006, had paid about $20.3 billion of this 

amount. However, how and when the remaining approximately $32.2 

billion in approved claims will be paid is uncertain. Depending on the 

growth of Iraq’s oil export revenues, award payments may be completed 

sometime between 2017 and 2020. These unpaid claims are in addition to 

Iraq’s external debt to international creditors, which the International 

Monetary Fund (IMF) estimated at $51 billion at the end of 2005. UNCC’s 

Secretariat had controls for preparing claims for presentation to the 

expert panels, who then recommended which claims should be paid and 

the amounts to be compensated. However, OIOS found some weaknesses 

in UNCC’s oversight of procedures for returning unclaimed payments and 

instances of claims overpayments by the panels recommending the 

awards. For example, in May 2005, OIOS reported that governments and 

international organizations owed UNCC about $38.8 million in claims that 

it was unable to pay because claimants could not be located. According to

UNCC, the total amount owed to the UNCC as of March 2006 was $11.7 

million. 

UNCC Has Paid More 

than $20 Billion in 

Compensation 

Claims, but 

Remaining Payments 

of More than $32 

Billion May Take until 

2020 

Page 30 GAO-06-330 Oil for Food
From 1991 to 1997—its deadline for accepting claims—UNCC received

almost 2.7 million claims seeking almost $353 billion in compensation for 

damages and losses.23 UNCC required that claimants submit claims 

through their governments and also allowed international organizations to 

submit claims on their behalf or on behalf of individuals who were not in a 

position to have a government file their claims. Individual claims came 

from Kuwaitis and also from many of the roughly two and a half million 

expatriate workers and their dependents living in Kuwait and Iraq at the 

time of the invasion, 90 percent of whom fled the region due to the war. As 

a result, UNCC received claims from 100 countries on behalf of the 

country submitting the claim, its nationals, or its corporations. Upon 

completing its work in 2005, UNCC had awarded more than 1.5 million 

claimants almost $52.5 billion in compensation, almost 15 percent of the 

total amount sought. OIOS auditors stated that an award rate of 15 percent 

is low and is evidence of the UNCC’s conservative approach to making 

awards. Appendix IV provides greater detail on the categories and 

amounts of claims. 

As of late January 2006, UNCC had paid about $20.3 billion in 

compensation of the $52.5 billion awarded, mostly to individuals and 

families. About $32.2 billion in outstanding awards remains to be paid. 

Depending on the growth of Iraq’s oil revenue, payments could extend 

through around 2020. In 2003, Security Council resolution 1483 reduced 

the portion of Iraqi oil revenues allotted to UNCC from 25 percent to 5 

percent.24 Using projections made by the International Monetary Fund, we 

estimate that the remaining compensation awards could be paid between 

2017 and 2020, assuming that oil export revenues grow at an annual 

average rate of about 5 percent and are about 57 percent of gross domestic 

product. With an average growth rate of 1 percent, the remaining 

compensation awards would be paid by 2020. At 10 percent, these awards 

Almost $32.2 Billion in 

Unpaid Awards Increases 

Iraq’s Debt Burden and 

May Not Be Paid Until 

2020 

 23UNCC accepted a number of claims filed after the February 1997 deadline from groups 

that were unable to meet the deadline. For example, UNCC accepted around 32,000 late

claims from Bedouns—members of a community that lived in Kuwait for many years but

were not citizens of Kuwait or any other nation—almost 10 years after the deadline. The 

claims were late because no country or international organization had accepted 

responsibility for filing the claims. UNCC also continues to receive a small number of

claims forwarded on behalf of missing persons as well as claims for damages and losses 

resulting from land mines but will no longer accept these claims after 2006. 

24With the adoption of Security Council resolution 986 in 1995, UNCC was directed to

receive up to 30 percent of the proceeds of Iraq’s oil sales. This amount was reduced to 25

percent in December 2000 pursuant to resolution 1330. 

Page 31 GAO-06-330 Oil for Food
would be paid by 2017.25 These unpaid claims are in addition to Iraq’s 

substantial external debt. In January 2006, the IMF estimated Iraq’s debt at

the end of 2005 at about $51 billion.

With the conclusion of the award process in 2005, UNCC’s Secretariat 

completed its claims preparation duties and began reducing its staff. The 

UNCC secretariat expects that by mid-2007 the payment of all individual 

awards will be completed. As an interim measure after that time, the 

Governing Council will oversee the Compensation Fund with assistance 

from a smaller secretariat. The Governing Council will consider a future 

date for transferring responsibility for remaining payments to the Iraqi 

government under the supervision of the Security Council. 

The UNCC secretariat employed controls in its administrative procedures 

for preparing claims for the expert panels, but OIOS found some 

weaknesses in the procedures for ensuring that unpaid claims are returned

to UNCC and instances of claims overpayments. OIOS found that 

inadequate oversight of the procedures for paying awarded amounts to 

claimants resulted in governments and international organizations owing 

UNCC about $38.8 million in unclaimed payments. In its response to a 

draft of this report, UNCC noted that this amount totaled $11.7 million as 

of March 2006. Further, OIOS noted that only about half of these entities

had submitted required audit documents certifying their payments to 

claimants. UNCC responded that the overwhelming majority of awards 

had been successfully paid and that it was working with five of these 

governments to improve their reporting obligations. UNCC questioned 

OIOS’ authority to audit certain aspects of its work, and a UN legal opinion 

agreed with UNCC, stating that the scope of OIOS’ audit authority did not

extend to those parts of UNCC’s work that constituted a legal process. 

Nonetheless, OIOS identified more than $500 million in potential 

overpayments to claimants. 

The claims award process was handled by three UNCC entities: the 

Secretariat, the Governing Council, and the Commissioner panels. The 

Secretariat organized the claims, prepared them for review by the 

Commissioner panels, and administered the award payments to 

UNCC Had Controls for 

Claims Preparation, but 

OIOS Reported Concerns 

with Award Payment 

Procedures 

UNCC Secretariat Had Controls 

for Processing Claims 

 25See Iraq: Request for Stand-By Arrangement. We used data from IMF and an economic 

consulting firm in calculating our scenarios. Appendix I contains details on our 

methodology. 

Page 32 GAO-06-330 Oil for Food
governments and international organizations submitting the claims on 

behalf of claimants. The Commissioner panels reviewed the claims, made 

recommendations to reject or accept the claims, and recommended award 

amounts. The Governing Council made final award decisions based on the 

panels’ recommendations. The council could disagree with the 

recommendations and return the decisions to the panels for further 

review; it could also increase or reduce the award amounts. After award 

decisions were final, payments were made to governments and 

international organizations submitting claims, and these entities 

distributed award payments to individual claimants. 

In managing the steps required to prepare claims for presentation to the 

Commissioner panels, the Secretariat put in place various measures to 

mitigate administrative errors and fraud, including efforts to ensure the 

integrity of claims data, identify duplicate claims, and deliver preliminary 

claims valuations to the Commissioner panels. For example, the 

Secretariat’s process included assigning all incoming claims a unique 

number, running quality control checks, and cleaning up queries to ensure 

the integrity of the data entered under each number. A 2002 assessment 

conducted by OIOS stated that certain controls for processing claims and 

the claims database were generally adequate at that time. 

OIOS concluded in May 2005 that UNCC did not exercise adequate 

oversight over the distribution of award payments by governments and 

international organizations. UNCC requires governments and 

organizations to report on the amount of payments distributed and the 

reasons for nonpayment of claims 12 months following the release of 

award payments. All funds not located and paid are to be returned to 

UNCC within this 12-month period.26 OIOS reported that the Secretariat 

did not properly review reports from governments detailing which 

awardees could not be located. The auditors also reported that

governments and international organizations owed UNCC about $38.8 

million in compensation intended for claimants they were unable to locate 

(governments and organizations did refund about $99 million to UNCC). 

Of this amount, more than $4 million had been outstanding for more than 2 

years.27 In addition, OIOS found that 14 of the 32 governments and 

international organizations receiving a total of about $197 million in an 

OIOS Reported Concerns with 

Award Payments, but UNCC 

Challenged OIOS’s Authority to 

Audit Specific Aspects of 

UNCC’s Work 

 26Governing Council Decisions 18 and 48. 

27Of the 3,126 U.S. claimants receiving UNCC awards, 29 have not been located. The United

States has returned about $100,000 to UNCC.

Page 33 GAO-06-330 Oil for Food
October 2003 disbursement of award payments had not submitted an audit 

certificate documenting that payments had been distributed. The 

uncertified amount totaled about $156 million. 

In comments to OIOS dated June 2005, UNCC responded that the 

overwhelming majority of the awards were successfully paid and that 

UNCC strongly pursued the submission of audit certificates by

governments and international organizations. UNCC also commented that 

it had visited five countries to assist governments with their reporting 

obligations and payment distribution. UNCC further noted that it is the 

responsibility of the governments and organizations to locate claimants for 

payment but added that it would review the actions necessary to obtain a

full accounting from governments that failed to meet prescribed deadlines. 

In addition, in commenting on a draft of this report, UNCC noted that the 

amount owed to UNCC can fluctuate almost daily as governments and 

international organizations locate previously unreachable claimants and 

ask for funds for repayment. UNCC further noted that audit certificates 

were required for payments beginning in October 2003. In responding to 

our draft report, UNCC provided updated documentation demonstrating 

that, as of March 2006, the amount owed to UNCC had decreased to $11.7 

million, and only $1.5 million—or 0.8 percent of the $197 million for which 

certificates were due—had not been supported by audit certificates. 

UNCC challenged OIOS’s authority to review specific aspects of UNCC’s 

work and requested guidance from the UN Office of Legal Affairs. 

Specifically, UNCC questioned whether OIOS had the authority to review 

(1) the Panel’s work in identifying applicable law and the Panel’s 

application of that law to claims pursuant to the UNCC’s Provisional Rules 

for Claims Procedure; (2) the manner in which the Panel organized its 

work pursuant to those Rules; and (3) the Panel’s determinations 

regarding the sufficiency of evidence, including its determinations relating

to the relevance, materiality, and weight of evidence pursuant to UNCC’s 

rules. In 2002, UN legal counsel rendered an opinion, stating that the audit

authority of OIOS included reviewing the panels’ computations of its 

recommended compensation amounts but did not extend to reviewing 

those aspects of the panels’ work that were part of the legal process. The 

UN legal counsel concluded that all three aspects of the Panel’s work in 

question were beyond the proper scope of OIOS’s audit authority. Both 

UNCC and the Department of State agreed with the UN legal opinion. 

OIOS disputed it, however, noting its general mandate to review and 

appraise the use of UN financial resources. In response, UNCC argued that 

the compensation fund does not constitute UN financial resources. As a 

result, UNCC only acted on those OIOS recommendations that it 

Page 34 GAO-06-330 Oil for Food
determined, consistent with the UN legal counsel’s opinion, were within 

the scope of its audit authority. 

OIOS continued to report on claims amounts and identified more than 

$500 million in recommended claims reductions. For example, in a 

September 2002 audit, OIOS found potential overpayments of $419 million 

in compensation awarded to Kuwait due to duplicate payments, 

calculation errors, insufficient evidence to support losses, and 

inconsistent claims methodologies. In April 2003, UNCC provided a 

detailed response to OIOS. In its response, UNCC cited documentation 

which they said showed that there were no duplicate payments and 

provided additional evidence of the losses—consultant reports, additional

documentation, and testimony. UNCC also stated that it and not OIOS had 

authority to determine the sufficiency of evidence—for example, using 

testimonial evidence with other support when documentary evidence was 

destroyed during Iraq’s invasion of Kuwait. As of February 2005, UNCC 

had agreed to reduce total claims overpayments by about $3.3 million. 

The Oil for Food program was flawed from the outset because it did not 

have sufficient controls to prevent the former Iraqi regime from 

manipulating the program. Internal controls, if properly designed and 

implemented, can provide reasonable—although never absolute—

assurance that program goals will be met and fraud will be minimized. 

Despite the risks inherent in allowing Iraqi government control over the 

contracting process and expanding the program beyond its initial 

emergency mandate, the Security Council and the Secretariat did not 

establish a system of internal controls, including timely and 

comprehensive risk assessment and effective control activities and 

monitoring. Moreover, fragmentation of responsibilities led to an 

environment in which no single unit or person was accountable for 

program management, monitoring, and oversight. The Oil for Food 

program was arguably the largest sanctions and humanitarian program in 

its scope, complexity, and structure that the UN had undertaken. Given the 

enormity of the undertaking, internationally accepted internal control 

standards should have been applied throughout the course of the program. 

Such standards would have helped ensure that the program was 

effectively and efficiently managed and that the Iraqi people received the 

intended benefits from the proceeds of its government’s oil sales. 

U.S. oversight of the Oil for Food program focused on preventing Iraq 

from obtaining dual-use items that could be used for military and weapons 

of mass destruction programs while meeting the humanitarian needs of 

Conclusion 

Page 35 GAO-06-330 Oil for Food
those suffering from sanctions. However, the United States and other 

Security Council members did not apply the same rigor to preventing Iraq

from obtaining illicit funds through smuggling and contract kickbacks. 

Over the past several years, the United States has taken the lead in 

promoting management and oversight reform at the UN. The lessons 

learned from the internal control weaknesses in the Oil for Food program 

could prove useful as the United States continues to press the UN to 

undertake fundamental reforms to address its key efficiency, management, 

and accountability challenges. 

We recommend that the Secretary of State and the Permanent

Representative of the United States to the UN work with other member 

states to encourage the Secretary General to take the following two 

actions: 

• ensure that UN programs with considerable financial risk establish, apply, 

and enforce the principles of internationally accepted internal control 

standards, with particular attention to comprehensive and timely risk 

assessments and 

• strengthen internal controls throughout the UN system based in part on 

the lessons learned from the Oil for Food program. 

We provided a draft of this report to the Secretary of State, the UN Deputy 

Secretary General, and the UN Compensation Commission for comment. 

We received written responses from State and UNCC (see apps. V and VI 

for the comments and our complete response). State did not agree or 

disagree with our recommendation but commented that, although no 

sanctions regime similar to Oil for Food is in place, tighter internal 

controls would be appropriate for a future program similar to Oil for Food. 

We have modified our recommendation to clarify that the principals of 

oversight and control should apply not just to programs with the unique 

characteristics of Oil for Food. The UN concurred with our 

recommendations and noted that it is taking steps to strengthen internal 

control in the organization. The UN also provided technical comments, 

which we have incorporated into the report as appropriate. 

State commented that our report does not (1) clearly distinguish between 

the responsibilities and actions of the Secretary General and the Security 

Council, (2) overstates the case that diffusion of responsibility for the 

program meant that no single entity was in charge and accountable for the 

Recommendation for 

Executive Action 

Agency Comments 

and Our Evaluation 

Page 36 GAO-06-330 Oil for Food
program, (3) does not highlight the Security Council’s inaction in the face 

of corruption in the sanctions regime, and (4) overstates the importance of 

internal control. 

We disagree. First, our report clearly distinguishes between the 

responsibilities and actions of the Secretary General and the Security 

Council. We note that both had a role in the decision to give Iraq contract 

authority; the Secretary General negotiated the agreement and the Security 

Council approved it. Second, the diffusion of program responsibilities was 

a major structural weakness of the program. Although the Secretary 

General was responsible for program management, the Security Council 

made key decisions about commodity contracts and oil pricing, and nine 

UN agencies administered the program in the North. Third, our report 

highlights inaction by the Security Council by fully discussing, for 

example, its inaction on oil smuggling to neighboring states. Finally, we 

believe that State does not sufficiently emphasize the importance of 

internal controls for a vulnerable program. Internationally accepted

controls require an overall structure of accountability with clear lines of 

authority and a comprehensive risk assessment. Taking these actions 

could have mitigated some of the corruption in the Oil for Food program. 

UNCC commented that we should not include UNCC as part of a report 

that deals with lessons learned from the Oil for Food program. UNCC 

requested that we issue a separate report or distinct chapter on its 

organization with additional information about its organization. We 

included UNCC in this report because it received more than $20 billion in

Iraqi oil revenues under resolution 986; our intent is to report fully on the 

entities entrusted with management of this revenue. We have modified the 

report to further make it clear that UNCC is not part of the Oil for Food 

program and that it is a separate entity funded by Iraqi oil revenues. UNCC 

further commented that it provided OIOS with comprehensive responses 

to audit findings of potential overpayments of compensation but that our 

draft report did not adequately discuss these formal responses. In addition, 

UNCC stated that our discussion of OIOS’s legal authority to audit UNCC 

awards does not adequately describe the position of UNCC or the UN 

General Counsel’s legal opinion. We added information to the report to 

describe UNCC responses to OIOS recommendations and its position 

regarding OIOS’s legal authority to audit its activities. 

We are providing copies of this report to the Secretary of State and 

interested congressional committees. We will also make copies available 

Page 37 GAO-06-330 Oil for Food
to others upon request. In addition, the report will be available on the GAO 

Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-8970 or ChristoffJ@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix VII. 

Joseph A. Christoff, Director 

International Affairs and Trade 

Joseph A. Christoff, Director 

International Affairs and Trade 

Page 38 GAO-06-330 Oil for Food
Congressional Committees: 

The Honorable John Warner 

Chairman 

The Honorable Carl Levin 

Ranking Minority Member 

Committee on Armed Services 

United States Senate 

The Honorable Duncan L. Hunter 

Chairman 

The Honorable Ike Skelton 

Ranking Minority Member 

Committee on Armed Services 

House of Representatives 

The Honorable Richard G. Lugar 

Chairman 

The Honorable Joseph R. Biden, Jr. 

Ranking Minority Member 

Committee on Foreign Relations 

United States Senate 

The Honorable Henry J. Hyde 

Chairman 

The Honorable Tom Lantos 

Ranking Minority Member 

Committee on International Relations 

House of Representatives 

The Honorable Susan M. Collins 

Chairwoman

The Honorable Joseph I. Lieberman 

Ranking Minority Member 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Tom Davis 

Chairman 

The Honorable Henry A. Waxman 

Ranking Minority Member 

Committee on Government Reform 

House of Representatives 

Page 39 GAO-06-330 Oil for Food
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To assess aspects of the control environment of the Oil for Food program, 

we collected and analyzed (1) our prior reports and testimonies on the 

Iraq sanctions and Oil for Food program, (2) reports issued by the United 

Nations (UN) Independent Inquiry Committee and the Iraq Survey Group, 

(3) UN Office of the Iraq Program (OIP) documents, (4) relevant Security 

Council resolutions and the memorandum of understanding between the 

UN and the Iraqi government, (5) UN Secretariat reports to the Security

Council, and (6) summaries of meetings of the Security Council’s Iraq 

sanctions committee. We reviewed Security Council reports and 

documents related to oil smuggling to neighboring countries.

To assess the sanctions and Oil for Food Program in relation to the four 

other internal control standards, we collected and analyzed the 

documentation listed above and also reviewed reports of the UN Office of 

Internal Oversight Services (OIOS) and other entities. The UN General 

Assembly created OIOS in 1994 and tasked it with conducting audits, 

investigations, inspections, and evaluations of UN programs and funds. 

The internal audit divisions of OIOS adhere to the Standards for the 

Professional Practice of Internal Auditing in the UN.

1

 In February 2005, we 

catalogued the findings and recommendations of 50 OIOS reports to 

determine common themes related to the management of the Oil for Food 

program and UN Compensation Commission (UNCC) using a protocol to

identify findings for data input. To ensure consistency of data input, a 

database manager reviewed all input, and all input was independently 

validated. At the State Department’s Oil for Food reading room, we 

reviewed more than 600 documents, including cables, reports, and 

memoranda. We asked for copies of these documents; we received about 

250 of them. We also reviewed summaries of internal audits provided by

the UN Development Program. Based on our review of these summaries 

and references to agencies’ internal audits in Independent Inquiry 

Committee reports, we determined that the basic issues raised in these 

reports mirrored many of the findings and recommendations of the OIOS 

reports. 

We also met with officials responsible for implementing and overseeing 

the sanctions and Oil for Food program to discuss the internal controls 

used in the program. These officials included representatives from the 

Departments of Commerce, Defense, Treasury, and State. We traveled to

 1

As promulgated by the Institute of Internal Auditors and adopted by the Representatives of 

Internal Audit Services of the UN Organizations and Multilateral Financial Institutions. 

Page 40 GAO-06-330 Oil for Food
Appendix I: Scope and Methodology 

New York to meet with officials from the U.S. Permanent Mission to the 

UN in New York, OIP, OIOS, the UN Children’s Fund, the UN Development 

Program, and the UN Office for Project Support. We also met with 

representatives from the Independent Inquiry Committee and the Iraq 

Survey Group to discuss their report findings and methodologies. To 

assess both the control environment and the other internal control 

standards, we applied the internal control standards described in GAO’s 

Standards for Internal Control in the Federal Government.2

We used the following methodology to estimate the former Iraqi regime’s 

illicit revenues from oil smuggling, surcharges on oil, and commissions 

from commodity contracts from 1997 through 2002: 

• To estimate the amount of oil the Iraqi regime smuggled, we used Energy 

Information Administration (EIA) estimates of Iraqi oil production and 

subtracted oil sold under the Oil for Food program and domestic 

consumption. The remaining oil was smuggled through Turkey, the 

Persian Gulf, Jordan, and Syria (oil smuggling to Syria began in late 2000). 

• We estimated the amount of oil to each destination based on information 

from and discussions with officials of EIA, Cambridge Energy Research 

Associates, the Middle East Economic Survey, and the private consulting 

firm Petroleum Finance.

• We used the price of oil sold to estimate the proceeds from smuggled oil.

We discounted the price by 9 percent for the difference in quality. We 

discounted this price by 67 percent for smuggling to Jordan and by 33 

percent for smuggling through Turkey, the Persian Gulf, and Syria. 

According to oil industry experts, this is representative of the prices paid

for smuggled oil. 

• To estimate the amount Iraq earned from surcharges on oil, we multiplied 

the barrels of oil sold under the Oil for Food program from 1997 through

2002 by 25 cents per barrel. According to Security Council members, the 

surcharge varied, but Iraq tried to get as much as 50 cents per barrel. 

Industry experts also stated the surcharge varied.

• To estimate the commission from commodities, we multiplied Iraq’s letters 

of credit for commodity purchases by 5 percent for 1997 through 1998 and 

 2

GAO/AIMD-00-21.3.1. We also referred to GAO’s publication, Internal Control 

Management and Evaluation Tool, GAO-01-1008G (Washington, D.C.: August 2001). 

Page 41 GAO-06-330 Oil for Food
Appendix I: Scope and Methodology 

10 percent for 1999 through 2002. According to Security Council members, 

the commission varied from 5 percent to 10 percent. This percentage was 

also confirmed in interviews conducted by U.S. officials with former Iraqi 

regime ministers of oil, finance, and trade and with Sadaam Hussein’s 

presidential advisors. 

We did not obtain source documents and records from the former regime 

about its smuggling, surcharges, and commissions. Our estimate of illicit 

revenues is therefore not a precise accounting number. Areas of 

uncertainty in our estimate include: 

• Our estimate of the revenue from smuggled oil is less than the estimates of 

U.S. intelligence agencies. We used estimates of Iraqi oil production and 

domestic consumption for our calculations. U.S. intelligence agencies used

other methods to estimate smuggling. 

• Our estimate of revenue from oil surcharges is based on a surcharge of 25

cents per barrel from 1997 through 2002. However, the average surcharge 

could be lower. UN Security Council members and oil industry sources do 

not know when the surcharge began or ended or the precise amount of the 

surcharge. One oil industry expert stated that the surcharge was imposed 

at the beginning of the program but that the amount varied. Security 

Council members and the U.S. Treasury Department reported that 

surcharges ranged from 10 cents to 50 cents per barrel. As a test of 

reasonableness, we compared the price paid for oil under the Oil for Food 

program with a proxy oil price for the period 1997 through 2002. We found 

that for the entire period, the price of Iraqi oil was considerably below the 

proxy price. Oil purchasers would have to pay below market price to have 

a margin to pay the surcharge. 

• Our estimate of the commission on commodities could be understated. We 

calculated commissions based on the commodity contracts for the 15 

governorates in central and southern Iraq (known as the “59-percent 

account” because these governorates received this percentage of Oil for 

Food revenues). We excluded contracts for the three northern 

governorates (known as the “13-percent account”). However, the former 

Iraqi regime negotiated the food and medical contracts for the northern 

governorates, and the Defense Contract Audit Agency found that some of 

these contracts were potentially overpriced. The Defense Contract Audit 

Agency also found extra fees of between 10 and 20 percent on some 

contracts. 

To examine the progress and procedures of UNCC, we reviewed its 

publicly available information, including extensive background 

Page 42 GAO-06-330 Oil for Food
Appendix I: Scope and Methodology 

information, a literature review, and copies of all official documentation 

pertaining to Governing Council policy decisions, panel recommendations, 

and disbursement figures. To gather information about UNCC’s 

management of its claims process, we reviewed about 20 OIOS audit 

reports related to the UNCC’s activities and met with attorneys from the 

Department of State regarding the U.S. role in adjudicating and delivery 

claims payments. In July of 2005, we visited the UNCC headquarters in 

Geneva, Switzerland, where we met with UNCC officials and the U.S. 

representative to the Governing Council regarding the procedures for 

administering the claims review and award processes. At that time, we 

obtained and reviewed written information on all steps for the claims 

processes undertaken by the UNCC Secretariat. We also met with OIOS 

auditors that conducted reviews of UNCC’s claims files, award decisions, 

and internal controls for the UNCC Secretariat’s claims procedures. We 

verified the most recent figures related to claims received, awarded, and 

disbursed with officials in Geneva and Washington. We determined that 

UNCC data on claims are sufficiently reliable to report the aggregate 

amount of claims awarded, the claims that UNCC has paid on behalf of 

Iraq, and the claims that Iraq still owes. 

To determine figures relating to Iraq’s ability to pay off remaining 

compensation awards, we developed an analysis built on International 

Monetary Fund (IMF) projections of Iraqi crude oil export revenue, award 

payment, and nominal gross domestic product (GDP), in both dollars and 

Iraqi dinars, for the period 2006 through 2010.3 We converted estimated 

crude oil export revenue and award payments into dollars. We projected

annual crude oil export revenue for the period 2011 through 2025 by 

assuming a constant annual growth rate. For each scenario, we selected a 

constant growth rate such that the annual average growth rate during 2006

through 2025 would be 10, 5, or 1 percent, respectively. We estimated 

annual award payments as 5 percent of annual crude oil export revenue. 

For each scenario, we computed cumulative award payments commencing 

in 2006 until the total exceeded $32.5 billion,4

 the outstanding award 

balance as of January 2006. We noted the year in which this occurred for 

each scenario. 

 3

IMF, Iraq: Request for Stand-By Arrangement, (Washington, D.C.: Dec. 7, 2005). 

4

At the time of our calculations, remaining unpaid awards totaled about $32.5 billion; by 

late January 2006 that amount had been reduced to about $32.2 billion. 

Page 43 GAO-06-330 Oil for Food
Appendix I: Scope and Methodology 

To calculate the ratio of crude oil export revenue to GDP, we projected

annual Iraqi GDP during 2011 through 2025. Using nominal GDP 

projections from the economic consulting firm Global Insight,

5

 we 

computed annual growth rates of nominal dollar GDP for the years 2011 

through 2025. We applied these growth rates to the IMF-projected 2010 

GDP figure and computed annual GDP through 2025. We constructed the 

ratio of crude oil export revenue to GDP for each scenario and calculated 

the average ratio for the period 2006 through 2025. 

We used the IMF report as the basis for our projections of how long it 

might take Iraq to repay the UNCC-awarded compensation because the 

report is the basis for approving the Stand-By Arrangement for Iraq of 

(Special Drawing Rights) SDR 475.4 million (about $685 million), which is 

intended to stabilize Iraq’s economy. Further, the IMF stand-by 

arrangement triggers a further reduction of 30 percent of Iraq’s sovereign 

debt, as agreed to by international creditors. 

 5

Global Insight, International Interim Forecast Analysis, Country Tables-Iraq (Boston,

MA: Jan. 6, 2006). 

Page 44 GAO-06-330 Oil for Food
Appendix II: Oil for Food Program Processes 

Page 45 GAO-06-330 

Appendix II: Oil for Food Program Processes 

This appendix briefly summarizes the extensive and complicated 

processes of the Oil for Food program. Under the program, the UN 

Security Council’s Iraq sanctions committee approved the contracts 

negotiated by Iraq for selling its oil. After oil was shipped, the companies 

deposited the funds into a UN-held account, and the proceeds from this 

account were used to fund humanitarian goods and services for Iraq. The 

Iraqi government negotiated the commodities for the 15 central and 

southern governorates under its control, as well as food and medicine for 

the entire country, including the three autonomous Kurdish governorates 

in northern Iraq. The UN reviewed and approved contracts to ensure that 

no items with potential military use were imported by Iraq with the 

program’s funds. The Iraqi government distributed the goods within the 

central and southern governorates. In northern Iraq, UN agencies 

distributed the food and medicine procured by the Iraqi government and 

contracted goods and services to implement humanitarian assistance 

projects in several sectors. 

Iraq’s state-owned oil marketing company was responsible for negotiating 

contracts with international oil companies to sell Iraqi oil. Once 

negotiated, the oil purchase contracts were reviewed by a panel of 

contracted oil overseers reporting to the Security Council’s Iraq sanctions 

committee. The oil overseers also reviewed Iraq’s pricing proposals and 

advised the sanctions committee on fair pricing. The sanctions committee 

used the advice of the overseers to set the oil price and approve contracts. 

The Secretariat also contracted oil inspectors to monitor and inspect the 

quantity of the oil exported. Once the oil was shipped, the oil purchasers 

directly deposited the proceeds into a UN-monitored escrow account held

at the New York branch of France’s Banque Nationale de Paris (BNP, now 

BNP-Paribas).1

The Iraqi government used the proceeds from its oil sales to purchase 

food, medicines, and infrastructure supplies and equipment. The 

government first submitted a distribution plan to the UN Secretariat for all 

18 governorates and then negotiated contracts directly with suppliers for 

Oil Sales 

Humanitarian Assistance 

to Central and Southern 

Iraq 

 1

In response to auditors’ concerns that too much money was being concentrated at BNP, 

the number of banks receiving Oil for Food deposits was expanded after 2000 to include JP 

Morgan Chase, Deutsche Bank, Banco Bilbao Vizcaya, Credit Agricole Indosuez, Credit 

Suisse, and HypoVereinsbank.

Oil for Food
Appendix II: Oil for Food Program Processes 

goods for central and southern Iraq.2 OIP reviewed contracts submitted by 

suppliers to ensure that the paperwork was complete and submitted it to 

the sanctions committee for approval. Beginning in December 1999,

resolution 1284 abolished Iraq’s export ceiling to purchase civilian goods, 

and the Security Council authorized OIP to approve certain humanitarian 

items without committee approval. 

Before May 2002, all exports to Iraq were forbidden unless the Security

Council specifically permitted them through resolutions or decisions. 

Starting in May 2002, in accordance with Security Council resolution 1409, 

the Security Council introduced a new system under which all goods were 

permitted, except products that could be used to develop weapons of 

mass destruction, conventional weapons, and military-related or dual-use 

goods. These controlled items were specifically listed on what was known

as the goods review list, and only these items were referred to the 

sanctions committee for review. Two UN inspection bodies assigned to 

monitor Iraq’s military and weapons of mass destruction programs—the 

UN Monitoring, Verification, and Inspection Committee and the 

International Atomic Energy Agency—examined commodity contracts to 

see if they contained items on the goods review list. Items that were on the 

goods review list, not entire contracts, were forwarded to the sanctions 

committee for further review and either approval or denial. 

Each member of the Iraq sanctions committee had authority to approve, 

hold, or block any contract; and the United States, as an active member of 

the sanctions committee, conducted a review of each commodity contract. 

U.S. technical experts assessed each item in a contract to determine its 

potential military application and whether the item was appropriate for 

the intended end user. These experts also examined the end user’s track 

record with such commodities. An estimated 60 U.S. government 

personnel within the Departments of State, Defense, Energy, and other 

agencies examined all proposed sales of items that could be used to assist 

the Iraqi military or develop weapons of mass destruction. In addition, the 

Department of the Treasury was responsible for issuing U.S. export 

licenses to Iraq. It compiled the results of the review by U.S. agencies 

under the UN approval process and obtained input from the Department of 

Commerce on whether a contract included any items found on a list of 

 2

In accordance with the 1996 memorandum of understanding, the Iraqi government

purchased food and medicines in bulk, including food and medicine intended for the three

northern Kurdish governorates.

Page 46 GAO-06-330 Oil for Food
Appendix II: Oil for Food Program Processes 

goods prohibited for export to Iraq for reasons of national security or 

nuclear, chemical, and biological weapons proliferation. 

When a contract was approved, the government of Iraq requested a letter 

of credit for the supplier. UN contractors at entry points into Iraq 

authenticated shipments. Following the authentication, OIP authorized the 

bank to pay the supplier from the escrow account. The Iraqi government 

was then responsible for distributing the items in accordance with the 

distribution plan and with its Public Distribution System, a food ration 

basket for all Iraqis. Commodity distribution in Iraq was monitored by 

about 160 UN observers who visited ration centers, marketplaces, 

warehouses, and other installations to ensure that distribution was 

equitable and in accordance with the targeted allocation plans submitted 

by Iraq for each 6-month phase. 

The Oil for Food program in the three semiautonomous governorates in 

northern Iraq was managed separately to ensure that these regions, with a 

majority Kurdish population, received the humanitarian assistance needed. 

Security Council resolution 986 and the 1996 memorandum of 

understanding between Iraq and the UN created a framework under which 

nine UN agencies delivered emergency assistance and humanitarian aid in

these regions. The process for delivering humanitarian assistance varied 

from that in central and southern Iraq. Food and medicines were procured 

in bulk by the central Iraqi government, and UN workers, accompanied by 

UN security guards, monitored the distribution of these items in the 

northern region. Activities of the nine UN agencies included constructing 

or rehabilitating schools, health clinics, power generation facilities, and 

houses. 

Humanitarian Assistance 

to Northern Iraq 

Page 47 GAO-06-330 Oil for Food
Appendix III: E

Illicit Re

for Food Progr

stimates and Ranges of Iraq’s 

venues and Payments during the Oil 

am 

Page 48 GAO-06-330 

Appendix III: Estimates and Ranges of Iraq’s 

Illicit Revenues and Payments during the Oil 

for Food Program 

GAO, the Iraq Survey Group, and the Independent Inquiry Committee each 

estimated the illicit revenues and payments obtained by the Iraq regime 

through its surcharges on oil sales, questionable commissions and 

kickbacks on commodity contracts, and smuggling. In their published 

estimates, the Iraq Survey Group and the Independent Inquiry Committee 

included revenues from smuggling and other trade outside the Oil for Food 

program since 1991, when sanctions were first imposed. We have included 

only their estimates for the years of the Oil for Food program—from 1997 

through about early 2003. our estimates include revenues from 1997 

through the end of 2002. (App. I contains more detail on our 

methodologies for estimating Iraq’s illicit revenues.) 

Table 1: Estimates of Iraq’s Illicit Revenues during the Period of the Oil for Food 

Program, by Source 

U.S. dollars in millions 

Revenue type GAO

Iraq Survey 

Groupa

Independent Inquiry

Committee

Surcharges on oil sales 0.9 0.23 0.23

Commodity purchase kickbacks 3.5 1.5 1.6

Smuggling/trade outside program 5.7 6.8 8.4

Total 10.1 8.53 10.23

Source: For GAO estimates: analysis of data from the oil industry, the Department of Energy, and information from Security Council 

member states. For other estimates: GAO analysis of Iraq Survey Group and Independent Inquiry Committee data. 

a

The Iraq Survey Group was created in 2003 to investigate Iraq’s weapons of mass destruction 

program. It included analysts from the Central Intelligence Agency, Defense Intelligence Agency, the 

Departments of Energy and State, and from allied countries. It reported its findings in an unclassified

report, Comprehensive Report of the Special Advisor to the DCI on Iraq’s WMD (Sept. 30, 2004). 

Table 2: Ranges of Iraq’s Illicit Revenues during the Oil for Food Program 

U.S. dollars in millions 

Revenue type Lowest estimate Highest estimate

Surcharges on oil sales 0.23 0.9

Commodity purchase kickbacks 1.5 3.5

Smuggling/trade outside program 5.7 8.4

Total 7.43 12.8

Source: GAO analysis of estimates developed by GAO, the Iraq Survey Group, and the Independent Inquiry Committee. 

For oil surcharges, we multiplied barrels of oil sold under the Oil for Food 

program for 1997 through 2002 by 25 cents, based on estimates supplied by 

Illicit Surcharges on 

Exported Oil 

Oil for Food
Appendix III: Estimates and Ranges of Iraq’s 

Illicit Revenues and Payments during the Oil 

for Food Program 

Security Council members and oil industry experts. The Iraq Survey Group 

had access to records at Iraq’s State Oil Marketing Organization (SOMO) 

and to U.S. interviews with former Iraqi officials. It based its surcharge 

estimates on the organization’s collections for 2000 through 2002. The 

Independent Inquiry Committee adopted a similar methodology using Iraqi 

records. 

We multiplied letters of credit for purchases by 5 percent for 1997 through 

1998 and by 10 percent for 1999 through 2002. We based this methodology 

on interviews with Security Council members that illicit commissions 

varied from 5 to 10 percent. This information was subsequently confirmed 

by former Iraqi minister and Saddam Hussein’s advisors in interviews 

conducted by U.S. officials. 

The Iraq Survey Group included estimates for the period 2000 through 

early 2003. It developed a formula based on Iraq’s oil earnings, the actual 

amounts spent on imports, lags between earnings and contract signings, 

and an estimated 10-percent kickback. 

The Independent Inquiry Committee’s estimate was based on UN 

accounting records detailing the actual amounts spent on Oil for Food 

contracts, Iraqi records that set forth the regime’s policies on obtaining 

illicit income, Iraqi ministry records with data on the kickbacks levied and 

collected, and banking records confirming and quantifying the deposit of 

kickbacks into collection accounts. 

To determine the amount of oil smuggled, we subtracted the amounts of 

oil sold through the Oil for Food program and domestic consumption from

Iraq’s production for 1997 through 2002 (as determined by the U.S. 

Department of Energy). We estimated illicit proceeds from this oil using 

prices for Iraqi oil under the Oil for Food program and price discounting 

methods. On the basis of discussions with experts, we applied a discount 

rate of between one-third to two-thirds of the Oil for Food price to the 

smuggled shipments, depending on location. 

The Iraq Survey Group separated earnings from ongoing trade agreements 

with neighboring countries from “private sector” oil revenue obtained 

outside either the Oil for Food program or ongoing trade agreements. For 

revenue from trade agreements, the Iraq Survey Group primarily used 

SOMO information on its invoices and collections from under these 

agreements. For “private sector” revenues during the Oil for Food program 

Commodity Purchase 

Kickbacks 

Smuggling and TradeRelated Revenues 

Page 49 GAO-06-330 Oil for Food
Appendix III: Estimates and Ranges of Iraq’s 

Illicit Revenues and Payments during the Oil 

for Food Program 

period, it relied mostly on SOMO actual collections for cash transactions 

and the invoice value for barter trade.

Similar to the Iraq Survey Group, the Independent Inquiry Committee 

broke out trade revenue from neighboring countries separately from other 

oil trade outside the Oil for Food program. Like GAO, the committee 

calculated the volume of oil sold on the basis of Iraq’s production, internal 

consumption, and foreign trade. However, it used SOMO data for these 

calculations and did not apply a discount rate. 

In addition to smuggling and contract surcharges and kickbacks, the 

Senate Permanent Subcommittee on Investigations, Committee on 

Homeland Security and Governmental Affairs, included other categories in 

its estimate of Iraq’s illicit revenues. For example, the Subcommittee 

estimated that Iraq gained $2.1 billion in illicit revenue from substandard 

goods. This scheme involved contracting first-quality goods, although the 

actual goods delivered were of lesser quality. The supplier received a small 

percentage of the difference and the Iraqi government kept the rest. The 

estimate was based on anecdotal information provided by officials of the 

former Iraqi regime, the UN, and the U.S. government. The estimate 

assumed that, from 1997 through 2003, on average, about 5 percent of all 

goods delivered under the Oil for Food program were substandard. 

Other Estimates of Illicit 

Revenue 

Page 50 GAO-06-330 Oil for Food
Appendix IV: U

Cl

NCC Organization and Its 

aims Categories and Amounts 

Page 51 GAO-06-330 

Appendix IV: UNCC Organization and Its 

Claims Categories and Amounts 

This appendix provides more detailed information on the organization of 

UNCC and how claims were decided based on the different categories of 

claims. 

The UN Security Council established UNCC in 1991 to process claims and 

pay compensation for damages and losses resulting from Iraq’s invasion 

and subsequent occupation of Kuwait. Security Council resolution 687 of 

April 3, 1991 established Iraq responsibility for such losses stating that 

“Iraq...is liable under international law for any direct loss, damage, 

including environmental damage and the depletion of natural resources, or 

injury to foreign Governments, nationals and corporations, as a result of 

Iraq’s unlawful invasion and occupation of Kuwait.” On May 20, 1991, the 

Security Council adopted resolution 692, which established UNCC and the 

UN Compensation Fund. With the adoption of Security Council Resolution 

986, UNCC, along with UN-sponsored humanitarian programs in Iraq, 

received funding from the profits from Iraqi oil sales. 

UNCC is a subsidiary organ of the UN Security Council and is comprised 

of three entities—the Governing Council, the panels of Commissioners, 

and the UNCC Secretariat. The Governing Council, whose membership is 

the same as that of the Security Council, is the principal policymaking 

organization within UNCC. The Governing Council approves the award 

decisions recommended by the panels of Commissioners. The threemember panels were responsible for reviewing the claims and making 

recommendations on whether to award claimants and the amounts to be 

awarded. Commissioner panels included experts in the fields of law, 

accounting, insurance, and environmental damage assessment. 

Commissioners were nominated by the UN Secretary General and 

appointed by the UNCC Governing Council on the basis of professional 

qualifications, experience, and geographic representation. The UNCC 

Secretariat organized the claims and provided support to both the 

Governing Council and the Commissioners panels. 

UNCC divided claims into six classes (A through F). Individuals and their

families filed A, B, and C claims—known collectively as the small claims 

categories—for damages and losses up to $100,000. The large claims 

categories—D, E, and F—were filed by individuals petitioning for $100,000 

or more in damages and losses, and from corporations, international 

organizations, and governments. Although the number of small claims was 

much higher, larger claims accounted for about 95 percent of the 

compensation sought. Claimants in the D, E, and F categories petitioned 

UNCC Formation and 

Organization 

UNCC’s Claims Categories 

and Amounts 

Oil for Food
Appendix IV: UNCC Organization and Its 

Claims Categories and Amounts 

for millions—and in some instances billions—of U.S. dollars. Table 3 

summarizes the claims categories and the types of losses and damage 

UNCC compensated. 

Table 3: UNCC Claims Categories 

Claim category Claim description

Small claims categories 

A claims Submitted by individuals forced to leave Iraq or Kuwait because of the Iraqi invasion of Kuwait. 

Individuals and families who intended to file claims in other categories were awarded $2,500 and 

$5,000, respectively. Individuals and families that agreed not to file other claims were entitled to receive

$4,000 and $8,000, respectively. 

B claims Submitted by individuals who suffered serious personal injury by the Iraqi invading force or whose 

spouse, child, or parent died as a result of the invasion and occupation of Kuwait; individuals were

awarded $2,500, and families were awarded up to $10,000. 

C claims Submitted by individuals for damages up to $100,000 for 21 different types of losses, including those 

relating to departure from Kuwait or Iraq; personal injury; mental pain and anguish; loss of personal 

property; loss of bank accounts, stocks, and other securities; loss of income; loss of real property; and 

individual business losses. 

Large claims categories 

D claims Submitted by individuals for damages over $100,000 for 21 different types of losses, including those 

relating to departure from Kuwait or Iraq; personal injury; mental pain and anguish; loss of personal 

property; loss of bank accounts, stocks, and other securities; loss of income; loss of real property; and 

individual business losses. 

E claims Submitted by corporations, other private legal entities, and public sector enterprises for construction or 

other contract losses; losses from the nonpayment for goods or services; losses relating to the 

destruction or seizure of business assets; loss of profits; and oil sector losses. 

F claims Submitted by governments and international organizations for losses incurred in evacuating citizens; 

providing relief to citizens; damage to diplomatic premises; loss and damage to other government 

property; and damage to the environment. 

Source: GAO analysis based on UNCC data.

Claimants for the small categories were awarded $8.43 billion—a little 

more than half of the $15 billion in compensation they requested, while 

large category claimants were awarded about $44 billion, or about 13 

percent of the $338 billion they requested. UNCC set the amount of 

compensation that could be requested and awarded for A and B category

claimants.1

 (See fig. 4). 

 1

At its first meeting, the Governing Council classified A, B, and C claims as “urgent claims” 

and required that their review be expedited. In general, expedited procedures meant that

the panels spent less time reviewing individual claims and depended on methods to

effectively process claims en masse. 

Page 52 GAO-06-330 Oil for Food
Appendix IV: UNCC Organization and Its 

Claims Categories and Amounts 

Figure 4: Claims Received and Awarded by Category 

A claims 923,158 $ 3.46 859,176 $ 3.21

B claims 5,734 .02 3,941 .01

C claims 1,736,265 11.50 672,829 5.21

D claims 13,863 16.54 10,348 3.35

E claims1 6,694 84.88 4,105 26.61

F claims

Source: GAO based on UNCC data.

393 236.13 285 14.08

Total 2,686,107 352.52 1,550,684 52.47

Number of 

claims

received

Compensation 

sought

(Dollars in billions)

Number of 

claims

awarded

Compensation 

awarded

(Dollars in billions)

Claim 

category

a

Claims in the E category include totals for export guarantee and insurance claims submitted to 

UNCC, which were designated as an E/F subcategory. There were 123 E/F claims, seeking $6.1 

billion in compensation, of which 57 were award $311 million in compensation. 

By late January 2006, the UNCC had paid about $20.3 billion in

compensation, mostly to individuals and families, leaving about $32.2 

billion in outstanding unpaid awards. Almost all of the amount yet to be 

paid is for claims in the E and F categories; i.e., claims submitted by 

corporations and governments. UNCC officials noted that the small 

outstanding amounts currently in the A and C categories are for 

individuals who have not been located and therefore were unable to 

receive awards. Category B claims have been paid entirely. 

Page 53 GAO-06-330 Oil for Food
Appendix V: Comments from the Department Appendix V of State : Comments from the Department 

of State 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

Page 54 GAO-06-330 Oil for Food
Appendix V: Comments from the Department 

of State 

See comment 1. 

Page 55 GAO-06-330 Oil for Food
Appendix V: Comments from the Department 

of State 

See comment 2. 

See comment 3. 

See comment 4. 

See comment 5. 

Page 56 GAO-06-330 Oil for Food
Appendix V: Comments from the Department 

of State 

See comment 6. 

See comment 7. 

See comment 8. 

See comment 9. 

Page 57 GAO-06-330 Oil for Food
Appendix V: Comments from the Department 

of State 

Page 58 GAO-06-330 Oil for Food
Appendix V: Comments from the Department 

of State 

The following are GAO’s comments on the Department of State’s letter 

dated March 16, 2006. 

1. We disagree with State’s assertion that the report does not clearly 

distinguish between the responsibilities and actions of the 

Secretary General and the Security Council. For actions attributed 

to both the Security Council and the Secretariat, our report 

collectively refers to the UN. For actions taken by one or the other 

entity, we clearly denote whether it is the Security Council or the 

Secretariat. State commented that the member states of the 

Security Council were responsible for the decisions that allowed 

Iraq to manipulate the program and circumvent sanctions, not the 

Secretariat or the “UN.” Although the Security Council was 

responsible for approving the agreement with Iraq, we disagree 

with State’s assertion that the Secretariat did not play a part in the 

agreement. We note that the Secretariat negotiated and the 

Secretary General signed the May 1996 memorandum of 

understanding between the UN and Iraq, and the Security Council 

approved it. This agreement allowed Iraq to choose its oil buyers 

and commodity suppliers and directly negotiate contract terms. 

Therefore, the UN was collectively responsible for allowing a 

control environment that enabled Iraq to obtain illicit revenues 

through surcharges and kickbacks. 

GAO Comments 

2. We disagree with State’s comment that the report does not 

highlight the Security Council’s inaction in the face of and 

corruption in the sanctions regime. We provide a clear discussion 

on how the Security Council’s lack of action failed to prevent 

smuggling to neighboring states. Our report further notes that

successive U.S. administrations issued annual waivers to Congress 

exempting Turkey and Jordan from unilateral U.S. sanctions for 

violating UN sanctions against Iraq. State commented that 

“smuggling to Jordan and Turkey was conscious and 

understandable,” but noted that other, unspecified tolerance by 

other Security Council members was harder to understand. We do 

not distinguish between “conscious and understandable” smuggling 

and other types—all smuggling violated UN sanctions and allowed 

a corrupt regime to obtain illicit revenues outside the Oil for Food 

program. 

3. We disagree with State’s comment that the report overstates the 

diffusion and lack of clarity regarding the program’s management 

Page 59 GAO-06-330 Oil for Food
Appendix V: Comments from the Department 

of State 

and oversight. While we agree that the Secretariat, through the 

Office of the Iraq Program, was responsible for the day-to-day 

management of the Oil for Food program, the Security Council’s 

Iraq sanctions committee was responsible for key oversight 

functions, including contract and oil pricing reviews and sanctions 

enforcement. As State points out in an earlier comment, the 

Security Council was also responsible for policy decisions that 

affected Iraq’s ability to manipulate the sanctions and Oil for Food 

program to its benefit. Moreover, as figure 3 in our report 

demonstrates, numerous other entities were responsible for 

various management and oversight aspects of the Oil for Food 

program and sanctions enforcement, including border inspectors, 

oil overseers, an interception force, nine UN agencies, and several 

audit offices. The Oil for Food program was large and complex and 

required management and oversight by multiple entities. However, 

the absence of clear leadership and lines of authority were 

significant structural weaknesses in the program. 

4. We reported in our section on information and communication that 

OIP failed to fully report to the Security Council’s sanction 

committee information on contract surcharges, kickbacks, and 

smuggling and that such disclosure may have mitigated some of 

Iraq’s manipulation of the program. State correctly observes that 

the Secretariat should have reported ongoing problems to the 

Security Council. This observation further supports our finding 

that the Secretariat was not the only entity responsible for the Oil 

for Food program and that leadership and accountability were 

diffused. 

5. State emphasized the role of political will in addressing 

noncompliance with sanctions, stating that stronger internal 

controls without political will might not have corrected the Oil for 

Food Programs problems. State further commented that the report 

has little discussion about the global and political dynamics that 

governed international efforts to contain Saddam Hussein. State 

undervalues the importance of an internal control framework.

Among other elements, internationally accepted principles of 

internal control require that responsible entities (1) provide an 

overall structure of accountability including clear lines of authority 

and responsibility; (2) conduct a comprehensive risk assessment, 

including the external context affecting the program; and (3) 

ensure that timely information be provided to decision makers. 

Although these controls might not have identified the oil 

Page 60 GAO-06-330 Oil for Food
Appendix V: Comments from the Department 

of State 

smuggling, they would have identified and made transparent 

specific program vulnerabilities and established clear 

accountability. This would have helped mitigate the kickbacks on 

commodity contracts by establishing accountability for contract 

pricing. However, we have added additional information to the 

report about the political context of the program. 

6. We disagree with State comments that our report merely restates 

OIOS findings about UNCC without making it clear that they are 

OIOS findings. Our report makes clear that the findings about 

UNCC are OIOS and not GAO findings. In response to State’s 

comment that we do not present both OIOS and UNCC sides, we 

have clarified the report to note that UNCC has disputed OIOS 

findings (see comment 7). 

7. State commented that we do not present the views of both OIOS 

and UNCC in the discussion of potential overcompensation due to 

the improper use of the exchange rate date. Our report does not 

discuss or refer to the exchange rate issue. We cite more than $500

million that OIOS refers to as potential overcompensation due to 

calculation errors, insufficient evidence to support losses, and 

duplicate claims. 

8. In response to State’s comment that we do not sufficiently discuss 

the issue of OIOS’s proper scope of audit authority, we have added 

additional information to the report about the legal challenge to 

OIOS’s audit authority and the UN Office of Legal Affair’s opinion. 

9. We have clarified and updated information on the amount of the 

UNCC awards that governments and international organizations 

have either not reported or not paid out. 

Page 61 GAO-06-330 Oil for Food
Appendix VI: Comments from the UN Appendix VI: Comments from the UN Compensation Commission

Compensation Commission 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

See comment 1. 

See comment 1. 

See comment 2. 

Page 62 GAO-06-330 Oil for Food
Appendix VI: Comments from the UN 

Compensation Commission

See comment 3. 

See comment 4. 

Page 63 GAO-06-330 Oil for Food
Appendix VI: Comments from the UN 

Compensation Commission

See comment 4. 

See comment 5. 

See comment 6. 

Page 64 GAO-06-330 Oil for Food
Appendix VI: Comments from the UN 

Compensation Commission

See comment 7. 

See comment 8. 

See comment 9. 

See comment 10. 

Page 65 GAO-06-330 Oil for Food
Appendix VI: Comments from the UN 

Compensation Commission

See comment 11. 

Page 66 GAO-06-330 Oil for Food
Appendix VI: Comments from the UN 

Compensation Commission

The following are GAO’s comments on the UN Compensation 

Commission’s letter dated April 10, 2006. 

1. In response to the UNCC’s concern that we are including UNCC in a 

report on Oil for Food, we have further clarified the report to note that 

UNCC is a separate entity. Our draft report made a clear delineation of 

UNCC and Oil for Food in the structure of the report. We included 

UNCC in the report because, under the terms of UN resolution 986,

Iraq’s oil revenues funded both the humanitarian program and the 

reparations. Because the reparations amounted to 25 to 30 percent of 

Iraq’s oil revenues and about $20 billion, we could not responsibly omit 

this important element of the sanctions in reporting to Congress. 

GAO Comments 

2. In comments on our report, UNCC noted that a separate chapter on its 

activities would facilitate a more expansive description of its 

organization and the claims process. We have added information about 

the organization of UNCC in the body of the report and in appendix IV. 

3. UNCC noted that our draft did not include adequate information about 

its detailed responses to the OIOS audit reports and findings and that 

UNCC disagreed with most OIOS findings. We have added information 

to the body of the report that describes the UNCC responses to OIOS 

audit reports. We note that our report does not analyze either OIOS 

findings or the UNCC responses. 

4. UNCC commented that brief mention is made of UNCC’s challenges to 

OIOS’s audit authority as well as the UNCC position on this matter. 

Furthermore, UNCC stated that the view of the UN Office of Legal 

Affairs was not sufficiently presented. We have provided additional 

explanation and context on the UNCC-OIOS legal relationship and 

have expanded on the UN Office of Legal Affairs opinion. 

5. With regard to our description of the OIOS report identifying $419 

million in potential overcompensation, UNCC noted that we did not 

describe its detailed response to the OIOS report, which disputed the 

findings. We have added information to the report on the UNCC 

response to the OIOS report. 

6. UNCC commented that a large majority of the claimed overpayments 

are based on the date of the currency exchange rate and that the 

correct date should be the date of the loss, consistent with 

international norms. We did not and do not report or comment on this 

issue in our report. 

Page 67 GAO-06-330 Oil for Food
Appendix VI: Comments from the UN 

Compensation Commission

7. We have updated our report to reflect the current amount of unclaimed 

payments. 

8. UNCC commented that it disputed the OIOS assertions that its 

oversight of governments’ unpaid claims was inadequate and that it 

provided oversight of all reports on the distribution of payments and 

refunds. We have added more information from the UNCC June 16,

2005, response to the OIOS audit dated May 27, 2005. 

9. We have updated our report to reflect the current amount of payments 

not supported by audit certificates. 

10. We have updated the information provided by the Department of State 

about the phasing out of UNCC, according to documentation UNCC 

provided to us in April 2006. 

11. We have revised the table, inserting the additional award information 

for category “A” and inserting the words “up to” before $10,000 in 

category “B.” 

Page 68 GAO-06-330 Oil for Food
Appendix VII: 

A

GAO Contacts and Staff 

cknowledgments 

Page 69 GAO-06-330 

Appendix VII: GAO Contacts and Staff 

Acknowledgments 

Joseph A. Christoff, Director (202) 512-8979 

In addition to the individual named above, Mona Nichols Blake, Jeanette

Espinola, Tetsuo Miyabara, and Audrey Solis made key contributions to 

this report. Richard Boudreau, Lynn Cothern, Bonnie Derby, Hynek 

Kalkus, Bruce Kutnick, Don Morrison, Valérie Nowak, George Taylor, 

Ann Ulrich, and Judith Williams provided technical assistance; Etana 

Finkler provided graphics assistance; and Mary Moutsos provided legal 

assistance. 

GAO Contact 

Staff 

Acknowledgments 

Oil for Food
Related GAO Products 

Page 70 GAO-06-330 

Related GAO Products 

United Nations: Preliminary Observations on Internal Oversight and 

Procurement Practices. GAO-06-226T. Washington, D.C.: October 31, 2005. 

United Nations: Sustained Oversight Is Needed for Reforms to Achieve 

Lasting Results. GAO-05-392T. Washington, D.C.: March 2, 2005. 

United Nations: Oil for Food Program Audits. GAO-05-346T. Washington,

D.C.: February 15, 2005. 

United Nations: Observations on the Oil for Food Program and Areas for 

Further Investigation. GAO-04-953T. Washington, D.C.: July 8, 2004. 

United Nations: Observations on the Oil for Food Program and Iraq’s 

Food Security. GAO-04-880T. Washington, D.C.: June 16, 2004. 

United Nations: Observations on the Management and Oversight of the 

Oil for Food Program. GAO-04-730T. Washington, D.C.: April 28, 2004. 

United Nations: Observations on the Oil for Food Program. GAO-04-

651T. Washington, D.C.: April 7, 2004. 

Recovering Iraq’s Assets: Preliminary Observations on U.S. Efforts and 

Challenges. GAO-04-579T. Washington, D.C.: March 18, 2004.

Weapons of Mass Destruction: U.N. Confronts Significant Challenges in

Implementing Sanctions against Iraq. GAO-02-625. Washington, D.C.: 

May 23, 2002. 

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