WASHINGTON: The Pentagon cannot properly account for nearly nine billion dollars in Iraqi oil revenues and other funds received for reconstruction programs after the 2003 US invasion, a US audit found Tuesday.

"The breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss," the Special Inspector General for Iraq Reconstruction said in a report.

The Pentagon received 9.1 billion dollars in 2004 from the fund set up by the US-led occupation authority to benefit Iraqis with Iraqi oil and gas revenues and assets seized from the ousted regime of Saddam Hussein.

But the audit found the Pentagon cannot properly account for 8.7 billion dollars because defense agencies that received the money failed to set up required Treasury accounts and no single organization was created to manage the funds.

The audit found that "weaknesses" in the Department of Defense (DOD) financial and management controls meant it could not account properly for the funds.

"This situation occurred because most DoD organizations receiving DFI (Development Fund for Iraq) funds did not establish the required Department of the Treasury accounts and no DoD organization was designated as the executive agent for managing the use of DFI funds," the report explained.

Separately "our selective review shows the records were not always complete. For example, (the Pentagon) could not provide documentation to substantiate how it spent 2.6 billion dollars," the report added.

The US Army Corps of Engineering and the US Central Command disputed the finding, the report said.

The Central Command said documents that could account for the missing money were "likely" deposited at a US base but retrieving it "would require significant archival retrieval efforts."

The Army Corps of Engineering said it had provided auditors with two billion dollars of the funds.

However, the Office of the Special Inspector General for Iraq Reconstruction recommended that Defense Secretary Robert Gates should specify procedures for future accounting all non-government funds made available for such operations.

BDST: 1003 HRS, July 28, 2010