Agencies agree to pay Iraq unspent oil-for-food costs

? The nine U.N. agencies involved in the oil-for-food program have agreed to pay Iraq about $40 million in oil proceeds they received in 2003 to finish their work but never spent, United Nations officials said Tuesday.

A U.N.-backed probe of the scandal-tainted operation, led by former U.S. Federal Reserve Chairman Paul Volcker, has been investigating the nine agencies and their handling of the money. The cash, which came from Iraqi oil revenue, was a flat fee and there had been no expectation that it would be returned.

Nonetheless, Iraqi officials and Volcker’s team had raised questions about the message that would be sent by keeping it. U.N. controller Warren Sach sent a letter on the issue to the nine agencies and all have agreed to pay back any surplus, U.N. spokeswoman Marie Okabe said.

The money was meant to help the agencies wrap up their work under oil-for-food, the 1996-2003 humanitarian operation that helped ordinary Iraqis cope with U.N. sanctions imposed after Saddam Hussein’s 1990 invasion of Kuwait.

One of the largest humanitarian programs in history, it was a lifeline for 90 percent of the country’s population of 26 million.

After the U.S.-led invasion of Iraq in 2003, the program was given six months to shut down. The U.N. Security Council set aside 1 percent of the value of ongoing projects for the nine U.N. agencies working in northern Iraq to help them finish up.

In a February interim report, Volcker’s team discussed the nine agencies in a positive tone, noting that they had requested less money for their operations than had been available.

Yet the Volcker probe promised to investigate the nine because of an “apparent lack of transparency and oversight” in the way they spent the money allotted to them.

The total amount to be returned was expected to be around $40 million, two officials with the U.N. agencies said. The officials spoke on condition of anonymity because they were not authorized to discuss Volcker’s findings before they are publicly released next week.