A Christian charity has accused the coalition authority in Iraq of failing to account for up to $20bn (nearly £11bn) of oil revenues which should have been spent on relief and reconstruction projects.

At the same time, the Liberal Democrats are demanding an investigation into the way the US-led administration in Baghdad has handled Iraq's oil revenues. The coalition is obliged to pay all oil revenues into the Development Fund for Iraq, but according to Liberal Democrat figures, the fund could be short by as much as $3.7bn.

Sir Menzies Campbell, Lib Dem foreign affairs spokesman, said yesterday: "This apparent discrepancy requires full investigation".

Christian Aid, in a report today, claims that the US-controlled Coalition Provisional Authority, which hands over power to an interim administration in Iraq this week, is in flagrant breach of the UN security council resolution which gave it control of the country's oil revenues.

Resolution 1483, passed in May 2003, stated that the money should be spent in the interests of the Iraqi people and independently audited, but an auditor was appointed only in April.

The charity quoted an unnamed UN diplomat as saying: "We only have the total amounts and movements in and out of the development fund. We have absolutely no knowledge of what purposes they are for and if these are consistent with the security council resolution."

Last October, Christian Aid revealed that $4bn of oil revenues were unaccounted for, but although procedures have been tightened up, the charity said, "we still do not know exactly how Iraq's money has been earned, which companies have won the contracts that it has been spent on, or whether this spending was in the interests of the Iraqi people."

According to the coalition's latest figures, the development fund has received $10.7bn. Yet it also admits that $12.5bn has been generated since June 2003.

When 5% is taken away to pay for Kuwaiti compensation, $1.2bn is still missing, say the Liberal Democrats.

Their own research, published today, also suggests that $12.5bn is anyway toward the low end of estimated revenue from oil sales.

The British government told Sir Menzies earlier this year that "information on the amount paid for Iraqi oil is not publicly available" to protect commercial confidentiality.

Christian Aid says billions of dollars are now being hastily allocated to projects which have not been properly planned and fears the authority will be wound up this week without ever having to account for the expenditure.

© Guardian Newspapers Limited 2004

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