NEW YORK, May 23: An internal US audit of some $8 billion paid to US and Iraqi contractors has found that nearly every transaction failed to comply with federal laws or regulations aimed at preventing fraud, in some cases lacking even basic invoices explaining how the money was spent.

Of the money paid during a five-year period — from 2001 through 2006 —$7.8 billion in payments skirted billing rules with some violations egregious enough to invite potential fraud, warned the Defence Department’s inspector general in a report. A similar audit report in 2004 charged that nearly $9 billion of Iraqi oil for food money transferred by the United Nations spent on Iraqi reconstruction was unaccounted for because of inefficiencies and bad management.

The money came from revenues from the UNs’ former oil-for-food programme, oil sales and seized assets — all Iraqi money. The audit did not examine the use of US funds appropriated for reconstruction.