Normally, the IOC distributes millions of dollars (gathered largely from sponsorship revenue) to the Olympic sport IFs. For most sports, this is a major source of revenue — 62.7% for the AIBA. In this case, the IOC has decided to freeze payments "due to general judging issues that remain unresolved since the Athens Olympics," according to IOC spokesperson Giselle Davies. Although the results from Athens are not in question, "there was a general observation in Athens that things needed to be improved." IOC president Jacques Rogge signed a letter saying the funds will remain frozen until AIBA provides a clear timeline and planned actions.
The IOC Programme Commission report (PDF) had this to say about the judging situation:
Senior AIBA officials have had discussions with the IOC regarding possible changes to the judging system, open scoring and selection of referees and judges. To date (March 2005), the AIBA has not provided any concrete information on the possible changes or when they would be implemented.
Actually, the Programme Commission Report makes it pretty clear (in as neutral a tone as possible) that the AIBA is run by a bunch of idiots, so perhaps this isn't very surprising. Among other highlights:
The AIBA states that it has a four-year strategic planning process in place but there is no indication as to how the plan is prepared, how often and who is consulted.
Summary of the three main development programmes run by the AIBA between 2001 and 2004: No response given.
And here is the AIBA's own press release (PDF) covering one of the IOC-AIBA "discussions" on the judging issue, held in May of 2005:
AIBA strongly hopes that the selection [of referees and judges] for the next Olympics will be definitely better than in the past years.
I'm guessing that the IOC wants them to move beyond a "strong hope" and come up with an actual plan.