Use the free
to view the PDF files
The following members of the IAMB were present:
Arab Fund for Economic and Social Development: Mr. Khalifa Ali Dau, Senior Financial Advisor
International Monetary Fund: Mr. Bert E. Keuppens, Senior Advisor
Government of Iraq (IGI): Adviser, Ministry of Finance
United Nations: Mr. Jean-Pierre Halbwachs, Assistant Secretary-General
World Bank: Mr. Charles McDonough, Director, Accounting Department
Also in attendance were the following:
International Monetary Fund:
Mr. Chris Hemus, Assistant to the Director, Finance Department
Ms. Mary Hoare, Accountant, IMF Finance Department
Mr. Jayantilal Karia, Director, Accounts Division
Mr. Moses Bamuwamye, Finance Officer
Ms. Caroline Harper, Lead Operations Officer
Government of Iraq:
Alternate Member, Chartered Accountant/Auditor
President, Board of Supreme Audit (BSA)
Invitees from the United States Department of Defense
Mr. Joseph Benkert, Deputy Director, Defense Support Office-Iraq
Invitees from the United States Department of State
Mr. Mathew Goshko
Mr. Joshua Voltz
The meeting was opened by the Chair.
- The agenda for the meeting was unanimously adopted in the executive session.
- As part of their oversight responsibilities, the members were briefed on the results of the public financial management review that was conducted jointly by the World Bank and the IMF. The members were informed of areas of concern that included the absence of: controls; reconciliations; and consolidated information systems. Another area of concern was the adequacy and sufficiency of financial information.
External Audit of the DFI
- The IAMB received a briefing by KPMG on the audit covering the period after the dissolution of the Coalition Provisional Authority (CPA) from June 29, 2004 to December 31, 2004. The IAMB reviewed findings to date as contained in the draft reports.
- The IAMB reviewed the draft audit reports by KPMG covering the period after the dissolution of the Coalition Provisional Authority (CPA) from June 29, 2004 to December 31, 2004. These reports supplement earlier reports covering the periods from May 23, 2003 to June 28, 2004. The audits were conducted under the oversight of the IAMB, in line with its mandate under UN Security Council Resolution 1546, and are available on the IAMB website (www.iamb.info). The IAMB agreed not to release these audit reports pending the finalization of agreement of the financial statements as contained in these reports with the records of the DFI, and pending official acceptance by the new Transitional Government of Iraq. The IAMB requested KPMG and the Iraqi representatives to expedite the process.
- The audit reports continue to be critical of the controls in place in the spending ministries, the U.S. agencies in respect of the outstanding commitments using DFI resources, and the Iraqi administration of DFI resources. The main weaknesses include: (i) incomplete DFI accounting records; (ii) untimely recording, reporting, reconciliation and follow-up of spending by Iraqi ministries; (iii) incomplete records maintained by US agencies, including disbursements that were not recorded in the Iraqi budget; (iv) lack of documented justification for limited competition for contracts at the Iraqi ministries; (v) unreconciled quantities of oil and oil products exported indicating a lack of control and possible misappropriation of oil revenues, and significant difficulties in ensuring completeness and accuracy of Iraqi budgets and controls over expenditures; and (vi) non-deposit of proceeds of export sales of petroleum products into the appropriate accounts in contravention of UNSCR 1483.
- The IAMB decided to draw to the attention of the Government of Iraq the weaknesses identified in the audit reports and to invite the Government to act on the audit recommendations to strengthen the financial controls and the administration of the DFI.
- The IAMB also took note of the offer of the Representative of Iraq to explore the modalities to extend the audits to cover the period from January 1 to June 30 2005.
Special Audit of Sole Sourced Contracts
- In a letter dated April 15, 2005, the United States Government had informed the IAMB that KPMG LLP had been selected to undertake the special audit of sole sourced contracts that were funded from the DFI.
- The special audit of sole sourced contracts calls for: (i) identifying all contracts awarded non-competitively by the CPA valued at over $5 million that used DFI funds; (ii) providing a summary of the findings of audits of such contracts that have already been conducted by various U.S. Government audit agencies; and (iii) conducting additional audit procedures on non-competitively awarded contracts that have not been the subject of audit, including whether such contracts were in accordance with the purposes outlined in UN Security Council Resolution 1483.
- The invitee from the United States Department of Defense briefed the IAMB and provided additional clarifications regarding the status of the audit of sole sourced contracts and informed the IAMB that unredacted audit reports on the special audit of sole sourced contracts is scheduled to be provided to the IAMB by end August 2005.
Follow-up on the Recommendations of the Previous DFI Audits
- The member representing the Interim Government of Iraq briefed the IAMB on steps taken by the Interim Government of Iraq to address the concerns that were raised by the IAMB in the light of the findings contained in the two previous audits of the DFI covering the period from May 2003 to June 2004.
- The Iraqi representative stated that steps were being taken to strengthen controls in the Ministry of Oil, including: (i) installation of an integrated computer system, (ii) inspection and certification of imported oil products, (iii) completion of feasibility studies on oil metering, and (iv) the issue of an invitation to tender for a comprehensive oil metering system. Steps have been taken to strengthen controls at spending ministries, including: (i) scheduling the implementation of a comprehensive financial management information system by 2007; (ii)implementing procedures, in coordination with the BSA, over receipts, payments and procurement; (iii) scheduling an audit of all contracts concluded in 2003 and 2004; (iv) appointing inspector generals in all Iraqi ministries; and (v) establishing the Integrity Commission to look into financial irregularities and abuse.
- The IAMB was also briefed on measures taken to control the disbursements from the DFI, including the closure of current accounts at various ministries, and the establishment of a procedure whereby allocated funds will not be transferred to the ministries but disbursements to the ministries will be based on estimated monthly needs.
Briefing by the Iraq Board of Supreme Audit
- The President of the BSA noted the difficult task the BSA was facing. He pointed out that the adoption of the public debt and financial administration law will assist the way funds are administered. He also indicated that the creation of a contract management capacity in each ministry is being considered. Regarding the observation of limited audit scope within SOMO, the BSA is planning to widen its audit coverage at SOMO. With regard to smuggling, the BSA intends to submit a report to the Council of Ministers on the control procedures that could help to address this matter.
Information on the Status of the DFI
- The IAMB reiterated its request for access to information on the DFI on a regular basis.
- The IAMB took note of the report of the Special Inspector General for Iraq Reconstruction (SIGIR), dated January 30, 2005, regarding the oversight of funds provided to Iraqi ministries through the national budget process. The IAMB noted that the findings contained in the report were along the same lines as those identified in the DFI audits carried out by KPMG for the IAMB.
- The IAMB noted that the unredacted Defense Contract Audit Agency (DCAA) audit reports covering sole sourced contracts have been made public. These reports refer to overcharges and questionable amounts billed under the sole sourced contracts of an amount in excess of $200 million. The IAMB notes with regret that these findings had been redacted in earlier DCAA reports submitted to the IAMB. Use of DFI resources that is not for the benefit of the Iraqi people is not consistent with UN Security Council Resolution 1483.
- According to UN Security Council Resolution 1546, the IAMB will cease operation no later than December 31, 2005 or such earlier time as decided by the Government of Iraq. In view of this, arrangements to plan for a smooth transition to an Iraqi oversight authority were discussed.
- The IAMB agreed on a press release.
- The date of the next meeting will be announced on the IAMB website (www.iamb.info).