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March 24, 2004
The International Advisory and Monitoring Board (IAMB) on Iraq met at the Arab Fund for Economic and Social Development, in Kuwait City on March 17-18, 2004 and issued the following statement:
"The IAMB welcomed Dr. Faik Ali Abdul-Rasool, Deputy Minister of Planning, as representative of Dr. Mehdi Hafedh, Minister of Planning and Development Cooperation and Chairman of the Iraqi Strategic Review Board for the Reconstruction of Iraq. On March 5, 2004 the Board had approved the appointment of three Observers, namely Mr. Dov Zackheim, Under Secretary of Defense (Comptroller), who had been nominated by the Coalition Provisional Authority (CPA), and Dr. Mehdi Hafedh, Minister of Planning and Development Cooperation and Chairman of the Iraqi Strategic Review Board for the Reconstruction of Iraq, and Professor Mahdi Hadi Al-Kafaji, who had been nominated by the Iraqi Governing Council. The IAMB also welcomed representatives from the CPA, and Mr. Ihsan Ghanim and Dr. Ala'a Alani, invitees from the Iraq Board of Supreme Audit.
"Pursuant to Section 3 D. of its Terms of Reference, the IAMB monitors the financial reporting and internal control systems established by the CPA and advises, as appropriate, on the adequacy of such systems. Following a briefing on the financial functions and operations of the Development Fund for Iraq (DFI) by the CPA at the Board's previous meeting, the IAMB had sought clarification on a number of issues of concern to the IAMB, which were further discussed at the current meeting. The IAMB will continue to monitor closely these issues, and will direct the DFI external auditor to pay special attention, as appropriate. Specifically:
The absence of metering for crude oil extraction and sales, which precludes a reconciliation of all crude oil extracted with its eventual utilization. The IAMB recommends the expeditious installation of metering equipment in accordance with standard oil industry practices. As an interim step to strengthen controls over oil extraction and limit possible diversion, the IAMB welcomes steps taken by the CPA to curtail smuggling activities.
The use of barter transactions for certain oil sales. The CPA is investigating possible ways to ensure that the equivalent proceeds from such transactions are placed into the DFI in accordance with UNSCR 1483. The IAMB looks forward to an early resolution of this issue.
The use of non-competitive bidding procedures for some contracts funded from the DFI. The IAMB acknowledges that special circumstances may have warranted sole-sourced contracts and welcomes steps taken by the CPA to limit future such contracts to exceptional circumstances. The IAMB is considering further steps, such as the conduct of a special audit of sole-sourced contracts.
"In accordance with Section 3 A. of the Terms of Reference, the nomination and appointment by the CPA Administrator of the DFI external auditor is subject to approval by the IAMB. The CPA briefed the IAMB on the evaluation process for the solicitations received from external audit firms. Following receipt of additional information, the IAMB, on March 24, 2004, approved the CPA's nomination for the external auditor.
"The IAMB considered that, in view of current plans for the handover of power to an interim Iraqi administration, it was appropriate to review ways in which the functions of the IAMB could be transferred to an Iraqi entity at a suitable time. In this context, the IAMB welcomed the opportunity to exchange views with representatives of the Iraq Board of Supreme Audit and will seek ways to more actively involve the Board of Supreme Audit in discharging the IAMB's functions.
"The place and date of the next meeting will be announced on the IAMB website (www.iamb.info)."