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October 25, 2010
The International Advisory and Monitoring Board (IAMB) of the Development Fund for Iraq (DFI) met in Amman on October 14 and 15, 2010 and issued the following statement:
“The IAMB met to continue its oversight role over the use of resources of the DFI, which is the principal repository for Iraq's oil-export receipts, and oversee audits of the DFI in line with its mandate under UN Security Council Resolutions.
“The IAMB was briefed by KPMG on the final 2009 audit reports. The 2009 audit was finalized well behind schedule due to delays in fieldwork, including as a result of explosions damaging a number of ministries. The final reports and management letters are available on the IAMB website (www.iamb.info).
“In accordance with the IAMB Terms of Reference, the IAMB had earlier approved the process and concurred with the recommendation of the Government of Iraq to appoint PricewaterhouseCoopers (PwC) to conduct the 2010 audits of the DFI. The interim review, for the period from January 1, 2010 to June 30, 2010, has taken place under the oversight of the IAMB, while the finalization of the 2010 audits of the DFI is expected to be undertaken under the oversight of the Committee of Financial Experts (COFE) in 2011.
“The IAMB reviewed a draft interim Statement of Cash Receipts and Payments for the DFI, and was briefed by PwC on the results of their work for the period from January 1, 2010 to June 30, 2010. A summary of the results of the PwC interim review is available on the IAMB website. At the request of the IAMB, the scope of work for the 2010 interim audit had been expanded to include a review of the installation of oil metering. PwC reported the installation of 75 percent of the total oil meters targeted to have been installed under the ministry of oil plan by end-June 2010. The report also notes that installed meters are not all being utilized as intended. PwC identified further steps required to fully implement the ministry of oil's schedule through the end of 2011. In particular, PwC recommends the appointment of a technically qualified independent party to verify the implementation plan as to its completeness, effectiveness, and efficiency when it is fully implemented based on the best practices of the petroleum industry. The IAMB notes with concern that the implementation of the plan is already behind schedule and encourages the Government of Iraq to make every effort to implement the metering plan on schedule and address the further steps recommended by PwC.
“United Nations Security Council Resolution 1905 (2009) recognized the need during 2010 to transition to successor arrangements for the DFI and requested the UN Secretary General and the Government of Iraq through the head of the Committee of Financial Experts to report quarterly on progress. The second briefing to the UN Security Council took place on July 12, 2010 and the related report has been posted on the IAMB website (www.iamb.info) and the COFE website (www.cofe-iq.net). The Iraqi representatives briefed the IAMB on the progress in achieving the action plan to implement successor arrangements during 2010. The IAMB welcomes progress in the implementation of the plan.
“The IAMB was also briefed on the reporting to the UN Security Council by the UN Secretary General in line with paragraph 3 of UNSCR 1905. The Representative of the UN Secretary General presented the second quarterly report to the UN Security Council on July 12, 2010, which included details on progress in strengthening financial and administrative oversight of the current DFI, the establishment of a ministerial committee to review all outstanding letters of credit under the oil for food program, and an assessment of the Government of Iraq's progress in preparing for the successor arrangements for the DFI and the dissolution of the IAMB by December 31, 2010. The UN Secretary General's report has been posted on the IAMB website. The third quarterly briefings of the UN Security Council by the UN Secretary General and COFE are scheduled to take place in November 2010.”
"The IAMB was briefed by COFE on further actions taken to enhance the transparency and accountability of the DFI, taking into account the earlier external audit findings. The COFE briefing of this meeting is published on the IAMB and COFE websites. COFE continues to meet monthly, and, in conjunction with the Board of Supreme Audit, performs much of the detailed follow-up and investigation of recommendations contained in the IAMB commissioned independent audit reports. COFE continues to report to the IAMB every two months on progress on a range of matters and these reports are posted on the IAMB website. The IAMB encouraged COFE to follow-up with the ministry of finance to recommence provision of monthly summaries of DFI inflows and outflows."
"Staff from the Special Inspector General for Iraq Reconstruction (SIGIR) briefed the IAMB on recent reports of relevance to the DFI. The July 2010 SIGIR audit report on the US Department of Defense's (DoD) accounting for DFI funds concluded that weaknesses in DoD financial and management controls left it unable to properly account for $8.7 billion of the $9.1 billion in DFI funds it received for reconstruction activities in Iraq. The DoD is uncertain about the amount of DFI funding made available to it or the amount of DFI funding its organizations may be holding. SIGIR concluded that the breakdown in controls left the funds vulnerable to inappropriate uses and undetected loss. SIGIR also concluded that the DoD has not issued guidance on the use and disposition of remaining DFI funds, and until it does, these funds are at risk of being expended. The IAMB noted that SIGIR's findings echoed those of the IAMB in 2004-2006 and agreed on the urgent need to expeditiously implement the recommendations of SIGIR, especially the return of unexpended DFI funds held by DoD agencies. The IAMB welcomed DoD's recent letter to COFE stating that the DOD would share its findings with the IAMB and COFE once the DoD has completed its initial response to SIGIR's report, which is expected within two months. The IAMB would then consider if further action was warranted with respect to SIGIR's report."
"The IAMB discussed arrangements for a final report on the operations of the IAMB since its establishment in 2003. The final meeting of the IAMB, together with COFE, is scheduled for January 2011, at which time a report will be issued and a press briefing will be held. COFE will also continue to meet separately in the interim."