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November 6, 2006
The International Advisory and Monitoring Board (IAMB) on the Development Fund for Iraq (DFI) met in Paris on October 30-31, 2006 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 continued to oversee audits of the DFI in line with its mandate under UN Security Council Resolution 1637. The IAMB (i) received and discussed the follow-up special audit reports of the single sourced contracts using DFI resources; (ii) discussed the results of the external auditor’s review of the interim DFI financial statement; and (iii) considered the progress in establishing an Iraqi oversight body to succeed the IAMB.
"Each of the external audit firms, Crowe Chizek and KPMG, reported on the findings of the follow-up special audits of sole sourced contracts. The IAMB had previously announced its concern about the use of non‑competitive contracting using DFI resources. The special audits were undertaken at the request of the IAMB and commissioned by the U.S. Government. The purpose of these audits were to (i) review the settlement between Kellogg, Brown and Root (KBR) and the U.S. Government, and (ii) further review the other sole-sourced contracts using DFI resources. These special audits have now been completed, and final audit reports for both audits are available on the IAMB website (www.iamb.info).
"Crowe Chizek reported that in their opinion the settlements between KBR and the U.S. Army Corps of Engineers were reasonable. Their audit reviewed the findings of earlier audit reports by the Defense Contract Audit Agency (DCAA) and found that the conclusions reached by DCAA were supported by the underlying accounting and auditing records. The findings also provide additional information about the transportation costs incurred by KBR in providing humanitarian fuel supplies to Iraq in the period May 2003 to March 2004. These costs were very high, in some cases as much as 86 percent of the total contract costs. The IAMB continues to question the reasonableness of these costs and the adequacy of the administration of contracts.
"KPMG briefed the IAMB on the results of the follow-up audit of the other sole-sourced contracts. KPMG noted a total of $22.4 million in unresolved amounts relating to (i) no evidence of goods received, (ii) unreconciled payments, and (iii) a lack of corrective action on some previously reported exceptions.
"In view of these findings the IAMB recommends that the Iraqi Government seek resolution with the U.S. Government concerning the use of resources of the DFI which might be in contradiction with the UN Security Council Resolution 1483.
"The IAMB had earlier agreed that the 2006 audit of the DFI should cover the period January 1 to December 31, 2006 with an interim audit for the period from January 1, 2006 to June 30, 2006. The IAMB was presented with the draft interim financial statement reviewed by Ernst & Young together with updated observations covering Iraq's oil export sales and the DFI operations for the period from January 1, 2006 to June 30, 2006. A summary of the results of the Ernst & Young interim review is available on the IAMB website (www.iamb.info). While Ernst & Young’s review noted progress in the financial control system, the review continues to be critical of the financial and accounting control systems. The overall control system needs to be further improved to be sufficiently effective.
"The IAMB received useful briefings from the Representative of Iraq and the President of the Iraqi Board of Supreme Audit (BSA) on progress in implementing earlier IAMB recommendations. The IAMB welcomed the action the Government of Iraq is taking on the implementation of the IAMB recommendations, and continued to reiterate its concern that key actions, especially the installation of an oil metering system, needed to be comprehensive and were taking a long time to implement.
"The IAMB mandate expires on December 31, 2006 under United Nations Security Council Resolution 1637. The Representative of Iraq informed the IAMB that the Iraqi Council of Ministers at its meeting on October 19, 2006 approved the establishment of an Iraqi oversight body, hereinafter referred to as the Committee of Financial Experts, to be chaired by the President of the BSA. The IAMB welcomes the establishment of the Committee of Financial Experts to continue the work of the IAMB upon its dissolution and encourages the continuation of independent oversight. Transparency in the collection, recording, investing and spending of oil revenues is of paramount importance in providing assurance that Iraqi oil resources are properly managed and spent.
"The final meeting of the IAMB is tentatively scheduled for December 11-12."