Annex 5
IRAQ: THE DEVELOPMENT FUND FOR IRAQ (DFI) AND THE
INTERNATIONAL ADVISORY AND MONITORING BOARD (IAMB)
a. The Development Fund for Iraq
The Development Fund for Iraq (DFI) was sanctioned
by United Nations Security Council resolution (UNSCR) 1483 (21
May 2003). It holds the proceeds of oil export sales from Iraq,
as well as remaining balances from the UN Oil-for-Food Programme
and other frozen Iraqi funds. Spending from the Development Fund
may only be used to: meet the humanitarian needs of the Iraqi
people; help economic reconstruction and infrastructure repair;
allow for continued disarmament; meet the costs of Iraqi civilian
administration; and promote other purposes benefiting the people
of Iraq.
Until the handover of power to the Interim Iraqi
Government (IIG), the Fund was directed by the Coalition Provisional
Authority (CPA), in consultation with the Iraqi Governing Council,
the Iraqi Minister of Finance, and the Governor of the Central
Bank of Iraq. Since 28 June 2004, resources in the DFI have been
managed and disbursed by the IIG.
b. The International Advisory and Monitoring
Board
The International Advisory and Monitoring Board (IAMB)
was established to ensure the transparency of spending from the
DFI, as required by UNSCR 1483. The IAMB comprises representatives
of the United Nations, the Arab Fund for Economic and Social Development,
the International Monetary Fund, and the World Bank. The principal
role of the IAMB is to help ensure that: the DFI is used in a
transparent manner for the benefit of the people of Iraq; and
that export sales of petroleum, petroleum products, and natural
gas from Iraq are made consistent with prevailing international
market best practices.
The IAMB acts as an audit oversight body for the
DFI. It oversees audits conducted by international accounting
firms of (i) oil export sales, (ii) the accounting for the proceeds
from oil export sales, (iii) the DFI financial statements, and
(iv) the disbursement procedures for DFI resources.
In March 2004 the IAMB approved the Coalition Provisional
Authority's appointment of KPMG to conduct audits in two stages:
first for DFI activities up to the end of December 2003, which
reported on 15 July; and second for the six months to 28 June
2004, which KPMG expects to report before the end of 2004. The
KPMG audit reports are published on the IAMB website (http://www.iamb.info).
Oil export sales and DFI operations
after June 28 2004 will be examined by external auditors to be
appointed by the Iraqi Government. The IAMB will work with the
Iraqi Government to ensure the appointment of appropriately qualified
external auditors.
c. Sole-sourced contracts funded
by the DFI
The IAMB has requested a special audit
to determine the extent of sole-sourced contracts funded by the
DFI. This audit has still to be commissioned, and the IAMB is
frustrated by the US Government's delay in handing over its audit
reports of sole-sourced contracts. The US Government has stated
that, for legal reasons, it cannot release this information without
the permission of the companies involved. We understand the US
Government is working to resolve
the issue.
| 
