OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

S1G - -012

MARCH 13~ 2008
SPECIAL INSPEC T O R GENE RAL FO R IRA Q R E C O N S T R U C T I O N

March 13,2008

MEMORANDUM FOR COMMANDER, JOINT AREA SUPPORT GROUP - CENTRAL

COMMANDER, JOINT CONTRACTING COMMANDIRAQ/AFG HANISTAN

SUBJECT: Attestation to Development Fund for Iraq Cash in the Possession ofthe Joint Area

Support Group-Central (SIGIR 08-012)

This attestation discusses the accountability of Development Fund for Iraq (OFI) cash controlled

by the Joint Area Support Group - Central (JASG-C) Comptroller/DFI Account Manager, and

stored in the basement vault, U.S. Embassy Annex, Baghdad, Iraq. The Special Inspector

General for Iraq Reconstruction conducted this attestation at the request of the Commander, Joint

Contracting Command - Iraq/Afghanistan. This attestation was conducted as SIGIR project

8010.

This report does not contain recommendations; therefore no written response to the report is

required. We appreciate the courtesies extended to the staff. For additional information on this

report, please contact Mr. Walt Keays at (703) 343-7926, or by emai l at

walt.keays@iraq.centcom.mil; or Mr. Ronald Rembold at (703) 343-9254, or by email at

ronald.rembold@iraq.centcom.mil.

~~Inspector General

400 Army Navy Drive · Arlington, Virginia 22202
Table of Contents

Executive Summary

Introduction I

Background I

Objectives 2

Findings 3

Cash on hand Agrees with Accounting Records 3

JASG-C Complied with Applicable Financial-Management Regulations 5

Appendices

A. Scope and Methodology 6

B. Acronyms 7

C. Memorandum of Agreement 8

D. Audit Team Members 10

400 Army Navy Drive · Arlington, Virginia 22202
Attestation to Development Fund for Iraq Cash in the

Possession of the Joint Area Support Group-Central

SIGIR-08-012

Executive Summary

Introduction

March 13, 2008

In December 2007, the Special Inspector General for Iraq Reconstruction (SIGIR) was asked

to attest to the amount of Development Fund for Iraq (OF!) cash controlled by the Joint Area

Support Group - Central (JASG-C) Comptroller/DFI Account Manager, and stored in the

basement vault ofthe U.S. Embassy Annex , in Baghdad, and to ensure that the cash on hand

agreed with government accounting records. SIGIR was also asked to attest to the transfer of

the cash to the Government of Iraq. However, the JASG -C has not finalized procedures for

such a transfer. Therefore, this report provides only an attestation to the amount of cash-onhand relative to the accounting records.

During the Coalition Provisional Authority's (CPA) administration of Iraq, the authority' s

Comptroller managed OFI funds. When the CPA was dissolved in June 2004, the

Comptroller was realigned as the U.S. Army Joint Area Support Group -Central (JASG-C)

Comptroller, and assumed responsibility for DFI cash control. The Iraqi Minister of Financ e

granted OF! administrative and delegation authority to the Joint Contracting Command -

Iraq/Afghanistan (JCC-I1A).l On December 31,2007, JCC-I1A's stewardship of the DFI

program ended.

Objectives

The objectives ofthis attestation were to conduct a physical count of DFI funds in the

possession ofJASG-C to determine whether the cash on hand agreed with JASG-C

accounting records, and whether procedures used to store funds complied with applicable

financial-management regulations.

Results

SIGIR conducted two cash counts on January 11 and February 26, 2008, and each count

showed that the amount of cash in the vault matched the OFI entry in the JASG-C accounting

records. Two counts were made because the expected transfer ofthe funds to the

Government of Iraq did not occur. Our review also showed that JASG-C complied with

J The DFI administrative and delegations responsibilities currently assigned to the Joint Contract Command -

Iraq/Afghanistan were previously assigned to the Program Managem ent Office.
applicable regulations in maintaining accountability for the funds pending transfer. SIGIR's

attestation to actual amounts is necessarily limited to the time the attestation occurred.

SIGIR conducted the February 26 count ofthe cash stored in the embassy vault in

accordance with the terms of a Memorandum of Agreement between SIGIR and JASG-C

(see appendix C). The auditors identified the sum of$24,455,189.40 in U.S. currency in the

vault.

11
Introduction

Background

In Decemb er 2007, the Special Inspector General for Iraq Reconstruction was asked to attest

to the amount of Development Fund for Iraq (DFI) cash controlled by the Joint Area Support

Group-Central (JASG-C) Comptroller/DFI Account Manager, and stored in the basement

vault ofthe U.S. Embassy Annex in Baghdad, and to ensure that the cash on hand agreed

with government accounting records. SIGIR was also asked to attest to the transfer of the

cash to the Government of Iraq. However, the JASG-C has not finalized transfer procedures.

Therefore, this report provides only an attestation on the amount of cash on hand relative to

the accounting records.

United Nations Security Council Resolution 1483, passed in 2003 , assigned responsibility for

managing the DFI to the Coalition Provisional Authority (CPA) . Resolution 1483 noted that

DFI funds should be disbursed at the direction ofthe CPA, in consultation with the Iraqi

interim administration. In addition, it required that the DFI funds be used in a transparent

manner for the following purposes in Iraq: to meet the humanitarian needs ofthe people; for

economic reconstruction and repair of infrastructure ; for continued disarmament; for the

costs of civilian administration; and for other purposes benefiting the people of Iraq. The

DFI was the primary financial vehicle to channel revenue from ongoing Iraqi oil sales,

unencumbered Oil for Food deposits, and repatriated national assets to the relief and

reconstruction efforts for Iraq.

CPA Regulation Number 2, "Development Fund for Iraq," issued in June 2003 , described the

responsibilities for the admin istration, use, accounting, and auditing ofthe DF!. The

regulation was intended to ensure that the fund was managed in a transparent manner for and

on behalf of the Iraqi people, consistent with Resolution 1483, and that all DFI disbursements

would be for purposes benefiting them.

During the CPA administration of Iraq, the CPA Comptroller managed the DFI funds. When

the CPA was dissolved in June 2004, the CPA Comptroller was realigned as the U.S. Army

Joint Area Support Group-Central (JASG-C) Comptroller, and assumed responsibility for

control of the DF!. The Iraqi Minister of Finance, through a number of memorandums,

granted DFI administrative and delegation authority to the Joint Contracting Command -

Iraq/Afghani stan(JCC-I/A) ? On December 31,2007, JCC-VA 's stewardship ofthe DFI

program ended.

Department of Defense Financial Management Regulation (FMR) Volume 5, governs all

DoD disbursing policy by establishing and enforcing requirements, principles, standards,

responsibilities, procedures, practices, and liability for disbursing officers, certifying officers

and other accountable officials throughout the department. Chapter 3 of Volume 5 governs

cash operations, safeguarding funds and related documents, and advancing funds to agents.

2 The DFI administrative and delegations responsibilities currently assigned to the Joint Contract Command -

IraqiAfgh anistan were previously assigned to the Program Management Office.
Objectives

The objectives ofthis attestation were to conduct a physical count of OFI funds in the

possession ofJASG-C to determine whether the cash on hand agreed with JASG-C

accounting records, and whether procedures used to store funds complied with appl icable

financial-management regulations.

For a discussion of the scope and methodology, and a summary of prior audit coverage, see

Appendix A. For definitions ofthe acronyms used in this report, see Appendix B. For the

Memorandum of Agreement between JASG-C and SIGIR on the actual work performed, see

Appendix C. For a list ofthe audit team members, see Appendix O.

2
Cash on Hand Agrees with Accounting Records

On February 26, 2008, at approximately 1400 hours, we conducted a cash count ofthe DFI

funds in the JASG-C Comptroller's vault.' Prior to the count, SIGIR and JASG-C signed a

Memorandum of Agreement regarding the services to be performed. A copy ofthe

agreement is in Appendix C ofthis report. SIGIR was given immediate access to the vault

and the entire count was observed by the Deputy Disbursing Officer. The cash in the vault

was stored in four ways:

• In Canvas Bags - Each ofthe bags which bear the markings ofthe Federal Reserve

Bank ofNew York contains 20,000 bills ofa single denomination ($1 's, $5's, or

$10 's). The bags were sealed by the Federal Reserve Bank with a lead seal and a tag,

indicating their origin.

• Large Bricks - Some funds were in blue-plastic wrapped bricks (referred to as

"plastic bags") from the Federal Reserve Bank. Each large brick contains 16 small

ones, and each ofthese holds 1,000 same denomination bills ($1 's or $100's) for a

total of 16,000 per large brick. Both sizes of bricks were packaged and sealed by the

bank, with the smaller bricks in a tamper-proof plastic bag .

• Small Bricks - The 16 smaller bricks, found in each large one , each contain 1,000

bills of one denomination ($1 's, $5's, $10's, $50's, or $100's). The Federal Reserve

has sealed these smaller bricks in a small, tamper-proof plastic bag.

• Loose Cash - Some ofthe funds consisted of loose, unwrapped cash and coins, as

well as small bricks of bills that are not sealed in plastic bags.

JASG-C and SIGIR agreed to conduct the count by mutually examining-for signs of

pilferage-the can vas bags, large bricks, and small bricks received from the Federal Reserve.

If either party believed the packages showed such signs, the package was opened and

counted. JASG-C and SIGIR both concluded that breaking the seals on bags without signs of

pilferage would complicate future cash counts, so those bags were accepted as containing the

proper amount of funds. All remaining funds were counted three times using an electric bill

counter to ensure accuracy; if any ofthe three totals did not agree, the funds were counted by

hand. Coins, too , were counted by hand.

3 SIGIR made similar cash count on January 1I, 2008 , in anticipation of an imminent transfer ofthe funds to the

Government of Iraq. Because that transfer did not occur as quickly as expected a second count was requested.

3
The result of SIGIR's cash count is shown in the following table:

Table-Results of Cash Count of OFI Funds on February 26, 2008 (in U.S.

Currency)

Currency

Loose Coin

TOTAL as of

February 26, 2008

Denomination Quantity Amount

Hundreds 209,298 bills @$100.00 $20,929,800.00

Fifties 9,021 bills @ $50.00 $451,050.00

Twenties 5,020 bills @ $20.00 $100,400.00

Tens 44,046 bills @ $10.00 $440,460.00

Fives 303,061 bills @ $5.00 $1,515,305.00

Ones 1,018,171 bills @ $1.00 $1,018,171.00

Coins $3.40

$24,455,189.40

Sour ce: SIGIR

Canvas bags containing 20,000 bills

Small bricks contain 1,000 bills

Large bricks containing 16,000 bilIs

Loose cash

4
As previously noted , SIGIR initially conducted a cash count ofthe DFI funds on January 11 ,

2008, in anticipation that the funds would be moved within a week. When that did not occur,

the second count was made. No transactions were identified in JASG -C's accounting records

between our January 11 and February 26 counts, so both cash counts arrived at the same total

cash on hand.

To ensure that the cash on hand agreed with JASG-C accounting records, SIGIR reconciled

the accounting records to the receiving and collection documents for the previous 12 months

and found that they were in agreement. SIGIR then compared the cash count results to the

JASG-C records and found them in agreement.

JASG-C Complied with Applicable Financial-Management

Regulations

SIGIR found that the JASG-C Comptroller's office follows the guidance in 000 Financial

Management Regulation (FMR) Volume 5, Chapter 3, in regards to cash controls. The

Comptroller's office maintains accounting records to track the DFI cash totals. SIGIR

reviewed the records and verified all receipts and disbursements for the previous 12 months,

and concluded that the records supported the cash on hand. In April 2006 , SIGIR also

conducted a cash count of DFI cash in the possession ofJASG-C and examined the records

and similarly found that the records supported the cash on hand .

Cash counts on a quarterly basis are required by FMR, Volume 5, Chapter 3. SIGIR also

examined the results of an independent, unannounced cash count conducted by JASG-C and

found that it agreed with SIGIR's own cash count. On December 23,2007, the JASG-C

Commander appointed two of his officers to perform an independent, unannounced cash

count. The total ofthat count was compared to the one in JASG-C accounting records, and

the two totals reconciled.

5
Appendix A-Scope and Methodology

To determine the amount ofDFI cash in the possession ofJASG-C, we conducted a cash

count ofthe funds stored in the basement vault ofthe U.S. Embassy Annex in Baghdad. The

count was made by our auditors, witnessed by the JASG-C Deputy Disbursing Officer, and

done in accordance with the terms of a February 26, 2008 Memorandum of Agreement

between SIGIR and JASG-C (see Appendix C). SIGIR had also conducted a cash count of

the DFI funds on January I I, 2008, in anticipation that the funds would be moved within a

week. No transactions occurred between our January and February counts, and both counts

found the same total cash on hand .

To determine whether storage ofthe funds complied with applicable financial management

regulations, we reviewed the Department of Defense's Financial Management Regulation

(FMR), Volume 5, which establishes the criteria for funds storage, and then performed the

checks needed to ensure compliance. To determine ifthe cash stored in the vault reconciled

with the JASG-C Comptroller's records, we reviewed the Comptroller's DFI Excel

Spreadsheet, which summarizes all DFI transactions from 2004 to the present. The last

transaction shown on the spread sheet is a turn-in of cash, which occurred in April 2007. We

ensured that all receipts and disbursements were supported with appropriate documentation.

We also examined documents supporting the JASG-C Comptroller's most-recent quarterly

cash count, made on December 23,2007. (Those cash counts are required by the FMR) .

Finally, we reviewed the Statement of Agent Officer's Account, DD Form 1081 to determine

the adequacy ofthe funds accountability provided by the JASG-C Comptroller/Disbursing

Officer.

We conducted this attestation from January 2008 through March 2008 with the latest cash

count performed on February 26, 2008. All work was performed at the JASG-C

Comptroller's Office and in the vault, located in the U.S. Embassy Annex, Old Republican

Palace, in Baghdad. This attestation was conducted in accordance with generally accepted

government auditing standards.

Use of Computer-Processed Data. We did not use computer-processed data to perform this

audit.

Prior Coverage. We reviewed the following reports.

SIGIR

SIGIR 06-008, Development Fund/or Iraq Cash Accountability Review:

Joint Area Support Group-Central, Apr. 28, 2006.

SIGIR 05-006 , Control ofCash Provided to South-Central Iraq, Apr. 30,2005.

6
Appendix B-Acronyms

CPA

DFI

000

FMR

JASG-C

JCC-I/A

SIGIR

Coalition Provisional Authority

Development Fund for Iraq

Department of Defense

Financial Management Regulations

Joint Area Support Group-Central (Provisional)

Joint Contracting Command - Iraq/Afghanistan

Special Inspector General for Iraq Reconstruction

7
Appendix C-Memorandum of Agreement

SPECIAL I:"Ii'S P ECT O R GE:"Ii'E RAL F O R IRAQ R E CO NSTR UCTI ON

MEMORANDUM O F AGRE EMENT

BET W E E N

.JOII 'T AREA S PPORT G ROUP-CENTRAL

AND

SPECIAL INSPECTOR GENERAL FO R IRAQ RECONSTRUCT ION

O N PROC EDURE. FO R VE RIFYING

DEVELOPMENT FUND FOR IRAQ CASH

Feb ruary 26, 20 08

The Joint Area Support Group-Central (JASG-C) seeks to ensure that cash in its possession belonging to

the Development Fund for Iraq is properly accounted for and transferred to the Government ofthe

Repu blic ofIraq . To assist JA SG-C in transfe rring the cash to the Govern men t of the Republic of Iraq so

tha t it can be fiscally accounted for, the Special Inspector Gen eral for Iraq Reconstruction (SIGIR) agr ees

to conduct a count ofthe DF! cash in the possession ofJA SG -C and reconcile that amount to the JASG-C

financial accounting records. Prior to co nduc ting the cash count and reconciliation. Government Auditing

Standards (GAO-07-73I G, Ju ly 200 7) requires that JA SG-C and SIGIR establish in writing an

understandi ng of the services to be provi ded and that SIG IR communicates its und erstandi ng o f the

serv ices to JASG-C management. and to the Joint Contracting Command-Iraq/Afghanistan. This

memorandum of agreement is established to satisfy those requirements.

Se rv ices to be provid ed: The cash in the possession ofJA G-C consists ofsealed canvas bags with each

bag containing 20,000 bills; large plastic wrappe d bricks of bills, each containing 16,000 bills; small

bricks ofbiIls, each containing 1,000 bills; and loose cash. In conducting this count and reconciliat ion

SIGIR and JASG-C agree that the following . reps will be taken:

I. Loose Cash - Loose cash in scaled plastic bags will be examined by JASG-C and SIGI R

personnel for signs of pilferage. Any bag that eithe r party believes shows signs of p ilfe rage will

be opened and SIGI R will conduct a complete co unt of the ca h. Bags that both parties agree

show ~o signs of pilferage will be presumed to contain the correct amount of cash. All currency

not in sealed bags and all coins will be counted in full.

2. Small Bricks of Bills - All small bricks of bills ( 1.000 bills each) will be examined by JASG-C

and SIGIR personnel for signs of pilferage. Any small brick that either pa rty bel ieves shows signs

of pilferage will be opened and IGIR will conduct a complete count o f the cash. Small bricks

that both parties ag ree show no sign s of pilferage will be presumed to contain the co rrect amount

of cash.

3. Large Bricks (plastic bags) of BiIIs- All plastic bags containing large bricks o f bills (16,000 bills

each) wiII be examined by JASG-C and SIG IR perso nnel for signs of pilferage . Any plasti c bags

that e ither part)' believes shows signs of pilferage will be opened and SIG IR and JASG-C will

examine the small bricks within for signs of pilferage. Any sma ll brick that either party be lieves

shows signs of pil ferage will be opened and SIGI R will co nduct a complete co unt ofthe cash .

8
SPECIAL INSPECTO R GENE RAL F O R I RA Q R E C O J STR CTIO .

Small.bricks that both parties agree show no signs of pilferage will be presumed to contain the

correct amount of cash.

5. Canvas Bags - All canvas bags will be examined by JASG-C and SIGIR for signs o f pilferage.

Any canvas bag that either party bel ieves shows si gns of pilferage will be opened and the small

bricksiin the bag will be examined for pilferage. Any small brick that either party believes shows

signs of pilferage will be opened and SIGIR will cond uct a complete count ofthc cash. Small

bricks that both parties agree show no signs of pilferage will be presumed to contain the correct

amount o f ca sh .

Upon completion o f the cash count, a reconcil iation between the cash count and the JASG-C accounting

records will be conducted.

Lt Col Philip

£rkS. Defenbach

JASG· C Comptroller

JCC-I/A DFI Comptroller

Glenn Furbish

Principle Deputy Assistant Inspector General

SIGIR

9
Appendix D-Audit Team Members

This report was prepared and the attestation conducted under the direction of David R.

Warren , Assistant Inspector General for Audit, Office ofthe Special Inspector General for

Iraq Reconstruction. The staff members who contributed to the report include:

Wendell Gentry

W. Dan Haigler, Jr.

Walt Keays

Ronald Rembold

10