OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

400 Army Navy Drive • Arlington, Virginia 22202

April 28, 2006 

MEMORANDUM FOR COMMANDER, JOINT AREA SUPPORT GROUP – CENTRAL 

 

SUBJECT: Audit Report on Development Fund for Iraq Cash Accountability Review: 

Joint Area Support Group-Central/Falluja (SIGIR-06-012) 

We are providing this audit report for your information and use. We performed the audit in 

accordance with our statutory duties contained in Public Law 108-106, as amended, which 

requires that we provide for the independent and objective conduct of audits, as well as 

leadership and coordination of and recommendations on policies designed to promote 

economy, efficiency, and effectiveness in the administration of Iraq relief and reconstruction 

programs and operations and to prevent and detect waste, fraud, and abuse. 

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

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

this report, please contact Mr. Joseph T. McDermott at (703) 343-7926, or by email at 

joseph.mcdermott@iraq.centcom.mil; or Mr. Clifton Spruill at (703) 343-9275, or by email 

at clifton.spruill@iraq.centcom.mil. For the report distribution, see Appendix C. 

Stuart W. Bowen, Jr. 

Inspector General 

cc: Distribution 
i 

Special Inspector General for Iraq Reconstruction 

SIGIR-06-012 April 28, 2006

Development Fund for Iraq 

Cash Accountability Review: 

Joint Area Support Group-Central/Falluja 

Executive Summary 

Introduction. This audit report is one of a series of reports addressing controls by U.S. 

government officials over cash in Iraq. This audit report discusses the accountability for 

the Development Fund for Iraq (DFI) cash controlled by the Joint Area Support Group - 

Central (JASG-C) Comptroller, who also serves as the DFI Account Manager. 

The DFI fund was established to meet: 

• the humanitarian needs of the Iraqi people 

• the economic reconstruction and repair of Iraq’s infrastructure 

• the continued disarmament of Iraq 

• the costs of Iraqi civilian administration 

• other purposes benefiting the people of Iraq 

This particular audit addressed DFI cash held by the Division Level Agent (DLA) in 

Falluja, Iraq. The DLAs are responsible for issuing cash payments to designated entities 

(individuals and/or businesses) and for clearing their accounts with the JASG-C 

Disbursing Officer. The JASG-C Disbursing Officer maintains an accounting ledger of 

cash accountability that included evidence of cash issued and receipts returned. Due to 

the availability of Electronic Funds Transfer, the DLA for Falluja, Iraq, no longer needs 

to maintain cash on site. 

Objective. The overall audit objective was to provide assurance that DFI funds turned in 

by the Falluja DLA agreed with government records. We specifically looked at whether 

Department of Defense (DoD) polices and procedures for cash accountability and 

disposition were being complied with. 

Results. We conducted an unannounced cash count on March 30, 2006, and as a result 

provided assurance that the $7.9 million in cash and payment packets turned in by the 

Falluja DLA agreed with government records. The Falluja DLA was accountable for DFI 

cash assets and complied with the DoD requirements for the disposition of cash to the 

JASG-C Disbursing Officer. We found that the processes employed by the DLA and the 

JASG-C Disbursing Officer for completing, controlling, and maintaining accurate records 

for the cash (DFI/Falluja) and the clearing of cash account balances were acceptable. 

 

Recommendations. We made no recommendations in this report.
Table of Contents 

Executive Summary i 

Introduction 

Background 1 

Objective 2 

Finding 

Control of the Development Fund of Iraq 

 Cash Accountability and Disposition 3 

 

Appendices 

A. Scope and Methodology 6 

B. Acronyms 7 

C. Report Distribution 8 

D. Audit Team Members 10 
1 

Introduction 

Background 

United Nations Security Council Resolution 1483, dated May 22, 2003, assigned 

responsibility for managing the Development Fund for Iraq (DFI) to the Coalition 

Provisional Authority (CPA). Resolution 1483 noted that DFI funds should be disbursed 

at the direction of the CPA, in consultation with the Iraqi interim administration. It also 

required that the DFI funds be used in a transparent manner to meet the humanitarian 

needs of the Iraqi people, for the economic reconstruction and repair of Iraq’s 

infrastructure, for the continued disarmament of Iraq, for the costs of Iraqi 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 Iraqi assets to the relief and reconstruction efforts 

for Iraq. 

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

the CPA was disestablished in June 2004, responsibility for administering DFI funds 

shifted to the U.S. Army’s Joint Area Support Group-Central (JASG-C). The CPA 

Comptroller was realigned as the JASG-C Comptroller, and assumed responsibility for 

cash control of the DFI and continued to perform the same duties for that portion of the 

DFI still being administered by the U.S. government. 

CPA Regulation Number 2, “Development Fund for Iraq,” dated June 10, 2003, 

described the responsibilities for the administration, use, accounting, and auditing of the 

DFI. The regulation was intended to ensure that the DFI 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 the people of Iraq. 

The United States used DFI cash funds to help fund the Commanders’ Emergency 

Response Program and the Rapid Regional Response Program. The Commanders’ 

Emergency Response Program enables U.S. military commanders in Iraq to respond to 

urgent humanitarian relief and reconstruction requirements of the local population by 

providing funds for repairs and condolence payments after combat operations; providing 

equipment such as electrical generators to support critical infrastructure, and large scale 

civic cleanup and construction activities to employ as many Iraqis as possible. The Rapid 

Regional Response Program was conceived as a civilian equivalent of the Commanders’ 

Emergency Response Program fund intended to create local jobs, support local industries, 

and stimulate the economy. 

Military regulations and guidance provide additional requirements for managing cash 

funds. Department of Defense Financial Management Regulation Volume 5 establishes 

disbursing policy principles, standards, responsibilities, procedures, practices, and 

liability for disbursing officers, certifying officers and accountable officials throughout 

the Department. The military also issued an instruction titled Guidance on the Use of the 

Development Fund for Iraq In Support of the Commanders’ Emergency Response 

Program, dated August 2003. The guidance applied to all parties involved in receiving, 

disbursing, accounting for, securing, and reporting for the DFI. It designates the CPA 

Comptroller as the DFI Account Manager with the responsibilities of overall financial 

and program accountability for the use of DFI monies in the Commanders’ Emergency 

Response Program. The CPA Comptroller’s responsibilities included accounting and 

reconciling DFI monies that were used in the Commanders’ Emergency Response Fund 
2 

and appointing Division Level Agents. The JASG-C Comptroller assumed the role of the 

DFI Account Manager when the CPA was disestablished. 

The JASG-C Comptroller/DFI Account Manager’s office is required to maintain an 

accounting ledger of cash accountability that included evidence of cash issued and 

receipts returned. The JASG-C Comptroller/DFI Account Manager’s office advances 

cash to the appointed Division Level Agents, recording the transaction on the Department 

of Defense (DD) Form 1081, “Statement of Agent Officer’s Account.” 

The Division Level Agents (DLAs) are responsible for receiving and disbursing DFI cash 

payments to designated entities (individuals and/or businesses) in support of the 

Commanders’ Emergency Response Program and the Rapid Regional Response Program. 

The DLAs are required to maintain cash accountability and payment packets, and to 

reconcile and clear the disposition of cash advances with the JASG-C Disbursing Officer 

at least monthly. 

Objective 

The overall audit objective was to provide assurance that DFI funds turned in by the 

Falluja DLA agreed with government records. We specifically looked at whether DoD 

polices and procedures for cash accountability and disposition were being complied with. 

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

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

list of the audit team members, see Appendix D. 
3 

Control of the Development Fund for Iraq 

Cash Accountability and Disposition 

This audit report discusses control of DFI cash controlled by the JASG-C Comptroller, 

who also serves as the DFI Account Manager. The JASG-C Comptroller/DFI Manager 

has designated physical accountability over the DFI cash funds to the Disbursing Officer. 

The Disbursing Officer is responsible for cash-on-hand held in the Palace vault (located 

at the U.S. Embassy Annex, Baghdad, Iraq), disbursing the funds, and for maintaining 

security for the funds. Also, the Disbursing Officer is responsible for the reconciliation 

of the funds held by the DLAs. 

The DLAs are required to maintain cash accountability and payment packets, and to 

reconcile and clear the disposition of cash advances with the JASG-C Disbursing Officer 

at least monthly. Due to the availability of Electronic Funds Transfer, the DLA for 

Falluja, Iraq, no longer needed to maintain DFI cash on site, and therefore, this was the 

final reconciliation for this account. 

Cash Accountability 

We conducted an unannounced cash count of the DFI funds being turned in by the Falluja 

DLA to the JASG-C Disbursing Officer’s vault at approximately 0800 hours on March 

30, 2006. We were given access to the funds immediately and we were observed by the 

Disbursing Officer and the DLA during the entire cash count. A full cash count was 

conducted to ascertain completeness of the funds. The cash was segregated by dollar 

denomination and loose coins. The amount of cash turned in by the Falluja DLA is 

shown in the following table. 
4 

Table: Results of Cash Count of DFI Funds on March 30, 2006 (in U.S. Currency) 

Denomination Quantity Amount 

Hundreds 66,672 Bills @$100.00 $6,667,200.00

Fifties 11,101 Bills @ $50.00 $555,050.00

Twenties 4 Bills @ $20.00 $80.00

Tens 0 Bills @ $10.00 $0.00

Fives 0 Bills @ $5.00 $0.00

Currency

Ones 0 Bills @ $1.00 $0.00

Loose Coin 

 $.09

TOTAL as of 

March 30, 2006 $7,222,330.09

Source: SIGIR 

The actual DFI cash on hand turned in by the Falluja DLA was $7,222,330.09, which 

matched the accountability records maintained on the JASG-C Comptroller. The 

Disbursing Officer performed a cash count immediately after our cash count. The totals 

of each cash count were the same. 

The JASG-C Comptroller’s office follows the guidance from the DoD Financial 

Management Regulation (FMR) Volume 5 in regards to cash controls. A Department of 

Defense Form 1081, “Statement of Agent Officer’s Account,” is prepared to document 

cash withdrawals, deposits, and reconciliation of the DFI fund. Additionally, the 

JASG-C Comptroller’s office maintains an Excel spreadsheet to track the DFI cash totals. 

Cash Disposition: Payment Packets

The JASG-C Comptroller/DFI Account Manager has established policies and procedures 

for appointing the DLA. In accordance with these policies and procedures, via the 

appointment letter, the DLA is authorized to take custody and make disbursement of DFI 

Funds. The DLAs must provide, in their payment packets, the following documentation 

to the Disbursing Officer to reconcile their accounts. Specifically, 

• the signed contract 

• detailed invoices 

• Material Inspection and Receiving Report/Certificate of Completion document 

The Falluja DLA presented four payment packets to the JASG-C to reconcile with the 

cash turn in. Our review found that the payment packets contained the above documents 

and were accurate. In reconciling the account we added the amount of each payment 

packet to the cash. The amount of the four payment packets was $697,418.31. This 
5 

amount added to the cash amount equaled $7,919,748.40. The JASG-C Disbursing 

Officer reconciled the payment packets. The totals from the cash count and the payment 

packets were compared, and were the same.

The JASG-C Disbursing Officer reconciled the cash and payment packets turned in for 

the Falluja DLA’s account against the DD Form 1081, reducing that account to zero. The 

JASG-C Disbursing Officer, using the Excel spreadsheet, increased the amount of cash 

returned to the vault by $7,222,330.09. 

Conclusion 

We conducted an unannounced cash count on March 30, 2006, and as a result provided 

assurance that the $7.9 million cash and payment packets turned in by the Falluja DLA 

agreed with U.S. government records. The JASG-C Disbursing Officer and the DLA 

were accountable for DFI cash assets on hand and complied with the DoD requirements 

for safeguarding cash. We found that the processes employed by the JASG-C 

Comptroller’s Office for completing, controlling, and maintaining accurate records for 

the issuance of cash to DLAs and for clearing the Falluja DLA’s cash account and 

payment packets balances were acceptable. The procedures the Falluja DLA employed 

to maintain control of and to turn in the DFI cash and payment packets were acceptable. 

Recommendations 

We made no recommendations in this report. 
6 

Appendix A. Scope and Methodology 

To determine if the DFI cash held by the Falluja DLA agreed with government records, we 

conducted an unannounced cash count of the DFI funds at approximately 0800 hours on 

March 30, 2006 (Project No. 6015). We were given access to the funds immediately and 

we were observed by the Disbursing Officer and the Falluja DLA during the entire cash 

count. We verified, by actual count, the cash in the amount of $7,222,330.09, which 

matches the accountability records maintained on the JASG-C Comptroller. 

We reviewed the spreadsheets of reconciliation between the Division Level Agents and 

the JASG-C Comptroller. We reviewed receipts payment packets to determine if the 

amounts equaled the amounts on the Excel spreadsheet totals. We verified, by reviewing 

supporting documentation, the amount of the four payment packets was $697,418.31. 

We reviewed the DoD Federal Management Regulation Volume 5 as the criteria to 

determine if the JASG-C Comptroller’s Office complied with applicable regulations. 

We reviewed the Statement of Agent Officer’s Account, DD Form 1081 to determine the 

adequacy of the JASG-C Comptroller and the DLA funds accountability. 

We performed the audit work at the JASG-C Comptroller’s Office and the Vault, located 

in the U.S. Embassy Annex, Baghdad, Iraq. 

We conducted this audit from March 2006 through April 2006, with the actual cash count 

performed on March 30, 2006, 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: 

The Special Inspector General for Iraq Reconstruction report, “Control of Cash Provided to 

South-Central Iraq,” (SIGIR 05-006, April 30, 2005). Reports issued by the Office of the 

Special Inspector General for Iraq Reconstruction can be accessed on its website 

http://www.sigir.mil. 

Air Force Audit Agency report, “Nonappropriated Fund Cash Controls,” (F2003-0003-

FB4000, dated 30 December 2002). AFAA Reports can be accessed on its website 

https://www.afaa.hq.af.mil 
7 

Appendix B. Acronyms 

CPA Coalition Provisional Authority

DFI Development Fund for Iraq 

DLA Division Level Agent 

JASG-C Joint Area Support Group – Central (Provisional) 
8 

Appendix C. Report Distribution 

Department of State 

Secretary of State 

Senior Advisor to the Secretary and Coordinator for Iraq 

U.S. Ambassador to Iraq 

Director, Iraq Reconstruction Management Office 

Mission Director-Iraq, U.S. Agency for International Development 

Inspector General, Department of State 

Department of Defense 

Secretary of Defense 

Deputy Secretary of Defense 

Director, Defense Reconstruction Support Office 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

 Deputy Chief Financial Officer 

 Deputy Comptroller (Program/Budget) 

Inspector General, Department of Defense 

Director, Defense Contract Audit Agency 

Director, Defense Finance and Accounting Service 

Director, Defense Contract Management Agency 

Department of the Army 

Assistant Secretary of the Army for Acquisition, Logistics, and Technology 

Principal Deputy to the Assistant Secretary of the Army for Acquisition, 

Logistics, and Technology 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Director, Project and Contracting Office 

Commanding General, Joint Contracting Command-Iraq/Afghanistan 

Assistant Secretary of the Army for Financial Management and Comptroller 

Chief of Engineers and Commander, U.S. Army Corps of Engineers 

 Commanding General, Gulf Region Division 

Auditor General of the Army 

U.S. Central Command

Commanding General, Multi-National Force-Iraq 

Commanding General, Multi-National Security Transition Command-Iraq 

Commander, Joint Area Support Group-Central 

Other Federal Government Organizations 

Director, Office of Management and Budget 

Comptroller General of the United States 

Inspector General, Department of the Treasury 

Inspector General, Department of Commerce 

Inspector General, Department of Health and Human Services 

Inspector General, U.S. Agency for International Development 

President, Overseas Private Investment Corporation 

President, U.S. Institute for Peace 
9 

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

U.S. Senate 

Senate Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations and Related Programs 

Senate Committee on Armed Services 

Senate Committee on Foreign Relations 

Subcommittee on International Operations and Terrorism 

Subcommittee on Near Eastern and South Asian Affairs 

Senate Committee on Homeland Security and Governmental Affairs 

Subcommittee on Federal Financial Management, Government Information and 

International Security 

Subcommittee on Oversight of Government Management, the Federal 

Workforce, and the District of Columbia 

U.S. House of Representatives 

House Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on Foreign Operations, Export Financing and Related Programs 

Subcommittee on Science, State, Justice and Commerce and Related Agencies 

House Committee on Armed Services 

House Committee on Government Reform 

Subcommittee on Management, Finance and Accountability 

Subcommittee on National Security, Emerging Threats and International 

Relations 

House Committee on International Relations 

Subcommittee on Middle East and Central Asia 
10 

Appendix D. Audit Team Members 

This report was prepared and the audit was conducted under the direction of Joseph T. 

McDermott, Assistant Inspector General for Audit, Office of the Special Inspector 

General for Iraq Reconstruction. The staff members who contributed to the report 

include: 

W. Dan Haigler, Jr. 

Ronald Rembold