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 (SIGIR 06-008) 

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. 

We considered management comments from the Joint Area Support Group-Central, MultiNational Force-Iraq, on a draft of this report when preparing the final report. 

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-06-008 April 28, 2006

 Development Fund for Iraq 

Cash Accountability Review: 

Joint Area Support Group-Central 

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 GroupCentral (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 

Objective. The overall audit objective was to provide assurance that funds on hand 

agreed with government records. We specifically looked at whether Department of 

Defense (DoD) polices and procedures for controlling cash and cash expenditures were 

being followed and whether the procedures were adequate given existing conditions. 

Results. We conducted an unannounced cash count on January 31, 2006, and as a result 

provided assurance that the $28.5 million funds on hand agreed with government records. 

The JASG-C Comptroller/DFI Account Manager was accountable for DFI cash assets on 

hand and complied with the DoD requirements for safeguarding cash, with some 

exceptions. We found that the processes employed by the JASG-C Comptroller/DFI 

Account Manager’s office were acceptable for completing, controlling, and maintaining 

accurate records for: (1) cash on hand (Palace Vault), (2) issuance of cash to paying 

agents in the Central Region, and (3) clearing paying agents’ cash account balances. 

However, we did note these exceptions during the review: 

• There is no file system to store and readily retrieve the paying agent’s documents. 

• The process for properly identifying the current accountable Disbursing Officer 

for backup access to the vaulted DFI funds did not follow applicable DoD 

Financial Management Regulations. 

• The mechanical condition of the vault does not allow for the periodic changing of 

the lock combination in accordance with DoD requirements. 
ii 

Management Actions. The Commander, JASG-C has taken actions to correct two of the 

reported deficiencies. Utilizing contracted resources, the JASG-C Comptroller’s Office 

has started scanning the payment agent’s payment packages to a database. The expected 

completion date is May 30, 2006. The database will allow proper filing of the payment 

packages, and faster retrieval if a payment question is raised. In addition, after we 

informed the JASG-C Deputy Comptroller of the deficiency relating to signatures on the 

combination and key envelope, the envelope was updated with the current Disbursing 

Officer’s signature. We commend the Commander, JASG-C and the JASG-C 

Comptroller for the prompt and thorough actions to correct these deficiencies. 

Recommendations. We recommend that the Commander, Joint Area Support GroupCentral, require these actions of the JASG-C Comptroller/DFI Account Manager: 

• Develop a file system to store and more readily retrieve specific payment 

packages. 

• Ensure that current signatures are affixed to the sealed enveloped containing the 

safe combination and duplicate key whenever a new Disbursing Officer takes 

custody of the cash assets.

• Develop a contingency plan for secure and reliable access to the vault and its 

contents to lower the risk of unauthorized access or in the event of mechanical 

failure of the combination lock.

Management Comments and Audit Response. The Commander, JASG-C, concurred 

with all recommendations. Actions have been taken and are underway to implement the 

recommendations. The comments received are fully responsive.
Table of Contents 

Executive Summary i 

Introduction 

Background 1 

Objective 2 

Finding 

Control of the Development Fund for Iraq Cash on Hand 3 

 

Appendices 

A. Scope and Methodology 8 

B. Acronyms 9 

C. Report Distribution 10 

D. Audit Team Members 12 

 

Management Comments 

Commander, Joint Area Support Group-Central 13 
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. On December 24, 2005, the 

Minister of Finance for the Iraqi government extended the Designation of Authority and 

Responsibility to the Chief of Mission and the Commander, Multi-National Force-Iraq to 

administer the DFI-funded contracts and grants to December 31, 2006. As such the 

JASG-C Comptroller and the Commanding General, Joint Contracting Command – 

Iraq/Afghanistan maintain their respective responsibilities as the DFI Funds Manager and 

the DFI Administrator. 

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 entitled, 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, 
2 

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 

and appointing Division Level Agents. As noted earlier, 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 DD Form 

1081, “Statement of Agent Officer’s Account.” 

Objective 

The overall audit objective was to provide assurance that funds on hand agreed with 

government records. We specifically looked at whether DoD polices and procedures for 

controlling cash and cash expenditures were being followed and whether the procedures 

were adequate given existing conditions. 

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 on Hand 

This audit report discusses control of 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 JASG-C Comptroller/DFI Account 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, disbursing the 

funds, and for maintaining security for the funds. The Palace vault is located in the 

basement of the U.S. Embassy Annex, Baghdad, Iraq. 

Our review provided assurance that the funds on hand agreed with the government 

records. Further, the processes employed by the JASG-C Comptroller/DFI Account 

Manager’s office for completing, controlling, and maintaining accurate records for the 

issuance of that cash to paying agents in the Central Region and for clearing those agents’ 

cash account balances were acceptable. 

However, we did note the following exceptions during the review: 

• There is no file system to store and readily retrieve the paying agent’s documents. 

• The process for properly identifying the current accountable Disbursing Officer 

for backup access to the vaulted DFI funds did not follow applicable DOD 

Financial Management Regulations. 

• The mechanical condition of the vault does not allow for the periodic changing of 

the lock combination in accordance with DoD requirements. 

Cash Accountability 

We conducted an unannounced cash count of the DFI funds held in the JASG-C 

Comptroller’s vault at approximately 1500 hours on January 31, 2006. We were given 

access to the vault immediately and we were observed by the Disbursing Officer during 

the entire count. A full cash count was conducted to ascertain completeness of the funds. 

The cash was stored in Canvas Bags, Large Bricks, Small Bricks, Bundles, and Loose 

Cash. The amount of cash stored in the vault is shown in the following table. 
4 

Table: Results of Cash Count of DFI Funds on January 31, 2006 (in U.S. Currency) 

Denomination Quantity Amount 

Hundreds 236,030 Bills @$100.00 $23,603,000.00 

Fifties 29,431 Bills @ $50.00 $1,471,550.00 

Twenties 14,652 Bills @ $20.00 $293,040.00 

Tens 54,864 Bills @ $10.00 $548,640.00 

Fives 314,965 Bills @ $5.00 $1,574,825.00 

Currency

Ones 1,028,596 Bills @ $1.00 $1,028,596.00 

Loose Coin Coins 

 

$4.73 

TOTAL as of 

January 31, 2006 $28,519,655.73 

Source: SIGIR 

The actual DFI cash on hand in the vault was $28,519,655.73, which matched the 

accountability maintained on the JASG-C Comptroller’s specific DD Form 1081 for 

January 31, 2006, and also on the Excel Spreadsheet. 

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. 

The JASG-C Comptroller also performs an independent, unannounced cash count on a 

quarterly basis as required by the FMR. Upon completion of the independent count, the 

cash count totals are compared to the total from Excel spreadsheet and a DD Form 1081 

for that days cash balance. If the cash count total is different from the total on the 

spreadsheet and the DD Form 1081, then the cash count is done again. If the balance 

turns out different the second time an investigation is started. However, this has not been 

the case, as each cash count verification has matched the spreadsheet balance. 

Record Storage

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

for appointing the Division Level Agent. In accordance with these policies and 

procedures, via the appointment letter, the Division Level Agent is authorized to take 

custody and make disbursement of DFI Funds. 
5 

The Division Level Agents must provide the following documentation for their payment 

packages to the Disbursing Officer to reconcile their accounts: 

• the signed contract 

• detailed invoices 

• Material Inspection and Receiving Report/Certificate of Completion document 

The JASG-C Comptroller’s Office maintains the payment package records in boxes in the 

Vault. The payment package record boxes are organized by the name of the paying 

agent. However, during our review we found different paying agent’s pay packages in 

boxes labeled with other paying agents names. To find a specific pay package, the 

Disbursing Officer would search through as many boxes as required to find the package. 

Management Actions. Utilizing contracted resources, the JASG-C Comptroller’s Office 

has started scanning the payment agent’s payment packages to a database. The expected 

completion date is May 30, 2006. The database will allow proper filing of the payment 

packages, and faster retrieval if a payment question is raised. 

Safeguarding Funds and Related Documents 

The JASG-C Comptroller/DFI Account Manager and Disbursing Officer in the Central 

Region did not fully comply with applicable regulations. The DoD Financial 

Management Regulation, states, “At the discretion of the Disbursing Officer the 

combination of each safe and duplicate key of each strong box may be placed in a sealed, 

signed, and dated envelope. The envelope shall be sealed and signed by the accountable 

individual in such a manner that unauthorized opening of the envelope can be detected.”1 

As it currently exists, the sealed envelope with the combination and an extra key to the 

vault are stored in the Commander’s safe. The envelope was sealed and signed by the 

current Commander, but not by the current Disbursing Officer. This condition does not 

give assurance to the current Disbursing Officer of the contents of the envelope or 

whether the envelope has been tampered with. 

The FMR also states that, “the combination of all vaults, safes, and fund containers is 

changed at least once every 6 months and upon relief, transfer, separation, or discharge of 

the accountable individual.”2

 In a September 7, 2005, JASG-C Memorandum for Record, 

are the results of a request for a change in the vault combination, as well as the problems 

associated with the vault that prevents compliance with this requirement. Specifically, in 

May 2005, the JASG-C Comptroller’s office submitted a trouble desk action request to 

Kellogg Brown and Root (KBR) regarding a change of the vault combination. KBR’s 

key, safe, and lock personnel observed the inner operations of the vault door, and 

concluded that the KBR locksmith could not guarantee the success of the action due to 

several factors, including: 

• the age of the vault 

• parts that are missing and may no longer be available 

• the possibility that further disassembling of the functioning door would jeopardize 

its current operation 

 

1

 DoD Federal Management Regulation Volume 5, Chapter 3, Paragraph 030302 B13. 

2

 Ibid. 
6 

As a result of KBR’s review, the recommendation was for JASG-C to contact the current 

vault manufacturer directly for adjustments which will require a redesign or rebuilding of 

the vault door. 

We believe that while some assurance may be implied in that access to the vault requires 

both the combination and the key, the inability to change the combination increases the 

potential of unauthorized access to the vault from someone with prior knowledge of the 

combination. Also, the potential for mechanical failure of the combination lock results in 

the potential for unreliable security for and access to the contents of the vault. 

Management Actions. During the course of the audit, the audit team informed the 

JASG-C Deputy Comptroller that the combination and key envelope were not current to 

identify the accountable Disbursing Officer, although the regulation reads that this 

process is at the discretion of the Disbursing Officer. In response to our notification, the 

envelope was updated with the current Disbursing Officer’s signature. 

Conclusion 

We conducted an unannounced cash count on January 31, 2006, and as a result provided 

assurance that the $28.5 million funds on hand agreed with government records. The 

JASG-C Comptroller/DFI Account Manager, was accountable for DFI cash assets on 

hand and complied with the DoD requirements for safeguarding cash, with some 

exceptions. We found that the processes employed by the JASG-C Comptroller/DFI 

Account Manager’s office were acceptable for completing, controlling, and maintaining 

accurate records for: (1) cash on hand (Palace Vault), (2) issuance of cash to paying 

agents in the Central Region, and (3) clearing paying agents’ cash account balances. 

However, we did note the following exceptions during the review, and that management 

had initiated corrective actions on the first two: 

• There is no file system to store and readily retrieve the paying agent’s documents. 

• The process for properly identifying the current accountable Disbursing Officer 

for backup access to the vaulted DFI funds did not follow applicable DoD 

Financial Management Regulations. 

• The mechanical condition of the vault does not allow for the periodic changing of 

the lock combination in accordance with DoD requirements. 

 

Recommendations, Management Comments and Audit 

Response 

We recommend that the Commander, Joint Area Support Group-Central, require these 

actions of the JASG-C Comptroller/DFI Account Manager: 

• Develop a file system to store and more readily retrieve specific payment 

packages. 

• Ensure that current signatures are affixed to the sealed enveloped containing the 

safe combination and duplicate key whenever a new Disbursing Officer takes 

custody of the cash assets.

• Develop a contingency plan for secure and reliable access to the vault and its 

contents to lower the risk of unauthorized access or in the event of mechanical 

failure of the combination lock.
7 

Management Comments and Audit Response. The Commander, JASG-C, concurred 

with all recommendations. Actions have been taken by the JASG-C Comptroller/DFI 

Account Manager to implement the recommendations relating to the signatures and vault. 

Action on the recommendation relating to the file system is currently underway with an 

estimated completion date of May 30, 2006. The comments received are fully 

responsive. 
8 

Appendix A. Scope and Methodology 

We conducted a DFI cash count of the JASG-C Comptroller’s vault at approximately 

1500 hours on January 31, 2006 (Project No. 6007). The auditors gave no prior 

notification of the cash count and were given access to the vault immediately. We 

verified by actual count the cash in the amount of $28,519,655.73, which matches the 

accountability maintained on the JASG-C Comptroller’s specific DD Form 1081 for 

January 31, 2006, and also on the Excel Spreadsheet. 

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/DFI Account Manager/Comptroller funds 

accountability. 

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

the JASG-C Comptroller. We reviewed receipt payment packages to determine if the 

amounts equaled the amounts on the Excel spreadsheet totals. 

We reviewed the contract that establishes the special action team to provide full and 

accurate accounting of the management of DFI funds. The contract requires the special 

action team to scan the payment packages for the database. 

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 January 2006 through April 2006, with the actual cash 

count performed on January 31, 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 
9 

Appendix B. Acronyms 

CPA Coalition Provisional Authority

DFI Development Fund for Iraq 

JASG-C Joint Area Support Group-Central (Provisional) 
10 

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
11 

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 

 
12 

 

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. 

Arlene Hunt 

Ronald Rembold 
13 

Management Comments 

Commander, Joint Area Support Group-Central 

Multi-National Force Iraq 
14