OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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SIGIR 12-001 

OCTOBER 26, 2011
SIGIR 

Special Inspector General for IRAQ Reconstruction 

For more information, contact SIGIR Public Affairs at 

(703) 428-1100 or PublicAffairs@sigir.mil Special Inspector General for Iraq Reconstruction 

Summary of Report: SIGIR 12-001 

Why SIGIR Did This Study 

The Coalition Provisional Authority (CPA) was 

established in May 2003 to provide for the 

temporary governance of Iraq. United Nations 

Security Council Resolution 1483 created the 

Development Fund for Iraq (DFI) and assigned 

the CPA the responsibility for managing it. The 

DFI comprised revenues from Iraqi oil and gas 

sales, certain remaining Oil for Food deposits, 

and repatriated national assets. It was used, in 

part, for relief and reconstruction efforts in Iraq. 

DFI funds were held in accounts at the Federal 

Reserve Bank of New York (FRBNY) and the 

Central Bank of Iraq (CBI) as well as in the 

presidential palace vault in Baghdad. During its 

almost 14-month governance, the CPA had 

access to $20.7 billion in DFI funds for use in 

supporting Iraq. When the CPA was dissolved 

on June 28, 2004, $6.6 billion remained in 

unexpended DFI funds. 

In response to a request from the Department of 

Defense (DoD) Comptroller about the status of 

remaining DFI funds, the Special Inspector 

General for Iraq Reconstruction (SIGIR) 

initiated this audit to determine: (1) who had 

authority and control over DFI funds after the 

CPA was dissolved, and (2) whether DFI funds 

shipped to Baghdad were properly controlled by 

the CPA and transferred to and deposited into 

the CBI. 

What SIGIR Recommends 

This report does not contain recommendations. 

Management Comments and Audit 

Response 

The Department of Defense and the Department 

of State provided written comments on a draft of 

this report. Their comments are addressed in the 

report where appropriate and are included as 

appendices to this report. 

October 26, 2011 

DEVELOPMENT FUND FOR IRAQ: THE COALITION PROVISIONAL 

AUTHORITY TRANSFERRED CONTROL OVER MOST OF THE 

REMAINING DFI FUNDS TO THE CENTRAL BANK OF IRAQ

What SIGIR Found 

When the CPA was dissolved, the Administrator transferred control over 

almost all of the $6.6 billion remaining in DFI funds to the CBI. This 

included $4.7 billion on deposit at the FRBNY, primarily held as U.S. 

Treasury bills, and $1.7 billion at the CBI. DoD assumed control of the 

remaining $217.7 million, which was in the presidential palace vault in 

Baghdad. In January 2012, SIGIR will report on DoD’s accounting for these 

funds and about $2.8 billion more in DFI funds used by DoD agencies, 

including the U.S. Army Corps of Engineers, for reconstruction projects in 

Iraq. 

The CPA adopted policies and procedures governing the transfer and deposit 

of DFI funds into the CBI. From August 2003 through June 2004, the 

FRBNY made 11 cash shipments to Baghdad totaling $10.2 billion in DFI 

funds. Four of these shipments, totaling approximately $5.8 billion, 

occurred within the last two months of the CPA’s existence. 

SIGIR reviewed these four shipments to determine if the CPA followed its 

established procedures in transferring the U.S. currency to the CBI. CPA 

documents show that a CBI representative signed for and took custody of 

two of the final four currency shipments at Baghdad International Airport. 

Receipt documentation was missing for the other two shipments, which 

totaled $1 billion and $2.4 billion. However, the CPA’s accounting records 

show the apparent disposition of these funds into CBI control upon their 

arrival in Baghdad. 

In reviewing the fund shipments, SIGIR found three instances where large 

amounts of U.S. currency flown to Baghdad were deposited into the CBI’s 

DFI Baghdad account in a manner that varied from CPA’s Policies and 

Procedures Manual: 

 CPA accounting records show a June 2004 currency shipment 

totaling $2.4 billion, with only $766.4 million deposited into the 

CBI’s DFI account. Based on a policy decision, the remaining $1.6 

billion was earmarked for Kurdistan and documents show it was 

transferred to a Central Bank of Kurdistan representative at the 

Baghdad International Airport for flight to Erbil. 

 CPA records show that $1.35 billion of $1.5 billion shipped to 

Baghdad in December 2003 was deposited into the CBI’s DFI 

account. The records note that $150 million was improperly given 

directly to the Iraqi Minister of Finance at the airport. Officials at 

the Iraq Board of Supreme Audit told SIGIR that the Minister of 

Finance did not have authority to take the funds directly. 

 SIGIR could not find any specific documentation on the arrival or 

deposit of an October 2003 $400 million shipment destined for the 

CBI’s DFI account. Officials at the Iraq Board of Supreme Audit 

reported to SIGIR that these funds were deposited into another CBI 

account under control of the Minister of Finance. 
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

2530 Crystal Drive • Arlington, Virginia 22202 

October 26, 2011 

MEMORANDUM FOR U.S. SECRETARY OF DEFENSE 

SUBJECT: Development Fund for Iraq: The Coalition Provisional Authority Transferred 

Control over Most of the Remaining DFI Funds to the Central Bank of Iraq 

(SIGIR 12-001) 

We are providing this audit report for your information and use. The report discusses issues 

related to the Development Fund for Iraq. We performed this audit in accordance with our 

statutory responsibilities contained in Public Law 108-106, as amended, which also incorporates 

the duties and responsibilities of inspectors general under the Inspector General Act of 1978. 

This law provides for independent and objective audits of programs and operations funded with 

amounts appropriated or otherwise made available for the reconstruction of Iraq and for 

recommendations on related policies designed to promote economy, efficiency, and 

effectiveness, and to prevent and detect fraud, waste, and abuse. This audit was conducted as 

SIGIR Project 1112a. 

The Department of Defense and Department of State provided written comments on a draft of 

this report, which SIGIR addressed as appropriate. Those comments are printed in their entirety 

in Appendices D and E. 

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

report, please contact Glenn D. Furbish, Assistant Inspector General for Audits (Washington, 

D.C.), (703) 604-1388/ glenn.furbish@sigir.mil, or Jim Shafer, Principal Deputy Assistant 

Inspector General for Audits (Washington, D.C.), (703) 604-0894/ james.shafer@sigir.mil. 

Stuart W. Bowen, Jr. 

Inspector General 

cc: U.S. Secretary of State 

U.S. Ambassador to Iraq 

Office of the Secretary of Defense (Comptroller) 
Table of Contents 

Introduction 1

Background 1

Objectives 5

CPA Transferred Control of Most Remaining DFI Funds to the Central Bank 

of Iraq 6

Control of DFI Funds at FRBNY Transferred to the CBI 6

Control of DFI Funds in the CBI Baghdad Account Transferred to the CBI 6

DoD Assumed Control of DFI Funds Remaining in the Presidential Palace Vault 7

DoD Granted Limited Authority To Administer and Use DFI for 

CPA-awarded Contracts 7

Some Documentation To Support the Transfer and Deposit of U.S. Currency 

Shipped to Baghdad Is Missing 9

CPA Requested 21 U.S. Currency Shipments from the Federal Reserve 9

Some Documentation Supporting the Transfer and Deposit of DFI Funds Is Missing 10

Not All DFI Funds Were Deposited into the CBI’s Baghdad Account 10

Conclusions and Recommendations 12

Conclusions 12

Recommendations 12

Management Comments and Audit Response 13

Appendix A—Scope and Methodology 14

Appendix B—Acronyms 16

Appendix C—Audit Team Members 17

Appendix D—Department of Defense Comments 18

Appendix E—Department of State Comments 20

Appendix F—SIGIR Mission and Contact Information 21
1 

Development Fund for Iraq: The Coalition Provisional 

Authority Transferred Control over Most of the 

Remaining DFI Funds to the Central Bank of Iraq 

SIGIR 12-001 October 26, 2011

Introduction 

The Coalition Provisional Authority (CPA) was established in May 2003 to provide for the 

temporary governance of Iraq, following the conclusion of major combat operations in that 

country. United Nations Security Council Resolution 1483 established the Development Fund 

for Iraq (DFI) in May 2003 and assigned the CPA full responsibility for managing the fund. 

The Resolution stated that DFI funds should be disbursed at the CPA’s direction, in consultation 

with the interim Iraqi administration. It specified the DFI should be used in a transparent manner 

and for the following purposes: (1) the humanitarian needs of the people, (2) the economic 

reconstruction and repair of infrastructure, (3) the continued disarmament of Iraq, 

(4) the costs of civilian administration, and (5) other purposes benefiting the Iraqi people. 

The DFI comprised revenues from ongoing Iraqi oil sales, unencumbered Oil for Food deposits, 

and repatriated national assets. During its almost 14-month life, the CPA had access to $20.7 

billion in DFI funds, including $10.2 billion in U.S. currency that was flown to Baghdad.1

 

Further, the CPA had $6.6 billion under its control when it completed its mission on June 28, 

2004. In July 2010, SIGIR reported on the accountability and control of these and other related 

DFI funds.2 In that report SIGIR concluded that weaknesses in DoD’s financial and 

management controls left it unable to properly account for and articulate the disposition of 

remaining DFI funds following dissolution of the CPA. 

In response to a request from the Department of Defense (DoD) Comptroller about the status of 

remaining DFI funds, the Special Inspector General for Iraq Reconstruction (SIGIR) initiated 

this audit to determine who had authority and control over DFI funds upon dissolution of the 

CPA and to determine whether DFI funds shipped to Baghdad were properly transferred to Iraqi 

control and then deposited in the Central Bank of Iraq (CBI). 

Background 

The CPA managed the DFI from May 2003 through June 2004. DFI funds were held at the 

Federal Reserve Bank of New York (FRBNY) until the CPA Administrator directed bulk 

 

1

 During the CPA’s existence, almost $12 billion in U.S. currency was flown to Baghdad, which consisted of $10.2 

billion in DFI funds and $1.7 billion in vested assets. Vested assets are Iraqi funds that had been frozen in U.S. bank 

accounts since the first Gulf war and then later transferred to U.S. government accounts. 2 Development Fund for Iraq: Department of Defense Needs To Improve Financial and Management Controls, 

SIGIR 10-020, 7/27/2010. 
2 

shipments of U.S. currency to Baghdad or electronic fund transfer payments to reimburse 

vendors for expenses incurred on completed reconstruction projects and other purposes 

benefitting the Iraqi people. The CPA Policies and Procedures Manual established guidance on 

the shipment of U.S. currency from the Federal Reserve to Baghdad and its deposit into the CBI. 

In addition to accounts at the FRBNY and the CBI, some DFI funds were held at the presidential 

palace vault in Baghdad.3 The CPA was responsible for directing the withdrawal of funds from 

the CBI for transfer to the Iraqi ministries or for deposit in the palace vault. 

During its administration, the CPA had access to $20.7 billion in DFI funds. It developed Excelbased spreadsheets to monitor and account for these funds. These spreadsheets documented the 

flow of DFI funds, similar to a single-entry checkbook-style register. Separate registers were 

maintained for FRBNY and CBI accounts regarding withdrawals and deposits; CPA used these 

records to prepare statements of cash receipts and disbursements. 

The CPA directed DFI expenditures totaling about $14.1 billion, most of which went to interim 

Iraqi ministries to pay for salaries, pensions, and operating costs. In January 2005, SIGIR 

reported that the CPA either failed to establish or did not properly implement sufficient 

managerial, financial, and contractual controls to ensure DFI funds provided to the ministries 

were used in a transparent manner.4

 Table 1 provides a financial matrix showing DFI revenues 

and expenditures during the CPA’s existence. 

 

3

 Saddam Hussein’s former presidential palace in Baghdad became the CPA’s headquarters and was used to store 

cash needed by the CPA. 

4 Oversight of Funds Provided to Iraqi Ministries through the National Budget Process, SIGIR 05-004, 1/30/2005. 
3 

Table 1—DFI Revenues and Expenditures during the CPA’s Existence 

Source: CPA financial matrix, as of June 28, 2004. 

CPA records show that $6.6 billion remained in unexpended DFI funds on June 28, 2004. The 

records also show that these funds were located in three places—FRBNY, CBI, and the 

presidential palace vault. Figure 1 shows the use of DFI funds during the CPA’s existence as 

well as the amount and location of remaining funds. 
4 

Figure 1—Use of DFI Funds during the CPA’s Existence and the Amount and 

Location of Funds Remaining upon Its Dissolution 

Notes: 

a

 Funds under CBI control. 

b Funds under DoD control. 

Source: SIGIR Analysis of CPA records. 

Figure 1 shows that the CPA Administrator directed cash shipments from the FRBNY to 

Baghdad totaling $10.2 billion—$8 billion was deposited in the CBI, $1.6 billion was provided 

to the Kurdistan Regional Government, and $150 million was provided directly to the Minister 

of Finance. Specific records were not located on the disposition of the remaining $400 million 

shipped to Baghdad. The Administrator also directed electronic fund transfers totaling $5.8 
5 

billion from the FRBNY to reimburse vendors for completed reconstruction projects and to 

support the Iraqi ministries. The CPA Administrator also directed cash transfers from the CBI in 

support of ministry budgets as well as to the palace vault. Lastly, Figure 1 shows the amount and 

location of DFI funds remaining as of June 28, 2004.

Objectives 

SIGIR’s objectives for this report were to determine: (1) who had authority and control over DFI 

funds upon dissolution of the CPA, and (2) whether DFI funds shipped to Baghdad were 

properly controlled by the CPA and transferred to and deposited into the CBI. 

For a discussion of the audit scope and methodology, see Appendix A. For a list of acronyms 

used, see Appendix B. For the audit team members, see Appendix C. For Department of 

Defense management comments, see Appendix D. For Department of State management 

comments, see Appendix E. For the SIGIR mission and contact information, see Appendix F. 

 
6 

CPA Transferred Control of Most Remaining DFI 

Funds to the Central Bank of Iraq 

When the CPA was dissolved on June 28, 2004, the Administrator transferred legal control over 

almost all of the $6.6 billion remaining in DFI funds to the CBI, under the control and authority 

of the Government of Iraq. This included $4.7 billion held at the FRBNY and $1.7 billion 

already in the CBI’s DFI account in Baghdad. DoD assumed control of the remaining $217.7 

million in the presidential palace vault. 

Control of DFI Funds at FRBNY Transferred to the CBI 

On June 28, 2004, the CPA Administrator transferred control of $4.7 billion in remaining DFI 

funds held at the FRBNY to the Governor, CBI. This included $4.5 billion invested in U.S. 

Treasury bills and $150.9 million held in several accounts. Upon our request and after gaining 

Iraqi governmental permission, Federal Reserve officials provided SIGIR with independent bank 

confirmations showing that the FRBNY balances matched those recorded in the CPA’s 

accounting records. 

The CPA Administrator instructed the FRBNY to invest excess funds in short duration U.S. 

Treasury bills of varying amounts. On June 28, 2004, CPA accounting records showed it had 

invested approximately $4.52 billion in U.S. Treasury bills with maturity dates ranging from 

August 2004 to December 2004. FRBNY officials confirmed that the value of these U.S. 

Treasury bills at maturity was $4.54 billion. CPA accounting records also show that an 

additional $150.9 million was held in several investment accounts within the FRBNY. 

In a letter dated June 15, 2004, the CPA Administrator informed the FRBNY that his authority 

over the DFI would terminate on June 30, 2004, and that control of remaining funds would 

transfer to the Governor, CBI.5

 On July 4, 2004, the Governor identified eight CBI banking 

officials who were authorized to transfer or expend DFI funds. The Governor informed FRBNY 

officials that all withdrawals of DFI funds would require three signatures from an authorized list 

of CBI banking officials. 

Control of DFI Funds in the CBI Baghdad Account Transferred to 

the CBI 

CPA accounting records show that $1.7 billion remained on deposit in the CBI’s DFI account in 

Baghdad when the CPA dissolved. The Governor of the CBI, in a letter to SIGIR dated 

October 9, 2011, confirmed that $1.7 billion remained in the DFI account in Baghdad on 

June 28, 2004. The CPA Administrator transferred control of these funds to the CBI, when the 

CPA dissolved. 

 

5

 The actual transfer of sovereignty occurred on June 28, 2004. This effectively ended the CPA’s control of funds 

on deposit at the FRBNY and CBI. 
7 

DoD Assumed Control of DFI Funds Remaining in the Presidential 

Palace Vault 

During its existence, the CPA Administrator periodically requested that funds be withdrawn 

from the CBI’s DFI account in Baghdad to replenish cash in the palace vault. As shown in 

Figure 1, a total of $836 million was deposited in the palace vault. A total of nine transfers to the 

palace are documented in CPA records, with five of the transfers occurring in May and June 

2004. Two transfers totaling $201.6 million occurred in May 2004, and three transfers totaling 

$208 million occurred in June 2004. 

CPA records show that about $618.3 million of the $836 million deposited in the palace vault 

was disbursed for projects, and $217.7 million still remained in the vault when the CPA 

dissolved. When the CPA ended its mission, SIGIR concluded that DoD assumed control over 

the remaining funds at the palace; SIGIR is not certain under what authority DoD assumed 

control of these funds. A DoD official told us the funds were used primarily to pay for small 

projects and for contractors that did not have electronic fund transfer capabilities. In February 

2008, SIGIR conducted a cash count at the palace vault and determined that $24.45 million remained.6

 

DoD returned these funds to the Government of Iraq in March 2008. 

In commenting on a draft this report, DoD officials stated that disbursements from the vault were 

made on behalf of the Government of Iraq and required approval of the Minister of Finance. 

SIGIR is continuing to review DoD’s ability to account for its use of the $217.7 million, 

including the process for approving payments from the vault and will issue a follow-on report in 

January 2012. At the same time, SIGIR will report on about $2.8 billion more in DFI funds used 

by DoD agencies, including the U.S. Army Corps of Engineers, for reconstruction projects 

provided under a separate agreement executed with Iraq in June 2004. 

DoD Granted Limited Authority To Administer and Use DFI for 

CPA-awarded Contracts 

Subsequent to the CPA’s dissolution, the Minister of Finance, Interim Iraqi Government, granted 

DoD agencies limited authority to use DFI funds—with approval of Iraqi officials. These funds 

were to be used to pay expenses for ongoing contracts awarded prior to the transfer of 

sovereignty on June 28, 2004. 

On June 1, 2004, the CPA Administrator approved a tentative plan for transitioning spending 

authority for the DFI to the Interim Iraqi Government. The transition plan recommended a 

separate sub-account be established within the FRBNY that would ensure continuing payments 

on contracts awarded by the CPA, prior to the final transfer of sovereignty. On June 15, 2004, 

the Iraqi Minister of Finance granted DoD agencies authority to monitor, confirm performance, 

certify, and/or make payments from the DFI on ongoing contracts awarded by the CPA or the 

Multi-National Force–Iraq. 

 

6 Attestation to Development Fund for Iraq Cash in the Possession of the Joint Area Support Group–Central, SIGIR 

08-012, 3/13/2008.
8 

On June 18, 2004, the CPA Administrator established a sub-account at the FRBNY entitled 

“Central Bank of Iraq/Development Fund for Iraq/Transition.” From July 2004 through 

December 2004, the Minister of Finance authorized the transfer of $2.8 billion into the subaccount which enabled DoD agencies to continue paying bills on contracts that the CPA awarded 

prior to the transfer of sovereignty. All payments from the sub-account required approval by 

designated Interim Iraqi Government officials. The Minister specified that DoD agencies submit 

monthly reports on payments and a final report outlining all payments made under this limited 

spending authority. SIGIR could not locate most of these reports. We continue to review DoD’s 

accounting for funds it used under this post-CPA authority and will issue a report on the matter 

in January 2012. 
9 

Some Documentation To Support the Transfer and 

Deposit of U.S. Currency Shipped to Baghdad Is 

Missing 

While the CPA had policies and procedures governing the transfer and deposit of U.S. currency 

once it arrived in Baghdad, SIGIR found that some documentation required by these policies and 

procedures is missing. For example, certain CPA procedures specified that U.S. currency 

shipped to Baghdad be deposited into the CBI’s DFI account in Baghdad. The FRBNY made 11 

cash shipments to Baghdad totaling $10.2 billion in DFI funds after establishing the Baghdad 

account. SIGIR could not locate all of the receipt documentation supporting the transfers to the 

CBI upon the money’s arrival at Baghdad International Airport. CPA’s own accounting records 

indicate that all currency shipped to Baghdad, with three exceptions, was deposited into the DFI 

Baghdad account. 

CPA Requested 21 U.S. Currency Shipments from the Federal 

Reserve 

There were 21 U.S. currency shipments from the FRBNY totaling almost $12 billion. Eleven 

shipments involving DFI funds were made after the CBI’s DFI Baghdad account was established 

in August 2003.7 Figure 2 provides a listing of these 11 currency shipments totaling $10.2 

billion. The CPA’s authority to request currency shipments ended when it transferred 

sovereignty to the Interim Iraqi Government on June 28, 2004. 

Figure 2—U.S. Currency Shipments of DFI Funds to Baghdad from August 30, 

2003 through June 28, 2004 

Source: FRBNY.

 

7

 The remaining 10 currency shipments included 9 shipments of vested funds and 1 shipment of DFI funds made 

before the CBI’s DFI Baghdad account was established. 
10 

Some Documentation Supporting the Transfer and Deposit of DFI 

Funds Is Missing 

SIGIR could not locate some CPA documents supporting the transfer and deposit of U.S. 

currency in the CBI once it arrived at Baghdad International Airport. Figure 2 shows that six 

U.S. currency shipments were made in 2004. Four of those shipments totaling approximately 

$5.8 billion, or almost half of all U.S. currency shipped, were made within the last two months of 

the CPA’s existence. SIGIR reviewed the final four shipments to determine if the CPA followed 

its own established procedures in transferring the currency to the CBI. 

The CPA Policies and Procedures Manual notes that the normal movement of cash was from 

Federal Reserve facilities in New Jersey to Andrews Air Force Base in Maryland and then to 

Baghdad via U.S. military aircraft. Federal Reserve officials stated their fiduciary responsibility 

ended with the money’s delivery to Andrews. At that point, a DoD representative was 

authorized to sign for the currency on behalf of the CPA. Custody would then be transferred to a 

CBI representative once the air-shipped currency arrived at Baghdad International Airport. A 

former CPA official told us that a Shipment of Funds document (DD Form 165) was used to 

document transfer of custody to the CBI. 

The former CPA official told SIGIR that three individuals were involved with transferring 

currency at Baghdad International Airport—a CPA representative, a CBI representative, and a 

DoD representative accompanying the shipment from the U.S. The CPA official stated that, 

once it arrived, all three individuals counted the currency. Upon completing the count, the CBI 

representative normally took custody of the currency. Both the CPA and CBI representatives 

signed the Shipment of Funds document, which was witnessed by two independent parties. At 

that point, the currency was in the CBI’s actual and legal custody and was supposed to be driven 

to the CBI location in Baghdad and deposited into its DFI account. 

SIGIR scanned an electronic database of CPA records and found documentation showing that 

two of the four currency shipments under review were met by a CBI representative who signed 

for and took custody at Baghdad International Airport. But documentation was missing for 

shipments totaling $1 billion and $2.4 billion. CPA accounting records show that the full 

amount for three of the final four shipments, or about $3.4 billion, was deposited into the CBI’s 

DFI account in Baghdad. For the fourth shipment, records show that only $766.4 million of the 

$2.4 billion shipped was deposited into the CBI’s DFI account in Baghdad. A Shipment of 

Funds document shows the remaining $1.6 billion was transferred to a Central Bank of Kurdistan 

representative. The CPA Administrator directed the transfer of these funds to cover budget 

shortfalls within the Kurdistan Regional Government. The money was flown from the Baghdad 

airport to Erbil, the capital of the Kurdistan Regional Government. 

Not All DFI Funds Were Deposited into the CBI’s Baghdad Account 

CPA records show that not all of the U.S. currency the Federal Reserve shipped to Baghdad was 

deposited into the CBI’s DFI Baghdad account. The CPA Policies and Procedures Manual states 

that U.S. currency shipped to Baghdad would be deposited into this account. In addition, the 

CPA’s written requests for the Federal Reserve to ship U.S. currency stated “Withdrawal for 

Deposit into the DFI Baghdad Account.” As noted above, CPA records show that only part of 
11 

the $2.4 billion final shipment to Baghdad was deposited into the account. SIGIR reviewed 

other U.S. currency shipments to Baghdad in 2003 and 2004 involving DFI funds, after 

establishment of the CBI’s DFI Baghdad account, to determine if the funds were deposited into 

the account. 

SIGIR found two additional instances where part or none of the currency shipped was deposited 

into the DFI Baghdad account. 

 CPA records show that the Administrator directed the FRBNY to ship $1.5 billion to 

Baghdad in December 2003, for deposit into the CBI’s DFI account in Baghdad. The 

CPA’s accounting records show that $1.35 billion was deposited into the DFI Baghdad 

account and $150 million was improperly given to the Iraqi Minister of Finance at 

Baghdad International Airport. A consulting firm to the CPA addressed this transfer 

stating that, in the future, all cash transfers from the Federal Reserve should be deposited 

into the CBI, in total, and that checks should be issued for any disbursements of those 

funds by the CBI thereafter. Officials at the Iraq Board of Supreme Audit8

 also told 

SIGIR that the Minister of Finance did not have authority to take the funds directly. 

 SIGIR also found a letter dated October 10, 2003, in which the CPA Administrator 

directed the FRBNY to ship $400 million to Baghdad for deposit into the CBI’s DFI 

Baghdad account. SIGIR could not find any specific documentation in CPA accounting 

records showing that the funds arrived in Baghdad and were deposited into the CBI’s DFI 

Baghdad account. While we do not have conclusive evidence, there is some indication 

from officials at the Iraq Board of Supreme Audit that these funds were deposited into 

another CBI account under control of the Minister of Finance. 

 

 

8

 The Iraq Board of Supreme Audit is the institution that: (1) provides the public and the government with objective, 

accurate information about government operations and financial conditions, and (2) promotes economy and 

efficiency by carrying out a broad range of financial and performance audits and program evaluations. 
12 

Conclusions and Recommendations 

Conclusions

SIGIR was able to account for the unexpended DFI funds remaining in DFI accounts when the 

CPA dissolved in June 2004. Sufficient evidence exists showing that almost all of the remaining 

$6.6 billion remaining was transferred to actual and legal CBI control. Most of the funds were 

held at the FRBNY ($4.7 billion) and the CBI ($1.7 billion). DoD assumed control over $217.7 

million at the presidential palace vault, but it is unclear under what authority it did so. 

The CPA did not always follow its policies and procedures governing the transfer and deposit of 

U.S. currency once it arrived in Baghdad. SIGIR could not locate all required documents 

showing that U.S. currency shipped to Baghdad was transferred to the CBI and was deposited 

into the DFI Baghdad account, which SIGIR finds of concern given the massive amounts of 

money involved. In two of the three shipments where this occurred, together totaling about $1.8 

billion, there was evidence obtained from different sources to indicate how the funds apparently 

were handled. While SIGIR does not have conclusive evidence to support the arrival and 

disposition of $400 million shipped to Baghdad in October 2003, indications are that these funds 

were deposited into a CBI account under the Minister of Finance’s control. 

Recommendations

This report does not contain recommendations. 

 
13 

Management Comments and Audit Response 

The Under Secretary of Defense (Comptroller) provided SIGIR written comments on a draft of 

this report. The Comptroller suggested that SIGIR should more clearly reference our July 2010 

report, which concluded that weaknesses in DoD financial and management controls left it 

unable to properly account for DFI funds remaining after the CPA was dissolved. We added an 

additional sentence to the introductory section of the report to clarify this reference. SIGIR notes 

that at the time of our July 2010 report, neither SIGIR nor DoD had sufficient documentation 

available to articulate the final disposition and use of remaining DFI funds. Since that time, both 

parties have gathered evidence that shows that most of the $6.6 billion in remaining DFI funds 

was transferred to actual and legal CBI control following dissolution of the CPA. 

The Comptroller provided other technical comments which SIGIR addressed in the body of the 

report where appropriate. For example, the Comptroller states that DoD identified and provided 

SIGIR with an index of items contained in 102 boxes of material that may include some of the 

missing currency shipment and deposit documentation. SIGIR was told that this material was 

scanned into an electronic records database and SIGIR had DoD officials electronically search 

the database using certain keywords but only recovered a few documents. The Comptroller also 

asserts that cash payments made from the Palace vault required approval from the Minister of 

Finance through a monthly reporting process. We continue to review DoD’s accounting for 

these and other funds made available to the DoD under the post-CPA authority and will issue a 

report on these matters in January 2012. 

The Under Secretary of State for Management generally agreed with the content of draft report 

and provided additional technical comments which SIGIR addressed in the body of the report 

where appropriate. 
14 

Appendix A—Scope and Methodology 

Scope and Methodology 

In June 2011, the Special Inspector General for Iraq Reconstruction (SIGIR) initiated Project 

1112a to review the transfer of Development Fund for Iraq (DFI) funds during and at the end of 

the Coalition Provisional Authority’s (CPA) existence. SIGIR’s objectives for this report were 

to determine: (1) who had authority and control over DFI funds upon dissolution of the CPA, 

and (2) whether DFI funds shipped to Baghdad were properly controlled by the CPA and 

transferred to and deposited into the Central Bank of Iraq (CBI). This audit was performed 

under the authority of Public Law 108-106, as amended, which also incorporates the duties and 

responsibilities of inspectors general under the Inspector General Act of 1978, as amended. 

SIGIR conducted its review from June through September 2011 in Baghdad, Iraq and Arlington, 

Virginia. 

To determine who had control over DFI funds upon dissolution of the CPA, SIGIR reviewed 

Federal Reserve Bank of New York (FRBNY) and CPA financial records. In addition, we 

obtained and reviewed correspondence between the CPA Administrator and the FRBNY 

regarding the transfer of control over the DFI upon the CPA’s dissolution. SIGIR also requested 

FRBNY and CBI officials to independently confirm the transfer of signatory authority for the 

DFI accounts and the remaining balances as of June 28, 2004. 

To determine whether DFI funds shipped to Iraq were properly transferred to the CBI and 

deposited into its DFI Baghdad account, we reviewed the CPA Policies and Procedures Manual 

to understand the requirements associated with documenting these actions. SIGIR obtained and 

reviewed FRBNY documents showing the number and amount of DFI funds requested by the 

CPA and shipped to Baghdad. SIGIR reviewed the final four shipments of U.S. currency to 

Baghdad to determine if the CPA followed established policies and procedures. These four 

shipments, from a total of 21 shipments made by the FRBNY, were chosen because they 

accounted for almost half of all the currency shipped, and all of them took place within the last 

two months of the CPA’s existence. We interviewed former CPA officials to obtain their views 

on the procedures followed in transferring DFI funds to and depositing them in the CBI. In 

addition, we met with CBI officials in Baghdad and requested specific documents supporting the 

transfer of DFI funds to them and the deposit of those funds into the DFI Baghdad account. We 

also reviewed and obtained information from an electronic database of historical CPA records. 

This audit was conducted in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 

Use of Computer-processed Data 

To achieve the audit’s objectives, we relied on computer-processed data provided by the FRBNY 

and obtained from CPA records. We did not assess the system’s general controls but cross-
15 

referenced the data with supplemental information obtained from the two sources. In performing 

this audit, SIGIR obtained FRBNY computer-generated data and CPA accounting records. We 

did not independently verify the detailed computer generated information, but because these are 

basic accounting systems of the involved organizations, we concluded that the computerprocessed information was sufficiently reliable and the best available for purposes of our audit. 

Internal Controls 

In performing this audit, we reviewed FRBNY and CPA internal management and financial 

controls for administering the DFI. As a key part of this work, we reviewed FRBNY bank 

statements and CPA accounting records. We also held discussions with key officials to gain an 

understanding of the internal controls governing the use of DFI funds. We concluded that 

controls governing the process for shipping, transferring, and depositing DFI funds into the CBI 

were sufficiently reliable for reporting on the status of DFI. We presented the results of our 

review of internal controls in this report, as appropriate. 

Prior Coverage 

We reviewed the following SIGIR reports: 

Guidance Needed for Use of Residual Iraqi Vested and Seized Asset Funds, SIGIR 11-002, 

10/15/2010. 

Development Fund for Iraq: Department of Defense Needs To Improve Financial and 

Management Controls, SIGIR 10-020, 7/27/2010. 

Process for Continuing Invoice Payment for the Development Fund for Iraq Needs Attention, 

SIGIR 10-014, 4/27/2010. 

Development Fund of Iraq: Policy Guidance Needed To Enhance Accountability of USACEManaged Funds, SIGIR 10-006, 10/29/2009. 

Attestation to Development Fund for Iraq Cash in the Possession of the Joint Area Support 

Group–Central, SIGIR 08-012, 3/13/2008. 

Oversight of Funds Provided to Iraqi Ministries through the National Budget Process, SIGIR 

05-004, 1/30/2005. 

Coalition Provisional Authority Control Over Seized and Vested Assets, SIGIR 04-008, 

7/30/2004. 

 
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Appendix B—Acronyms 

Acronym Description 

CBI Central Bank of Iraq 

CPA Coalition Provisional Authority 

DFI Development Fund for Iraq 

DoD Department of Defense 

FRBNY Federal Reserve Bank of New York 

SIGIR Special Inspector General for Iraq Reconstruction 

 
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Appendix C—Audit Team Members 

This report was prepared and the audit conducted under the direction of Glenn D. Furbish, 

Assistant Inspector General for Audits, Office of the Special Inspector General for Iraq 

Reconstruction. 

The staff members who conducted the audit and contributed to the report include: 

Ziad Buhaissi 

Benjamin Comfort 

Dan Haigler 

Glenn Knoepfle 

Richard Newbold 

Kevin O’Connor 

Michael Welsh 
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Appendix D—Department of Defense Comments 
19 

 
20 

Appendix E—Department of State Comments 

 
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Appendix F—SIGIR Mission and Contact Information 

SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, and 

operations in Iraq, the Special Inspector General for Iraq 

Reconstruction provides independent and objective: 

 oversight and review through comprehensive audits, 

inspections, and investigations 

 advice and recommendations on policies to promote 

economy, efficiency, and effectiveness 

 deterrence of malfeasance through the prevention and 

detection of fraud, waste, and abuse 

 information and analysis to the Secretary of State, the 

Secretary of Defense, the Congress, and the American 

people through Quarterly Reports 

Obtaining Copies of SIGIR 

Reports and Testimonies 

To obtain copies of SIGIR documents at no cost, go to 

SIGIR’s Web site (www.sigir.mil). 

To Report Fraud, Waste, and 

Abuse in Iraq Relief and 

Reconstruction Programs 

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline: 

 Web: www.sigir.mil/submit_fraud.html 

 Phone: 703-602-4063 

 Toll Free: 866-301-2003 

Congressional Affairs Hillel Weinberg 

Assistant Inspector General for Congressional 

 Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 2530 Crystal Drive 

 Arlington, VA 22202-3940 

Phone: 703-428-1059 

Email: hillel.weinberg@sigir.mil 

Public Affairs Deborah Horan 

Office of Public Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 2530 Crystal Drive 

 Arlington, VA 22202-3940 

Phone:703-428-1217 

Fax: 703-428-0817 

Email: PublicAffairs@sigir.mil