OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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SIGIR 12-008 

JANUARY 27, 2012
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 12-008 

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 full 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 Iraq relief and reconstruction efforts. 

During its almost 14-month governance, the 

CPA had access to $20.7 billion in DFI funds 

and directed expenditures of about $14.1 billion. 

The CPA had $6.6 billion under its control when 

its mission ended on June 28, 2004. The 

Government of Iraq (GOI) gave the U.S. 

Department of Defense (DoD) access to about 

$3 billion of these funds to pay bills for 

contracts the CPA awarded prior to its 

dissolution. Most of these funds were deposited 

into the DFI sub-account at the Federal Reserve 

Bank of New York (FRBNY). 

The Special Inspector General for Iraq 

Reconstruction (SIGIR) initiated this audit to 

determine whether DoD properly accounted for 

its use of the: (1) $2.8 billion deposited into the 

DFI sub-account at the FRBNY after the CPA 

dissolved, and (2) $217.7 million in cash that 

remained in the presidential palace vault when 

the CPA dissolved. 

What SIGIR Recommends 

This report does not contain recommendations. 

Management Comments 

The Office of the Under Secretary of Defense 

(Comptroller) provided written comments on a 

draft of this report and, in general, agreed with 

the report. The comments are printed in their 

entirety in Appendix E. 

January 27, 2012 

DEVELOPMENT FUND FOR IRAQ: THE DEPARTMENT OF DEFENSE 

CANNOT FULLY ACCOUNT FOR THE FUNDS IT USED AFTER THE 

COALITION PROVISIONAL AUTHORITY DISSOLVED

What SIGIR Found 

DoD cannot account for about two-thirds of the approximately $3 billion in 

DFI funds made available to it by the GOI for making payments on contracts 

the CPA awarded prior to its dissolution. Most of these funds were held in 

the DFI sub-account at the FRBNY ($2.8 billion); the remainder was held in 

the presidential palace vault in Baghdad ($217.7 million). FRBNY records 

show that DoD made about $2.7 billion in payments from the DFI subaccount. However, the FRBNY does not have specifics about the payments 

or financial documents, such as vendor invoices, to support them. It 

required only written approval from the GOI to issue payment. 

Although it was DoD’s responsibility to maintain documentation supporting 

the full $2.7 billion in expenditures made from the FRBNY sub-account, it 

could provide us documentation supporting only about $1 billion. Although 

DoD established internal processes and controls to report sub-account 

payments to the GOI, the bulk of the records are missing. As a result, 

SIGIR’s review was limited to the $1 billion in available records. SIGIR 

examined 15 payments from this group and found most of the key 

supporting financial documents. DoD continues to search for documents 

supporting the remaining $1.7 billion in payments. DoD’s problems with 

DFI records management are not new, and both SIGIR and DoD have 

previously reported on them. 

DoD is also missing other key documents including copies of monthly 

reports documenting expenditures from the DFI sub-account and from the 

palace vault. When the Minister of Finance gave DoD authority to spend the 

money, he directed DoD to submit monthly reports and a final report 

documenting its payments from the DFI sub-account. From July 2004 

through December 2007, DoD should have provided 42 monthly reports. 

However, it can locate only the first four reports. SIGIR found evidence 

indicating that other monthly reports were sent. For example, we found 

transmittal letters dated July 2006 and October 2007, but the attachments 

providing the transaction details were missing. We also contacted the DoD 

official who signed the October 2007 letter, who confirmed that the monthly 

report was sent. However, neither SIGIR nor DoD could locate any of the 

other reports. 

Finally, DoD cannot locate documentation supporting $119.4 million of the 

$193.3 million it spent from the $217.7 million in cash remaining in the 

presidential palace vault when the CPA dissolved. DoD did not establish the 

required U.S. Treasury account to maintain accountability for the funds. 

Instead, DoD established its own internal processes and controls to account 

for and report cash payments to the Minister of Finance. DoD has Excel 

spreadsheets supporting about $73.9 million of the $193.3 million spent 

from the palace vault cash. SIGIR reviewed 15 payments from the $73.9 

million to assess DoD’s financial controls and found most of the required 

documents to support them. DoD continues to search for documentation 

supporting the remaining $119.4 million in cash payments. 
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

2530 Crystal Drive • Arlington, Virginia 22202 

January 27, 2012 

MEMORANDUM FOR U.S. SECRETARY OF DEFENSE 

SUBJECT: Development Fund for Iraq: The Department of Defense Cannot Fully Account 

for the Funds It Used after the Coalition Provisional Authority Dissolved (SIGIR 

12-008) 

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

related to the U.S. Department of Defense’s accountability for Development Fund for Iraq funds 

it used after the Coalition Provisional Authority dissolved. 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. The Special Inspector 

General for Iraq Reconstruction (SIGIR) conducted this audit as Project 1112b. 

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.d.furbish.civ@mail.mil or Jim Shafer, Principal Deputy Assistant 

Inspector General for Audits (Washington, D.C.), (703) 604-0894/ fred.j.shafer.civ@mail.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 3

Documentation Supporting Most Payments Made from the DFI Sub-account 

Is Missing 4

GOI Deposited $2.8 Billion into the DFI Sub-account 4

Documentation Supporting the Expenditure of Most Funds from the DFI Sub-account 

Cannot Be Located 5

Most Monthly Reports and the Final Report to the GOI Documenting DFI Sub-account 

Payments Are Missing 6

Documentation Supporting Most Payments Made from the Presidential 

Palace Vault after the CPA Dissolved Is Missing 8

DoD Assumed Control of DFI Funds Remaining in the Presidential Palace Vault 8

DoD Did Not Establish Required U.S. Treasury Financial Controls for DFI Funds 

Remaining in the Presidential Palace Vault 8

Most Documentation Supporting the Expenditure of Cash from the Presidential Palace 

Vault after the CPA Dissolved Is Missing 9

Conclusions and Recommendations 10

Conclusions 10

Recommendations 10

Management Comments 11

Appendix A—Scope and Methodology 12

Appendix B—Acronyms 14

Appendix C—Results of SIGIR’s Documentation Review of DoD’s Electronic 

Funds Transfer and Cash Payments 15

Appendix D—Audit Team Members 17

Appendix E—Department of Defense Comments 18

Appendix F—SIGIR Mission and Contact Information 19
1 

Development Fund for Iraq: The Department of Defense 

Cannot Fully Account for the DFI Funds It Used after the 

Coalition Provisional Authority Dissolved 

SIGIR 12-008 January 27, 2012

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 it. Resolution 

1483 specified the DFI should be used in a transparent manner and for: (1) the humanitarian 

needs of the Iraqi 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 governance, the CPA had access to 

$20.7 billion in DFI funds and directed expenditures of about $14.1 billion. The CPA had $6.6 

billion under its control when its mission ended on June 28, 2004. In October 2011, the Special 

Inspector General for Iraq Reconstruction (SIGIR) reported that the CPA Administrator 

transferred full and legal control over almost all of the $6.6 billion remaining in DFI funds to the 

Central Bank of Iraq (CBI).1

 

After the CPA dissolved, the Government of Iraq (GOI) provided the U.S. Department of 

Defense (DoD) access to about $3 billion of the remaining DFI funds to pay outstanding bills for 

contracts awarded by the CPA prior to its dissolution. Most of these funds were held in the DFI 

sub-account at the Federal Reserve Bank of New York (FRBNY); the remainder was held in the 

presidential palace vault in Baghdad.2

 SIGIR initiated this audit to determine whether DoD 

properly accounted for its use of the: (1) $2.8 billion deposited into the DFI sub-account after 

the CPA dissolved, and (2) $217.7 million in cash remaining in the presidential palace vault 

when the CPA dissolved. Because DoD encountered difficulties in locating documentation, 

SIGIR’s review was limited to about $1 billion in available DFI sub-account payment records 

and $73.9 million in available presidential palace vault payment records. 

Background 

The CPA managed the DFI from May 2003 through June 2004. During that time period, DFI 

funds were held in the DFI main account at the FRBNY until the CPA Administrator directed 

 

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, 10/26/2011. 2

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

cash needed by the CPA. 
2 

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

vendors for expenses incurred on completed reconstruction projects and other purposes 

benefitting the Iraqi people. On June 1, 2004, the CPA Administrator approved a tentative plan 

for transitioning spending authority for the DFI to the Interim Iraqi Government. The plan 

recommended a separate sub-account be established within the FRBNY that would ensure 

continuing payments on contracts awarded by the CPA prior to its dissolution. 

On 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. The actual transfer of sovereignty occurred on June 28, 2004, at which time the 

CPA Administrator transferred full and legal control of $4.7 billion and $1.7 billion in remaining 

DFI funds held at the FRBNY and at the CBI, respectively, to the Governor, CBI. DoD assumed 

control of the remaining $217.7 million in the presidential palace vault. 

On June 18, 2004, the Iraqi Minister of Finance created a sub-account within the FRBNY 

entitled “Central Bank of Iraq/Development Fund for Iraq/Transition” to facilitate payments on 

contracts the CPA awarded prior to June 28, 2004. All payments from the DFI sub-account 

required prior approval by designated Interim Iraqi government officials. The Governor, CBI, 

designated eight CBI banking officials who were authorized to transfer or expend DFI funds. 

The Governor informed FRBNY officials that withdrawals of funds from the DFI sub-account 

required the signatures of three individuals from the designated list of CBI banking officials. 

The Iraqi Minister of Finance granted DoD limited authority to monitor, confirm performance, 

certify, and/or make payments from the DFI sub-account on ongoing contracts awarded by the 

CPA or the Multi-National Force–Iraq. From July 2004 through December 2004, the Minister of 

Finance transferred a total of $2.8 billion from funds remaining in the DFI main account at the 

FRBNY into the newly established DFI sub-account. DoD also had access to the $217.7 million 

remaining in the presidential palace vault in Baghdad. 

The Joint Area Support Group–Central (JASG-C), a DoD agency, was responsible for 

accounting for DFI funds following the CPA’s dissolution. The first JASG-C Comptroller, who 

held the position from mid-July 2004 through mid-November 2004, established internal 

processes and controls to account for DFI payments and report them to the Iraqi Minister of 

Finance. The Comptroller maintained an Excel spreadsheet to account for DFI funds expended 

from the DFI sub-account as well as from the presidential palace vault. The spreadsheet 

contained 13 columns of information including voucher number, payment order number, payee, 

payment amount, payment date, and Iraqi ministry responsible for the sector in which the work 

was done. 

The Minister of Finance directed DoD to submit monthly reports, as well as a final report, 

outlining all expenditures, payments, and outflows of DFI funds made from the DFI sub-account 

on behalf of the Interim Iraqi Government. The Minister withdrew DoD’s authority for 

administering DFI funds effective December 31, 2007. 
3 

Objectives 

SIGIR’s objectives for this report were to determine whether DoD properly accounted for its use 

of the: (1) $2.8 billion deposited into the DFI sub-account at the FRBNY after the CPA 

dissolved, and (2) $217.7 million in cash that remained in the presidential palace vault when the 

CPA dissolved. 

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

used, see Appendix B. For the results of SIGIR’s documentation review of DoD’s electronic 

funds transfer and cash payments, see Appendix C. For the audit team members, see Appendix 

D. For DoD management comments, see Appendix E. For the SIGIR mission and contact 

information, see Appendix F. 
4 

Documentation Supporting Most Payments Made 

from the DFI Sub-account Is Missing 

DoD could not locate documentation supporting most of the $2.7 billion it spent from the $2.8 

billion the GOI deposited into the DFI sub-account for making payments on contracts the CPA 

awarded prior to its dissolution. Even though DoD established internal processes and controls to 

account for and report sub-account expenditures to the GOI, it can locate documentation 

supporting only about $1 billion. As a result, SIGIR’s review of payments was limited to this $1 

billion. SIGIR reviewed 15 payments to assess DoD’s financial controls and found most of the 

key financial documents to support them. DoD continues to search for documentation 

supporting the remaining $1.7 billion in payments made from the DFI sub-account. We selected 

20 additional payments from the FRBNY’s records and compared them with JASG-C’s records, 

and vice versa, and found complete agreement between them. 

We also looked for monthly reports documenting expenditures from the DFI sub-account. When 

the Minister of Finance gave DoD authority to spend the money, he directed DoD to submit 

monthly reports and a final report documenting its payments from the DFI sub-account. From 

July 2004 through December 2007, DoD should have provided 42 monthly reports, but it can 

locate only the first four reports. However, there is evidence indicating the reports were sent. 

GOI Deposited $2.8 Billion into the DFI Sub-account 

In 2004, the GOI made four deposits totaling $2.8 billion into the DFI sub-account at the 

FRBNY. The first deposit of $800 million was made in July 2004, followed by a $400 million 

deposit in September 2004. Two additional deposits of $800 million each were made in 

November and December 2004. The GOI deposited funds into the sub-account for DoD’s use in 

making payments on contracts awarded by the CPA prior to its dissolution. 

FRBNY records show that about $2.7 billion was paid out of the DFI sub-account from July 

2004 through December 2007.3

 These records provide a line-by-line listing of DFI sub-account 

payments made, but specifics regarding the transactions are limited. For example, the FRBNY 

did not receive financial documents to support transactions such as material inspection and 

receiving reports or vendor invoices. To make a payment, the FRBNY needed only the written 

approval of CBI banking officials designated by the Governor, CBI. 

According to a former JASG-C Comptroller, his office was responsible for obtaining the 

necessary financial documents to support a requested payment. Once the Comptroller’s office 

had the required documentation, it wrote to the Governor, CBI, requesting authorization to make 

a payment from the DFI sub-account. Along with the request letter, the Comptroller included all 

of the financial supporting documentation justifying the payment. If the Governor concurred, 

 

3

 FRBNY records show that about $667 million out of the $2.7 billion in payments involved U.S. Army Corps of 

Engineers-administered contracts. In 2012, SIGIR plans to conduct a detailed audit of the Corps’ accounting for 

DFI funds it had access to during and after the CPA’s existence. The U.S. Army Corps of Engineers previously 

reported to SIGIR that it had access to $2.4 billion in DFI funds (SIGIR 10-006, 10/29/2009). 
5 

authorized CBI banking officials would send a letter to the FRBNY instructing it to make the 

payment. 

FRBNY officials told us they have the CBI’s written authorizations for all of the $2.7 billion 

expended from the DFI sub-account. The FRBNY provided SIGIR with signed copies of the 

written authorizations that show the CBI instructed the FRBNY to pay a certain amount of 

money from the DFI sub-account to a specified beneficiary. 

Documentation Supporting the Expenditure of Most Funds from the 

DFI Sub-account Cannot Be Located 

DoD could not locate documentation supporting the payments for most of the $2.7 billion it used 

from the DFI sub-account. DoD officials have Excel spreadsheets supporting about $1 billion of 

the $2.7 billion, or 37%, it used from the sub-account. These spreadsheets cover the first four 

months of payments from the sub-account following the CPA’s dissolution. DoD is looking for 

documentation supporting the remaining $1.7 billion in payments. 

DoD officials told us that during an initial data search they found an Excel spreadsheet 

accounting for about $860.5 million in DFI sub-account payments made in the first three months 

following the CPA’s dissolution. The officials also told us the first JASG-C Comptroller 

prepared this spreadsheet and after contacting him learned that he had kept detailed back-up 

records documenting sub-account payments made throughout his four-month assignment in Iraq. 

The Comptroller had spreadsheets and financial documents supporting about $1 billion in 

payments made from the DFI sub-account from June 29, 2004 through November 13, 2004. 

The Office of the Under Secretary of Defense (Comptroller) is trying to locate the Excel 

spreadsheets supporting the remaining $1.7 billion in payments made from the DFI sub-account. 

Comptroller officials told us they reviewed more than 100 boxes of hard copy files and 

conducted multiple electronic database searches of DFI documents in their attempt to locate the 

missing spreadsheets. They also contacted former JASG-C Comptrollers, Deputy Comptrollers 

and DFI Disbursing officers to determine whether they had back-up DFI sub-account payment 

records similar to those kept by the first JASG-C Comptroller. The officials told us that none of 

these former JASG-C officials kept back-up records. 

DoD’s inability to locate historical records from Iraq is not a new issue. For example, an internal 

DoD study identified significant problems with all phases of its records management in Iraq. In 

July 2010, SIGIR reported that DoD had records management policies and procedures but had 

not fully implemented those procedures for preserving its Iraq reconstruction records. In some 

cases, DoD organizations were missing records or did not know the status of records that had 

been shipped to storage. SIGIR noted that these situations could result in the U.S. government 

not having the necessary information to perform audits of reconstruction activities.4

 

 

 

4 Plans To Preserve Iraq Reconstruction Program and Contract Records Need To Be Improved, SIGIR 10-021, 

7/30/2010. 
6 

SIGIR’s Review of 15 Payments Found Good Documentation 

SIGIR’s review was limited to the $1 billion in payments documented by the first JASG-C 

Comptroller. From these payments, we selected 15 for detailed review. We looked for three 

documents: (1) the material inspection and receiving report, (2) vendor invoice, and (3) public 

voucher. The 15 payments had a combined value of $135 million or about 13.5% of the total 

funds expended during that time period. The payments ranged in value from $68,710 to $60.9 

million. 

SIGIR found that DoD had 44 of the 45 required documents (97.8%) to support the 15 payments. 

The material inspection and receiving report was missing for a $13.9 million payment, but it did 

have the associated vendor invoice and public voucher. The results of our review are presented 

in Appendix C. 

SIGIR’s Comparison of DoD Payment Records with FRBNY Payment Records Found 

Complete Agreement Between the Two 

SIGIR selected 20 DFI sub-account payments from the first JASG-C Comptroller’s spreadsheets 

and looked for those payments on the FRBNY’s records and found them all. Similarly, we 

selected 20 additional DFI sub-account payments from the FRBNY’s records, looked for those 

payments on the first JASG-C Comptroller’s spreadsheets, and found all of them. According to 

the first JASG-C Comptroller, the results of our comparison of records was not surprising 

because he reconciled his payment records with the FRBNY on a daily basis. 

Most Monthly Reports and the Final Report to the GOI 

Documenting DFI Sub-account Payments Are Missing 

DoD could not locate most of the monthly reports and the final report that it was required to 

provide to the GOI documenting expenditures from the DFI sub-account. In total, DoD should 

have provided 42 monthly reports covering the period July 2004 through December 2007. DoD 

has the first four monthly reports covering the period July through October 2004, which 

corresponds to the tenure of the first JASG-C Comptroller. These monthly reports provide a 

line-by-line listing of payments made from the DFI sub-account during this time period.5 

SIGIR and DoD officials searched hard copy files as well as available electronic databases of 

CPA and other DFI records but did not find the remaining 38 monthly reports or the final report. 

However, there are no assurances that the files and databases searched represent all CPA and 

DFI records. Nonetheless, during these searches, two transmittal letters from the JASG-C 

Comptroller’s office to the Minister of Finance were found—one from July 2006 and the other 

from October 2007—indicating that the required monthly reports were sent. The October 2007 

letter listed five attachments, two of which reportedly provided detailed listings of payments 

made from the DFI sub-account and the presidential palace vault from July 2004 through 

October 2007. While this indicates that a comprehensive list of payments was provided to the 

Minister of Finance, neither SIGIR nor DoD could locate the attachments. Without the 

 

5

 Although the Iraqi Minister of Finance did not require it, DoD included payments made from the presidential 

palace vault in its monthly reports to the GOI for payments made from the DFI sub-account. 
7 

attachments, SIGIR cannot verify the payments and sample those payments for key financial 

documents. 

Two former JASG-C officials told us the required reports were sent monthly to the GOI during 

their tenures with the Comptroller’s office in Baghdad. For example, the official who signed the 

October 2007 letter told us that the report, with attachments, was sent to the Minister of Finance. 

He also confirmed that it was a cumulative report covering the period July 2004 through October 

2007, and provided detailed information on expenditures from both the DFI sub-account and the 

presidential palace vault. However, the official did not know who might have a copy of the 

report or where it may be stored. 
8 

Documentation Supporting Most Payments Made 

from the Presidential Palace Vault after the CPA 

Dissolved Is Missing 

DoD could not locate documentation supporting most of the $193.3 million it spent from the 

$217.7 million in cash remaining in the presidential palace vault when the CPA dissolved. DoD 

assumed control of the remaining cash in the vault, but it did not establish the required U.S. 

Treasury account to maintain accountability for the funds. Instead, DoD established its own 

internal processes and controls to account for and report cash payments to the Minister of 

Finance. DoD has Excel spreadsheets supporting about $73.9 million of the $193.3 million spent 

from the cash remaining in the presidential palace vault. SIGIR reviewed 15 payments to assess 

DoD’s financial controls and found most of the required documents to support those payments. 

DoD continues to search for documentation supporting the remaining $119.4 million in cash 

payments. 

DoD Assumed Control of DFI Funds Remaining in the Presidential 

Palace Vault 

During the CPA’s governance, the Administrator periodically requested that funds be withdrawn 

from the CBI’s DFI account in Baghdad to replenish cash in the presidential palace vault. CPA 

records show that during its almost 14-month governance, $836 million was withdrawn from the 

DFI Baghdad account and deposited into the presidential palace vault. Nine withdrawals 

occurred during this time period, with $409.6 million, or almost half of all the funds, taking place 

in the last two months of the CPA’s governance. CPA records show that $618.3 million was 

disbursed, and $217.7 million in cash remained when the CPA dissolved. 

Almost all of the DFI funds remaining under the CPA’s control when it dissolved were returned 

to and placed under control of the CBI. However, DoD assumed control of the $217.7 million in 

cash remaining in the presidential palace vault.6 A DoD official told us the funds were needed to 

pay for small projects and for contractors that did not have electronic funds transfer capabilities. 

In February 2008, SIGIR conducted a cash count at the palace vault and found that $24.4 million 

remained.7

 DoD returned these funds to the GOI in March 2008. 

DoD Did Not Establish Required U.S. Treasury Financial Controls 

for DFI Funds Remaining in the Presidential Palace Vault

DoD did not establish a deposit fund account within the U.S. Department of the Treasury for the 

$217.7 million in DFI funds remaining in the presidential palace vault for which it took full 

control. Treasury Financial Manual Volume 1, Part 2, Chapter 1500, Section 1535—Deposit 

 

6 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, 10/26/2011. 7 Attestation to Development Fund for Iraq Cash in the Possession of the Joint Area Support Group–Central, SIGIR 

08-012, 3/13/2008.
9 

Funds Accounts—states that the Financial Management Service’s Budget Reports Division is to 

establish deposit fund accounts for agencies to record funds that do not belong to the Federal 

government. Treasury’s guidance states that to maintain accountability, agencies must establish 

separate deposit fund accounts to hold non-U.S. government funds, such as from a foreign 

government, for individual statutory authorizations or programs, for which the U.S. government 

is acting solely as a banker, fiscal agent, or custodian. These accounts, a key financial 

management control, enable agencies to maintain accountability for non-U.S. government funds 

by tracking obligations and expenditures on a monthly basis, just as they would with U.S.-

appropriated funds. According to a Treasury official, DFI funds were subject to this 

requirement, and each U.S. government agency possessing DFI funds was responsible, in 

consultation with the Office of Management and Budget, for requesting that the deposit fund 

account be established. 

DoD officials told us they never established a deposit fund account because they had full 

authority from the GOI to spend the remaining cash in the presidential palace vault. They also 

told us that disbursements from the palace vault, as well as the DFI sub-account, were made on 

behalf of the GOI and required approval of the Minister of Finance. While a letter from the 

Minister of Finance directed DoD to obtain approval before making payments from the DFI subaccount, it was silent with regard to cash payments from the presidential palace vault. A former 

JASG-C official told us that the GOI was notified of cash payments made from the vault, but the 

notification came after the payments were made. Further, in similar situations where DoD 

received funds from the GOI and controlled those funds, such as the Commander’s Emergency 

Response Program and the Iraq–Commander’s Emergency Response Program, it established the 

proper deposit fund accounts within the U.S. Treasury. 

Most Documentation Supporting the Expenditure of Cash from the 

Presidential Palace Vault after the CPA Dissolved Is Missing

DoD could not locate documentation supporting the payments for most of the $193.3 million in 

funds expended from the $217.7 million contained in the presidential palace vault when the CPA 

dissolved. DoD has Excel spreadsheets supporting about $73.9 million out of the $193.3 million 

it spent, or 38.2%, from the remaining cash in the presidential palace vault. DoD continues its 

efforts to locate documentation supporting the remaining $119.4 million in cash payments made 

from the presidential palace vault. 

To assess DoD’s financial controls, SIGIR selected 15 payments from the spreadsheets that 

existed for the time period June 29, 2004 through November 13, 2004. These payments had a 

combined value of about $14.4 million or 19.7% of the funds expended during this time period. 

The payments ranged in value from $6,300 to $4.76 million. 

For each of the 15 payments, we looked for three key financial documents: (1) material 

inspection and receiving report, (2) vendor invoice, and (3) public voucher. SIGIR found that 

DoD had 44 of the 45 required documents (97.8%) to support the 15 payments. The material 

inspection and receiving report was missing for a $6,300 payment, but it did have the associated 

vendor invoice and public voucher. The results of our review are presented in Appendix C.
10 

Conclusions and Recommendations 

Conclusions

SIGIR believes that DoD’s difficulty in locating supporting documentation for DFI payments 

made after the CPA dissolved is a records management issue. Records management has been an 

ongoing problem for DoD in Iraq. By all accounts, DoD established good internal processes and 

controls to account for and report on DFI funds it had access to after the CPA dissolved. Where 

DoD records existed, we found they matched the FRBNY’s records, and that there was good 

financial documentation supporting individual payments. Further, there is sufficient evidence 

indicating that required monthly reports documenting DFI sub-account and presidential palace 

vault payments were sent to the GOI. Nonetheless, DoD’s inability to locate these reports and 

related financial documentation prevents SIGIR from performing a thorough and complete audit 

of DFI payments following the CPA’s dissolution. 

Recommendations

This report does not contain recommendations. 

 
11 

Management Comments 

The Office of the Under Secretary of Defense (Comptroller) provided written comments on a 

draft of this report and, in general, agreed with the report. The comments are printed in their 

entirety in Appendix E. 

 
12 

Appendix A—Scope and Methodology 

Scope and Methodology 

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

1112b to review the extent to which the U.S. Department of Defense (DoD) retained records to 

document its use of Development Fund for Iraq (DFI) funds following the Coalition Provisional 

Authority’s (CPA) dissolution. SIGIR’s objectives for this report were to determine whether 

DoD properly accounted for its use of the: (1) $2.8 billion deposited into the DFI sub-account 

after the CPA dissolved, and (2) $217.7 million in cash remaining in the presidential palace vault 

when the CPA dissolved. 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 October 2011 

through January 2012 in Arlington, Virginia. Because DoD encountered difficulties in locating 

documentation, SIGIR’s review was limited to about $1 billion in available DFI sub-account 

payment records and $73.9 million in available presidential palace vault payment records. 

To determine whether DoD properly accounted for funds used from the DFI sub-account, we met 

with Office of the Under Secretary of Defense (Comptroller) officials and a former Joint Area 

Support Group–Central (JASG-C) Comptroller in Washington, D.C. We reviewed policies, 

procedures, and other related DFI data. We also reviewed Federal Reserve Bank of New York 

(FRBNY) and JASG-C accounting records for payments made from July 2004 through 

December 2007. These records primarily consisted of Excel spreadsheets containing expenditure 

information from the DFI sub-account such as the payee, payment amount and date, and contract 

number. We selected 15 DFI sub-account payments from JASG-C’s spreadsheets to determine 

whether they had the proper financial supporting documentation. For each payment, we looked 

for three key financial supporting documents—material inspection and receiving report, vendor 

invoice, and public voucher. Due to the limited amount of information available, all of the 

selected payments came from JASG-C’s spreadsheets covering the period June 29, 2004 through 

November 13, 2004. We also selected 20 additional DFI sub-account payments from the 

FRBNY’s spreadsheet and crosschecked them with JASG-C’s spreadsheets, and vice versa, to 

determine if payments from the two spreadsheets matched. 

To determine whether DoD submitted the required monthly reports and final report documenting 

DFI sub-account payments to the Government of Iraq (GOI), we met with Office of the Under 

Secretary of Defense (Comptroller) officials and a former JASG-C Comptroller. We also had 

telephone discussions with other former JASG-C Comptrollers to determine whether they 

recalled sending the monthly reports to the GOI and whether they had kept personal copies of the 

monthly reports or knew where they were sent for storage. In addition, we reviewed some hard 

copy files of DFI records and made multiple searches of available CPA and DFI electronic 

databases for the required reports. 

To determine whether DoD properly accounted for cash used from the presidential palace vault, 

we met with Office of the Under Secretary of Defense (Comptroller) officials and a former 

JASG-C Comptroller. We also held telephone discussions with other former JASG-C 

Comptrollers. We used the first JASG-C Comptroller’s financial spreadsheets supporting cash 
13 

payments to assess DoD’s financial controls. We selected 15 cash payments to determine 

whether they had the proper financial supporting documentation. For each payment, we looked 

for three key financial supporting documents—material inspection and receiving report, vendor 

invoice, and public voucher. Due to the limited amount of information available, all of the 

selected payments came from JASG-C’s spreadsheets covering the period June 29, 2004 through 

November 13, 2004. Lastly, we reviewed U.S. Treasury Financial Manual policies and 

procedures regarding the establishment of deposit fund accounts for handling non-U.S. 

government funds provided to a U.S. agency. 

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 

In performing this audit, SIGIR obtained FRBNY computer-generated data and JASG-C 

accounting records. We did not assess each system’s general controls but crosschecked data 

from the two providers. Further, because these were basic accounting systems of the involved 

organizations, we concluded that the computer-processed information was sufficiently reliable 

and the best available for purposes of our audit. 

Internal Controls 

In performing this audit, we reviewed FRBNY and JASG-C internal management and financial 

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

JASG-C accounting records. We also held discussions with key officials to gain an 

understanding of the internal controls governing the DFI fund payments. We concluded that 

controls governing the payment of DFI funds and the reporting of them to the GOI were 

sufficiently reliable for use in this audit. We presented the results of our review of internal 

controls in this report, as appropriate. 

Prior Coverage 

We reviewed the following SIGIR reports: 

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, 10/26/2011. 

Plans To Preserve Iraq Reconstruction Program and Contract Records Need To Be Improved, 

SIGIR 10-021, 7/30/2010. 

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

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

 
14 

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 

GOI Government of Iraq 

JASG-C Joint Area Support Group–Central 

SIGIR Special Inspector General for Iraq Reconstruction 

 
15 

Appendix C—Results of SIGIR’s Documentation 

Review of DoD’s Electronic Funds Transfer and Cash 

Payments 

Table 1 shows the results of SIGIR’s documentation review of 15 electronic funds transfer 

payments from the DFI sub-account from June 29, 2004 through November 13, 2004. 

Table 1—Documentation Check List for Electronic Funds Transfer Payments 

Project Description 

Payment 

Amount 

Payment 

Date 

DD-250 

Forma Vendor 

Invoice 

Public 

Voucher 

Utility Upgrade and Facility 

Renovation at Military Base $893,746 04/30/2004 X X X 

Ambulance, Wrecker, and 

other Vehicles $10,400,355 07/30/2004 X X X 

Engineering Consulting 

Services $13,952,860 08/02/2004 - X X 

Ballistic Vests with Plates $4,969,020 08/03/2004 X X X 

Fuel Import and Delivery $60,884,825 08/05/2004 X X X 

Supplies and Maintenance $3,339,367 08/05/2004 X X X 

Security Services $5,894,584 08/09/2004 X X X 

Radio Equipment and 

Service $403,437 08/12/2004 X X X 

Force Protection $1,343,080 08/16/2004 X X X 

Imported Electricity $7,432,224 09/07/2004 X X X 

Communication Supplies $4,837,398 09/20/2004 X X X 

Repair/Establishment of 

Warehouses $4,976,373 10/01/2004 X X X 

Personnel and Facility 

Security $68,710 10/12/2004 X X X 

Armored Personnel Carrier $10,790,921 10/21/2004 X X X 

Equipment, Vehicle

Maintenance, Force 

Protection 

$4,835,224 11/05/2004 X X X 

Documents Required 45 

Documents in File 44 

Documents Missing 1 

Percentage of Documents in File 97.8% 

Note: 

a Material Inspection and Receiving Report 

Source: SIGIR analysis of DoD Comptroller data. 
16 

Table 2 shows the results of SIGIR’s documentation review of 15 cash payments from the 

presidential palace vault from June 29, 2004 through November 13, 2004. 

Table 2—Documentation Check List for Cash Payments 

Project Description Payment 

Amount 

Payment 

Date 

DD-250 

Forma

Vendor 

Invoice 

Public 

Voucher 

Grant Payment for Death 

Program $500,000 07/16/2004 X X X 

Ministerial Convention Pool 

Rehabilitation $92,330 07/18/2004 X X X 

Armored Vehicle Purchase $140,000 07/30/2004 X X X 

Ministerial Convention Pool 

Rehabilitation $175,290 08/03/2004 X X X 

Ministerial Convention Pool 

Rehabilitation $40,650 08/03/2004 X X X 

Support Services for Military 

Training Base $4,614,735 08/09/2004 X X X 

Boots for Military Training 

Base $171,440 08/12/2004 X X X 

Office Supplies $201,767 08/14/2004 X X X 

Life Support Services for 

Baghdad Public Service 

Academy Training Site 

$4,762,097 08/16/2004 X X X 

Security Services $533,875 08/17/2004 X X X 

Letter of Credit Fee $6,300 08/17/2004 - X X 

Construction Materials for 

Baghdad University $100,000 08/20/2004 X X X 

Military Body Armor-Vests $1,727,320 10/13/2004 X X X 

Compact Water Units $695,984 11/06/2004 X X X 

Supply Uniforms $598,400 11/06/2004 X X X 

Documents Required 45 

Documents in File 44 

Documents Missing 1 

Percentage of Documents in File 97.8% 

Note: 

a Material Inspection and Receiving Report 

Source: SIGIR analysis of DoD Comptroller data. 

 
17 

Appendix D—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 M. Buhaissi 

Benjamin H. Comfort 

M. Glenn Knoepfle 

Richard C. Newbold 

L. Michael Welsh 
18 

Appendix E—Department of Defense Comments 
19 

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.civ@mail.mil 

Public Affairs Christopher Griffith 

Director of Public Affairs 

Mail: Office of the Special Inspector General 

for Iraq Reconstruction 

 2530 Crystal Drive 

 Arlington, VA 22202-3940 

Phone: 703-604-0693 

Fax: 703-428-0818 

Email: PublicAffairs@sigir.mil