Inspector General's report -- 28 July, 2004

Coalition Provisional Authority Comptroller Cash Management Controls Over the Development Fund for Iraq 28 July, 2004

$600 million in funds were held in the DFI. Of this, $400 million was disbursed to the field and handled by agents with limited visibility, whose appointments were not adequately documented, and who did not adequately document and take receipts for the disbursements. The report finds that

1. proper cash accountability was not maintained
   • Of the $400 million disbursed on the field, $50 million was cleared without a reciept, and the remainder were often cleared with limited explanation, and for services ``contradictory to the allowable expenses''.
   • North Star Consultants were hired at $1.4 million to review internal controls. When they failed to do this, the comptroller ``verbally modified the contract and employed the contractor to primarily perform accounting tasks in the Comptroller's office''. (Incidentally, this the same consultancy noted by KPMG that thought that a single employee with a spread-sheet would be adequate to account for the entire DFI To do: who are North Star?).
2. physical security was inadequate
   • Keys to the safe were kept in the disbursing officers backpack
   • As far as I can tell, at some point the officer actually left the room with the safe open and (at least) the auditors present
3. fund agent records were not complete
4. fund managers' responsibilities and liabilities were not properly assigned.