STATEMENT OF WORK

STATEMENT OF WORK EXTERNAL AUDITS RELATING TO ALL EXPORT SALES OF IRAQI OIL, PETROLEUM PRODUCTS AND NATURAL GAS AND THE OPERATIONS OF THE DEVELOPMENT FUND FOR IRAQ 1. BACKGROUND United Nations Security Council Resolution (“UNSCR”) 1483, dated 22 May 2003, noted the establishment of the Development Fund for Iraq (“the DFI”). Resolution 1483 authorizes the Coalition Provisional Authority (“the CPA”) in consultation with the Iraqi interim administration to direct disbursements from the DFI and underlines, in paragraph 14, that the DFI shall 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, and for the costs of Iraqi civilian administration, and for other purposes benefiting the people of Iraq. This Statement of Work addresses the requirements contained within UNSCR 1483 and the Terms of Reference (“the TOR”) of the International Advisory and Monitoring Board (“the IAMB”), (attached) for the external audits of all export sales relating to Iraqi oil, petroleum products and natural gas and the operations of the DFI. In accordance with UNSCR 1483 and the agreed upon TOR of the IAMB, the independent public accountants (External Auditor(s)) referenced in paragraphs 12 and 20 of UNSCR 1483 to execute these audits shall be nominated and appointed by the Administrator of the CPA, subject to approval by the IAMB. The selection process for the External Auditor(s) and the terms of reference for the objectives, scope and approach of the External Auditor(s) work shall be approved by the IAMB. The DFI. On May 22, 2003, the U.S. Federal Reserve Bank of New York (“FRBNY”), at the request of the Administrator of the CPA (“Administrator”), established the DFI. The Central Bank of Iraq holds the DFI on its books. The FRBNY (and/or the Bank of International Settlements (Switzerland) ), and /or other financial institutions opened the “Central Bank of Iraq/Development Fund for Iraq” account and maintain(s) it at the direction of the CPA Administrator or his designates. Consistent with UNSCR 1483, funds are disbursed from the DFI at the direction of the CPA, in consultation with the interim Iraqi authority, 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's civilian administration, and for other purposes benefiting the people of Iraq. One billion United States dollars from unencumbered funds in accounts established pursuant to paragraphs 8(a) and 8(b) of UNSCR 986 (1995) were transferred by the United Nations into the DFI shortly following its establishment. Since then an additional $4.6 billion United States dollars have been transferred by the United Nations. Also, certain restored funds and surplus funds, pursuant to paragraph 17 and 23 of Resolution 1483, continue to be transferred to the DFI. In addition, ninety five percent of the proceeds from all export sales of petroleum, petroleum products, and natural gas from Iraq are being deposited into the DFI, pursuant to paragraph 20 of Resolution 1483, and five percent of such proceeds are being deposited in the Compensation Fund established pursuant to UNSCR 687 (1991) and pursuant to paragraph 21 of UNSCR 1483. As appropriate, gifts, contributions, donations or other funds, revenues or proceeds have been and will be deposited into the DFI. Proceeds from the investment of Fund assets, have been and will also be deposited into the DFI. The Central Bank of Iraq and the FRBNY (and/or other financial institutions(s), if the Administrator so directs), accept instructions, as agreed, concerning the DFI, including instructions to pay sums out of the DFI, only from the Administrator or his authorized designates. DFI Locations. The DFI is held on the books of the Central Bank of Iraq, and the corpus of the DFI is held in an account entitled “Central Bank of Iraq/Development Fund for Iraq” in the FRBNY (and/or other financial institutions if the Administrator so directs), for the Central Bank. In addition, pursuant to UNSCR 1483 and CPA Regulation Number 2, the FRBNY is maintaining on its books an Oil Proceeds Receipts Account (the “Receipts Account”) for the initial receipt of proceeds of all export sales of petroleum, petroleum products, and natural gas from Iraq and for the immediate transfer of ninety-five percent of such proceeds to the “Central Bank of Iraq/Development Fund for Iraq” account and five percent of such proceeds to the appropriate United Nations Compensation Fund account. Oil export Sales. Oil export sales are arranged for and conducted by the State Oil Marketing Organization (SOMO), which is the Iraqi Ministry of Oil’s marketing and supply organization. Pursuant to paragraph 20 of UNSCR 1483, the CPA oversees these transactions to ensure they are consistent with prevailing international best practices. SOMO contracts for oil export sales via tenders, spot contracts, and term contracts. For each oil export sale, the buyer first files a letter of credit with the FRBNY, the lift of the contracted quantity occurs, final pricing occurs, and payment to FRBNY is made within 30 days of the lift. CPA monitors SOMO’s clientele, reviews its oil export sales contracts and its official sales prices (OSP), and ensures the correct payment is made to the FRBNY. 2. PROJECT OBJECTIVE The objective is to conduct external audits relating to Iraqi oil, petroleum products and natural gas and the operations of the Development Fund for Iraq. 3. PROJECT SCOPE The contractor will perform a special purpose audit engagement of the DFI in accordance with the Terms of Reference. The specified component is the Fund and its related accounts established at the FRBNY. In conjunction with the engagement, the contractor must issue a report that expresses an opinion as to whether the fund is administered in a transparent manner and used for the benefit of the people of Iraq. The engagement must be performed and the report written in accordance with International Standards on Auditing (ISA), January 1, 2003 and applicable INTOSAI Standards in Government Auditing (“Audit Standards”). The scope must cover: the export sales of oil, petroleum products and natural gas from Iraq (the “Export Sales”), supporting the objective of ensuring that the Export Sales are made consistent with prevailing international market best practices; the “Oil Proceeds Receipts Account” held by the Central Bank of Iraq at the Federal Reserve Bank of New York; the DFI (including, but not limited to, all inflows, investments and other assets, disbursements, liabilities and contingencies of the DFI), supporting the objective of ensuring that the DFI is used in a transparent manner in accordance with applicable control procedures; and disbursements of resources from the DFI to ensure that they are in accordance with the provision of paragraph 14 of UNSCR 1483 and that DFI funds are used in a transparent manner and for the purposes for which they were disbursed. For purposes of (i) and (ii) above, the contractor must ensure that all sales and related receipts are accurately accounted for and the distribution of receipts between the DFI and the Compensation Fund account are accurately reflected. For purposes of (iii), the contractor must audit, in accordance with International Financial Reporting Standards (IFRS), the financial statements prepared by the Administrator. For purposes of subparagraph (iv) above, the contractor will make (1) a determination as to whether the disbursements from the DFI are duly authorized and received by the designated recipient; and (2) an assessment as to whether the controls (including the requirement to ensure proper records) of the designated recipient are adequate to ensure that disbursements from the DFI are utilized as intended. The “designated recipient” is the Iraqi Ministry or other government organization responsible for implementing the program for which the disbursement from the DFI is made. 4. TASK MONITOR – Contracting Officer’s Representative (COR) The Coalition Provisional Authority Inspector General or another designate appointed by the Administrator will serve as the COR for this contract. The COR, in coordination with the IAMB, will issue tasks to the contractor and will monitor the contractor’s work to ensure compliance with the terms of the contract prior to approving compensation. 5. DELIVERABLES 5.1. Audit Documentation The contractor must provide engagement documentation that complies with the Audit Standards. The documentation must be written in the English language. If the documentation is provided in electronic format, the COR must have access to the software package used by the contractor to oversee and review the documentation, as needed. The contractor must provide copies of the documentation requested by the designated COR, as necessary. The contractor will provide a copy of the documentation 15 days after contract award and every 15 days thereafter until the contract is complete. Through the specified engagement phases listed in the Audit Standards, the contractor must make the documentation available to the COR for review to ensure compliance with applicable standards. Documentation must provide the support for the contractor’s report. Included in the documentation must be documents that support the efforts performed in planning and conducting the engagement. The contractor must also comply with the request set out in paragraph 10 of this document. 5.2. Status Meetings The contractor must schedule a briefing in Baghdad, Iraq with the COR and CPA representatives to discuss the status of the Contract Order not later than 21 days after the award of the Contract Order. Subsequent briefings and meetings will take place as required. The purpose of the briefings and meetings will be to discuss the provision of services described herein, and any potential delays or problems. A representative of the IAMB may attend status meetings. 5.3. Auditor’s Report The contractor must prepare separate audit reports for each of the areas covered under 3, Project Scope, in accordance with Audit Standards. The reports will be provided simultaneously to the Administrator and to the IAMB. The initial contract order will cover the periods from inception to December 31, 2003 and from 1 January 2004 to 30 June 2004. In accordance with the terms of engagement described in paragraph 6, reports will be provided every six months. At a minimum, the Auditor’s Report should include (1) the title, addressees, and an opening or introductory paragraph containing (a) identification of the financial information audited and (b) statement of the responsibility of the entity’s management and the responsibility of the contractor; (2) a scope and methodology paragraph describing the nature of the audit (a) referencing the Standards applicable to the engagements or other relevant international standards or practices and (b) the work the contractor performed; and, (3) an opinion paragraph containing an expression of opinion on the areas for examination set out in paragraph 3 (i) to 3 (iv) above. The contractor may expand the report to include other information and explanations not intended as a reservation. Audit reports will be provided in both Arabic and English. 6. Terms of the Engagement. Work under this Contract Order must commence upon award. The contractor must complete this Contract Order in respect of the period from inception to December 31 2003 not later than 90 days after contract award. Additional work without specified completion dates must be coordinated with the designated COR. The cost of this Contract Order is not-to-exceed the total compensation proposed in Section 8. The resulting award will consist of the periods since inception to 31 December 2003 and 1 January to 30 June 2004. The CPA will provide the contractor with access to the DFI’s financial records, documents, personnel and the designated recipients, with any confidential or proprietary materials protected in a manner agreed between the parties. 7. KEY PERSONNEL Prime Contractor. The proposed names of the contractor’s key personnel must be identified before executing this Contract Order. After contract award, the names may not be substituted under this Contract Order without the COR approval. The contractor will not be paid for individuals billed to the Contract Order unless previous written authority by the COR is in the possession of the contractor. Subcontractors. The prime contractor must provide the names, addresses, and qualifications of all anticipated subcontractors that will perform work on this Contract Order, prior to contract award. Any changes to the subcontractors are subject to prior written approval from the COR. 8. COMPENSATION Cost. The contractor’s cost proposal must include the labor category, the estimated hours for each category, and the labor rates. The contractor must provide total amounts for each labor category and the not-to-exceed amount for the entire proposal on the pricing sheet. The contractor should also propose rates to be used to price tasks for additional work that may requested by the IAMB. Alternative Costing. The CPA encourages potential contractors to offer alternative costing arrangements and scope changes that would be more cost effective and efficient than what the CPA has proposed in its statement of work. The CPA will consider any innovative cost and techniques proposed in a submitted proposal. 9. LOGISTICAL SUPPORT Transportation. The contractor, or its designated subcontractor, will be reimbursed for approved economy class transportation charges for transportation related to the conduct of the audit. Transportation to and from Baghdad, Iraq must be arranged through the CPA. Contractor or designated subcontractor will use government transportation to the fullest extent possible. The CPA controls entrance to Iraq, thus contractors will be required to obtain country clearance approval from the CPA. Life Support. All CPA approved meals and lodging required for the contractor, or its subcontractor, in Baghdad will be provided by the CPA. Subject to CPA approval, office facilities and internet access on site in Iraq will be provided to the contractor by CPA. 10. RELATIONSHIP BETWEEN THE CONTRACTOR AND THE IAMB The IAMB, consistent with its terms of reference, shall perform functions similar to those of outside audit committees, functioning according to international best practices and the contractor shall interact with the IAMB accordingly. The IAMB, in coordination with the CPA COR, shall review all audit reports prepared by the contractor and determine whether the audits were conducted in a satisfactory and comprehensive manner, and in accordance with appropriate standards. The IAMB will periodically have executive sessions with the contractor, and may, at its discretion include the CPA COR or other relevant persons in such sessions. The contractor shall respond to all requests and queries from the IAMB and shall otherwise disclose fully the material facts that have given rise to audit observations. The IAMB shall, pursuant to its terms of reference, ensure that all audit reports under this statement of work are made public. The IAMB shall have access to financial and other records and access to all personnel relevant to its mandate, including those of the contractor and any subcontractors. The contractor must also make its personnel available to meet with the IAMB as necessary. A representative of the IAMB has the right to attend the status meetings with the contractor. 11. EVALUATION OF PROPOSAL Designated government personnel will evaluate submitted proposals and auditors shall be nominated and appointed by the Administrator of the CPA subject to approval by the IAMB. Each bidder must submit a Statement of Independence and a list of prior clients that can be contacted to discuss their opinion on the quality of the bidder’s prior engagement work. 2004-01-28 DABV01-04-R-0015