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Audit and oversight

Development Fund for Iraq

Date
1 January 2004
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Audit and oversight
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Development Fund for Iraq Statement of Cash Receipts and Payments For the period from 1 January 2004 to 28 June 2004 (with Independent Auditors' Report) This report con!oins 16 pages KPMG Fakhro Audit 5th Floor Chamber of Commerce Building PO Box 710, Manama Kingdom of Bahrain CR No. 6220 Telephone +973 17 224807 Fax +973 17227443 Internet www.kpmg.com.bh Independent Auditors' Report To the International Advisory and Monitoring Board of the Developrrent Fund for Iraq To the Project and Contracting Office (successor to the Coalition Provisional Authority) We have audited the accompanying state~nt of cash receipts and payments of the Develop~nt Fund for Iraq (the "Fund") for the period from 1 January 2004 to 28 June 2004. This financial statement is the responsibility of the Coalition Provisional Authority. Our responsibility is to express an opinion on the accompanying financial state~nt based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with International Standards on Auditing and International Organization of Supreme Audit Institutions (INTOSAl) Standards on Government Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by the Coalition Provisional Authority, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 4 to the financial statement, the internal control systems over the Iraqi oil industry were not sufficient to ensure the completeness of export sales of petroleum and petroleum products for the period from 22 May 2003 to 28 June 2004, of which the proceeds were required to be deposited in the Fund in accordance with United Nations Security Council Resolution 1483. It was not practicable to extend our auditing procedures sufficiently to quantify such amounts and accordingly we could not satisfy ourselves about the completeness of export sales. Cash advances received for and proceedS of export sales of petroleum and petroleum products during the period from 1 January 2004 to 28 June 2004 amounting to $20,038,000 were deposited in an Iraqi bank account controlled by the State Oil Marketing Organization, the sales arm of the Iraqi Ministry of Oil. In accordance with United Nations Security Council Resolution 1483, 95% of cash proceeds for export sales were required to be deposited in the Fund as described in Note 4. As a result. receipts for the period from 1 January 2004 to 28 June 2004 and cash as at 28 June 2004 are understated by $19,036,100. IndeDendent Auditors' ReDort. continued In our opinion, except for the effects of such adjustments, if any, of the matter referred to in the third paragraph above, and except for the understaten1ent of the receipts and cash as refmed to in the preceding paragraph, the accompanying statement of cash receipts and payments presents fairly, in all material respects, the receipts and payments of the Development Fund for Iraq for the period from I January 2004 to 28 June 2004 in accordance with the International Public Sector Accounting Standard "Financial Reporting.under the Cash Basis of Accounting". Without further qualifying our opinion, we draw attention to Note 2 to the financial statement, which states that the Coalition Provisional Authority ceased to exist on 28 June 2004 and explains the transfer of the Mministration of the Fund to the hlterim Government oflI'aq. Without further qualifying our opinion, we draw attention to the fact that due to the departure of the CPA Administrator, CPA Chief Financial Officer and CPA Comptroller, the statement of cash receipts and payments was approved by Colonel Sidney Heetland, DFI Ftmd Manager, who was not involved in the administration of the Coalition Provisional Authority. This report. including om opinion, is intended solely for the information and use of the International Advisory and Monitoring Board of the Development FWld for Iraq and the Project and Contracting Office and should not be used for any other purpose. However, this report is a matter of public record and its distribution is not limited. We do not, in giving om opinion, accept or assume responsibility for any other purpose or to any other person to whom this statement is shown or into whose hands it may come save where expressly agreed by om consent in writing. Manama, Kingdom of Bahrain I< P fV\ r;-- 30 September 2004 Development Fund for Iraq Statement of Cash Receipts and Payments For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Receipts Net proceeds from export sales of petroleum and petroleum prodUCts UN Oil for Food program transfers Deposits from assets frozen outside of Iraq Net deposits by Iraqi Ministries for payments on their behalf Food and Agricultural Organization and World Food Program Interest on US Treasmy bills Interest on overnight deposits Other Total receipts Payments Transfers to Iraqi Ministries Projects administered by the CPA Letters of credit Food and Agricultmal Organization and World Food Program Total payments (Excess of payments over receipts) I excess of receipts over payments Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period 1 January to Notes 28 June 2004 (6 months) 4 5 6 7 8 12 12 9 10 11 $ 7,636,390 2,500,000 298,546 140,574 25,879 29,715 3,352 309 10,634,765 6,834 f,788 4,893 ,,668 725 ;,730 8 17.976 12,472,162 22 May to 31 December 2003 (7.3 months) $ 3,726,271 5,600,000 757,550 76,596 120,000 3,780 4,348 274 10,288,819 1,375,950 245,182 57,154 125.400 1,803,686 8,485,133 4, 12, 15 (1,837~97) 8.485.133 $ 6_647.736 $ 8.48~.133 This Statement of Cash Receipts and Payments was approved by the Project and Contracting Office 30 September 2004 and signed on its behalf by: Sidney Beetland, Colonel, USAF DFI Fund Manager 1 2. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments For the period from 1 Jannary 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Organization of the Fund The Development Fund for Iraq (the Fund or DFI) was established dwing May 2003 by the United States of America and recognized by United Nations Security Council Resolution (UNSCR) 1483. Power was delegated by the US President to the Administrator of the Coalition Provisional Authority (CPA). The F\n1d consists of bank acCO\n1ts with the Federal Reserve Bank of New York and the Central Bank of Iraq.. In accordance with UNSCR 1483, the proceeds from export sales of petroleum, petroleum products and natural gas from Iraq are to be deposited in the DFl In addition, the surplus funds from the UN Oil for Food program, established by UNSCR 986, are to be transferred to the F\n1d. Furthennore, all Member States are obligated to freeze and transfer funds and other financial assets of the former Iraqi regime to the DFI. Consistent with UNSCR 1483, the Fund is to be used in a transparent manner to meet the humanitarian needs of the ~i people, for the economic reconstruction and repair of Iraq's infrastrUcture, for the continued disarmament of Iraq, for the costs of Iraqi civilian administration and for other p~ses benefiting the people of Iraq. In accordance with CPA Regulation 1 issued on 16 May 2003, the CPA was vested with all executive, legislative and judicial authority necessary to achieve its objectives, to be exercised under relevant UNSCRs, including UNSCR 1483, and the laws and usages of war. The CPA was responsible for the ter;nporary governance of Iraq under the authority of the CPA Administrator. In accordance with CPA Regulation 2 issued on 15 June 2003, the CPA Administrator oversaw and controlled the establishment, administration and use of the Fund for and on behalf of the Iraqi people, and directed disbursements from the Fund for those purposes he determined, in consultation with the Iraqi interim administration, to be for the benefit of the people of Iraq. An International Advi~ and Monitoring Board (IAMB) for the Fund was appointed in accordance with UNSCR 1483, to perfonn functions similar to those of an audit coImnittee. Going concern assumption On 28 J1.Ule 2004, the CPA ceased to exist and, in accordance with UNSCR 1546 of 8 J1.Ule 2004, the disbursement of DFI funds became subject to the sole discretion of the Interim Government of Iraq. To complete transition efforts and continue with Iraqi Reconstruction, the Iraq Reconstruction Management Office was established by the US Government at that time. Pursuant to UNSCR 1546, the proceeds of export sales of Iraqi petroleum and petroleum products shall continue to be deposited with the DFI and utilized in a transparent and equitable manner, through the Iraqi budget, until a government is constitutionally elected. The IAMB shall continue its activities in monitoring the Fund and shall include an additional full voting member designated by the Government of Iraq. These provisions can be reviewed at the request of the Transitional Government of Iraq to be elected by 31 January 2005, at the late~. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) 3. Summary of significant accounting policies Statement of compliance The Statement of Cash Receipts and Payments has been prepared in accordance with the International Public Sector Accounting Standard "Financial Reporting under the Cash Basis of Accounting" issued by the International Federation of Accountants in January 2003. The effective date for the adoption of this standard is I January 2004 with early adoption CDCO\D'aged. The CPA and the IAMB elected to adopt this standard for the reporting periods from inception (22 May 2003) to 31 December 2003 and I January 2004 to 28 June 2004. Basis of presentation The Fund consists of cash held on behalf of the Ceritral Bank of Iraq. These funds are held at the Federal Reserve Bank in New Yark in an account entitled "Central Bank of Iraq / Development Fund for Iraq", at the Central Bank of Iraq and by Coalition Forces. The accounting policies have been applied consistently throughout the period and are consistent with those used in the previous period. Certain prior period amounts have been reclassified to conform to current period presentation. The reporting periods were determined by the IAMB and the CPA. These reporting periods are not comparable. All amo\Dlts are in thousands of US dollars \Dlless otherwise stated. Receipts The Fund records receipts when cash is received in bank accounts under the control of the DFI. Non-cash transactions. including barter transactions. are not recorded. Payments A payment occurred when funds were transferred from the control of the CPA to a non- Coalition Forces recipient (e.g. a contractor or an Iraqi Ministry). Cash deposits with banks for issued irrevocable documentary letters of credit are also considered to be payments. Commitments The DFI allocates funds for specific budgetary items These funds are considered to be committed and are not available for other spending. Management estimates Information disclosed in the notes required the CPA to make estimates and assumptions that affect the reported amounts of conunitments, unrecorded assets and liabilities, and other note disclosures. Actual results could differ from those estimates. Functional currency The functional cUITcncy is the US dol1ar 4. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Cash equivalents Cash equivalents are short-term, highly-liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value and are held for the purpose of meeting short-telm cash cOImnitments rather than for investment or other pmposes. Net proceeds from export sales of petroleum and petroleum products Export sales of petrole\nn and petroleum products are arranged and invoiced exclusively by the State Oil Marketing Organization (SOMO), the sales arm of the Iraqi Ministry of Oil. There were no export sales of natural gas from Iraq, as there is no Iraqi infrastructure for the export of nannoal gas. The proceeds of export sales of petroleum and petroleum products are required to be deposited in the Oil Proceeds Receipts Account (OPRA) and inunediately thereafter, 95% is required to be deposited in the Fund and the remaining 5% is required to be deposited in the Compensation Fund. The Compensation F\D1d was established in accordance with UNSCR 687 and subsequent relevant resolutions, as a result of the Iraqi invasion of Kuwait dming 1990. Export sales of petroleum and petroleum products are paid for by inevocable documentary letters of credit with proceeds received approximately 30 days after the petroleum or petroleum products have been lifted. In addition, a limited number of export sales of petroleum and most export sales of petroleum products were made tmough barter transactions. Export sales and proceeds of petrolewn and petroleum prooucts for the period from I January 2004 to 28 June 2004 are as follows: Total export sales of petroleum for the period (277,694,869 barrels) Less proceeds deposited in OPRA post-28 Jooe 2004 Plus cash deposited in 2004 from proceeds of 2003 export sales Proceeds deposited in OPRA during 2004 for petroleum Plus proceeds deposited in OPRA during 2004 for petroleum products Less amooots transferred to the Compensation Fund Net proceeds deposited in the Fund for the period to 28 June 2004 $ 8,085,193 (1,201,817) 1.154.243 8,037,619 686 (401.915) $ 7.636.390 Export sales and proceeds of petroleum for the period from inception to 31 December 2003 are as follows: Total export sales of petroleum for the period (198,242,690 barrels) Less proceeds deposited in OPRA in early 2004 Proceeds deposited in OPRA dming 2003 for petroleum Less amounts transferred to the Compensation F\D1d Net proceeds deposited in the Fund for the period to 31 December 2003 $ 5,076,634 (1.154.243) 3,922,391 (196.120) $ 3.726.271 As the OPRA account is technica)]y not a OFJ account, it has been excluded from the Fund. Accordingly, only 95% of export sales receipts are included in Receipts. 5. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) SOMa also engages in barter transactions (see note 13) for exports of petroleum and petroleum products. Barter transactions consist mainly of ex~ of residual fuel oil for light fuel products and exports of crude oil for electricity from Syria. The value of these barter transactions, as recorded by SOMa, for the period from 1 January 2004 to 28 June 2004 is $209,881 (2003: $120,907). As these were non-cash transactions, they are not recorded in the statement of cash receipts and payments. The CPA believed that an unknown quantity of petroleum and petroleum products was illegally exported from Iraq (smuggling), especially in the early months of post-hostilities, by-passing the authorized processes of marketing, sales and cash collection. Despite the key internal controls put in place by the CPA and SOMa, the CPA also believed that internal control systems over the Iraqi oil industry were insufficient to ensure that all petroleum and petroleum products were accounted for in the absence of a metering system. The CPA was unable to reliably estimate the amounts of petroleum and petroleum products that were illegally exported for the period from 22 May 2003 to 28 June 2004. UN Oil for Food program transfers The UN Oil for Food (OFF) program was established by UNSCR 986 and subsequent relevant resolutions. UNSCR 1483 directed that all sUIplus funds in the OFF program were to be transferred to the DFI at the earliest possible time. OFF transfers during the period from 1 January 2004 to 28 June 2004 are as follows: 31 March 19 April $ 2,000,000 500.000 $ 2.500.000 OFF transfers during the period from inception to 31 December 2003 are as follows: 28 May 31 October 18 November 31 December $ 1,000,000 1,000,000 1,000,000 2.600.000 $ 5.600.000 Subsequent to 28 J\Dle 2004, the United Nations 1ransferred an additional amount of $500,000 on 30 June 2004. In addition, the United Nations has notified the DFI that additional amounts may be 1ranSferred to the DFI subject to the completion of various OFF programs. According to the United Nations, there are no restrictions, conditions or other covenants over the funds received from the OFF program. Further, the United Nations have confinned that funds transferred to the DFI are not repayable under any circmnstances. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) 6. Deposits from assets frozen outside of Iraq In accordance with UNSCR 1483, all Member States were obligated to freeze and transfer funds and other financial assets of the former Iraqi regime to the DFI unless those assets were subject to prior judicial, administrative or arbitral lien or judgment. During the period from 1 January 2004 to 28 June 2004, amounts deposited by Member States into the DFI arc as follows: Jordan Lebanon Spain Great Britain United States of America Cyprus NOIWaY Finland Croatia Italy Other $ 215,000 46,931 29,604 4,268 984 729 377 140 98 51 364 $ 298.546 During the period from inception to 31 December 2003, amounts deposited by Member States into the DFI are as follows: Switzerland United States of America Great Britain Japan Jordan Tunisia Kuwait France Italy Australia Vietnam $ 211,077 207,945 184,066 98,088 35,000 8,006 6,963 4,188 2,198 17 2 -' 757.550 Other fimds and financial assets of the fOmler Iraqi regime are still held by various Member States, which the US Government and regulatory agencies in Member States are actively pursuing. The CPA cannot reliably estimate the arnoW1t of such funds that may eventually be transferred to the DFI as some of these assets are subject to prior judicial, administrative or arbitral lien or judgment. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) 7. Net deposits by Iraqi Ministries for payments on their behalf Iraqi Ministries made dePosits with the CPA for payments on their behalf. Most of these deposits were made to fund letters of credit as the Iraqi banking system does not have the capability to execute wire transfers for payment to international suppliers. ~i Ministries' deposits and payments for the period from 1 January 2004 to 28 June 2004 are as follows: Ministry oft Electricity Health Finance - Central Bank of Iraq Interior Agriculture Transport National Security and Defense Connnunications Housing and Construction Industry and Minerals Oil Culture Foreign Affairs Other Deposits bY: $ 448,086 118,384 37,482 34,640 16,000 12,807 11,400 9,380 4,815 2,891 1,190 1,000 437 602 , $ 699.114 Payments for: $ 336,405 116,390 22,768 29,887 15,956 12,807 11,089 6,141 4,817 988 267 423 602 $ 558.540 Net deposits by Iraqi Ministries $ 140.574 Iraqi Ministries' deposits and payments for the period from inception to 31 December 2003 are as follows: Ministry oft Health Electricity Interior Cotmnunications Deposits by: $ 53,271 30,000 10,704 Payments for: $ 8,082 120 10,422 1,275 21 Other 51 $ 95.271 $18.675 Net deposits by Iraqi Ministries $ 76.596 8. 9. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Food and Agricultural Organization and World Food Program The Food and Agricultural Organization. the World Food Program and the CPA agreed that the Iraqi Ministry of Trade should act as the procurer for the 2003 Iraqi wheat and barley harvest. During the period &om inception to 31 December 2003 receipts &om these programs amounted to $120,000 and payments to the Ministry of Trade amounted to $125,400. Although these programs were completed during 2003, a final receipt of $25,879 and a payment of $17,976 occurred in 2004. As at 28 June 2004, there was $2,503 which had not been disbursed &om the DFI. Transfers to Iraqi Ministries The Iraqi Ministry of Finance is mainly funded by the DR. After funds are transferred from the DR to the Iraqi Ministry of Finance, ftmds are redistributed to other Iraqi Ministries in accordance with their individual budgets. Certain DR funds were also transferred directly to the Kurdish Regional Government by the CPA. Payments for the period from 1 January 2004 to 28 J\DlC 2004 are as follows: Ministry of Finance January February March April May J\D1C Kurdish Regional Government January May l\D1e $ 727,776 508,812 900,000 600,000 530,000 1,791,400 21,300 120,000 1.635.500 $ 6_834.788 Transfers in June 2004 were larger than previous months to ensme the Interim Government of Iraq had sufficient funds to meet obligations subsequent to the transfer of authority. Payments for the period from inception to 31 December 2003 are as follows: Ministry of Finance October November December $ 433,000 392,950 550.000 $ 1.375.950 During the period from post-hostilities to September 2003, the Iraqi Ministries were ftmded by other sources. These included ftmds of the former Iraqi regime in the USA, frozen under UNSCR 687 and subsequently vested under Executive Order 13290 of 20 March 2003 and transferred before the adoption of the UNSCR 1483, monies seized in Iraq under the laws and usages of war and US appropriated funds. 10 10. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dol/ars) Projects administered by the CPA The CPA administered certain projects and the related payments on behalf of Iraqi Ministries Payments for the period from I January 2004 to 28 J\D1e 2004 are as follows: Mblistry of Project: Oil Import of petroleum products Oil Emergency pipeline repair Oil Restoration of oil infraStI'\lctm"e Oil Oil Infrastructw'e Oil Secmity Electricity Restoration of Iraqi electricity Electricity Reconstruction of power plants Electricity Pmchase of electricity from Turkey Electricity Secmity of power lines Trade UN WFP food procurelMnt Trade Food procmemen t Trade OFF-Wbeatpurchase Trade OFF-Certification Trade OFF - Coordination centers (refund) Finance OFF - Northern program Finance h'aqi media network Finance Iraqi banknote prqgram Finance External debt reconciliation Finance Election assistance National Security and Defense Weapons & equipment National Sec\D'ity and Defense Firefighter equipment Agriculture Fertilizer Agriculture Credit program for local farmers Agriculture OFF - Equipment Planning PMO office construction Awqaf (Religion) Hajj pilgrimage Various ministries 40 programs Other: Commander's Emergency Response Program (CERP) Rapid Response Regional Program (RRRP) $ 1,891,058 81,842 67,593 62,857 42,811 551,295 126,969 31,350 8,968 910,000 33,500 28,241 6,294 (25,000) 118,483 37,464 26,970 13,216 9,599 43,257 5,206 18,942 10,000 8,047 5,558 50,633 64,877 354,781 308.857 $ 4.893.668 CERP ftmds are provided to Coalition Forces to be disbmsed for civil reconstruction and repair of in frastructme, including water and sanitation, education, police, roads and healthcare. RRRP funds are provided to CPA Governorate Coordinators to be disbmsed for projects similar to CERP. The CPA Governorate Coordinators work in conjunction with Iraqi counterparts and input from Coa)jtion Forces. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Payments for the period from inception to 31 December 2003 are as follows: Ministry oft Project: Finance Iraqi banknote purchase Finance Iraqi banknote exchange Finance Iraqi currency exchange Finance OFF - Northern program Finance Trade Bank of Iraq Oil Import of petroleum products Oil Sec\n"ity Oil Restoration of oil infrastructure Oil Cotmnunications Electricity Pmchase of electricity from Turkey Electricity Reconstruction of power plants Electricity Restoration of Iraqi electricity Natiorial Sec\n"ity and Defense Weapons National Sec\n"ity and Defense Equipment Trade OFF - Coordination centers Awqaf (Religion) Hajj pilgrimage Housing and Construction Sec\n"ity Culture Donation $ 116,593 31,154 340 13,462 1,100 13,417 12,560 1,130 315 11,393 4,919 4,100 2,832 1,278 25,000 5,000 569 20 $ 245.182 11. Letters of Credit The CPA deposited cash with JP Morgan Bank on behalf of Iraqi Ministries, for issued irrevocable documentary letters of credit. The related contracts and programs are managed by the Iraqi Ministries, in consultation with the CPA. The cash is held at JP Morgan until evidence of the completion of the service, or receipt of goods, is received by the Iraqi Ministries. Payments for the period from January 2004 to 28 June 2004 are as follows: Ministry oft Trade Finance - OFF Northern program Oil Electricity State Company Communications and Post Finance Housing and Construction State Company for Internet Services $ 438,280 140,847 90,250 29,516 12,045 9,364 3,787 1.641 S 725.730 Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Payments for the period from inception to 31 December 2003 are as follows: Ministry oft Oil Housing and Construction $45,850 11.304 $ 52.154 12. Cash and cash equivalents Cash and cash equivalents as at 28 June 2004 are as follows: US Federal Reserve Bank of New York: US Treasury bills Overnight repurchase agreement pool facility Operatingaccounts Central Bank of Iraq - operating account Cash with Coalition Forces $ 4,519,965 150,800 79 1,759,192 217.700 ~ 6.647.736 Cash and cash equivalents as at 31 December 2003 are as follows: US Federal Reserve Bank of New York: US Treasury bills Ovemightrepurchase agreement pool facility Operating aCCO\D1ts Central Bank of Iraq - operating aCCO\D1t Cash with Coalition Forces $ 3,777,455 3,115,000 78 1,432,600 160.000 $ 8.485.133 Cash and cash equivalents include $3,057,518 as at 28 June 2004 (2003: $4,477,176) of cash connnitted for certain projects (see note 15). h1 addition, cash includes $217,170 (2003: $76,596) deposited by Iraqi Ministries, which is restricted for use only in accordance with instructions from the Iraqi Ministries (see note 7). The return on US Treasury bills and the overnight facility ranged from approximately 0.5% to 1.04% (2003: 0.5% to 1.0%). Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Maturity dates and purchase prices of US Treasury bills as at 28 June 2004 are as follows: 12 August 2004 19 August 2004 26 August 2004 2 September 2004 9 September 2004 16 September 2004 23 September 2004 30 September 2004 7 October 2004 14 October 2004 21 October 2004 28 October 2004 4 November 2004 12 November 2004 18 November 2004 26 November 2004 2 December 2004 $ 213,087 249,111 269,144 398,548 284,415 248,884 275,329 304,921 283,467 243,618 262,942 243,859 252,402 248,413 253,158 240,255 248.412 $ 4.519.965 Maturity dates and purchase prices of US Treasury bills at 31 December 2003 are as follows: 29 January 2004 26 February 2004 25 March 2004 22 April 2004 27 May 2004 17 June 2004 $ 697,946 697,944 697,515 697,022 697,087 289.941 ~ 3.777.455 13. Unrecorded assets and liabilities The Fund records acco1.U1ting transactions on a cash basis and commenced the process of identifying and valuing major classes of assets and liabilities which would have been recorded had the Fund presented accrual based fmancial statements. The identified assets and liabilities as at 28 June 2004 are as follows: Assets Net receivables from export sales of petrolewn Receivable from UN Oil for Food pro~ Accrued interest from US Treasury bills & overnight deposits Liabilities Deposits by Iraqi Ministries Other accruals and liabilities $ 1,141,726 500,000 9.893 S 1.651.619 $ 217,170 4.701 $221.871 14. 15. Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) The identified assets and liabilities as at 31 December 2003 are as follows: Assets Receivable from UN Oil for Food program Net receivables from export sales of petroleum ' Advance payment to the Ministry of Trade for World Food Program Accrued interest from US Treasury bills Liabilities Deposits by Iraqi Ministries Other accruals and liabilities $ 2,500,000 1,096,531 5,400 4.623 $ 3.606.554 $ 76.596 6.737 $ 83.333 Barter transactions Barter transactions for petroleum and petroleum products are non-cash transactions. Barter transactions are not recorded in the DFI Statement of Cash Receipts and Payments and are not considered unrecorded assets or liabilities, as these transactions will not materialize into cash at any time. Consequently, payments were not made to the Compensation Fund. However, based on the value of the barter transactions as recorded by SOMa, payments to the Compensation Fund for the period from 1 January 2004 to 28 June 2004 would amount to $10,494 (2003: $6,045). Related parties For the period from inception to 28 JWle 2004, key management of the FWld consisted of the CPA Administrator and CPA Senior Advisors and their staff, in consultation with the Iraqi interim administration. The FWld is monitored by the IAMB in accordance with UNSCR 1483. Key management and the IAMB receive no compensation or fees from the DFI. Management control of the Fund was transferred to the Interim Government of Iraq on 28 June 2004. Commitments and contingencies The DFI uses commitments as a means of managing cash resources. Commitments may not be accurate as certain projects are not complete and the final costs are not known. However, the CPA did not believe that there will be material adjustments to the final costs of these projects. Cash and cash equivalents less connnitments as at 28 June 2004 are as follows: Cash and cash equivalents Contractual commitments Amount not conmritted as at 28 June 2004 $ 6,647,736 (3.057.518) $ 3.590.218 Contractual commitments include contracts signed by the CPA, which are managed by the Project and Contracting Office, a US Government agency. Commitments do not include contracts signed by the Interim Government of Iraq or future cash transfers for the Iraqi National Budget. 15 Development Fund for Iraq Notes to the Statement of Cash Receipts and Payments, continued For the period from 1 January 2004 to 28 June 2004 (all amounts are in thousands of us dollars) Litigation In the nonnal comse of its activities, the Fund is party to various legal claims, actions and complaints. It is not possible to predict with certainty whether or not the Fund will ultimately be successful in any of these legal matters or, if not, what the impact might be. However, the CPA and the Project and Contracting Office do not expect that the results in any of these legal proceedings will have a material adverse effect on the Fund's activities. Immunity In accordance with UNSCR 1483, certain Member States have taken legal steps as considered necessary, to ensme immunity of the petroleum and petroleum products originating in Iraq, until title passes to the initial purchaser, from legal proceedings against them so as not to be subject to any fonn of attachment, garnishment or execution. This immunity expires on 31 December 2007, unless the United Nations Security Council decides otherwise. Taxation The Fund is not subject to taxation.