Minutes of the meeting held at the IMF Headquarters, Washington DC on 24 and 25 May 2004

Minutes of the meeting held at the IMF Headquarters, Washington DC on 24 and 25 May 2004. World Bank: Mr. Fayezul Choudhury, Vice-President and Controller Observer: Prof. Mahdi Hadi Al-Kafaji (Governing Council of Iraq) Observer's Representative: Mr. David Norquist, Deputy Under-Secretary, Department of Defense (Coalition Provisional Authority) Arab Fund for Economic and Social Development: Mr. Shehab Bayoumi, Financial Advisor Mr. Chris Hemus, Deputy Chief, Finance Department Mr. Jayantilal Karia, Director, Accounts Division Mr. Charles McDonough, Director, Accounting Department Mr. Said Al Habsy, Chief Counsel, Middle East, North Africa and South Asia Ms. Caroline Harper, A representative from KPMG briefed the IAMB on the on-going audit of the DFI. He indicated that the audit was progressing satisfactorily after encountering some initial difficulties. The Observer from the Governing Council and the representative from the CPA pledged their continued support for the audit and their assistance to KPMG. KPMG reiterated its commitment to adhere to the time-line as stated in the Statement of Work. The IAMB noted KPMG's and the CPA's concerns with the practical difficulties in preparing the financial statements on an accrual basis, It was agreed that the financial statements of the DFI would be presented on a cash basis and that they would be based on the International Public Sector Accounting Standards (IPSAS) and be accompanied by detailed supplementary notes. The observer from the Governing Council emphasized the need to present the financial statements and audit reports in both English and Arabic. Noting the need to address any outstanding issues expeditiously, the IAMB requested KPMG to keep the Board informed on the progress of the audit and to present a full update report at the next IAMB meeting. Briefing by the CPA As a follow up to the April 24 - 25 briefing provided to the IAMB, the CPA provided an update on the latest DFI activities. The CPA is continuing to build up the functions of inspectors general throughout the various ministries. Responding to earlier requests by the Board to obtain audit reports regarding sole source contracts, including those by the Defense Contract Audit Agency, the CPA advised that these reports will be provided as soon as clearance from the concerned parties with regards to proprietary information is finalized. The CPA provided an update on controls over oil in Iraq including progress being made on metering, the status and financial controls over the bartering process, and the impact of the security situation on oil production. The IAMB was informed that two contracts have been issued for the installation of meters and that the metering project for the entire country will take between 12 to 18 months. The IAMB noted its initial concern that the two contracts had been awarded as "Task Orders" (add-ons to existing contracts) and that some of the original contracts might have been awarded under the sole source contracting procedure. The CPA representative promised to send additional information on this matter. The CPA indicated that it had commissioned a review of controls in the State Oil Marketing Organization. The IAMB looks forward to receiving a report on the same. In his comment, the Observer from the Governing Council stressed the need to establish proper internal control systems especially with regards to the extraction and export of oil. In their response to the CPA briefing, the possibility of engaging some experts on oil from the IMF and the World Bank to give an assessment on the losses as a result of smuggling and the lack of metering is being considered by the IAMB. Briefing by the Governing Council Observer In his briefing to the Board, the observer from the Governing Council noted that smuggling of oil and oil products is a concern of the Governing Council and stated that steps should be taken to control it. Post June 30 2004 The CPA briefed the Board on the preparations for the anticipated hand-over of the DFI ands its operations. The members agreed to issue a press release highlighting the results of this meeting and to post this press release on the IAMB website. The next meetings of the IAMB have been scheduled for 20–22 June in Paris, and 14–15 July in Washington DC. The meeting was adjourned on Tuesday 22 May 2004.