Development fund of and the successor account Letter of observations of the current year Ministries of Iraq and entities not associated to ministries financed from the Fund December 31, 2016

1 KPMG القواسمي وشركاه تلفون: -7090 565 6 966+ عمان- األردن فاكس: -8598 568 6 966+ To the government of Iraq Development find of Iraq and successor account (CBI 2) The republic of Iraq

No. 2017-01-156 Date : October 27, 2017

Dear Sirs We are pleased to submit to you our Management Letter containing our observations and recommendations concerning the internal control structure and other matters resulting from our audit of the Development Fund for Iraq and Successor Account (DFI) for the year ended 31 December 2016. Our audit uncovered certain conditions that, although not considered by us to be material weaknesses, are matters for which corrective act ion should be considered.

In planning and performing our audit of the financial statements of the Development Fund for Iraq and Successor Account ( " DFI" ), we considered internal control relevant to the preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances. but not for the purpose of expressing an opinion on the effectiveness of internal control.

According ly our audit may not have identified all weaknesses within your systems. The observations and recommendations as listed in this report may not be a comprehensive record of all weaknesses that may exist . This report is intended solely for the information and use of the COFE and the Government of Iraq and is not intended to be and should not be used by anyone other than these specified par ties. Because others may seek to use it for different purposes, this report should not be quoted. referred to or shown to any other parties (except the addressee's professional advisers acting in that capacity provided that they accept that we assume no responsibility or liability whatsoever to them in respect of the contents) unless so requi red by court order or a regulatory authority, without our prior consent in writing. We assume no responsibility whatsoever in respect of or arising out of or in connection with the contents of this presentation to parties other than the addressees. If others choose to rely in any way on the con tents of this presentation they do so entirely at their own risk.

We have discussed the content of our report. including our recommendations, with the members of your staff directly involved and where relevant we have incorporated their comments. Degree of Risk Note Page No. Ministry of education 13 High 1- Construction of Sports City project 14 Ministry of youth 15 High 1- Construction of Basra Sports City project 16 High 1- Contracts not resolved by the Ministry 17 High 2- Contracts not resolved by the Ministry- Cont. 18 High 2- Contracts not resolved by the Ministry- cont. 19 High 3- Local projects, not subjected to the decision No. 347 20 High 3- Local projects, not subjected to decision No. 347- Cont. 21 Moderate 4- Suspended advances 22 High 1- Application of decisions Nos. (347 & 432) of 2015 24 High 2- Suspended projects (Work withdrawal) 25 High 3- Suspended advances 26 Ministry of commerce 27 High 1- Suspended advances from previous years 28 High 2- Staff files/ lack of staff files 29 High 3- Staff files/ lack of patent and application and letter of appointment 30 High 4- Interim deposits 31 Ministry of commerce The general company of goods trade 32 High 2- Acceptance of the letter of guarantees from the banks 33 High 3- Suspended Suppling Produces 34 High 4- Reconciliations with the banks 35 Degree of Risk Note Page No. High 5- The existence of suspended instruments in the settlement of banks from previous years 36 Moderate 6- Refraining from signing the contract and then re-activation 37 Moderate 7- Renewal of letter of credit for long periods 38 Moderate 8- Delay in preparation 39 Moderate 9- Lack of daily reports with the received quantities 40 Moderate 10- Disputed and properties owned by third party 41 Moderate 11- Properties overridden by third party 42 Moderate 12- Investment Project 43 Ministry of commerce The general grain Company 44 High 1- Suspended advances from previous years/ General Company for Foodstuff Trading 45 High 2- Suspended advances from previous years 46 Moderate 3- Direct Contracting 47 Moderate 4- A subsidiary company of the Iraqi-Vietnamese Rice Trading Company 48 Ministry of health 49 High 2- Contracts for importing incinerators, not identical to the country of origin 51 High 3- Materials failed by examination- purchase of anaesthetic materials 52 High 4- The existence of suspended instruments in the bank settlements since previous years 53 5- Failure to resolve projects for the establishment of multi-capacity hospitals in accordance Moderate 54 with the Council of Ministers Decision No. (347) - Ministry. 6- The failure to confirm the processing of the ongoing contracts, under the control of the 55 government under the council of ministers decision No. 347 with the ministry of planning as Moderate the final phase 7- Non-approval of the processing of the projects, not subjected to the control of the 56 Moderate government according to the council of ministers decision No. 347 Moderate 8- The existence of contracts for the purchase of delayed medical supplies- Kimadia Co. 57 Ministry of agriculture 58 Ministry of agriculture Ministry center 59 High 1- suspended receivables from previous years 60 Degree of Risk Note Page No. High 2- The lack of preparation of regular banking settlements 61 Moderate 3- Failure to complete all the procedures of decision No. 124 62 Moderate 4- The failure to resolve the projects according to the council of ministers decision No. (347) 63 Moderate 5- Delay in Proportion 64 Ministry of agriculture The general Company for agriculture preparation 65 High 1- Outstanding and uncollectible debts 66 High 2- Delay in Proportion 67 Ministry of electricity 68 High 1- Non compliance to the terms of the contract 69 Ministry of electricity Ministry center 70 High 2- Delay in the procedures of opening the letters of credit 71 High 3- Delay in the procedures for closing the letters of credit 72 High 4- Suspended advances account «interim and advances of working individuals 73 5- Failure to prepare updated reports for the energy distribution department for some Moderate 74 investment plan projects / ministry center Moderate 6- Shortcoming in the documentary credits 75 Moderate 7- Financial planning missions 76 Ministry of electricity / the directorate of Karkh 77 1- The failure to finalize the contracts, subjected to the government’s control under the 78 High council of ministries decision No. 347 with the ministry of planning as the final phase. High 2- Delay in preparation (projects with governmental authorities) 79 High 3- Non compliance with the terms of contract 80 High 3- Non compliance with the terms of contract 81 4- Payment of the contracts amounts with the government authorities in advance and 82 High entirely with the contractual value despite the delay in preparation. High 5- Calculation of fines for delayed contracts 83 Moderate 6- Contracting with intermediate companies 84 Ministry of electricity / of the general directorate of the gas production projects 85 High 1- Direct Contracting 86 Degree of Risk Note Page No. High 2- Non calculation of delay fines for the delayed contracts 87 3- The failure to finance the contracts, subjected to the government’s control under the Moderate 88 council of ministries decision No. 347 with the ministry of planning as the final phase. Ministry of oil Ministry of oil Oil projects Company 90 High 1- The failure to resolve the projects according to the council of ministers decision No. (347) 91 High 2- Delay in issuing the decision of the Tender Analysis Committee 92 High 3- Minutes of opening the tenders 93 High 4- The project of strategic tube line Topic(26) 94 High 5-Delay in signing the contract 95 Moderate 6- Non-ratification of the final financial statements 96 Moderate 7- Contract Language 97 Moderate 8- Completion of the tenders opening committee members 98 Ministry of oil Piplines oil Compnay 99 High 1- Delay in signing the contact 100 High 2- Suspended instrument in the banking reconciliation 101 Moderate 3- Non-inclusion of the dispatch clause to the contract 102 Ministry of oil Middle Refineries Company 103 High 1- Delay in signing the contact 104 High 2- customs clearance 105 Moderate 3- Development of Doura refinery units 106 Oil Marketing Company 107 High 1-Sale of Oil Products 108 High 2- Outstanding differences and amounts with one of the customers 109 High 3- Credit Notes 110 Moderate 4- Delay fines 111 Degree of Risk Note Page No. Moderate 5- Non-ratification of the final financial statements 112 Moderate 6- Employees files 113 Ministry of communication 114 Ministry of communication Ministry center 115 Moderate 1- Failure to approve financial records and final statements for previous years 116 Moderate 2- Reconciliations with the banks 117 Ministry of communication The general Company for communication and postal 118 High 1- Failure to keep consolidation records for the years 2003-2012 119 High 2- Delay in the procedures of transfer into the governmental system for the years 2003-2012 120 3- The failure to resolve at the projects, not subjected to the control of the central 121 Moderate Government according to decision No. 347 Ministry of Communication The general Company for international information network 122 1- Delay in completing the construction project of the General Company for the services of 123 High the International Information Network in the governorate of Babylon Ministry of manufacturing and minerals 124 High 1- Advances for the purposes of the activity suspended from previous years 125 High 2. The unresolved projects according to the Decision of the Council of Ministers No. (347) 126 High 3- Delay in preparation 127 4. Lack of approval the record of consolidation of financial statements of the operational and 128 Moderate investment two balance sheets Ministry of housing 129 Housing department 130 High 1- Not resolving the projects outside the government control as per Decision No (347) 131 2- The finalizing of contracts that have been liquidated and controlled by the Government High pursuant to the Decision of the Council of Ministers No. 347 with the Ministry of Planning is 132 not finalized. The Roads and Bridges Department 133 1- The projects that is controlled by the Central Government unresolved in accordance with 134 High the Decision of the Council of Ministers No. (347) 1- The projects that is not controlled by the Central Government unresolved in accordance 135 Moderate with the Decision of the Council of Ministers No. (347) Degree of Risk Note Page No. Building department 136 High 1. Delay in completing the projects of the Buildings Department 137 2. Lack of completion of all the supporting documents for projects that have been ceased by 138 High the Buildings Department Ministry of labor and social affairs 139 High 1. Account of advances and deposits (suspended from previous years) 140 High 2. The Two Decisions Committee (347 and 432) for the year 2015. 141 High 3. Suspended Projects (Withdrawal of work) 142 Ministry of planning Ministry center 143 High 1. Development Fund - Ministry of Planning 144 High 2. Frozen Accounts Receivable from previous years 145 High 3. Suspended advances from previous years - Central Bureau of Statistics 146 High 4. Follow-up of government projects in relation to the Council of Ministers Decision No. 347 147 4. Follow-up of government projects in relation to the Council of Ministers Decision No. 347- 148 High Continue 4. Follow-up of government projects in relation to the Council of Ministers Decision No. 347- 149 High Continue High 5. Follow-up of outstanding projects 150 High 5. Follow-up of outstanding projects - Continue 151 Ministry of culture 152 High 1. The lack of authentication for the consolidation Records 153 Moderate 2. Non-ratification of the final financial statements 154 Moderate 3. Failure to resolve projects in accordance with Decision 347. 155 Ministry of water resources 156 Ministry of water resources Ministry center 157 High 1. Delays in the preparation of projects 158 Moderate 2. Lack of authentication for the consolidation registr of the investment plan 159 Moderate 3. Non-ratification of the final financial statements 160 Moderate 4. Suspended advances from previous years 161 Ministry of water resources General Authority for Irrigation and Reclamation Projects 162 High 1. Suspended Advances from previous years 163 High 2. Failure to resolve the decision of projects with advanced achievement ratios 164 Degree of Risk Note Page No. 3. Failure to resolve the decision of projects not under the control of the central government 165 High in accordance with decision No. (347). Moderate 4. Non-ratification of the final financial statements 166 High 5. Non-approval of the consolidation registry for the investment plan 167 Ministry of water resources General Authority for the operation of irrigation and drainage 168 projects High 1. Incompleteness of all the procedures in accordance with Decision 347 169 Ministry of water resources General Authority for Dams and Reservoirs 170 High 1. Provision of backup tools For the pumps of the plug dam 171 2. Approval of the consultancy services for the permanent treatment of Mosul Dam «Contract 172 High No. 5/2013» High 3. Suspended advances from previous years 173 High 4. Calculation of investment plan securitization 174 5. Contracts that its defects have not been completed, nor its deficiencies arising out thereof 175 High have been amended during the maintenance period. Ministry of Immigration and Displaced 176 Moderate 1. Relief and social aid 177 Moderate 2. Outstanding amounts at Banks 178 High 3. Electronic administration project at the Ministry's headquarters 179 Ministry of transportation 180 Ministry of transportation Ministry center 181 High 1. Suspended advances and trustees 182 Moderate 1. Suspended advances and trusts – To be followed 183 Moderate 2. Approving of financial records and closing statements 184 Ministry of transportation General Company for Iraqi Ports 185 Moderate 1. Reluctancy in processing 186 High 1. Reluctancy in the equipment – continued 187 2. Failure to comply with the terms of the contract without taking necessary legal actions as 188 High well. Moderate 3. Advances and suspended investment trusts 189 Moderate 4. Approval of financial statements 190 Degree of Risk Note Page No. Ministry of transportation The general Company of civil aviation 191 High 1. Non-renewing documentary credit for some contracts 192 High 2. Delay in receiving some projects 193 High 3. Offering of extended periods for some projects 194 4. Delay in finalizing of contracts under the control of the Government pursuant to the 195 High Council of Ministers Decision No. (347) High 5. Non-providing the required documents 196 Moderate 6. Approval of consolidation records and final financial statements 197 Ministry of transportation General Company of Iraqi Airways 198 High 1. Contracts of American Boeing and Canadian CS300 airliners 199 High 2. Reluctancy of processing some contracts within the operational budget 200 High 3. Approval of consolidation records and final statements 201 Ministry of transportation The General Company of Railways 202 1. Non-Decision of projects to establish contracts in accordance with the decision of the 203 High Council of Ministers Decision No. (347) 1. Failure to resolve the projects for the establishment of contracts in accordance with the 204 High decision of the Council of Ministers No. (347) – to be continued High 2. The existence of suspended bank accounts 205 High 3- Pending instatements in bank reconciliation belongs to previous years 206 Moderate 4- Following pending Loan, deposits and Creditors 207 Ministry of high education and scientific research 208 Ministry of high education and scientific research Ministry center 209 High 1- Final Accounts/ Pending loans 210 Moderate 2-Non-approval of financial data of unified record for operating and investment budgets 211 Moderate 3- No approval of final financial statement 212 Ministry of high education and scientific research Science and technology department 213 Moderate 1- No-approval of financial data unified record for operating and investment budgets 214 Moderate 2- No approval of final financial statement 215 Degree of Risk Note Page No. Ministry of foreign affairs 216 High 1- Contract of establishing Foreign Ministry Club 217 High 2- preparing studies and drawings for residential building/ Dakar project 218 High 3- Preparing studies and drawings to establish a building for the mission/ Rabat 219 High 4- Settlement of Entries- Missions abroad 220 Ministry of defense 221 Ministry of defense Ministry center 222 High 1- Final Financial Statements are not approved 223 High 2-Approving Unified Register 224 Ministry of defense Directorate of work 225 High 1- Delay in paying dues on contracts 226 Ministry of defense Budget and programs department 227 228 التأخر برصف مستحقات العقود .1 عا يل High 1- Funds suspended in bank reconciliation 229 Moderate 2- cadres working in department of unified data and insertion 230 Ministry of interior 231 High 1- No supporting documents for pending loans and trusts- to be continued 232 High 1- No supporting documents for pending loans and trusts- to be continued 233 High 2- Approving final financial statement 234 High 3- A number of projects were not terminating due to decision No. 347 235 Moderate 4. Not having a validation to unification records about operational plane 236 Letter on the new observations through our visit to the Shiite Bureau, the Sunni Bureau , the 237 Christian Bureau and other religions and the Independent High Electoral Commission. The Shiite Bureau 238 Moderate 1. Absence of integrated data base to Shia moratorium staff 239 High 2. Accepting letters of guarantee from insolvent Banks 240 High 3. There is override of cast limit for some investment contracts 241 High 4. Non preforming of protection coditions 242 High 5. Operating suspended advances 243 High 6. Non-compliance with payments and issues raised by contractors 244 Degree of Risk Note Page No. Moderate 7. Approval of final financial statements and consolidation records 245 Moderate 8. Advances and Amended Safes 346 The Sunni Bureau 347 High 1. The existence of instruments suspended in the settlement of banks since previous years 348 High 2. Employees files / lack of employees files 349 3. Failure to fix the treatment of continuing contracts under the Council of Ministers Decision 250 High No. (347) 3. Failure to fix the processing of ongoing contracts under Council of Ministers Decision No. 251 High (347) - follows High 4. Insufficient letter of guarantee - the shrine of Sheikh Masoud - Khalidiya 252 High 5 Difficulty accessing the site - the tomb of Sheikh Mohammed Al Azhari and Jama Al-Hakiki 253 6. Non-implementation of the project of the Islamic State Complex after receiving the 254 High operational advance High 7. The letter of guarantee returns to the contractor without confirming the state of reality. 255 the Christian Bureau and other religions and 256 High 1- Failure to access the standardization records 257 High 2. The existence of instruments suspended in the settlement of banks from previous years 258 High 3. Suspended advances from previous years 259 High 3. Suspended predecessor from previous years - continued 260 High 4. Absence of written undertaking 261 High 5. Non- implementation of Decision 347 262 the Independent High Electoral Commission 263 High 1- Non-ratification of the final financial statements 264 High 2. Bank Reconciliations 265 Moderate 3. advances suspended from previous years 266 Moderate 3. and advances suspended from previous years - continued 267 Appendix 1: Key symbols 268 Ministry of education

13 Topic 1 - Contracts for the printing of textbooks Degree of Risk High

Note Through our review of the contracts for printing the school textbooks of the Ministry, we noted the decline of the to the content ofالمالحظةcompletion rates of some of these contracts till the date of our visit on January 31, 2017, contrary the minutes of the Ministry's Central Committee No. (1) of 2016 (tenth) that includes the Decision of the subject of printing the school textbooks for evading any delay and benefiting from the Council of Ministers decision No. (42) of 2016; including the power to enter into the contractual obligation by the installment payment, noting that the first semester ended without printing the curriculum of the school textbooks for 2016 entirely. For example: Contract No. Company or Processing Paragraph/ Contract's Default Compl printing press term/day grade name signature completio etion name date n date rates 6/processing/b/ Tobacco & Cigarette 2016 Press 120 Science/ grade five 2016/8/4 2016/12/2 %10.83 4/processing/b/ Tobacco & Cigarette Reading/grade 2016 Press 120 two 2016/7/5 2016/11/2 %16.2 6/processing/b/ Mathematics/ first 2016 Dar Al Warth Press 120 intermediate grade 2016/8/8 2016/12/6 %44.43 7/processing/a/2 History/ first 016 Al-Faisal Press 120 intermediate grade 2016/8/28 2016/12/26 %50

Recommen We recommend the companies and printing presses to comply with the contract items and complete the printing of dation the school textbooks during the contract term as been contained at the minutes of the Ministry's central committee No. (1) of 2016 (tenth) as the delay of printing such textbooks has a negative impact on the educational process of the Ministry.

Processing and printing the textbooks is conducted after making the study of the Ministry of Education for the Manageme evaluation of the production capacity of the companies and printing presses along with the product quality nt evaluation and execution term and thus accrediting the producing companies and printing presses of such Response textbooks. Due to the financing conditions and the processing of raw materials, the delivery of these books is sometimes delayed. 14 Ministry of youth

15 Topic 1- Construction of Basra Sports City project Degree of Risk High

Note Through our review of the investment contracts, we noted that the construction contract of Basra Sports City, is signed on 2009 with the final amount of IQD 652.656.879.777 with the delivery date up to 15/03/2012, i.e. during 32 months and contract, it is found outالمالحظةthat the completion rate thereof is 97.5%. Upon studying the that the completion rate concerns the main stadium. We also notes that the value of the list of unfixed materials remains less IQD 32 billions according to the reports of the consulting company (AMBS), the work is currently suspended due to the lack of financial liquidity and for the existence of unpaid advances till today.

Recommendation We recommend the management to re-consider the decision, related to the mutual termination of the contract by including the claim of refunding the value of unfixed materials.

Management Basra Sports City project is under judicial arbitration during the years 2015, 2016 and Response 2017. The decision is currently for the benefit of the Ministry, yet it has been agreed upon terminating the contract satisfactorily.

16 Topic Degree of 1- Contracts not resolved by the Ministry High Risk

Note Through our review of the investment contracts, we indicated that the Ministry has not taken the legal procedures against some contractors despite requiring this:

Actual Procedurالمالحظة Project name Contractor Notes Start date Assignment name cost completio es n rate

Construction Negm The company 26/11/2010 463.470.000 91% Requiring of warehouse Mohammed has not lawsuit at the form of Al Dathan submitted the Jamalon (Al contract Anbar) termination application despite notification Construction Laman Al The company 9/7/2008 1.160.400.0000 95% Requiring of 500- Yaqout has not lawsuit spectators submitted the hall in Al contract (Al termination Anbar) application despite notification

17 2- Contracts not resolved by the Ministry- Cont. Topic Degree of Risk High

Note

Project Contracto Notes Start date Assignment Actual Procedures name r name cost com. rate المالحظة Fencing a Manar Al The company did not 15/12/2009 220,260,000 0% Requiring plot in Al Sabrin indicate its attitude of the lawsuit. The Hussein decision No. 347 completion rate district is zero and there (Basra) is no headquarters Cladding the Al Afnan The company submitted 19/7/2012 417,000,000 60% The project is running Al Khadra the contract termination beyond the track of application under the control of the Tartan decision No. 124 of 2015 federal playground government (Al Anbar) Construction Al Srour The contract termination 28/7/2008 4,490,440,000 0% Requiring lawsuit of open Co. application is not Olympic submitted despite swimming notification. A lawsuit is pool (Al filed against the Economy Anbar) Bank for Investment and Financing for the purpose of refunding the letter of guarantee amount

18 Topic 2- Contracts not resolved by the Ministry- cont. Degree of Risk High

We recommend the management to follow up these projects and to take the further, conduct theالمالحظة,required procedures according to the decision No. 347 and to work withdrawal procedures from the contractors; refraining from cooperation with the Ministry. Recommendation

Management Such projects will be considered and filed to the Judicial District through the Response committee; consisted by the Department of Contracts and the legal Department on 12/04/2017

19 Topic 3- Local projects, not subjected to the decision No. 347 Degree of Risk High

Note In the course of our review of the local contracts in the Ministry of Youth and Sports, we noted the presence of local projects:

Project name Venture Contract amount Executi Start date Actual Actual Contract status المالحظةcompany (Iraqi dinar) on completi completio name term on rate n rate 2015 2016

Setting up the Al - Fayafi 3.943.450.0000 720 days 26/9/2011 62% 62% Contract is withdrawn, women forum Contracting Co. yet the fact is not in the officers signed. neighborhood Removal and Anwar Algerian 3.732.072.500 540 days 8/6/2011 18% 18% Notification is addressed setting up the Co. to the venture company youth forum (b) due to not signing on in Al-Qurnah the matter of fact.

Constriction of Bright windows 1.963.995.000 120 days 3/10/2011 2% 2% Works is withdrawn in two halls 2012, yet the venture (k.Span) company did not sign on - the matter of fact till Babylon- now. Madhatiya Construction of Hebat Al Furat 3.164.272.000 540 days 24/8/2009 13% 13% Notification is only 1000 + addressed to the spectators- hall Shoaa Al Amal contractors till 2017, yet in Al Hussein the matter of fact is not district signed till now.

20 Topic 3- Local projects, not subjected to decision No. 347- Cont. Degree of Risk High

المالحظة We recommend the Ministry to follow up these projects and to take the required procedures according to the decision No. 347 and to, further, conduct the legal procedures for the work withdrawal from the contractors; refraining from the co- Recommendation operation with the Ministry.

Is indicated through developing the contract at the above schedule. Management Response

21 Topic 4- Suspended advances Degree of Risk Moderate

We noted that the Ministry granted the advance amounts to the committees and the affiliate formations thereof Note for the purposes of the sportive and operational activities in the previous years that are not settled till December المالحظة 31, 2016. We also noted that there are many advances, granted under the name of committees. However, they are given with the names of recipients without mentioning the authority/ beneficiary committee name from such advance.

Advance grant Recipient name Advance amount date/advance type (Iraqi dinar) Committees advance/ 2016 Alaa Faisal/ Abbas Abdul Razzaq/ Mustafa Faleh 202,226,040 Committees advance/2016 Taha Mohammed/ Hussein Ali/ Karam Riad 1,096,278,000 Interim advances/ 2016 Department of Engineering Affairs 300,000,000 Travel advances/2015 Osama Abdel Kafhim/ Salem Abdel Reda/ Seif Nazem 25,000,000 Delegation advances/ 2016 Ali Khayoun/ Basem Mutalab 17,000,000 Maintenance Mohammed Mazkhour/ Tahseen Abdel Hussein/ advances/2016 Hossam Hadi 20,000,000

We recommend the management to follow up the committees' works and to check with the work progress with Recommendation regard to the settlement of such advances.

Management There are committees for the follow-up of these advances. Response

22 وزارة العدل

23 Topic 1- Application of decisions Nos. (347 & 432) of 2015 Degree of Risk High

Through our review of the Ministry projects, we noted the existence of unresolved suspended projects under the decisions Nos. (347) & (432) of 2015, the below are details of these projects المالحظة till the auditing term on March 1, 2017: Project name Contract date Contractor Name Building the Judicial Circuits Note Complex in An Numaniyah 10/10/2017 Bahaa Al Rafdeen Co. Construction of judicial complex in (Hamza/ Al Diwaniyah) 24/11/2011 Ras Al Khayma Co. Construction of judicial complex in Al Diwaniyah Governorate/ Bu Saleh) 17/7/2013 Bezrat Al Haq & Al Negmat Al Khadra Co.

Recommendation We recommend the ministry to necessarily form the committee in the ministry's center to tackle the application of the two decisions Nos. (347) & (432) of 2015 for all the Ministry projects and the affiliate departments thereto and to, further, complete the minutes of the committee and settle the suspended projects in addition to the inclusion of all the projects, for which no procedure is taken within the above two decisions. Management A committee is formed in the engineering and technical department for following up the above Response projects as the department of ministries does not consider the need to form a special committee for the follow up of the execution of the two decisions Nos. 342 and 347 of 2015 as the technical department has the ability and acknowledgment of such matters.

24 Topic 2- Suspended projects (Work withdrawal) Degree of Risk High

that work isالمالحظة Through our review of the Ministry projects, we notes that there are two projects and withdrawn from the venture companies thereof with the different completion rates for a period exceeding two years. No procedure is taken in this regard by the Ministry despite giving the priority to such two projects. Below are the details of the projects till the auditing term dated March 1, 2017:

Description Work withdrawal date Completion rate The project of constructing the 2015 87% Note Judicial Circuits complex in Al Najf/Al Governorate The project of constructing the 2012 35% Judicial Circuits complex in Al Diwanya/Ghammas Governorate

* We are not provided with the amounts of the contracts and the additional terms thereof despite requesting them more than once

We recommend the Ministry to necessarily follow up the completion of these projects and to re-include Recommendation them within the projects of the investment plan for benefiting from the economic feasibility thereof.

As for Al project, it is agreed that there is no objection to continue the procedures of re- declaration and assignment to contracting due to the importance of the project and the provision of the amount of annual leases. In addition, the space of rented circuits is small and is not sufficient for the Management employees and beneficiaries number and that the completion rate is advanced; reaching up to 87%. Response As for Al Diwanya project, the procedures of re-declaration are delayed as the completion rate is too small by 35%; noting that the remaining works are declared twice and assignment is not conducted due to the difference of prices and the increase thereof since 2010; requiring the update of the estimated cost.

25 Topic 3- Suspended advances Degree of Risk High

المالحظة Note Through our review of the advances accounts of the center of the Ministry of Justice, we notes the presence of the suspended advances with the amount of (19,508,925) dinars under the account of (prepaid advances and errors processing advances) that can not be settled due to the terrorist bombing of the ministry; passing a long time from 2004 till 2011 at the ministry records and not being liquidated till the date of our visit on March 1, 2017.

Recommendation We recommend the Ministry to follow up such suspended accounts, to settle them and to obtain the required approval from the Ministry of Finance and Planning for the closure thereof as the loss of priorities is due to the terrorist bombing and not the human shortfall. As for the errors processing advances, we recommend to form a committee for the study of the reason of errors, treat them and account the defaulters if proven.

Management The General Secretariat of the Council of Ministers is addressed by the letter No. 620 dated Response March 20, 2014 to indicate the opinion concerning the subject matter and to resolve such subject matter till the date of our visit on March 1, 2017.

26 Ministry of commerce

27 Topic 1- Suspended advances from previous years Degree of Risk High of interim advances ofالمالحظةNote Through our visit to the Ministry of Commerce/ Ministry center, we notes the presence a previous years, that are not liquidated till the date of our visit. The total interim advances amounted to IQD (246.921.975.121), in violation of the decision of the council of ministers No. (M/11/R/37360) Of 2009; stipulating upon the liquidation of all the advances no later 30th of December for the year, subject matter of grant. Advance amount- IQD Details Advance grant date 225.568.452.000 Compensation of ration card allowance of IQD 25.000 2013

587.625.000 Compensation of ration card allowance of IQD 15.000 2011

Recommendation Through our review of the note, we notes that the above advances are nor settled. In addition, there are some other examples such as : Dohuk Governorate (26.628.775.000), (23.729.625.000), Erbil (39.288.825.000), Bablyon Governorate (46.348.675.000),a country belonging to Salahuddin governorate (2.355.200.000) and (67.164.200.000). The note remains continuous during the year 2016.

Follow up The Ministry recommend to form a committee to verify the above mentioned balances and to meet with the officials in the previous governorate to reach to the final solution

Management We conduct the continuous follow-up and the letters to the warehouses of the concerned governorates for Response paying the compensation amounts of the ration card and providing the statements of expenses so as the ministry can make the settlement and deal with the suspended advances. We shall mention from our letters for example without limitation the following letters: the addressed letter to the Department of planning , the ration sections in the Ministry and governorates and a copy to the minister's office and that of the general director No. 2/31975 dated 12/12/2016.

28 Topic 2- Staff files/ lack of staff files Degree of Risk High المالحظة Note Through our study of the staff files, we notes the lack of files for a number of employees as follows:

Name Placed “there is no information of the placement” Firdus Ibrahim There is no information Moahmmed Hassan Kazem Department of companies Registration Ahmed Abdel Wahab Saleh Department of Supply and Planning Mohammed Fawzi Jassim Department of Supply and Planning Majed Ahmed Abbas Dhi Qar Control Haidar Younis Saget Nineveh Control Mayser Nizar Mohammed Hamid Control Hamed Satar Halim

Recommendation We recommend the Ministry to immediately investigate the reasons behind the lack of staff files and to detect the presence of non-real employees.

Management There is no response from the Management for the reason behind not maintaining the staff Response files

29 3- Staff files/ lack of patent and application and letter of Topic Degree of Risk High appointment

Note Through our study of a sample of the staff employees, we notes that the ministry does not maintain copies of the patent of a number of employees or the letters of appointment and المالحظة :examples of this are as follows None Notes Place of previous Job Topic Name work Employment Transfer date Military manufacturing Assistant technical director Hasshem Hawid application, work 14/08/2008 authority contract or letter of appointment Appointment Transfer date Ministry of education Prime observers Mohammed Hanon application 24/05/2006

Employment None None Assistant director in the Wafa Fadel application, work planning department contract or letter of appointment and patent Work contract and None None Prime observers in the Abdullah GhAZY employment application administrative department Khalaf

Recommendation We recommend the ministry to follow up the employees and the applications from the different departments by updating and completing all the required information from such files.

Management Resulting from the burning of primaries in the bombing of the ministry and the raids by the Response vandals in 2003

30 Topic 4- Interim deposits Degree of Risk High

Note Through our visit to the ministry of commerce/ the ministry center along with our study of a sample of third party deposits, we noted the presence of interim outstanding deposits for the Such 921,975,121,المالحظةbenefit of the ministry of finance from previous years, amounted to IQD 246 deposits belong to the submitted advances to the governorates’ warehouses for compensation a number of the ration card items for 20111, the following are some details of these deposits:

Advance amount- IQD Details Advance grant date 225,568,452,000 Compensation of ration card allowance of 2013 IQD 25.000 587,625,000 Compensation of ration card allowance of 2011 IQD 15.000

As for the other years such as 2012, 2014, 2015 and 2016, the balance of other advances is considered as a floating and non-outstanding balance that is periodically treated.

Recommendation We recommend the ministry to necessarily follow up on the settlement of the outstanding deposits through settling the advances, submitted to the governorates through the formation of the committee.

Management Treatment of the deposits depends on the processing of advances, i.e. upon the processing of Response advances, submitted to the governorates’ warehouses, the deposits are treated.

31 Ministry of commerce The general company of goods trade

32 Topic 2- Acceptance of the letter of guarantees from the banks Degree of Risk High المالحظة Note Upon inquiring the legal department about whether there are previously filed lawsuits against the banks with which the company deal or not. Through our study of a sample of the contracts for the General Company for Food Trading, we notes the presence of accepted letters of guarantee from the banks, against which the lawsuits are previously filed due to the non-payment of the amount of the issued letters of guarantee as the company has accepted the letters of guarantee from Elaf Islamic Bank for the following contracts despite the existence of previous lawsuits, related to the confiscation of the letter of guarantee:

Item type Contracting Value Letter of Letter of Contract date Contract Provider name method guarantee guarantee No. No. date

Sugar Direct IQD 141.219.450.000 30/12/2015 901/317/2015 11/1/2016 S/27 Union for Iraqi invitation Food Industries

Sugar Direct IQD 162.339.500.000 9/6/2016 901/83/2016 15/6/2016 309 Union for Iraqi invitation Food Industries

Sugar Direct IQD 131.290.380.504 24/10/2016 901/197/2016 10/11/2016 886 Union for Iraqi invitation Food Industries

Recommendation We recommend the company to stop accepting for any letters of guarantee from any bank with a prior history of refraining from paying the letters of guarantee.

Management The bank is not deemed in solvent as the central bank of Iraq issues the circulation about the troubled Response banks, the above mentioned banks are not deemed within the troubled banks according to the Central Bank of Iraq.

33 Topic 3- Suspended Suppling Produces Degree of Risk High المالحظة Note Through our visit to the company, we noted the presence of damaged quantities of suppling produces, unfit for human consumption at the company’s stores, distributed over different locations in the republic of Iraq, including the following without limitation:

Suspension date Items value Quantity Site Item 4/6/2012 USD 35.147 5.131 tons Karkh Baby milk 3/14/2010 USD 207.372 188.520 Diyala Turkish beans 9/2/2010 712.234 647.485 Erbil Turkish beans Without 26.620 20.556 liters Diyala Oil food of different brands Without 56.601 29.790 Basra Fat

Recommendation We recommend the company to work on forming a committee for the completion of the procedure to liquidate the suspended items and to follow up the procedures concerning the damaged and expires items in the company’s stores.

Management Destruction needs huge sums of amounts and is to be one of the presidency's powers only. Response

34 Topic 4- Reconciliations with the banks Degree of Risk High

Note Through our visit to the company and our auditing of the banking reconciliation with the banks, we noted the following: 1- The company has not attached the bank statements to the banking reconciliation as the company made sufficiency with the statements of settlement items only. 2- The banking recompilation includes outstanding instruments from 2015 “ the reconciliation of Rafidain Bank, Al Mansour 57 branch” which value is IQD 15.458.544. 3- Preparation of the banking reconciliation is delayed as we noted that the company prepared Rafidain bank reconciliation dated 31/12/2016, Sadr Branch on 5/3/2017, Rafidain Mansour Bank on 1/3/2017 and Rafidain Jerusalem branch on 26/2/2017.

Recommendation We recommend to necessarily attach the banking statements in the banking recompilation, to treat the outstanding amounts, match the accounts balances and identify the reasons of differences for further control procedures. Circulating the balances of the previous years, in compliance with the accounting standards. Preparation of the banking circulation periodically.

Management 1- Photocopying the bank statement is difficult and it can not be attached with the settlements, otherwise Response providing it for any applicant authority for being an original copy. 2- This is due to the fact that the accounts for 2013 and 2014 are not authenticated by the Federal Audit Bureau. 3- The reason behind the delay in preparing the banking settlements is the delay in sending the monthly sales statement from the centers of sale as the agents delay in cutting the lists of the ration card items and till the completion of the cutting process. Statements are prepared by the centers and are sent to the financial department for the purpose of organizing the restrictions of sale.

35 5- The existence of suspended instruments in the Topic Degree of Risk High settlement of banks from previous years

Note Through our visit to the company and our auditing of the banking settlements, we noted the following: 1- The banking reconciliation has outstanding instruments from 2015” the reconciliation of Rafidian bank, Al Mansour 57 branch” which value is IQD 15.485.544. 2- Preparation of the banking reconciliation is delayed as we noted that the company prepared Rafidain bank reconciliation dated 31/12/2016, Sadr Branch on 5/3/2017, Rafidain Mansour Bank on 1/3/2017 and Rafidain Jerusalem branch on 26/2/2017.

Recommendation We recommend the management to necessarily follow up the suspended instruments and to take the appropriate measures concerning the suspended instruments for periods of more than 6 months for the purpose to indicate the cash accounts fairly in the final financial data that may affect the determination of the real cash flow of the company and further to prepare the banking reconciliation periodically.

Management 1- The reason behind the delay in preparing the banking settlements is the delay in sending the monthly Response sales statement from the centers of sale as the agents delay in cutting the lists of the ration card items and till the completion of the cutting process. Statements are prepared by the centers and are sent to the financial department for the purpose of organizing the restrictions of sale. 2- This is due to the fact that the accounts for 2013 and 2014 are not authenticated by the Federal Financial Control Bureau, balances are not circulated and the outstanding balances are treated till date. Settlement of all the fixed instruments will be made in the previous years after authentication and conducting the opening restrictions.

36 6- Refraining from signing the contract and then re- Topic Degree of Risk Moderate activation

Note In accordance with the referral No. 2195 dated 28/6/2016, authenticated by the Minister of Commerce, the contract of one of the providers, refraining from signing the contract in 2014 is re-activated as Opes Group- Turkey has refrained from signing on the contract No. (508) dated 30/12/2014 during 15 days and the company has not taken any legal procedure against the provider, however, the contract is re-activated on 28/7/2016.

Recommendatio We recommend to necessarily sign on the contracts during the period of 14 days as of the n referral date according to the instruction for the implementation of the governmental contracts of 2008 (Article 7- Paragraph b/20)

Management The provider’s refraining from signing on the contract is due to not accepting to incur all Response the wages upon the arrival of the ship to the port as been mentioned in the referral. However, the provider desires to incur such wages to the ministry. Correspondences extended for two years, till it is agreed upon incurring such wages to the provider; obtaining the price of less than 120 dollars per ton. The referral is re-activated and the contract is signed.

37 Topic 7- Renewal of letter of credit for long periods Degree of Risk Moderate

Note Through our review of a sample of the company’s contracts, we noted that the company renewed the documentary credit for a period of one year and half approximately without having a signed contract by the beneficiary authority (Opes Group Co. has refrained to sign on the contract).

Recommendation We recommend the company to close the documentary credits of the un-contracted upon contracts or that are not completed entirely and to refund the remaining amounts at the credits’ balances to the company’s treasury for benefiting from the other needs of the company.

Management The extension of the credit period returns to the general director of the company and we Response extended the credit terms till referring the credit to Opes Group Co. whereas in case of re-extension thereof, the credit allocations will be withdrawn by the Ministry of finance.

38 Topic 8- Delay in preparation Degree of Risk Moderate

Note Through our review of a sample of the ration card contracts, we noted that the additional granted periods to the contracted with companies for carrying out the contract exceeds in some cases the period of execution of the original contract. The reason for this is the lack of provisions in the instructions; determining the time limit of the additional periods that may be granted in some contracts, if necessary. The absence of a rime limit; determining the additional periods ratios shall give an opportunity to exploit such gap in the instructions. Consequently, the implementation of the projects will be disrupted significantly along with the non-exploit of the state resources as been planned. The following examples represent the previewed sample through revising a number of contracts:-

Extension period Contract period Contract Provider

40 days 60 days 680 dated 15/10/2015 Gemona

45 days 90 days 566 dated Florea 10/9/2015

Recommendation We recommend the Committee of Economic Affairs of the Council of Ministers to Topicthe amendment of the applicable instructions concerning the additional terms upon contracting for identifying a time limit thereof such as being at the rate not exceeding 25% of the original contract term.

Management The approvals of the council of ministers/ the economic committee to grant the two processed Response companies the extension terms under their letters No. (650/SL) dated 28/12/2016, are obtained. The two companies, Florea and Germona are granted the extension periods of 45 and 40 days respectively, the arrears are imposed on the providers and the value of USD 1.116.048 & USD 31.867 are deducted respectively.

39 Topic 9- Lack of daily reports with the received quantities Degree of Risk Moderate

Note Upon our review of the company contracts, we noted the company’s inability to know and determine the extent of the provider’s compliance with fulfilling its contractual obligations with the contractual quantities for the contracted upon periods, for example without limitation: The contract no. 27/s requires the provider to deliver the quantity of 5.000 tons daily and thus we are not able to acknowledge whether the provider has complied with such term or not with regard to the company’s deliveries in the different regions.

Recommendation We recommend the company to necessarily prepare the common reports with the received quantities in the different areas with such receivables daily, for evading the delay to detect any differences.

Management We are not able to know the daily deliveries due to the uncontrollable events, beyond Response our control as the quantities shall be delivered to many sites within the Republic of Iraq. for example; we are provided a monthly report tow times with the received quantities in addition to the technological constrains such as not connecting the computers in the company with the stores.

40 Topic 10- Disputed and properties owned by third party Degree of Risk Moderate

Note Through our visit to the company, we noted the existence of facilities and plots, affiliate to the company, yet they are owned by third party, including but not limited to:

Governorate Plot No. Area Nature of works Ordinary ownership Salahuddin 10/4858 25 Stores+ branch management General Company dunums for Building Materials Trading Wasit 2/1051 40 dunums My store complex 27 sheds 19 / General Company room chilled circle of our for Central company(2) Trade Control Markets Department

Recommendation We recommend to transfer the Topic deeds of such facilities and plots for the benefit of the company for the Department of Real Estate Registration.

Management Cases are filed for refunding the ownership of these facilities and plots. Response

41 Topic 11- Properties overridden by third party Degree of Risk Moderate

Note Through our visit to the company, we noted the existence of facilities and plots, affiliate to the company, yet they are used by third party and we detail the following for example:

Governorate Plot No. Area Nature of works Imam Ali stores complex 1/7098 41 dunums Overridden by citizens Imam Ali stores complex 1/6980 4 dunums Overridden Ninawa (plot) 7/1016 10 uliks Overridden by the Church of the East Basra (plot) 2/6 9 dunums Overridden by citizens Meshtel/ Teachers plot 3/8890 6 dunums Dunums are overridden by the Ministry of Health Hamamiyat 1/406 69 dunums Overridden by citizens Shipping & Transportation Department / 4/19 120 shares Overridden by the truck people in the site Old Massacre

Recommendation We recommend to take the legal actions for the removal of abuses or the regulation of commercial contract between the company and the other parties.

Management As for Imam complex, there is unresolved lawsuit yet and no procedure is taken for Ninawa Response Governorate for being a hot zone. Concerning Basra Governorate, the proceedings are delayed by the decision of the council of ministers. Further, a lawsuit is filed against the Department of Health of /Rusafa governorates.

42 Topic 12- Investment Project Degree of Risk Moderate

Note Through our visit to the company, we noted the existence of the project for the construction of a new building of the company’s headquarters in Muzaffar square that is suspended since 2010 as the project is withdrawn from the provider and there are existing lawsuits , filed by the contractor against the company, that are not adjudicated finally.

Recommendation We recommend to necessarily take deterrent measures against the delayed companies in processing all the paragraphs of the agreed upon contract by incurring the provider the damages, resulting from the non-compliance with the contract paragraphs. Further, the providers or the companies are requested for the inclusion in the black list and otherwise procedures as a result of the prejudice to the contract items as been referred to in the instructions of the implementation of contracts in chapter nine and ten of the governmental contracts execution No. 2 of 2014.

Management They are not legally processed according to the decision No. 347 as the project is suspended Response before the issuance of this decision whereas the project is withdrawn from the contractor on 14/7/2010 due to exceeding the contractor’s delay period in the completion. The contract term shall extend for two years and half and the contractor exceeded half of such term without completing any mentioned ratio. In addition, the project is withdrawn from the contractor and there is an existing lawsuit, filed by the contractor against the company, to be adjudicated for the benefit of the company. The company has raised the lawsuit against the provider for the resulting damages.

43 Ministry of commerce The general grain Company

44 1- Suspended advances from previous years/ General Company Topic Degree of Risk High for Foodstuff Trading

Note Through our audit of the financial records of the Ministry of Finance/the General Grain Marketing Company, we noted the existence of suspended advances (working personnel advances and advances for the activity purposes), returning to the previous years. These advances are not liquidated till the date of our visit as the total suspended advances amounted to IQD 4.285.457.239. This is not incompliance with the decision of the council of ministers No. 37360/r/11/ma of 2009; stipulating upon the liquidation of all the advances no later December 30, of the year, subject matter of grant. The schedule below indicates an example of these advances:

Amount- Iraqi dinar Period Advance type 105,612,160 More than three years Advances for activity purposes 70,019,953 More than three years Working personnel advances 70,303,454 More than three years Working personnel advances

Recommendation We recommend the company to necessarily follow-up concerning the settlement of granted advances since long time through the preparation of the settlements periodically and to, further, follow-up the beneficiaries authorities for the purpose of providing the required settlements and to take the required procedures against the defaulters from providing such settlement.

Follow- up Through our follow-up, we indicated the presence of movements on the above balances, yet they are few except with the advance of Mr. Mohammed Lifta, that is entirely paid.

Management The amount (105.612.160) for the inclusion of Mr. Taleb Khudair who continuous payment monthly. The Response amount of (123.823.694) and (84.235.025) are entirely settled and the amount of (66.098.114) is entirely paid. As for the remaining amounts, they are paid continuously.

45 Topic 2- Suspended advances from previous years Degree of Risk High

Note Through our visit to the Ministry of Commerce/ Ministry center, we notes the presence of interim advances of a previous years, that are not liquidated till the date of our visit. The total interim advances amounted to IQD (246.921.975.121), in violation of the decision of the council of ministers No. (M/11/R/37360) Of 2009; stipulating upon the liquidation of all the advances no later 30th of December for the year, subject matter of grant. Advance amount- IQD Details Advance grant date 225.568.452.000 Compensation of ration card allowance of IQD 2013 25.000 587.625.000 Compensation of ration card allowance of IQD 2011 15.000

Follow-up Through our review of the note, we notes that the above advances are nor settled. In addition, there are some other examples such as: Dohuk Governorate (26.628.775.000), Sulaymaniyah Governorate (23.729.625.000), Erbil (39.288.825.000), Bablyon Governorate (46.348.675.000),a country belonging to Salahuddin governorate (2.355.200.000) and Basra Governorate (67.164.200.000). The note remains continuous during the year 2016.

Recommendation The Ministry recommend to form a committee to verify the above mentioned balances and to meet with the officials in the previous governorate to reach to the final solution

Management We conduct the continuous follow-up and Topicthe letters to the warehouses of the concerned governorates for Response paying the compensation amounts of the ration card and providing the statements of expenses so as the ministry can make the settlement and deal with the suspended advances. We shall mention from our letters for example without limitation the following letters: the addressed letter to the Department of planning , the ration sections in the Ministry and governorates and a copy to the minister's office and that of the general director No. H/31975 dated 12/12/2016.

46 Topic 3- Direct Contracting Degree of Risk Moderate

Note Through our review of a sample of the contracts of rice and wheat, we noted that the company contracts directly without referring to the method of tenders; depending on the two decisions of the council of ministers Nos. 32 of 2012 and 56 0f 2010;stipulating upon authorizing the Ministry of Commerce the Power of direct purchase except with the provisions of Article No. 4 of the instructions of the governmental contracts No. 1 of 2008, for example:

Contract date Contract No. Provider name 2016/10/11 18251 Ameropa 2016/9/22 18252 Admriceinc 2016/11/30 18474 Amirchand 2016/11/30 18255 Olam

Recommendation We recommend the company to approve the bidding method for obtaining the best quotations.

Management The agreed upon prices with the direct negotiation method are significantly lower than the prices offered by the Response suppliers with the bidding methods as the savings average per ton amounts to 50 dollars approximately.

47 Topic 4- A subsidiary company of the Iraqi-Vietnamese Rice Degree of Risk Moderate Trading Company

Note The general Company for Cereal Trading owns more than 50% of the Iraqi- Vietnamese Rice Trading Company . During 2016, the company has not made any purchase transaction from the company as no exception is obtained from the council of ministers to deal with the subsidiary; resulting in the loss of part of such profit, that can be achieved thereby as a result of the tenders of rice.

Recommendation We recommend to necessarily grant the company an exception for the purchase of rice via the subsidiary company, provided to obtain the prices that not exceed the possible prices to be obtained by the other companies.

Management The company has requested an exception to deal therewith and the submitted Response application is not approved by the center of the ministry of commerce as the department of contracts in the ministry’s center has become concerned with determining the contracted with companies along with the referral of the contracts to the companies.

48 Ministry of health

49 1- The existence of expired materials with no settlement with the Topic Degree of Risk High suppliers

Note Through our review of a number of the contracts of Kimadia Co., we indicated the existence of expired materials. According to the company’s contract with the supplier, there is an item; allowing the company to return the expired materials to the supplier. No agreement has been reached with the companies till the audit date in April 2017 concerning the recovery thereof for the disputes with the suppliers. Exchanges are previewed with them. The following schedule indicates the details of the damaged-materials contracts:

Company/supplier name damaged materials value (USD Contarct value (USD Contract No. Urotech 288,715 480,331 3-2010-466 Plastilab 10,070 352,944 71-2010-495-P Plastilab 92,644 352,944 71-2010-495-N Cook Medical 21,306 388,216 83-2010-460-R1-2 Bard 13,188 428,936 82-2013-83 Cook Medical 6,075 74,722 83-2010-536 Muna Al-Zbin 16,728 1,166,708 82-2007-605

Recommendation We recommend the company to necessarily coordinate between the medical centers and the hospitals for the purpose of transfer between the center as needed to avoid the expiation of the materials. We also recommend the company to activate the follow-up with the above suppliers for settling the amounts. The liability of reports preparation with the quantities which may expire shall be incurred by the liable official of each medical center.

Manageme Exchanges were made with the suppliers with the purpose of recycling the materials to the nt suppliers; noting that a number of suppliers requested the assessment process for determining the Response expiration reasons of these materials.

50 2- Contracts for importing incinerators, not identical to the Topic Degree of Risk High country of origin

Note Through our review of the contracts of Kimadia Co.- Department of Engineering, we noted the existence of ongoing contracts such as contract No. 435-2008-77 of 2008. upon auditing, it is indicated that it is a contract with Britannia Medical Ltd Co., belonging to the purchase of hospital incinerators for the hospitals as the quantity of 508 ones in France. Upon the receipt of the first batch of 240 units, it is found that the size is not identical and the country of origin is China. Further, the company has not complied with the items of maintenance and installation.

Contract No. Company name Contract Contract Contract term amount (USD) signature date 77-2008-435 Britannia 14571150 12/05/2008 4 months as of Medical the contract date

Based on the contract terms, it is decided to incur the supplier the additional expenses (declaration, stamps, Ivag and Training) with the total amount of 928.179 dinars plus the main value of the contract.

Recommendation We recommend the ministry to take the required actions as a result of the prejudice to the contract items.

Management The contract is referred to the legal department for the purpose of claiming the supplier with the damages as a result Response of the prejudice with the certificate of country of origin and sending the materials, not identical to the specifications.

51 3- Materials failed by examination- purchase of anaesthetic Topic Degree of Risk High materials

Note Through our review of the contract No. 64-2011-93 of Mays Al Reem Saudi Company for the purchase of anesthetic materials with the total number of USD 34.000, it is found that based on the decision of the committee of experts that the materials which value is USD 20.000 failed in the laboratory tests. The company referred the contract to Legal Department for taking the necessary measures and for deducting the amount from the supplying company. The case is not settled with the supplying company till the audit date in April 2017.

Contract No. Company Contract Contract Contract term name amount (USD) signature date 93-2011-64 Mays Saudi 34,632 20/06/2011 2 months as of Arabia the contract date

Recommendation We recommend the management to necessarily follow up the required legal procedures for maintaining the company’s rights

Management The company is approached for the purpose of returning the failed items by examination and deducting Response the value thereof from the supplier’s liability. The supplier has not replied till the date of our visit. According to the letter No. 378 dated 24-1-2017, issued by the Legal Department of the company, the filed lawsuit remains pending and is not adjudicated yet.

52 4- The existence of suspended instruments in the bank Topic Degree of Risk High settlements since previous years

Note Through our review of the reconciliation of the bank accounts, we noted the existence of outstanding instruments since previous years. Law stipulates upon that any instruments for more than 6 months are deemed as null and void and shall be cancelled in the books of the general company for the marketing of the drugs and medical supplied (Kimadia). noting that such instruments remain outstanding and revert to the previous years, 2009, 2010, 2011, 2012, 2013, 2014 and 2015. The following schedule indicates the outstanding amounts between the banks accounts and the statements of the General Company for the marketing of drugs and medical supplied along with the bank statements in Iraqi dinar.

Bank Balance at bank Balance at Outstanding Amounts of Total modern+ statment company records outstanding old suspended cheques more cheques than months Al Rasheed Bank- IQD Al Rafidain bank- IQD

Recommendation We recommend the ministry to necessarily follow up the suspended instruments and to take the appropriate procedure concerning the suspended instruments for periods of more than 6 months for the purpose to indicate the cash accounts fairly in the final financial data that may affect the determination of the real cash flow of the company

Management Management consider the procedure as unimportant. Response

53 5- Failure to resolve projects for the establishment of multi-capacity hospitals in Moderate Topic Degree of Risk accordance with the Council of Ministers Decision No. (347) - Ministry.

Note Through our review of the contracts of the ministry of health, we noted the existence of contracts with the companies for the purposes of establishing multi- capacity hospitals, noting that the completion ratio of these contracts are law. According to the council of Ministers decision No. 347, decision No. (5), a- it shall be settled after confirmation of the status quo of the completed works and the non-received materials, having agreed with the second party upon termination. The contracting axes are processed according to the terms of the council of ministers decision. Otherwise, in case of satisfaction or the non- approval of the second party upon settlement according to decision No. 5-b, we noted that the settlement forms are not prepared for stabilizing the situation, either for the presence of financial problems or problems with the executer in addition to the existence of areas beyond the government’s control. The below schedule indicates the details of the contract and the completion rates till the audit term in April 2016.

Turkish Universal Ajersan Co. Cost (USD) Spent Start date Prospected(amended)completion Completion amount date rate Establishment of hospital of 400 bed capacity in Al Kout 145,000,000 43,358,909 28/09/2011 28/04/2015 30.78% Establishment of hospital of 100 bed capacity in Dagil 35,000,000 9,747,311 28/09/2011 04/05/2015 30.78% Establishment of hospital of 100 bed capacity in Touz 35,000,000 10,651,952 28/09/2011 10/06/2015 30.7% LG & Hertz Turkish Co. Establishment of hospital of 400 23/08/2011 09/10/2015 bed capacity in 145,000,000 35,731,958 25.46% Establishment of hospital of 300 23/08/2011 29/08/2015 bed capacity in 104,980,000 26,398,878 29.10% GMS Co. Cost (USD) Spent Start date Prospected(amended)completion Completion amount date rate Establishment of hospital of 400 28/09/2011 12/01/2015 bed capacity in Muthanna 145,000,000 37,113,856 26% Establishment of hospital of 100 28/09/2011 05/12/2014 bed capacity in Al Dour 40,000,000 11,195,603 29.50% Establishment of hospital of 100 28/09/2011 11/11/2014 bed capacity in 40,000,000 13,283,050 34.50% Al Manaheg Real Estate Co. Cost (USD) Spent Start date Prospected(amended)completion Completion amount date rate Establishment of hospital of 200 23/08/2011 13/03/2015 beds capacity in Qaim 75,000,000 35,442,930 56.59% Establishment of hospital of 200 23/08/2011 14/03/2015 bed capacity in 75,000,000 39,427,095 56.48% Establishment of hospital of 200 23/08/2011 15/03/2015 bed capacity in Hit 75,000,000 39,718,320 57%

Recommendation Pursuant to the decision of the council of ministers No. 347, the projects with low ratios shall be stopped and the contracts shall be terminated amicably between the parties in addition to the recovery of the letter of guarantee of good execution, the liquidation of the operational advances account and the determination of the remaining dues.

Management Based on the management’s response, the ministry is in the phase of processing the settlements with the contractors and the company’s responses shall be as follows: Response -Universal Co.: the company is approached for the purpose of completing the settlement procedures (the contractor and the engineers are approached for the purpose of preparing the case). -- GMS company: the company expressed its desire to freeze the work in the project according to its letter No. 88 dated 30-6-2016. -- Al Manahig Real Estate Co.: the minutes of negotiation is signed with the company upon freezing the work and the negotiation minutes are authenticated under the decision No. 14 dated 7-6-2016.

54 6- The failure to confirm the processing of the ongoing contracts, under the control Topic of the government under the council of ministers decision No. 347 with the Degree of Risk Moderate ministry of planning as the final phase

Note Following the decision of the council of ministers, concluded on 22-9-2015 concerning the development of the required controls for the execution of the council decision No. (347) for processing the payment mechanism for the continuous investment projects, subjected to the government’s control.

According to the decisions of the council of ministers, developing the required controls and granting the suspension terms requires the entire suspension of all the contracts and the acknowledgment not to claim any amount of compensation after the confirmation of the status.

Through our review of the samples of ongoing contracts of the low completion rates for following up the execution procedures of the contracts, it is noted that the most contracts are settled between the central committee and the contractors and none of them are proved at the ministry of planning as the last step of the process. Attached a sample of the ongoing contracts of the projects, subjected to the control of the government.

Project name Contract value (one million Iraqi Details Dinars)

Establishment of Taji primary health care headquarters - 2.085.121 Project completion rate is 41% and the Baghdad contractual completion date is 23-3-2015

Establishing a 300-bed maternity hospital with furnishing 24.234 Project completion rate is 30% and the and equipment in Karbala contractual completion date is 29-8-2015

Establishment of an investment building in Madaen 2.355 Project completion rate is12% and the contractual General Hospital completion date is 7-3-2014

preparation of alternative sites and the demolition and 26.993 Project completion rate is 11% and the establishment of the second phase of the development of contractual completion date is 20/2/2017 the Martyr Mohammed Baqir al-Hakim Hospital In addition, we noted that some contracts of Rusafa and Karkh areas are not settled; noting that such areas are subjected to the government’s control.

Recommendation We recommend the management to necessarily take the required procedures with the directorates for the purpose of completing the settlements procedure timely.

Management According to the management’s response, the ministry has not received any clearances from the same directorates such as Karkh and Rusafa Response and that the reason of delay is the directorates and contractors. As soon as the ministry has obtained such data, it will be supplied to the minsitry of planning for obtaining the final settlement and confirmation of the contracts.

55 7- Non-approval of the processing of the projects, not subjected to the control of Moderate Topic Degree of Risk the government according to the council of ministers decision No. 347

Note Through our review of the ministry’s ongoing contracts, we noted the existence of contracts, not subjected to the control of the government and not treated under the council of ministers decision No. 347.

Under this decision, the ministry shall terminate the work satisfactorily as follows:

The letter of guarantee: deducting the value of completed work from the operational advance and refunding the remaining amount along with the cancellation of the letter of guarantee and returning it to the second party, in addition to compliance with the remaining instructions according to the decision.

In case of the inability of satisfactorily termination, the contracts are frozen and dealt with as been contained in paragraph 5-b at schedule 2 of the instruction.

According to our review of the ministry’s ongoing contracts, not subjected to the control of the government, we noted the non-start of the procedures for treating these contracts such as the procedures of contracts settlement and the central committee’s meeting with the contractors as a result of the difficulty to access the site and to confirm the matter of fact. Attached below a sample of the contracts, not subjected to the government’s control.

Details Contract value (one million Project name Iraqi Dinars)

The contractual completion date is 24-7-2015 and the 3.000 Building TB coordinator units with providing the requirements completion ratio amounts to 14% thereof- Nineveh

The contractual completion date is 30-11-2013 and the 3.000 Building TB coordinator units with providing the requirements completion ratio amounts to 30% thereof- Kirkuk- Poverty reduction strategy

The contractual completion date is 2-2-2014 and the 3.442 Medical establishment and processing and furnishing 3 medical completion ratio amounts to 11% centers

The contractual completion date is 5-4-2014 and the 2,000 Provision of multiple- purpose equipment and appliances- completion ratio amounts to 55% Poverty reduction strategy activities in Kirkuk

Recommendation The necessity to comply with the council of ministers decision by deducting the value of the completed work from the operational advance amount, to refund the remaining amount and to cancel the letter of guarantee. Such decision is cancelled and retrieved to the second party immediately after approval and settlement.

Management These procedures can not be started without confirming the matter of fact along with the necessity to follow up the imposed obligations thereupon. As a result of the difficulty to enter and assess the completion rates of these sites, the committee has decided to wait for this step till stabilizing the status and Response facilitating the access to the areas.

56 8- The existence of contracts for the purchase of delayed medical Topic Degree of Risk Moderate supplies- Kimadia Co.

Note Through our review of the company accounts, we noted the existence of some contracts for the purchase of delayed medical supplies despite paying the value of the contract by 80%. According to the agreement, they shall be completed in 2015; noting that the reason of delay returns to the suppliers’ delay in providing the materials. However, the company has not received such supplied and it has been referred to the legal department under the letter No. 1320-14-1-m a dated 2-2-2017 for the purpose of claiming the financial fines by the contracted with authority.

Company Contract No. Contract Credit opening Details value /USD date Baxter 20-2015-14 111.150 5/11/2015 Representing the contract for the purchase of medicines and the materials shall be supplied within 210 days as of the credit receipt date; knowing that the execution is no conducted till the audit date in April 2017. The contract is referred to the Legal Department for taking the necessary procedures. A fine of 10% of the contract value shall be claimed based on the contract between the two parties. Gezyme 40-2015-24 240.000 05/03/2016 Representing the contract for the purchase of medicines and medical supplies. The shipment is supposed for arrival in October 2016. Kimadia Co. has not received the shipment till the audit date in April 2017. The contract is referred to the Legal Department for taking the necessary procedures. A fine of 10% of the contract value shall be claimed based on the contract between the two parties.

Recommendation We recommend the management to necessarily follow up the legal procedures against the suppliers and to try to find the suppliers with good reputation.

Management As a result of the existence of disputes with the supplier; leading to the difficulty to make Response settlements with the supplier and the contract is referred to the legal department for taking the necessary action.

57 Ministry of agriculture

58 Ministry of agriculture Ministry center

59 Topic 1- suspended receivables from previous years Degree of Risk High

Note Through our review of the ministry, we noted the existence of suspended receivables, not settled at the audit date in May 2017. An example of the advances accounts, not settled for the years 2015 and 2016:

Amount (IQD) Account holder Amount (IQD) Account holder 166,313,528 Private sector customers 1,079,186,381 Receivables 235,077,949 Sales customers of 2,320,284,042 Commercial receivables branches systems 68,038,023 Private sector debtors 2,352,246,019 Public sector receivables

Recommendation We recommend the ministry to correspond the beneficiary authority for the above receivables to recover such receivables.

Management The management will extinguish these receivables after taking the approval of the Response Financial Control Bureau.

60 Topic 2- The lack of preparation of regular banking settlements Degree of Risk High

Note The company has not prepared the banking settlements on monthly basis. As a result, it can not detect the difference in the appropriate time.

Recommendation We recommend the ministry to prepare the banking settlements on monthly basis as soon as possible for ensuring the preparation of the reconciliation properly and to detect any differences at the time thereof.

Management This is due to the lack of movement on the banks. Response

61 3- Failure to complete all the procedures of Topic Degree of Risk Moderate decision No. 124 Note Upon our review of the investment contracts of the ministry of agriculture, it is found out that the contract of the strategic warehouse in the governorate of Nineveh- Hamdania for the benefit of Zahra Qarqosh is satisfactorily terminated according to the decision No. 124 0f 2015 due to the security status in the governorate. The authenticated minutes of termination is made by H.E the minister of finance, yet the contractor’s approval is not obtained upon the minutes of project termination.

Recommendation We recommend the ministry to follow up the procedures as required and to obtain an undertaking from the contractor terminate the project.

Management The letter is provided to the contractor for the purpose of providing an Response undertaking and there is no reply on such undertaking despite signing on the letter of undertaking provision for the purposes of project termination. This is responded with the letter by the legal department; informing it to remove the project from the Manahig Investment of 2017.

62 4- The failure to resolve the projects according to the Topic Degree of Risk Moderate council of ministers decision No. (347) Note Through our review of the contracts of the ministry of agriculture, we noted the existence of ongoing contracts, noting that the completion ratio is law. According to the council of Ministers decision No. 347, decision, it shall be settled after confirmation of the status quo of the completed works and the non-received materials, having agreed with the second party upon termination. we noted that the settlement forms are not prepared for stabilizing the situation, either for the presence of financial problems or problems with the executer in addition to the existence of areas beyond the government’s control. The below schedule indicates the details of the contract and the completion rates till the audit term in April 2017.

Contract amount Completion Start date Company name Contract name (IQD) rate

19.575.602.050 52% 2nd of Al KHARBIT Co. & Al Establishment of January, Attiyah General modern village- 2012 Contracting Co. 1.730.743.750 6% 9th of Zhou Al Ola Co. Establishment of October, strategic store in Dhi 2013 Qar governorate in Al- Nasr district

Recommendation Pursuant to the council of ministers decision no. 347, the projects of low ratios shall be suspended, the matter of fact shall be proved and the contracts are to be terminated satisfactorily in addition to refunding the letter of guarantee of proper execution, the liquidation of the operational advances account and the determination of the remaining dues. Management Based on the Management Response , the ministry has submitted a request to freeze the projects Response according to the decision No. 347 of 2015

63 Topic 5- Delay in preparation Degree of Risk Moderate

Note Through our review of the ministry of Agriculture, we noted the presence of a number of the delayed companies in the completion of the projects despite sending the letters of Note by the ministry to the delayed companied to complete the project in vain as soon as possible.

Contract amount Completi Start date Company name Contract name (IQD) on rate 468,425,000 8% 14th of March, Iraq General Contracting Company Establishment of Agriculture Division 2012 Qal'at Salih - Maysan Governorate 466,104,000 8% 5th of September, Sunjar Mountains General Establishment of the Division of 2012 Contracting Co. Ltd. Agriculture Al-Ajaj -

Recommendation We recommend to necessarily take the appropriate procedures against the delayed companies as a result of the prejudice to the contract items as been referred to in the instructions of the implementation of contracts in chapter nine and ten of the governmental contracts implementation No. 2 of 2014 along with the necessity to access the satisfactorily settlement with the supplier for avoiding the lost of time and effort. Management Based on the Management Response , the ministry is in the process of making settlements Response with the contractors, agriculture division, Saleh Citadel- Iraq Al Salam Co.- re-declaration of the tender after the engineering section shall determine the required bills of quantities according to the controls, Al Bajaj Agriculture division- Sinjar Mountains General Contracting Co. - This project is within the hot spot, currently under study.

64 Ministry of agriculture The general Company for agriculture preparation

65 Degree of Topic 1- Outstanding and uncollectible debts High Risk Note Through our review of the amounts of debts, we noted the existence of suspended uncollectible amounts till the audit date in May 2017 for the years 2015 and 2016:

Amount (IQD) Name Amount (IQD) Name

301,523,845 Feed materials to the 395,040,900,937 Materials equipped to the private livestock breeders and socialist sector 13,837,723,587 Sold feeds to the 169,000,000,000 Old debts breeders by the directorates of agriculture 80,279,683,377 Accounts receivables 230,930,394 Feed materials, prepared for the under the control of ISIS agricultural associations 69,175,726,817 Different systems debts 1,678,469,867 Feed materials, prepared for the department of the state 1,102,651,402 Potato seeds debts, 1,030,068,517 Feed materials, prepared for the equipped for farmers multiple circuits 1.632.463.521 Collectors debts

Recommendation We recommend the management to follow up the collection of these debts.

Management We have sent the letter No. 6213 dated 10-4-2017 to the ministry of agriculture, the Response department of audit and internal control, indicating the debts and waiting for the response by the ministry of agriculture.

66 Topic 2- Delay in preparation Degree of Risk High Note Through our review of the agricultural equipment company, we noted that there are some companies, delayed in the execution. The schedule indicates the details of delayed contracts and the completion rates thereof:

Completion Contract date Contract amount Contracting authority name Contract No. rate Zero 24-1-2016 USD 1.880.800 Agco Massey Forks Company 152. Machinery - 2016

Zero 7-4-2016 USD 2.845.000 Class Global Germany Co. 158 - Machinery - 2016

Zero 11-2-2016 USD 686.200 Liwan Co. for Commercial Agencies and 165 - Machinery - 2016 Project Management

90% 27-10-2013 IQD 1343,569.000 Rawat Al Borouj General Contracting Ltd. Co. Construction of the branch headquarters with the establishment of a fence, bridge and accessories in the branch Zero 22-2-2016 EUR 5.787.710 Power Austrian Co. 146 - Machinery - 2016

40% 28-4-2015 IQD 12.450.000.000 Shamoukh Al Ezz General Trading Co. 94 - Processing - 2015

15% 22-11-2015 USD 18.400.000 Aali Al Kawthar General Trading Co. 137 - Urea – 2015

Zero 15-12-2015 USD 11.715.500 Dommion Irrigation and Agricultural 147 - Machinery - 2015 Machinery Manufacturing co.

Zero 15-12-2015 USD 23.070.400 Commercial Agencies Initiation Line Co. Ltd. 149 - Machinery - 2015

Recommendation We recommend to necessarily take the appropriate procedures against the delayed companies as a result of the prejudice to the contract items as been referred to in the instructions of the implementation of contracts in chapter nine and ten of the governmental contracts implementation No. 2 of 2014 We recommend the management to necessarily access the satisfactorily settlement with the supplier for avoiding the lost of time and effort. Management The company has sent the letters of Note and ahs urged the delayed companies to complete the projects as soon as Response possible. Follow up is made by the legal department.

67 Ministry of electricity

68 Topic 1- Non compliance to the terms of the contract Degree of Risk High

Note Through our review of the ministry of electricity, we noted the existence of a contract with Mashreq Energy Co. ( Shamara Group) dated 22/4/2004 in order to connect Nasim Syrian Station with Al Qaim Iraqi Station with the effort line of 400 KV as the initial payment of the operational advance, amounted to USD16.000.000 for the company’s delay and the non-compliance with carrying out the contract items and the termination of the power of the letters of guarantee. Despite passing thirteen years, the value of the operational advance and the legal interests by 5% are refunded as of the legal claim date and till the actual performance. Despite the existence of the lawsuit, filed against the authorized director of the above-mentioned company, noting that the ministry has contracted with Al Hurra International Co., owned by the same owner in more than one project as follows:

Contract Directorate Project name amount $ 3,950,000 Directorate General for the production of electric power Operation and maintenance of Al Hayat and Karbala stations, / Middle Al Forat contract 2, dated 7/9/2014 $ 7,500,000 Directorate General for the production of electric power Operation and maintenance of Al Hayat and Karbala stations, / Middle Al Forat contract 3, dated 7/9/2014 $ 55,331,737 General Directorate of Electricity Production Projects Najaf Gas Electricity Station dated 28/5/2007

$ 7,500,000 Directorate General of gas production projects Hala gas station (operation and maintenance) on 05/15/2010

$ 7,500,000 Directorate General of gas production projects Karbala gas station (operation and maintenance) on 05/15/2010

Recommendation We recommend the Department of investments and contracts in the ministry to follow-up and refund the above amount from the affiliate companies dues of Shamara Group (International Free Zone) and to give the utmost importance of this.

Management The legal department has filed the lawsuit against the company and the authorized director thereof in the Iraqi Courts in 2012 whereas Response the judgment to acquire the decisive decision of the termination of the above contract is issued and the defendant is obliged to pay the amount of sixteen million dollars, to be paid to the plaintiff along with incurring him with the resulting legal expenses, in addition to the custody of movable and immovable funds. However, Al Mashreq Co. has no presence at all. The ministry is currently paying the debts through the concluded contractual transactions with International Free Zone Co. and Shamar Group as the director commissioner of the said companies is the same person.

69 Ministry of electricity Ministry center

70 Topic 2- Delay in the procedures of opening the letters of credit Degree of Risk High

Note Through our review of a sample of the files to open the documentary credits, we noted the following: 1- The delay in the procedures of opening the credit as some credits conclude after passing 6 months as of the contract date, for example:

Credit value Credit No. Contract value Contract Directorate USD 250.000 ILCUSC1780415 USD 589.000 No. 16659 dated Directorate General of On 15/6/2016 1/11/2015 Energy Production in Basra

Recommendation We recommend the ministry to form the committees to follow up the contracts, signed by the directorates and to follow up the procedures for opening the documentary credits, in line with the contracts implementation law of 2014 periodically; stipulating upon the inadmissibility to contract without proving the sufficient and allocated funds for such purpose.

Management For the lack of liquidity in the Ministry of Finance. Response

71 Topic 3- Delay in the procedures for closing the letters of credit Degree of Risk High

Note Through our review of a sample of the files for the ongoing documentary credits from previous years, we noted the following: The delay in the procedures of closing the credit and we can mention the following for example:

Credit date Credit No. Contract value Directorate 17/9/2007 3799 EUR 100.572.224 Al - Sadr First Gas Station

Recommendation We recommend the ministry to form the contracts follow up committees, signed at the directorates and the follow up the procedures to close the documentary credits periodically. Management The contract is signed with Saneer Iranian Co. dated 17/9/2007 with the amount of EUR 111.387.340. The Response price is reduced later under the contract annex to be EUR 100.527.224 and the company has completed the contractual missions thereof. The council of Ministers/ The committee of Economic Affairs is approached under our letter No. 14573 dated 5/7/2007. Further, we indicated that the company has not calculated the value of income tx by 3.3% out of the contract cost and requested the company’s exemption from the taxes pursuant to the dissolved revolutionary command council No. 767 of 1987. The company has obtained the approval of the Economic Affairs Committee to exempt the company from the tax liability of the contract amount. Accordingly, the company’s exemption from the taxes is included to the contract. However, the General Authority for Taxes rejected the exemption thereof, based on that the contract is signed in 2007, i.e. within the period of disruption if the decision No. 767 of 1987.

72 4- Suspended advances account «interim and advances of Topic Degree of Risk High working individuals Note Through our review of the interim advances account, we noted the following: The existence of old suspended advances, not liquidated despite equipping the companies entirely with the contract materials. In addition, these suspended advances belong to the previous years and the contracted upon contracts without the existence of the sufficient allocation of the contracting, in violation of the contracts execution law of 2014; stipulating upon “contracting is not permissible without the provision of sufficient and allocated funds for such purpose” which value amounts to IQD 3.653.992.454 and IQD 4.903.500 as of 31/12/2016, the following are examples thereof: Amount No. Advance date Details 13,138,509 Iraqi Dinar Without Without Kurdistan Region 2008 1,007,444,066 Iraqi Dinar Without Without Electrical Power System 2009

Recommendation We recommend the Ministry to form a committee to verify the above mentioned balances and to meet with the officials so as to reach to a final solution along with compliance with the issued decisions and instructions by the General Secretariat of the Council of Ministers and the Ministry of Planning. Management The advances from previous years and the concerned authorities will be addressed by the Response financial department in the ministry.

73 5- Failure to prepare updated reports for the energy distribution Topic Degree of Risk Moderate department for some investment plan projects / ministry center Note Through our review of the ministry of electricity, we noted the lack of updated reports of the completion rates of the investment projects, affiliate to the Department of the northern governorate despite our request, we shall include the following projects as an example: The secondary stations 11/33 KV, implemented within the investment plan projects for ach of the following: Start via the Last completion Start date Project cost Project period Secondary company rates stations

Al-Zawra 16% 2013/01/14 3,809,395 360 days West of Ramadi American dollar Al-Zawra 22.75% 2013/01/14 3,809,395 360 days Island of Karma American dollar Al-Zawra 22.75% 2013/01/14 3,809,395 360 days Barwana American dollar Al-Zawra 22.75% 2013/01/14 3,809,395 360 days Rawa American dollar

Recommendation We recommend the ministry to follow up yhe liberated areas and to obtain the updated reports on the completion rates.

Management The work is suspended for the security reasons for being an area, beyond the central control as all the Response projects are suspended due to the procedures to release these areas in addition to not monitoring any allocations of these projects.

74 Topic 6- Shortcoming in the documentary credits Degree of Risk Moderate

Note Through our review of a sample of the documentary credits, we noted the lack of the following documentary documents in the files of credits ( bill of entry, customs declaration, and clearing bills), we mentioned the following for example:

Company name Contract’s documentary No. Muher house 6104\1829816\5 20\12\2015 Black sea 1850216/53 20/12/2015 Birth 6159 \ 1829616 \ 15441 I / 10 \ 2015 General Electric GE 20/12/2015 56 /6202/1851616 Black sea 1816516 \28/8/2014 79 First model 20/12/2015 13990/ 189416

Recommendation We recommend the ministry to maintain all the documentary credits, to follow up the concluded contracts and to open the credits thereof within the reasonable periods.

Management These documents are not attainable by the ministry center, yet they remain in the border Response crossings.

75 Topic 7- Financial planning missions Degree of Risk Moderate

Note Through our visit to the ministry, we noted the following: The missions of the department of financial planning in the ministry of electricity include the control of the cash flows of the formations and departments, affiliate to the ministry and to , further, acknowledge whether there are essential deviations in the departments or not as the department requests the balances of the affiliate departments to the ministry monthly. Through our study of a sample of these balances, it is noted that most balances are not audited and we can mention for example, the middle production directorate that does not provide the ministry center with the audited balance.

Recommendation We recommend the ministry to necessarily Topicthe concerned directorate and to urge them to send the audited and sealed balances by the internal auditing.

Management The instructions of the audit bureau prevent the registration of the deposit at the Response accounting records unless by the financial department. In addition, the auditing by the financial control is made monthly whereby matching the received amount in the records and the accounting deportations.

76 Ministry of electricity / the directorate of Karkh

77 1- The failure to finalize the contracts, subjected to the Topic government’s control under the council of ministries decision No. Degree of Risk High 347 with the ministry of planning as the final phase. Note Following the council of ministers decision dated 22-9-2015 concerning the development of the necessary controls for implementing the council decision No. 347 for processing the payment mechanism for the ongoing investment projects, subjected to the government’s control. According to the decisions of the council of ministers, the required controls shall be developed and the entire suspension term is to be granted for all the contracts along with undertaking not to claim of any amount for compensation; having confirmed the matter of fact. Through our review of a sample of the ongoing contracts for following up the procedures to carry out the contracts, it is noted that most contracts are settled between the central committee and the contractors and none of them is proved with the ministry of planning as the last step, we mention for example:

Completion date Com Start date Cost Company Direct Project name rate name orate 420 working days as of the signing date of the contract 92% 1/4/2014 1,521,921,000 Top Heritage Karkh Abu Ghraib on 1/4/2014+30 days of obtaining the approvals, 60 Iraqi Dinars Contracting electrical days are granted as the extension term so as the network contract termination date shall be 16/11/2015. 90 days as of the issuance date of the contract’s annex 51% 13/06/2013 1,015,476,250 Akhaa Karkh Rehabilitation dated 24/6/2015, the contract is extended for 60 days Iraqi Dinar Contracting of the electrical so as to have the termination date on 24/11/2015 land network of the Yarmouk region 180 working days as of the site receipt date and 30 97% 30/11/2014 578,010,000 Karam Al- Karkh Construction of days are obtained so as to be on 27/7/2015 in addition Iraqi Dinars Hawi Amel district to 35 days as additional period and 5 days as the Contracting sector suspension from work term to have the contract termination date on 15/9/2015 and the last extension period has been for 90 days dated 24/12/2015

Recommendation We recommend the ministry to necessarily follow up the procedures with the ministry of planning for the purpose of completing the procedure of fixing the settlements and treatments in a timely manner. Management We are waiting for the authentication of the ministry of planning and the Genderl Secretariat of the council of ministers on such treatments. Response

78 Topic 2- Delay in preparation (projects with governmental authorities) Degree of Risk High

Note Through our review of a sample of the projects contracts, we noted the existence of delay in carrying out the projects according to the fixed implementation periods, the below schedule indicates the projects details:

Completion Actual spent Completion date after Cost Provider Co. Contract No. Project name rate additional periods

95% IQD 300.900.00 27/10/2014 IQD 1.003.000.000 Al Zawra Co. (formerly Al 70/2/1 dated Box stations Tahadi General Co.) 27/8/2013 0% IQD 303,135,000 27/10/2014 IQD 303.135.000 Al Zawra Co. (formerly Al 71/2/1 dated Distribution of 630 Tahadi General Co.) 27/8/2013 and 400 capacity k

0% 134.300.000 10/09/2014 1.433.000.000 Al Zawra Co. (formerly Al 72/2/1 dated Processing of Tahadi General Co.) 27/8/2013 specialized mechanisms

Recommendation We recommend to take the appropriate measures as a result of the prejudice to the contract items as been referred to in the instructions of the contracts execution law in chapter nine and ten of the instructions of the government contracts execution law No. 2 of 2014 Management As for Al Zawra Co. “ formerly Al Tahadi General Co.”, one of the companies of the ministry of industry, the ministry is Response addressed with letter No. 3560 dated 20/4/2017 for obtaining the approval of the center committee for auditing and authenticating the results of the directorate’s results with the representatives of Al Zawra Co. in the ministry of industry with the following conditions of these contracts: 1- Confiscation of the remaining amount of guarantee, representing 5% of the value of the contract No. 70 for not providing us with the certificate of origin. 2- Release of the guarantee of proper execution, submitted under the letter of guarantee, representing 5% of the value of contract 70 3- Claim of refunding the amount of IQD 404.180.390 that represents 40% of the value of the contract 71. 4- Claim of refunding the amount of IQD 401.200.000 that represents 40% of the contract 70. 5- Claim to confiscate the guarantee of proper execution, submitted under the letters of guarantee that represent 5% of the value of the two contracts Nos. 71 and 72 for not starting the implementation of the contracts and requested to terminated them satisfactorily without fines. The ministry is addressed with the letter No. 9943 dated 4/5/2016 for obtaining the approval and no response is received thereby till the date of our visit on 11/5/2017.

79 Topic 3- Non compliance with the terms of contract Degree of Risk High

Note Through our visit to the directorate of Karkh, affiliate to the ministry of electricity, we noted the existence of the contract with Al Zawra Co. (formerly Al Tahadi General Co.) as follows: 10 the challenge company “ incorporated within Al Zawra Co.” has prejudiced with its contractual obligations as it has not provided the directorate of Al Karkh with the certificate of origin of the box stations 630, authenticated by the Iraqi Consulate, in which the certificate of origin is issued.

Project Contract Provider Co. Cost Completion Actual spent Com. name No. date after Rate additional periods Box stations 70/2/1 Al Zawra Co. (formerly IQD 21/10/2014 IQD 95% Al Tahadi General Co.) 1.003.000.000 300.900.000

Recommendation We recommend the ministry to follow up the procedures to obtain the certificate of origin for ensuring whether the country of origin, the box stations, is identical to the contractual obligations or not.

80 Topic 3- Non compliance with the terms of contract Degree of Risk High

Management Concerning Al Zawra Co., formerlY Al Tahadi General Co., one of the companies of the ministry Response of industry, a minutes of settlement is made between Al Karkh Directorate and Al Zawra Co. “formerly Al Tahadi General Co.” according to the following: - The above paid up amounts to the company are matched: - The following is indicated - Al Karkh Directorate has requested the following: - 1- request to provide the directorate with the original certificate of origin of the contracted upon measures, equipped within the contract No. 70 - 2- confiscation of the letter of guarantee of the above contract Al Tahadi company formerly “Al Zawra currently” has agreed to deduct the guarantee amount of 5% of the above contract in exchange for the certificate of origin and the release of the letter of the guarantee.

- The ministry is addressed with the letter No. 9943 dated 4/5/2016 for obtaining the approval upon the following: - Approval to confiscate the remaining letter of guarantee, representing 5% of the value of the contract No. (70) - For not providing them with the certificate of origin. - The ministry has not issued any response till the date of our visit on 11/5/2017.

81 Topic Degree of 4- Payment of the contracts amounts with the government authorities in advance High and entirely with the contractual value despite the delay in preparation. Risk Note Through our visit to the Directorate of Al Karkh, affiliate to the Ministry of Electricity, we noted the existence of the contracts with Al Zawra Co. “formerly Al Tahadi General Co.” as follows: The Directorate of Al Karkh has paid the entire value of the company’s contractual value, in violation of the Federal Balance instructions and the Contracts implementation law instructions. It is worth mentioning that the company prejudices with the contractual obligations thereof; having delayed in the completion as follows:

Project name Contract Provider Co. Cost Completion date after Actual Com. No. additional periods spent Rate Box stations 70/2/1 Al Zawra Co. IQD 1.003.000.000 21/10/2014 IQD 95% (formerly Al Tahadi 300.900.00 General Co.) Distribution of 630 and 71/2/1 Al Zawra Co. IQD 303.135.000 21/10/2014 IQD 0% 400 capacity k dated (formerly Al Tahadi 303,135,000 27/8/2013 General Co.) Processing of 72/2/1 Al Zawra Co. 1.433.000.000 10/09/2014 134.300.000 0% specialized mechanisms dated (formerly Al Tahadi 27/8/2013 General Co.)

Recommendation We recommend the Ministry to form the committee under the supervision of the council of ministers for following up the above amounts and taking the necessary procedures for treating such contracts in addition to developing a clear policy, related to the payment of the contracted upon amounts in the future. Management With regard to the payment of the above amounts, Al Zawra Co. has submitted the official letters to the directorate for approval upon the disbursement thereof. These letters are assigned to the directorate of the commercial affairs for the purpose of assignment. There is no objection to prepare the Response instruments by the directorate of the financial affairs, provided not to deliver them unless after carrying out the contractual obligations thereof. In addition, and having received Al Zawra Co. of such amounts, the minutes of settlement is prepared between the directorate of Al Karkh and Al Zawra Co. “Formerly Al Tahadi Co.” according to the following: -The above paid up amounts to the company are matched: -The following is indicated -Al Karkh Directorate has requested the following: -1- request to provide the directorate with the original certificate of origin of the contracted upon measures, equipped within the contract No. 70 -2- confiscation of the letter of guarantee of the above contract Al Tahadi company formerly “Al Zawra currently” has agreed to deduct the guarantee amount of 5% of the above contract in exchange for the certificate of origin and the release of the letter of the guarantee. -The ministry is addressed with the letter No. 9943 dated 4/5/2016 for obtaining the approval upon the following: -Approval to confiscate the remaining letter of guarantee, representing 5% of the value of the contract No. (70) -For not providing them with the certificate of origin. -The ministry has not issued any response till the date of our visit on 11/5/2017

82 Topic 5- Calculation of fines for delayed contracts Degree of Risk High

Note Through our review of a sample of the projects contracts, we noted the existence of delay in carrying out the project according to the fixed execution periods in the contract. No delay fines are calculated for these contracts. The schedule indicates the details of the projects:

Project name Company name Directorate Cost Start date Com. Rrate

Processing of custom mechanisms General Motors Karkh 143,300,000 11/13/2014 0% 1- wheel rescue and 2- water Company Iraqi Dinars withdrawal mechanisms Processing of occupational safety Cano French Karkh 4,856,484 euros 14/03/2016 70% equipment Company

Recommendation we recommend the necessity to calculate the delay fines and otherwise procedures, resulting from the prejudice to the contract items as been referred to in the instructions of the Contracts Implementation Law in the government contracts No. 2 of 2014 in chapter nine and ten. Management Due to the security conditions of the area, the lack of provision the resources by the company Response and the delay in work. As for Cano French Co., the reason is the non-receipt of the shipment’s delayed documents and deeds for determining the fines periods and amounts.

83 Topic 6- Contracting with intermediate companies Degree of Risk Moderate

Note Through our visit to the directorate of Al Karkh, affiliate to the ministry of electricity, we noted the existence of contract with Al Zawra “formerly Al Tahadi General Co.”, one of the companies of the Iraqi industrial Ministry as follows: Completion date after Cost Provider Co. Contract No. Project name the additional periods 21/10/2014 IQD Al Zawra Co. (formerly Al 70/2/1 Box stations 630 1.003.000.000 Tahadi General Co.) Whereas the contract stipulates upon that Al Zawra Co. shall process the directorate of l Karkh at the box stations 360, pursuant to the letter No. 47908 dated 30/7/2014; approving the minister of electricity to authorize the directorate general of Al Karkh Electricity to sign on a number of the contracts with the companies of the ministry of Industry and Minerals with the exception of the instructions of the governmental contracts Execution, in support of the national product. However, the above mentioned contract shall not represent any national product as the ministry of industry and minerals have the intermediate role for the importance of measures, in addition to the presence of other concluded contracts with the companies of the ministry of industry and minerals Recommenda These contracts shall not be deemed as support for the national product as the above mentioned tion contract is mere processing contract for the imported equipment, we recommend the ministry to contract without introducing any intermediary for the waste of the ministry's money. Management This contracting is concluded based on the guidance and approval of the council of ministers/ Response committee of energy affairs.

84 Ministry of electricity / of the general directorate of the gas production projects

85 Topic 1- Direct Contracting Degree of Risk High

Note Through our review of a sample of the contracts of the general directorate of the gas production projects, we noted that the directorate contract directly without resorting to the general tenders method in the contract, otherwise Article (4-fourth- a) of the instructions of the governmental contracts execution; indicating that the contracting method shall be general tender for the amounts, exceeding 100 million dinars.

Contract No. Contract date Company Contract type Estimated cost

36 12/08/2013 GE Operation and USD 23.537.000 maintenance works

Recommendation We recommend the company to approve the tenders method in the purchase for obtaining the best quotations.

Management Response We have followed the minister’s guidelines concerning the contraction through direct invitation.

86 Topic 2- Non calculation of delay fines for the delayed contracts Degree of Risk High

Note Through our review of a sample of the contracts of the projects, we noted the delay in the implementation of the projects according to the fixed execution periods in the company and no delay fines are calculated for these contracts, the schedule indicates the details of these projects:

Completion rate Start date Directorate Company name Project name

70% 13/12/2012 General General Company for Rumaila Water Station Company for Industrial Designs and Gas Production Consultations Projects

Recommendation we recommend the necessity to calculate the delay fines and otherwise procedures, resulting from the prejudice to the contract items as been referred to in the instructions of the Contracts Implementation Law in the government contracts No. 2 of 2014 in chapter nine and ten

Management The delay fine, amounted to 393.549.592 dinars is calculated, yet it is not deducted as the Response company provided a plea not to deduct the delay fine and it is approved by the minister of electricity under the Letter No. 18714 dated 12/11/2013.

87 3- The failure to finance the contracts, subjected to the government’s Topic control under the council of ministries decision No. 347 with the Degree of Risk Moderate ministry of planning as the final phase. Note Following the decision of the council of ministers, concluded on 22-9-2015 concerning the development of the required controls for the execution of the council decision No. (347) for processing the payment mechanism for the continuous investment projects, subjected to the government’s control. According to the decisions of the council of ministers, developing the required controls and granting the suspension terms requires the entire suspension of all the contracts and the acknowledgment not to claim any amount of compensation after the confirmation of the status. Through our review of the samples of ongoing contracts of the low completion rates for following up the execution procedures of the contracts, it is noted that the most contracts are settled between the central committee and the contractors and none of them are proved at the ministry of planning as the last step of the process. Attached a sample of the ongoing contracts of the projects, subjected to the control of the government.

Completion rate Start date Directorate Company name Project name

80% 7/10/2012 IQD 1.670.495.000 Top Heritage Contracting Administration building contract of Karbala project

Recommendation We recommend the ministry to necessarily follow up with the ministry of planning for the purpose of completing the procedures of fixing the settlements and treatments in a timely manner.

Management We can not refer this contract to the decision No. 347 so as the directorate shall not incur the losses as there is a Response dispute about the amount of the final subject matter by the contractor. In addition, the directorate claims of the delay fines, amounted to IQD 97.000.000

88 Ministry of oil Ministry of oil Oil projects Company

90 1- The failure to resolve the projects according to the Topic Degree of Risk High council of ministers decision No. (347)

Note Through our review of a sample of the minutes of satisfactorily settlement, prepared by the Oil Projects Company and based on the instructions of the ministry of planning for carrying out the decision of the secretariat of ministers No. 347 of 2017, we noted the delay in signing on the minutes of settlement till the date of our visit on May 25, 2017 for not obtaining the approval of the ministry of planning. Upon checking with the department of studies, planning and follow-up in the ministry of oil concerning the subject, we found out that the ministry of planning returned the minutes of settlement of Larsa Engineering Consulting and Trading Co. (Jordanian) and Al Mutasadra Heating and Air-conditioning Co. (Jordanian) at its letter No. 8345 dated March 27, 2017 as the treatments made by the contracting authorities do not apply on the decision instructions as follows: 1- The satisfactorily settlement forms of the above two companies indicated that the material completion rate amounted to 100% and the treatment, taken by the contracting authority while paragraph (5-1) of the decision indicates that the projects with low completion rates and without the priority shall be settled, having agreed with the second party which do not apply on the taken treatment. 2- The minutes of settlement of the above companies indicated the two parties' agreement of settlement, made under paragraph second/b of the council of ministers decision No. 347. Termination is concluded with satisfaction upon signing on the undertaking by the two above companies while the mentioned paragraph is concerned with the case of the inability of satisfactory termination.

Recommendation We recommend to follow up with the department of studies, planning and follow-up for the completion of the approvals of the minutes of settlement and the compliance with the instructions of the decision no. 347 of 201. It is possible to treat the above two cases according to paragraph third of the decision, competent with the completed and received projects initially and finally.

Management The department of studies, planning and follow-up will be coordinated with as the company is in deterrent Response need for such settlements due to the financial crisis, experienced by the company.

91 2- Delay in issuing the decision of the Tender Analysis Topic Degree of Risk High Committee

Note Through our review of the priorities of a sample of contracts of Oil Projects Co., we noted the delay of issuance of the analysis of tender committee decision, the following are some examples:

Contract No. Closing date of the tender Issuance of Delay term opening committee committee’s report (days) (33/5349/IR-01/2013) 7 June 2012 15 May 2013 360 days

(5/5342/QR08/2014) 20 August 2013 20 January 2014 153 days

Recommendation we recommend to accelerate the issuance of the Tender Analysis Committee decision in the future to avoid the delay that causes harm to the company’s interest or the public interest.

Management The reasons of the delay with regard to the first contract is due to the termination of the Response works of the old committee and the formation of new one for opening the tenders; resulting in some time due to the process of delivery and receipt between the two committees. The series of correspondences and inquiries between our company and the applicant companies for the tender along with the completion of some shortfalls needs some time.

92 Topic 3- Minutes of opening the tenders Degree of Risk High

Note Through our review of the priorities of a sample of the contracts of Oil Projects Co., we noted the non-completion of the signatures of the members of the tenders opening committee on the minutes of the committee. The functional Topics are not also proved so as to acknowledge the extent of compliance with the content of Article (6- first) of the instructions of Governmental Contracts Law No. (1) of 2008 (as amended), stipulating upon “formed at the center of each ministry of authority, not related to the ministry of a central committee or more for opening the experiences and concerned tenders, headed by an employee whose function is not less than the function of director or senior engineers along with the membership of a representative of each of the legal and financial departments and the contracts formations include the concerned technical employee and rapture whose job tile is not less than observer”, here are some examples: 1- Contract No. 11/2011 of 2011. 2- Contract No. 16/2011 of 2011. 3- Contract No. 13/2011 of 2011. 4- Contract no. 11/2011 of 2011

Recommendation We recommend to comply with the content of the above article and to fix the functional addresses of the members of tenders opening committee. Further, we recommend to replace the sent or authorized members with a number of the dame rank and specialization.

Management The subject will be considered. Response

93 Topic 4- The project of strategic tube line Topic(26) Degree of Risk High

Note Through our review of the priorities of the project of strategic tube line, Topic26, the provider company is contracted with for the materials dated 1/3/2013 with the processing period of (10) months as of the contractual completion date on 31/5/2012. while upon auditing the receipt dates of the shipments and the arrival dates of the first shipment to the site and the receipt thereof initially on 12/11/2012, i.e. after the termination of the contractual term with 6 months approximately, causing the delay in the contract completion till 11/7/2013, i.e., one year and two months approximately. The Oil Projects Co. made sufficiency with deducting the highest limit of the delay fines, amounted to 10% of the contract’s amount an acceleration committee of the concerned persons is to be formed, in which the contractor is represented for disbursing on the remaining works, otherwise the work is withdrawn under the contract terms or the provider is to equip the materials from the companies, set in the providers list for evading the delay as the delay of this contract is one of the important reasons in the delay of the completion of strategic line, cycle 26.

Recommendation We recommend the company to comply with the instructions of the governmental implementation laws and to take the sufficient procedures for accelerating the contract completion including the formation of the acceleration committee to evade the damaged delay of the public interest.

Management It will be done in the following contracts. Response

94 Topic 5-Delay in signing the contract Degree of Risk High

Note Through our review of sample of the contracts of Oil Projects Co., we noted the delay of a number of the bidders in signing the contract, in violation of implementing the instructions of the governmental Contracts Law; stipulating upon the necessity to sign the contract within a period of not more than (15) days as of the notification date of referral. In case the winning bidder refrains from signing on the contract within the set forth term, the contracting authority shall direct an official letter of warning notification indicating the necessity of signing the contact within (15) days as of the notification date. Moreover, Article (10) – First – A - stipulates that the winning bidder refrains from signing the contract without a legally excusable reason after receiving the notification of referral and after receiving an official letter of warning notification to sign the contract within fifteen (15) days from the date of receiving the official letter of warning shall be considered in breach of contract.

Contract No. Referral decision date Delay term

(2014/IR-01/5395/13) 23/01/2014 102

(QR-01-2013/5441/42) 11/04/2013 67

Recommendation We recommend the necessity to direct official warning letters to the contracting parties upon the delay signing the contract for a period of 15 days as of the referral decision date. We also recommend the company to follow up with the contracting parties in the future and to provide them with the necessary instructions in order to avoid the harmful delay to the company’s interest.

Management The reason of delay owed to the process of collecting the requirements and ensuring the validity Response of issuance thereof, which requires the provision of time.

95 6- Non-ratification of the final financial Moderate Topic Degree of Risk statements

Note Through our review of the Oil Projects Co., we noted that the final financial accounts for the years from 2011 till 2016 are not ratified by the Financial Control Bureau till the audit period on August 25, 2017 despite the company has submitted them for ratification within the specific limit of time.

Recommendation We recommend the company to necessarily follow up the financial Control Bureau for ratifying upon the final accounts for the previous years.

Management The company is currently working on following- up the financial Control Response Bureau for ratification on the final accounts for the previous years through removing the effect of the bureau’s notes on the company’s final accounts.

96 Moderate Topic 7- Contract Language Degree of Risk

Note Through our review of the priorities of the contract No. IR-01/5395/13/2014, the translated copy of the contract into Arabic Language is included with the note that, after the approval thereof, in case of dispute between the parties, in violation of Article (8- Seventh- a) of the instructions of the Governmental Contracts Implementation law and the letter of the ministry of planning/ the legal department No. 6083/5/4 dated 2/5/2010; stipulating upon the inclusion of a term in the contract that the Arabic copy shall have the same proof of evidence with the English copy.

Recommendation We recommend to comply with the instructions of the governmental Contracts Execution law and the mentioned letter of the ministry of planning.

Management In the import contracts, the English Language shall be approved as our orders are Response specialized and have details and branches that can not be translated into Arabic Language. As it is difficult to deliver the technical meaning of these materials, yet the technical orders depend on the world criteria and standards, permanently issued in English language to maintain the company’s right and to access the required standard specifications as long as ensuring the company’s rights upon arbitration.

97 8- Completion of the tenders opening committee Moderate Topic Degree of Risk members

Note Through our review of the priorities of the contract No. PR-03/45-2013/5342 OF 2013,we noted that the members of the tenders opening committee are not completed with those not attending with other employees of the same competence, in violation of Article (6- fifth- b) of the instructions of the governmental Contracts Execution law, Stipulating upon ( the head of the tenders opening committee shall ensure the existence of the committee members and in case of the absence of a number of them, such absence shall be completed by the employee of the same competence, determined by the head of the contracting authority or the authorizer thereof).

Recommendation We recommend to comply with the mentioned instructions of the governmental contracts execution law.

Management Such note will be taken into consideration in the future. Response

98 Ministry of oil Piplines oil Compnay

99 Topic 1- Delay in signing the contact Degree of Risk High

Note Through our review of sample of the contracts of Oil Projects Co., we noted the delay of a number of the Contracts المالحظةbidders in signing on the contract, in violation of the instructions of the governmental implementation Law; stipulating upon the necessity to sign on the contract within a period of not more than 15 days as of the notification date of referral. In case the winning bidder refrains from signing on the contract within the set forth term, the contracting authority shall direct an official letter of Note for the necessity of signing on the contact during 15 days as of the notification date. Article No. 10- first also stipulates upon “ provided that the winning bidder who refraining from signing the contract, after notifying him with the referral letter and after the sent official Note thereto, shall promise to sign on the contract within 15 days as of the Note data and without a legally excusable reason.” The following are some examples of the delayed contracts in signature:

Contract No. Contact Topic Referral decision date Delay term Rehabilitation of main roads and spaces 21/10/2013 83 2014/2/ق

Construction of control towers 12/9/2013 131 2014/5/ق Construction of a block fence at the gas station 8/4/2014 54 2014/17/ق in Northern Rumaila

Recommendation We recommend the necessity to direct an official letters of Note to the contracting authorities upon the delay in signing on the contract for a period of 15 days as of the referral decision date. We also recommend the company to follow up with the contracting authorities in the future and to provide them with the necessary instructions for evading the damaged delay to the company’s interest.

Management The reason of delay returns to that the process of collecting the requirements and ensuring the validity of Response issuance thereof requires the provision of time.

100 Topic 2- Suspended instrument in the banking reconciliation Degree of Risk High

Note Through our review of the process if preparation of reconciliations of the banking accounts in Oil of 2014 for theالمالحظةPipes Lines Co., we noted the existence of suspended instrument since June benefit of Lines, law stipulates upon that any instrument dated for more than 6 months shall be deemed as null and void and shall be cancelled from the company books.

Instrument Beneficiary Amount (IQD) Date Bank name No. 17317 Baijai Lines Co. 29.611.258 June 2016 Rafidian BANK

Recommendati We recommend the management to necessarily follow up the suspended instruments and to on take the appropriate procedures concerning the suspended instruments for a period of more than 6 months for the purpose of indicating the cash accounts fairly in the final financial accounts that may affect on the determination of the real cash liquidity of the company.

Management We support your note and we would like to inform you that we are working with the bank to Response match our balance with respect to the mentioned instrument as the instrument represents the value of the salaries of Baiji lines Co. whereas the instrument is disbursed by our representative in Baiji and this has not been proved in the bank records for coinciding with the security events in the region. The bank has opened an alternative site to the branch in Kuwait and it is contacted for taking the necessary measures.

101 Moderate المالحظةTopic 3- Non-inclusion of the dispatch clause to the contract Degree of Risk

Note Through our review of a sample of the contracts for the Oil Pipelines Co., we noted the dispatch of a number of the company’s employees while the concluded contract does not include the paragraph that stipulates upon this, the following are examples of this: 1- Contract No. 15/2015, 3 employees are sent from Oil Pipelines Co. to Malaysia; fulfilling the invitation of the ministry of Industry and Minerals/ General Company for Steel Industries for 15 days except with the travel days. 2- the concluded contract No. 127 of 2014, 7 employees are sent, two of them are affiliates of the Oil Pipelines Co., to Turkey; fulfilling the invitation of Iranian Tadbir Co. for the purpose of authenticating the designs of pressure reduction systems of the Iranian Gas Carrier for 5 days.

Recommendation we recommend to consider accuracy in fixing the items of the concluded contract and to comply with the instructions thereof for evading the legal and financial accountability that may be incurred by the company

Management Further consideration will be taken into account. Response

102 Ministry of oil Middle Refineries Company

103 Topic 1- Delay in signing the contact Degree of Risk High

Note Through our review of sample of the contracts of Oil Projects Co., we noted the delay of a number of the bidders in signing on the contract, in violation of the instructions of the governmental Contracts implementation Law; stipulating upon the necessity to sign on the contract within a period of not more than 15 days as of the notification set forth term, theالمالحظةdate of referral. In case the winning bidder refrains from signing on the contract within the contracting authority shall direct an official letter of Note for the necessity of signing on the contact during 15 days as of the notification date. Article No. 10- first also stipulates upon “ provided that the winning bidder who refraining from signing the contract, after notifying him with the referral letter and after the sent official Note thereto, shall promise to sign on the contract within 15 days as of the Note data and without a legally excusable reason.” The following are some examples of the delayed contracts in signature:

Contract No. Contact Topic Referral Delay term decision date For the year 2014 (D/949) safety equipment and fire purchase order 24/03/2014 29 /For the year 2015 (D/1042) processing of metal molds purchase order 5/02/2015 31 For the year 2013(D/810) processing of electrical transformers purchase 14/03/2014 71 order For the year 2015/(D/1094) Processing of fixed type of package and crust of 11/06/2015 111 exchangers For the year 2014) P/20) processing of 137 fire engines with accessories 25/11/2013 36

Recommendation We recommend the necessity to direct an official letters of Note to the contracting authorities upon the delay in signing on the contract for a period of 15 days as of the referral decision date. We also recommend the company to follow up with the contracting authorities in the future and to provide them with the necessary instructions for evading the damaged delay to the company’s interest.

Management The reason of delay returns to that the process of collecting the requirements and ensuring the validity of issuance Response thereof requires the provision of time.

104 Topic 2- customs clearance Degree of Risk High

Note Through our review of a sample of the contracts, we noted that there is a delay in the companies due to المالحظةprocess if receiving the materials equipped by the contracted with the procedures of the customs clearance and the tax exemption which are the obligations of the Central Refineries Co., for example: Project name Venture company Delay period/day name Cooling towers project Aramada Co. 378 CRR project IFC Co. 90

Recommendation We recommend the Central Refineries Co. to necessarily accelerate the clearance of the equipped materials for evading the execution of the projects and the payment of the additional flooring wages in the ports.

Management Delay in the process of the customs clearance of the equipped materials is due to the Response shortfall in the priorities of the supplied materials by the contractor, the company also faces some difficulties as a result of the complexity of the customs procedures.

105 Moderate Topic 3- Development of Doura refinery units Degree of Risk

Note Through our review of the priorities of the development of Doura Refinery Units, we noted the المالحظة :following 1- not fixation of the contract’s conclusion date in paragraph (f/ concerning the contract’s editing date) of the contract items and the signature date of both parties is not proved as well. The contracting contract is concluded in English Language and there is no Arabic version thereof despite the contracting parties have the Arab Nationality. 2- the contractual paragraph (5-2) concerning the obligations of the owner indicates that the site shall be clean and free of any occupants for starting the execution of the equipment installation works. This indicates the contractual default in formatting this paragraph whereas it is supposed in such contracts (processing and installation contracts) that installation coincides with the implementation of the civil works. It shall not be completed and the site shall be cleaned for starting the installation and then the operation, particularly that the civil works are assigned to another contractor.

Recommendation We recommend to determine the contract signature date upon the conclusion of the contracts along with compliance with the instructions of the applicable governmental Contracts Execution Law concerning the language of the contract.

Management 1- your notes are taken into consideration as all the signatures held the signature date and the Response non-determination of the date occurred inadvertently; noting that the contract’s signature date is the existing date on the signature of the director general and the contract’s signature date does not change the basis of the direct implementation date. 2- we support this notes and also ascertain upon the referral of the project entirely along with the civil works to the same contractor by the company management for evading the problems, we would also like to indicate that one of the most important justifications to refer the civil works formerly by our company is to encourage the local companies and to find work opportunities thereof in addition to the local operation of the labor. 106 Oil Marketing Company Topic 1-Sale of Oil Products Degree of Risk High

Note Through our audit, we noted that Oil Marketing Co. has sold the oil products by 2016 as the value of the sales of Oil Products, non-transferred to the fund accounts, amounted to USD 60.882.236 during the year 2016 for the sale of Naphta product.

Recommendation We recommend to necessarily deposit the amounts of the sale of oil products for the fund accounts.

Management The company shall carry out such procedure based on the guidelines by the ministry Response of oil, economic department and the ministry of finance, accounting department.

108 2- Outstanding differences and amounts with one of the Topic Degree of Risk High customers المالحظة Note Through our visit to Oil Marketing Co. and our review of the company accounts, we noted the existence of debit balances with the value of USD 51.4 millions, required from Shell Co. such amounts are the result of changing the course of shipments loaded by the customer from that agreed upon one. Accordingly, the price differences are resulted for the benefit of Oil Marketing Co. Such amounts are not collected and is deemed as the subject matter of difference with the customer till the date of our visit on July 3, 2017. The Oil Marketing Co. is working on booking the due credit Notes for Shell Co. for the delay fines while the total number of these Notes amounted to USD 4 millions only as in the end of the year 2016. The company has not taken any procedures against the suspension of sales for the benefit of the customer till the collection of the resulting amount thereupon. The company has not also taken any legal procedures for collecting such amounts; noting that the dispute concerning these amounts continues since the end of 2008.

Recommendation We recommend the company to settle the dispute with the customer and to suspend the sale of the oil products to the customer in case of refraining from paying the due amounts.

Management The dispute with the customer is a financial one and the friendly meetings for the Decision Response thereof continue. In addition, there is a strategic importance for maintaining Shell Co. as one of the world Major Companies as a permanent customer or Iraqi Raw Oil. Accordingly, the transaction with the above mentioned company continuous and it is equipped and allocated by the ministerial committee. The supreme authorities are currently working on reaching to the financial settlement with the customer that will resolve the mentioned dispute.

109 Topic 3- Credit Notes Degree of Risk High

Note Through our visit of Oil Marketing Co. and our audit of a sample of the sales movements, المالحظة we noted the delay of the company in issuing the credit Notes for the benefit of the customers for the achieved delay fines on the company as a result of delay in loading the product, the following is some examples: Note No. Note date Shipment No. Invoice No. Shipment Delay date date (day) B/10/2016 24/1/2016 BBL/7776 (1) B/771/2014 26/12/2014 394

B/12/2017 16/1/2017 BBI/8418 B/925/2015 16/12/2015 401

B/109/2016 24/4/2016 BBL/7956 (1) B/245/2015 21.4.2015 369

This delay violates the items of the signed contact with the customers and causes difficulty in matching the balances between the parties due to the delay of the Notes for a period of more than one year.

Recommendation We recommend the company not to delay in issuing the credit Notes and to issue them as soon as possible.

Management The reason of delay in issuing the credit balances is due to the delay of collecting the Response following required documents and the approvals thereupon: 1- The delay penalty Memo, issued by the Crude Oil and Gas Marketing Authority. 2- The bill of lading (carrier sailing cable) issued by the shipment division.

110 Topic 4- Delay fines Degree of Risk Moderate

Note Through our audit, we noted that the total resulting fines upon the company as a result of the delay of loading the carriers amounts to USD 175.657.741 during 2016 for the reasons such as weather conditions and maintenance works.

Recommendation We recommend the company to necessarily comply with the set out dates of loading for saving the financial resources.

Management There are many factors that the company can not control and that lead to the delay fines Response such as the bad weather conditions and the maintenance works.

111 Moderate Topic 5- Non-ratification of the final financial statements Degree of Risk

Note Through our review of the Oil Projects Co., we noted that the final financial accounts for the years from 2014 till 2016 are not ratified by the Financial Control Bureau till the audit period on July 3, 2017 despite the company has submitted them for ratification within the specific limit of time.

Recommendation We recommend the company to necessarily follow up the financial Control Bureau for ratifying upon the final accounts for the previous years.

Management The company is currently working on following- up the financial Control Bureau for Response ratification on the final accounts for the previous years through removing the effect of the bureau’s notes on the company’s final accounts where the final accounts for the two fiscal years 2014 and 2015 are submitted after introducing the required amendments thereto and we are waiting for the bureau’s ratification thereupon.

112 Moderate Topic 6- Employees files Degree of Risk المالحظة

Note Through our visit to Oil Marketing Co., we noted the lack of some files of the documents of newly transferred employees and the following are their names: Employee name Job Topic Transferring institution Transfer date Drgham Shaker Senior Oil Products 16th of April 2017 Bishara Accountant Distribution Company Haidar Munther Associate Chief Secretariat of the 17th of April 2017 Hussein Engineer Council of Ministers Walid Jassim Mohi Associate Middle Refineries 22nd of May 2017 observant Company

Recommendation We recommend the company to follow up the personal files of the employees and to ensure the availability thereof upon the employee’s proceeding work.

Management The mentioned employees are transferred from governmental companies or institutions Response and we are provided with the letters of the administrative orders of transfer and processing and the transferee institutions will send these files during a short time.

113 Ministry of communication

114 Ministry of communication Ministry center

115 1- Failure to approve financial records and final ModerateالمالحظةTopic Degree of Risk statements for previous years

Note Through our review, we have Noted that the record of consolidation of the operational budget is not approved by the Ministry of Finance from 2008-2013 due to the existence of an amount of (54) billion Iraqi dinars that is disputed upon since 2008, related to the salaries of the subsidiary companies of the ministry and representing the restricting settlement No. 8817 of the cash section dated June 9, 2009. It was supposed to appear within the ministry’s final accounts for the year 2008. The ministry of finance has left the final financial statements from 2008-2013 as non- authenticated by a clear letter and it has authenticated the year 2014 on 29/12/2015 without verifying the validity of the opening balances.

Recommendation We recommend the ministry to follow up with the ministry of finance to resolve the dispute on the record of consolidation and authentication thereupon. we recommend the ministry to follow up with the Financial Control Bureau for authenticating the final data of the operational budget.

Management The authentication for the year 2014 shall be deemed as comprehensive from 2008=2014 Response for being attached to the enhanced schedules and balances, requested by the ministry of finance. Whereas the explosion that hit the ministry of finance during 2009 has led to the lost of the documents and prevented the intervention of restricting settlement at the registers of the ministry of finance; leading to the lack of correspondence between the two authorities.

116 Topic 2- Reconciliations with the banks Degree of Risk Moderate

,with the banks المالحظةNote Through our visit to the ministry, and our audit of the banking reconciliation we noted that there are no outstanding instruments since previous years.

Recommendation We recommend the management to necessarily follow up the suspended instruments and to take the appropriate measures concerning the suspended instruments for periods of more than 6 months for the purpose to indicate the cash accounts fairly in the final financial data that may affect the determination of the real cash flow of the company.

Management These instruments will be settled in accordance with the decision of the FSA.. Response

117 Ministry of communication The general Company for communication and postal

118 Topic 1- Failure to keep consolidation records for the years 2003- Risk High المالحظةDegree of 2012

Note Through our review of the company, we noted that the General Telecom Co. and the Post Authority has not kept the consolidation records since 2003 and till 30/6/2012; noting that the company prepared the consolidation records as of the year 2013.

Recommendation We recommend to necessarily treat the suspension term in the preparation of the consolidation records.

Management The ministry shall suppose the sufficiency of the records of consolidation, in which the Response records are kept.

119 Topic 2- Delay in the procedures of transfer into the governmental Degree of Risk High المالحظة system for the years 2003-2012

Note Through our review of the General Telecom Co. and the Post Authority, we noted the non- termination of the application of the guidelines of the Financial Supervisory Authority to separate the investment accounts from the operation ones of the company and to transfer the company into the governmental system for the period from 2003-30/6/2012 as the previous work depends on the application of the consolidated accounting system till April 2008.

Recommendation We recommend the General Telecom Co. and the Post Authority to necessarily work on transferring all the financial statements for the period from 2003- 30/6/2012 from the consolidated accounting system to the governmental one along with the necessity to provide the treated statements to the Ministry of Finance so as the Audit Department can audit them.

Management We are currently working on transferring the financial statements from the consolidated Response accounting system to the governmental one and the work is completed till 2005 due to the lack of the functional cadre; consisting of three-person staff, in addition to the employees’ slow down in work due to the introduction of accounts to the work system.

120 3- The failure to resolve at the projects, not subjected to the Topic Degree of Risk Moderate control of the central Government according to decision No. 347 Note Through our review of the contracts of the ministry of health, we noted the existence of contracts with the companies for the purposes of establishing multi-capacity hospitals, noting that the completion ratio of these contracts are law. According to the council of Ministers decision No. 347, decision No. (5), a- it shall be settled after confirmation of the status quo of the completed works and the non-received materials, having agreed with the second party upon termination. The contracting -in case of satisfaction or the nonالمالحظة,axes are processed according to the terms of the council of ministers decision. Otherwise approval of the second party upon settlement according to decision No. 5-b, we noted that the settlement forms are not prepared for stabilizing the situation, either for the presence of financial problems or problems with the executer in addition to the existence of areas beyond the government’s control. The below schedule indicates the details of the contract and the completion rates till the audit term in May 2017:

Project name Venture Execution Referral cost Execut Company Start Complet authority method (IQD) ion name date ion rate term

Establishing a telephone Nineveh Direct 6.552.567 300 ZTE 2012 68% network for switches in Mosul Telecom execution expanding the Communications Nineveh Direct 113.024.000 180 ZTE 2012 68% and Mail area of Shoura area Telecom execution expanding the Internet service Nineveh Direct 181.61.000 180 ZTE 2012 68% using DSL devices Telecom execution Construction of Al - Qahtaniyah Nineveh Contracting 808.265.425 240 Sanja Fences 2013 85% Telecom Complex Telecom

Recommendation Pursuant to the council of ministers decision no. 347, the projects of low ratios shall be suspended, the matter of fact shall be proved and the contracts are to be terminated satisfactorily in addition to refunding the letter of guarantee of proper execution, the liquidation of the operational advances account and the determination of the remaining dues. Manageme Based on the Management Response , the ministry is in the process of making settlements with the contractors, this project is nt Response within the hot spot, currently under study.

121 Ministry of Communication The general Company for international information network

122 1- Delay in completing the construction project of the General Topic Company for the services of the International Information Degree of Risk High Network in the governorate of Babylon Note During our review of the contract No. 1/2014 «Construction project for the General Company for of Babylon», we noted theالمالحظة Services of the International Network of Information in the governorate existence of a delay in the delivery of the building where it was supposed to be completed in 2015, but so far there is only the first delivery on 6 / 10/2016, although the percentage of completion as stated in the initial receipt is 98%.

Notes Contract Contract Executi Contract Company Contract name status amount (IQD) on signature name term date A one-year Initial 1,335,596,500 389 18/12/2014 Al - Tawz contract No. 1/2014 maintenance period receipt is days Contracting «Construction project for the ending on conducted Company General Company for Services 12/9/2017 is of the International Network of granted Information in the governorate of Babylon»,

Recommendation We recommend to necessarily take the appropriate procedures as a result of the prejudice to the contract items according to the instructions of the contracts execution law in chapter nine and ten of the Governmental Contacts Implementation Law No. 2 of 2014.

Management The existence of dispute with the supplier as a result of the prejudice to the agreed upon items of Response the contract; leading to the difficulty to settle the contract termination.

123 Ministry of manufacturing and minerals

124 1- Advances for the purposes of the activity suspended from Topic Degree of Risk High previous years

Note Through our review we Noted that there are Advances for the purposes of the activity Suspended from previous years have not yet settled until the date of our visit on 17 May been settled as on 31المالحظةan example for the advances accounts that have not yet .2017 December 2016:

Account’s name Amount (IQD) Account’s name Amount (IQD)

Adnan Mohamed Abdel 485,000,000 Mehdi Jaber Mutlaq 10,450,050,000

Mahdi Jaber Ali Nasser WKf 3,985,000,000 Qurtuba Motors 13,013,000,000

Ammar Shaker Qassem 75,000,000 Yasin Mukhlif Eabd 500,000,000

Rooney Emad 840,500,000 ALWAN CO, Adel Hashem Jaafar 678,420,000

Mohammed Hussein Ali 650,000,000 Advances- Erbil BookFair 1,225,900,000

Sabah Ali Matroud 600,000,000 Saif al-Din Dawood 6,235,858,907

Recommendation We recommend that the ministry to contact the beneficiary party of the above advances to return the same .

Management There is follow up by the financial department, through expenditure of the affiliates wages. Response And a list will be issued to be directed to Monitoring Directorate.

125 Topic 2. The unresolved projects according to the Decision of Degree of Risk High the Council of Ministers No. (347)

Note Through our review of the contracts of Ministry of Industry and Minerals, there are continuous contracts with some companies and it should be noted the percentage of completion in such contracts is considered very low. In according to the Decision of Council of Ministers No. ( 347), those contracts must be settled after proof of the status quo for the done works and the undelivered materials and after agreement with the second party on the termination, we noted the forms of settlement have not issues or issues with the المالحظةbeen prepared for the proof of the status quo either due to financial developer.in addition there are uncontrolled. The following table shows the details of a sample of the contracts, and percentage of completion until the period of audit in May 2017:

Company’s Name Project's name Date of the Com. Amount of the contract Ratio contract (ID)

The state Company for Drugs To establish two plants for antibiotics 30/09/2010 42% 13,650,000,000 Industry (Salahuddin General Company)

The state Company for Drugs To establish 8Mega Plant 18/08/2011 70% 12,310,000,000 Industry

Recommendation Based on the Decision promulgated by the Council of Ministers No. (347), the projects of low parentage of completion must be ceased, confirming of status quo, and terminating the contracts by mutual agreement, in addition to recovering the letter of guarantee and good implementation, settling the operational advances account and determining the remaining receivables. Management As per the Management Response , the ministry made a request for freezing the projects as per the Decision promulgated No. 347 of 2015. Response

126 Topic 3- Delay in preparation Degree of Risk High

Note Through passing the matter to the ministry of industry, we noted that some companies are delayed concerning the implementation of the contract. The following table shows a sample of delayed contracts and percentage of the completion

.Contract Contract Date Com المالحظةCompany’s name Project’s Name Amount of Ratio

UR State Company Rehabilitation of Cables Plant 447,010,000,000 05/09/2012 60%

State Company of Electrical and Production and Maintenance of Distribution 8,093,208 Euro 21/06/2011 78% Electronic Industries Transformer

Dhat al-Sawari State Enterprise Rehabilitation of Dhat al-Sawari State Enterprise $990,000 31/12/2013 65% / second Phase

ibn_alwaleed company Rehabilitation of ibn_alwaleed company/ Third IQD 371,000,000 30/10/2013 45% Phase

Ikha General Company Drums and Metal Packagings IQD15,000,000,000 31/10/2011 95%

Badr General Company Rehabilitation of Badr General Company IQD 11,365,000,000 29/09/2013 70%

Jabir Ibn Hayyan Co trickle irrigation system Project 5/6/21 IQD 10,000,000,000 11/02/2014 5%

Recommendation We recommend the ministry to prepare the appropriate action resulted from the breach of terms of contract as per the instructions of implementation of the contracts contained in the ninth and tenth chapters, the instructions of implementation of the government contracts N. 2 of 014. We also recommend the management to reach satisfactory settlement with the supplier to avoid to waste time and effort

Management The Ministry sent warning letter, and urged the company is delayed to speedy completion of the project, and the legal Response department followed up the matter.

127 Topic 4. Lack of approval the record of consolidation of financial statements of the operational and investment two Degree of Risk Moderate balance sheets المالحظة Note Through passing the matter to the Ministry of Industry and Minerals, we noted that the final financial statements of the years from 2013 to 2016 have not been approved by Board of Supreme Audit up to the date of our visit in May 2017

Recommendation We recommend that the Ministry of Industry and Minerals to follow up with Board of Supreme Audit for approving on the final financial statements of the years 2013-2014- 2015-2016

Management The ministry sent all the statements to Board of Supreme Audit up to the date, but until Response now a response on the approval has not been sent.

128 Ministry of housing

129 Housing Department

130 1- Not resolving the projects outside the government control as Topic Degree of Risk High per Decision No (347)

Note Through our review of the contracts of housing department, the presence of contracts concluded with companies for the purposes of project formation. It should be noted that such projects will be formed in areas outside the government control, in according to the Decision N. 347 promulgated by the Council of Ministers of ministers, Decision N. (5-A), these projects must be settled and after the proof of status quo of the done works and undelivered materials and after making agreement with the second party for termination promulgated by Council of Ministers المالحظةthe contract, the all aspects of the contracting shall be processed as per the terms of the Decision of the minsters, in case of resolving the dispute or non-accepting of settlement by the second party as per Decision N (5-B). We noted that the settlement forms have been prepared to proof the status quo. The following table shows the details of a sample of the contracts, and percentage of completion until the period of audit in May 2017:

Project's Name Executing Entity Referral Term of Start Date Com. Date Com. Cost IQD Com. Ratio Estab of Housing Complex in DulFuqqar Company 42,808 730 2013/1/20 25/1/2015 41% Sinjar/ Nineveh 15

Estab of Housing Complex in Al Awad Company and 45,174 915 3/5/2011 3/11/2013 43% Anbar, Jubail, Al Kharab Dyar Al Emarra

Estab of housing Complex/ Hayt Al Mansoura General 59,525 913 20/3/2012 19/9/2014 84% for Contracting Co

Estab of Housing Complex in Golden star for 59,204 900 20/1/2010 9/7/2012 71% Salladeen/ Mutarada Contracting Co

Recommendation Based on the Decision promulgated by the Council of Ministers No. (347), the projects of low parentage of completion must be ceased, confirming of status quo, and terminating the contracts by mutual agreement, in addition to recovering the letter of guarantee and good implementation, settling the operational advances account and determining the remaining receivables.

Management As per the Management Response , the ministry made a request for freezing the projects as per the Decision promulgated No. 347 of 2015. Response

131 2- The finalizing of contracts that have been liquidated and controlled by the Topic Government pursuant to the Decision of the Council of Ministers No. 347 with Degree of Risk High the Ministry of Planning is not finalized.

Note Through our review of a sample of investment contracts in the Housing Department, we Noted the contractors and none of themالمالحظة existence of some ongoing contracts that have been settled with the have been established with the Ministry of Planning as a final step, for example:

Project’s Name Executing entity’s Name Contract Amount Contract Date Contract Actual Comp. Billion Iraqis Duration/day Ratio 2016

Construction of residential Al Faw Company and Four 187,603 5/6/2014 900 19% complex in Maysan / Martyrs Seasons Company Foundation

Construction of a residential Durga Industrial Company 230,596 26/4/2011 822 66% complex in Basra / Al-Sabah

Construction of a residential Al Bilad and Arabian Peninsula 119,416 24/7/2012 913 65.7% complex in Basra / Al-Zubair Company

Construction of a residential Stratos Company 159,,255 26/12/2012 820 33% complex in Basra / Shatt Al Arab 2

Construction of a residential Al-Mutasim Company and Nile 235,572 14/5/2014 900 3.9% complex in Basra / Shatt Al Arab 3 Bin Harmal Foundation

Recommendation We recommend the Management to take the necessary legal measures in accordance with the instructions for the implementation of government contracts..

Management Work is under execution in order to complete the procedures related to the Ministry of Planning. Response

132 The Roads and Bridges Department

133 1- The projects that is controlled by the Central Government unresolved in accordance with the Degree of Risk High Topic Decision of the Council of Ministers No. (347)

Note Through our review of a sample of investment contracts in the Roads and Bridges Department, we Noted the existence of contracts that have been terminated but without all priorities as stated in Decision No. (347) in line with paragraph 5 / table (1), we mention thereof as follows:

Project’s Name Executing Contract Date of the Contract Actual Project Status المالحظة entity’s Name Amount / contract Duration/ Com. Ratio Billion Iraqis day 2016

Highway Traffic Project I / Hamorabi 11/10/2011 974 64% The proof of the status que. The project 6 Right Corridor (000, + Company 77,856 suspension form has not been signed and the Ministry of Planning has been 47 + 000) contacted about. Highway Traffic Project I / Ashour Company 11/10/2011 1095 71% 6 Right Corridor (000, + 99,489 47 + 000+95)

Compensation and Hamorabi 15/12/2014 235 0% Suspension and commencement of the rehabilitation of the Company & project upon the improvement of the financial highway / Baghdad by Ashour Company 96,670 situation and the procedures have not been length of 120 km Phase I & Contra of completed in accordance with Decision No. Shore Company 347.

Rehabilitation of the Turkish Neem 22/12/2013 2% The contract has been withdrawn according to highway (1) part I / 4 m / Company the letter No. 9143 on 10/5/2016, the work is underway to complete the proof of status quo 1 by the length of 105 km 111,808 and we Noted that the contracting company has taken an advance payment of 11 billion / Iraqi dinars.

Recommendation We recommend the Management to complete the necessary procedures in accordance with Decision 347 of 2015.

Management The proof of status quo of the two contracting parties has been satisfied and the matter will be considered soon. Response

134 1- The projects that is not controlled by the Central Government Topic unresolved in accordance with the Decision of the Council of Degree of Risk Moderate Ministers No. (347)

Note Through our review of a sample of investment contracts in the Roads and Bridges Department, we Noted the existence of contracts with companies for the purpose of establishment of multiple projects, noting that these projects are in of the Council of Ministers المالحظةareas not under the control of the central government, and in accordance with the Decision No. (347) Decision No. 5-A must be settled; after the proof of the status quo of the completed works and materials not received and after Agreement with the Second Party to terminate and deal with the basis of the contract according to the terms of the Decision of the Council of Ministers either in the status of consent or non-consent of the second party on the settlement in accordance with Decision 5-b. We noted the forms of settlement have not been prepared for the proof of the status quo. The following table shows the details of a sample of the contracts, and percentage of completion until the period of audit in May 2017:

Project’s Name Executing entity Cost of Execution Start Date Completio Actual assignment / Duration/ n Date Com. Ratio Billion Iraqis day 2016

Rawat Road - Hadar, c / 1 (67 km) Al Anbar Ajil / Bab al-Kharbit and Mohammed 49,092 850 6/5/2012/ 23/8/201 6% Shaker al-Dulaimi 4

Construction of the road of Ksak Rabia M / 1 by Jubail and the White Sea Co. 25,172 730 5/5/2008 7/12/201 90% a length of 25 km / Nineveh 3

Recommendation Based on the Decision promulgated by the Council of Ministers No. (347), the projects of low parentage of completion must be ceased, confirming of status quo, and terminating the contracts by mutual agreement, in addition to recovering the letter of guarantee and good implementation, settling the operational advances account and determining the remaining receivables.

Management The ministry is in the process of making adjustments with contractors and work is under execution to form Response committees to discuss projects in hot spots.

135 Building department

136 Topic 1. Delay in completing the projects of the Buildings Department Degree of Risk High

Note Through our review of a sample of investment contracts in the Buildings Department, we Noted that there was a delay in completing certain projects, as he Buildings Department failed to cease these projects in accordance with Decision No. 347 of 2015. The following are the details of these projects:

Project Status المالحظةProject’s Name Contract Executing Amount Date of Date of Contract Actual No. entity's of contract completi Execution Com. Name contract on Duration / Ratio / Billion day 2016 Iraqis

Establishment of the 17 # ofok 14/2/2012 6/10/201 730 71% A committee has been set up to headquarters of llzoraa 4 speed up on 5/1/2015, and the Chaldean Patriarchate of Company Prime Minister has been Babylon and the 12,936 approached on 6/11/2016 for the preparation of its purpose of obtaining approval for requirements / Baghdad the allocation of 6 billion dinars, but the request was rejected

The implementation 48 # ALCOM - 18/11/2013 25/4/201 720 61% The executing company signed a works of the third phase 7 written undertaking to complete a of the project (the shrine large part of the project within 60 of Mr. Mohammed Baqir days. The company has 71,102 al-Sadr) (Quds Sarra) / committed to this, as it increased Najaf the cadres, opened other sections and completed the work of the dome mirrors

Recommendation We recommend the Buildings Department to take the procedures resulting from the breach of the terms of contract as referred to in the instructions for implementing the contracts in Chapter 9 and 10 of the Instructions for Implementing Government Contracts No. 2 of 2014. We also recommend it, if necessary, to cease projects and complete the procedures in accordance with Decision 347 of 2015.

Management The percentage of completion in the project of establishing the headquarters of the Chaldean Patriarchate of Babylon has been Response improved as the percentage of the actual completion achieved through the committee was 85.7% . As well as, the percentage of completion in the implementation of the third phase of the project (the shrine of Mr. Mohammed Baqir al-Sadr) has been improved as the actual completion achieved by reaching a solution to give 60-day deadline was 90.7% and work is underway on completion of the projects as soon as possible after providing allocations.

137 2. Lack of completion of all the supporting documents for Topic Degree of Risk High projects that have been ceased by the Buildings Department

Through our review of a sample of investment contracts in the Buildings Department, we Noted the existence of contracts that have been terminated but without obtaining Note all the priorities as stated in the Decision (347) in line with paragraph 5 / table (1). It is mentioned that the Decision provided for the transfer of part of the budget in order to complete the projects that have achieved completion rate of 90% or more, we mention thereof as follows: المالحظة

Project’s Name Executing Contract Contract Contract Actual Actual Com. Project Status entity’s Amount/ Date Execution Com. Ratio Ratio 2016 Name Billion Iraqis Duration / day 2015

Establishment Al Fao 11/2/2013 365 90% 90% The company has requested to cease the of the Office of Engineering project until the financial situation improves, the National Company currently in the preparation phase of the status quo and the final payment. The Human Rights 2,103 Network / company is currently responsible for Karbala guarding the project until the approval of the Ministries of Planning and Finance to allocate the amounts of guard. Construction of Al Fao 9/10/2012 545 91% 91% The company requested to cease the project a building for Engineering until the financial situation improves. The the Directorate Company current status quo was completed and the of roads and final payment was approved. 7,107 bridges, , with furnishing

We also Noted the lack of letters of guarantee and performance bond of these projects and the lack of letters of suspension signed by the parties, as well as the lack of the another proof of status quo.

Recommendation We recommend the Management to complete the necessary procedures in accordance with Decision 347 of 2015. The projects were not completed from the operational budget due to lack of adequate allocations.

Management The Management stated that the work is under way on the letters of guarantee of the Operational Advances, and the letters of guarantee and performance bond.. Response

138 Ministry of labor and social affairs

139 1. Account of advances and deposits (suspended from previous Topic Degree of Risk High years) of advances inالمالحظةNotes During our auditing of the financial records of the Ministry, we noted that there are balances the account of (other temporary advances) which have not been settled until 31 December 2016. Despite a long period of time has passed from the date of granting these advances , it has not been settled by the ministry. Below are details of these accounts until the audit period on July 13, 2017 :

Statement Date Amount -Iraqi Dinars

Bukhayev Company 2004 307,790,000

Hashemite Telecom Company 2009 2,550,000

Iyad Gasp 2014 28,730,000

Recommendations We recommend that the Ministry should follow up and settle these suspended advances. As well as the preparation of settlements periodically to ensure the settlement of the suspended advances during the financial year, we also recommend that the Ministry should keep all documents supporting the exchange process and the settlement process.

Management For the advances of Boukihaf and the Hashemite Telecom Company, the matter was referred to the Council of Response Ministers for making a decision and no decision was issued until the date of our visit on 13 July 2017. As for the advance of Iyad Jassim, the Ministry has formed a legal committee to investigate the subject and the decision of the Committee has not been issued until the date of our visit on July 13, 2017.

140 Topic 2. The Two Decisions Committee (347 and 432) for the year 2015. Degree of Risk High

Note During our auditing of the projects of the Ministry covered by the above decisions, we noted that there is a committee formed by the Ministry to resolve the projects in accordance with these decisions, where it was recommended to liquidate four projects pursuant to decision (432) but without a ratification thereto by the of Planning to beالمالحظةMinister and the completion of the settlement form for the purpose of sending to Ministry approved. Moreover, some projects have not yet been resolved by the (347 and 432) Committee for the year 2015. Details of these projects are outlined herein until the audit period on 13 July 2017:

Project Name Contract Date Amount in Iraqi Dinar

Establishment of the typical reform complex in Diwaniyah 01/12/2011 34,231,320,768

Project of establishing the typical reform complex in Basra 13/12/2011 23,656,031,000

Project for the establishment of orphanage and elderly care center 17/12/2017 2,584,322,160 in Wasit

Recommendation We recommend that the Ministry shall follow up the procedures for the ratification of the minutes of the Committee and resolving the suspended projects. As well as listing the projects for which no action has been taken in the two decisions above.

Management The Ministry of Planning / Government Contracts Department has been approached by the letter No. 2943 in Response 2017/2/14 for the purpose of resolving the matter in accordance with decision (347) for the year 2015, or canceling the decision provided for the withdrawal of work due to it has been included by decision (432) for the year 2015. Where the Ministry of Planning refused to resolve the issue on the pretext of not informing the contractors according to the customary methods and return the subject to the Ministry of Labor to start the reporting procedure again and that the contractors have not been notified until the date of our visit on 13 July 2017.

141 Topic 3. Suspended Projects (Withdrawal of work) Degree of Risk High

Note During our review of the Ministry's projects, we Noted that two projects have been withdrawn from the four years. Noالمالحظةcompanies implementing these projects and with different completion rates for more than action has been taken by the Ministry in this regard. Below are the details of these projects until the audit period in the month of January, 2017:

Statement Amount in Iraqi Dinar Date of work Completion withdrawal rate

Establishment of the Ministry of Labor Department 2.113.994.000 2009 30 and Social Affairs Complex in Maysan

The project of establishing a nursery in the Ministry of 791.325.000 2012 66 Labor and Social Affairs Complex

Recommendation We recommend the ministry to follow up the completion of these projects. And the re-inclusion of it within the projects of the investment plan, as leaving projects without full completion expose them to extinction and theft and not to benefit from the economic and social feasibility of them.

Management As for the project of establishing the departments complex in Maysan, there is a proposal from the board of Response the Social Security Fund to transfer the project to a commercial purpot where the project will be completed at the expense of the social security fund after the ministry completes the procedures for withdrawing work according to decision 432 as the ministry is about to end the project.

With regard to the project of establishing a nursery in the Ministry of Labor complex, the Economic Affairs Committee was approached for the purpose of approving the exemption of the project from the legal formality relating to the duration of the cancellation request, as the project will be completed without the approval of the Economic Committee in the Council of Ministers.

142 Ministry of planning Ministry center

143 Topic 1. Development Fund - Ministry of Planning Degree of Risk High المالحظة Note Through our review of the Development Fund of the Ministry of Planning, it was noted that the number of projects for which loans have been borrowed from the Fund is 31 projects. The total amount outstanding for the borrowers (in local currency) is IQD 9,433,826,148. Despite the decision of the Ministry of Finance to liquidate the fund and transfer all bank balances to the account of the Ministry of Finance under the letter No. (2963) on 19-8-2014 and transfer of fixed assets to the Ministry of Planning. Despite this decision, loans continue to be received in the accounts of the Fund, in addition to the accrued benefits granted to citizens, which have not yet been received by the Ministry of Planning.

Recommendation We recommend that the committee delegated to liquidate the fund in cooperation with the Ministry of Finance and the Council of Ministers to necessarily make appropriate decisions for all parties regarding the loans and interest owed by borrowers in order to find ways to pay the amounts due.

Management The Ministry has implemented the decisions of the Ministry of Finance regarding the Response transfer of amounts available to the Ministry of Finance and liquidation of fixed assets at that time. With regard to the amount of loans and interest due. Loaners were required to exempt the borrowers from interest due to the damage suffered by borrowers as a result of the deterioration of the currency and not to benefit from these loans.

144 Topic 2. Frozen Accounts Receivable from previous years Degree of Risk High المالحظة Note Through our review of the Ministry's records, we have shown that there are frozen accounts payable from previous years dating back to 2010, 2011 for the contractors of the Ministry's Rehabilitation Project. The following is a summary of these frozen balances and the body to which they belong:

-Al-Hamed Company: The amount of 3,465,241,000 Iraqi Dinars from the year 2010 concerned the rehabilitation of the building, which is a good performance insurance intermittent. -Al-Khwarizmi Company: The amount of 23,325,000 Iraqi Dinars from 2010 belongs to the consultant office for the rehabilitation of the building.

Recommendation We recommend that the Ministry of Planning to necessary cooperate with the Ministry of Finance to form a committee to verify the balances to ensure payment of the amount owed to the Ministry and to avoid a request from the said parties for the benefits owed to them.

Management These amounts are for the implementation of the project. The project was finally delivered and Response accepted by the Ministry but there is insufficient liquidity to pay the contractors. The Ministry of Finance has been approached to obtain sufficient funding to pay the contractors.

145 Topic 3. Suspended advances from previous years - Central Bureau of Degree of Risk High Statistics

Through our review of the records of The Central Bureau of Statistics.- for one of the المالحظة New departments of the Ministry of Planning, we noted the existence of advances suspended from previous years with a total value of 34,267,679 Iraqi dinars. Notes The following is a summary of the balances, dates and bodies of these advances:

- An advance payment of 19,039,701 Iraqi dinars belonging to the Kurdistan Region for the month of December 2011. - An advance payment of 15,227,978 Iraqi dinars belonging to the Kurdistan Region for the month of November 2011

Recommendation We recommend that the Ministry of Planning in cooperation with the Ministry of Finance to transfer these balances from the records of the Ministry of Planning of the Kurdistan Region or collect them as soon as possible.

Management According to the management's response, these funds represent remittances by the Ministry Response of Finance for the Kurdistan Region and it has been registered within the allocations of the Ministry of Planning and therefore it has been registered as an advance in the records of the Ministry of Planning.

146 Topic 4. Follow-up of government projects in relation to the Council Degree of Risk High of Ministers Decision No. 347 المالحظة Note Through our review of the Ministry of Planning in connection with the Council of Ministers Decision No. 347 in the follow-up of government projects, we found that the Ministry of Planning did not follow up the ministries and governorates that did not send lists of projects to which the decision No. 347 applies thereto, according to the letter issued by the Ministry of Planning (General Government Contracts Department – Decision Committee 347, of number 4-7- 18493 dated 30-8-2016), the only letter issued on the subject until the date of our visit on 25-7-2017. The General Government Contracts Follow-up Department does not carry out any procedure to verify the completion of the lists sent by the ministries, which include the projects to which the Council of Ministers Decision No. 347 applies thereto, as preliminary studies related to the projects are carried out and a settlement is prepared for the contractors' receivables without ascertaining the work of the list submitted by the ministries and the governorates. This may lead to the existence of projects that have not been submitted to the General Government Contracts Department and the 347 Decision Committee of the Ministry of Planning.

Recommendation We recommend the follow-up government contracts department to necessarily bring into being a complete regulation including all projects of ministries and governorates to ensure the completion of the lists sent by the ministries and provinces.

Management The role of the project follow-up department depends on the review of the forms submitted by the entities Response and their compliance with the settlement requirements determined by the Council of Ministers. A copy of all the contracts that have been processed in accordance with decision 347, attached to the Ministries that have been attached to the Ministry of Planning for Contract Processing In accordance with decision 347 with the number of contracts for each ministry, noting that the Department of Sector Planning of the Ministry did not provide us with a consolidated list form all investment contracts signed in all ministries, despite the request to them more than once and the latest letter No. 2017-13-103 on 29 August 2017 .

147 4. Follow-up of government projects in relation to the Topic Degree of Risk High Council of Ministers Decision No. 347- Continue

المالحظة :Ministries that did not correspond with the Ministry of Planning - 1

Ministry of Higher Education, Scientific Ministry of Construction, Municipalities The Sunni Endowment Research, Science and Technology and Public Works Basra province Ministry of Youth and Sports Shiite Endowment office Ministry of Interior Governorate of Qadisiyah Ministry of Justice Ministry of Electricity Ministry of Transportation Ministry of Education Ministry of communications Ministry of Industry and Metals Ministry of Commerce Ministry of Finance Governorate of Mesan Oil Ministry Ministry of Displacement and Migration Christian Waqf Diwan and other religions Ministry of Health Ministry of Agriculture Ministry of Water Resources The Ministry of Labour and Social Affairs Ministry of Culture Karbala Governorate The Ministry of Labour and Social Affairs Ministry of Culture

148 4. Follow-up of government projects in relation to the Topic Council of Ministers Decision No. 347- Continue Degree of Risk High

1 - Ministries that did not correspond with the Ministry of Planning:

Name of Ministry - Governorate - Diwan Ministry of Planning Oil Marketing Company Independent High Electoral Commission

Dhi Qar Governorate Central Bank of Iraq Ministry of Defense Baghdad Municipality Ministry of Foreign Affairs

149 Topic 5. Follow-up of outstanding projects Degree of Risk High

المالحظة Note Through our review of samples of the projects of the follow-up of the implementation of government projects department, we Noted the existence of some projects belonging to ministries and governorates can not be settled as a result of disputes between the Center and contractors, which necessitates that follow up department in the Ministry of Planning to form a committee to follow up and resolve disputes to facilitate the process of settlement of projects according to the decision of the Council of Ministers No.(347). Through our review of samples of the ministries' contracts, we noted the following projects are pending without taking final measures: Project Name/Ministry Causes of Disputes Highway No. 1 - Ministry of A dispute was found between the parties. The Roads and Bridges Department expressed its desire to Housing and Construction withdraw the work, while the contractor refused to withdraw the work and demanded a complete discontinue. A case was filed by the contractor (the contractor has a great opportunity to win the case). The Ministry of Planning issued a letter (4-7-14268) dated July 13, 2017 indicating that the ministry is the subject of research and that it has already been discussed in this subject according to the letter No. 4-7-16221 on 30- 8- 2016 No final decision has been reached until the date of the visit on 24-7-2017. Building of Municipality of It was found that there was a dispute in determining the status quo (The cost of the completed paragraph in Amrali (Kirkuk) respect of completed work) was determined after reviewing the settlement minutes for the projects received. Based on the Council of Ministers ‘s Decision No. 347 of 2015, the following was stated: The form shall be sealed and signed by both parties. The non- presence of the name of the authorized manager of the company, it was observed that the amounts actually disbursed were not audited and that they were not in accordance with the actual expense, the absence of special pledges which shall be authenticated by the notary public. The letter of guarantee and the operational advance will be issued after completion of the settlement according to the decision of the Council of Ministers. Rehabilitation of Al Hussein Road There is a dispute between the contractor and the governorate of Karbala in respect of: the contractor's from Imam Ali Bridge enTopicments, letter of guarantee, maintenance fees and guardians' salaries. The Ministry of Planning issued a letter (4-7-14483) dated 16-7-2017 to the contractor Taj Aleppo Company stating the following: The need to deal with the project within the Council of Ministers decision No. 347 so that the additional amount of the company's dues can be deducted during the final settlement as an alternative to the supplement Original letter of guarantee. With regard to the amount of maintenance decided to be considered the dues of the company and deal with it within the generalities of the Department of Investment Programs No. (2-8-2768), and in terms of insurance guards salaries indicate the need to adopt the Investment Program Department No. (2-8-13917)

150 Topic 5. Follow-up of outstanding projects - Continue Degree of Risk High

Recommendation We recommend the Government Projects Follow-up Department that specific procedures shall be put in place to terminate contracts that have disputes between contracting parties. المالحظة Management There is no specific instructions related to these contracts. A committee representing the Response private sector and all relevant departments of the Ministry of Planning and the Iraqi Contractors Union was formed on 19 June 2017 to study all contracts that have disputes between these contractors and ministries. The committee did not hold any meeting until the date of our visits on August 23, 2017.

151 Ministry of culture

152 Topic 1. The lack of authentication for the consolidation Records Degree of Risk High

Note Through our review of the Ministry, we noted that the Ministry of Culture did not approve the consolidation register for the years 2015 and 2016 until the date of our visit on 19 July 2017.

Recommendation We recommend that the Ministry of Culture should follow up with the Ministry of Finance for المالحظة .the purpose of approving the record of unification

Management That the consolidation records are available to the Ministry of Finance for the purpose of Response approving the 2016 data. As for the 2015 data, they were approved and not retrieved from the Ministry of Finance until the date of our visit on 19 July 2017.

153 Topic 2. Non-ratification of the final financial statements Degree of Risk Moderate

Note Through our review of the Ministry, we noted that the final financial statements for 2016 were not approved by the Audit Bureau until the audit period in July المالحظة 2017, although the Ministry submitted them for approval on 30 May 2017.

Recommendation We recommend that the Ministry should follow up with the Financial Control Bureau in order to approve the final financial statements for the year 2016.

Management The Ministry has submitted the final statements for 2016 in May 2017 and the Response delay is in the hands of the Financial Control Bureau.

154 Topic 3. Failure to resolve projects in accordance with Decision 347. Degree of Risk Moderate

Note Through our review of a sample of the investment contracts of the Ministry of Culture, we found that a number of projects were not completed until the date of our visit in July 2017 and the implementation of Decision 347. The table below shows the details of contracts and completion rates of these projects:

Project Name Company Name Contract Date Contract Contract Value Completion Term Rate المالحظة the rehabilitation of the Iraqi Al-Rakha General 07/10/2009 802 Days 6,426,000,000 IQ. 88% Fashion House Contracting Co. Ltd. Rehabilitation of the National Al - Furat Trading 15/12/2013 55 Days 632,750,000 60% Information Center in the & General Department of Cultural Contracting Co Relations

Recommendation We recommend that the management shall abide by the instructions and decisions issued by the Council of Ministers regarding investment contracts and the need to follow up contracts in accordance with decision 347.

Management As For the rehabilitation of the Iraqi Fashion House project, it has been negotiated with the contractor to refer the Response project to decision 347 but it was rejected. As for the delay in the completion of the project, it is due to the inability of the committees of the Ministry of receipt of the project in a final manner because the project was drowned two years ago, in addition to the issuance of order No. 5 of the year 2011 and so far it has not been approved by the committees over the years where the contractor to execute the spare order without obtaining approval. As for the project of the National Center, the Ministry, under letter No. 2895 of February 2, 2016, formed committees of inventory and liquidation and so far have not completed these committees work until the date of your visit in July 2017.

155 Ministry of water resources

156 Ministry of water resources Ministry center

157 Topic 1. Delays in the preparation of projects Degree of Risk High

Note During our review of a sample of investment contracts in the center of the ministry, we noted the existence of some ongoing contracts that were delayed in completion, which led to the failure to benefit from the financial allocations investment budget of theالمالحظةto them during the previous years and the continued inclusion of these projects within the ministry for the subsequent years and the possibility of implementing new projects. The delay in the completion of these projects during previous years has led to the difficulty of completion during the years 2011 to 2016 because of the federal budget deficit. For Example:

Contract Name Contr Contracting type Company Name Contract Contract Value Contract Com. Project Status act No /Contractor Term/ Date Rate Month Processing (120) 1008/ Processing of Al Samoud General 57 39,721,631,25 17/08/ 74% A meeting was held with the pumping crew with 2011 mechanisms Company for Steel 2011 representatives of Al-Samoud pipes and spare parts Industries / Company on 22/8/2016 for the Ministry of purpose of the company's Industry and commitment to complete the Metals deficiencies and the company has not carried out any action to date. The Processing (106) half- 1023/ Processing of Al Samoud General 39 25,630,649,442 12/08/ 44% Ministry has approached the Ministry meter pumping crew 2011 mechanisms Company for Steel 2011 of Planning by letter # 2811 dated complete with backup Industries / 1/2/2017, July 2017 Pending reply tools Ministry of from the Ministry of Planning. Industry and Metals Processing, Installation, 256/2 Processing of Ibn Majid Public 15 51,700,000,000 03/12/ 99% The Ministry's approval to issue a installation, 013 mechanisms Company / 2012 work change order no. 1 was issued by construction and Ministry of the letter No. 773 on 9/1/2017. The operation of floating Industry and company did not resolve the stations (30) with Metals mentioned notes and the company mechanical accessories, was confirmed according to the pipes with back up tools operating letters, the latest is the letter No.# 3602 on February 13, 2017.

Recommendation We recommend the ministry shall review the above contracts and to take the appropriate decision either to withdraw the work or to terminate the contract with the implementing agency due to the expiration of the contractual terms for most of them.

Management The work will continue through the correspondence mentioned in (project status) as in the table above. Response

158 2. Lack of authentication for the consolidation register Topic Degree of Risk Moderate of the investment plan

Note Through our review of the consolidation registry of the Ministry Center and Ministry of Water Resources, we noted that the registration record for the 2016 investment plan was .2017المالحظةnot sent to the Ministry of Finance until the date of the visit, 20 July

Recommendation The General Authority for irrigation and reclamation projects recommend that there shall be a follow up with the Ministry of Finance to approve the consolidation registry for the investment plan because it is of great importance in ensuring the compatibility of financial data between the records of the General Authority and the Ministry of Finance.

Management Work is under way to finalize the consolidation record until it is sent to the Ministry of Response Finance.

159 Topic 3. Non-ratification of the final financial statements Degree of Risk Moderate المالحظة Note Through our review of the financial statements of the Ministry Center and the Ministry of Water Resources, we noted that the final financial statements for 2016 were not approved by the Bureau of Financial Supervision until the audit period 2017, although the Ministry submitted them for approval on 31/1/2017 in its letter for No. # 2733.

Recommendation We recommend the General Assembly to follow up with the Office of Financial Supervision in accordance with compliance with the provisions of the implementation of the budget section I paragraph (5), which requires submission of accounts 2015 by 31 January 2016 for the purpose of conducting the audit and follow-up with the Office of Financial Supervision.

Management Pending approval by the Financial Control Bureau. Response

160 Topic 4. Suspended advances from previous years Degree of Risk Moderate the existence ofالمالحظةNote Through our audit of the financial records of the Ministry Center, we noted advances suspended in the Ministry's records (investment plan) and the Ministry did not settle them until 31/12/2016 as shown in the table below.

Type of advance Balance of the advance as in 2016 Advance details / Iraqi Dinar

Credit advances The remaining balance of such advances represents the unperformed part of the continuing projects. First payment The remaining balance of such advances represents advances the undeveloped portion of the continuing projects that have not been settled due to insufficient cash allocations.

Recommendation We recommend that the Ministry shall settle the above advances and making an agreement with contractors on a specific mechanism to pay after the availability of cash allocations in coordination with the Ministry of Planning.

Management The advances of the credits and advances of the initial payments are contracts that are still ongoing Response and that the change in the balances will be according to the adjustments provided by those companies. These advances will be closed once the settlements are concluded with the contractors.

161 Ministry of water resources General Authority for Irrigation and Reclamation Projects

162 Topic 1. Suspended Advances from previous years Degree of Risk High

Note In our review of the financial records of the General Authority for Irrigation and Reclamation Projects, we noted that the Authority has granted advances to contractors in the form of prepayments. Whereas The المالحظة Authority is currently in the process of settling these advances. These advances reached 31/12/2016 as shown in the table below:

Date of grant of advance Name of beneficiary The amount of the advance (ID / Iraqi) 2016 1 January 2012 Faw Company Contract No. 21st of 2012 1,198,763,730

6 November 2012 Faw Company Contract No. 22nd of 2012 2,255,223,032

11 November 2009 Al - Sarayar Company Contract No. 24 109,489,611 of the year 2009 22 September 2011 Al Faw Company Contract 45 for the year 1,564,828,300 2011

Follow Up By following up on the above note, it is clear to us that the Authority is committed to the instructions regarding settlement of outstanding advances from previous years. However, some advances have not been settled until the date of the visit in July 2017.

Recommendation We recommend the Ministry to form a committee to review the priorities of the above advances and to work on their liquidation as soon as possible, and to review the accounting record for those advances.

Management The Ministry of Finance has opened the final records for the year 2014 until the accounting restrictions and Response adjustments of these advances, and the Department will complete the treatments soon.

163 2. Failure to resolve the decision of projects with Topic Degree of Risk High advanced achievement ratios

,Reclamation ProjectsالمالحظةNote During our review of a sample of investment contracts in the General Authority for Irrigation and we Noted the existence of contracts that were terminated, although the completion rate is advanced but without all the priorities as stated in Decision (347) in line with the fifth paragraph / table (2) Including the following:

Project Name Name of Contract Contract Date Contract expiry date Contract Actual com. Project Status executing Value /One under last extension Execution Term Ratio agency Million ID /Day

Contract (28 of Al Faw 5,577,729 13/06/2011 15/06/2015 4 years 69% It was agreed to settle the contract in accordance 2011) the Company with decision 347 under paragraph (5 / B / 1) implementation between the Authority and the company and the of the Ramthiya settlement was sent in letter No. 142 on 18/1/2017. route in The completed work has been audited and is Muthanna currently being audited.

Contract (31 of Al Faw 2,204,250 15/06/2011 30/04/2015 Yow years and 97% It was agreed to settle the contract in accordance 2012) the Company four months with decision 347 under paragraph (5 / B / 1) implementation between the Authority and the company and the of supplementary settlement was sent in letter No. 142 on 18/1/2017. works of the The completed works have been completed and are Shatt al- currently being audited. The Ministry has been Rumthiyah Canal approached by letter number 4000 on 22/5/2017 to support these benefits.

Contract (9 of Raya Al- 1,500,829 10/03/2010 15/06/2013 3 years 98% It was agreed to settle the contract in accordance 2010) the Iman with decision 347 under paragraph (5 / b / 1) implementation Company between the Authority and the Company. The of the earthworks settlement minutes were sent by letter No. 1387 on and construction 15/2/2016. Currently, coordination is ongoing with to reclaim 11000 the Central Committee of the Ministry to complete acres the requirements of the settlement and to complete the audit of the work completed and currently under audit.

Contract (32 for Rural 379,454,585 21/06/2011 15/01/2013 One year and 7 99% The company submitted a request for termination the year 2011) Trading months of the contract under decision 347 for the year 2015 implementation Company and its request was postponed until the decision of of the work of the ministerial committee to resolve the issue of adjustment and financial dues and completed works of the company leveling field and sent it to the ministry by letter 1755 on houses 1/3/2017. Ministerial meeting 11142 on 17/5/2017

Recommendation We recommend the administration to complete the necessary procedures in accordance with decision 347 for the year, and we recommend the implementation of the decision of the General Secretariat of the Council of Ministers No. 347 I / 6, which provides that the financial coverage of projects with advanced completion rates of more than (90%) and is of the utmost importance through the transfer From the operating budget or the current to the investment and the validity of the matter along with informing the Ministries of Finance and Planning.

Management The Ministry has been approached as in the above letters and is currently waiting for a response regarding each project. Response 164 3. Failure to resolve the decision of projects not under the control of Topic Degree of Risk High the central government in accordance with decision No. (347).

Note During our review of a sample of investment contracts in the General Authority for Irrigation and Reclamation Projects, we noted the existence of contracts with companies for the purpose of establishing multiple projects, noting that these projects are in areas not under No. 5-A, it shall beالمالحظةthe control of the central government. In accordance with the decision of the Council of Ministers No. 347, decision settled upon confirming the status quo for the accomplished works and the not received materials upon reaching an agreement with the Second Party on the termination. However, the Contract themes shall be resolved in accordance with the terms of the decision of the Council of Ministers either by mutual agreement or non-consent of the Second Party on the settlement in accordance with decision 5-B.

Contract No. Contract Subject Contract Com. Company Formed committee Recom. as in the letter No. # 9417 Response of Value Rate Name dated 21/05/2015 General Authority for Irrigation

Contract No. Reclamation of the lands 4,912,377,000 55% Al Sahl Al The Committee Recommended cancelling the work withdraws Sending the letter to 59 of the year of Marhout (4800 Akhdar decision and terminating the contract consensually without the General 2010 dunums) with the Company and compensation in accordance with the decision No. 417 of 2014, Manager Office completion of the its partner Alq Clause (1) and to form a committee to liquidate the contract shortcomings of the Gulf works with the deduction of the maximum limit for delay second phase) penalties

Contract No. Reclamation of the 6,604,580,000 72% Al Bilad 1. Terminating the contract consensually Sending the letter to 30 of the year Ramadi land Contracting 2- Forming a committee that includes a member of the the General 2012 Company Authority, a member of the resident engineer department and a Manager Office member of the representative of the company to receive the completed works which are in conformity to the technical Contract No. Implementation of 3,396,863,390 76% Al Bilad specifications, to be reinforced by laboratory tests to calculate 11 of the year irrigation network for the Contracting the value of these works and to receive them initially and 2012 area of 5000 acres within Company finally. the project of 4 - Launch the letter of guarantee of 5% of the contract value reclamation of Ramadi (good implementation) and the issuance of the final acceptance certificate for the works executed as of status quo. 5 - Deduction of delay fines to stop due to security conditions.

Tender No. 9 The project was still in 1,500,582,914 98% Al Jazeera The assignment is canceled because of the security situation Sending the letter to for the year the tender status Arab and the General 2013 Emaar Al Manager Office Badia

Recommendation We recommend the General Authority for Irrigation and Reclamation Projects to follow up with the Recommendations of the Legal Department and the contracts based on the decision of the Council of Ministers No. (347) to stop the projects and to prove the reality of the case and to terminate the contracts by mutual consent. In addition to the recovery of the letter of guarantee of good execution and liquidation of the account of operational advances and identify the remaining receivables.

Management The ministry is in the process of making adjustments with contractors and the work is underway on the formation of committees to discuss projects in hot spots. Response 165 Topic 4. Non-ratification of the final financial statements Degree of Risk Moderate

Projects, weالمالحظة Note Through our review of the General Authority for Irrigation and Reclamation noted that the final financial statements for the years 2014 and 2016 were not approved by the Financial Control Bureau until the audit period 2017. Although the Ministry submitted them for approval in 2016, the Authority did not obtain data Financial approved for the years 2014 through 2016 until the date of the visit 20 July 2017.

Recommendation We recommend to the General Assembly to follow up with the Financial Control Bureau in accordance with the instructions of implementation of the budget section I paragraph (5), which requires the submission of accounts for the years mentioned above by 31 January each year for the purpose of conducting the audit and follow-up with the Office of Financial Supervision.

Management The financial statements are as follows: Response - 2014 data: issued by the Financial Control Bureau. - 2015 Data : The financial statements are in the final audit stages. - 2016 Data : It is still at The Office of Financial Supervision.

166 5. Non-approval of the consolidation registry for the Topic Degree of Risk High investment plan

Note Through our review of the consolidation registry of the General Authority for Irrigation and Reclamation Projects, we noted that the consolidation registry of the investment plan for the years 2014-2016 has not been approved by the Ministry of Finance. By observing the above note, we observed that the by the Ministry of Finance on المالحظةconsolidation registry for the years 2014-2015 has been approved 9/2/2016; As for the consolidation registry for 2016 it has been sent to the audit in the Ministry of Finance and until the date of the visit in July 2017 has not been ratified.

Recommendation We recommend that the General Authority for irrigation and reclamation projects to follow up with the Ministry of Finance to approve the consolidation registry for the investment plan because it is of great importance in ensuring that the financial data are consistent between the records of the General Authority and the Ministry of Finance.

Management Waiting for a reply by approving the consolidation record by the Ministry of Finance. Response

167 Ministry of water resources General Authority for the operation of irrigation and drainage projects

168 Topic 1. Incompleteness of all the procedures in accordance with Decision 347 Degree of Risk High

Note Through our review of a sample of the General Authority contracts for the operation of irrigation and drainage projects; We noted that there is no written commitment from the contractor regarding the executed works. Whereas the text of the Decision states that the projects will be terminated by mutual agreement or the project will be suspended and started after the financial situation improves. Where the decision includes a paragraph relating to the contractor's responsibility of the executed works; This paragraph states that the second party - the implementing agency - shall undertake a technical responsibility for the work carried out by him, which may be subject to damage as a result of the extinction. The work shall be evaluated when it is started and added to the bill of quantities. The undertaking is certified by a notary and secure the amounts of guardians andالمالحظةpublic. Further, the decision is clear to be coordinated with the Ministry of Planning in all projects protect the assets of the project for the stalled projects. Ministry of Finance shall provide funding for the preservation of state properties.

Project Name Co. Name Project Contract Date of Execution Com. Ratio of Project status Project Status Value Date granting Duration Rate actual of the decision (Iraqi suspension expenditu 347 Dinar) re (financial accom.)

Improvement of the Al Naim Al Fadi 2,050,080,00 10/7/2014 23/4/2015 320 %56 %25.5 The contract The amount actually disbursed projects of the Tigris and General Contracting 0 was covered and received by the contractor Euphrates Basin, 203 / T / Co. Ltd. by paragraph 554,031,097 Iraqi dinars, the 2014 (5 / b / 2) measures have been taken, but without a written commitment by the contractor.

Establishment of flood Rafidain Company 2,126,825,0 18/9/201 1/3/2015 150 %95 %2 The contract The money actually disbursed protection and flood for the 00 4 was covered and received by the contractor treatment requirements implementation of by paragraph amounted to 425,365,000 Iraqi for 2014 dams (5 / b)a Dinars, noting that there are no measures taken with regard to the protection of the project and its assets.

Recommendation We recommend to the General Authority for the operation of irrigation and drainage projects to comply with all the procedures of decision 347 with regard to securing the protection of the project and obtaining written commitments from the contractors, because it is of great importance in preserving the state money.

The Ministry of Planning has been approached with regard to securing project escorts. Most projects do not have security guards due to lack of liquidity. In terms of the written Management undertaking of the Tigris and Euphrates Basin Improvement Project, the Administration believes that the contractor has signed the last status quo in the presence of all Response contracting parties. 169 Ministry of water resources General Authority for Dams and Reservoirs

170 Topic 1. Provision of backup tools For the pumps of the plug dam Degree of Risk High Mosul

Note Through our audit of the documentary credits, we Noted that the documentary credit for the processing of spare parts for the pumps of the filling in Mosul Dam is still open at the Iraqi Trade Bank, although the contract has been completed in full, as shown in the letters No. 3267 المالحظة and 5402 on 4/12/2016, 2017 respectively; in which the Board addressed the Iraqi Trade Bank by closing the documentary credit and refunding (712,550 USD) to the account of the Ministry of Finance account No. 300600; and until the date of the visit on 20 July 2017 the credit was not closed or refunded. No accounting restrictions were made which were required to close the above-mentioned credit. Recommendation We recommend that the authority shall follow up with the Iraqi Trade Bank to close the credit and make the appropriate restrictions to close the accreditation.

Management The Legal Department is following up with the Iraqi Trade Bank to close this credit, as the Response General Authority for Dams and Reservoir sent a letter to close the credit for the contract 18 for 2012 and issued by the Bank of Baghdad No. 4409 on 3/7/2017; In addition to the letter of the General Authority for Dams and Reserves No. 5994 on 10/7/2017 addressed to the Iraqi Trade Bank and to support the closure of the credit, either the letter, which was the instruction to Rafidain Bank to convert the value of the letter of guarantee and issued by the Iraqi Trade Bank No. 1218124 on 5/7/2017.

171 Topic 2. Approval of the consultancy services for the permanent treatment of Degree of Risk High Mosul Dam «Contract No. 5/2013»

Note Through our audit of Documentary Credits, we have noted that the documentary credit for the consultancy services for the permanent treatment of Mosul Dam, which was signed on 19/2/2013, amounted to 777,174 thousand Euros. The accreditation No. 5/8/2013, LLCUSCI 1447913 was opened. The first paragraph of the contract € 544,012 (first paragraph evaluation of bids), the second paragraph, amounting to 233,152 euros .المالحظةhas not been implemented, where this amount is still with the Iraqi Trade Bank

Recommendation We recommend that the authority shall follow up with the Iraqi Trade Bank and the Ministry of Planning to close the accreditation and make the appropriate restrictions to close the accreditation. Management The Ministry of Planning has been approached by the Department of Legal Department - Ministry of Water Response Resources Center by letter No. 15909 on 16/5/2016; awaiting the receipt of the answer for the purpose of ending the contract and returning the remaining amount to the Ministry of Finance according to the instructions of the investment budget Article No. 51

172 Topic 3. Suspended advances from previous years Degree of Risk High

Note During our review of the financial records of the Authority, we noted that there are granted advances, represented by temporary advances and advances of contractors dating back to previous years. The following table shows the details of these advances:

Advance Doc Date of Advance Detailed explanation of the advances granted No. granting Amount/Iraqi المالحظة (advance Dinar (2016 Mosul dam (temporary 6 20 March, 2007 1,504,403,611 This advance represents the advance of a current account «cash»; while this balance ancestor) remains until the amount is recovered in cash from the hot spots

Vincent Company 1439 30 December, 2,782,424,944 That the advance is still pending because of the existence of a judicial ruling and the 2007 case has not been resolved until the date of the visit 20 July 2017.

Rafidain Company 1290 7 August ,2008 826,362,519,350 Part of the advance balance was written off under letter 18181 dated 13/11/2016, which provides for the contractor's approval to make a balance between the balance of the advances and the balance of the secretaries. The remaining balance is still outstanding due to lack of liquidity. This balance is accumulated over the years due to The existence of ongoing projects.

Al Faw Company 3348 12 December 2012 1,148,993,400 This amount represents the reality of the work accomplished for the contract "Area of the Tigris" between the regions of Salah al-Din and Anbar, which is hot spots and no action has been taken against them.

Dutch company Kop 415 26 February, 2012 1,089,195,767 This company is the executing of the contract of Nazem Abu Sakhir and currently the International amount of the operational advances of the company Kop from the workloads provided.

Supreme Council for 55 12 December, 808,367,256 An accounting registration is required from the Ministry of Finance. The Ministry has Populating 2012 been approached by a letter dated 14/11/2016 under the letter # 8345 for the purpose of settling the amount. This amount is shown in the current budget, as shown in the investment budget.

Recommendation We recommend that the Authority shall close all outstanding advances and abide by the duration granted as stated in Decision No. 28 of 2017. We also recommend the Ministry of Finance to extend the period of work of this decision No. 28 - and the general publication No. 3913. Management Work is under way to close all these advances and the work of restrictive adjustments determined by decision No. 28 of 2017, issued Response on 20/2/2017 - «which provides for the settlement of all advances suspended in the current and investment budgets for previous financial years legally and fundamental in the final accounts For the year 2014. Within a maximum period of three months ».

173 Topic 4. Calculation of investment plan securitization Degree of Risk High

Note Through our review of the Authority's account, we Noted the existence of suspended guarantees from previous years represented by the initial guarantees received from contractors as well as deductions from contractors to third parties and the deductions of monetary along with delay penalties due to the return of their assets to 2007. For example:

المالحظةAccount Name Balance age The Balance 2016 A detailed explanation of the insurance provided (Iraqi Dinar)

The initial insurance Established since 51,124,000 The largest amount of this insurance is due to the company "Mazaya for 2007 Reconstruction" amounting to 55,400,000 Iraqi dinars, the work was withdrawn because of the delay; and that all these insurances related to contracts will be treated as administrative loads (other expenses) for the companies that carried out the work after the spoiling of these companies. As for the remaining amount will be transferred to the state treasury as other income.

Cash Deduction Established since 9,880,501,600 The liquidation of this amount of secretariats is in need that the companies which Insurance 2007 have these secretariats for providing a request to the Authority of the dams to recover those amounts, which in turn Topicthe Ministry of Finance with the documents for the purpose of disbursement, as the liquidation of these advances is not possible for the lack of cash.

Deductions of delay Established since 3,703,117,255 These amounts represent fines imposed on contractors as a result of delay in penalties 2007 implementation. The reason for the decline in this balance is that the Authority has canceled the amount of the delay penalty imposed on COOP International, in accordance with the decision of the Council of Ministers # 12286 exempting public and private sector companies from financial fines; # 837 and # 831.

Recommendation We recommend the Ministry to close all outstanding bonds and commitment to the period granted as stated in Decision No. 28 of 2017 - named public publication No. 3913.

Management The work is currently in the process of settling all these guarantees and closing them and in terms of error in the initial Response insurance that the administration will work to close this account and deal with it.

174 Topic 5. Contracts that its defects have not been completed, nor its deficiencies arising out thereof have been amended during the Degree of Risk High maintenance period. Note During our review of a sample of the General authority for Dams and Reserves, we noted the existence of a project with deficiencies and defects that were not addressed due to the lack of the necessary liquidity. Project Name Company Name Contract Status

المالحظة Contract No. 19 of 2009 Turkish company Noor The work was received initially as of 24/3/2013 and Implementing a special Soi according to the letter No. 352 on 15/1/2015, the dam Jay in the maintenance period have been ended without the governorate of Kirkuk shortcomings being completed by the company as well as addressing the imbalance in the locker rooms.

Recommendation We recommend the authority to resolve the contracts that include the completion of deficiencies and mending defects in the case of the availability of cash required, but in the absence of cash liquidity is resolved in accordance with Decision 347. Management The company was informed that the work will be carried out on its account and deducting the amount from its Response dues plus the administrative expenses under the terms of the contract for the civil engineering, mechanical and electrical works according to the letter of the implementing company No. 1500 on 15/2/2017. Due to the lack of cash flow necessary to carry out the work and based on the guidance of «Ministry of Planning / d. General Government Contracts / Consulting and Training Department» No. 4/7/8846 on 25/4/2017 Paragraph (4,6) containing the projects received in the initial receipt shall be dealt with in accordance with the controls and instructions and under the terms of the contract for the work of civil, mechanical and electrical engineering. If it is not possible to complete them because of lack of financial liquidity, its value shall be calculated as well as claimed or deducted from the dues of the Second Party. The project shall be received in a final way and the account shall be settled. Therefore, the Office of the Inspector General has been approached to obtain the approval of the policies mentioned in the above. 175 Ministry of Immigration and Displaced

176 Topic 1. Relief and social aid Degree of Risk High

Note Through our review of the Ministry of Immigration and Displaced, Department of Accounting we noted: The Ministry spent 592,367,164,925 ID for the relief of displaced persons and social aid المالحظة (such as setting up camps, grants for those returning from abroad, granting for the displaced inside Iraq, purchasing a food basket for the displaced people, purchasing refrigerators, water tanks, etc.). We have not been provided with an account statement detailing the amount mentioned-above, noting that the Ministry has loaded the full amount on account No. 42912 without the presence of tabs within the account showing each expense separately, which leads to the difficulty of review as well as the difficulty of access to information required by the regulatory authorities.

Recommendation We recommend the ministry to prepare detailed statements of relief and social aid expenses, and also to divide them into tabulation within the principle account.

Management The number cannot be calculated because the number comes within the budget as a Response one number for the purposes of relief of the displaced and social aid without detail. The ministry only prepares statements for administrative purposes and for the purpose of monitoring the expenditure of these amounts.

177 Topic 2. Outstanding amounts at Banks Degree of Risk Moderate

Note We recommend that the Ministry should settle outstanding amounts and make periodic adjustments to ensure that the account is cleared and released from the suspensions. The note is still ongoing during the year 2016, where we noted through our review

:number (11200) as followsالمالحظةto match the bank balance in Rafidain Bank account 1.The existence of amounts in the daily register as a settlement of the balance which has been shown in the bank statement amount (10,960,550,000) Iraqi dinars suspended from 2012 until December 2016. 2.The amount of (828,934,349) Iraqi dinars, which represents the transfer amounts to the Rafidain Bank for the disbursement of salaries and grants to the displaced and those who are forced to emigrate have not been liquidated since 2013 until the end of 2016.

Recommendation We recommend that the Ministry should settle outstanding amounts and make periodic adjustments to ensure that the account is cleared and released from the suspensions.

Management A committee has been set up to study the cases. Where the committee is currently Response working on studying the documents in order to deal with them.

178 Topic 3. Electronic administration project at the Ministry's Degree of Risk High headquarters Note Through our review of the contract (electronic management project at the headquarters of the Ministry) signed with Sinatel for the trade and installation of equipment and communications in 2012/12/9 (1,981,968,561), we noted the following: 1 - Lack of feasibility study of the project by a specialized (consultative) in a manner commensurate with the importance of the project, noting that the project did not link the ministry with its affiliates. Likewise, the needs and the electronic infrastructure المالحظة of the ministry has not been assessed. 2 - The percentage of financial accomplishment of the project has reached (100%) without specifying the percentage of technical achievement by the relevant body in the ministry, although there are many problems and obstacles have been identified from all sections of the ministry, but without any treatment. The project also has been used currently only for the purpose of recording leave and time-out, because no immediate measures are taken to these problems. Absence of the role of supervision and follow-up committees of the project (resident engineer) ،where no follow-up reports 3- on the progress and results of work by the relevant departments, which can assess the status of the project during the stages of work. 4. Staff were not trained on the new electronic system at the work site, which was an important obstacle in the implementation of the project, and the training was limited to some managers outside Iraq for the period (7 to 21) days. 5- The project has not been initially received since the ministry has formed (3) committees for this purpose. Despite the existence of a letter from the Department of Information and Research / Programming Department under the letter No. (D / M / B / 337) on 9/12/2014, Electronic administration, but the project was not received until the date of our visit on July 23, 2017.

Recommendation We recommend that the ministry should use a specialized consultant to reassess the project to serve the ministry at all stages, and prepare a final report on the project that includes the percentage of accomplishment and deviations from the scheme as well as the problems facing the system to reach solutions to avoid these obstacles and problems, and to supervise the receipt of the project, On the training of staff in all sections of the ministry on the system at the workplace.

Management The company completed most of the project, where a ceremony has been held to mark the completion of the project on 3 March 2014. The Ministry also trained the staff on two meals in Turkey and also held a technical workshop for the Response implementation of the project in the Kurdistan Region. The implementing company sent trainers from the company to know how to use of the program, but due to the conditions of displacement and pressure on the ministry cadres during the year 2014 to cope with the burden of refuge, the cadres of the ministry that were left in that period were not enough to implement the project and was assigned to the Information and Research Department to oversee the project and its implementation.

179 Ministry of transportation

180 Ministry of transportation Ministry center

181 Topic 1. Suspended advances and trustees Degree of Risk High

Note Through our review of the administrative and financial department of the Ministry of Transport, we Noted the existence of advances and secretariats suspended from previous years within the operating budget which have not been liquidated, that are as follows:

a. There are suspended balances in the advances account, which are detailed below:

Response المالحظةAccount 31/12/2016 Management

Other temporary advances 3,689,187,560 The follow-up continues to process approximately 1,100,000,000 Iraqi dinars and there are legal proceedings against persons who have in their liabilities advances for the purpose of liquidation of this account. The remaining amount represents an advance that cannot be dealt with as there is no priority or information to deal with. Committees Advances 4,299,521,096 The advances were not closed due to the lack of any preliminary information to be processed. The General Secretariat of the Council of Ministers has been approached under our letter No. 12194 on 19-03-2017 to give an opinion on the treatment and the amount has been transferred to the investment plan based on the Ministry of Finance letter No. 15856 at 25-08 2015. The ministry will form committees of the departments and the ministry to audit the details of these amounts Advances of Documentary 800,000,000 The follow up is ongoing to deal with this amount with the Ministry of Finance / Accounting Credits Department and the latest is our letter No. 7712 on 30-01-2017, where the aforesaid authority approached the budget department / budget movement under the letter No. 5506 on 09-03-2017 for the formulation of a pro-rata allocation which is necessary for writing down this advance in the records of the Ministry That the amount is allocated within the Ministry of Finance for 2017 to be reversed by them. Advances of dispatch 178,751,730 The follow-up continues to deal with the advances of the dispatch, as there are legal proceedings against persons who have incurred advances for the purpose of settling the account.

Permanent advances for 69,990,000 The advances have not been closed due to the lack of any preliminary information to be processed. maintenance The General Secretariat of the Council of Ministers has been approached by our letter no. 12194 on 19-03-2017 to give an opinion on its treatment.

182 Topic 1. Suspended advances and trusts – To be followed Degree of Risk Moderate المالحظة Note B. The existence of suspended balances in the accounts of the secretariats and creditors, the details of which are listed below:

Account 31/12/2016 Management Response

Other Trusts 13,583,977,961 For the interests of other departments in favor of the ministry; and the ministry in the process of analysis and settlement during the current year. Principle insurances 1,462,560,820 For contractors' insurance which will be settled during the current year.

Recommendation We recommend that the Ministry of Finance shall form a committee to investigate the fact that most of the advances' priorities are lost because the security situation in addition to moving the ministry to a new site is not deemed to be a justification for the loss of originals and important documents. we also recommend the liquidation of the accounts of advances and balances suspended accounts of the secretariats and creditors as soon as possible.

Management The management's response is as detailed in the table above for each account. Response

183 Topic 2. Approving of financial records and closing statements Degree of Risk Moderate

Note Through our review of the Finance Department at the Ministry of Transport, we noted the following: 1 - The final financial statements of the status of the ministry is not approved by the Federal Audit Bureau for the years 2014 - 2016 until the period of our visit on 30 July 2017.

2- The Consolidation Register for the Investment Budget for 2014-2016 has not been approved by the Ministry of Finance until the date of our visit on 30 July 2017.

المالحظة :Recommendation We recommend the Ministry of Transport to work on the following

- The need to follow up with the Office of Financial Supervision to approve the financial statements for the years 2014 to 2016.

- The need to follow up with the Ministry of Finance in order to approve the consolidation records for the years 2014 through 2016.

Management The financial statements were sent to the Financial Control Bureau for approval, but there was no response. The details of the Response letters were as follows:

2014: According to letter No. 20826 dated 19-6-2017 after the necessary amendment for 2014.

2015: According to the letter No. 6814 dated 21-1-2016.

2016: According to the letter No. 7890 dated 31-1-2017.

The Consolidation records were sent to the Ministry of Finance for approval and the reply and details of the letters were as follows:

2014: Account number 8569 dated 11-2-2015.

2015: According to the letter No. 10191 dated 29-2-2016.

2016: According to the letter No. 10522 dated 28-2-2017.

184 Ministry of transportation General Company for Iraqi Ports

185 Topic 1. Reluctancy in processing Degree of Risk Moderate

Recommendation Through our review of some of the investment contracts, we Noted a reluctance in the processing of two contracts as related to forklift trucks, a number of 26 different loading cranes as well as the processing of four hydraulic wire cranes according to the periods of equipment set forth in the contract with the General Company for Engineering Inspection. Despite the fact that the port company urged the company responsible for the equipment material to rapidly process the material but to no avail. المالحظة :Below is a table showing the details of the two contracts

Company Name Project Name Contract No. Contract Date Contract Value Contract Term in Commencement date Completio (Iraqi D) days n rate on 31/12/20 16

General Company Equipment of 26 4048 22-12-2011 3,338,000,000 180 days 29-12-2011 60% for Engineering forklifts Inspection and Qualification

General Company Equipment of 4049 22-11-2011 4,58.,000,000 240 days 08-12-2011 25% for Engineering four wire cranes Inspection and Qualification

In respect of Contract No. 4048, 7 forklifts were equipped out of 26 cranes which have been initially received and according to the initial receipt minutes which was approved by the Director General on 28-10-2014 while the remaining cranes were not equipped. The spare materials for all cranes included in the contract were also not supplied, as the company has paid the amount of 1,133,000,000 dinars to the General Company for Engineering Inspection of the value of the contract.

With regard to Contract No. 4049, the cranes were not equipped despite the large number of confirmations and the sending of a warning letter No. 5708/1/128 dated 04-03-/2014 to the General Company for Engineering Inspection and Qualification. Management We recommend that the necessary procedures be taken as a result of violation of the terms of the contract, as Response referred to in the instructions for the implementation of contracts in the ninth and tenth chapters of the instructions for the implementation of government contracts No. 2 of 2014.

186 Topic 1. Reluctancy in the equipment – continued Degree of Risk High

Note With regard to the contract for the equipment of 4 wire cranes, 95% of the value of the contract was paid and the letter No. 15127 was sent on 1-6-2017 to the Ministry of Industry and Minerals / General Company for Engineering Inspection and or not. After that, the OfficeالمالحظةQualification for the purpose of noting the readiness of the company to equip the wired cranes of the Inspector-General shall be approached for the purpose of obtaining approval over the conclusion of the contract and the equipment of cranes.

As for the contract for the equipment of 26 forklifts, a proportion of 35% of the value of the contract has been paid on 29-11- 2011. The General Company of Iraqi ports invited the General Company for examination and engineering qualification to hold a meeting for the purpose of financial adjustments of the contract and deduct all belongings and the non-executing paragraphs mentioned in the initial receipt. The company which is responsible for the equipment shall be incurred all the demurrage and administrative expenses will be incurred in their liabilities which were as a result from their observations and it will be sufficient to have the received equipped cranes, its number is 7 in addition to the termination and settlement of the contract. where the meeting was not held due to the absence of representatives of the General Company for Engineering Inspection and Qualification; despite inviting them several times since the date of 07.05.2016.

In respect of the two contracts , appropriate legal action will be taken According to the Office of the Inspector-General of the Ministry of Transport.

187 Topic 2. Failure to comply with the terms of the contract without taking Degree of Risk High necessary legal actions as well. Note IN our review of a sample of the investment contracts, we Noted a delay in the conclusion of the purchase contract and the equipment of a 6000 m3 pipette buffer because the executing company did not comply with the terms of the contract and did not take the necessary legal action towards the executing company:

Completion rate المالحظةCompany Name Project Name Contract Date Contract Value Contract Term in Commencement (Iraqi D) days date on

Purchase and STI Company of 10/9/2012 45,640,000 425 Days 05-02-2014 95% equip a 6000 m3 South Korea absorbent piping excavator

Recommendation We recommend that the necessary procedures be taken as a result of violation of the terms of the contract, as referred to in the instructions for the implementation of contracts in the ninth and tenth chapters of the instructions to implement government contracts No. 2 of 2014.

Management -The Sea Dredger did not leave The South Korean for this purpose by requesting the signing of a contract supplement to Response increase the contract amount by 58% (from the total amount of the contract) STI where the percentage of financial accomplishment was 90%. Knowingly, the actual completion rate was calculated according to the periodic reports received by the committees responsible for Follow up the project where the machine is manufactured according to the specifications and standards required, and constitute a transfer of 5%. -- The request of the company for increasing the amount has been forwarded to the Minister's office for information and opinion. - There has been no approval for the increase of the amount by the Minister and the opinion was to take legal action against the executing company in case of failure to complete the implementation of the contract. Where it is necessary to complete the contract of the dredger and delivered to the General Company of the ports of Iraq within the period of 30 days from the date of our letter No. 13129 on 9-5-2017, otherwise legal actions shall be taken against them. A meeting was held at the General Company for Iraqi Ports attended by representatives of the Korean company STI and the Minister of Transport and related parties of the General Company of Iraqi ports and found the preference to find solutions to resolve the problems of the solution rather than converted to international arbitration.

188 Topic 3. Advances and suspended investment trusts Degree of Risk Moderate

Note Through our review of the administrative and financial department of the General Ports Company, we have Noted the existence of advances and investment secretaries suspended from previous years within the investment budget dating back to before 2014 and has not been liquidated, the details as of 31 December 2016: No. Details Total Amount Management Response to close these advances, asالمالحظةDocumentary Credits 1,197,624,385,728 Due to the lack of sufficient allocation 1 advances the closure of advances requires the allocation of an account from the Ministry of Finance 2 Advance payments 21,289,932,000 Prepayment advances will be deducted from the value of project invoices, which will be closed during the year 2017.

3 Initial insurance 17,902,500,000 The bid bond shall be returned after the maintenance period for each project, based on the contractor's request.

4 Cash deductions 1,114,194,858,768 Cash deductions represent 5% as a guarantee and maintenance period where they are paid to the executing company upon completion of the project. If 5 years have passed without the amount being claimed, the deduction will be transferred to the revenue. 5 The secretariats for the 15,453,320,150 10% represent intermittent transactions that are closed at the end Third Party of the project and the signing of the clearance.

6 Further secretariats 410,195,157 Representing the value of the tax and engineering fees, which will be paid back in 2017.

Recommendation We recommend that the General Company of Iraqi ports shall follow up and work on the liquidation of the advances and collateral suspended as soon as possible.

Management The management's response is explained as above for each item of advances and trusts. Note that no action has been taken Response on the advances and trusts mentioned above until the date of our visit on 25 July 2017.

189 Topic 4. Approval of financial statements Degree of Risk Moderate

Note Through our review of the General Company of Iraqi Ports, we have Noted that the final financial statements are not approved by the Federal Audit Bureau for 2015 -2016 until the date of our visit on 25 July 2017. المالحظة

Recommendation We recommend that the General Company for Iraqi Ports should follow up with the Financial Control Bureau in order to approve the financial statements.

Management The financial statements of the Financial Control Bureau have been sent for approval as shown Response below: 2015: According to the letter No. 1970, dated 25-1-2016. 2016: According to the letter No. 2485 dated 29-1-2017.

190 Ministry of transportation The general Company of civil aviation

191 Topic 1. Non-renewing documentary credit for some contracts Degree of Risk High

Note Through our review of some investment contracts, we have Noted that the period of documentary credit for the following contract has not been extended despite the closure of the documentary credit by the correspondent bank (IBL Bank) since 2012: المالحظة Contract Contracting Contract Opening Completion Financial details Authority Value (U.S.D.) Credit date Period Accomplishm ent Rate

Iraq Radio Andy Satcom 1,662,945, 14/11/2011 175 Days 50% Coverage Company in addition to Project Currently a contract Contract Airbus supplement in the amount of 142,000

Recommendation We recommend that the General Establishment of Civil Aviation should extend the period of documentary credit for contracts that are still ongoing.

Management The company will make a transfer of the remaining amount of the contract in the coming period and the renewal Response of documentary credits ended upon completion will be taken into account, noting that the completion rate of the project is 100%.

192 Topic 2. Delay in receiving some projects Degree of Risk High

Note In our review of the equipment contract for Basra International Airport generators, we Noted that two of the three generators were equipped with a 65% completion rate. Whereas the third generator was not equipped due to the failure to complete the training clause for the General Establishment for Civil المالحظة Aviation and the final receipt of the two generators. The contract is as follows:

Contract Name Contracting Contract Completion Singing Completion Authority Value (Iraqi Period contract rate dinars) date Rehabilitation of Basra General Company 9,170,500,000 11 months 14-11-2011 65% International Airport after for Hydraulic the equipment and Industries installation of three generators.

Recommendation We recommend the company to follow up and coordinate with the concerned departments to work on the receipt of projects that have been implemented within reasonable time from the date of completion of those projects and try to complete projects as soon as possible. Management Two generators out of three have been equipped. The company has been delayed in the equipment of Response the third generator to ensure that the two generators are working properly. In addition, there is an old generator that must be removed before starting the process of equipping the third generator. The procedures are still ongoing regarding the training and follow-up work of the two generators to equip the third generator and the completion of the project.

193 Topic 3. Offering of extended periods for some projects Degree of Risk High

Note Through our review of some investment contracts, we Noted the existence of relatively long deadlines and extensions of the contracted execution period, for example:

المالحظة Contract details Contracting Contract Contract Completion Additional Financial Authority Value (U.S.D.) date Period periods Accomplishme nt Rate

Rehabilitation of Basra Cork 5,230,437,355 01-12- 360 days from 387 Days 98% International Airport; Engineering 2013 the date of equipment, installation Systems & Land receipt of the and operation of the Al Areen advance Central Control and General Trading payment on Mentoring System & Contracting & 16-1-2014 (CCMS). Telecommunicat ion Services Limited

Recommendation We recommend that the General Establishment of Civil Aviation shall take the necessary measures to urge the contracting companies to carry out the work within the period specified in the contract and to comply with what is mentioned in Chapter Nineteen of the Instructions for Implementing Government Contracts No. 2 of 2014. Management If the financial claim is more than one month old, the project is deemed to be suspended due to the lack of Response financial liquidity, which requires the company to provide additional time and extensions for these projects and the project in the final stages for final receipt.

194 Topic 4. Delay in finalizing of contracts under the control of the Government pursuant to the Degree of Risk High المالحظة (Council of Ministers Decision No. (347 Note Pursuant to the decision of the Council of Ministers on 22-9-2015 on the establishment of the necessary controls for the implement the Council of Ministers Decision No. (347) to remedy the payment mechanism for ongoing investment projects under the control of the government in accordance with the decisions of the Council of Ministers requires the establishment of the necessary controls and granting a deadlock for all contracts and pledge not to claim any amount to compensate, so after the implantation of the actual case. In our review of a sample of contracts with varying percentages of completion to follow the procedures for the implementation of contracts, it was noted that the following contract is still in contact with the contractor to implement the decision either by continuing or settlement consensual or through full suspension, we mention as an example:

Project Name Contracting Contract Value Contract Date Execution Term Completion Rate Authority (U.S.D)

Installation and DEF 19,983,922 12-12-2013 840 Days 88,5% operation contract for fire systems, investigation and early warning of fire

Recommendation We recommend the company to follow up the procedures with the contractors and the work of all treatments as well as determining the importance of the project if it is important and the Ministry of Planning to approve the treatment of those contracts.

Management The first batch of materials was received and approved on 2016/6/2. There is a spare order under study with the spare parts Response committee. The company requested to liquidate the work due to non-payment of the amounts to continue the work and there is the demand for the need of the fire department for the materials.

195 Topic 5. Non-providing the required documents Degree of Risk High Note We have not been provided with detailed statements for suspended advances and investment trusts as at 31 December, 2016, despite the continuous demand from the Finance Department due to the lack of collecting cumulative statements covering all outstanding advances and trusts from previous years.

المالحظة

Recommendation We recommend the General Establishment of Civil Aviation to cooperate with the regulatory authorities and the need to maintain comprehensive records of advances and safety accounts.. Management Response The absence of a compilation statements of previous years, nor giving a Recommendation for that by the Internal Control and Audit Department.

196 Topic 6. Approval of consolidation records and final financial Degree of Risk Moderate statements المالحظة Note Through our review of the financial Department of the General Establishment of Civil Aviation of the Ministry of Transport, we noted the following: -We have noted the lack of approval of the financial statements for the years 2010 to 2016 by the Office of Financial Supervision. -The consolidation records of the General Establishment for Civil Aviation for the years 2010 to 2016 were not approved by the Ministry of Finance until the period of our visit on 30 July 2017. -We have not received any communication between the General Civil Aviation Authority, the Financial Control Bureau and the Ministry of Finance regarding this matter, despite the continuous demand from the Finance Department.

Recommendation We recommend the General Establishment of Civil Aviation with the following: -The need to follow up with the Office of Financial Supervision in order to approve the financial statements. -Follow-up with the Ministry of Finance for the approval of consolidation records.

Management The Ministry of Finance and the Financial Control Bureau will follow up to approve the financial records Response and final statements.

197 Ministry of transportation General Company of Iraqi Airways

198 Topic 1. Contracts of American Boeing and Canadian CS300 airliners Degree of Risk High

Note We requested the Iraqi Airways General Company to provide us with a copy of the contract for the purchase of Boeing aircraft :observations المالحظةas well as the purchase contract for the Canadian aircraft CS300, where we found the following CS300 Contract Purchase: We have not been provided with the Contract Agreement on the terms and conditions of delivery of the aircraft despite repeated requests. Boeing Aircraft Purchase Contract: We have not been provided with the Boeing Airline Receipt Certificate by the Iraqi Airways Company (14) as per the Project Manager's letter of 2 August 2017 despite the repeated request for receipt certificates. The delay in the receipt of the remaining aircraft has also been noted for the existence of change orders for the Plan of the specific delivery due to the inability of the Iraqi Airways to pay $ 239 million, Which represents arrears in addition to interest. The following is a detailed table of the two contracts and according to the amounts disbursed statements on the draft investment budget for the fiscal year ended as of 31 December 2016 issued by the Iraqi Airways:

Contract Name Date of signing the contract Contract Value (U.S.D) Cumulative expense as Material Completion Rate On 31 December Iraqi Dinar

Purchasing Boeing aircraft 24/03/2008 1,3111,827,700 635,329,768,678 29%

صفر% Purchasing Canadian 04/12/2013 200,000,00 81,196,200 Aircraft

Recommendation We recommend that the General Company of Iraqi Airways to cooperate and provide us with all information related to the schedule of receipt of Canadian aircraft and to allow the receipt of certificates of receipt Boeing aircraft. In addition to that we recommend to approach the Minister's Office to accelerate the amendment of the contract to reschedule the amounts due in line with the financial capacity of the Iraqi Airways.

Management An agenda has been proposed by the Iraqi side to Boeing to change the remaining aircraft to be the Boeing 737. This allows Iraqi Response Airways time to prepare the amounts to be paid in the second half of 2019 instead of due dues now. Where the approval of the Boeing Company to replace the aircraft at the same prices agreed upon in the original contract. The issue was submitted to the Director General to obtain the approval of the Minister of Transport to amend the agreement to include the new type of aircraft on 2 August 2017which has not been signed until now. Actually, the agreement includes the rescheduling of obligations on the Iraqi Airways.

199 Topic 2. Reluctancy of processing some contracts within the Degree of Risk High operational budget Note Through our visit to the General Company of Iraqi Airways, we Noted the company's reluctance in the implementation of some projects that the company contracted with some companies. for example :-

Contract details Executing Company Contracting date Contract Value Contract Term Percentage of technical Name (Iraqi Dinar) accomplishment as of 8 August 2017 المالحظة - The Modern 10/02/2015 990,000,000 55 Days 80% processing a Facades number of 10 Company for Pulling Iraqi General machines: Contracting

- Rehabilitation Al - Mansour 06/04/2015 70,280,000 120 days 95% of fire alarm Engineering systems in the Office for buildings of the General company Contracting and Iraqi Pledges

Recommendation We recommend that Iraqi Airways transfer contracts to the legal department to take appropriate action against the above companies. Management - The processing a number of 10 Pulling machines: Date of final receipt 05/07/2015 which is the date of Response receipt of the last three Pulling machines. The completion of the training period where the executing company requested to transfer the training venue from France to Beirut, a committee was formed by administrative order No. 12954 dated 2017 / 6/21 to follow up the subject with the company executing, But the matter has not yet been worked out. - Rehabilitation of fire alarm systems in the buildings of the company: The company which is responsible for implementation was informed of the attendance under the letter No. 2522 dated 24/5/2017 so that the supervisory committee to work to support the work done but they did not attend.

200 Topic 3. Approval of consolidation records and final statements Degree of Risk High

Note We noted that the financial records and final statements of 2014 to 2016 of the General Company of Iraqi Airways have not been approved by the Ministry of Finance and the Federal Audit Bureau. This is contrary to the provisions of the implementation of the federal budget section I paragraph 5, which provides (Commitment to submit the final المالحظة accounts for the year 2015 to the Office of Financial Supervision no later than 31 January of the following year for the purpose of conducting the work of control and audit).

Recommendation We recommend that the General Company of Iraqi Airways should follow up with the Ministry of Finance and the Financial Control Bureau to approve the financial statements.

Management The 2014 financial records were sent to the Ministry of Finance under letter No. 130 dated Response 15/1/2015. The records of 2015 were sent under the letter No. 1631 dated 2016/4/11. The records for 2016 were also sent to the number 12801 dated 2017/6 / 19 and have not yet been ratified.

201 Ministry of transportation The General Company of Railways

202 Topic 1. Non-Decision of projects to establish contracts in accordance with Degree of Risk High the decision of the Council of Ministers Decision No. (347)

Note In the course of our review of the contracts of the Railway Company, we noted the existence of contracts with companies for the purpose of establishing multiple projects, noting that the rate of achievement of these contracts is low. In accordance with the decision of the Council of Ministers No. (347), Decision No. 5-A shall be settled. Following establishing the reality of the case for the completed works and the materials not received and after the agreement with the second party to the termination and to deal with the axes of the contracting in accordance with the terms of the decision of the Council of Ministers either in the case of consent or non-consent of the second party to the settlement in accordance with decision 5-b. either because of financial problems orالمالحظة,We have Noted that no settlement forms have been prepared to stabilize the situation problems with the port, in addition to the existence of areas beyond control. Below is a table showing the details of the contracts and the percentage of completion until 31 December 2016:

Contract Company Cost Start Date Comp Rate

Construction of the South Railway General Company for the 4,575,379,000 12/01/2014 30% Directorate Building implementation of transport (Iraqi Dinar) projects

The processing of concrete beams with General Company for the 19,830,000,000(Ir 08/12/2014 0 180000 casual implementation of transport aqi Dinar) project / government

Mine clearance and quality control of the Ministry of Environment / 6,830,000,000 13/07/2015 0 Basrah-Shalamjah railway track Department of Mine Affairs (Iraqi Dinar) Government - Iraqi

The international tender for the re-survey Company CZ + C4 Krupp and ikp 2,350,000 U. D. 03/06/2010 70% and update of the specifications of the company Jektien and Power project of the connector - Dahuk - Engineering Office

Recommendation Based on the decision of the Council of Ministers No. (347), the projects with low percentages should be stopped, as well as the reality of the case should be established and terminating the contracts by mutual agreement between the parties, in addition to the recovery of the letter of guarantee of good execution, The liquidation of the operational advances account and the identification of the remaining receivables.

203 Topic 1. Failure to resolve the projects for the establishment of contracts in accordance with the decision of the Council of Ministers No. (347) – to be Degree of Risk High continued Note As for the construction contract of the Directorate of Railways, the work was considered completely suspended, as of 02/02/2016. The General Company for Implementation of Projects was directed to settle all the works executed and located on the site based on the Council of Ministers Decision No. (347) of 2015. Ministry of Transport / Planning and Follow-up Department have been informed with the agreement of the parties to inspect the materials presented in the laboratory by the second party as well as unloading the materials in the stores of the first party in the case of casting. The results of the laboratoryالمالحظةsuccess. The columns were examined in which defects were found in the examination of the materials presented (Reinforcement steel, liquid asphalt), And the material (reinforcement steel) is not conforming to specifications and it has been rejected. Currently, orders of change (a number of 5 parts) have been sent for the purpose of auditing in order to sign a contract supplement. Regarding the contract of mine clearance, a letter was sent to the Ministry of Environment / Department of Mine Affairs, which includes ((ending the contract by mutual consent because of the lack of financial allocation for the project for 2017 due to the lack of allocations for this year)) based on the Council of Ministers's Decision No. (347) of the year 2015, A letter to our department to obtain the original approvals to terminate the contract by mutual consent. As for the contract for the installation of concrete beams, a contract supplement was signed on 11/01/2016, based on " the meeting of the opinion body held in 13/03/2013, to process what contained in the original contract. Concerning the financial receivables, the Planning Department has been approached on the disbursement of contract receivables under the decision (347) of 2015. Regarding the international tender for re-surveying, the Director General's approval of the company's work has resulted in the withdrawal of the work from the executing company pursuant to decision No. 2 of the work withdrawal committee in the railway company. Subsequently, the technical section submitted a proposal to cancel the decision to withdraw the work due to the contractor has submitted all the documents and designs necessary for the implementation of the project, and pursuant to the requirements of the contract and its annex. The original documents have been forwarded to the competent committee to study the subject.

204 Topic 2. The existence of suspended bank accounts Degree of Risk High Note Through our audit of the company's accounting records, we noted that there were balances of bank accounts that had been suspended since 2003 and the company does not own Bank statements or reconciliations until December 31, 2016. After discussion of the financial department, it was found that the company does not have any original documents on the balances of these accounts due to its loss after the events of the war in 2003. Below is a table showing the details of these balances as at 31 December, 2016 as recorded in the final financial statements within the Banks.

المالحظة Bank Balance (Iraqi Dinar)

Station before events - Rafidain Bank 957,523,194

Maqal - Basrah - Rafidain Bank 16/401,686

Recommendation We recommend that the railway company shall form a committee to follow up these balances with the Ministry of Finance and the Bank of Rafidain, and try to investigate to find their original documents for the purpose of obtaining or settlement in the event of the inability to collect these amounts. Where it is necessary to disclose cash accounts fairly in the final financial statements that would affect In determining the company's real cash flow. Management That the reason for freezing these accounts back to previous years, according to decisions by banks to freeze these accounts and the company does not have any information about these accounts. Response

205 3- Pending instatements in bank reconciliation belongs to previous Topic Degree of Risk High years Reviewing Stratifications of bank accounts proving that; there are warrants which are pending years ago. Subject to law which stipulated that, any warrants remained pending for more than 6 months .since years agoالمالحظةshall be null, depending on the fact that; these warrants are still pending The following schedule clarifying what is pending between bank accounts and company’s statements in Iraqi Dinar.

Bank Balance in Bank Balance in Company Pending warrants for more Note Statement Statement than one year Rafidain Bank - Railway 251,052,591 (508,060,603) 562,933,478 Rafidain Bank – Railway salaries 6,336,509,321 6,198,807,319 73,811,825

Recommendation We recommended that; management shall follow up pending warrants and take suitable procedure concerning that warrants which are pending for more than 6 months; aiming at fair cash accounts in final financial statement which had an affect on identifying the true liquid cash of the company.

Management Management is waiting instructions of concerned authorities to Write off warrants. Response

206 Topic 4- Following pending Loan, Deposits and Creditors Degree of Risk Moderate there are pending ;المالحظةNote Upon referring back to financial department of Republic Railway Company, we found that accounts years ago relating to accounts of loan, deposits and creditors in investment plan, which was going back to 2014 as it was not classified the same as on December 31, 2016

December 31, 206

Loan 4,127,074,447 Creditors 1,298,487,408 Trusts 876,869,408

Recommendation We recommended that; Republic Railway Company shall following and establish clearance of pending balance for accounts of loan, trusts and creditors; to be done as soon as possible to avoid accumulation and inflation o such accounts to extend of inability to get supporting fundamentals

Management rigidity balance relating to the fact that; during 2016 company was not able to finish or agree upon handling Response any of its contracts or projects; whereas company is willing to handle contracts on 2017, whether through settlement, due to decision No. 347 or suspense execution of projects where works did not begin

207 Ministry of high education and scientific research

208 Ministry of high education and scientific research Ministry center

209 Topic 1- Final Accounts/ Pending loans Degree of Risk High Note Upon reviewing final accounts relating to Ministry Centre, it was proved that; there is a pending loan as mentioned hereinafter on December 2016 المالحظة Amount of Money (Iraqi Dinar) Name of Loan 28,183,373,102 Letters of Credit Loans 4,188,401,297 Committees of Business Execution Another temporary loans 34,085,141,794

Recommendation We recommended that all of loans and trusts which are pending years ago shall be settled and handled as soon as possible appropriately.

Management Management is wafting for settlement or withdraw of loans, concerning rest of loans; Response management waiting Council of Ministers decision to settle loans to be retroactive since 2014 till its date

210 Topic 2-Non-approval of financial data of unified record for Degree of Risk Moderate operating and investment budgets المالحظة Note Upon referring back to the ministry we Noted that; financial data unified record for operating and investment budgets since 2014 till 2016 was not approved by Ministry of Finance till audit time on July 25, 2017

Recommendation We recommended that; ministry shall follow up with Ministry of Finance for approval upon financial data unified record for operating and investment budgets since 2014 till 2016

Management Company sent all of information to Ministry of Finance till its date, without any reply from Response them concerning approval. Moreover we did not receive any copy from the document

211 Topic 3- No approval of final financial statement Degree of Risk Moderate المالحظة Note Upon referring back to the Ministry, we Noted that final financial statement since 2014 till 2016 were not approved by Financial Regulatory Authority during audit duration on July 25, 2017

Recommendation We recommended that; Ministry shall follow up with Financial Regulatory Authority to approve final financial statement since 2014 till 2016

Management Company had sent all of information to Financial Regulatory Authority without any reply Response concerning approval till its date, moreover we did not receive a copy from the document.

212 Ministry of high education and scientific research Science and technology department

213 Topic 1- No-approval of financial data unified record for operating and Degree of Risk Moderate investment budgets

Science and المالحظة,Note Upon referring back to Ministry of Higher Education, Scientific Research Technology, department of science and technology we Noted that; ; financial data unified record for operating and investment budgets since 2014 till 2016 were not approved by Financial Regulatory Authority during audit duration on July 27, 2017

Recommendation We recommended that; Ministry shall follow up with Ministry of Finance to approve final financial statement since 2014 till 2016

Management Company sent all of information to Ministry of Finance till its date, without any reply from Response them concerning approval. Moreover we did not receive any copy from the document

214 Topic 2- No approval of final financial statement Degree of Risk Moderate

Science and المالحظة,Note Upon referring back to Ministry of Higher Education, Scientific Research Technology, department of science and technology we Noted that; that final financial statement since 2014 till 2016 were not approved by Financial Regulatory Authority during audit duration on July 27, 2017

Recommendation We recommended that; Ministry shall follow up with Financial Regulatory Authority to approve final financial statement since 2014 till 2016

Management Company sent all of information to Ministry of Finance till its date, without any reply from Response them concerning approval. Moreover we did not receive any copy from the document

215 Ministry of foreign affairs

216 Topic 1- Contract of establishing Foreign Ministry Club Degree of Risk High

Foreign MinistryالمالحظةNote from Upon reviewing Foreign Ministry Contracts we Noted that, contract of establishing previous Club which total amount is 15,917,715,000 Dinar is lagged, as achievement percentage till auditor report 31/12/2013 (35%), taking into consideration that contract was signed on 15/3/2010 for a term of (22) months in addition to the following: • There is an amount of (1,224,277,654 Iraqi Dinar) from operating loan which was granted to the company • Decision No, 432 of 2015 was not applied • Letter of credit was not reserved • Project layout is not in conformity with its space

Recommendation We recommended that, Ministry shall take all of necessary legal procedures to terminate the contract and all of its obligations .

Management Work with executed company was cancelled to certify such action with Ministry of planning within Response meeting of the committee decided to be formed due to a Note No. (3/centre/85/10940) on 22/12/2015 during meeting held with Ministry of planning on 18/7/2016 in headquarter of Ministry of Planning. Due to the fact that, contractor inability to re-announce about the rest of works need to be executed due to financial conditions. Concerning letter of credit, a Note had been sent to the bank to reserve the amount of money, but we did not receive any reply till now, wile Note which we had sent was as following (Notes No. 444 on 11/4/2017, 677 on 16/5/2017, No. 2658 on 20/6/2016 and No. 3635 on 17/4/2017).

217 2- preparing studies and drawings for residential building/ Dakar Topic Degree of Risk High المالحظة project Note from Upon reviewing contracts of Foreign Ministry we Noted that contract of preparing studies and drawings for previous residential building/Dakar with an amount of 37,000 dollar; is lagged, as achievement percentage till was auditor report (35%), taking into consideration that contract was signed on 6/7/2011 for a term of (14) weeks as maximum, in addition to the following: •There is not valid letter of credit •Decisions No. (432 and 347) Of 2015 were not applied •Executed company was not obliged to pay any delay penalties •There are engineering changes upon project were not included within the layout

Recommendation We recommended that; Ministry shall take necessary procedures as soon as possible

Management Work was stopped due to Note No. 1/contract/3/2/117 on 24/1/2017 Response A committee had been formed to settle the contract due to Note No. mim.kaa/2013 on 13/4/2017 recommending the following: • A delay penalty shall be paid worth 50 dollar for each day of delay • Contractor shall be included in black list and publish such news to mission outside • Claiming for an amount of 1,427 dollar from the company for invalidity of letter of credit • Referring to committee assigned to settle contract amicably and approved status of the project • Recommendations of the committee were certified by Minister on 16/4/2017 without taking any procedure till our visit on July 27, 2017

218 3- Preparing studies and drawings to establish a building Topic Degree of Risk High for the mission/ Rabat and drawings toالمالحظةNote from Upon reviewing contracts of Foreign Ministry we Noted that contract of preparing studies previous auditor establish a building for the mission/ Rabat with an amount of 2,250,000 Moroccan Dirham; is lagged, as report achievement percentage till was (50%), taking into consideration that contract was signed on 27/6/2013 for a term of (17) weeks as maximum, in addition to the following: •Letter of credit was not reserved •Decisions No. (432 and 347) Of 2015 were not applied •Executed company was not obliged to pay any delay penalties

Recommendation We recommended that; Ministry shall take necessary procedures as soon as possible

Management Work was stopped due to Note No. 118 on 24/1/2017 Response A committee had been formed; due to Note No. 2577 on 19/2/2017 aiming at settle the contract to recommending that: • Taking legal procedures and delay penalties • Sent committee to Rabat to know reasons behind lagged Minister had approved that on 18/3/2017 due to Note no 1/contracts/mim/23 on 26/2/2017 After sending committee: Took a bank guarantee with an amount of 55 thousand dirham as a bank warrant according to document No. 1/1/gim114 on 5/7/2017, to reconsider the decision of stopping the work and agree upon completing the project

219 Topic 4- Settlement of Entries- Missions abroad Degree of Risk High المالحظة Note Upon reviewing daily entries of missions abroad till our visit on March 1, 2017; we Noted that no adjusting entries happened to accounts relating to account of (loans of simple credits) although they are no more existed; as loan account appeared under debit upon awarding . No adjusting entries happened upon receiving Noted from missions to close it in account of expenses.

Recommendation We recommended that; Ministry shall do adjusting entries upon receiving Note from missions to insure that these loans are not accumulated without settlement.

Management These amount of moneys are not large and had not financial effect Response

220 Ministry of defense

221 Ministry of defense Ministry center

222 Topic 1- Final Financial Statements are not approved Degree of Risk High

During our visit to the Ministry, we Noted that; final financial statement of 2015 and 2016 was not المالحظة Note prepared or delivered to Financial Regulatory Authority to be audited and approved till our visit on July 25, 2017. In addition to that; final financial statements were not approved since 2012 and till above mentioned audit.

Recommendation We recommended Ministry of Defense with necessity of: 1. Abiding by instructions of budget, first section, paragraph (5) which require submission of accounts 2015 on January 31, 2016 maximum aiming at audit and control. 2. Following up with Financial Regulatory Authority to approve final financial data of the ministry from 2010 till 2015

Management We are going to prepare all of required final statements as soon as possible. Response

223 Topic 2-Approving Unified Register Degree of Risk High

Note Upon visiting Ministry of Defense, General Directorate of Budget, we Noted that; unified register since 2014 till 2016 was not prepared to be delivered to Ministry of Finance for approval. In since 2011المالحظة addition, unified register of the Ministry of Defense was not approved

Recommendation We recommended that, Ministry of Defense shall follow up with Ministry of Finance for approving unified register since 2011 till current year

Management This Note was taking into account to depend upon in the future. Response

224 Ministry of defense Directorate of work

225 Topic 1- Delay in paying dues on contracts Degree of Risk High

Note upon a visit to Directorate of work, Ministry of Defense, we Noted that; Directorate received an amount of according to document ofالمالحظة Iraqi Dinar during 2016 from allocations of directorate and 12,500,000,000 Ministry of Finance No. 16663 on August 2016. In addition, none of these amount of money was benefit or paid till May 2017, although a number of directorate projects are suspended due to deficiency in cash, among which are:

Name of Contract Number of Contract Loan promotion Date of paying loan Date Infrastructure works in Muthanna Air Base 7/ash/2013 May 2016 May 2017 Design and Establish ground trainer for 2/ash/2015 June 2016 May 2017 Eurocopter plan Establishing building for naval command 1/ash/2013 February 2016 July 2017 headquarters in Khor Al Zubair

Delay in paying dues shall harm progress of project and delay its execution

Recommendation We recommended that; exchange operations shall be followed up to avoid project suspend, in addition to identifying a correct and quick mechanism to avoid any duplication in payments, in cooperation with Ministry of Finance and Iraqi Central Bank

Management Delay of exchange was to assure that; there is no duplication in payments and to make sure whether Ministry Response of Finance Iraqi Central Bank had paid treasury bonds had been to execution authorities

226 Ministry of defense Budget and programs department

227 Topic 1- Delay in paying contracts dues Degree of Risk High

Note upon a visit to Directorate of work, Ministry of Defense, we Noted that; Directorate received an amount of according to document ofالمالحظة Iraqi Dinar during 2016 from allocations of directorate and 12,500,000,000 Ministry of Finance No. 16663 on August 2016. In addition, none of these amount of money was benefit or paid till May 2017, although a number of directorate projects are suspended due to deficiency in cash, among which are:

Name of Contract Number of Contract Loan promotion Date of paying loan Date Infrastructure works in Muthanna Air Base 7/ash/2013 May 2016 May 2017 Design and Establish ground trainer for 2/ash/2015 June 2016 May 2017 Eurocopter plan Establishing building for naval command 1/ash/2013 February 2016 July 2017 headquarters in Khor Al Zubair

Delay in paying dues shall harm progress of project and delay its execution

Recommendation We recommended that; exchange operations shall be followed up to avoid project suspend, in addition to identifying a correct and quick mechanism to avoid any duplication in payments, in cooperation with Ministry of Finance and Iraqi Central Bank

Management Delay of exchange was to assure that; there is no duplication in payments and to make sure whether Ministry Response of Finance Iraqi Central Bank had paid treasury bonds had been to execution authorities

228 Topic 1- Funds suspended in bank reconciliation Degree of Risk High

Note Reviewing Stratifications of bank accounts proving that, there are accumulated and pending amount of money since 2010, which were not handled till our visit on July 25, 2017 as: المالحظة

Account No. Name of Bank Pending amount of Money Nature of ending money (Iraqi Dinar) Rafidain Bank / Ministry Deposits appeared in bank statement, but 100018 88,079,965 of Defense Branch it was not mentioned in records Rafidain Bank / Ministry Receipts mentioned in records, but did 100018 27,205,435 of Defense Branch not appear in bank statement Rafidain Bank / Ministry Receipts appeared in bank statement, but 100000 60,772,234 of Defense Branch it was not mentioned in records Rafidain Bank / Ministry Deposits mentioned in records, but did 100000 6,429,400 of Defense Branch not appear in bank statement

Recommendation We recommended that; such pending amount of money shall be handled, reconcilement of accounts balance and identifying reasons behind discrepancies for more control avoiding any bad financial effect upon the ministry

Management Receipts which were not registered referred back to amount of money deposited mistakenly and were Response not followed up by depositors

229 Topic 2- Cadres working in department of unified data and insertion Degree of Risk Moderate

Note Upon our visit to Ministry of Defense, General Directorate of Budget and Program, we Noted that; there without qualifications المالحظةare a huge number of cadres working in department of unified data and insertion of accounting relation and experience, which delayed account keeping and insertion of accounts

Recommendation We recommended that; there shall be a mechanism assuring qualifications of cadres working in department of unified data and insertion for public benefit and to avoid any error and delay in executions of department tasks

Management This Note shall be considered to abide by in the future. Response

230 Ministry of interior

231 Degree of Topic 1- No supporting documents for pending loans and trusts- to be continued High Risk

Upon our visit to Interior Ministry/ Center of Ministry, we Noted that; there are pending loans, the same as in December left without beingالمالحظةtaking into consideration that; these accounts relating to previous years since 2003 till 2016 ;2016 ,31 handled till our visit on August 24, 2017. In addition to that,, we could not get analytical statements for this loan as it was not prepared in full, due to discrepancies between Ministry of Interior and Ministry of Finance as clarified in accounts of Ministry of Finance.

Amount of money/ Iraqi Dinar Details December 31, 2016 502,039,597 Loans for executing works and services 92,501,085,131 Loans of documentary credits 13,188,298,713 Contractors Loans 58,759,647 Another temporary loans Note 247,517,232 Loans for delegation 25,337,919,533 Another Trusts 68,950,528,695 Returned debtors of salaries 5,670,662,106 Trusts of other directorate 1,094,159,822 Taxes Trusts 2,899,732,330 Rasheed Bank 11,207,893,511 Non withdrew warrants 553,607,523 Execution Trusts 27,670,002 Another directorate and authorities 3,119,084 Rafidain Bank

232 1- No supporting documents for pending loans and trusts- to be Topic Degree of Risk High continued المالحظة We recommended that, Ministry shall settle above mentioned settlement and to agree with contractors upon a specific mechanism for paying after availability of cash allocations in cooperation with Ministry of Planning, we Recommendation also recommended that; there is necessity of preparing initial statements for loan and trusts, due to its importance in clarifying the financial status concerning these loans

Preparations of statements were delayed due to discrepancies like; Weapon Selling Contract FMIS- whereas, this contract is executed and American bank had paid directly the total amount to Ministry of Interior, Ministry Management of Finance asked for more details about payment as stated in the contract. Interior Ministry had mentioned in Response document o. 9927 on July 12, 2017 that; it is difficult to settle pending loans; due to the fact that these loans including loans (from 2003 till 2016) in addition to loans paid by Ministry of Finance.

233 Topic 2- Approving final financial statement Degree of Risk High

Centre, we NotedالمالحظةUpon referring back to General Directorate of financial affairs in Ministry of Interior that; that final financial statement of operation for Center of Ministry since 2010 till 2016 were not Note approved by Financial Regulatory Authority during audit duration on July 27, 2017, in addition to not approving final financial statement of investment for Center of Ministry since 2014 till 2016.

We recommended that, Ministry of interior Center shall abide by instructions of budget, first section, Recommendation paragraph (5) which stated the necessity of submitting accounts since 2010 till 2016 every year on January 31 at maximum, aiming at executing control, audit and following up with Financial Regulatory Authority to approve final financial statement data of ministry for the next years,

Accounts had been approved till 2009, while accounts since 2010 had been sent for approval; whereas information shall be approved till fulfillment of approval: Status of final statements is as following: • Final statements of 2010 submitted for approval upon document No. 5584 on August 13, 2017, which was not approved Management • Final statements of 2010 and 2011 which had been submitted for approval due to document No. Response 5780 on June 12, 2013; but it was not approved till now • Final statements of 2014, still had open accounts for settling pending loans, depending upon directions of Financial Regulatory Authority stated the necessity of settle accounts of 2014 • Final statements of 2016 was not prepared or delivered as mentioned in visit date

234 Topic 3- A number of projects were not terminating due to decision No. 347 Degree of Risk High

Through revising a sample from contracts of Interior Ministry/ Center of Ministry, we Noted that; there are a number of continued contracts with delay in execution, which means that there is no benefit from financial allocations through previous years, despite that fact those project had been inserted in Ministry investment budget for next years with no ability to execute new projects. due to deficiency federalالمالحظة ,Delay in execution throughout previous years resulting in difficulty of execution from 2011 till 2016 budget is suffering from, like:

Executed Amount of Date of Term of Percentage Status of contract Name of Entity Project) project contract of Project Iraqi dinar) signature / day Execution

Constructing a Adwaa Dar Al Mimar 5,277,242 10/9/2013 900 42% . multi-story building Contracting Project was governed by Decision 347, there is a delay in preparing in Center of Company settlement with contractor due to not approving the final order of change, this ministry was a result of administration procedures ending by delay in approving final measurement due to existence of change orders that are not approving by Note directorate of business in their document No. 4203 on July 25, 2017. The final measurement had been sent after taking approval upon change orders to financial department/Interior Ministry due to document of contract No. 4993 on August 3, 2017. Now we are waiting approval from department of accounts till full settlement to be send to Ministry of planning

Establishment of Association of Al 5,034,616 900 17% Settlement was not completed; whereas a measurement had been prepared Safwan border gate Habwa and Al Waffa 11/8/2013 with current status of the project due to document 1224 on February 23, 2017 companies for due to not approving a number of changing orders till our visit on August 24, general contracting 2017, due to the fact that; it was difficult to approve amount of easement, L.L.C unless attachment of contract relating to change order had been approved. Taking into consideration that; change orders is subject to research between resident engineer- Ministry of Industry and Mineral- and Directorate of engineering works

Establishment of Association of Al 47,773,768 23/7/2013 730 65% Ministry of Planning had approved mechanism of transforming project Zerbatiehborder AMD LAND AND execution using investment and due to paragraph (5/b/4) of Council of gate Nawaercompanies Ministers decision No. 437 of 2015, due to document No. 15443 on July 27, for general 2017 contracting L.L.C

We recommended that, Ministry shall revise above mentioned contracts with concerned authorities to take approval upon final Recommendation measurements and settlements, we also recommend that; terminated projects shall be deleted

Both of Constructing a multi-story building in Center of ministry andEstablishment of Safwan border gate are about to be approved for settlement to be delivered to Ministry of Planning, in consideration of project Establishment of Zerbatieh border Management gate we are waiting till calculating partial-execution paragraph and Ministry of Planning shall take decision about inserting it within Response measurement amount of money

235 4. Not having a validation to unification records Topic Degree of Risk Moderate about operational plane

During our audit to records of consolidate of Directorate general of finance affairs to the status of New Note Ministry of Interior. We have noted that the record consolidate of operating plans is not ratified from year 2009 to 2016.

المالحظة We recommend the directorate general of finance affairs to the status of Ministry of Interior to followed the work of committee established by section of Directorate Account for not having a Recommendation validation of records consolidate of operational plan because of its vital role in insuring match financial data between records of General authority and Ministry of finance.

Record consolidate of operating balance had had a validation of 2008. The next years will have the validation after committee established by Account Directorate had finished as per Ministry of Interior post No.4273 on 14 march of 2016, where as the cause of not having validation is not completing records about advances since year 2008. Management Response s

236 Letter on the new observations through our visit to the Shiite Bureau, the Sunni Bureau , the Christian Bureau and other religions and the Independent High Electoral Commission.

237 the Shiite Bureau

238 Topic 1. Absence of integrated data base to Shia moratorium Degree of Risk Moderate staff

Note During our audit to human resources section, we have been ordered provide us with details' payroll for staff include the name of the employee who work into moratorium professional المالحظة,with his own information e.g.(full name, salary, Educational attainment grade, date of hire …etc.) for reconciliation with original payrolls of staff salaries, where we couldn’t get integrated database for staff however our request that.

Recommendation We recommend the Council of Ministers to prepare integrated data base for all Shia moratorium staff that include all the private information of employee.

Management According to diwan of Shia moratorium, that all information regarding employee in the Response s files of personal staff with difficult to have integrated database for staff.

239 Topic 2. Accepting letters of guarantee from insolvent Banks Degree of Risk High

Note During our review of some contracts, we noted that an absence of an accepted letter of guarantee from bank faced a lawsuit because of not payment of issued letters of guarantee, where as the Council of Ministers was accepted the letter of guarantee from Economy Bank of next contract however, there is a lawsuit about withdrawal of letter's guarantee. المالحظة

Project name Letter of guarantee NO. Date of letter of Value(IQD) guarantee Project Mazar safee al 002/028794/14 E 18-04-2014 480,000,000 safaa 287442

Recommendation We recommend Council of Ministers not to accept any letters of guarantee from any bank have a previous history in no payment of letters of guarantee.

Management The bank is not to be stalled according to our plans with Central Bank of Iraq, that we don't accept any letters of guarantee Response s from banks which deemed to be stalled only in lists of Central Bank of Iraq.

240 Topic 3. There is override of cost limit for some investment contracts Degree of Risk High

Note During our audit to goddamn from invest mental contracts, We have noted a cost over without any allocations of the flowing contracts, with note that the contractor in the first project was fulfill a case against Council of Ministers and won it. Project name Referral amount Turnaround Date of actual Amount Amount of Proportion of )IQD) time as per direct disbursed overxpeniture actual contract

High school in paple 1,044,685,000 300Day 14/10/2009 734,986,000 432,000,000 %78 المالحظة Religious school 420Day inTuz khormato 1,341,044,000 23/10/2011 2,041,188,500 722,765,000 %100

*Council of Ministers has increased the project cost by distributing of project cost witch not refereed (one of Theecar schools) with cost 1.319.680.000 IQD, whereas project is consider one of three projects, building 2 religious school at THEECAR and one school at Tuz khormato. According to instrucrures of Ministry of Planning, not refereed projects are submit (canceled) with decreasing cost.

Recommendation We recommend the Council of Ministers to put procedures about relevant sections and audit all costs and coordinate with all committees in order to not to exceed costs.

Management According to respond of Council of Ministers of Shia moratorium, above mentioned projects, additional lists of projects have Response s been requested without having prior approval from Ministry of Planning to obtain allocation required. The engineering executive section will prepare the additional lists of projects and coordinate with other sections to ensure that these lists are included in costs and identified Amounts, and if there was exceeding the amount will not be increased by Ministry of planning.

241 Topic 4. Non preforming of protection conditions Degree of Risk High

Note During reviewing invest mental contract about establishing religious and cultural center at Waste with amount of 17.391.905.000IQD with ALFAECOON company for general contracts limited, We noted that completion percentage of project is 50%, and the Council of Ministers is flow the low of 347 to stop the project. The contract is include inoperative protection items with amount of 4 billion IQD, and because the project due to the المالحظةof not having necessary funds the Council of Ministers is not able to complete request has been disagreed by Ministry of planning.

Recommendation We recommend the Council of Ministers of Shia moratorium to make all procedures and contact with Ministry of planning to complete amount of protection items to avoid losing project.

Management According to response of Council of Ministers of Shia moratorium, The Council of Ministers has Response s contacted with Ministry of planning about protection items. Project have been stopped because of cash is not available at present.

242 Topic 5. Operating suspended advances Degree of Risk High

Note During our reviewing to financial and administrative division of Council of Ministers of Shia moratorium, We noted there was suspended advanced return to previous years include in operational balance and hasn't ratted, Arrested balances are : c Details Total amount(IQD) (2015 and pre) المالحظة Implementation of works 1,000,206,381 1 advance 2 committees advance 5,378,783,916 3 Other temporary advance 9,875,732,169

4 Travel advance 106,463,650 5 IFAD advance 53,203,929 6 Salary advance 337,842,751 Total 16,752,232,796

Recommendation We recommend the Council of Ministers of Shia moratorium to flow and liquidation of suspended advanced quickly. Un settlement advance may be increase false and lose right of Council of Ministers.

Management According to response of Council of Ministers of Shia moratorium, Many of these advances are preparing equipment responses and machines for all governorates advances from governmental companies. The Council of Ministers begun to liquid all suspended advances and solve it through present year 2017 by adding about 5 billion IQD through 2017.

243 Topic 6. Non-compliance with payments and issues raised by contractors Degree of Risk High

Note Through our review of the legal department of the Shiite Waqf bureau, we found some cases against the court by the contractors, which show non-payment of contractors' receivables, which are still under appeal as follows:

SR Contractor Claim No.: Total amount (IQD) 1 Al - Eqaion General Contracting 1004/B/2016 1,593,350,000

321,853,350المالحظة Al Salam General Company 590/B/2017 2

3 Heba Al Furat Trading & Contracting 12/B/2016 2,287,000,000

4 Heba Al Furat Trading & Contracting 792/B/2016 500,000,000

Recommendation We recommend that the Shiite Waqf Bureau should abide by the procedures of the contracts signed with the contractors and reach settlements with the contractors and take the approval of the necessary allocations.

Management According to the response of the Shiite Endowment Bureau, the lack of necessary liquidity led to the lifting of some cases by the Response contractors against the Bureau, and will be the necessary allocations and follow-up judicial matters to reach final settlements with contractors.

244 Topic Degree of 7. Approval of final financial statements and consolidation records Moderate Risk

Note During our review of the Shiite Endowment Bureau, we noted the following: 1- The final financial statements of the Bureau are not approved by the Federal Audit Bureau for the years 2014, 2015 and 2016 until the audit period on 10 May 2017. 2- The consolidation record for the investment budget for the years 2008 till 2016 has not been approved the consolidation record for المالحظةby the Ministry of Finance until the period of our visit on 10 May 2017, and the operational budget for 2014, 2015 and 2016 has not been ratified. 3 - We have not been provided with contacts between the Office of the Shiite Waqf and the Office of Financial Supervision and the Ministry of Finance in respect of final financial statements and records of consolidation.

Recommendation We recommend that the Shiite Waqf Bureau should work on the following: • Compliance with the provisions of the implementation of the federal budget for 2015 Section I - paragraph V, which states (requires the spending units to commit to submit the final accounts for the year 2015 to the Office of Financial Supervision no later than 31 January 2016 for the purpose of conducting the audit and audit), in addition to the submission of final accounts for the year 2016 not later than 31 January 2017. • Follow-up with the Ministry of Finance to approve the consolidation records.

Management According to the response of the Shiite Endowments Bureau, the SAI has sent all the data to the Financial Response Control Bureau and to date, no reply has been received by them regarding its ratification. The SAI has sent a record of consolidation of the operational budget for the year 2014 after the amendment and the years 2015 and 2016 for ratification. The balance sheet for the investment budget is still under amendment and will be sent to the Ministry of Finance for approval.

245 Topic 8. Advances and Amended Safes Degree of Risk Moderate

Note Through our review of the administrative and financial department of the Shiite Endowment Bureau, we noted the existence of advances and secretariats suspended from previous years within the investment budget and have not been liquidated, which are as follows: Secretariats:

Sr Details Total amount (IQD) المالحظة Goodwill Securities 401,552,993 1 2 Maintenance Securities 5,094,325,300 3 Tax Securities 1,763,055,792 4 Delay Penalties 849,317,155 5 Varied Securities 2,314,694,390 Total 10,422,945,630

2. Suspended advances: The balance of the predecessor of the cumulative execution of the suspended works as at 31/12/2016 amounted to about 160,932,322 Iraqi Dinars, which represents the advances of thresholds (operating advances 10%).

Recommendation After follow-up, we found out that these advances and trusts still exist and have not been liquidated.

Management We recommend that the Shiite Waqf Bureau should follow up and work to eliminate the advances and trusts suspended as soon as Response possible.

Topic According to the response of the Shiite Waqf, most of the advances and trusts of the investment budget revert to the thresholds. These projects are referred to Law No. 347 either for suspension or completion of the project after the approval of the Ministry of Planning. Most of these guarantees and advances are closed at the end of the project.

246 the Sunni Bureau

247 Topic 1. The existence of instruments suspended in the settlement of banks since Degree of Risk High previous years

Note We have Noted through our review of the reconciliation of the accounts of the banks to the Waqf Bureau and its subsidiaries. We have found that there are suspensions due to the existence of outstanding instruments for previous periods. According to the law that any sukuk issued for more than 6 months is null and void,

The following table shows the pendants between bank accounts and bank statements of the Islamic Institutions المالحظة .Department and the Department of Engineering Affairs The following table shows outstanding instruments with periods of more than six months and more (in Iraqi dinars).

Bank Name Number of instruments for more than six months Outstanding Instruments Value (IQD) Islamic Institutions 5 instruments outstanding for more than 6 months (February to May) 493,994 Department Department of Engineering One instrument of more than 6 months (April 2016) 419,874 Affairs

Recommendation We recommend management to follow up the suspended instruments and take appropriate action with respect to the suspended instruments for periods of more than 6 months in order to present the cash accounts fairly in the final financial statements that would affect the determination of the Company's real cash flow.

Management These instruments will be processed in the subsequent period. Response

248 Topic 2. Employees files / lack of employees files Degree of Risk High

Note Through our study of employee files we Noted the lack of files for employees, for example:

Employee Name Nihad Shams Aldin Dawood المالحظة Zine El Din Hamid Abdel Aziz Diaa Haq Haqi Ahmed Wafa Abdel Aziz Majeed Asayid Hamid Abdul Aziz

Recommendation We recommend that the Waqf Bureau work on the immediate verification of the reasons for the lack of files for employees and the detection of the presence of non-real employees and transfer their files from the concerned party.

Management The reason for the absence of files for this sample is that this sample belongs to employees affiliated with Response departments and bodies belonging to the Sunni Endowment Department, such as the Department of Religious Education, the Department of Islamic Institutions, Imam Al-Azam College and the Investment Management Authority.

249 3. Failure to fix the treatment of continuing contracts under the Council of Ministers Topic Degree of Risk High Decision No. (347)

Note Following the decision of the Council of Ministers held on 22-9-2015 on the establishment of the necessary controls to implement Council Decision No. (347) to Topicthe payment mechanism for ongoing investment projects under government control. According to the decisions of the Council of Ministers requires the establishment of the necessary controls and grant a period .all contracts and pledge not to claim any amount of compensation, after the installation of the case المالحظةof complete cessation of In our review of continuous contract samples, we noted that they were not processed by Decision 347 as shown in the table:

Project Value (in Iraqi Completi project name Note Project state Dinars) on rate

Shops, light, lighthouse 786,002,000 54% The decision to suspend work was issued in August 2015 The project is and fence Najem Al- according to Decision 417, and at the time of the suspended and not Assi Mosque - Hawija issuance of Decision 347, the contractor was called in treated according to order to terminate the project by mutual consent. The Decision 347 contractor did not submit to the negotiation and the processing of Decision 347 has not yet been implemented (the project is outside government control) Demolition and 529,013,000 80% The contractor was called in order to implement A decision was issued reconstruction of the Decision 347, it was decided to freeze the project and to freeze the project Mosque of Al Rhma Al the processing of the project was not completed and Mohdah the contractor is required to pay the dues. The administration is currently in the process of investigating and completing the procedures.

250 Topic 3. Failure to fix the processing of ongoing contracts under Council of Ministers Decision Degree of Risk High No. (347) - follows

Note Project Value (in Complet project name Note Project state Iraqi Dinars) ion rate

Establishment of 5,637,304,000 62% The contractor was called up and decided to Continuous shops and stick to the project, complete it later, and restaurant in the not comply with Decision 347, fearing that المالحظة city of - the allocation would be canceled by the Anbar Ministry of Finance and the situation would begin to improve (the project is outside government control).

Recommendation We recommend that the administration take necessary measures with the contractors in order to complete the timely adjustments and to implement the provisions of Decision No. 437 and follow-up the matter by the Legal Department in the event that the contractor fails to settle.

Management Response Based on management's response, each project was treated as follows:

- Al-Manara Shops Project for Nazem Al-Assi Mosque: The project is outside the control of the government. The project was previously processed according to the 417 decision but the contractor did not submit to the negotiation. - Project of demolition and construction of the Mercy Mosque: The Department in the stage of determining the contractor's enTopicments to complete the procedures of processing the project in accordance with Decision 347. - Construction of shops and restaurants in Nukhayb: There is no desire to implement Decision 347 due to fear of loss of allocation for the project, and the desire of the contractor to continue looking for the improvement of the situation in the region.

251 Topic 4. Insufficient letter of guarantee - the shrine of Sheikh Degree of High Masoud - Khalidiya Risk

Note Through our review of the Sheikh Masoud shrine, we Noted that the project was delayed and a settlement was requested prior to Decision 347, noting that the contract was referred in 2013. The letter of guarantee is not sufficient to settle the work performed and المالحظة advances to the contractor. The value of the contract is equal to 1,350,212,000 Iraqi Dinars. The value of the guarantee letter is 67,000,000 Iraqi Dinars, compared to the amount requested by the Court in the amount of IQD 302,000,000 inclusive of fines. When the contractor was called upon to settle the advances and process the project according to the decision, the contractor refused to pay the advance to the bank. In addition, the bank refused to liquidate the letter of guarantee on the grounds that there were cases between the parties.

Recommendation We recommend that the administration follow the necessary legal procedures to preserve the rights of the Bureau, and recommend that the contractor be included in the black list.

Management This contract has been submitted to the legal department to collect the amount of the Response advances and settle the contract. The procedures are still in progress and no final decision has been issued.

252 Topic 5. Difficulty accessing the site - the tomb of Sheikh Mohammed Al High Degree of Risk Azhari and Jama Al-Hakiki estimated at 93% and was notالمالحظةNote The project was allocated in 2013 and the completion rate of the project is based on Decision 347 in respect of projects with advanced completion rates so that the transfer between the investment and operational budget with the flags of my ministry Finance and Planning.

Recommendation We recommend that the SAI need to find a solution to the obstacles that prevent the implementation of the project, in accordance with the Council of Ministers Decision No. (347), which requires financing projects with advanced achievement ratios and strategy to be funded by the transfer between the operational budget and the investment budget with the Ministry of Finance and Planning.

Management The reason for the delay of the project is due to the occurrence of the project next to the Central Bank Response and the existence of barriers hindering the entry of the contractor and completion of the project.

253 Topic 6. Non-implementation of the project of the Islamic Degree State Complex after receiving the operational High of Risk advance

Note Through our review of the Islamic State Project in , we found that of 81,894,767,000 Iraqiالمالحظةthe project dates back to 2013 with a project value Dinars. We noted that after signing the contract with the Turkish company DKA, an advance payment of 10% of the project value was paid. The contractor was summoned for the purpose of recovering the operational advance and the completion of the project in accordance with Decision 347, but the contractor objected to the settlement and refused to pay the advance or make a settlement. The case is still pending by the Legal Department. Recommendation We recommend management to follow the legal procedures necessary to preserve the rights of the company, and we recommend that the contractor be included in the black list.

Management The case has been referred to the Legal Department for the purpose of Response follow-up, and to date no final decision has been issued. We recommend management to follow the legal procedures necessary to preserve the rights of the company, and we recommend that the contractor be included in the black list.

254 Topic 7. The letter of guarantee returns to the contractor Degree of Risk High without confirming the state of reality.

Notes From reviewing the Project of the shrine of Sheikh Abdullah bin Mubarak in AL Anbar province, We Noted that due to the difficulty of implementing the project, work was carried out in accordance with the procedures of Decision 347 and the project was frozen by the parties. We have also noted that the letter of guarantee has been returned to the contractor without confirmation of the case between the parties, only a commitment has been signed by the contractor to finalize the project.

Recommendation The Diwan has to abide by all the terms of the resolution, as it is required take action immediately to confirm the state of reality, to determine the valuation of liability in favor of the contractor or the Diwan.

Management Response Due to the difficulty of accessing the site to confirm the state of reality , and as a result of signing the commitment by the contractor to complete the project when situations improved, the letter of guarantee was returned. the Christian Bureau and other religions and

256 Topic

1- Failure to access the standardization Degree of Risk High records

Notes Through our review of the endowment for Christianity , we were unable to obtain the investment and operational standardization record for the purpose of ascertaining that the balances were consistent with the Ministry of Finance(MOF); to ensure that there were no differences and to determine the years approved.

Recommendation We recommend that the Administration need to keep a copy of the record of standardization and get a book from the MOF confirms that a record still (held by) in possession of the Ministry.

Management Response The standardization records are available to the MOF for approval of the 2016 data as the 2015 data have been approved. Topic 2. The existence of instruments suspended in the Degree of Risk High settlement of banks from previous years

Note We have Noted through our review of the reconciliation of accounts of banks the existence of suspensions due to the existence of instruments outstanding from previous years, and the law provides that any instruments for more than 6 months are المالحظة considered null and must be canceled from the books. noting that these instruments are still pending and return to 2014. The following table shows the inter-bank accounts between the bank accounts and the statements of the Christian Waqf and other religions in the Iraqi dinar.

Bank Name No. Instrument Amount of instrument Date of instrument Rafidain Bank - Al - Wahda District 2798 1,000,000 7/5/2014 Rafidain Bank - Al - Wahda District 2806 15,117,500 20/5/2014 Rafidain Bank - Al - Wahda District 2840 4,595,000 22/5/2014

Recommendation We recommend management to follow up the suspended instruments and take appropriate action with respect to the suspended instruments for periods of more than 6 months in order to present the cash accounts fairly in the final financial statements that would affect the determination of the Company's real cash flow.

Management The instruments were disbursed and the funds were received but because of the Response control of the terrorists on some areas, the branch of the Bank was unable to send the Notes to the main bank.

258 Topic 3. Suspended advances from previous years Degree of Risk High

Note Through our audit of the records, we Noted the existence of suspended advances for the years 2013 and 2014 totaling 146,785,300 Iraqi Dinars. Iraqi Dinar belongs to the predecessor of the implementation of works and services, which contravenes the decision of the Council of Ministers No. 11 / R / 37360 of 2009, which provides for the liquidation of all advances by 20 December of each year and otherwise impose a delay penalty of 7% . The following table shows the types of advances: Investment advances the year المالحظة The nature of the advances the amount

Predecessor committees 53,009,300 2014

Operational advances

The nature of the advances the amount the year

Predecessor committees 4,000,000 2014

The predecessor of the mission 3,500,000 2013

Other advances 86,276,000 2014 and 2013

Recommendation We recommend the ministry to eliminate the suspended advances and abide by the decisions and instructions issued by the General Secretariat of the Council of Ministers and the Ministry of Planning.

Management Investment advances: Investigative committees have been formed and the outcome has not yet been decided. Response Operational advances: The predecessor of the mission: The reason for stopping it is that Mr. Ibrahim Antoine left Iraq and has not returned to date. The Bureau addressed the following entities, the banks and the real estate department, to ascertain whether they had any real estate or bank accounts until they were seized and replied that there were no real estate or property. The predecessor of the committees: that these advances represent the predecessor of the committees of the governorates that have fallen into the hands of gangs, he said, the SAI is in the process of following up these advances.

259 Topic 3. Suspended predecessor from previous years Degree of Risk High - continued

Management Other advances: Other advances include: Response 1 - The predecessor of the distribution of aid to displaced families in Mosul and its environs. Investigative committees have been formed and the outcome has not yet been decided. 2 - Support advances to places of worship, monasteries and shrines with the necessary materials and supplies for the relief of the displaced in Mosul and its environs. Commissions of inquiry have been formed and the outcome has not yet been decided. 3 - advance the expenses of participation in the development course at the University of Mosul. Certificates were issued to individuals to participate in a course at the University of Mosul and were delivered to the university and no receipts were received from the university so it remained registered to the people and according to the latest update the course will be held at the University of Erbil and will be extinguished. 4 - An advance of 3,500,000 Iraqi Dinars was paid to the Chairman of the Committee for the purpose of lifting the refrigeration equipment of the Church of St. Thomas / Al- Nairiya where he received the amount and left Iraq and has not returned to date. The Bureau addressed the following authorities, the banks and the Real Estate Department, to ascertain whether they had any real estate or bank accounts until they were seized and replied that there was no real estate or property.

260 Topic 4. Absence of written undertaking Degree of Risk High

Note We noted some of suspended projects where there is no written undertaking from the contractor certified by the public notary including the re-coverage of the project with letter of guarantee in addition to not claim any amounts to compensate for the loss of expected profits of the paragraphs contracted and not implemented.

The following table shows some contracts that have no written undertaking from the contractor: Note Project Project date Project name Contractual Achievement NO. amount ratio

2 16/01/2014 Establishment of the Guest House of the 686,910,000 Iraqi 45% Ancient Eastern Church \ Sarah Camp Dinar

3 23/03/2014 The establishment of the priest's house and a 662,807,500 Iraqi 60% banquet hall for the Church of Mart-Chamony Dinar in Al-dawra, Baghdad

Recommendation We recommend the Administration to implement all the provisions of Decision 347, which stipulates that a written undertaking from the contractor; certified by the public notary shall be taken, including the re- coverage of the project with a letter of guarantee, in addition to not claiming any amounts to compensate for the loss of expected profits for the contracted periods and not implemented.

Administration’s The projects have been suspended on the basis of official letters from the divan which stipulate that no response financial compensation shall be claimed. And The government contracting laws stipulate that if the contractor is addressed with an official letter, he has the right to object within seven days, and no objection has been made by any contractor. This office shall guarantee its right after any compensation is claimed.

261 Topic 5. Non- implementation of Decision 347 Degree of Risk High

Note Through our audit of the divan contracts, we noted that some contracts were not referred to Decision 347. The following table shows a sample of contracts on which Decision 347 was not applied: Note Project Project date Project name Contractual amount Achievement NO. ratio 1 09/02/2015 Rehabilitation of the Khorna Syed Al-Najat Center for Syriac 298,730,000 Iraqi Dinar 25% Catholics / Baghdad 19 20/08/2014 of the Mandaean School Center / Baghdad 163,890,000 Iraqi Dinar 85%

Recommendation We recommend the Administration to implement all the provisions of Decision 347.

Administration’s Rehabilitation of the Khorna Syed Al-Najat Center for Syriac Catholics / Baghdad response Al-Khorna is considered one of the most important projects since the church was exposed to a terrorist act and its rehabilitation has a great impact on the Christian community in general and the affected families in particular. Rehabilitation of the Mandaean School Center / Baghdad is one of the projects of great importance to the cultural significance for Baghdad and the status of the project related to the religion of the divine religions، the project will be completed with special funding from the community.

262 the Independent High Electoral Commission

263 Topic 1- Non-ratification of the final financial statements Degree of Risk High

Note Through our review of the Independent Electoral Commission, we noted that the final financial statements for the years 2014 through 2016 were not approved by the Financial Control Bureau until the audit period on 31 July 2017, although the statements for 2014 after المالحظةIndependent Electoral Commission submitted the financial Amendments required by the Office of Financial Supervision in the book No. / AD / 18/510 »on 30/1/2017 for approval.

Recommendation We recommend that the IECI comply with the provisions of the budget implementation paragraph (5), which requires the submission of accounts for the years 2014 to 2016 by 31 January each year for the purpose of conducting the audit and audit and follow-up with the Office of Financial Supervision to approve the final financial statements of the Commission for years We also recommend that the Independent High Commission to follow up with the Office of Financial Control to obtain the data approved for the years 2014, 2015 and 2016.

Management The Administration did not provide data for the years 2015 and 2016 due to the fact that Response the 2014 data were made adjustments required by the Bureau and the data may be sent for 2015 and 2016 only after the approval of the financial statements for 2014 as the opening assets are not yet ratified.

264 Topic 2. Bank Reconciliations Degree of Risk High

Note Through our review of bank reconciliations, we noted the existence of amounts suspended and accumulated in the matches of Rafidain Bank and the Iraqi Bank of Trade since 2005 and have not yet been processed until the date of our visit on 31 July 2017.

Bank name account The amount Details of outstanding issues number outstanding (IQD) as in 2016 المالحظة Rafidain Bank - Branch of the 111 162,946,200 76 billion Iraqi dinars represent a General Secretariat of the Council settlement since April 2013 of Ministers

Rafidain Bank - Branch of the 112 92,758,000 30 million Iraqi dinars transfer in July 2010 General Secretariat of the Council of Ministers

Rafidain Bank - Branch of the 127 20,843,050 8 million Iraqi dinars since August 2010 General Secretariat of the Council predecessor of Karbala of Ministers

Iraqi Trade Bank 1039 234,531,748 Represented by a swaps and instruments that have been outstanding since December 2005

Recommendation We recommend that these outstanding amounts should be dealt with, that the balances of the accounts should be reconciled and that the reasons for the differences should be identified for further control and control procedures.

Management Response The work continues to liquidate the suspended amounts for bank matches where there is only a few vocabulary for the outstanding amounts in the account of the Commercial Bank of Iraq, where a committee was formed a month ago and work is underway to remove all these plankton.

265 Topic 3. Advances suspended from previous years Degree of Risk Moderate

Note Through our review of the financial records of the Commission, we noted the existence of secretariats and advances of previous years that UNHCR did not resolve until 31/12/2016 as shown in the table below:

Type of advance Balance up to Advance details 31/12/2016 Interim advances 2,757,535,922 The balance of these advances represents the advances granted and the advances granted المالحظةdue to the 2014 parliamentary elections to the provincial offices for the parliamentary elections to be held in 2017. The predecessor of 30,431,290- The balance of these advances represents advancements granted to working individuals staff working on polling stations and advances to delegations in previous years.

Type of safe Balance up to Safes details 31/12/2016 Tax Authorities 357,620,173 That this balance represents the tax guarantees deducted from the expenses of the elections since previous years where these amounts are transferred to the General Authority for Taxes. Various other 4,746,297,569- That this balance represents the salaries retained for employees of secretariats polling stations working in hot spots from 2014 to 2016, where a decision of the Council of Ministers and the High Commission with a letter No. 25488 stipulates that their salaries remain suspended .until the statement of their position of the terrorist

Other circuit secretaries 8,752,000,000 This balance represents the secretariats of the parties launched by the Commission during the year 2016, as the parties participating in the elections pay the fees of participation of 50 million Iraqis, and winning parties to recover these amounts from the Commission.

266 Topic 3. and advances suspended from previous Degree of Risk Moderate years - continued

Recommendation We recommend that the Commission should implement the decision of the Council of Ministers No. 28 of 2017 and work on the liquidation of advances and accumulated trusts.

Management That the Commission is committed to the implementation of settlements as المالحظة :Response shown in the following table

Settlement type Balance in the Balance in the Balance of consolidation record consolidation record settlements 31/12/2013 31/12/2016 executed up to 2016 Settlement of advances 228,805,368,095 22,282,076,815 206,523,291,280

Settlement of 87,792,759,658- 21,636,192,839- 66,156,166,819 secretariats

267 Appendix 1: Key symbols

Symbols Statement

The observation relates to a material impairment that affects the achievement of the underlying objectives or financial results or affects the professional المالحظة .reputation. We recommend immediate processing Degree of Risk is High

The note relates to matters of Moderate risk which may lead to a weakness in the internal control system and / or the efficiency of operational activities, Degree of Risk is which should be disclosed. We recommend that you take remedial action within Moderate a short period of time.

The observation relates to matters that we have observed that may not affect the internal control system and / or the effectiveness and efficiency of the operational activities, but must be taken care of by management. We The Degree of Risk is Low recommend that you take remedial action within a reasonable period of time.

268 Thank you

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