Iraq: Reconstruction Assistance

Prepared for Members and Committees of Congress

A large-scale assistance program has been undertaken by the United States in Iraq since mid-
2003. To date, nearly $49 billion has been appropriated for Iraq reconstruction. Most recently, in
June 2008, Congress approved over $4 billion for Iraq reconstruction in an FY2008/2009
supplemental appropriations bill, H.R. 2642 (P.L. 110-252).
Contributions pledged by other donors at the October 2003 Madrid donor conference and in
subsequent meetings have amounted to roughly $17 billion in grants and loans.
On June 28, 2004, the entity implementing assistance programs, the Coalition Provisional
Authority (CPA), dissolved, and sovereignty was returned to Iraq. U.N. Security Council
Resolution 1546 of June 8, 2004, returned control of assets held in the Development Fund for Iraq
to the government of Iraq. U.S. economic assistance is now provided through the U.S. embassy,
while security aid is chiefly managed by the Pentagon.
A significant number of reconstruction activities on the ground are completed or ongoing, but
security concerns have slowed progress and added considerable expense to these efforts.
Reconstruction programs have included the training and equipping of Iraqi security forces;
construction of road, sanitation, electric power, oil production, and other infrastructure; and a
range of programs to offer expert advice to the Iraqi government, establish business centers,
provide school books and vaccinations, finance village development projects, and promote civil
society, etc.
Reconstruction priorities and funding mechanisms have changed over time. The Iraq Relief and
Reconstruction Fund (IRRF), the main U.S. assistance account in the first few years, is no longer
available, and most large-scale infrastructure programs are no longer funded. However, many
small-scale, targeted community-level infrastructure efforts are funded under the Commander’s
Emergency Response Program (CERP) and the Economic Support Fund (ESF). The key
emphases of the aid program are the training of Iraqi forces and programs assisting the
development of Iraqi governing capacities and supporting the work of the Provincial
Reconstruction Teams (PRTs).
The report will be updated as events warrant. For discussion of the Iraq political situation, see
CRS Report RL31339, Iraq: Post-Saddam Governance and Security, by Kenneth Katzman.

Most Recent Developments.............................................................................................................1
Introduc tion ..................................................................................................................................... 1
Funding for Reconstruction.............................................................................................................1
U.S. Assistance..........................................................................................................................2
FY2008 Consolidated Appropriations................................................................................6
Second FY2008 and FY2009 Supplemental Appropriations..............................................6
FY2009 Regular Appropriations Request and Congressional Action.................................8
Defense Authorization for FY2009.....................................................................................9
Oil Revenue, Corruption, and the Iraqi Capital Budget............................................................9
Iraqi Corruption................................................................................................................10
Iraqi Capital Budget...........................................................................................................11
Iraqi Debt................................................................................................................................13
Other Donors...........................................................................................................................13
Iraq Trust Fund..................................................................................................................14
United Nations..................................................................................................................14
International Compact for Iraq..........................................................................................15
U.S. Assistance Policy and Program Structure..............................................................................15
U.S. Reconstruction Assistance.....................................................................................................17
Reconstruction Programs and Issues.......................................................................................17
Reconstruction Programs: 2003-2006...............................................................................17
Current Reconstruction Priorities.....................................................................................18
Infrastructure Sustainability and Asset Transfer...............................................................19
Capacity Development......................................................................................................20
Provincial Reconstruction Teams (PRTs)..........................................................................21
The Role of Iraqi Private Sector in Reconstruction and DOD Business Task Force........24
CERP ........................................................................................................................... ..... 25
Security ............................................................................................................................. 27
Accountability, Waste, and Fraud............................................................................................28
Assessments of Reconstruction...............................................................................................32
Table 1. U.S. Assistance to Iraq.......................................................................................................4
Author Contact Information..........................................................................................................34

On October 14, 2008, the Duncan Hunter National Defense Authorization Act for FY2009 was
signed into law (S. 3001, P.L. 110-417). It bans the use of ISFF funds for infrastructure projects
and restricts the use of the CERP for this purpose by setting a maximum limit on project cost at
$2 million.
On September 30, 2008, FY2009 regular appropriations funding was provided under the terms of
a continuing resolution (H.R. 2638/P.L. 110-329) that allows foreign aid spending at the level
provided in the FY2008 Consolidated Appropriations Act (P.L. 110-161). The resolution expires
on March 6, 2009. The FY2008 regular appropriations provided no economic aid for Iraq, with
the exception of some humanitarian assistance. Most economic and security assistance for Iraq
has been provided to date under emergency supplemental legislation.
On July 16, 2008, the House State/Foreign Operations Subcommittee approved its FY2009 bill. It
provides no funding for Iraq. On July 17, the Senate Appropriations Committee reported S. 3288
(S.Rept. 110-425), its version of the FY2009 State/Foreign Operations bill, recommending $75
million in ESF and $25 million in INCLE funds for Iraq, $275 below the combined request for
these accounts.
In June 2008, Congress approved H.R. 2642 (P.L. 110-252, signed June 30, 2008), an FY2008
and FY2009 emergency supplemental appropriations bill, providing $4.3 billion in Iraq
reconstruction assistance.

Following years of authoritarian rule and economic sanctions, the United States and the
international community agreed in the spring of 2003 that efforts should be made to rehabilitate
economic infrastructure and introduce representative government to post-war Iraq, among other 1
objectives. To meet these ends, a large-scale assistance program has been undertaken by the
United States in Iraq. This program, funded through a mix of appropriations accounts, will likely th
be scrutinized closely in the 111 Congress. This report describes recent developments in this 2
assistance effort and key issues of potential interest to Congress.

Several “spigots” have been available to fund Iraq reconstruction during the period from 2003 to
the present. U.S. foreign aid appropriations for Iraq have been provided mostly in annual
emergency supplemental bills beginning in FY2003. International donors have also made aid
contributions. Iraqi funds, largely derived from oil export profits, have been employed to cover
the “normal” operating costs of the Iraqi government, and, when sufficient amounts are available,
have been used to address reconstruction needs. Additionally, the reduction or rescheduling of

1 U.N. Security Council Resolution 1483, May 22, 2003.
2 For detailed discussion of the Iraq political situation, see CRS Report RL31339, Iraq: Post-Saddam Governance and
Security, by Kenneth Katzman.

Iraqi debt repayments has made further resources available. These sources of reconstruction
funding are discussed below.
Over the years, U.S. assistance to Iraq has been provided through multiple appropriations
accounts (see Table 1 for funding levels). In the first several years of the U.S. effort in Iraq, the
bulk of U.S. assistance was provided through a specially created Iraq Relief and Reconstruction
Fund (IRRF), placed under the direct control of the President, supporting aid efforts in a wide
range of sectors, including water and sanitation, electricity, oil production, training and equipping
of Iraqi security forces, education, democracy, and rule of law. The Fund, established in the April
2003 FY2003 Emergency Supplemental (P.L. 108-11, H.R. 1559/H.Rept. 108-76) and replenished
in the November 2003 FY2004 Emergency Supplemental (P.L. 108-106, H.R. 3289/H.Rept. 108-

337), eventually totaled nearly $21 billion.

A new DOD account, the Iraq Security Forces Fund (ISFF), supporting the training and equipping
of Iraqi security forces, was set up under the May 2005 FY2005 emergency supplemental (P.L.
109-13, H.R. 1268/H.Rept. 109-72). Previously, most security training funds had been provided
out of the IRRF. Policy responsibility for the IRRF, originally delegated to the CPA (under DOD
authority), had, since the end of the occupation in June 2004, belonged to the State Department as
a result of a Presidential directive (NSPD 36, May 11, 2004), which, nonetheless, continued to
give DOD the main role in directing security aid. Putting funding for security assistance entirely
under DOD, however, was a sharp departure from historic practice. Under most military
assistance programs—Foreign Military Financing (FMF) and the International Military Education
and Training Program (IMET)—State makes broad policy and DOD implements the programs.
The conference report on the supplemental adopted the President’s formula for the new account
but required that the Iraq Security Forces Fund be made available “with the concurrence of the
Secretary of State.”
Another DOD account, the Commander’s Emergency Response Program (CERP), has provided
immediate reconstruction and humanitarian assistance at the local level to support the work of
U.S. military commanders. More recently, a Business Task Force, attempting to rehabilitate state-
owned enterprises to stimulate the Iraqi economy and increase employment, has been funded out
of the DOD Iraq Freedom Fund account.
By FY2006, the Economic Support Fund (ESF) account had replaced the IRRF as the main spigot
of U.S. economic aid, provided in support of a wide variety of economic development and
governance efforts, but not funding the large-scale infrastructure programs or the security forces
training that characterized much of the IRRF. ESF, in particular, is a key component of the so-
called “surge” initiative, announced in January 2007. It largely funds the programs implemented
by the Provincial Reconstruction Teams (PRTs), such as improvements to community
infrastructure, job training, vocational education, and micro-loans, and supports programs at the
national level, including Ministerial capacity development, agriculture and private sector reform,
and strengthening of the judicial process and democratization efforts. Under the FY2007
Supplemental (P.L. 110-28), all ESF, including previously unobligated funds, was withheld until
the President certified in reports to be submitted before July 15 and September 15, 2007, that the
government of Iraq had made progress in 18 benchmarks, including whether it enacted the hydro-
carbon law, taken specific steps toward provincial and local elections, reformed de-Baathification
laws, and begun expenditure of the promised $10 billion Iraqi funds for reconstruction. The
benchmark certification requirements could be waived by the President. The reports were

submitted as required, and the President released $1.7 billion in ESF through waivers issued on
July 12 and September 28, 2007.
In addition to ESF, the International Narcotics and Law Enforcement account (INCLE) has
supported “rule of law” efforts, the Democracy Fund supports a range of democratization and
civil society efforts, and the Treasury Department Technical Assistance program offers experts on
financial issues to the government of Iraq. More recently, humanitarian refugee and displaced
persons concerns have been addressed by increased funding for the Migration and Refugee
(MRA) and International Disaster Assistance (IDA) accounts.
Most funding for Iraq reconstruction has been appropriated under emergency supplemental
appropriations legislation, because it is “off-budget” and does not compete with other aid
priorities in the regular aid bill. Efforts to “regularize” the economic assistance program for Iraq
by requesting funds in the traditional annual foreign operations appropriations bill have met with
limited success. The first such effort, in 2005 for the FY2006 foreign operations bill (P.L. 109-

102, H.R. 3057), saw only $60.4 million (after rescission) provided of a $414 million request,

because some Members felt that sufficient funds remained unobligated in the IRRF—at the time,
$3-$5 billion—from which the Administration could draw to pay for continuing reconstruction.
Iraq programs received an allocation of only $176.3 million of an $734 million FY2007 regular
foreign operations request as a consequence of the continuing appropriations resolution (H.R.

5631/P.L. 109-289 Division B, as amended by H.J.Res. 20, P.L. 110-5, on February 15, 2007),

which only set funding levels for major aid accounts. In December 2007, Congress rejected
almost all of the regular FY2008 request for Iraq (see below).

Table 1. U.S. Assistance to Iraq
(appropriations in $ millions)
Consolidated Enacted
(Reg & 1st 2nd 2008 2009 Total Regular 2009
Fiscal Year 2003 2004 2005 2006 2007 Supp) Supp Supp 2003-2009 (request)
Iraq Relief and
Reconstruction Fund
(IRRF) 2,475.0 18,389.0a 10.0b — — 20,874.0
Economic Support Fund
(ESF) — 1,535.4 1,620.8c 15.0 424.0 102.5 3,697.7 300.0
Democracy Fund 250.0 75.0 325.0
INCLE (Int’l Narcotics & d
Law Enforcement) 91.4 170.0 — 85.0 346.4 75.0
iki/CRS-RL31833IFTA (Treasury Dept. Tech Asst.) — 13.0 2.8 — 15.8
s.orMRA (Migration & Refugee
leakAsst.) — 65.0 149.5 30.0d 141.0d 385.5
NADR (Nonprolif, Anti-
://wikiTerror, De-mining) 3.6 19.4 16.0 4.5 43.5 20.0
httpIMET (Int’l Mil. Ed &
Training Program ) 1.2 1.1 — 2.3 2.0
IDA (Int’l Disaster d
Assistance) — 7.9 50.0 80.0 45.0 182.9
Other USAID Funds 469.9 469.9
Total 150 Account 2,944.9 18,390.2 3.6 1,657.7 2,179.1 260.5 614.0 293.0 26,343.0 397.0
DOD - Iraq Security
Forces Fund (ISFF) 5,391.0 3,007.0 5,542.3 1,500.0 1,500.0 1,000.0 17,940.3
DOD - Iraq Army 51.2 210.0e 261.2
DOD - CERP 140.0 718.0 708.0 750.4 370.0 875.0 3,561.4
DOD - Oil Repair 802.0 802.0

Consolidated stndEnacted
(Reg & 1 2 2008 2009 Total Regular 2009
Fiscal Year 2003 2004 2005 2006 2007 Supp) Supp Supp 2003-2009 (request)
DOD - Iraq Freedom Fund
- Business Support 50.0 — 50.0 100.0
Total 050 Account 853.2 140.0 6,319.0 3,715.0 6,342.7 1,870.0 2,425.0 1,000.0 22,664.9
Total U.S.
Assistance 3,798.1 18,530.2 6,322.6 5,372.7 8,521.8 2,130.5 3,039.0 1,293.0 48,977.9 397.0
Sources: State Department FY2009 Foreign Operations Congressional Budget Justification; SIGIR Report to Congress, July 30, 2008; and CRS calculations.
Notes: The 150 account encompasses International Affairs spending and is mostly appropriated in the State/Foreign Operations bill. The 050 account is Defense
appropriations. This table does not contain agency operational costs, including CPA, State Department, and PRTs, except where these are embedded in the larger
reconstruction accounts. Estimated costs to date are an additional $3.0-$4.0 billion.
a. Original appropriation was $18,439 million. $50 million was rescinded in 2008 by P.L. 110-252.
iki/CRS-RL31833b. Transfer from ESF.
s.orc. Original appropriation was $1,574 million. State Department rescinded $76 million in 2008.
leakd. The appropriation includes an unspecified amount for Iraq. If there was a specific request, assumes request level will be met.
://wikie. Transfer from ISFF to reimburse Army for previous Iraqi training expenses.


On February 5, 2007, the Administration sent to Congress two budget requests for Iraq
reconstruction funding. First, it requested $391.8 million in regular FY2008 State/Foreign
Operations appropriations—mostly $298 million in ESF and $75.8 million in INCLE. Second, the
Administration issued a request for an FY2008 “Global War on Terror” emergency supplemental.
The emergency request for Iraq reconstruction, as later revised on October 22, 2007, totaled $4.9
billion, including $3 billion under the ISFF, $1.2 billion in combined Afghanistan/Iraq CERP
funds, $797 million in ESF, and $159 million in INCLE.
Both House (H.Rept. 110-197) and Senate-approved (S.Rept. 110-128) versions of the regular
FY2008 State/Foreign Operations appropriations (H.R. 2764) rejected most economic (as
opposed to security) aid to Iraq. These views were carried into the final version of H.R. 2764,
which became the vehicle for the omnibus Consolidated Appropriations Act (P.L. 110-161, signed
into law on December 26, 2007). The act included regular FY2008 funding as well as a first
tranche of the FY2008 emergency supplemental appropriations. With a few discrete exceptions,
Congress, in section 699K, specifically rejected almost all regular or supplemental economic
assistance to Iraq provided under the State/Foreign Operations part of the bill (Division J). It
approved efforts to fund humanitarian demining ($16 million in regular NADR funds) and assist
refugees and internally displaced persons (allocated to date from the larger supplemental MRA
and IDA accounts are $149.5 million and $80 million, respectively), provided $5 million (before
imposition of a .81% across-the-board rescission) in ESF for the Marla Ruzicka War Victims
Fund and $10 million (pre-rescission) in ESF for the rescue of Iraqi scholars.
Congress did provide a significant portion of the Administration emergency supplemental request
made for Defense appropriations. It appropriated half ($1.5 billion) of the request for the Iraq
Security Forces Fund and nearly half of the total CERP request (of which $370 million has been
allocated to Iraq).
In the end, the Consolidated Appropriations Act provided about 40% of the total $5.3 billion
combined FY2008 regular and emergency Iraq reconstruction request. More than 88% of the total
appropriation is DOD assistance. U.S. funding for PRT operations and programs and a wide range
of other economic aid programs were left to rely on previously appropriated funds until a second
tranche of the FY2008 request could be considered.
Outstanding from the FY2008 supplemental request was roughly $2.9 billion in Iraq
reconstruction assistance, of which $986 million was for foreign operations economic assistance.
The outstanding FY2008 foreign operations request was for three accounts—$797 million in ESF,
$159 million in INCLE, and $30 million in MRA. The outstanding DOD request—nearly $2.0
billion—was for the training and equipping of Iraqi security forces ($1.5 billion under the ISFF),
for development programs delivered under the CERP (Iraq could expect at least half of the $719
million still outstanding for both Iraq and Afghanistan), and for the Task Force to Improve
Business and Stability Operations in Iraq ($100 million under the Iraq Freedom Fund account).
On May 2, 2008, the Administration issued a request for FY2009 emergency supplemental
funding. The request included $398.8 million for foreign operations reconstruction—$212.8
million in ESF, $141 million in MRA, and $45 million in IDA accounts. The DOD appropriations

reconstruction request included $2 billion for the ISFF, $1.7 billion for the CERP in Iraq and
Afghanistan, of which at least half would go to Iraq, and $50 million for the Business Task Force.
Both DOD and Foreign Operations portions of the FY2009 emergency request were considered
by Congress at the same time as the second FY2008 supplemental.
Outstanding FY2008 supplemental funds included operational costs (not counted in the
reconstruction aid total or the table) for staffing and administering reconstruction programs: $679
million for PRTs. The new FY2009 supplemental request included funding for PRT operations (an
unspecified portion of a total $921 million Embassy/PRT request), $23.6 million for USAID
operational expenses, and $15 million for the Special Inspector General for Iraq Reconstruction
The final version of the FY2008/2009 supplemental appropriations bill, H.R. 2642 (P.L. 110-252,
signed June 30, 2008), approved by the House on June 19 and by the Senate on June 26, 2008,
provided $4.2 billion in Iraq reconstruction assistance, compared to a combined Administration
request of $4.9 billion. (For a full discussion of House and Senate action on the supplemental, see
CRS Report RL34451, FY2008 Spring Supplemental Appropriations and FY2009 Bridge
Appropriations for Military Operations, International Affairs, and Other Purposes (P.L. 110-252),
by Stephen Daggett et al., FY2008 Spring Supplemental Appropriations and FY2009 Bridge
Appropriations for Military Operations, International Affairs, and Other Purposes (P.L. 110-252.)
On the Foreign Operations side, Congress provided a total FY2008/2009 supplemental
appropriation of about $907 million, compared to the request of $1.4 billion. Of this amount,
$526.5 million is ESF funding. Judging by the allocations made by the Appropriations
Committees for the ESF, there will be a shift in the direction of the economic aid program
favoring more local-level assistance programs.
Of this amount, at least $414 million would be targeted to provincial and local community
activities, rather than programs supporting the national government. PRT programs would get
$174 million. Related community-based programs, the Community Stabilization Program (CSP)
and the Community Action Program (CAP), would receive $132.5 million and $107.5 million
respectively. The bill withholds half of the (CSP) appropriation until the State Department
certifies that USAID is implementing the Inspector General’s recommendations addressing
concerns about a possible misuse of funds.
Provincial economic growth, including microcredit and agriculture, would get $25 million. The
only significant national-level effort, the National Capacity Development program, would receive
$70 million, a cut of $178 million from the request. Another request for a nationally-based effort,
$70 million for the provision of infrastructure security protection, was cut entirely. The proposed
enterprise fund would also not be funded. The bill withholds the $10 million approved for
funding infrastructure maintenance (cut by $124 million) until the Department of State certifies
that Iraq has entered into and begun to implement an asset transfer agreement, including an Iraqi
agreement to maintain U.S.-funded infrastructure.
Democracy assistance, requested under ESF, is being provided under the Democracy Fund
account at $75 million, and is expected to be implemented through the National Endowment for
Democracy (NED) and other NGOs. The FY2008 INCLE Iraq program funding, at $85 million,
was cut substantially, by $74 million, from the request, and no prison construction funding was
included. The bill releases no more than 40% of rule of law (INCLE) funding until the State

Department reports that an anti-corruption strategy has been developed and is being implemented
by the Iraq government.
The legislation withholds all PRT operating expenses and program funds until the State
Department reports on a strategy for winding down and closing out the PRTs, on the costs of the
PRT program, expenses, security, and any Iraq contribution, and on the future costs and
placement of U.S. consulates in Iraq.
Because operational funds for the PRTs are blended with those of the Embassy and USAID
operating expenses are provided for both Iraq and Afghanistan, it is not possible to say with
certainty whether the full request was met by the legislation. The bill does provide the SIGIR
with $2.5 million and $36.5 million for FY2008 and FY2009, respectively.
Reflecting recent indications that Members of both parties desired to see the Iraqi government
pay a greater share of the costs of reconstruction, the Act contains a measure that would require
most economic reconstruction funds to be matched by Iraqi obligations on a dollar-for-dollar
basis. The exceptions are for democracy and human rights programs, the USAID Community
Action Program and other NGO-assisted programs, humanitarian demining, refugee and
displaced persons assistance. The Secretary of State must submit a report by end of September
2008 with amounts obligated and expended by the government of Iraq. It is not clear from the bill
language whether the match would have to be made project-by-project or whether total Iraqi
funding for reconstruction in general would suffice to permit continued U.S. assistance at the
same level. If the latter, the provision might not affect U.S. funding significantly as, in the past
year, Iraqi obligations for security and economic reconstruction have approached the U.S.
contribution and will likely surpass it in 2008.
The Senate explanatory language on the legislation from May 19 and made applicable to P.L.
110-252 by section 8004 directs the Secretary of Defense to develop procedures for an equal cost
sharing for all reconstruction projects funded under DOD appropriations at amounts greater than
$750,000. The new process must begin on October 1, 2008.
On February 4, 2008, the Bush Administration submitted its FY2009 regular appropriations
request, providing $397 million for Iraq reconstruction under foreign operations and, as is usually
the case, making no request under the regular DOD appropriations. Of the requested amount,
$300 million is for ESF, $75 million for INCLE (rule of law), and $20 million for NADR (mostly
On July 16, 2008, the House State/Foreign Operations Subcommittee approved its FY2009 bill. It
provides no funding for Iraq. On July 17, the full Senate Appropriations Committee reported S.
3288 (S.Rept. 110-425), its version of the FY2009 State/Foreign Operations bill, recommending
$75 million in ESF and $25 million in INCLE funds for Iraq, $275 below the combined request
for these accounts. A recommended NADR account amount for Iraq was not specified.
On September 30, 2008, FY2009 regular appropriations funding was provided under the terms of
a continuing resolution (H.R. 2638/P.L. 110-329) that allows foreign aid spending at the level
provided in the FY2008 Consolidated Appropriations Act (P.L. 110-161). The resolution expires
on March 6, 2009. The FY2008 regular appropriations provided no economic aid for Iraq, with
the exception of some humanitarian assistance.

On October 14, 2008, the Duncan Hunter National Defense Authorization Act for FY2009 was
signed into law (S. 3001, P.L. 110-417). It contains several provisions of importance to the
reconstruction of Iraq. The most significant provision (sec. 1508) bans the use of ISFF funds for
infrastructure projects. A large proportion of IRRF security funding and ISFF funds has gone to
the construction of training facilities, border forts, police stations, and the like. The congressional
view in approving this measure is that the Iraqis should now provide such infrastructure from
their own resources. In another effort to limit the use of U.S. funds for infrastructure, the Act (sec.

1214) restricts the use of the CERP by setting a maximum limit on project cost at $2 million;

anything over $1 million must be certified by the Secretary of Defense as an urgent humanitarian
or reconstruction requirement. The legislation also authorizes (sec. 1501) only half of the
Administration’s FY2009 ISFF request, providing only the $1 billion already approved in the
FY2008/2009 supplemental approved in June 2008.
Prior to the war, the Administration had expected that Iraq’s oil reserves would help it “shoulder 3
much of the burden for [its] own reconstruction.” Although, until recently, they have been
insufficient in view of Iraq’s enormous needs, oil revenues have been an important element in
reconstruction funding. The May 22, 2003, U.N. Resolution 1483 which ended sanctions
permitted the occupying coalition to use oil reserves for more long-term reconstruction purposes.
The resolution shifted responsibility for oil profits and their disbursal from the U.N. to the United
States and its allies by establishing a Development Fund for Iraq (DFI) held by the Central Bank 4
of Iraq and into which oil profits and other Iraqi assets would be deposited.
During the occupation, DFI funds available to the CPA—$20.7 billion by June 28, 2004—were
used to support a wide range of reconstruction activities, including the currency exchange
program, oil and electricity infrastructure repair, purchase of firefighting equipment, the Iraqi
operating budget, and the Oil for Food Program’s monthly food baskets, responsibility for which
was transferred from the U.N. to the CPA in November 2003. Under Security Council Resolution
1546, adopted on June 8, 2004, the transitional government of sovereign Iraq obtained control
over use of DFI funds, which continue to be replenished with oil revenue.
Oil production accounted for more than 94% of the Iraqi government revenue in 2007.
Recognizing the importance of oil revenue to Iraq reconstruction, more than $2.5 billion of total
U.S. reconstruction funding has been devoted to efforts to restore and expand oil production
infrastructure. Oil exporting resumed in mid-June 2003, but oil production was slowed by
sabotage and corruption, and the CPA target of 2.8-3.0 million barrels/day (MBD) by end of 2004
was not met. In September 2004, rates of production reached a peak of 2.67 MBD compared with
an estimated pre-war rate of 2.5 MBD, but rates fell after that and for much of the past few years
stood at around 2.0 MBD. Production grew during 2007, and although pipeline disruptions have

3 Press briefing by Ari Fleisher, White House, February 18, 2003; Sec. 1506 Report to Congress, July 14, 2003, p. 4.
4 On March 20, 2003, President Bush issued an executive order confiscating non-diplomatic Iraqi assets held in the
United States, an estimated $1.74 billion worth available for reconstruction purposes. Another $927 million in assets
located by the United States in Iraq were also used for these purposes. In addition, foreign governments were reported
to hold an estimated $3.7 billion in seized or frozen assets, of which $847 million had been deposited in the DFI by
June 28, 2004. Security Council Resolution 1511 urged member states to deposit seized assets in the DFI.

periodically cut the rate, in mid-November 2008, the rate was 2.4 MBD. The Iraqi government 5
goal for 2008 is 2.2 MBD.
Due to slow rates of expenditure (see below) and increased worldwide oil prices, Iraqi revenues
have far exceeded expectations. According to an August 2008 GAO report, the Iraqi government
had a budget surplus of about $29 billion from 2005 to 2007. GAO anticipated a surplus of 6
between $38.2 billion and $50.3 billion for 2008.
Until the past two years, payment for operating budget expenses and a variety of government
social programs limited the amount of oil revenue left for reconstruction. Fuel and food subsidies
as well as support for state-owned enterprises have accounted for as much as $11 billion annually.
Because these practices divert funds from needed reconstruction, Administration officials since
2003 have repeatedly pressured the Iraqi government to face the need to address the subsidy
issue. As part of its agreement with the IMF pursuant to a debt reduction with the Paris Club, Iraq
in mid-December 2005 began to take steps to end its subsidy of gasoline, increasing the price of
fuel from 5 cents to roughly $1.06 a gallon. Fuel subsidies, reportedly, have been mostly 7
eliminated. In response to rising commodity prices, the government of Iraq announced that in 8

2008 the monthly food rations would be halved and recipient numbers reduced.

A further concern regarding the amount of oil income available for reconstruction is the extent of
corruption and mismanagement in the Iraqi government. A 2006 audit of the DFI found that
controls over export earnings were ineffective and funds improperly accounted for by government
staff. The Comptroller General of the GAO has also suggested that there is “massive corruption”
in the Oil Ministry, and the head of Iraq’s Commission on Public Integrity estimates that
corruption has cost the government up to $18 billion. Iraq ranks third from the bottom on 9
Transparency International’s corruption index.
A recent SIGIR project inspection report provides one example of how corruption affects Iraqi-
funded reconstruction efforts, even those managed by the United States. A contract to refurbish
three schools, managed by the U.S. military under the CERP program but funded by the Iraqi
government, had to be closed and efforts instituted to find another contractor when the original
Iraqi contractor reported that he had refused multiple bribe solicitations by Iraqi government
representatives. His refusal was met with threats against him and his family, and he asked to be

5 Department of State, Iraq Weekly Status Report, November 12, 2008, p. 16.
6 GAO, Iraqi Revenues, Expenditures, and Surplus, GAO-08-1031, August 2008.
7 Government of Iraq, International Compact Annual Review, June 16, 2008, p. 33; Country Report Iraq Updater Fiscal
Policy, Economist Intelligence Unit, May 15, 2007; “Iraqi Economy Adds to Tensions with U.S.,” Financial Times,
July 7, 2005;Iraqis Reluctant to End Love Affair with Fuel Subsidies,” Financial Times, June 13, 2005.
8 Department of State, Iraq Weekly Status Report, January 3, 2008, p. 10.
9 Transparency International, 2007 Global Corruption Perception Index, September 2007; “Corruption Cited in Iraq’s
Oil Industry,” Washington Post, July 17, 2006; “An Audit Sharply Criticizes Iraq’s Bookkeeping, New York Times,
August 12, 2006; “Iraqi Judge Says Maliki’s Government Shields Officials Accused of Corruption, New York Times,
October 5, 2007; “Nonstop Theft and Bribery Stagger Iraq, New York Times, December 2, 2007;Iraq Insurgency Runs
on Stolen Oil Profits,” New York Times, March 16, 2008.

released from the contract obligation. Schools that were to be ready by end of July 2008 were 10
therefore not completed by the time the review was conducted in mid-September.
A variety of U.S. assistance programs attempt to address the corruption issue. Among these are
provision of staff training and equipment to the Commission on Public Integrity, the key national
anti-corruption organization, similar assistance to each Ministry Inspector General office, and
most rule of law efforts that seek to strengthen the judicial system. On March 11, 2008, the U.S.
Embassy announced the appointment of Ambassador Lawrence Benedict as Coordinator for Anti-
Corruption Initiatives. In the past, the SIGIR has found fault with management of the Embassy
anti-corruption effort—only 2 of 12 recommendations made by the SIGIR in July 2006 had been
fully implemented a year later. However, in a January 2008 report, the SIGIR noted that the
Embassy had taken steps to implement all its concerns, and a July 2008 report found 5 of the 12 11
recommendations now fully addressed.
As the U.S. economic assistance program has dwindled in size, the importance of Iraqi-owned
funds available for large-scale infrastructure has increased significantly. However, Iraqi ministries
have had difficulty spending their budget for capital projects such as roads, schools, and oil
production. According to U.S. officials, only about 23% of the 2006 capital budget of about $6.2
billion was spent in that year, and only 3% of a $3.5 billion capital budget available to the Oil
Ministry was spent in 2006. Funds not spent in 2006 were being utilized in 2007, delaying
expenditure of 2007 capital funds, and, later, 2008. Among the reasons offered for this situation
has been a rapid turnover in personnel, security concerns preventing construction, a lack of
personnel skilled in contracting and managing projects, and a fear by government employees of
being accused of corrupt practices. The latter concern led the Finance Minister in January 2008 to 12
call for the abolition of the Commission on Public Integrity, a key public watchdog group.
Complementing the Administration’s new strategy for Iraq, the Iraqi government approved a 2007
budget containing $10.1 billion for capital investment, of which $2.1 billion was expected to go
to provincial governments. The 2007 Iraq budget also included $2.4 billion for investments in oil
production and another $3 billion for the construction of new oil refineries to reduce oil product
The allocation and expenditure of the 2007 Iraqi capital budget was one of the 18 benchmarks
assessed under section 1314 of the FY2007 Supplemental. In September 2007, the Administration
found progress on this factor to be satisfactory. In January 2008, however, the GAO found the
data on which the Administration based its reports of 2007 improvements in budget execution to
be subject to dispute, and indicated that actual expenditures may be significantly lower than 13
reported. The State Department disputed the GAO view.

10 SIGIR, Al Quds, Al Mualameen, Al Faoo Schools Sustainment Assessment, PA-08-149 to 08-151, October 29, 2008.
11 SIGIR, U.S. Anticorruption Efforts in Iraq: Sustained Management Commitment is a Key to Success, 08-008,
January 24, 2008; SIGIR, Progress Made in Implementing Revised Management Plan, 08-016, April 24, 2008; SIGIR,
U.S. and Iraq Take Actions But Much Remains to be Done, 08-023, July 29, 2008.
12Oil Revenues are in the Billions, but Iraq is Failing to Spend Them,” New York Times; and SIGIR, Report to
Congress, July 30, 2007, p. 5; “Iraqi Finance Minister Warns of Iranian-U.S. Escalation, Al-Hayat in BBC Monitoring
Int’l Reports, January 23, 2008.
13 GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq’s Budget Execution, January 2008, GAO-08-153;

There appears to be confusion in the presentation and definition of data by various agencies,
which more recent data has done little to alleviate. For instance, while a March 2008 DOD report
(page 9) noted that 45% of Iraq’s 2007 capital budget was “spent” through October 2007, a June
2008 GAO report said that total capital spending rose from 23% in 2006 to 28% in 2007. Often in
reporting on the Iraqi ability to utilize its resources, there is little distinction made between
commitment of funding and spending of those funds. Despite the discrepancies in reported data, it
appears that some improvement has been made in Iraq’s ability to utilize its resources, especially
in view of the significant annual growth in the budget that must be executed. According to DOD,
the Iraqi government spent 118% more on capital projects in the first five months of 2008 than in 14
the same period in the preceding year.
Both U.S. Embassy and PRT assistance are partly aimed at helping ministries and local
government, respectively, develop the capacity to efficiently utilize these Iraqi-owned resources
(see “Capacity Development” section below). According to U.S. officials, since 2007, the
government of Iraq has taken significant steps to facilitate execution of its capital budget,
including formation of a senior-level task force, establishment of new procedures such as revised
procurement regulations, and additional training. In 2008, a number of ministries and governors
have been permitted to enter into contracts at much higher levels than previously and a central
contracts committee has been replaced with a more decentralized system.
The second FY2008 supplemental appropriations requires that Iraq match U.S. economic aid
appropriations on a dollar-for-dollar basis. Although the Iraqi government budget, on paper, has
provided funding for capital investments equivalent to the U.S. reconstruction effort in some
sectors, its expenditures to date have not matched those of the United States. According to the
GAO, the United States spent about $23.2 billion on four critical sectors—security, oil, electricity,
and water—from FY2003 through June 2008, 70% of its total allocation of $33.4 billion in these
sectors. Iraq, however, spent 14%, $3.9 billion, of its total $28 billion allocation for these same 15
sectors from 2005 through 2008.
With rising oil revenue, the Iraqi government 2008 budget, originally approved at $49.9 billion,
$13.1 billion of which was for capital projects, was amended in July 2008. Although announced
at $72 billion, of which $21 billion was for capital projects, it has subsequently been lowered to
$67 billion, due to the fall in oil prices. Nonetheless, it is clear that the Iraqi 2008 budget for
items that parallel U.S. funding for both security and economic reconstruction activities has
grown to surpass, on paper, the U.S. contribution. If Iraqi capacities are better addressed and
corruption restrained, obligations and/or expenditures could match or exceed it.

White House, Benchmark Assessment Report, September 14, 2007, p. 27; “State Dept. Official Disputes Iraq Report,”
Washington Post, January 17, 2008.
14 DOD, Measuring Stability and Security in Iraq, September 2008 Report to Congress, p. 9; June 2008 Report to
Congress, p. 10; March 2008 Report to Congress, p. vi, 9; GAO, Progress Report: Some Gains Made, Updated
Strategy Needed, 08-837, June 2008, p. 43.
15 GAO, Iraqi Revenues, Expenditures, and Surplus, GAO-08-1031, August 2008, p.17.

At the time of the invasion, Iraq’s debt, both public and private, was estimated at $125 billion. 16
Current total debt is estimated at $74 billion.
Since 2003, the United States has argued that any new Iraqi government should not be burdened
with debts associated with the policies of its previous ruler and has supported a near total
forgiveness of debt. Some large holders of Iraqi debt—France, Germany, and Russia for
instance—were more inclined to reschedule debt than to forgive it, arguing that, as an oil rich 17
country, Iraq could afford someday to pay its debts.
Several steps led to a partial resolution of the debt issue. A series of meetings in early 2004
between the President’s personal envoy for Iraq debt reduction, former Secretary of State James
Baker III, and the leaders of debt-holding countries led to statements of support, but no firm
commitment, for varying levels of relief. By September 2004, Iraq had both assumed sovereignty
and cleared its overdue financial obligations to the IMF, making it easier for Iraq to negotiate an
agreement with private and government creditors. Further, Congress authorized $360 million
(P.L. 108-309) to cover the costs of cancelling the roughly $4 billion Iraqi debt obligation owed
the United States. These factors culminated in an agreement by the 19 Paris Club government
creditors on November 20, 2004, to write off roughly $32 billion in Iraqi debt, 80% of what it
owed to this group.
In addition to Paris Club creditors, Iraq has borne about $69 billion in other bilateral debt (mostly
to Gulf States countries) and more than $21 billion in commercial debt. Of the latter, most claims
have been resolved. In May 2007, four nations offered to forgive nearly $21 billion of Iraqi
bilateral debt as part of their participation in the International Compact with Iraq. Negotiations
with Saudi Arabia to forgive 80% of Iraq’s estimated $15 billion debt reportedly broke down in 18
September. In July 2008, the United Arab Emirates announced it would forgive all $3.6 billion 19
in Iraqi debt.
To date, according to the SIGIR, more than 40 non-U.S. donors have offered about $17.0 billion 20
in economic reconstruction funds to Iraq. Of this reconstruction assistance, grant aid promised
by other donors totals about $5.3 billion. These include $1.6 billion by Japan, $832 million by the

16 Based on Paris Club data. Does not include $29 billion in unpaid Gulf War reparations. International Monetary Fund,
Iraq: Use of Fund Resources—Request for Emergency Post-Conflict Assistance, September 24, 2004. SIGIR, Report to
Congress, App. M-4.
17 “G-7 Agrees That Iraq Needs Help with Debt, Washington Post, April 13, 2003; “Restructuring, Not Forgiveness,”
Financial Times, April 15, 2003.
18 Department of Defense, Measuring Stability and Security in Iraq, March 2008, p. 9; SIGIR, Report to Congress,
April 30, 2008, App. M. See CRS Report RL33376, Iraq’s Debt Relief: Procedure and Potential Implications for
International Debt Relief, by Martin A. Weiss, for further details.
19 Department of State, Weekly Status Report, July 8, 2008, p. 22.
20 SIGIR, Report to Congress, October 30, 2008, p. H-1. Most of these pledges were made at the Madrid Donor
Conference held in October 2003. In addition, immediately following the U.S. intervention in Iraq, U.N. appeals for
postwar humanitarian relief to Iraq met with $849 million in grant donations from non-U.S. donors. U.N. Office for the
Coordination of Humanitarian Affairs, Total Humanitarian Assistance for Iraq Crisis 2003. April 5, 2004.

United Kingdom, $214 million by Spain, $920 million by the European Commission, $200
million by South Korea, and $350 million by Italy. Much of the grant assistance has been
provided as a contribution to the IRFFI (see below). Of the nearly $12 billion offered in loans,
about $3.2 billion have been provided, including by Japan ($2.1 billion), the World Bank ($399
million), and the IMF ($744 million).
Japan and Britain have been notably active in providing bilateral assistance. Japan, the second
largest donor after the United States, has already spent most of the grant aid it pledged and has
developed projects for use of $2.1 billion of a $3.5 billion concessional loan pledge. Among other
things, it has provided significant funding for electrical power station rehabilitation, water
treatment units and tankers, medical equipment, and firetrucks and police vehicles. The loan is
funding port and power plant rehabilitation and irrigation improvements. Britain has offered
considerable technical assistance and related support for improvements in the justice system,
governance, and economic policy.
Among multilateral contributions, the IMF provided an Emergency Post-conflict Assistance
package in 2004 and continues to offer a roughly $744 million Standby Arrangement on which
Iraq can draw, but has yet to do so. The World Bank has allocated $399 million of a $500 million
concessional loan program, including a $100 million education project, $135 million road project, 21
and $124 million electric power project.
During much of the U.S. occupation, donors had been reluctant to contribute to reconstruction 22
because they had no say in where the funds were to be allocated. To deal with this concern, a
multi-donor trust fund, the International Reconstruction Fund Facility for Iraq (IRFFI), was
established on December 11, 2003. The Facility has two windows, one run by the Bank (the
World Bank Iraq Trust Fund) and one by the United Nations (UNDG Iraq Trust Fund). As of July
2008, 25 donors had deposited about $1.9 billion in the Facility. Among other activities, the
World Bank Fund ($497 million committed) has financed textbooks, school rehabilitation, and
water and sanitation infrastructure, and has provided hundreds of Iraqi civil servants with
management training. The UNDG Fund ($1.4 billion committed) is supporting a wide range of 23
projects, most to be implemented by the Iraqi government.
Despite the devastating bombing of its Baghdad compound in 2003, the U.N. has played a major
role in Iraq reconstruction. The U.N has been largely responsible for providing assistance and
guidance to promote the democratization of Iraq, including support to the transitional government
and the Iraqi Electoral Commission. U.N. envoy Lakhdar Brahimi helped negotiate the transition
to sovereignty, and a U.N. team headed by Carina Perelli assisted the implementation of elections
for the National Assembly, successfully held on January 30, 2005. With U.N. assistance the

21 IMF, Iraq Financial Position in Fund as of September 30, 2007,; World Bank, World Bank
Operations in Iraq, as of September 30, 2007.
22U.S. Seeks Help With Iraq Costs, But Donors Want a Larger Say, New York Times, July 14, 2003;Bush’s Plea for
Iraq Aid Falls on Deaf Ears,” Financial Times, September 25, 2003.
23 IRFFI website,

electoral law was drafted, thousands of registrars were trained, 540 registration centers were set
up around the country, millions of ballots were printed, 5,300 voting centers established, and
thousands of poll watchers trained. Subsequently, the U.N. helped with the constitution-writing
process, the constitutional referendum, and the December 2005 parliamentary election. The U.N.
is currently assisting in organizing provincial elections expected in January 2009. With Trust
Fund support, the development organizations within the United Nations are actively working on
dozens of projects. U.N. Security Council Resolution 1830, approved August 7, 2008, extended
the U.N. Mission for Iraq (UNAMI) another year. In the same month, the UN and Iraq agreed on
an Assistance Strategy for the period 2008-2010, the first one of its kind since the 1990s. The
number of U.N. international staff in Iraq itself has grown significantly since 2006; in September 24

2008 there were about 354, as well as about 420 local staff.

In response to a continuing U.S. effort to encourage greater levels of donor contributions, the
U.N. and Iraq, on July 27, 2006, launched an International Compact with Iraq. Under this
initiative, participating donor countries have pledged funds and, in return, Iraq has promised a
five-year program of specific reforms and actions leading to long-term economic and political
development. The Compact was finalized at a donor meeting held in Egypt on May 3, 2007,
attended by more than 60 countries. Roughly $700 million in non-U.S. grant and loans
commitments (included in the above donor totals) and $21 billion in debt relief are estimated to 25
be associated with the Compact.

On June 28, 2004, the Coalition Provisional Authority (CPA), the agency established to
temporarily rule Iraq and implement reconstruction programs, was dissolved as Iraq regained its
sovereignty. At that time, broad responsibility for assistance programs moved from the Secretary 26
of Defense to the Secretary of State. At the Department of State, the Senior Advisor and
Coordinator for Iraq is David Satterfield. In Iraq, the United States provides assistance and, to the
extent possible, policy guidance to the Iraqi government through its U.S. embassy. Ryan Crocker
is the Ambassador. The embassy employs about 1,000 U.S. direct hire staff.
By executive order (13431), on May 15, 2007, an Iraq Transition Assistance Office (ITAO) was
established in the embassy, supplanting some of the functions of the Iraq Reconstruction
Management Office (IRMO) that had, itself, supplanted CPA efforts in setting requirements and
priorities for the aid program. The Embassy’s Office of Provincial Affairs is in charge of the

24Security Council Approves a Broader U.N. Mandate in Iraq to Seek Reconciliation,” New York Times, August 11,
2007; “New U.N. Envoy in Iraq Sets Out Strategy to Revive Hopes Crushed in 2003 Attack,” New York Times,
December 3, 2007; “U.N. to Help Organize Iraqi Elections Set for October, New York Times, February 15, 2008;
UNAMI Focus, September 2008, p. 4.
25 Ambassador David Satterfield, Department of State briefing on April 30, 2007; SIGIR, Report to Congress, July 30,
2007, p. 131.
26 According to National Security Presidential Directive (NSPD) of May 11, 2004. It made the Secretary of State
responsible forcontinuous supervision and general direction of all assistance for Iraq.”

The Project and Contracting Office (PCO), formerly the CPA’s Program Management Office
(PMO), is run by the Army Corps of Engineers, Gulf Region Division (GRD), headed by Brig. 27
Gen. Jeffrey J. Dorko. The GRD-PCO has been chiefly responsible for the more than $10 billion
in FY2004-funded IRRF programs dedicated to infrastructure construction, as well as follow-on
sustainability efforts. The GRD/PCO coordinates, manages and monitors contracting and
expenditures in six sectors—transport and communications; electricity; buildings/health;
security/justice; public works/water resources; and oil. Although in the Department of the Army,
it reports to the Department of State as well as to the Department of the Defense.
Overall responsibility for management of U.S. military activity in Iraq belongs to General
Odierno, as commander of the multinational forces in Iraq. He also serves as principal military
adviser to the U.S. ambassador. With the policy guidance of the ambassador, Lt. General James
Dubik is the officer immediately in charge of overseeing the training and support of all Iraqi
security forces. Although the State Department had assumed control of technical assistance
provided to the different Iraq ministries, in October 2005 it ceded responsibility to DOD for the
two ministries most closely involved in security matters—Interior and Defense. Among reasons
given for this switch are that DOD has greater resources at its disposal and that State has had
difficulty filling advisor positions in these ministries, the latter point disputed by some. In most 28
other countries, State has responsibility for training police forces.
A third major U.S. actor in the implementation of the aid program is the U.S. Agency for
International Development (USAID). Responsible for more than $5.2 billion of assistance to date,
USAID manages a wide range of economic, social, and political development programs. Its
programs have included a multi-faceted, large-scale construction project and most activities
related to public health, agricultural development, basic and higher education, civil society, local
governance, democratization, and policy reform.
The post of CPA Inspector General, created under the FY2004 Emergency Supplemental
legislation (P.L. 108-106), was redesignated the Special Inspector General for Iraq Reconstruction
(SIGIR) by the FY2005 DOD Authorization (P.L. 108-375). Special Inspector General Stuart
Bowen, Jr., reports to both the Secretary of Defense and State. The SIGIR office has about 60
employees examining a range of issues, including the extent and use of competition in
contracting; efficient and effective contract management practices; and charges of criminal
misconduct. The SIGIR issued his first report to Congress regarding his audits and investigations 29
on March 30, 2004, and has reported quarterly since then.
The SIGIR’s scope of authority originally encompassed only the IRRF, although the SIGIR has
responded to specific congressional and executive branch requests to audit other account
programs. The FY2007 Defense Authorization made all FY2006 reconstruction appropriations,
regardless of account, subject to SIGIR jurisdiction as though they were under the IRRF. The
FY2008 Defense Authorization (H.R. 4986, P.L. 110-181), signed into law on January 28, 2008,
broadens the authority of the SIGIR to include all reconstruction programs from all accounts and
all years.

27 The PCO and IRMO were established by the May 11, 2004 NSPD. See GRD-PCO website at http://www.rebuilding-
28Aid to Iraq Ministries to Shift to Pentagon,” Washington Post, September 26, 2005.
29 See for reports and audits.

Among the key policy objectives laid out by the Bush Administration is the economic and
political reconstruction of Iraq. Discussion and debate have been ongoing regarding the strategy
to reach these ends utilizing reconstruction aid funds and the effectiveness of aid implementation.
Most funding during the first several years of the U.S. assistance program came from the Iraq
Relief and Reconstruction Fund (IRRF). The nearly $21 billion provided through that account
supported the entire range of economic and security programs. Although FY2004 IRRF funding
levels were initially established in 10 categories of assistance, reconstruction priorities changed
over time and allocations mirrored shifting events on the ground. For example, in November
2003, when the CPA decided to accelerate the hand-over of sovereignty, it immediately revised
the allocation of FY2004 IRRF appropriations that had been legislatively mandated only weeks
previously in order to increase substantially the democratization effort—from $100 million to
$458 million. After the State Department took charge in June 2004, the new U.S. Embassy
country team reallocated FY2004 IRRF resources, emphasizing security needs, increased oil
production, greater employment, and democracy as the highest priorities, at the expense of many
large-scale economic infrastructure projects—in particular water and sanitation and electricity—
that were viewed as too slow and dependent on an improved security situation to have an
immediate impact. Although these and later reallocations were pragmatic responses to new events
on the ground, their cumulative impact was to divert funds from previously planned programs. As
a result, water and sanitation projects were cut by half (from $4.3 billion to $2.1 billion), and
electric power programs lost a quarter of their original funding (from $5.6 to $4.2 billion). In the
end, nearly a quarter of the IRRF ($5 billion) has gone to the training and equipping of Iraqi
security forces, nearly half (roughly $10 billion) to economic infrastructure—the construction of
water, oil, electric, and other facilities—and another quarter to a range of more traditional
assistance in health, education, policy reform, and other areas.
These reconstruction programs have shown mixed results.30 There have been many positive
outputs. Among achievements of the U.S. reconstruction program, more than 1,200 security
facilities—police stations, border forts, fire stations, courts, etc.—were completed. Nearly a half-
million police and military security forces have been trained and equipped. As of October 23,
2008, security responsibility for 12 of the 18 provinces has been handed over to the Iraqi
authorities. Health facilities have been rehabilitated and equipped, health care providers trained,
and medical services such as immunizations provided. The deepwater port at Umm Qasr was
restored, as were 96 of 98 railway stations, two international airports, and three regional ones.
Local governance has been strengthened through establishment of councils and community
associations. More than 6,000 grassroots projects have been conducted through USAID grants
provided to more than 1,450 community action groups. Voter education, training of election
monitors, and related activities contributed to three successful elections in 2005. Technical

30 SIGIR, Report to Congress, October 30, 2008 and previous reports; Department of State, 2207 Report to Congress,
July 2008.

experts continue to provide advice to government agencies regarding adoption of budgetary and
management reforms. About 6,716 schools were rehabilitated and 60,000 teachers trained.
Irrigation systems were rehabilitated, 68 veterinary clinics reconstructed, and 83,500 date palm
offshoots planted. Agricultural extension agents have been trained and agribusiness supported.
Credit has been provided to micro and small business. U.S.-funded projects have added 2,500
megawatts (MW) to Iraq’s generating capacity. Water and sanitation sector assistance has
provided clean water to 6.7 million people and sanitation to 5.1 million. As noted earlier, oil
production, largely stagnant in the first few years, has risen to near pre-war levels.
Yet, along with the accomplishments have come less than satisfactory outcomes. In the critical 31
sectors of electric power and oil production, outputs were less than originally envisioned. Many
health-related construction projects experienced considerable delays, and contracts won by U.S.
firms had to be revoked and re-awarded to Iraqis, including 12 of 20 refurbished hospitals. Only
91 of a planned 142 new clinics will be completed with U.S. funding. Further, the Basrah
Children’s Hospital has had significant cost overruns. Although the airports and seaport have
shown considerable activity, only a tiny percentage of Iraqi trains run because of security
concerns, but numbers have been improving in recent months. Despite democratization efforts,
halting progress has been made on achieving national reconciliation, including amending the Iraqi
constitution, and holding long-promised local elections.
Moreover, the impact of U.S. projects on Iraq is hard to estimate, and the extent to which they
and other-donor contributions meet the total needs of Iraq has not been fully assessed. While the
U.S. water and sanitation contribution has been significant, the International Committee of the
Red Cross estimates that more than 40% of Iraqis do not have access to clean water. Despite U.S.
efforts in the health sector, Oxfam reports that 90% of Iraq’s 180 hospitals lack basic medical and 32
surgical supplies. U.S. transport assistance is said to have repaired only 8 bridges of 1,156 in
poor condition or destroyed. Although mismanagement and corruption play a large role in
diminishing returns from reconstruction efforts, it has been the lack of stability and the effects of
the insurgency that have most affected the course of reconstruction to date (see “Security”
section). A more peaceful environment in the past year has set the stage for noteworthy
improvements in the electric and oil sectors.
As of the end of September 2006, IRRF funds were no longer available for obligation, and most
large-scale infrastructure programs, which chiefly characterized IRRF economic efforts, are no
longer funded by the United States (although there are a number of exceptions—a new Amara
surgical hospital is being funded with ESF funds, the CERP increasingly funds larger projects,

31 Before the war, electric power was 4,500 MW and, until recently, capacity fell well below this level despite an early
goal of reaching 6,000 MW. However, by the 3rd quarter of 2007, it had increased to around 4,550 MW, a post-war rd
record. In the 3 quarter of 2008 it was 4,919 MW. In Baghdad, Iraqis receive fewer hours of electricity than before the
war (averaging about 17 hours in early November); elsewhere they receive more than previously (about 15 hours). In
addition to the impact of insurgent activity, other challenges to the growth of electrical power are the rising demand for
electricity, a lack of centralized monitoring and control systems, poorly maintained infrastructure, and a shortage of
fuels to operate power plants. The GAO estimates that an infrastructure investment of $27 billion is required to meet
demand. See oil section of this report for history of that sector. Glenn Zorpette,Keeping Iraq in the Dark,” New York
Times, March 11, 2008.
32 State Department, Iraq Weekly Status Report, November 5, 2008, p. 14; Oxfam, Rising to the Humanitarian
Challenge in Iraq, July 30, 2007, p. 3 and 11.

targeted neighborhood-oriented infrastructure projects and sustainment of completed
infrastructure projects continue, and, until an October 2008 prohibition was imposed, the ISFF 33
supported construction of security-related facilities). The major elements of current assistance
are as follows:
• Military-Security Assistance. More than four-fifths of total FY2008 regular and
supplemental reconstruction appropriations are applied to the training and
equipping of Iraqi security forces. This effort is funded entirely from the ISFF.
Economic-social-democratization assistance is funded mostly with Economic Support Fund
(ESF) assistance, categorized under three “tracks”:
• Security Track. Under the security track are assistance programs most closely
associated with the Administration’s new strategy for Iraq, largely programs
supporting work of the Provincial Reconstruction Teams (PRTs). There are 27
PRTs, including 13 embedded with combat battalions (ePRTs) in strategic
locations. These work with Iraqi local leaders to identify economic and political
development projects that can be implemented with U.S. financing (see PRT
section below for details).
• Economic Track. This track encompasses assistance to help Iraqis operate,
maintain, and sustain U.S.-funded infrastructure projects (see sustainability
section below for discussion).
• Political Track. Under the political track are a range of efforts to support
governance, democratization, and rule of law programs at all levels of
government in Iraq, including helping Iraqi ministries improve their ability to
operate and helping local governments administer their provinces and
Finally, there has been increasing attention paid to humanitarian needs.
• Humanitarian Aid. The Migration and Refugee Assistance (MRA) and
International Disaster Assistance (IDA) accounts address the problems of a
refugee and internally displaced persons population amounting to more than 4.6
Security, sustainability, PRTs, governance, and humanitarian needs constituted the key features of
the Administration budget reconstruction aid requests for FY2008 and FY2009.
As large-scale construction projects—power plants, water and sanitation systems, oil facilities,
etc.—have been completed, there has been concern regarding the ability of Iraqis to maintain and
fund their operations once they are handed-over to Iraqi authorities. This concern has grown
following SIGIR “sustainment reviews” that suggested projects transferred to Iraqi control are not

33 According to the SIGIR, most of theunobligated FY2003 IRRF funds were used to reimburse the Department of
State for reconstruction costs incurred prior to the appropriation. (SIGIR, Report to Congress, October 31, 2007, p. 61.)
According to the Department of State, $402 million of the remainingun-obligated FY2004 IRRF funds were
considered “expired and can only be used for claims and adjustments related to existing IRRF-funded contracts. (2207
Report to Congress, October 2007, p. 1.) $50 million of this total was rescinded under P.L. 110-252.

being adequately maintained. For instance, a July 2007 assessment found that two Baghdad
region power station units that had been rehabilitated with U.S. funds were not operational, 34
largely because of insufficiently maintained equipment.
To insure long-term sustainability, the U.S. effort—the so-called “economic track” now led by the
Army Corps of Engineers—has focused on capacity development—providing training to the
appropriate personnel in the labor force who will operate and maintain facilities and insuring
sufficient funds are available for repairs and equipment replacement following project
completion. At the Ministry level, the United States is assisting development of policies and laws
conducive to efficient use and maintenance of infrastructure.
In addition, the United States is providing significant assistance to support the physical protection
of important infrastructure, in particular electricity and oil facilities. Efforts to secure
infrastructure include the use of biometrics, construction of security perimeters, lighting and
communications improvements, establishment of exclusion zones for pipelines, and 35
enhancements to the forward operating bases used by the Iraqi army to protect infrastructure.
The long-term responsibility for sustainability, however, lies with the Iraqi government. Although
a “principal objective” of the U.S. infrastructure construction program has always been the “swift
transition of the reconstruction effort to Iraqi management and control,” the SIGIR found in July
2007 that the Iraqi government had not accepted any U.S. project transfers since July 2006. As of
May 31, 2007, 2,363 projects valued at $5.3 billion awaited transfer. According to the SIGIR, the
U.S. government in some cases has continued to fund maintenance of projects pending 36
acceptance by Iraq. A SIGIR report in April 2008 found that only limited progress had been
made in establishing an asset transfer process, and that current planning included only IRRF 37
projects and excluded more than $2 billion in ESF, ISFF, and CERP projects. In July 2008, the
SIGIR noted the continued lack of a definitive asset transfer agreement—many facilities were
being transferred unilaterally without formal Iraqi government acceptance—and was preparing to 38
conduct a review of the process. P.L. 110-225 withholds $10 million in infrastructure
maintenance funding until the Department of State certifies that Iraq has entered into and begun
to implement an asset transfer agreement, including an agreement to maintain U.S.-funded
Much effort and assistance has gone into improving the capabilities of government ministries,
including equipping and training personnel at all levels of service, and situating U.S. advisers in
every ministry. Ministry officials and staff, however, remain deficient in knowledge of modern
administrative systems and management practices. The current focus is on improving budget
execution and service delivery, considered by many to be essential elements of an effective Iraqi
government. As noted earlier, both the national Government of Iraq and provincial governments

34 SIGIR, Report to Congress, April 30, 2007, p. 147; SIGIR, Report to Congress, July 30, 2007, p. 7; SIGIR, Project
Assessment 07-103, Doura Power Station Units 5 and 6, July 18, 2007.
35 State Department, 2207 Report to Congress, January 2008, p. III6-9.
36 Iraq Reconstruction Pre-Proposal Conference Briefing Slide Show, DOD, January 21, 2004; SIGIR, Transferring
Iraq Relief and Reconstruction Fund Capital Projects to the Government of Iraq, Audit 07-004, July 25, 2007.
37 SIGIR, Transferring Reconstruction Projects to the Government of Iraq, 08-017, April 2008.
38 SIGIR, Report to Congress, July 30, 2008, p. 4.

have had difficulty implementing capital budgets. U.S. programs, including institution of 18
Provincial Procurement Assistance Teams, several Procurement Assistance Centers (two in
Baghdad and one in Erbil), and a range of training programs in public administration, appear to
have led to improvement over the previous year’s performance in this regard, although the extent
of that improvement has been subject to some dispute (see “Oil Revenue, Corruption, and the 39
Iraqi Capital Budget” section).
In 2005 and 2006, the SIGIR highlighted problems with U.S. implementation and coordination of
capacity development programs, pointing out that, as there was no single organization responsible
for the reconstruction effort, the capacity building program had gone without an integrated plan
providing coordination and priorities to the multiple organizations responsible for it. These points
were reiterated in an October 2007 GAO report on the effort. Perhaps responding to the SIGIR’s
concerns, in early 2007, the newly appointed Coordinator for Economic Transition began leading
an Embassy Budget Execution Initiative. This initiative established an interagency task force to
coordinate U.S. activities, including those of USAID and the U.S. senior consultants assigned to
each ministry. The GAO findings suggested that this and parallel efforts had not resolved
coordination issues and that only in late 2007 had U.S. officials begun to develop a capacity 40
development strategy.
In an effort to expand outreach to the provinces and strengthen local government, the U.S.
Embassy, in mid-2005, began establishing Provincial Reconstruction Teams (PRTs). There are 41
two types of PRTs in Iraq—the original PRTs and embedded PRTs. In each case, the military
provides protection to U.S. civilian officials and development specialists, allowing them access to
parts of Iraq that otherwise would not be possible. The PRTs are now a major purveyor of U.S.
reconstruction aid—responsible for over $1 billion in FY2006 and FY2007 ESF funds—and a
key element in the President’s new strategy for Iraq.
The first PRTs were made up of Embassy, PCO, USAID, military, and other U.S. agency staff,
between 35 and 100 members in each, with the State Department as leader. There are currently 14 42
of these PRTs. Three are British, Italian, and South Korean-led, respectively.
Embedded PRTs—called ePRTs—are structured differently than their predecessors. They are
embedded in Brigade Combat Teams with the Brigade Commander acting as leader. Most have 8
to 12 personnel. They were created as part of the January 2007 surge strategy, which also saw an
increase in U.S. forces. In essence, the strategy envisions that, as U.S. and Iraqi military forces
work to clear and hold an area, ePRT staff will work with local Iraqis to further stabilize the area

39 GAO, Better Data Needed to Assess Iraqs Budget Execution, 08-153, January 2008, p. 15-19.
40 SIGIR, Status of Ministerial Capacity Development in Iraq, Audit 06-045, January 30, 2007; SIGIR, Report to
Congress, July 30, 2007, pp. 61-66; SIGIR, Report to Congress, October 31, 2007, pp. 101-105; GAO, U.S. Ministry
Capacity Development Efforts Need an Overall Integrated Strategy to Guide Efforts and Manage Risk, GAO-08-117,
October 2007.
41 There are also four Provincial Support Teams (PSTs), much smaller teams that reside on a military forward operating
base and provide advice to provincial officials as needed. These are being converted to PRTs or blended into existing
42 SIGIR, Review of the Effectiveness of the Provincial Reconstruction Team Program in Iraq, 07-015, October 18,
2007; Department of State, 2207 Report to Congress, October 2006, p. 5.Military to Protect U.S. Aid Teams in Iraq,”
Washington Post, April 14, 2006.

by drawing on all available spigots of U.S. and Iraqi government funding to create jobs and meet
other basic needs. They play a major role in reconciling tribal, municipal, district, and provincial
government entities. Of the 13 ePRTs—nine are in Baghdad, three in Anbar, one in northern 43
Babylon, one in southern Diyala, and one is in Wasit province.
While the new ePRTs are more focused on establishing stability, the other PRTs emphasize
improvement of local governance. They work together with local community and Iraqi
government representatives—forming Provincial Reconstruction Development Councils
(PRDCs)—to identify projects that can be implemented and carried out with U.S. financing. It is
anticipated that, as a result of this collaboration, local governments may be strengthened while
U.S. projects achieve more lasting support. The PRTs also work closely with provincial
governments to strengthen their capacities and enable them to better interact with the central
government as well as to more effectively utilize the Iraqi government funds that have been 44
allocated to each province.
At the disposal of all PRTs is a tool-box of projects that can be implemented at the grass-roots
level. PRDC-identified projects tend to be focused on infrastructure—road and bridges, water and
sanitation, schools, and health clinics—and usually are finished in one year. Although the
Embassy must approve them, PRDC projects generally are implemented by the Army Corps of
Engineers. In August 2007, a new Quick Response Fund (QRF) that mimics the flexibility of the
CERP in funding local community projects was made available to the PRTs. They support local
government, NGOs, and small businesses.
In addition to economic projects directly handled by the PRTs, USAID runs several programs,
often in conjunction with the PRTs, that address local-level concerns. The Community Action
Program (CAP) funds projects identified by local representative associations, stimulating
democratic participation, while meeting local needs and creating short-term employment. The
Community Stabilization Program (CSP) addresses economic needs in specific strategic cities,
providing youth programs, micro and small enterprise support, and vocational training. The Local
Governance Program (LGP) helps build management and knowledge skills of provincial
government personnel. Complementing the work of the PRTs and USAID, although apparently
provided independently, Commander’s Emergency Response Program (CERP) funding is also
available to pacify the local population where PRTs reside. A large proportion of CERP projects
support local, small-scale infrastructure construction, especially in the water and sanitation and
electrical power sectors.
One problem with these multiple assistance programs is that they are implemented by different
agencies, with different funding sources, and different authorities, raising concerns regarding
coordination of program coherence. Among other criticisms of the PRTs are that they lack clear 45
lines of authority, agreed missions, and measurable objectives.
Security constraints may have negatively affected PRT performance, especially in its first years.
One reason there had been limited grassroots development work in the provinces up to the

43 SIGIR, Report to Congress, July 30, 2007, pp. 53-60; SIGIR, Status of the Provincial Reconstruction Team Program
Expansion in Iraq, Audit 07-014, July 25, 2007.
44 Robert Perito, Embedded Provincial Reconstruction Teams, U.S. Institute of Peace Briefing.
45 U.S. House of Representatives, Committee on Armed Services, Subcommittee on Oversight and Investigations,
Agency Stovepipes vs Strategic Agility: Lessons We Need to Learn from Provincial Reconstruction Teams in Iraq and
Afghanistan, April 2008.

creation of the PRTs in 2005 is the lack of security. Although originally reluctant to divert the
necessary manpower from its other responsibilities, the Department of Defense finally agreed to
provide protection to the PRTs and a Memorandum of Understanding to this effect was signed in
November 2006. However, according to an October 2006 SIGIR report, minimum “movement”
by PRT personnel required three armored vehicles and eight “shooters.” Normal business was,
therefore, difficult. The SIGIR reported that many PRT members could not regularly meet with 46
local government officials to carry out their capacity-building chores. Further, a former PRT
diplomat who left in January 2007 suggested that local Iraqis were too intimidated to meet with 47
U.S. staff and that training sessions had been cancelled due to security concerns. In January
2007 congressional testimony, however, Secretary Rice indicated that civilian staff were able to
meet regularly with local government personnel, and Ambassador Satterfield claimed in February

2007 that the SIGIR’s views on this issue did not reflect current reality. But a March 2007 article 48

based on PRT foreign service officer reports indicated that the security problem had persisted.
The October 2007 SIGIR report continued to find that PRT performance was impeded by security
concerns, and its draft version even recommended that personnel be reassigned to better
functioning PRTs until security improved. According to the SIGIR, the Embassy and military 49
promised new efforts to ensure that PRTs were not hindered by lack of appropriate security.
The March 2007 article mentioned above also raised the concern that security obstacles facing
PRTs might increase as U.S. troops protecting PRT staff hand responsibility for security over to
Iraqi forces. In September 2007 testimony to Congress, a SIGIR official noted that there was little
coordination between the PRTs and U.S. military in those cases where security has been handed
to the Iraqis. As a result, the official suggested that U.S. civilians would be unable to move about
freely and, consequently, PRTs might be unable to function in those areas where the U.S. military 50
steps down. Whether the ePRTs are to be dissolved or redeployed elsewhere following the draw-
down on “surge” forces is not yet apparent. The FY2008/2009 supplemental withheld all PRT
operating expenses and program funds until the State Department reported on a strategy for
winding down and closing out the PRTs. That strategy, issued on September 7, 2008, reportedly
envisions that the mission currently carried out by PRTs will evolve into a traditional USAID 51
program at some point.
As of July 2008, there were about 450 U.S. agency personnel in the PRTs, counting temporary 52
government employees and contractors. Up to mid-2008, the availability of qualified U.S.
government civilian staff had been a concern. Early reports of its first year of operations
suggested that State was having difficulty enticing its personnel to volunteer for PRT posts.
According to the SIGIR, DOD stepped in to provide military civil affairs personnel in place of the
State posts, but required skills for such posts as local government, city management, business

46 SIGIR, Status of the Provincial Reconstruction Team Program in Iraq, 06-034, October 29, 2006.
47Ex-Envoy Says Iraq Rebuilding Plan Won’t Work,” Reuters, February 17, 2007.
48 “Rice’s Rebuilding Plan Hits Snags,Washington Post, January 15, 2006; Testimony of Secretary Rice to Senate
Foreign Relations Committee, January 11, 2007; Teleconference of Ambassador Satterfield, February 7, 2007; Shawn
Dorman, “Iraq PRTs: Pins on a Map,Foreign Service Journal, March 2007.
49 SIGIR, Review of the Effectiveness..., October 18, 2007, p. x.
50 Shawn Dorman, “Iraq PRTs: Pins on a Map,” Foreign Service Journal, March 2007; Testimony of Ginger Cruz,
Deputy SIGIR, to House Armed Services Committee, Subcomm. on Oversight, September 5, 2007.
51 SIGIR, Report to Congress, October 20, 2008, p. 9.
52 But not counting local staff amounting to about 260. The U.S. agency staff, including contractors, encompasses 230
deployed by the State Department, 95 by USAID, 90 by DOD, 20 by USDA, 10 by Justice, and 5 by the Commerce
Department. GAO, Provincial Reconstruction Teams in Afghanistan and Iraq, 09-86R, October 1, 2008.

development, and agricultural advisers were not being fully met. That situation continued as the
ePRTs were established. About 104 of the new ePRT posts were temporarily occupied by military
personnel or civilians until State was able to recruit sufficient numbers of skilled individuals.
Those recruited in specialized skills are mostly contract personnel, because such skills are not
typically available from either the State or USAID foreign service. According to the October

2007 SIGIR report, many PRTs at the time were at half-capacity, there was a mismatch of skills to 53

requirements, and there were only 29 bilingual Arabic-speaking cultural advisers.
One facet of the U.S. reconstruction effort has been an attempt to encourage economic growth
and decrease unemployment by trying to utilize Iraqis in the implementation of projects. In 2003-
2004, this involved making Iraqi businessmen aware of contract opportunities and encouraging
U.S. contractors to employ Iraqi firms. Although U.S. government requirements could be waived
for Iraqi contractors, most work for Iraqi business came in the form of subcontracts under U.S.
prime contractors.
When the State Department took over reconstruction in July 2004, however, greater efforts were
made to contract project work directly with Iraqis. By 2005, the SIGIR estimated that about 70%-54
80% of new contracting was directly with Iraqis. A contributing factor in this effort was the
deleterious impact of security on the activities of the large-scale contractors. In January 2005,
Contrack International, holder of a $325 million roads and bridges construction contract, 55
announced its withdrawal. Consequently, many bridge and road projects were then implemented 56
directly with the Ministry of Construction, with estimated savings of between 30% and 40%. As
some U.S. contractors were shown to perform inadequate work, they were replaced by Iraqi
contractors. Unfortunately, increasing the use of Iraqi contractors may have unintentionally
increased opportunities for the diversion of U.S. assistance for corrupt purposes.
While hundreds of Iraqi firms were working on U.S.-funded reconstruction projects at one time,
these numbers have fallen significantly as construction projects have been completed. CERP and
USAID Community Action Program grants are often designed to directly employ large numbers
of Iraqis, many at the village level. About 118,691 Iraqis were reported to be employed under all 57
U.S.-funded projects in early November 2008.
In the past year, U.S. defense officials, seeking to create employment opportunities for Iraqi
citizens, have begun a number of activities to stimulate business development. To support this
effort—entitled the Task Force to Improve Business and Stability Operations—Congress
approved $50 million in the FY2007 supplemental and has approved an additional $50 million

53 SIGIR, Report to Congress, October 30, 2007, p. 87; “Pentagon Agrees to Help Fill State Department’s Iraq
Reconstruction Jobs on Temporary Basis, New York Times, February 20, 2007; Teleconference of Ambassador David
Satterfield, February 7, 2007; and Robert Perito, Provincial Reconstruction Teams in Iraq, United States Institute of
Peace, February 2007.
54 Stuart Bowen, Testimony to House Foreign Operations Appropriations Subcommittee, September 7, 2005.
55 BNA, Inc., Federal Contracts Report, January 11, 2005.
56 Ambassador Jeffrey, Testimony to House Foreign Operations Subcommittee, September 7, 2005. Department of
State, 2207 Report to Congress, October 2005, p. 3.
57 Department of State, Iraq Weekly Status Report, November 5, 2008, p. 20.

under the DOD Iraq Freedom Fund account in the second tranche of the FY2008 supplemental.
The SIGIR reports that another $80 million has been provided through other funding spigots in
the past two years.
About $50 million of the funds are being used to rehabilitate some of the roughly 240 state-
owned enterprises that composed a large portion of the Iraqi economy prior to the U.S.
occupation. Soon after the occupation began, the CPA attempted to privatize them in an effort to
open up a free market economy in Iraq, but officials gave up on what promised to be a politically
unpopular endeavor when the turnover of sovereignty was accelerated. Roughly 34 factories have
been started-up or had production increased: among them, one producing Iraqi uniforms, another
armored vehicles, and another household ceramic bathware for domestic Iraqi consumption.
Funds are used to purchase production equipment and raw materials, to repair equipment, to train
managers, and to establish a supply chain, among other things.
A further Task Force effort directs U.S. military contracts to Iraqi business—$200 million worth
each month to over 3,900 private sector businesses, according to the DOD. The Task Force also
seeks international investment in the enterprises with a view to eventual privatization. It claims
$1 billion in such investment to date. It also promotes investment in new enterprises and claims
$1 billion has been attracted to this endeavor. The Task Force claims credit for facilitating a
recent contract for construction of a new hotel in Baghdad. The Task Force has further sought to
encourage the development of the private banking system, promoting formation of a consortium 58
of these banks and assisting the adoption of electronic funds transfers.
Skepticism had been expressed regarding the DOD program when it was launched. About
100,000 jobs have reportedly been created versus the original DOD employment goal of 150,000
jobs in 140 restarted factories by September 2008. Some have suggested that, unless well-
managed, investments in SOEs might provide opportunities for corruption and political 59
manipulation. DOD officials attributed early program problems to a lack of enthusiasm by U.S.
companies, the Iraqi consumer’s preference for imported goods, the lack of electricity, and the 60
uncertain political and security environment.
Drawn from DFI and Department of Defense funds rather than IRRF or ESF appropriations, the
Commander’s Emergency Response Program (CERP) contributes to the reconstruction effort by
providing U.S. military commanders on the ground with “walking around money” intended to
win hearts and minds throughout Iraq. Up to now, a total of about $4.1 billion—$548 million in

58 SIGIR, Report to Congress, October 30, 2008, p. 75; SIGIR, Information on a Special Department of Defense
Program to Foster Economic Recovery in Iraq, 08-024, July 29, 2008; DOD, Measuring Stability and Security in Iraq,
December 2007, p.10 and June 2008, p. 12-13; DOD News Briefing with Deputy Undersecretary Paul Brinkley, March
28, 2007; “To Stem Iraqi Violence, U.S. Aims to Create Jobs,” Washington Post, December 12, 2006; “Bush to
Propose Restoring Iraqi Factories to Create Jobs,” New York Times, January 10, 2007; “Aging and Shut, Iraq Factories
May Reopen and Mitigate Ills,” New York Times, January 18, 2007; Paul Brinkley, “Restoring Hope, Military Review,
March-April 2008.
59 SIGIR, Report to Congress, April 2008, p. 132; United States Institute of Peace, State-Owned Enterprises: Post-
Conflict Political Economy Considerations, March 2007. “Defense Skirts State in Reviving Iraqi Industry,
Washington Post, May 14, 2007.
60U.S. Falters in Bid to Boost Iraqi Business, Washington Post, August 24, 2007; SIGIR, Report to Congress,
October 30, 2007, p. 95; “In Iraq, One Man’s Mission Impossible,, September 4, 2007.

CPA-provided Iraqi funds and about $3.6 billion in U.S. DOD appropriations—has been made
available for this purpose. In April 2008, the Iraqi government allocated $300 million to establish
an Iraqi CERP to be managed by the U.S. military.
In addition to the dolls, tee shirts, sheep, and other items reportedly provided to win popular
support, the CERP supports a wide variety of reconstruction activities at the local level, from
provision of micro-grants to businesses to digging wells to painting schools, provided in the form 61
of small grants. CERP also funds infrastructure efforts, such as repair or provision of electric
generators and construction of water and sewer systems, roads, and schools. Commanders
identify local needs and dispense aid with few bureaucratic encumbrances. Major subordinate
commanders have authority to approve grants up to $500,000. The grants have been credited with
helping the military better exercise their security missions, while at the same time meeting
immediate neighborhood development needs, often much more quickly than equivalent efforts of
the civilian reconstruction program. In addition to reconstruction, CERP funds are used for 62
compensation payments to the families of killed or injured Iraqis. The CERP has also been used
to pay the salaries of the so-called Sons of Iraq (formerly known as the Concerned Local
Citizens); this effort accounts for more than one third of total FY2008 CERP obligations. A
transition of responsibility for the Sons of Iraq to the Iraqi Government began on October 1, 63


As the IRRF program has declined, the CERP program has grown as a major spigot of U.S. aid in
Iraq. From its beginnings as a small-scale village program—the average grant in FY2004 was
$67,000—it is now the major source of U.S. infrastructure construction aid with an average grant
in FY2006 of $140,000. The most recent SIGIR report, however, indicates that in FY2008 the
number of large-scale projects has declined. The 2009 Defense Authorization (P.L. 110-417, sec.
1214) sets the maximum cost of CERP projects at $2 million unless waived by the Secretary of
Defense, and requires certification of any project over $1 million as an urgent need.
The SIGIR and others have raised some concerns regarding the CERP, most derived from the
essentially different security and reconstruction objectives of military and civilian efforts,
respectively. Among the SIGIR’s concerns is that there is no mechanism to measure the outputs
and outcomes of CERP projects. Secondly, the high turnover of military personnel in Iraq means
that there is little continuity in management and oversight of the projects. Third, little weight has
been given to the handing-over of projects to Iraqis and insuring their sustainability. Other
observers have noted that civil affairs officers and others allocating CERP grants are not
development specialists and have been provided little or no training on the selection and
management of reconstruction activities. The program’s early rationale—that the military were
the only ones able to conduct small-scale reconstruction in places where civilian U.S. officials
and NGO aid personnel were unable to go—appears less strong now that civilian ePRT personnel
are embedded in combat battalions. Further, the October 2007 SIGIR report on the PRTs points to
cases where the use of CERP funds to meet local needs conflicted with PRT efforts to make local
government assume responsibility for provision of local services and work with the provincial 64
and national government, instead of the U.S. military, to address problems.

61Money as a Weapon,” Washington Post, August 11, 2008.
62 SIGIR, Report to Congress, January 30, 2007, Appendix G.
63 State Department, Iraq Weekly Status Report, November 12, 2008, p. 8.
64 SIGIR, Commanders Emergency Response Program in Iraq Funds Many Large-Scale Projects, 08-006, January
2008; SIGIR, Review of the Effectiveness of the Provincial Reconstruction Team Program in Iraq, 07-015, October 18,

The successful conduct of reconstruction work is contingent on an environment of order and
stability. Although in the past year there has been a lessening of violence, the cumulative effect on
the reconstruction effort of years of continued instability has been manifold.
Implementation of reconstruction projects was hindered. Security threats prevented PRT
personnel from communicating directly with local governments, construction workers from 65
appearing at their jobs, and project managers from monitoring project work. Completed
reconstruction projects and pre-existing infrastructure were destroyed. For instance, in June 2007,
eight of the twelve 400-kV transmission lines were out of service, greatly reducing the electricity
supply to Baghdad. Major pipelines were sabotaged, shutting down oil exports. Along with
criminal activity and poor equipment, insurgent attacks are estimated to be responsible for the 66
loss of $16 billion in oil revenue during a two year period from 2005-2006.
Reconstruction costs rose substantially due to the need to provide for security and insurance for
personnel. Estimates of the portion of project costs devoted to security have varied widely—a
2006 SIGIR survey of major U.S. contractors found security costs to range from a low of 7.6% to
a high of 16.7%. Unanticipated security costs as well as the related need to shift $1.8 billion from
water and power projects to the training and equipping of Iraqi forces meant that infrastructure 67
programs could accomplish less than originally anticipated.
Fearing for their safety, many aid implementors were withdrawn from the country, with U.N. and
some bilateral aid donors forced to run programs from Jordan or Kuwait utilizing Iraqi personnel 68
to the extent possible. With implementors not able to meet with local people and design and
monitor projects as they would in other countries, the quality of aid has likely been negatively
affected. The pool of foreign expertise available to offer technical assistance has been restricted to
those few willing to endure the country’s hardships. U.S. agency personnel stay only a short time
(usually one year) and therefore institutional knowledge is not maintained. Among the 2.4 million
Iraqis who have fled the country are professionals necessary to successful reconstruction. In
2006, more than 300 teachers and Ministry of Education staff were killed. Since 2003, an
estimated 8,000 doctors fled the country, thereby hindering the ability to open new health
facilities. Notable signs of the decrease in violence in the past year are reports of the return of 69
many foreign aid staff and the reappearance of 800 Iraqi doctors.

2007, pp. 23-24; GAO, Military Operations: Actions Needed to Better Guide Project Selection for CERP, GAO-08-
746R, June 23, 2008.
65 For example, the SIGIR reports that on March 24, 2006, a project manager received an e-mail threatening all
employeesas a result, no one came to work the next day. SIGIR, Report to Congress, April 30, 2006, p. 12; SIGIR,
Status of the Provincial Reconstruction Team Program in Iraq, 06-034, October 29, 2006.
66 SIGIR, Report to Congress, August, 2007, pp. 69, 77; “Militias Seize Control of Grid,” New York Times, August 23,
2007; “Iraq Insurgents Starve Capital of Electricity,” New York Times, December 19, 2006; “Report Details Oil
Industry Losses,Washington Post, September 29, 2006.
67 SIGIR, Fact Sheet in Major Contractors’ Security Costs, 06-044, January 30, 2007.
68Wolfowitz Says Iraq Violence Impedes Rebuilding Aid,” Wall Street Journal, June 1, 2005; “Driven from Iraq, Aid
Groups Reflect on Work Half Begun,” New York Times, November 15, 2004; “Security Conditions Continue to
Hamper U.N. in Iraq,Washington File, August 11, 2004; “Charities Get Ready to Leave,London Times, September
9, 2004.
69 Department of State, Iraq Weekly Status Report, September 10, 2008, p. 13; Oxfam International, Rising to the

There are two elements in the effort to provide the security that might allow political and
economic reconstruction to take hold—U.S. and coalition peacekeeping forces and the training of
Iraqi security forces to replace them. The number of U.S. troops is currently roughly 146,000. 70
There are also about 6,400 troops from 19 other nations.
About $23 billion in U.S. appropriations has been aimed at building Iraqi security forces.
According to the State Department, in late September 2008, there were 292,672 trained
conventional Iraqi police and Ministry of Interior forces and 261,043 army and other defense 71
During the first four years of the U.S. presence in Iraq, poorly trained and equipped security
forces, no-shows and desertions, dismissals of police for criminal behavior, bribe-taking for
obtaining higher rank or for release of insurgent suspects, and infiltration of police and other units 72
by sectarian militia groups threatened U.S. plans to increase security using Iraqi personnel. The
September 2007 Jones Commission report called for the breakup and reconstitution of the police
due to the high level of corruption and sectarianism, although U.S. commanders believe this step 73
is unnecessary because of progress made in weeding out inappropriate personnel.
In June 2008, the DOD stated that 67% of all formed Iraqi Army combat units are able to plan
and execute operations with “minimal or no assistance.” It reports “continued progress” since
then. U.S. military officials point to a lack of logistical capabilities on the part of the Iraqi 74
military as a major challenge.
A lack of transparency in early contracting and numerous reports in the media suggesting that
reconstruction funds were being squandered led to the establishment in November 2003 of an
Inspector General for the CPA, now called the Special Inspector General for Iraq Reconstruction
(SIGIR). To date, the SIGIR has issued 129 audits and 131 project assessments, and it has
conducted 96 limited onsite inspections as well as dozens of investigations of possible criminal

Humanitarian Challenge in Iraq, July 30, 2007, p. 11; SIGIR, Report to Congress, October 30, 2007, pp. 127-128;
International Committee of the Red Cross, Iraq: No Let-up in the Humanitarian Crisis, March 2008; “Civilian Death
Toll Reaches New High in Iraq, U.N. Says, New York Times, November 23, 2006; “As Death Stalks Iraq, Middle-
Class Exodus Begins,” New York Times, May 19, 2006; “Iraqs Attorneys Practicing in a State of Fear, Washington
Post, June 10, 2006; “Professionals Fleeing Iraq as Violence, Threats Persist,” Washington Post, January 23, 2006.
70 Iraq Index, Brookings Institution,, November 6, 2008, p. 26.
71 Department of State, Iraq Weekly Status Report, November 12, 2008.
72 GAO, Stabilizing Iraq: Factors Impeding the Development of Capable Iraqi Security Forces, GAO-07-612T, March
13, 2007; “U.S. Officers Detail Problems with Iraqi Soldiers,” Washington Post, November 1, 2006; In Baghdad, a
Force Under the Militias’ Sway,” Washington Post, October 31, 2006; “Flaws Cited in Effort to Train Iraqi Forces,”
Washington Post, November 21, 2006.
73 White House, Benchmark Assessment Report, p. 24; General James L. Jones, Chairman, The Report of the
Independent Commission on the Security Forces of Iraq, September 6, 2007, p. 20; “U.S. Commanders Say Iraqi Police
Can Be Reformed,” Washington Post, December 11, 2007.
74 See CRS Report RL34387, Operation Iraqi Freedom: Strategies, Approaches, Results, and Issues for Congress, by
Catherine Dale; DOD, Measuring Stability and Security in Iraq, June 2008 Report to Congress, p. 38; DOD,
Measuring, September 2008 Report to Congress, p. iv, 37.

activity.75 It should be noted that many sectors and projects have not yet been subject to program
audits or project assessments, including many traditional assistance programs such as those in
democracy, governance, education, agriculture, and economic growth sectors. The expansion of
SIGIR authority beyond the IRRF will likely facilitate increased oversight of the ESF and ISFF
accounts that now compose the majority of U.S. assistance to Iraq.
Some of the most egregious examples of misconduct found to date appear to center on the CPA’s
use of Iraqi funds during the year-long occupation. For instance, a January 2005 SIGIR audit
found that the CPA “provided less than adequate controls” for $8.8 billion of DFI resources it
moved through Iraqi ministries. An April 2005 audit concluded that CPA managers of DFI funds
distributed in the South-Central region of Iraq could not account for more than $96.6 million in
cash and receipts. An October 2005 audit found that South-Central personnel could not account
for more than $20.5 million in Rapid Regional Response Program funds and made $2.6 million in
excessive payments. In late 2005, several U.S. citizens were criminally charged with respect to
the handling of these funds—and have since pled guilty. In February 2007, five more were 76
While some investigations of reconstruction programs utilizing U.S.-appropriated funds have
raised the possibility of criminal activity, many more have produced evidence of poor project
implementation and questionable management and oversight of projects, a large proportion of
these the responsibility of the Army Corps of Engineers which runs the Embassy’s Project and
Contracting Office. SIGIR auditors and project assessment teams with engineering, audit, and
investigative experience have traveled to major U.S.-funded IRRF project sites to see if work is
being performed properly. Although most conclude that projects were either carried out as
intended or point out correctable quality control and structural deficiencies, the SIGIR has found
some projects to be especially problematic, including the following:
• The Basrah Children’s Hospital, expected to cost $50 million, will run to at least
$98 million and nearly a year behind schedule. Bechtel, the project contractor,
was removed and the project will be completed using local contractors. USAID,
the agency responsible, failed to report the cost and delays, in part because it had
only one contracting officer and one technical officer to oversee 20 projects 77
worth $1.4 billion.
• In September 2006, the SIGIR reported that the Baghdad Police College, a $75
million construction project implemented by Parsons, was riddled with
deficiencies, including improperly fabricated wastewater plumbing which poses a
health and structural hazard. Press reports in November 2007 indicate that the
problems have still not been fixed by the contractor, despite promises made to

75 See SIGIR website,, for audit reports to date. SIGIR, Report to Congress, October 30, 2008,
Section 4.
76 Management of Rapid Regional Response Program Grants in South-Central Iraq, Report No. 05-015, October 25,
2005; Audit of Oversight of Funds Provided to Iraqi Ministries through the National Budget Process, Report No. 05-
004, January 30, 2005; Control of Cash Provided to South-Central Iraq, Audit Report No. 05-006, April 30, 2005; “5
Indicted in Probe of Iraq Deals,Washington Post, February 8, 2007.
77 SIGIR, Audit 06-026, July 2006;U.S. Neglect Found in Long-Delayed Iraq Hospital Project,” Washington Post,
July 29, 2006.

Congress.78 The Mosul police headquarters, constructed by an Iraqi contractor at 79
a cost of approximately $1 million, is similarly troubled.
• A $218 million first responders network was ineffective—communication was
not possible between the three established zones of the system and Iraqi citizens 80
could not call in to request emergency assistance, among other problems.
• After the expenditure of $186 million, only 6 of 150 planned primary health care
centers to be constructed by Parsons were completed and only 14 more were
expected to be finished. A contract was awarded to Iraqi firms to complete 121 81
partially constructed centers.
• A project to run 16 oil pipelines under the Tigris River failed amidst warnings
from a geologist that the subsoil was not conducive to drilling, demonstrating a
lack of appropriate oversight by the Army Corps of Engineers. Nearly $76 82
million in DFI funds were wasted.
• An examination of Task Force Shield, a program to train and manage an oil and
electricity infrastructure protection force, found it had been unsuccessful after the
expenditure of $147 million. In part, this outcome was due to the absence of a
clear management structure for the various U.S. agencies involved. Further,
auditors, reportedly, could not determine how many Iraqis were trained or how 83
many weapons were purchased.
• An audit of “design-build” contracts that characterize many of the infrastructure
projects found very high administrative costs in some cases. About 55% of KBR
work on the RIO project and 43% of a Parsons oil project were consumed by
overhead costs. Security is likely one factor in the high level of overhead found
here, and enforced idleness while awaiting government direction to begin work is
another. However, the audit also found inadequate accounting and billing systems 84
to capture administrative costs in four of five contracts examined.
• Roughly 370,000 weapons purchased with $133 million in IRRF funds for the
use of Iraqi security forces were not accompanied by spare parts or technical
repair manuals, and were not registered to insure accountability. (Some of these 85
weapons have reportedly made their way to the black market.)

78 SIGIR, Project Assessment-06-078.1 and 06-079.1, September 27, 2006;Heralded Iraq Police Academy a
‘Disaster’,” Washington Post, September 28, 2006; “Baghdad’s Police Academy Remains in Poor Condition, Despite a
Repair Pledge,” New York Times, November 6, 2007.
79U.S. Agency Cites Flaws in Another Iraqi Construction Project,” New York Times, October 12, 2006.
80 SIGIR, Audit 06-020, July 2006.
81 SIGIR, Audit 06-011, April 2006; SIGIR, Report to Congress, October 30, 2006, p. 78; “In a Dispute, Army Cancels
Rebuilding Contract in Iraq,” New York Times, May 13, 2006.
82 SIGIR, Project Assessment SA-2005-001, in Report to Congress, January 30, 2006, pp. 73-75; “Rebuilding of Iraqi
Oil Pipeline as Disaster Waiting to Happen, New York Times, April 25, 2006.
83 SIGIR, Audit 06-009, April 2006; “In Shadows, Armed Groups Propel Iraq Toward Chaos, New York Times, May
24, 2006.
84 SIGIR, Audit 06-028, October 2006; “Idle Contractors Add Millions to Iraq Rebuilding, New York Times, October
25, 2006.
85 SIGIR, Audit 06-033, October 2006. “Black-Market Weapon Prices Surge in Iraq Chaos, New York Times,
December 10, 2006.

• A DynCorp project to provide services to international police trainers spent
nearly $44 million on a residential camp that was not used (including an
Olympic-size swimming pool that was unauthorized) and about $36 million for
weapons that cannot be accounted for. The audit found the State Department
Bureau for International Narcotics and Law Enforcement (INL) and State Office 86
of Acquisition Management provided poor contract administration.
• A 2007 SIGIR financial review of the State Department’s DynCorp contract for
training Iraqi police could not be completed, because documents were in disarray,
invoices had not been validated, and INL did not know what it received for the 87
$1.2 billion in expenditures.
• A more than $38 million project to provide a new accounting system for the Iraq
Ministry of Finance has been of limited use and has been suspended pending 88
clarification of Iraqi government support for the effort.
• A 2007 DOD IG audit of $5.2 billion in the Iraq Security Forces Fund found a 89
lack of proper accountability for $1 billion in equipment purchase contracts.
• A 2008 assessment of the $270 million Nassriya water treatment plant was
producing water at one fifth its intended capacity, because the Iraqi government
had failed over a four-year period to meet its promises to provide permanent
power, repair leaks in the distribution system, and provide qualified staff to 90
operate the facility.
• A 2008 audit of the USAID Community Stabilization Program found potential
fraud ranging from $6.7 to $8.4 million in on district of Baghdad, including
possible diversion of funds to militia activities by means of overpriced trash
collection contracts as well as phantom workers for cleanup campaigns. The 91
project was suspended in that district.
• Two July 2008 audits demonstrate the level of waste incurred by contract
terminations, usually due to poor planning and cost estimates. In one case, $6.9
million was wasted when water-supply project task orders were terminated at the

60% design stage due to lack of funds. In the other, $142 million was spent on 92

task orders for fire station and police training facilities that were terminated.
• A 2008 audit of the $98 million Fallujah Waste Water Treatment System found a
system costing three times the original estimate, but serving only one third the
homes originally planned. In addition, the original U.S. plan to provide a system

86 SIGIR, Audit 06-029, January 2007. An April 2008 review of INL progress in meeting SIGIR recommendations
arising from the earlier audit found that a concerted effort was being made to implement them. SIGIR, Audit 08-014,
April 2008.
87 SIGIR, Audit 07-016, October 19, 2007. See above footnote re April 2008 review of INL.
88 SIGIR, Audit 08-001, October 23, 2007.
89 Department of Defense Inspector General, Management of the Iraq Security Forces Fund in Southwest Asia—Phase
III, November 30, 2007, Report No. D-2008-026.
90 SIGIR, Sustainment Assessment, 07-116, April 28, 2008.
91 USAID Inspector General, Audit of USAID/Iraq’s Community Stabilization Program, E-267-08-001-P, March 18,
92 SIGIR, Audit 08-018, July 2008; SIGIR, Audit 08-019, July 2008.

requiring little power and maintenance was rejected by the Iraqi Public Works
Ministry because it was for “third-world countries.” The new system requires
thousands of gallons of fuel per day, provision of which there is no commitment 93
from the Ministry, raising the possibility that the U.S. effort has been wasted.
Dozens of reports and articles published during the past five years have sought to analyze, 94
criticize, and recommend action regarding the progress of reconstruction aid. Many focus on the
history of the aid program with a view toward explaining the current state of affairs. Others, like
the Iraq Study Group report, seek to improve future outcomes.
Another category of assessments are reviews of specific projects, some findings of which are
noted in the previous section. Security concerns in Iraq have made it difficult for interest groups
and the news media to produce the kind of expert and anecdotal reports they publish about other 95
places. Most project assessments, therefore, have come from various U.S. government auditors.
Even these, however, appear constrained by security in the number of site-visits they are able to
undertake to review project results. The SIGIR conducted some assessments by aerial imagery
because of the risk to its personnel; while investigating for its April 2008 report on the Nassriya
Water Treatment Plant, on-site inspections were limited to 30 minutes each. Government
Accountability Office (GAO) investigators were not even able to visit Iraq while preparing a 96

2005 report on water and sanitation programs.

Some observers have suggested that one problem with assessing the progress of economic
reconstruction is that there is no “big picture” overview; by comparison, more comprehensive 97
end-result assessments of security assistance appear to be regularly conducted by DOD.

93 SIGIR, Project Assessment 08-144 to 08-148, October 27, 2008.
94 Among the most notable are Anthony Cordesman, Cleaning Up the Mess, Center for Strategic and International
Studies, July 7, 2004; David Rieff, “Blueprint for a Mess,New York Times Magazine, November 2, 2003; George
Packer, “War After War: Letter from Baghdad,The New Yorker, November 24, 2003; Kenneth M. Pollack, “After
Saddam: Assessing the Reconstruction of Iraq,” Foreign Affairs, January/February 2004; John Hamre et al., Iraq’s
Post-Conflict Reconstruction: A Field Review and Recommendations, Center for Strategic and International Studies,
July 17, 2003; James Fallows, “Blind into Baghdad,” The Atlantic Monthly, January/February 2004; Center for
Strategic and International Studies, Post-Conflict Reconstruction Project, Frederick Barton and Bathsheba Crocker, Co-
Directors, Progress or Peril? Measuring Iraqs Reconstruction, September 2004 and November 12, 2007, Update;
Larry Diamond, Squandered Victory: The American Occupation and the Bungled Effort to Bring Democracy to Iraq,
Henry Holt, 2005; James Fallows, “Why Iraq Has No Army, The Atlantic Monthly, December 2005; Rajiv
Chandrasekaran, Imperial Life in the Emerald City: Inside Iraqs Green Zone, Knopf, 2006; and George Packer, The
Assassins’ Gate: America in Iraq, Farrar, Straus and Giroux, 2005; International Crisis Group, Reconstructing Iraq,
September 2, 2004, available at; T. Christian Miller, Blood Money, Little,
Brown, and Company, 2006; SIGIR, Iraq Reconstruction: Lessons in Program and Project Management, March 2007;
and Glenn Zorpette, “Re-engineering Iraq,IEEE Spectrum, February 2006, available at
95 For a list of audits and inspections from all agencies, see SIGIR, Report to Congress, July 30, 2008, Appendices J, K,
N and O.
96 SIGIR, Report to Congress, July 30, 2005, pp. 60-66; GAO, Rebuilding Iraq: U.S. Water and Sanitation Efforts Need
Improved Measures for Assessing Impact and Sustained Resources for Maintaining Facilities, GAO-05-872,
September 2005.
97 Although observers may not agree on the meaning of what they find. In three assessments of the effort to train and
equip Iraqi security forces released in September 2007, somewhat differing perspectives emerged. While the White
House Benchmarks report found much progress in the development and operation of the Iraqi security forcesfrom

Responsible government agencies provide information regarding how many infrastructure
projects are being started and completed—amounts of kilowatt hours produced and oil pumped—
how many small-scale grants are being provided, and how many people are being trained, but
there is little detail regarding to what degree the overall national need for drinking water, schools,
health care, electricity, employment, and other requirements is being met by the expenditure of
billions of dollars in U.S. resources—not to mention Iraqi and other donor resources—targeted at
these needs. When such data have been gathered, they suggest that the needs are not being
addressed to the extent required. For example, the GAO has estimated that it will take $50 billion 98
in infrastructure investments to meet needs in the electricity and oil production sectors alone.
The extent to which specific Iraqi needs are met is one way of assessing an assistance program.
The extent to which U.S. policy objectives have been met is another. With the exception of a brief
moment when what some would call an idealistic Administration appears to have sought to
transform Iraq into a modern Western nation, the purpose of the U.S. assistance program has at
the very least been to create a minimal level of stability in which a minimally functioning Iraq
could take care of its own affairs. The strategies to accomplish this end have changed over time.
While the strategy governing security assistance shifted from classroom military training to ever
greater levels of cooperative U.S.-Iraqi troop operations, the strategy for economic assistance has
moved from the construction of large-scale infrastructure, which chiefly characterized the period
from 2004 through 2006, to technical assistance provided to encourage ministerial and local
government capacities to manage and administer their own programs, small-scale employment
initiatives, and hundreds of community-based projects meant to supplement and supplant the
stabilization activities of the U.S. and Iraqi security forces.
The impact of these economic aid efforts, many underway on a smaller scale since 2003, is much
more difficult to weigh than for the infrastructure programs. The seemingly most accessible
potential measurement of success for the effort to enhance ministerial and local government
capacities has been the rate of contracting and expenditure of capital investment—budget
execution. In September 2007, the Administration touted a much improved level of budget
execution over the previous year. However, a January 2008 GAO report suggested that figures
employed to make that judgment were flawed and that the level of spending could not be 99
established with then-current conflicting data. New data suggest an incremental improvement in
Iraqi budget execution capabilities, but the picture remains fuzzy.

growth in size to assumption of lead roles and independent planningit also found the increase in the number of Iraqi
security forces being capable of operating independently of U.S. troops to be unsatisfactory. The GAO, pointing out
that the number of independent units declined between March and July 2007, bluntly chose to describe the objective as
not being met. And the Iraqi Security Forces Independent Assessment Commission led by General James Jones found
that, while the Iraqi Army is capable of taking over an increasing amount of day-to-day combat responsibilities, the
Iraqi forces would be unableto fulfill their essential security responsibilities independently over the next 12-18
months.” White House, Benchmarks Assessment Report, September 14, 2007; GAO, Iraqi Government Has Not Met
Most Legislative Security and Economic Benchmarks, GAO-07-1230T, September 7, 2007; General James L. Jones,
Chairman, The Report of the Independent Commission on the Security Forces of Iraq, September 6, 2007, p. 8.
98 “Iraq Far From U.S. Goals for Energy,” Washington Post, September 2, 2007.
99 GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq’s Budget Execution, January 2008, GAO-08-153.

Curt Tarnoff
Specialist in Foreign Affairs, 7-7656