Stabilizing Iraq
Preliminary Observations on Budget and Management Challenges of Iraq's Security Ministries Gao ID: GAO-07-637T March 22, 2007In November 2005, the President issued the National Strategy for Victory in Iraq. According to the strategy, victory will be achieved when Iraq is peaceful, united, stable, secure, well integrated into the international community, and a full partner in the global war on terror. To help Iraq achieve this, the U.S. is, among other efforts, helping strengthen the capabilities of the Iraq Ministries of Defense and Interior (police forces) so they can assume greater responsibility for the country's security. The United States has provided about $15.4 billion to develop Iraqi security forces and institutions. In this testimony, GAO discusses preliminary observations on (1) U.S. and Iraqi funding to develop and sustain the Iraqi security forces, and (2) key challenges the United States and Iraq face in improving the security ministries' operations and management. This statement is based on prior GAO reports, recent fieldwork in Iraq and Department of Defense, U.S. Treasury and Embassy budget documents. GAO added information to this statement in response to comments from Multinational Security Transition Command-Iraq. We completed the work in accordance with generally accepted government auditing standards.
In March 2007, DOD reported that Iraq will increase its 2007 security budget from $5.4 billion to $7.3 billion (a 37-percent increase). DOD states this increase provides evidence of the country's growing self-sufficiency and commitment to security. However, our analysis shows that some of this increase is due to the appreciation of the Iraqi dinar against the dollar. Using a constant exchange rate, Iraq's 2007 security budget grows by 15 percent. Also, Iraq faced problems spending its 2006 security budget. As of November 2006, the Iraq Ministry of Defense had spent only about 1 percent of its capital goods budget for weapons, ammunition, and vehicles. DOD has requested $5.8 billion in additional U.S. funds to help purchase these items for Iraq and provide assistance to its security ministries. The United States and Iraq face personnel and logistical challenges in developing ministries that can sustain Iraq's growing security forces. For example, the ministries have inadequate systems to account for personnel and inexperienced staff with limited budgeting and technology skills. Also, both security ministries have difficulties acquiring, distributing, and maintaining weapons, vehicles, and equipment. The U.S.-led coalition has provided significant resources to develop Iraq's security forces and has 215 military and civilian advisors at the ministries. The United States signed a foreign military sales agreement with Iraq that, according to U.S. officials, allows Iraq to bypass its ineffective procurement systems to purchase equipment directly from the United States. Iraq has deposited $1.9 billion into its account for foreign military sales. However, it is unclear whether this program will help improve the ministries' procurement and contracting capacity.
GAO-07-637T, Stabilizing Iraq: Preliminary Observations on Budget and Management Challenges of Iraq's Security Ministries
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Testimony:
Before the Committee on Armed Services, Subcommittee on Oversight and
Investigations, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 9:00 a.m. EDT:
Thursday, March 22, 2007:
Stabilizing Iraq:
Preliminary Observations on Budget and Management Challenges of Iraq's
Security Ministries:
Statement of Joseph A. Christoff, Director:
International Affairs and Trade:
GAO-07-637T:
GAO Highlights:
Highlights of GAO-07-637T, a testimony before the Subcommittee on
Oversight and Investigations, Committee on Armed Services, House of
Representatives
Why GAO Did This Study:
In November 2005, the President issued the National Strategy for
Victory in Iraq. According to the strategy, victory will be achieved
when Iraq is peaceful, united, stable, secure, well integrated into the
international community, and a full partner in the global war on
terror.
To help Iraq achieve this, the U.S. is, among other efforts, helping
strengthen the capabilities of the Iraq Ministries of Defense and
Interior (police forces) so they can assume greater responsibility for
the country‘s security. The United States has provided about $15.4
billion to develop Iraqi security forces and institutions.
In this testimony, GAO discusses preliminary observations on (1) U.S.
and Iraqi funding to develop and sustain the Iraqi security forces, and
(2) key challenges the United States and Iraq face in improving the
security ministries‘ operations and management.
This statement is based on prior GAO reports, recent fieldwork in Iraq
and Department of Defense, U.S. Treasury and Embassy budget documents.
GAO added information to this statement in response to comments from
Multinational Security Transition Command-Iraq. We completed the work
in accordance with generally accepted government auditing standards.
What GAO Found:
In March 2007, DOD reported that Iraq will increase its 2007 security
budget from $5.4 billion to $7.3 billion (a 37-percent increase). DOD
states this increase provides evidence of the country‘s growing self-
sufficiency and commitment to security. However, our analysis shows
that some of this increase is due to the appreciation of the Iraqi
dinar against the dollar. Using a constant exchange rate, Iraq‘s 2007
security budget grows by 15 percent. Also, Iraq faced problems spending
its 2006 security budget. As of November 2006, the Iraq Ministry of
Defense had spent only about 1 percent of its capital goods budget for
weapons, ammunition, and vehicles (see figure). DOD has requested $5.8
billion in additional U.S. funds to help purchase these items for Iraq
and provide assistance to its security ministries.
The United States and Iraq face personnel and logistical challenges in
developing ministries that can sustain Iraq‘s growing security forces.
For example, the ministries have inadequate systems to account for
personnel and inexperienced staff with limited budgeting and technology
skills. Also, both security ministries have difficulties acquiring,
distributing, and maintaining weapons, vehicles, and equipment. The
U.S.-led coalition has provided significant resources to develop Iraq‘s
security forces and has 215 military and civilian advisors at the
ministries. The United States signed a foreign military sales agreement
with Iraq that, according to U.S. officials, allows Iraq to bypass its
ineffective procurement systems to purchase equipment directly from the
United States. Iraq has deposited $1.9 billion into its account for
foreign military sales. However, it is unclear whether this program
will help improve the ministries‘ procurement and contracting capacity.
Figure: Iraq Security Ministries' Budget Expenditures Jan.-Nov. 2006:
[See PDF for Image]
Source: GAO analysis of Iraq's 2006 budget expenditures as of November
2006, provided by U.S. Treasury.
[End of figure]
[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-637T].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Joseph A. Christoff at
(202) 512-8979 or christoffj@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our preliminary observations
on U.S. and Iraqi funding commitments and related challenges in
strengthening the Iraqi Ministry of Defense (MOD) and Ministry of
Interior (MOI). We are presently completing reviews of U.S. efforts to
help the Iraqi government execute its budget and build capacity in its
ministries. The November 2005 National Strategy for Victory in Iraq
articulated the desired end-state for U.S. operations in Iraq: a
peaceful, united, stable, and secure Iraq, well integrated into the
international community, and a full partner in the global war on
terrorism. To achieve this desired end state, the United States is,
among other things, helping MOD and MOI play a greater role in managing
and sustaining their security forces and assuming greater
responsibility for the country's security. The President's fiscal year
2008 funding request states that the Iraqi government will be largely
capable of sustaining its security forces by 2008. From 2003 through
2006, the United States provided about $15.4 billion to develop Iraqi
security forces and institutions.
My testimony discusses our preliminary observations on (1) U.S. and
Iraqi funding to develop and sustain the Iraqi security forces, and (2)
key challenges the United States and Iraq face in improving the
security ministries' operations and management.
In developing this statement, we relied on prior GAO reports and, where
appropriate, we updated data. To identify the U.S. and Iraqi government
financial commitments for developing and sustaining the Iraqi security
forces, we reviewed Department of Defense (DOD), Multinational Force-
Iraq (MNF-I), and Multinational Security Transition Command-Iraq (MNSTC-
I), and Treasury budget documents and requests. We also analyzed data
on Iraq's 2006 and 2007 budgets and 2006 budget execution through
November 2006, which were provided to us by the U.S. Treasury from
Iraq's Ministry of Finance.[Footnote 1] To identify the challenges the
government of Iraq faces in developing the capacity of the Ministries
of Defense and Interior, we reviewed MNF-I assessments of the
capabilities of these ministries. We also conducted field work in Iraq
and met with the MOD and MOI transition teams to obtain further
information on the ministries' capabilities and to discuss U.S. and
coalition efforts at the ministries. This work was conducted in
accordance with generally accepted government auditing standards.
Summary:
In March 2007, DOD reported that Iraq will increase its 2007 security
budget from $5.4 billion to $7.3 billion (a 37-percent increase), which
DOD cites as evidence of the country's growing self-sufficiency and
commitment to security. However, our analysis shows that a portion of
this increase is attributable to the recent appreciation of the Iraqi
dinar against the dollar. Using a constant exchange rate, which
reflects changes in Iraq's budget in its own currency, Iraq's 2007
security budget will grow by 15 percent. Moreover, the budget of the
Ministry of Defense, which plays the lead role in conducting
counterinsurgency operations, will grow by only 1 percent. To help
assess whether Iraq's security ministries will be able to spend the
2007 budgets, we analyzed their 2006 budgets and spending. For example,
between January and November 2006, the MOD had spent only about 1
percent of its $864 million capital goods budget for weapons,
ammunition, and vehicles. Overall, Iraq's security ministries spent a
higher share of funds budgeted for salaries than funds budgeted for
capital goods. DOD has requested $5.8 billion for 2007 to 2008 to help
purchase these critical items for Iraq and provide additional
assistance to Iraq's security ministries.
The United States and Iraq confront personnel and logistical challenges
in developing security ministries that are capable of sustaining Iraq's
growing security forces. The security ministries have inadequate
systems to account for their personnel, as well as inexperienced staff
with limited budgeting and technology skills. However, in 2007, the
ministries plan to recruit 60,000 to 70,000 additional personnel and
assume financial responsibility for the 150,000 security guards
currently protecting Iraq's 35 ministries and directorates. In
addition, as we previously reported, both ministries have difficulties
planning for, acquiring, distributing, and maintaining weapons,
vehicles, and equipment.[Footnote 2] In response to these problems, the
coalition has provided significant resources to support Iraq's security
ministries. In addition to financial assistance, the U.S.-led coalition
has 215 military, civilian, and contractor personnel advising MOD and
MOI staff on planning, budgeting, personnel, and logistics issues.
Furthermore, the United States signed a foreign military sales
agreement with Iraq in 2006, that according to U.S. officials, will
allow the security ministries to bypass their ineffective procurement
systems and purchase equipment and supplies directly from the United
States. Under this agreement, Iraq has deposited $1.9 billion into its
foreign military sales account and has requested to purchase
helicopters, small arms, trucks, and light armored vehicles, among
other items. However, in the long term, it is unclear whether Iraq's
use of this program will contribute to the ministries' capacity to
improve their own procurement and contracting systems.
The Multinational Security Transition Command-Iraq commented on a draft
of this statement, stating that GAO did not give the government of Iraq
and the security ministries credit for negotiating the 2007 budget
responsibly and openly. The Command further stated that the government
of Iraq clearly recognized its inability to responsibly make
procurements for the military and police and thus entered into a
foreign military sales agreement with the United States. We added
information in the statement to reflect MNSTC-I's comments. Both DOD
and GAO agree that it will take considerable time and resources to
address the challenges the United States and Iraq face in developing
security ministries and capable Iraqi forces.
Background:
In August 2003, the Coalition Provisional Authority (CPA) dissolved the
military organizations of the former regime, including the Ministry of
Defense. In March 2004, the CPA established a new Ministry of Defense.
The MOD was ultimately to be responsible for the overall management,
direction, and control of the Iraqi armed forces, which now include the
Iraqi Army, Air Force, and Navy. Responsible for an estimated 200,000
civil servants and military personnel, the MOD is expected to conduct
all functions needed to sustain the armed forces, including developing
plans, programs, and budgets; and procuring needed goods.
The CPA did not dissolve the Ministry of Interior. MOI's role is to
manage more than 300,000 staff in the Iraqi police services, the
National Police, the Border Enforcement, and other services. Managerial
functions include setting qualifications and training for the forces,
vetting all police and other employees, and conducting the budgeting
and financing for MOI forces. The MOI directly controls the national
police forces. However, the MOI exercises only limited administrative
control over regular Iraqi police forces in the provinces, controlling
issues such as recruiting standards and yearly budget allocations.
Operational control of provincial police rests with the governor and
his Council.
MNF-I leads U.S. and coalition military efforts in Iraq. Under the
command of MNF-I, MNSTC-I is responsible for leading coalition efforts
to train and equip Iraqi security forces and to build MOI and MOD
capabilities. MNSTC-I helps develop MOI and MOD capabilities through
Ministry Transition Teams and the Joint Staff Transition Team, which
have a total of about 215 coalition advisors assigned to work with
Iraqi officials at the ministries.
The Iraqi government and the coalition transition teams confront a
challenging national environment to develop Iraq's security ministries.
Corruption is reportedly widespread and poses a major challenge to
building an effective government. A March 2007 DOD report states that
the Prime Minister has committed to reforming the government beginning
with his cabinet and the ministries. This commitment recognizes the
government's failure to counter corruption and reduce sectarianism,
which hampers the government's ability to perform.[Footnote 3] In
addition, capacity building efforts are taking place amid ongoing
violence and sectarian tension, posing a threat to Iraqi government
employees.
Although Iraq's Security Budget Has Grown, the United States Continues
to Fund a Significant Portion of Iraq's Security Needs:
The 2007 increase in Iraq's security budget is attributable to
increases in planned expenditures and an appreciation of the Iraqi
currency against the U.S. dollar. MOD and MOI spent the largest
percentage of budgeted amounts on salaries but were less successful in
spending funds on goods and services (e.g., food, uniforms, and fuel)
and capital goods (e.g., weapons, ammunition, and vehicles). Given
Iraq's continued difficulties in spending funds for these items, DOD
has requested $5.8 billion in additional funds to help purchase these
critical items and provide other assistance to Iraq's security
ministries.
Reported Increase in Iraq's 2007 Security Budget Is Partially
Attributable to Exchange Rate Appreciation:
DOD's March 2007 report to Congress stated that the 37-percent increase
in Iraq's 2007 security budget is evidence of Iraq's growing self-
sufficiency and commitment to security. However, our analysis of Iraq's
2007 budget shows that this reported increase is attributable to both
increases in planned expenditures and an appreciation of the Iraqi
currency against the U.S. dollar (Iraq's fiscal year begins on January
1 of each year). Iraq implemented a 14-percent exchange rate
appreciation between November 1, 2006, and February 1, 2007, to reduce
the rate of core (non-fuel) inflation. In 2006, inflation in Iraq
averaged over 50 percent.[Footnote 4]
Iraq's official budget is presented and executed in Iraqi dinars, not
U.S. dollars. The percentage changes we calculated using a constant
2006 exchange rate are the same as those in the official budget based
on Iraqi dinars. For example, MOD's 2007 budget shows a decline in the
number of Iraqi dinars budgeted for goods and services compared with
2006. However, when converted to U.S. dollars at the new appreciated
exchange rate, the budget shows an increase in planned expenditures. It
is therefore important to know the source of changes in the budget. For
imported products, the appreciated exchange rate (which means the Iraqi
dinar exchanges for relatively more U.S. dollars than before) allows
Iraq to buy relatively more imported products for the same number of
dinars. However, for expenditures made in Iraq, especially salaries,
the appreciated exchange rate may not best reflect changes in Iraq's
budget expenditures. Thus, we present both calculations.
Table 1 shows how the projected growth rate of Iraq's security budget
varies with the foreign exchange rate used to convert Iraqi dinars into
U.S. dollars. When using an appreciated exchange rate, Iraq's security
budget grows by 37 percent in 2007. The budget of MOD, which plays a
key role in conducting counterinsurgency operations, grows by 20
percent. However, when using a constant exchange rate to facilitate a
more direct comparison of the planned increases in budgeted dinars,
Iraq's security budget grows by 15 percent in 2007 to $6.2 billion
(constant exchange rate), which represents 18 percent of Iraqis total
2007 budget of $34.5 billion. Thus, the increase in Iraq's budget in
U.S. dollars is due to the actual increases in planned expenditures and
an appreciation of the currency.
Table 1: Budget Projections for Ministry of Defense and Interior, 2006-
2007 (Millions of U.S. dollars):
Ministry of Defense.
Budget Category: Salaries;
2006 (constant) exchange rate: 2006 budget: 912;
2006 (constant) exchange rate: 2007 budget: 1,201;
2006 (constant) exchange rate: Percentage change from 2006: 32%;
2007 (appreciated) exchange rate: 2007 budget: 1,429;
2007 (appreciated) exchange rate: Percentage change from 2006: 57%.
Budget Category: Goods and services; (e.g., food, uniforms, fuel,
medicine, maintenance);
2006 (constant) exchange rate: 2006 budget: 1,966;
2006 (constant) exchange rate: 2007 budget: 1,800;
2006 (constant) exchange rate: Percentage change from 2006: -8%;
2007 (appreciated) exchange rate: 2007 budget: 2,143;
2007 (appreciated) exchange rate: Percentage change from 2006: 9%.
Budget Category: Non-financial assets; (e.g, capital goods such as
weapons, ammo, vehicles);
2006 (constant) exchange rate: 2006 budget: 530;
2006 (constant) exchange rate: 2007 budget: 438;
2006 (constant) exchange rate: Percentage change from 2006: -17%;
2007 (appreciated) exchange rate: 2007 budget: 521;
2007 (appreciated) exchange rate: Percentage change from 2006: -2%.
Budget Category: Capital projects;
2006 (constant) exchange rate: 2006 budget: 33;
2006 (constant) exchange rate: 2007 budget: 40;
2006 (constant) exchange rate: Percentage change from 2006: 20%;
2007 (appreciated) exchange rate: 2007 budget: 48;
2007 (appreciated) exchange rate: Percentage change from 2006: 43%.
Budget Category: Other expenditures;
2006 (constant) exchange rate: 2006 budget: —;
2006 (constant) exchange rate: 2007 budget: —;
2006 (constant) exchange rate: Percentage change from 2006: 0%;
2007 (appreciated) exchange rate: 2007 budget: 1;
2007 (appreciated) exchange rate: Percentage change from 2006: 19%.
Budget Category: Total;
2006 (constant) exchange rate: 2006 budget: $3,442;
2006 (constant) exchange rate: 2007 budget: $3,479;
2006 (constant) exchange rate: Percentage change from 2006: 1%;
2007 (appreciated) exchange rate: 2007 budget: $4,141;
2007 (appreciated) exchange rate: Percentage change from 2006: 20%.
Ministry of Interior.
Budget Category: Salaries;
2006 (constant) exchange rate: 2006 budget: $1,465;
2006 (constant) exchange rate: 2007 budget: $2,130;
2006 (constant) exchange rate: Percentage change from 2006: 45%;
2007 (appreciated) exchange rate: 2007 budget: 2,536;
2007 (appreciated) exchange rate: Percentage change from 2006: 73%.
Budget Category: Goods and services; (e.g., food, uniforms, fuel,
medicine, maintenance);
2006 (constant) exchange rate: 2006 budget: 200;
2006 (constant) exchange rate: 2007 budget: 230;
2006 (constant) exchange rate: Percentage change from 2006: 15%;
2007 (appreciated) exchange rate: 2007 budget: 274;
2007 (appreciated) exchange rate: Percentage change from 2006: 37%.
Budget Category: Non-financial assets; (e.g, capital goods such as
weapons, ammo, vehicles);
2006 (constant) exchange rate: 2006 budget: 225;
2006 (constant) exchange rate: 2007 budget: 262;
2006 (constant) exchange rate: Percentage change from 2006: 16%;
2007 (appreciated) exchange rate: 2007 budget: 312;
2007 (appreciated) exchange rate: Percentage change from 2006: 38%.
Budget Category: Capital projects;
2006 (constant) exchange rate: 2006 budget: 27;
2006 (constant) exchange rate: 2007 budget: 33;
2006 (constant) exchange rate: Percentage change from 2006: 25%;
2007 (appreciated) exchange rate: 2007 budget: 40;
2007 (appreciated) exchange rate: Percentage change from 2006: 49%.
Budget Category: Other expenditures;
2006 (constant) exchange rate: 2006 budget: 3;
2006 (constant) exchange rate: 2007 budget: 17;
2006 (constant) exchange rate: Percentage change from 2006: 570%;
2007 (appreciated) exchange rate: 2007 budget: 21;
2007 (appreciated) exchange rate: Percentage change from 2006: 698%.
Budget Category: Total;
2006 (constant) exchange rate: 2006 budget: $1,919;
2006 (constant) exchange rate: 2007 budget: $2,673;
2006 (constant) exchange rate: Percentage change from 2006: 39%;
2007 (appreciated) exchange rate: 2007 budget: 3,182;
2007 (appreciated) exchange rate: Percentage change from 2006: 66%.
Total Security Budget (Both Ministries).
Budget Category: Total;
2006 (constant) exchange rate: 2006 budget: $5,362;
2006 (constant) exchange rate: 2007 budget: $6,152;
2006 (constant) exchange rate: Percentage change from 2006: 15%;
2007 (appreciated) exchange rate: 2007 budget: 7,323;
2007 (appreciated) exchange rate: Percentage change from 2006: 37%.
Note: The 2006 exchange rate used to convert Iraq dinars into dollars
was 1500/$1. Using the same exchange rate to convert both the 2006 and
2007 budgets to U.S. dollars retains the same percentage change between
the two years as is found when comparing the change between the two
years in dinars. The U.S. Treasury uses an exchange rate of 1260/$1 for
the 2007 Iraq budget (the appreciated exchange rate in the table),
reflecting the recent exchange rate appreciation of the Iraqi dinar
relative to the U.S. dollar. Totals may not add due to rounding. Budget
classification scheme is based on the 2007 budget. "—" refers to values
that are less than one half of one million dollars.
Source: GAO analysis of Iraq's 2006 and 2007 budgets, provided by the
U.S. Treasury.
[End of table]
Although MOD's overall budget will grow in 2007, its budget for several
critical items needed to wage counterinsurgency operations will decline
in 2007. For example, the Ministry of Defense's 2007 budget for capital
goods--including weapons, ammunition, and vehicles--will decrease
whether using a constant exchange rate (17 percent) or appreciated
exchange rate (2 percent).
In contrast to MOD, MOI's 2007 budget shows positive growth rates in
all major categories. For example, the Ministry of Interior's 2007
budget for capital goods--including weapons, ammunition, and vehicles-
-will increase regardless of which exchange rate is used, by 16 percent
using a constant exchange rate or by 38 percent using the appreciated
exchange rate. The MOI is receiving increased budget support for its
law enforcement responsibilities. However, the additional budget
support will be provided to a ministry prone to militia infiltration.
For example, in November 2006, the Director of the Defense Intelligence
Agency stated that the Ministry of Interior and the police were heavily
infiltrated by militia members of the Badr Organization and the Mahdi
Army. In addition, the MOI's national police--a paramilitary force of
about 24,000 personnel--had conducted counterinsurgency operations in
the past, but the Iraqi government decided in late 2006 to transform it
into a civil society force due to frequent allegations of abuse and
other illegal activities.
The total number of staff reportedly employed by the Ministries of
Defense and Interior will grow from about 538,000 in 2006 to 608,000
employees in 2007 (see table 2). However, these numbers should be
interpreted with some caution. As we reported in January 2007,[Footnote
5] ghost employees comprise about 20 to 30 percent of Ministry of
Interior staff, according to U.S. officials. Also, as of February 2007,
the Iraqi government has yet to complete a census of all government
employees, as required by the International Monetary Fund.
Table 2: Estimated Number of Ministry of Defense and Interior
Employees, 2006 and 2007:
Ministry of Defense;
2006: 160,000;
2007: 200,000;
Percentage change from 2006: 25%.
Ministry of Interior;
2006: 378,000;
2007: 408,000;
Percentage change from 2006: 8%.
Total security forces and civilian personnel;
2006: 538,000;
2007: 608,000;
Percentage change from 2006: 13%.
Source: GAO analysis of Iraq 2006 and 2007 budgets provided by the U.S.
Treasury.
[End of table]
In 2006, Ministries of Defense and Interior Spent Budgets on Salaries
but Not Capital Items:
To help assess whether Iraq's security ministries will be able to spend
the 2007 budgets, we analyzed the security ministries' 2006 budgets and
spending. Figure 1 shows the total amounts budgeted and expended by
funding category. In terms of their budgets, the MOD had both a larger
budget ($3.4 billion compared with $1.9 billion) and a larger portion
of its budget targeted at goods and services and capital goods,
compared with the MOI. For the MOI, salaries dominated the budget in
2006.
Figure 1 also shows that the ministries have had difficulty expending
some categories of their budgets. For example, MOD and MOI spent about
76 and 82 percent, respectively, of the $912 million and $1,471 million
budgeted for salaries as of November 2006.[Footnote 6] In contrast, MOD
and MOI spent 1 and 15 percent, respectively, of the $864 million and
$233 million budgeted for capital goods (e.g., weapons, ammunition, and
vehicles). The inability or unwillingness of Iraq's security ministries
to spend budgeted funds on critical items raises questions about the
priorities and capabilities of Iraq's government to fund its security
requirements. As the U.S. government transfers more of its security
responsibilities to the Iraqi government, it is important that the
Iraqi government demonstrate that it can execute its approved budgets
more effectively.
Figure 1: Percentage of Budgeted Amounts Expended, by Funding Category,
Ministry of Defense and Ministry of Interior, January through November
2006:
[See PDF for image]
Source: GAO analysis of Iraq's 2006 budget expenditures as of November
2006, provided by U.S. Treasury.
Note: Budget classification scheme is based on the 2006 budget and does
not directly correspond to the figures provided in table 1. The values
in this figure were provided to us by the U.S. Treasury from Iraq's
Ministry of Finance. The limited spending by various Iraqi ministries
in certain areas, such as capital projects, is a known issue and
receiving attention from U.S. advisors. However, we have not
independently verified the precision of these values and they are
likely to change as Iraq's expenditure data for the remainder of the
year become available. We provide this information for the purpose of
demonstrating the relative differences in Iraq's ability to expend its
budget across ministries and budget categories.
[End of figure]
While Iraq's security ministries have encountered difficulties in
spending budgets for weapons, equipment, vehicles, food, fuel, and
other items needed to mount counterinsurgency campaigns, the U.S.
government anticipates providing additional support to these two
ministries at least through the end of fiscal year 2008. DOD has asked
for an additional $5.8 billion to develop the Iraqi security forces in
its fiscal year 2007 supplemental request and the fiscal year 2008
Global War on Terror budget request (see table 3).
Table 3: Request for Additional Funds to Develop Iraqi Security Forces
(dollars in millions):
Category: Infrastructure;
2007 Supplemental: MOD: 264.8;
2007 Supplemental: MOI: 205.0;
2007 Supplemental: Not Specified: 0;
2007 Supplemental: Subtotal: 469.8;
2008 Global War on Terror Budget Request: MOD: 0;
2008 Global War on Terror Budget Request: MOI: 0;
2008 Global War on Terror Budget Request: Subtotal: 0;
2008 Global War on Terror Budget Request: Total: 469.8.
Category: Equipment and Transportation;
2007 Supplemental: MOD: 1,584.3;
2007 Supplemental: MOI: 373.6;
2007 Supplemental: Not Specified: 0;
2007 Supplemental: Subtotal: 1,957.9;
2008 Global War on Terror Budget Request: MOD: 1,043.0;
2008 Global War on Terror Budget Request: MOI: 245.0;
2008 Global War on Terror Budget Request: Subtotal: 1,288.0;
2008 Global War on Terror Budget Request: Total: 3,245.9.
Category: Training and Operations;
2007 Supplemental: MOD: 51.7;
2007 Supplemental: MOI: 52.9;
2007 Supplemental: Not Specified: 0;
2007 Supplemental: Subtotal: 104.6;
2008 Global War on Terror Budget Request: MOD: 77.0;
2008 Global War on Terror Budget Request: MOI: 500.0;
2008 Global War on Terror Budget Request: Subtotal: 577.0;
2008 Global War on Terror Budget Request: Total: 681.6.
Category: Sustainment;
2007 Supplemental: MOD: 1,079.6;
2007 Supplemental: MOI: 72.9;
2007 Supplemental: Not Specified: 0;
2007 Supplemental: Subtotal: 1,152.5;
2008 Global War on Terror Budget Request: MOD: 135.0;
2008 Global War on Terror Budget Request: MOI: 0;
2008 Global War on Terror Budget Request: Subtotal: 135.0;
2008 Global War on Terror Budget Request: Total: 1,287.5.
Category: Related Activities;
2007 Supplemental: MOD: 0;
2007 Supplemental: MOI: 0;
2007 Supplemental: Not Specified: 157.5;
2007 Supplemental: Subtotal: 157.5;
2008 Global War on Terror Budget Request: MOD: 0;
2008 Global War on Terror Budget Request: MOI: 0;
2008 Global War on Terror Budget Request: Subtotal: 0;
2008 Global War on Terror Budget Request: Total: 157.5.
Category: Total;
2007 Supplemental: MOD: 2,980.4;
2007 Supplemental: MOI: 704.4;
2007 Supplemental: Not Specified: 157.5;
2007 Supplemental: Subtotal: 3,842.3;
2008 Global War on Terror Budget Request: MOD: 1,255.0;
2008 Global War on Terror Budget Request: MOI: 745.0;
2008 Global War on Terror Budget Request: Subtotal: 2,000.0;
2008 Global War on Terror Budget Request: Total: 5,842.3.
Source: Fiscal Year 2008 Security Forces Fund, Justification for Iraq
Security and Afghan Security Forces Fund, February 2007.
[End of table]
Of this amount, about $3.25 billion (about 56 percent) would purchase
equipment and transportation for the Iraqi security forces. DOD is also
requesting about $682 million for training and operations, including
efforts to develop senior management capabilities within the Ministries
of Defense and Interior, and to provide increased training for MOD
intelligence operations, communications operations, and resource
management.
Iraq Faces Personnel and Logistical Challenges in Developing its
Security Ministries' Management Capabilities:
Iraq's security ministries face numerous challenges if they are to more
effectively direct and sustain Iraq's security forces. DOD reports and
our February 2007 fieldwork in Iraq found that the security ministries
face two key challenges: (1) managing a growing workforce while
developing effective personnel systems, and (2) improving the limited
ability of MOD and MOI to manage their logistics operations. Coalition
advisors are working with the security ministries to improve their
planning, budgeting, personnel, and logistical systems. In addition, a
2006 Foreign Military Sales (FMS) agreement with Iraq will enable the
security ministries to bypass their ineffective procurement systems and
purchase needed equipment and supplies directly from the United States,
according to U.S. officials.
MOD and MOI Have a Growing Workforce and Weak Personnel Management
Systems:
Planned changes in the size and composition of the security forces will
complicate MOD and MOI efforts to effectively manage their personnel.
The security ministries plan to add 60,000 to 70,000 staff to their
rolls in 2007. In addition, in December 2006, the Iraqi Prime Minister
directed the MOI to assume responsibility for paying most of the
Facilities Protection Service (FPS), a 150,000-strong ministry guard
force currently working for 27 ministries and 8 independent
directorates.[Footnote 7] According to DOD reporting, the FPS lacks a
coherent force structure and standardized equipment, and its personnel
are often untrained, unreliable, and sometimes responsible for violent
crimes. According to a senior coalition advisor, FPS personnel will be
paid by the MOI but remain under the day-to-day supervision of the
ministries, agencies, or provincial governments to which they are
assigned.
Although the ministries are significantly expanding their workforces,
DOD reports that MOD and MOI cannot accurately account for the
personnel they currently have on their payrolls. DOD notes that about
65 percent of authorized personnel in fielded units are present for
duty at any time, but this figure is based on unreliable data.[Footnote
8] Similarly, MOI also has no reliable data to indicate how many
personnel are still serving with the ministry, so it is unknown how
many of the more than 300,000 employees on the MOI payroll are present
for duty. MNSTC-I estimates that the number of employees present for
duty is less than 70 percent. DOD reports that payments for pensions,
medical care, and death benefits are currently included in security
ministry payrolls. Thus, the security ministries' personnel figures may
include retired, wounded, or deceased personnel. DOD also found that
corruption inflates both security ministries' personnel figures, as
corrupt leaders often collect pay and other compensation designated for
non-existent soldiers and policemen on the unit rolls.
In addition, a February 2007 MNF-I assessment stated that development
of MOD's personnel management system was hindered in 2006 by poor
leadership, low morale, and reliance on coalition counterparts. MNSTC-
I commented that higher level leadership within MOD did not allow
knowledgeable managers to implement personnel reforms and overruled
their decisions. U.S. government documents and coalition officials also
cited problems at MOI with militia infiltration that complicated reform
efforts. Our recent work in Iraq also found that the ministries' lack
of skilled or experienced staff presents a challenge. Some coalition
officials noted that the lack of trained staff hindered efforts to
improve MOD budget formulation, noting that only two or three members
of the 30-person budget office were capable of producing budget
spreadsheets on a computer. Furthermore, these advisors stated that
most ministry staff lack basic computer and information technology
skills, are unwilling to make decisions, and often refer problems to
higher levels.
Ministries Face Significant Challenges in Logistics Management:
DOD's March report stated that the most significant shortcoming in MOD
and MOI forces capabilities is in planning and executing logistics and
sustainment requirements. The report noted that the factors underlying
this deficiency include inadequate levels of sustainment stocks, such
as vehicle fuel pumps and filters. Also identified as a challenge was
the limited capacity of MOD and MOI to plan for, acquire, distribute,
and maintain needed items. In addition, the security ministries have
difficulties in accounting for their equipment. For example, MOI's
immature equipment accountability system cannot track what police
weapons and vehicles remain in service or how much equipment authorized
by the provincial governors MOI has purchased for their staff, which
had been. Our fieldwork found that MOD and MOI units maintain equipment
accountability through the use of hand receipts and manual ledgers. As
GAO previously testified, both MOD and MOI have significant logistics
management issues to overcome before they are capable of independently
sustaining their security forces.[Footnote 9]
Our recent fieldwork also found that developing the security
ministries' logistics capacity remains a major challenge, particularly
at MOI. U.S. officials noted that MOI cannot sustain the wide variety
of equipment donated by the coalition. For example, GAO previously
testified that the MOD had difficulty maintaining 21 different types of
light trucks. Similarly, MOI has been unable to maintain the 17 makes
of vehicles it has received for use by its personnel. According to
coalition officials, the cost and difficulty of obtaining spare parts
for these diverse vehicle fleets results in using some vehicles for
spare parts and not repairing others. Moreover, the MOI has not
approved the draft logistics concept proposed by the coalition, in part
because it has yet to gain the agreement of the provinces and is still
negotiating with them on the national warehouse system.
Coalition Efforts to Address Problems at the Iraqi Security Ministries:
The coalition devotes significant resources to develop capacity at
Iraq's security ministries. As of March 2007, the U.S.-led coalition
had assigned 215 military, civilian, and contracting personnel to
advise Iraqi staff at the MOD and MOI on establishing plans and
policies, budgeting, and managing personnel and logistics. In
comparison, the Ministries of Oil and Electricity had 10 and 18
advisors, respectively.
The 111 coalition advisors at the MOD are embedded with staff from a
number of offices, including Plans and Policies and the Iraqi Joint
Staff. According to the advisors, they work with their Iraqi
counterparts to improve their planning processes and capabilities. For
example, a senior advisor to the joint staff helped MOD develop its
counter insurgency strategy. He provided them with a planning template,
reviewed their work, and suggested they add details such as the source
of the threat, the risk level, and the forces required to counter the
threats. He was uncertain as to whether his Iraqi counterparts had
taken ownership of the process.
Our recent field work at the MOI found that 104 coalition advisors are
working with Iraqi officials. Among other efforts, they are helping MOI
develop processes for vetting Iraqi security forces, including
collecting and storing biometric data; establishing an identification
card system; and establishing a personnel management database that will
house inventory, payroll, human resource, financial, and budget data.
However, U.S. advisors stated that MOI staff has resisted efforts to
computerize their manual processes because of the increased
transparency it would provide.
Finally, MNSTC-I personnel are also assisting the MOD and the MOI in
purchasing needed equipment from the United States through the Foreign
Military Sales (FMS) program.[Footnote 10] Under FMS, the U.S.
government agrees to sell defense articles or services (including
training) to eligible foreign countries or international organizations.
The articles or services usually come from DOD stocks or through
purchase under DOD-managed contracts. In December 2006, the government
of Iraq transferred $1.9 billion into an Iraqi account for FMS
purchases. According to a November 2006 DOD report, Iraq's use of the
FMS program is intended to provide a way for both MOD and MOI to spend
their money on complete procurement packages without risking the loss
of funds to the corruption and mismanagement that hampers Iraqi
government contracting. In the latter part of 2006, DOD notified
Congress of a number of possible foreign military sales to Iraq,
including:
* Up to $900 million on intelligence, surveillance, and reconnaissance
aircraft, as well as related support equipment, training, spare and
repair parts, publications and technical data, and other elements of
logistics support;
* Up to $750 million for troop transport helicopters, small arms,
ammunition, vehicles, and associated logistics support; and:
* Up to about $460 million for trucks, vehicles, including light
armored vehicles, and trailers, as well as associated equipment and
services.
According to a March 2007 DOD report,[Footnote 11] MOD also plans to
fund a $160 million maintenance contract through the FMS program from
April 2007 through March 2008.
U.S. and coalition officials stated that the FMS agreement would allow
both MOD and MOI to bypass their ineffective procurement systems and
procure equipment and supplies more quickly and efficiently. However,
in the long term, it is unclear whether Iraq's use of the FMS program
will contribute to the ministries' capacity to improve their
inefficient procurement and contracting systems.
Conclusion:
DOD expects that the Iraqi government will be capable of sustaining its
security forces by 2008. This expectation may not be met given the
security ministries' past problems in spending their capital budgets
and current personnel and logistical weaknesses.
In addition, as we previously reported, the United States and the Iraqi
security ministries are supporting Iraqi forces that have divided
loyalties, varying capabilities, high absenteeism, and questionable
dependability.[Footnote 12]
Mr. Chairman, this concludes my statement. I would be pleased to answer
any questions that you or other members may have at this time.
Agency Comments:
The Multinational Security Transition Command-Iraq provided comments on
a draft of this statement. The head of the Command stated, "The GAO
testimony fails to give the government of Iraq and the two security
ministries any credit for recognizing their financial vulnerabilities
and for progressing far beyond the opaque and irresponsible business
practices of previous interim governments. The 2007 GOI budget was
negotiated responsibly and openly. Though the security budget may
represent 'only' a 15-percent increase from the previous year in
purchasing power, it is nearly a 20-percent share of the national
budget. The government of Iraq has clearly recognized its inability to
responsibly make procurements on behalf of its military and police
forces and so has entered into a $1.7 billion Foreign Military Sales
Agreement with 2006 funding. We anticipate that another $1.55 billion
investment into United States FMS this calendar year."
We added information in this statement to reflect MNSTC-I's comments.
However, both DOD and GAO agree that it will take considerable time and
resources to address the challenges the U.S. and Iraqi governments face
in developing fully functioning security ministries and capable Iraqi
forces.
GAO Contact and Acknowledgments:
For questions regarding this testimony, please call Joseph A. Christoff
at (202) 512-8979 or christoffj@gao.gov. Other key contributors to this
statement were Nanette Barton, Daniel C. Cain, Lynn Cothern, Mattias
Fenton, Elisabeth Helmer, B. Patrick Hickey, Bruce Kutnick, Stephen M.
Lord, Judy McCloskey, Tetsuo Miyabara, Mary Moutsos, and Timothy
Wedding.
FOOTNOTES
[1] We corroborated our analysis and findings with information from
other U.S. agencies, the Iraqi government, and the International
Monetary Fund. While we did not independently verify the precision of
the data on Iraq's budget execution, we found that the data are
sufficiently reliable to show the relative differences in budget
execution across Iraq's ministries and budget categories (e.g., capital
projects versus salaries).
[2] GAO, Operation Iraqi Freedom: Preliminary Observations on Iraqi
Security Forces' Logistical Capabilities, GAO-07-582T (Washington,
D.C.: Mar. 9, 2007).
[3] DOD, Measuring Stability and Security in Iraq: Report to Congress
in Accordance with the Department of Defense Appropriations Act 2007,
Section 9010, Public Law 109-289 (Washington D.C.: Mar. 2, 2007).
[4] The 2006 and 2007 Iraqi budgets are prepared in nominal (not
inflation-adjusted) Iraqi dinars. We have not adjusted them for
inflation either because this would require predicting the level of
inflation in Iraq in 2007. However, a high inflation rate would reduce
the purchasing power of the budget.
[5] GAO, Securing, Stabilizing, and Rebuilding Iraq: Key Issues for
Congressional Oversight, GAO-07-308SP (Washington, D.C.: Jan. 9, 2007).
[6] The budget figures for these categories are based on Iraq's 2006
budget. The budget figures presented in table 1 for both 2006 and 2007
are based on Iraq's 2007 budget categories. Since the composition of
some categories changed, the values in the table do not necessarily
correspond to the values in figures 1 and 2.
[7] DOD reported that the directive transferring responsibility to MOI
did not include FPS forces at the Ministry of Oil, the Ministry of
Electricity, and the Higher Juridical Council.
[8] According to MNSTC-I, the introduction of a human resources
management system at the end of March 2007 will enable MOD to know more
precisely how many serving and non-serving military and civilian staff
it is paying.
[9] See GAO, Operation Iraqi Freedom: Preliminary Observations on Iraqi
Security Forces' Logistical Capabilities, GAO-07 -582T (Washington,
D.C.: Mar. 9, 2007).
[10] Under FMS, defense articles or services may be sold or leased to a
country or international organization only if the President, in
accordance with the Arms Export Control Act, as amended, determines
that the country or organization is eligible. The President determined
that Iraq was eligible to participate in the FMS program on July 21,
2004.
[11] DOD, Measuring Security and Stability in Iraq.
[12] GAO, Stabilizing Iraq: Factors Impeding the Development of Capable
Iraqi Security Forces, GAO-07-612T (Washington, D.C.: Mar. 13, 2007).
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