Rebuilding Iraq
Improved Management Controls and Iraqi Commitment Needed for Key State and USAID Capacity-Building Programs Gao ID: GAO-09-526 June 3, 2009Since 2003, the United States has provided $49 billion to help rebuild Iraq. To build the capacity of Iraq's central and provincial governments to sustain this effort, the United States is implementing programs including Department of State's (State) Provincial Reconstruction Development Committee (PRDC) and the U.S. Agency for International Development's (USAID) National Capacity Development (NCD). The use of key management controls, such as appropriate organizational structure and program monitoring, helps ensure programs achieve their objectives. Through field visits in Iraq, interviews with program officials, analyses of official reports, and examination of a sample of projects, we assessed whether the PRDC and NCD's management controls support the programs' objectives of building the capacity of Iraq's government. We also assessed Iraq's commitment to sustaining these U.S. programs.
Through the PRDC program, State and USACE work with Iraqis in the provinces to develop proposals and undertake small-scale projects such as building schools, repairing roads, and developing water facilities. However, weaknesses in State's management controls hinder achieving the program objective to build provincial government capacity. First, the program involves multiple organizations and a complex process but had no clearly identified program manager until May 2009 when State designated one in response to GAO's findings. Second, State lacks a performance monitoring system that measures progress toward building provincial capacity to deliver essential services. Third, the program's guidelines and policies have changed frequently, but State did not adequately communicate or consult with the USACE, the program implementer, about these changes. Finally, USACE's financial controls for the timekeeping process did not ensure adequate documentation of time and attendance records for labor charges on projects. USAID's management controls generally supported the NCD program's objective of building ministry capacity by training Iraqi employees in administrative skills such as planning and budgeting and supporting Iraqi training centers. First, USAID's organizational structure is clear, including who is responsible for overall program management. Second, in response to an audit report, USAID narrowed the NCD program objective to improving ministries' administrative capabilities and clearly linked them to measures of outcome. Some of these measures include Iraqi ministries' execution of their capital budgets, including the number of capital projects approved and the rate of spending on capital projects. USAID reported it was on track to meet or exceed its 2008 targeted results. However, as of March 2009, final data on results were not available. Third, USAID's guidelines and program expectations for NCD are documented, clear, and communicated throughout the organization. However, with regard to financial controls, GAO found that USAID officials did not confirm receipt of goods and services for invoices totaling about $17 million of $79 million, prior to payment. The officials did not always document reasons such as security risks, when confirmation was not possible. Iraq has committed to sustaining U.S.-funded programs and sharing in their costs, but actual budget expenditures for such activities are unclear. For the PRDC program, 16 of the 40 projects in our sample had evidence that the Iraqi government agreed to sustain the project; however, the records did not specify actual financial or budget commitments. For the NCD program, the Iraqi government is supporting the program by providing trainers and allocating funds in their 2009 budgets for training center equipment and other NCD efforts. These funds are to be spent in 2009. We have previously reported that the Iraqi government includes funding in its budgets for investment activities such as operating and maintaining U.S.-funded reconstruction projects and training, but does not subsequently expend these funds.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-09-526, Rebuilding Iraq: Improved Management Controls and Iraqi Commitment Needed for Key State and USAID Capacity-Building Programs
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
June 2009:
Rebuilding Iraq:
Improved Management Controls and Iraqi Commitment Needed for Key State
and USAID Capacity-Building Programs:
GAO-09-526:
GAO Highlights:
Highlights of GAO-09-526, a report to congressional committees.
Why GAO Did This Study:
Since 2003, the United States has provided $49 billion to help rebuild
Iraq. To build the capacity of Iraq‘s central and provincial
governments to sustain this effort, the United States is implementing
programs including Department of State‘s (State) Provincial
Reconstruction Development Committee (PRDC) and the U.S. Agency for
International Development‘s (USAID) National Capacity Development
(NCD).
The use of key management controls, such as appropriate organizational
structure and program monitoring, helps ensure programs achieve their
objectives. Through field visits in Iraq, interviews with program
officials, analyses of official reports, and examination of a sample of
projects, we assessed whether the PRDC and NCD‘s management controls
support the programs‘ objectives of building the capacity of Iraq‘s
government. We also assessed Iraq‘s commitment to sustaining these U.S.
programs.
What GAO Found:
Through the PRDC program, State and USACE work with Iraqis in the
provinces to develop proposals and undertake small-scale projects such
as building schools, repairing roads, and developing water facilities.
However, weaknesses in State‘s management controls hinder achieving the
program objective to build provincial government capacity. First, the
program involves multiple organizations and a complex process but had
no clearly identified program manager until May 2009 when State
designated one in response to GAO‘s findings. Second, State lacks a
performance monitoring system that measures progress toward building
provincial capacity to deliver essential services. Third, the program‘s
guidelines and policies have changed frequently, but State did not
adequately communicate or consult with the USACE, the program
implementer, about these changes. Finally, USACE‘s financial controls
for the timekeeping process did not ensure adequate documentation of
time and attendance records for labor charges on projects.
USAID‘s management controls generally supported the NCD program‘s
objective of building ministry capacity by training Iraqi employees in
administrative skills such as planning and budgeting and supporting
Iraqi training centers. First, USAID‘s organizational structure is
clear, including who is responsible for overall program management.
Second, in response to an audit report, USAID narrowed the NCD program
objective to improving ministries‘ administrative capabilities and
clearly linked them to measures of outcome. Some of these measures
include Iraqi ministries‘ execution of their capital budgets, including
the number of capital projects approved and the rate of spending on
capital projects. USAID reported it was on track to meet or exceed its
2008 targeted results. However, as of March 2009, final data on results
were not available. Third, USAID‘s guidelines and program expectations
for NCD are documented, clear, and communicated throughout the
organization. However, with regard to financial controls, GAO found
that USAID officials did not confirm receipt of goods and services for
invoices totaling about $17 million of $79 million, prior to payment.
The officials did not always document reasons such as security risks,
when confirmation was not possible.
Iraq has committed to sustaining U.S.-funded programs and sharing in
their costs, but actual budget expenditures for such activities are
unclear. For the PRDC program, 16 of the 40 projects in our sample had
evidence that the Iraqi government agreed to sustain the project;
however, the records did not specify actual financial or budget
commitments. For the NCD program, the Iraqi government is supporting
the program by providing trainers and allocating funds in their 2009
budgets for training center equipment and other NCD efforts. These
funds are to be spent in 2009. We have previously reported that the
Iraqi government includes funding in its budgets for investment
activities such as operating and maintaining U.S.-funded reconstruction
projects and training, but does not subsequently expend these funds.
What GAO Recommends:
GAO recommends that State address management control weaknesses such as
developing measures of effectiveness; that the U.S. Army Corps of
Engineers (USACE) and USAID improve financial controls; and that State
and USAID document that Iraq shares the cost of these efforts. State
and the USACE agreed with our recommendations. USAID is considering our
financial control recommendations; GAO considers these important to
implement.
View [hyperlink, http://www.gao.gov/products/GAO-09-526] or key
components. For more information, contact Joseph A. Christoff at (202)
512-8979 or christoffj@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
State Cannot Ensure That the PRDC Program Is Achieving Its Objective to
Build Capacity:
NCD Management Controls Support the Goal of Building the Capacity of
Iraqi Ministries but Do Not Adequately Verify Expenditures:
Iraq Has Agreed to Sustain the Programs and Is Providing Some Support
for NCD, but Budget Expenditures Are Unclear:
Conclusion:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of State:
Appendix III: Comments from the U.S. Army Corps of Engineers:
Appendix IV: Comments from the U.S. Agency for International
Development:
Appendix V: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Status of $700 Million PRDC Program Funds, Fiscal Years 2006
and 2007:
Table 2: Examples of NCD Outcome Result Indicators Fiscal Year 2008:
Figures:
Figure 1: PRDC-Funded Electric Substation in Muthanna Province (U.S.
provided $1.2 million in funds for this project):
Figure 2: NCD-Funded Equipment for Ministry of Planning and Development
and Cooperation:
Figure 3: PRDC Program Organizational Structure and Process:
Figure 4: NCD Organization Chart:
Figure 5: Training Iraqis in Computer Skills at the National Center for
Consultancy and Management Development:
Abbreviations:
ESF: Economic Support Fund:
GRD: Gulf Regional Division:
IRRF: Iraq Relief and Reconstruction Fund:
ITAO: Iraq Transition Assistance Office:
OPA: Office of Provincial Affairs:
NCD: National Capacity Development:
PPM: Provincial Program Manager:
PRDC: Provincial Reconstruction Development Committee:
PRT: Provisional Reconstruction Team:
SIGIR: Office of Special Inspector General for Iraq Reconstruction:
USACE: U.S. Army Corps of Engineers:
USAID: U.S. Agency for International Development:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
June 3, 2009:
Congressional Committees:
Since 2003, the United States has provided $49 billion to rebuild and
stabilize Iraq, including the reconstruction of large water and power
plants. Since fiscal year 2008, U.S. agencies have stated that
reconstruction has ended and the focus will be on helping Iraq build a
sustainable, accountable, and responsive government that can maintain
and continue U.S. efforts. Two programs intended to build the capacity
of Iraq's government are the Department of State's (State) Provincial
Reconstruction Development Committee (PRDC) program and the U.S. Agency
for International Development's (USAID) National Capacity Development
(NCD) program. The PRDC program funds and implements Iraqi proposals
for small-scale projects such as schools, road repair, and water
facilities in Iraq's provinces. By having Iraqi officials develop and
agree on proposals, State intends to build provincial and local
government capacity to identify, plan, and deliver essential services.
The NCD program trains Iraqi government employees in administrative
skills such as planning and budgeting and supports Iraq's national and
regional training centers and individual ministry training programs.
Finally, the NCD program advises Iraq's national ministries, including
the electricity, oil, water, and planning ministries. The PRDC and NCD
programs are funded through the Economic Support Fund (ESF) for Iraq.
The PRDC program received $700 million in ESF funds between November
2006 and February 2008.[Footnote 1] The NCD program received $209
million in ESF funds in July 2006, and another $59.8 million in
September 2008 and is scheduled to end in January 2011.[Footnote 2]
A key factor in U.S. agencies' ability to achieve their missions and
improve accountability is the implementation of appropriate management
controls. Management controls help provide reasonable assurance that
programs are focused on and can achieve their objectives. Key controls
include (1) a clear organizational structure with adequate managerial
and staff capacity that establish an effective control environment; (2)
monitoring systems that track progress toward achieving desired
outcomes; (3) policies and procedures that ensure management directives
are carried out and the prompt communication of those policies and
procedures; and (4) financial controls that accurately record and
document financial transactions in a timely manner.[Footnote 3]
This report uses management control elements as criteria to evaluate
the PRDC and NCD programs. Specifically, we assessed whether (1) PRDC's
management controls support the objective of building provincial
government capacity, (2) NCD management controls support the objective
of improving the capabilities of national ministries to develop budgets
and programs, and (3) State and USAID ensure that the Iraqi government
is committed to sustaining the PRDC and NCD program efforts. Due to
broad congressional interest in issues related to Iraq, we completed
this report under the Comptroller General's authority to conduct
evaluations on his own initiative.
To assess the management controls, we analyzed project contracts,
program files, agency reports, guidelines, financial and programmatic
databases, and assessments for both the PRDC and NCD programs. We
interviewed officials at State, USAID, and U.S. Army Corps of Engineers
(USACE) in Washington, D.C.; Millington, Tennessee; and Winchester,
Virginia. In Iraq, we interviewed officials in the Iraq Transition
Assistance Office (ITAO), the Office of Provincial Affairs (OPA), the
Gulf Regional Division (GRD) and its district offices, at USAID in
Baghdad, and the NCD training compound in Karada. We also selected 40
PRDC construction projects that were initiated with fiscal years 2006
and 2007 funds to examine the project monitoring conducted, the process
used to implement the projects, and challenges to implementing them. We
visited several projects in Babil, Baghdad, Basra, Muthanna, and Thi
Qar provinces to verify the information and observe project
implementation. To evaluate U.S. efforts to ensure Iraqi government
commitment to sustaining U.S. program efforts, we analyzed two elements
of commitment--letters or other evidence that the Iraq government
pledged to sustain or maintain the programs and projects and evidence
that the Iraqi government is sharing the cost of U.S. efforts.
We conducted this performance audit from March 2008 to June 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. A detailed description of
our scope and methodology is included in appendix I.
Results in Brief:
Through the PRDC program, State and USACE work with Iraqis in the
provinces to develop proposals and undertake small-scale projects such
as building schools, repairing roads, and developing water facilities.
However, State's PRDC program has management control weaknesses that
hinder the achievement of its program's objective of building Iraqi
provincial government capacity. First, the program involves multiple
organizations in a seven-step process; Iraqi officials develop
proposals, the State embassy team approves them, and USACE implements
the projects. However, no single program manager was clearly
responsible for the overall management of the program until May 2009,
when State designated one in response to GAO's findings. Without a
manager to oversee the entire program, it is difficult to identify
systemic problems and solutions and ensure provincial government
capacity is built. Second, State lacks a performance monitoring system
that measures outcomes for the PRDC program. State measures PRDC
program accomplishments by the number of projects completed and awarded
and the amount of funds disbursed. However, this measure does not
provide evidence of the program's effectiveness in building provincial
government capacity to deliver services. Third, the program's
guidelines and policies have changed frequently, as has the program's
direction, but State did not adequately communicate or consult with
USACE, the project implementer, about these changes. For example, in
January 2008, State shifted the focus of the program from building
infrastructure to maintaining and sustaining projects. However,
according to USACE officials, State did not consult with the USACE
until September 2008 about how to implement these changes. As a result,
USACE developed over 100 projects that were no longer the focus of the
program. Finally, USACE's financial controls for the PRDC timekeeping
process did not ensure adequate documentation of time and attendance
records used for labor charges on projects. We found 26 percent of the
labor charges in our sample had inadequate documentation. As of May
2009, USACE was implementing initiatives to correct this and other
deficiencies.
USAID's management controls for the NDC program generally support the
program's objective of building the capacity of Iraqi ministries, but
there are weaknesses in some internal controls over contract payment.
First, USAID's organizational structure clearly shows the units
responsible for training Iraqis, developing Iraq's training centers,
and consulting with the ministries. The reporting chain up to the USAID
official responsible for the overall program is clear. As of February
2009, the program had 278 contract staff, about 70 percent of whom were
Iraqi nationals who worked in Baghdad, in the provinces, and at the
ministries. Second, to improve the NCD program and better link the
objectives to actual program results, USAID responded to a 2008 USAID
Inspector General review that found the program lacked indicators for
improving the ministries' delivery of services. USAID realized that the
objective of improving service delivery was beyond the scope of the
program and narrowed the objective to improving the ministries'
administrative capabilities. As of September 2008, some indicators of
program impact are how Iraqi ministries execute their capital budgets,
including the number of capital projects approved and the rate of
capital project expenditures. Third, USAID's guidelines and program
expectations are documented and clear, and these are communicated
throughout the organization. In contrast, there are weaknesses in some
NCD financial controls for contract payment. For example, invoices of
about $17 million of a total $79 million were not supported by a
confirmation of receipt of goods and services prior to payment and
there is no requirement to document reasons that preclude confirmation.
Also, USAID did not adequately document that it reviewed the
contractor's' invoices prior to payment. In November 2008, USAID began
implementing initiatives to document the review of contractor invoices.
Iraq has committed to sustaining U.S.-funded projects and programs and
sharing in their costs, but actual Iraqi expenditures for this purpose
are unclear. For the PRDC program, 16 of the 40 projects we reviewed
had evidence that the Iraqi government agreed to sustain the project.
[Footnote 4] However, the letters did not specify financial resources
or other support that would be provided. In addition, State could not
provide evidence that the Iraqi government followed through and
budgeted or provided funds to sustain these projects. For the NCD
program, two Iraqi ministries signed memorandums of understanding to
support the program, eight other ministries drafted capacity-building
strategies with NCD, and five ministries assumed the NCD training using
their own instructors. In addition, several ministries committed to and
allocated funds in their 2009 budgets to continue the NCD training,
provide equipment for training centers, and share the cost of other NCD
initiatives. However, we have previously reported that for 2005 to 2008
budget years Iraq did not spend all of its budgeted funds for
investment activities, including maintenance and training.
To help these programs achieve their objectives of building the
capacity of the provincial governments and central ministries,
* We recommend that, for the PRDC program (1) the Secretary of State
ensure that management control weaknesses are addressed in the PRDC
program by designating an overall program manager; developing outcome
measures of effectiveness; and documenting actual Iraqi government
budget allocations and expenditures for fiscal year 2007 PRDC projects;
and (2) the Secretary of the Army ensure that USACE initiatives to
improve the financial controls for the timekeeping process correct the
deficiencies discussed in this report.
* We recommend that, for the NCD program, the USAID Administrator (1)
revise USAID policy and procedures for confirming receipt of goods or
services applicable to the NCD program in Iraq to include (a)
clarifying that confirmation of receipt of goods/or services must be
noted separately from the administrative approval or (b) documenting
reasons precluding actual confirmation such as prohibitive personal
danger or security protection costs; (2) ensure that USAID/Iraq
initiatives to improve the documentation of the voucher examiner's
required review of contractor invoices correct the deficiencies
discussed in this report; and (3) document actual Iraqi government
budget allocations and expenditures to ensure funds committed to
support NCD activities are expended.
State, USACE, and USAID provided written comments on a draft of this
report, which we have reprinted in appendixes II, III, and IV. The
USACE also provided technical comments, which we have incorporated
where appropriate.
State agreed with our recommendation to address management control
weaknesses in the PRDC program. State commented that it had clarified
and confirmed ITAO's overall responsibility for the PRDC program and
that a program manager has now been designated. State also accepted our
recommendation to develop outcome measures of effectiveness for PRDC
and clarified that its reporting of projects approved and funds
dispersed in the 2207 report to Congress was not intended to be a
measure of PRDC's success. State further agreed to report on Iraqi
government contributions to PRDC projects in its next cost matching
report to Congress.
USACE agreed with our draft recommendation to strengthen its financial
controls for payroll and provided additional information about its
initiatives to improve its timekeeping process. We subsequently refined
our recommendation to state that the Secretary of the Army ensure that
USACE initiatives to improve the timekeeping process correct the
deficiencies discussed in the report. USACE agreed to this
recommendation. In technical comments, USACE noted substantial
discrepancies--amounting to millions of dollars and over 100 projects-
-between its financial and project data and ITAO's data that we
included in our draft report. In reconciling the conflicting data, ITAO
agreed to revise its April 3, 2009, Essential Indicators Report to
reflect the corrected data.
The U.S. Agency for International Development commented that it is
taking under advisement our recommendation to require confirmation of
receipt of goods and services and that it has already implemented our
recommendation to document the voucher examiner's review of contract
invoices. The agency agreed to implement our recommendation to document
the government of Iraq's commitments and expenditures associated with
the NCD program.
Background:
To help Iraq assume responsibility for sustaining U.S. reconstruction
efforts, U.S. agencies are implementing programs to build the capacity
of Iraq's central and provincial governments, including State's PRDC
program to strengthen the capacity of Iraqi provincial governments to
deliver essential services such as water and electricity and USAID's
NCD program to assist the Iraqi government in improving the
administrative capacity of several ministries and executive offices
through training.
Provincial Reconstruction Development Committee Program:
In 2005, the United States created PRDCs to give the provinces a voice
in deciding how to spend U.S. reconstruction funds for Iraq. The PRDCs
comprise members of Iraq's Provincial Councils, representatives of the
governor, and the Director Generals of Iraq's Central Ministries. The
PRDC role is to identify needs within their province, prioritize the
needs, and develop a list of projects to address those needs. The
primary U.S. objective of the PRDC program is not reconstruction but
strengthening the capacity of Iraqi provincial governments to develop
and implement essential service projects, according to State.
Congress appropriates funds to State, which are used, for the PRDC
program to State, and the USACE's Gulf Regional Division (GRD)
implements the program. ITAO coordinates and oversees the selection
process for specific projects and according to State provides overall
program management, and GRD provides project management.[Footnote 5]
The Office of Provincial Affairs within the U.S. Embassy Baghdad
provides policy guidance and support to the Provincial Reconstruction
Teams (PRT) program. The PRTs serve as the coordinating body for this
funding, assisting PRDCs with identifying, prioritizing, and developing
project request packages. Each PRDC creates a prioritized list of
reconstruction projects that address provincial needs; these are then
discussed in a public forum. The project list is submitted to the
Provincial Council for review and approval. Approved projects are
forwarded to the PRT provincial program manager who reviews them to
ensure they meet U.S. government policies and legal requirements. The
PRT provincial program manager forwards the list to ITAO for review and
approval. The National Embassy Team reviews and approves projects. The
Gulf Region Division (GRD) scopes, estimates, bids, and awards project
contracts. As the implementer, GRD assists ITAO by providing program
and project oversight, which includes awarding contracts and providing
quality assurance and quality control. The PRT engineer provides
teaching, mentoring, training, guidance, and support for the PRDCs in
preparing scopes of work, bills of quantities, estimates, and project
nomination forms. The program funds small-scale projects proposed by
the PRDCs, including water and electric plants, roads, bridges,
schools, health clinics, airports, and fire stations. For fiscal year
2007 funds, the PRDC program shifted focus to provide funds to help
provincial governments sustain and plan essential service projects.
Figure 1 is an example of a PRDC project we visited in Iraq in November
2008.
Through three interagency agreements between State and USACE, State
obligated $700 million for fiscal years 2006 and 2007 to reimburse the
USACE for costs incurred and awards made for the PRDC program.
Specifically, State obligated $315 million and $385 million for fiscal
years 2006 and 2007, respectively, under the agreements.
Figure 1: PRDC-Funded Electric Substation in Muthanna Province (U.S.
provided $1.2 million in funds for this project):
[Refer to PDF for image: photograph]
Source: GAO.
[End of figure]
As table 1 shows, for fiscal year 2006, USACE had entered into
contracts to implement the program totaling about $259 million and
about 135 out of 213 projects had been completed by April 2009,
according to GRD. For fiscal year 2007, USACE had entered into
contracts amounting to about $207 million and about 40 out of 185
projects had been completed by April 2009, according to GRD.
Table 1: Status of $700 Million PRDC Program Funds, Fiscal Years 2006
and 2007 (Millions of U.S. dollars):
Total funds obligated:
Fiscal Year 2006: $315;
Fiscal Year 2007: $385.
Projects approved by National Embassy Team:
Fiscal Year 2006: Cost: $259.6;
Fiscal Year 2006: Projects: 213;
Fiscal Year 2007: Cost: $262.3;
Fiscal Year 2007: Projects: 185.
Projects entered into contracts:
Fiscal Year 2006: Cost: $258.6;
Fiscal Year 2006: Projects: 210;
Fiscal Year 2007: Cost: $207;
Fiscal Year 2007: Projects: 160.
Projects started:
Fiscal Year 2006: Cost: $256.9;
Fiscal Year 2006: Projects: 208;
Fiscal Year 2007: Cost: $167.2;
Fiscal Year 2007: Projects: 145.
Projects completed:
Fiscal Year 2006: Cost: $129.1;
Fiscal Year 2006: Projects: 135;
Fiscal Year 2007: Cost: $25.4;
Fiscal Year 2007: Projects: 40.
Source: USACE GRD.
Notes: Data as of April 2009 and includes USACE labor costs. Planning
and design funds obligated for fiscal year 2006 are $3.0 million and
for fiscal year 2007 are $7.7 million.
[End of table]
National Capacity Development Program:
In July 2006, USAID created the National Capacity Development (NCD)
program to build the capacity of Iraq's central government. The program
focuses on building the skills and capabilities of several Iraqi
government executive offices, such as the Prime Minister's Office, and
10 key Iraqi ministries, such as the Ministries of Electricity, Oil,
and Water.[Footnote 6] Key tasks include (1) raising the skill levels
of Iraqi public managers in project management, fiscal management,
human resources, budgeting, and information technology; (2) advising
key ministries in strategy development, program planning, and capacity
building; and (3) expanding the Iraqi government's training capacity at
its national training center and in the provinces. Additional
activities for the program included providing equipment, furniture, and
support to develop Iraq's training centers, and providing overseas
scholarships to Iraqi civil servants. To help reform the Iraqi
government's procurement system, USAID purchased equipment for
administrative tribunal courtrooms at the Ministry of Planning and
Development Cooperation, which rules on disputes over Iraqi government
contract awards (see figure 2).
Figure 2: NCD-Funded Equipment for Ministry of Planning and Development
and Cooperation:
[Refer to PDF for image: photograph]
Source: USAID.
[End of figure]
USAID is responsible for the NCD program and has hired a contractor,
Management Systems International, to implement the program.[Footnote 7]
The initial contract was for $165 million for a 3-year period. Various
modifications increased the program funding, changed the scope of work,
and extended the completion date to January 31, 2011. A modification
made in September 2008 increased the total contract amount to $339
million. According to the USAID's financial management system, as of
April 2009, the program has obligated $259 million, and of that amount
about $152 million has been disbursed.
State Cannot Ensure That the PRDC Program Is Achieving Its Objective to
Build Capacity:
State's PRDC program has management control weaknesses in organization,
monitoring, and communication that hinder the achievement of its goal
of building provincial government capacity. First, State's organization
of the program does not clearly define who is responsible for the
overall management of the program, and the multistep process for
implementing the program adds to this ambiguity. Second, State lacks a
performance monitoring system that measures progress toward building
the capacity of provincial governments. Third, State's guidelines and
policies have changed frequently, as has the direction of the program,
but State did not fully communicate or consult with program
implementers about these changes. Finally, USACE labor costs for the
program are not always supported by adequate documentation, increasing
the risk that USACE' requests to State for reimbursement of labor costs
may be overstated or understated.
PRDC's Organization Does Not Clearly Delineate Responsibility, and the
Program Has Experienced Staffing Challenges:
Management control standards require a well-managed and properly
structured organization that clearly delineates authority and
responsibility. In addition, management control standards call for
qualified staff in place without excessive personnel turnover in key
functions, such as program management, to implement proper management
controls.
State's PRDC Program Lacked a Manager to Oversee Program Challenges:
State's PRDC program has multiple entities responsible for managing
parts of its complicated, multistep process to approve and implement
projects. However, no single program manager was clearly responsible
for overall management of the program until May 2009, when State
designated one in response to GAO's findings. The PRDC process for
approving and implementing projects includes at least 7 entities and 7
steps involving project development, project management, and project
execution. Figure 3 illustrates the PRDC's complex organizational
structure and process as reported by State.
Figure 3: PRDC Program Organizational Structure and Process:
[Refer to PDF for image: illustration and three photographs]
Project Development:
Government of Iraq Ministries[A]:
* Coordination with ITAO (Iraq Transition Assistance Office)[B];
* Standards, Operations and maintenance, as well as coordination of
requirements occurs with PDRC (Provincial Recontruction Development
Committee[A] (DGs));
1) PDRC (Provincial Recontruction Development Committee[A] (DGs)):
nomination forwarded to Provincial Council[A];
2) Provincial Council forward the nomination to the PRT (Provincial
Reconstruction Team)[B]; The PRDC and PRT interact on requirements
development and execution management;
Project Execution:
3) PRT (Provincial Reconstruction Team)[B]: forwards nomination to ITAO
(Iraq Transition Assistance Office)[B];
Project Management:
4) ITAO (Iraq Transition Assistance Office)[B]: Interacts with the
National Embassy Team[B], which includes: Director ITAO; ITAO
CFO/Budget; ITAO Ops; OPA; GRD.
5) National Embassy Team[B]: forwards approval to GRD (Gulf Region
Division[B]; GRD and ITAO interact on funding obligations 632b;
Project Execution:
6) GRD forwards approval to GRx[B] (Gulf Region: North/Central/South);
7) GRx forwards contracts to: Contractors/vendors[A];
Contractors/vendors[A]: delivery occurs (indicated by photographs).
Source: Chart: DEpartment of State; photographs: GAO.
[A] U.S. entities.
[B] Iraq and non-U.S. entities.
Note: According to the Gulf Regional Division, the organization has
been excluded from both the National Embassy Team review and approval
meetings.
[End of figure]
Until May 2009, no single entity was accountable for the program in its
entirety or responsible for ensuring that the program's objectives were
met. For instance, although ITAO has a PRDC program manager, in
response to an October 2008 report on ESF in Iraq, State indicated that
ITAO coordinates and oversees project selection.[Footnote 8] The other
entities also do not have responsibility for managing and ensuring that
the overall program objectives are met. For instance, the Provincial
Reconstruction Teams (PRT), through the PRT provincial program manager
and PRT engineer, focus on helping the PRDC identify, prioritize, and
develop project proposals. The PRDCs create prioritized lists of
reconstruction projects that are submitted to the Provincial Council
for review and approval. According to a State document, the PRT
provincial program manager guides the process; however, a PRT
provincial program manager is located at each PRT and therefore guides
the process for that individual PRT and does not manage the entire
process. ITAO and the National Embassy Team review and approve projects
and then forward these to the program implementer, the USACE Gulf
Regional Division (GRD). GRD focuses on scoping projects, estimating
their costs, receiving bids, awarding projects, and providing quality
assurance and quality control. As a result, no entity was responsible
for managing the overall program and ensuring the program's goals are
achieved.
Without an overall program manager, no one oversees the entire program
process and has overall responsibility for addressing systemic problems
such as coordination issues. For instance, although coordination
between U.S. and Iraqi officials is essential to building provincial
capacity, it remains one of the program's key challenges. In our sample
of 40 PRDC projects, we found that about 16 projects had problems
coordinating with local Iraqi authorities. For example, determining and
verifying land ownership is a major challenge in Iraq and is one of the
most common causes for delays in awarding project contracts. In another
instance, a $1.5 million potable water network to service Baghdad's
Mansour district lost nearly 7 months waiting for the necessary
building permits and test results. Other coordination challenges have
also resulted in delays, cost increases, and project terminations. For
example, on a $1.4 million Baghdad water network project, a local
government office did not follow established guidance in requiring
certain technical tests to be performed and rejected subsequent test
results because they were conducted by an independent laboratory. The
municipality suspended all work at the site and threatened to arrest
personnel who continued to work. With about $400,000 already spent, the
project is in the process of being terminated. In May 2009, State
designated ITAO as the program manager in response to one report
finding.
PRDC Has Experienced Staffing Changes and Shortages:
Both ITAO and GRD have staffing challenges. Our review of ITAO
documents found that ITAO's PRDC point of contact, who coordinates and
oversees the selection process for specific projects, changed six times
since December 2006. Specifically, from January 2008 to September 2008,
ITAO had three different PRDC managers. According to GRD, these
frequent changes in ITAO's PRDC managers contributed to inconsistent
information about program direction. For example, in January 2008, when
the PRDC program shifted from building infrastructure to helping
provincial governments in sustaining and planning essential services,
ITAO failed to consult GRD about developing a new program management
plan until September 2008.
Gulf Region South officials stated that they have had difficulty
obtaining staff with the skills and training to manage reconstruction
projects. To address staffing shortages, Gulf Region South hired Iraqi
associates to inspect projects in the field. In addition, Iraqi
associates have been hired to contribute to a trained local work force,
build local infrastructure, and ensure continued project
sustainability, according to USACE officials. During our site visits,
we observed that the Iraqi engineers were able to visit the sites more
frequently, and because they spoke Arabic, they could interact with the
Iraqi contractors. Senior GRD management stated that Iraqi workers have
been essential, particularly when security conditions deteriorated.
PRDC Program Lacks a Monitoring System to Track Performance Toward
Building Provincial Capacity:
Standards for management control require performance measures and
indicators to monitor progress in achieving program objectives.
The PRDC program has no performance measurement system to assess
whether the program is achieving its objective of helping build
provincial government capacity to deliver essential services, according
to State officials. According to an October 2008 State report, PRDC
program accomplishments are measured by the number of projects
completed and awarded and amount of funds disbursed.[Footnote 9]
However, this is a measure of State's ability to obtain and use U.S.
funds. The indicator does not provide information about the extent to
which U.S. efforts build the capacity of provincial governments to
deliver essential services, particularly since only U.S. funds are
involved in program funding. Further guidance for PRDC states that the
program's capacity building will be demonstrated when operations and
maintenance services and provincial planning projects are identified
and programmed into the provincial budgets for 2008. However, at the
time our review, ITAO and the Office of Provincial Affairs (OPA)
[Footnote 10] could not provide us with this information.
PRT engineers are responsible for assisting PRDC officials by teaching,
mentoring, training, guiding, and supporting the preparation of all
project scopes of work, bills of quantities, estimates, and project
nomination forms. During site visits, we found that PRT engineers
conducted training through the local GRD district offices to help Iraqi
contractors prepare technical contract proposals. Similarly, OPA
provided anecdotal examples to show how PRT engineers are building
capacity in two provinces. However, these examples cannot be reliably
used to track progress and outcomes in building capacity.
Although there is no system to monitor program outcomes, GRD tracks
project implementation through the Resident Management System. For
example, based on a random sample of 40 projects, we found that 16
projects had missed their milestones; 9 projects were on or ahead of
schedule; 6 projects had construction canceled or terminated; and 6
projects had been completed and accepted by the U.S. government for
transferring to the Iraqi government. The most common challenges cited
in these projects were contractor inefficiency, poor security, and
coordination with local Iraqi authorities. Over two-thirds of the 40
projects we analyzed described numerous problems with contractors'
work. The challenges of conducting reconstruction work in a conflict
environment hindered PRDC project execution in nearly half of the
projects in our sample. For example, according to officials, dangerous
security conditions in Maysan province prevented regional office U.S.
personnel from visiting any projects in that province for an 18-month
period ending in September 2008. In December 2008, a senior official at
the U.S. embassy in Baghdad said the embassy was creating an official
process for obtaining the status of all U.S.-funded reconstruction
projects with problems that would include a review of the project
schedule, budget, project status, and project quality. However, these
indicators will not monitor or assess U.S. efforts to build the
capacity of provincial government officials to deliver essential
services.
In commenting on a draft of the report, State agreed with the need to
develop outcome measures of effectiveness. State proposed measures to
track the length of project development, procurement, contracting,
execution, and oversight process to see if it improves over time, as
well as the quality of the projects completed. Other possible measures
included the degree of constituent input in the project selection
process, the degree of transparency and anti-corruption measures in the
contracting process, the separation of powers between the executive and
legislative, and the rate of Ministries, to follow-through to budget
for and sustain the projects.
Frequent Changes in PRDC Guidelines Were Not Adequately Communicated:
Effective management controls call for the design and implementation of
policies and procedures to ensure that management directives are
carried out and that information is communicated clearly and in a
timely fashion.
ITAO issued PRDC program guidelines through action memorandums that
specified funding allocations, types of projects that would be
approved, priorities, and the general process for project approval.
However, the guidelines were revised or clarified six times between
August 2006 and July 2008. The program implementer--GRD--expressed
concern about these frequent changes, particularly the lack of
communication and consultation. In addition, according to a senior GRD
official, ITAO had not communicated adequately and consistently about
the guidelines and changes. For example, in January 2008, State shifted
the focus of the PRDC program from building infrastructure to
maintaining and sustaining projects. According to ITAO officials, State
emphasized sustaining local operations and maintenance services of U.S.-
procured infrastructure, strategic planning for the infrastructure
projects, and capacity building for provincial governments'
professional staff. However, according to GRD officials, ITAO waited
until September 2008 to consult with GRD on developing a new management
plan to implement these changes. As a result, according to GRD
documents, in 2008, the GRD district offices developed 109 project
proposals with a value of $158 million. According to a senior GRD
official, staff wasted resources developing these infrastructure
project proposals because these projects were no longer the focus of
the program.
In commenting on a draft of this report, State indicated that GRD was
involved in planning at an early date and that GRD received copies of
all changes to the PRDC program via memos. However, according to GRD
officials, in July 2008, ITAO directed the National Embassy Team to
approve projects for award without any GRD involvement in the approval
process. As of May 2009, GRD officials stated that the limited
involvement of GRD in the strategic planning process for the PRDC
program has hindered the ability of GRD to understand the shifts in
program focus and realign resources in an efficient and effective
manner to meet the needs of State Department and the program.
PRDC Labor Cost Could Be Overstated or Understated:
Standards for internal control call for federal agencies to retain
evidence that transactions and events are appropriately classified and
promptly recorded throughout the life cycle of each transaction,
including final classification in summary records from which reports
are prepared.
Our tests of USACE's established controls to help ensure financial
accountability for the PRDC program identified deficiencies in the
maintenance of adequate documentation to support labor costs that USACE
charged to PRDC projects. Inadequate documentation highlights a control
weakness that may cause the USACE reported cost for specific PRDC
projects to be inaccurate. Further, USACE's requests to State for
reimbursement of labor costs may be overstated or understated. Our
review of time and attendance records for 152 USACE employees, totaling
about $2.5 million in net labor charges to 36 PRDC projects, disclosed
that about 26 percent of these charges did not have adequate supporting
documentation.[Footnote 11]
Our review disclosed that APPO timekeepers' files did not contain
complete time and attendance records. USACE procedures require
timekeepers in Iraq to send time and attendance documentation to the
Administrative Personnel Processing Office (APPO) in Winchester,
Virginia, for data entry into the USACE financial management system and
retention in APPO files. We also found instances where the hours on the
time and attendance records that were located did not agree with the
hours entered into the USACE financial management system. However,
neither we nor the APPO staff could readily determine the reason for
these inconsistencies. Furthermore, a November 2008 APPO review of time
and attendance practices in Iraq also identified problems regarding the
accuracy of labor hour charges to PRDC projects.[Footnote 12] For
example, the review disclosed that employee supervisors did not
routinely verify that hours entered into the financial management
system agreed with hours on original time and attendance records. USACE
officials also stated that, although certain managers were authorized
to correct labor charges that were incorrectly charged to a project in
a prior pay period, evidence of the correction was not required to be
maintained in the APPO timekeepers' files because APPO timekeepers were
not responsible for recording these corrections in the financial
management system. Additionally, an APPO official stated that, in 2006
and 2007, APPO timekeepers sometimes discarded original time and
attendance records when corrected time and attendance records were
subsequently received to avoid having two or more time and attendance
records for the same pay period. Although the official explained that
the current procedure is to attach corrected copies of time and
attendance documentation to the original documentation, these
procedures have not been formally documented. Discarding original time
and attendance records precludes the ability to determine why
corrections were made to the original entry.
GRD program managers use financial reports derived, in part, from time
and attendance records and adjustments to monitor a project's financial
status and labor resources expended. In addition, USACE uses time and
attendance data to bill State for reimbursement of PRDC labor costs in
accordance with an interagency agreement between the USACE and State
that provides funding to USACE to implement the PRDC program. The APPO
November 2008 review noted that some steps were being initiated to help
improve the documentation of time and attendance transactions, which,
if successfully implemented, should help improve time and attendance
internal controls.
However, as of January 2009, APPO informed us that time and attendance
reporting problems continue to be identified. To help improve
timekeeping, in April 2009, the GRD Finance and Accounting Officer
informed us that the timekeeping function would be moved from APPO to
the GRD office in Winchester, Virginia, by May 2009. According to the
GRD Finance and Accounting Officer, the intent is to hire a team of
three people to work exclusively on timekeeping matters with personnel
in Iraq to increase timekeeping accuracy. APPO had been tasked with
preparing personnel for deployment and travel in addition to
timekeeping. We were also informed that the timekeepers are being
trained on labor costing and the importance of proper labor charging.
In addition, the GRD timekeepers will be responsible for documenting
timekeeping problems and informing personnel in Iraq about needed
improvements.
NCD Management Controls Support the Goal of Building the Capacity of
Iraqi Ministries but Do Not Adequately Verify Expenditures:
The goal of USAID's NCD program is to build the planning and
administrative capacity of Iraqi ministers and officials. The
organization of the program clearly lays out roles and responsibilities
of key players in training and consulting with Iraqi ministries and
identifies the reporting chain up to the individual responsible for the
overall program. In response to a 2008 USAID Inspector General report,
USAID scaled back the NCD program objective of improving ministry
service delivery to more achievable objectives such as improving the
ministries' administrative systems and budget execution. For 2008, NCD
monitors and tracks both outputs and outcomes for its new objectives
and provides regular reporting on the results. USAID's polices and
procedures provide guidance for implementing the program by laying out
explicit expectations for contract modifications and task orders in
USAID's automated directive system. Nevertheless, we found that the
controls for documenting program expenditures are weak; we found
invoices totaling about $17 million that did not have confirmation of
receipt.
NCD's Organization Provides Clear Lines of Accountability and Authority
and Is Increasingly Relying on Iraqis to Execute the Program:
The organization and structure of the NCD program is clearly laid out,
and related guidance details the roles of the key players. The units
responsible for training Iraqi officials and working with the
ministries are clearly identified, and the chain of command is
unambiguous. Figure 4 shows the organization of the NCD program.
Figure 4: NCD Organization Chart:
[Refer to PDF for image: illustration]
Top level: USAID Iraq Capacity Building Office (CBO) Director[A].
Second level, reporting to the CBO Director: USAID Iraq CBO Deputy
Director Cognizant Technical Office (CTO)[A].
Third level, reporting to the CTO: National Capacity Development (NCD)
Program: Tatweer Project Chief of Party[B].
Fourth level, report to the NDC:
* Institutional Development Deputy Chief of Party[B]:
- Tatweer Energy Director[B];
- Executive Ministries Director[B];
- Line Ministries and Provincial Outreach[B];
* Training and Consulting Deputy Chief of Party[B];
- Professional Development Director[B];
- Regional Training Coordinators and Advisors[B];
- Consulting Units and Team Leaders[B].
* Administration and Finance Deputy Chief of Party[B]:
- Controller[B];
- Chief Administrative Officer[B];
- IT Manager[B].
Source: GAO analysis of USAID data.
[A] USAID staff.
[B] USAID contractors.
[End of figure]
As the figure shows, the director of the Capacity Building Office (CBO)
in Iraq has overall responsibility for the program. The deputy director
coordinates the program and acts as the liaison with the Iraqi
government and the U.S. agencies in Iraq, according to NCD guidance.
The deputy director directs and coordinates NCD activities through the
contractor chief of party, who is responsible for training Iraqi civil
servants, consulting at the ministries, developing Iraqi training
centers, and completing progress reports as requested by USAID.
To carry out these activities, the program relies on Arabic-speaking
employees for all aspects of its operations. As of February 2009, NCD
program staff comprised 278 contract staff, of which about 70 percent
are Iraqi nationals and the rest are expatriates from the United States
and third countries. These staff work within Iraqi ministries,
including the Ministries of Planning, Health, Agriculture, Oil, and
Electricity. The staff also conducts training at three U.S. compounds
in Baghdad and assists in developing the training programs at Iraqi
provincial training centers in Basra, Ramadi, and Hilla. According to
USAID, early in its implementation, the program faced the challenge of
recruiting qualified Arabic-speaking instructors and training advisors
who would reside in Baghdad under the security conditions present in
Iraq in early 2007. To address this challenge, the program emphasized
hiring qualified Iraqis to teach these courses, such as at the Karada
compound we visited in October 2008 (see figure 5). By the end of its
second year, the NCD program trained more than 25,000 Iraqi civil
servants in project management, accounting, and risk analysis,
according to a USAID report.
Figure 5: Training Iraqis in Computer Skills at the National Center for
Consultancy and Management Development:
[Refer to PDF for image: photograph]
Source: USAID.
[End of figure]
USAID Monitors NCD Program Impacts but Had to Revise Overall
Objectives:
USAID uses a results framework with indicators that measure program
outputs and outcomes to monitor progress toward program objectives.
Through this framework, USAID reviews program activities, makes
corrections to identified problems, and responds to audit reports.
During the second year of the NCD program, USAID revised its indicators
in response to a November 2008 USAID Inspector General's report stating
that the NCD program did not have indicators to measure the program's
impact in improving key ministries' delivery of core services.[Footnote
13] For example, USAID measured many of its output goals such as
training Iraqi employees, establishing regional training centers, and
awarding scholarships. However, there were no outcome indicators to
measure the achievement of USAID's goal to build the capacity of key
Iraqi ministries to deliver core services. As a result, USAID narrowed
its overall program indicators and stated it would begin to track the
budget execution rates of Iraqi ministries such as the percentage of
ministries' approved budget that is spent. For example, USAID will now
monitor the value of capital projects approved, the number of capital
projects approved by the Ministry of Planning, and the rate of capital
projects implemented.
In 2007, 3 out of the 20 NCD program accomplishment indicators were
output--or numeric--goals, such as number of civil servants trained or
the number of scholarships awarded. However, in 2008, the NCD program
emphasized the measurement of results and included additional outcome
indicators in its accomplishment reporting. For instance, 14 out of the
24 indicators measured outcomes, or actual improvements. Some of the
outcome indicators for 2008 included the extent to which trainees were
using their new skills at work and saw related improvements at their
office; whether the ministries were implementing improved fiscal
information technology systems, based on USAID contractor's
recommendations; and the extent to which ministries and the Iraqi
government's public administration training center, the National Center
for Consultation and Management Development, were initiating their own
training. Table 2 provides examples of these indicators and our reason
for considering these to be outcome indicators.
Table 2: Examples of NCD Outcome Result Indicators Fiscal Year 2008:
Outcome Indicator: Proportion of training graduates that often use new
training skills;
Comment: Indicator goes beyond output on numbers trained to probe the
extent training is utilized.
Outcome Indicator: Proportion of training graduates reporting
significant improvements in their unit or ministry;
Comment: Indicator goes beyond output on numbers trained for respondent
to judge the evidence around them for positive change.
Outcome Indicator: Proportion of priority improvements in fiscal
management implemented by ministries;
Comment: Response measures improvements such as adopting modifications,
amending procedures, and developing new systems based on joint
assessments by the Ministry and NCD.
Outcome Indicator: Proportion of priority improvements in information
technology implemented by ministries;
Comment: Response based on joint assessments by the Ministry and NCD.
Outcome Indicator: Number of ministries establishing a public
administration training program;
Comment: While this is a numeric goal, this is an outcome indicating
Iraqi government commitment to the development of the civil service and
improvement in service delivery to beneficiaries.
Source: GAO analysis of USAID data.
[End of table]
USAID has been compiling data on the 2008 overall results for (1)
strengthening public management skills, (2) establishing more effective
administrative systems, and (3) expanding the Iraqi government's
training capacity. In October 2008, USAID reported that some target
measures were exceeded, some were not achieved, and several were on
track. For instance, the program did not achieve its target for
significant improvement reported by graduates within their ministry or
unit. We observed and participants told us during our site visits in
October 2008 that many of the trainees were lower-level employees who
lacked the authority to implement their new skills within the units to
which they returned after training. USAID reported that ministries were
either on track to meet or had exceeded other results to establish more
effective administrative systems for 6 of 7 indicators. USAID stated it
had achieved or exceeded targeted results for 8 out of 10 indicators to
expand the Iraqi government's capacity to train its own officials.
However, the results were not complete at the time of our review so we
could not independently assess them.
NCD Policies and Guidance Provide Direction for Implementing the
Program:
Polices and procedures for the NCD program are documented and
accessible. USAID programs are required to follow the mandatory
guidance in the automated directives system (ADS), which includes USAID
internal policy and required procedures as well as external
regulations. Agency employees must adhere to these policy directives
and required procedures. For example, ADS chapter 596 gives management
responsibility for internal controls and provides the policy and
required procedures to improve the accountability and effectiveness of
USAID programs by establishing, assessing, and reporting on internal
controls. In addition, ADS chapter 253 provides guidance for designing
and implementing training and capacity building programs. The chapter
includes guidance on assigning primary responsibility for the program;
host country responsibilities for the program; and requirements for
data collection, reporting, and monitoring of the program and
participants.
The NCD contract and its contract modifications provide specific
guidance and expectations for implementing the program. For example,
the first task order implementing the contract called for six major
tasks, a list of responsibilities assigned to each major task and
deadlines from within 30 days to 24 months for these assignments. The
assignments included assisting the Iraqi government in developing its
own capacity-building strategy, training government of Iraq employees
at specific ministries, introducing standard training modules for
regional training centers, and sending at least 50 Iraqis abroad to
work on degrees or certificates related to public administration.
Subsequent modifications added tasks based on the capacity-building
needs of the ministries and Iraqi government. For example, a September
2007 modification expanded ministerial capacity development teams and
placed project management units in key ministries and institutions.
Communication of the results occurred regularly and the contractor was
required to provide weekly, monthly, quarterly, and annual reports on
program implementation. We reviewed annual, quarterly, and monthly
reports for 2006 through 2008 and some of the weekly reports. These
reports documented program statistics on training, consulting with
ministries, provision of equipment, and other activities. The reports
also reported on challenges to implementing the program. For example,
in 2007, the security situation in Iraq, including the inability to
visit ministries and send Iraqis to training, was a major challenge to
implementing the program. Other challenges included high staff turnover
and the difficulties in acquiring skilled staff fluent in Arabic, which
USAID has addressed by hiring local Iraqis. Longer-term challenges
included dealing with extensive capacity needs at the ministries, while
identifying ministries and individuals willing to implement reforms.
Weaknesses Identified in NCD Financial Controls Over Contract Payment
Process:
Under USAID policy, an approving officer, usually the cognizant
technical officer, performs administrative approval, which provides
written evidence that USAID received the services or goods specified on
the contractor's invoice prior to payment, and fills out a checklist to
support administrative approval.[Footnote 14] The checklist is on the
USAID Administrative Approval Form and Checklist and includes six
different options for supporting administrative approval. Between April
2007 and June 2008, USAID received 18 invoices from the NCD contractor
totaling about $79 million. We found that the cognizant technical
officer did not check off the option indicating receipt of contractor
services on the form for administrative approval for 6 of these 18
invoices, totaling about $17 of the $79 million. Instead, the cognizant
technical officer indicated that acceptance of the contractor's
services was based on meeting(s) between the officer and contractor
personnel during which the contractor's performance was discussed.
Thus, the cognizant technical officer appeared to rely on the
contractor's statements that the billed services were provided to
authorize payment of the bill. Although the Administrative Approval
Form and Checklist provides an option for an officer to confirm the
receipt of goods or services by marking the appropriate place,
instructions do not require confirmation of receipt. For example, the
instructions direct the officer to mark as many reasons on the form as
possible to justify acceptance of the contractor's services, and that
at least one reason on the checklist must be checked for administrative
approval of the contractor's invoice. Not requiring the confirmation of
receipt invalidates this internal control and could circumvent the
regulatory and GAO internal control standards that require confirmation
of receipt prior to payment.
The instructions for the form do not require an explanation if
confirmation of receipt is not possible. According to USAID officials,
there is a reasonable likelihood that security risks may arise that
make confirming the receipt of services impossible due to prohibitive
personal danger or security protection costs. If these conditions are
not documented, USAID managers cannot readily monitor the extent to
which invoices were paid without confirmation of receipt or take other
measures to ensure that the government's interest is protected.
USAID policy also requires verification of the pricing and computations
on a contractor's invoice and assigns this responsibility to the
financial voucher examiner. We found that USAID did not have reasonable
assurance that the voucher examiner completed this function because
many of the contractor's invoices showed no indication that the
examiner had performed any verifications, causing a lapse in the
internal control to detect any errors in contractor billings.
Furthermore, USAID policy did not specifically address the
documentation that voucher examiners should use to support their
analysis of contractor invoices. However, the USAID Deputy Controller
in Iraq stated that, as of November 2008, voucher examiners began using
a form to document their analysis of contractor invoices. It is too
early to determine whether this form has been an effective control to
prevent improper payments to the contractor.
We observed that the complexity of these invoices and the process of
verifying pricing and computations against the terms of the contract
are unwieldy. This increases the risk that the voucher examiner's
review may not prevent improper payments. For example, two of the
contractor's invoices were more than 100 pages and listed numerous
labor-hour costs and other direct costs, including a variety of
footnotes and adjustments. Invoices listed the number of hours that
specific individuals worked on the NCD program and numerous labor hours
for administration. In addition, the cost of equipment purchases was
not easily identifiable, if at all. Furthermore, the Defense Contract
Audit Agency identified problems with certain NCD contractor costs
billed to USAID.[Footnote 15]
Iraq Has Agreed to Sustain the Programs and Is Providing Some Support
for NCD, but Budget Expenditures Are Unclear:
Iraq committed to sustaining U.S.-funded projects and programs and
sharing in their costs in several official documents and the
International Compact for Iraq.[Footnote 16] For example, we found that
Iraqi government officials had signed letters agreeing to sustain many
of the PRDC projects in our sample. The documents, however, do not
specify dollar amounts or other resources to do this. For the NCD
program, two Iraqi ministries signed memorandums of understanding for
support of the program and eight other ministries developed capacity-
building strategies that incorporated NCD materials. Iraq also
demonstrated its commitment to U.S. efforts by expanding the NCD
training program and starting its own training programs in some
ministries. Several ministries also made 2009 budget commitments to
continue the NCD training and provide equipment for training centers,
among other efforts. These amounts are due to be expended during 2009.
However, our past work has found that, although Iraq budgets for
investment and sustainment activities, it may not spend the budgeted
funds.
The Iraqi Government Has Committed to Operate and Maintain PRDC
Projects and Is Supporting NCD Efforts:
For the PRDC program, 16 of the 40 projects we reviewed had indications
that the Iraqi government agreed to sustain the projects; however, none
of the records we examined included specific funding or resource
commitments that would allow a check against actual Iraqi budgets and
expenditures. For fiscal year 2007 project funds, U.S. guidance
required that all PRDC project proposals include a letter of
sustainment from the appropriate Iraqi government office. However, in
response to our request, ITAO provided only 10 of the 12 letters of
sustainment for fiscal year 2007 projects in our sample. For fiscal
year 2006, 6 of the 28 projects in our sample had evidence of Iraqi
government commitment to sustain the projects.[Footnote 17] Letters of
sustainment indicate Iraqi government approval for the design and
construction of the project and an agreement to accept staff, operate,
and maintain the project. For example, on a 2007 PRDC project to
convert river water to drinking water, the Director General of the
Wasit Water Directorate signed a letter agreeing to staff, operate, and
maintain the water plant, once completed. For a 2007 PRDC project to
build four electrical feeders, the Director General of Electricity
agreed to prepare and submit an annual budget to the Ministry of
Electricity to operate and maintain the project.
The Iraqi government has agreed to support some NCD efforts. For
example, the Ministry of Electricity pledged to provide ongoing support
for NCD efforts; sustain projects funded in whole or part by NCD; and
provide staff to NCD, including finance and accounting specialists,
power generation engineers, maintenance engineers, and others.
Commitments from other ministries have been demonstrated by their
actions to develop capacity-building plans with NCD assistance. In
October 2007, we reported that not all U.S. capacity development
efforts were clearly linked to the needs and priorities identified by
the Iraqis, which may reduce the sustainability of U.S.-funded efforts.
[Footnote 18] USAID has attempted to identify Iraqi government needs
and obtain official government commitments by helping the ministries
develop their own capacity-building plans. As of January 2009, eight
ministries, plus the Prime Minister's Office and the Council of
Ministers' Secretariat, had developed capacity development plans with
NCD assistance. Based on ministry self-assessments that identify Iraqi
needs and priorities, the plans emphasized the Iraqi ministries
partnering with the U.S. government on budget execution, training in
project management, strategic planning, human resources, and fiscal
management. For example, the Prime Minister's Office, as result of
developing its capacity development plan in 2007, developed a new
organization structure, job descriptions, and a strategy for the
office.
Iraqi ministries have also demonstrated commitment to NCD's train-the-
trainers program, and five ministries have started their own training
programs. USAID stated that the Iraqi government is increasingly taking
over USAID's training. For example, according to USAID's contractor, as
of May 2008, Iraqi government staff who had graduated from USAID's
courses and received additional train-the-trainer courses taught more
than half of all monthly courses. Iraqi government staff trained by
USAID contractors taught 14,720 (over 54 percent) of 27,127 course
participants trained through September 2008. Moreover, as of September
2008, the Iraqi government's National Center for Consultancy and
Management Development delivers all train-the-trainer and core public
administration courses in project management, budgeting, procurement,
and strategic planning. The center has developed a tool to assess
trainers and established a monitoring and evaluation unit to assess the
impact of its training programs.
Iraqi Budget Expenditures for PRDC and NCD Programs Are Unclear:
State's PRDC 2006 guidance states that U.S. assistance will be matching
in nature to ensure commitment and investment from the provincial
government. PRDC program guidelines for fiscal year 2007 ESF funds
further state that the development of capacity building would be
demonstrated when projects are identified and programmed into Iraq's
2008 provincial budgets. In its 2007 International Compact, Iraq stated
that any new development programs should be co-financed by Iraq to
leverage Iraq's own resources and provide a framework for mutual
accountability.
ITAO officials could not provide support that specific PRDC projects
have been co-financed or that the Iraqi government budgets contained
operating and maintenance funds for these projects. In August 2008, GRD
officials stated that Iraq had not provided any cost-share funds for
implementing fiscal year 2006 and fiscal year 2007 PRDC projects to
date. Moreover, according to a GRD official, the Iraqis have been
unable to meet their commitments to sustain PRDC projects because the
central ministries have not budgeted sufficient funds to sustain
projects. For example, according to this GRD official, the Director
General for roads in the Ministry of Construction and Housing budgeted
only $100 million in fiscal year 2008 for building and maintaining all
roads in Iraq--an inadequate amount for road construction and
maintenance.
Iraq's past inability to spend its investment budget also raises
concerns about whether Iraq is providing funds to sustain PRDC
projects. In March 2009, we reported that Iraq's inability to spend its
resources, particularly on investment activities, limits the
government's efforts to further economic development and deliver
essential services to the Iraqi people.[Footnote 19] Although Iraq's
total expenditures grew from 2005 through 2007, Iraq was unable to
spend all of its budgeted funds, especially for investment activities
such as maintenance of roads, bridges, vehicles, buildings, water and
electricity installations, and weapons. In 2007, Iraq spent 28 percent
of its $12 billion total investment budget. In 2008, it spent 39
percent of its $24 billion investment budget. In 2008, the Iraqi
government spent $949 million, or about 2 percent of its total 2008
expenditures, for the maintenance of Iraqi-and U.S.-funded investments.
In 2008, the provinces spent $2,054 million, or 22 percent of total
investment expenditures of $9,167 million. The 2008 investment budget
for the provinces, including the supplemental budget, was $6,470
million. The provinces spent 32 percent of their investment budget.
There were sufficient unspent budget funds for the provinces to provide
matching funds.
The spending limits imposed by the central ministries in Baghdad also
limit the ability of Iraq's provincial governments to sustain projects.
According to a PRT official, the Director General for water in Basra
has a $2,500 per item requisition limit. For items higher than that
amount, he needs approval from the Ministry of Water in Baghdad. Most
items cost more than $2,500; a filter for the Garma water purification
facility, for example, costs $25,000. Obtaining approval from the
central ministry in Baghdad takes time, and often that ministry will
approve some parts but not others, which severely limits the Director
General's ability to live up to his commitment to sustain U.S.-funded
water projects in Basra.
For the NCD program, Iraq government ministries and executive offices
have pledged about $95 million in cost sharing for specific NCD-related
activities and procurements, according to USAID. Some of these
commitments are included in Iraqi government budgets, according to a
USAID report.[Footnote 20] For example, the Ministry of Agriculture
budgeted $5.8 million to construct a strategic planning center for
training and capacity building and allocated $5.1 million in its
operating budget to run the center. The report also states that the
Iraqi Ministry of Planning and Development Cooperation allocated $6
million in its 2009 operational budget to fund postgraduate studies.
Moreover, the Council of Ministers Secretariat allocated $1 million to
create an executive training department and dedicated office space to a
full-time training center. USAID also reported that various ministries
and executive offices have agreed to contribute about 41 percent (an
estimated $2.2 million) of the total cost of funding equipment,
facilities, and training at four geographic information system centers
and 16 training centers.
Conclusion:
A successful U.S. transition from Iraq depends on the Iraqi
government's commitments to programs that build government capacity,
such as the PRDC and NCD programs. However, given the management
weaknesses in State's PRDC program, including a lack of an overall
program manager, measures of effectiveness, and a lack of a focus on
capacity building, it is unclear if the program is achieving its
objectives. Although the Iraqi government has agreed to maintain PRDC
projects, based on prior experience, the Iraqi government's commitment
to spend resources on U.S.-funded reconstruction projects may not be
realized. Also, USACE financial controls for the timekeeping process
did not ensure adequate documentation, although USACE introduced
initiatives to correct this. The management controls of USAID's NCD
program support the objective of capacity building,and the program,
including its outcome indicators and guidance, is focused on this
objective. However, the program has weaknesses in the financial
controls for confirming the receipt of goods and services and review of
contractor invoices. In addition, USAID will need to ensure that the
Iraqi government follows through on commitments to sustain USAID NCD
programs.
Recommendations for Executive Action:
To help these programs achieve their objectives of building the
capacity of the provincial governments and central ministries,
* We recommend that, for the PRDC program (1) the Secretary of State
ensure that management control weaknesses are addressed in the PRDC
program by designating an overall program manager; developing outcome
measures of effectiveness; and documenting actual Iraqi government
budget allocations and expenditures for fiscal year 2007 PRDC projects;
and (2) the Secretary of the Army ensure that USACE initiatives to
improve the financial controls for the timekeeping process correct the
deficiencies discussed in this report.
* We recommend that, for the NCD program, the USAID Administrator (1)
revise USAID policy and procedures for confirming receipt of goods or
services applicable to the NCD program in Iraq to include (a)
clarifying that confirmation of receipt of goods/or services must be
noted separately from the administrative approval or (b) documenting
reasons precluding actual confirmation such as prohibitive personal
danger or security protection costs; (2) ensure that USAID/Iraq
initiatives to improve the documentation of the voucher examiner's
required review of contractor invoices correct the deficiencies
discussed in this report; and (3) document actual Iraqi government
budget allocations and expenditures to ensure funds committed to
support NCD activities are expended.
Agency Comments and Our Evaluation:
State, USACE, and USAID provided written comments on a draft of this
report, which we have reprinted in appendixes II, III, and IV. The
USACE also provided technical comments, which we have incorporated
where appropriate.
State agreed with our recommendation to address management control
weaknesses in the PRDC program. State commented that it had clarified
and confirmed ITAO's overall responsibility for the PRDC program and
that a program manager has now been designated. State also accepted our
recommendation to develop outcome measures of effectiveness for PRDC
and clarified that its reporting of projects approved and funds
dispersed in the 2207 report to Congress was not intended to be a
measure of PRDC's success. State further agreed to report on Iraqi
government contributions to PRDC projects in its next cost matching
report to Congress.
USACE agreed with our draft recommendation to strengthen its financial
controls for payroll and provided additional information about its
initiatives to improve its timekeeping process. We subsequently refined
our recommendation to state that the Secretary of the Army ensure that
USACE initiatives improve the timekeeping process correct the
deficiencies discussed in the report. USACE agreed to this
recommendation. In technical comments, USACE noted substantial
discrepancies--amounting to millions of dollars and over 100 projects-
-between its financial and project data and ITAO's data that we
included in our draft report. In reconciling the conflicting data, ITAO
agreed to revise its April 3, 2009, Essential Indicators Report to
reflect the corrected data.
USAID commented that it is taking under advisement our recommendation
to require confirmation of receipt of goods and services and that it
has already implemented our recommendation to document the voucher
examiner's review of contract invoices. The agency agreed to implement
our recommendation to document the government of Iraq's commitments and
expenditures associated with the NCD program.
We are sending copies of this report to interested congressional
committees and the Secretary of State, the Secretary of Defense, the
Secretary of the Army, and the Administrator for USAID. We will also
make copies available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov]. If you or your staff have any questions about this
report, please contact me at (202) 512-8979 or christoffj@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Key contributors
to this report are listed in appendix V.
Sincerely yours,
Signed by:
Joseph A. Christoff:
Director:
International Affairs and Trade:
Signed by:
Asif A Khan:
Director:
Financial Management and Assurance:
List of Congressional Committees:
The Honorable Carl Levin:
Chair:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Senator Kent Conrad:
Chair:
The Honorable Senator Judd Gregg:
Ranking Member:
Committee on Budget:
United States Senate:
The Honorable John F. Kerry:
Chair:
The Honorable Richard G. Lugar:
Ranking Member:
Committee on Foreign Relations:
United States Senate:
The Honorable Joseph I. Lieberman:
Chair:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Patrick J. Leahy:
Chair:
The Honorable Judd Gregg:
Ranking Member:
Subcommittee on State, Foreign Operations, and Related Programs:
Committee on Appropriations:
United States Senate:
The Honorable Ike Skelton:
Chair:
The Honorable John M. McHugh:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John M Spratt, Jr.
Chair:
The Honorable Paul Ryan:
Ranking Member:
Committee on Budget:
House of Representatives:
The Honorable Howard L. Berman:
Chair:
The Honorable Ileana Ros-Lehtinen:
Ranking Member:
Committee on Foreign Affairs:
House of Representatives:
The Honorable Edolphus Towns:
Chair:
The Honorable Darrell E. Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
To assess whether the management controls of the Provincial
Reconstruction Development Committee (PRDC) program and the National
Capacity Development (NCD) program support the achievement of the
programs' objectives, we interviewed agency officials and analyzed
project contracts, program files, agency reports, guidelines, financial
and programmatic databases, and assessments for both the PRDC and NCD
programs. We examined key management controls, including (1) a clear
organizational structure with adequate managerial capacity and
financial systems that establish an effective control environment; (2)
policies and procedures that ensure management directives are carried
out and communication of those policies and procedures; and (3)
monitoring systems that track progress toward desired outcomes. We
interviewed officials at the Department of State (State), U.S. Agency
for International Development (USAID), and the U.S. Army Corps of
Engineers (USACE) in Washington, D.C., and Iraq. In Iraq, we also met
with officials at State's Iraq Transition Assistance Office (ITAO),
which oversees and coordinates aspects of the PRDC program, the Office
of Provincial Affairs, and Gulf Regional Division (GRD) and its
district offices. We reviewed a sample of 40 PRDC construction projects
using Economic Support Funds (ESF) from fiscal years 2006 and 2007and
examined all activities in the NCD program.[Footnote 21] We conducted
field visits to several PRDC projects and to a training center, where
we observed Iraqi officials in NCD training activities. We used
information from the USACE's Resident Management System database to
identify the status of projects and specific challenges. We assessed
the reliability of this system database by (1) interviewing agency
officials and contractors about data quality control procedures, and
(2) checking the data by visiting sites. We determined that the data
were sufficiently reliable for the purposes of this report.
To develop the sample of 45 PRDC projects, we used the population of
290 PRDC projects as of June 30, 2008, that were initiated with fiscal
year 2006 and 2007 ESF.[Footnote 22] We selected a dollar unit sample
to test financial controls over PRDC project data in the USACE's
Financial Management System. We used a 90-percent confidence level, an
expected error of 0, and tolerable error of 5 percent, for the sample
plan. Given the parameters of the sample test (e.g., sample size,
expected errors) any control testing error would indicate the control
is not operating as designed.
To review the financial management controls over the PRDC and NCD
program, we reviewed documents supporting obligation and disbursement
transactions for 40 PRDC construction and 5 nonconstruction projects,
and all NCD obligation and disbursement transactions. We interviewed
USAID officials in Washington, D.C., and Iraq; and USACE officials in
Washington, D.C.; Millington, Tennessee; Winchester, Virginia; and
Iraq. Our review of PRDC and NCD transactions covered the period
October 1, 2005, through June 30, 2008. To determine whether the
financial data provided to us were reliable, we interviewed agency
officials and performed testing regarding the accuracy and completeness
of information.
To evaluate U.S. efforts to ensure Iraqi government commitment to
sustaining U.S. program efforts, we examined U.S. guidance in obtaining
commitments from the Iraqi government and interviewed State and USAID
officials and their program implementers, GRD and Tatweer. We then
focused on two elements of commitment--letters or other evidence that
the Iraqi government committed to sustain or maintain the programs and
projects and evidence that the Iraqi government is sharing the cost of
U.S. efforts. PRDC program guidelines for 2006 state that the projects
will be matching in nature to ensure buy-in and investment from the
government and the 2007 guidelines require an Iraqi government letter
of sustainment for the projects. Moreover, Iraq has budget surpluses,
and in the Annual Review of the International Compact with Iraq, the
Iraqi government committed to co-finance any new development programs
to leverage its resources and provide a framework for mutual
accountability.
We conducted this performance audit from March 2008 to June 2009 in
accordance with generally accepted government auditing standards. Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: Comments from the Department of State:
United States Department of State:
Washington, D.C. 20520:
May 19, 2009:
Ms. Jacquelyn Williams-Bridgers:
Managing Director International Affairs and Trade:
Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548-0001:
Dear Ms. Williams-Bridgers:
We appreciate the opportunity to review your draft report, "Rebuilding
Iraq: Improved Management Controls and Iraqi Commitment Needed for Key
State and USAID Capacity Building Programs," GAO Job Code 320587.
The enclosed Department of State comments are provided for
incorporation with this letter as an appendix to the final report.
If you have any questions concerning this response, please contact Kyle
Peterson, Desk Officer, Bureau of Near Eastern Affairs at (202) 647-
9837.
Sincerely,
Signed by:
James L. Millette:
cc:
GAO - Tet Miyabara:
NEA - Jeffrey Feltman (Acting):
State/OIG - Mark Duda:
[End of letter]
Department Of State Comments On GAO Draft Report:
Rebuilding Iraq: Improved Management Controls and Iraqi Commitment
Needed for Key State and USAID Capacity Building Programs (GAO-09-526,
GAO Code 320587):
Thank you for the opportunity to review and comment on the May 2009 GAO
draft report Rebuilding Iraq: Improved Management Controls and Iraqi
Commitment Needed for Key State and USAID Capacity-Building Programs.
The United States is committed to helping build the capacity of Iraq's
central and provincial governments, and the Provincial Reconstruction
Development Committee (PRDC) program is a critical part of that
commitment. We welcome GAO's investigation into this important issue,
and are working with our Embassy in Baghdad to explore options to
improve our coordination and metrics to ensure that this program can
better achieve its objectives.
Recommendation:
The Secretary of State ensure that management control weaknesses are
addressed in the PRDC program by designating an overall program
manager; developing outcome measures of effectiveness; and documenting
actual Iraqi government budget allocations and expenditures for fiscal
year 2007 PRDC projects.
Designating an overall PRDC program manager:
The Department agrees that clarification of overall program management
for the PRDC is important, and has confirmed that the Iraq Transition
and Assistance Office (ITAO) is the overall PRDC program manager.
Nevertheless, in a war zone where command of civilian and military is
vested in separate leaders, programs and activities that involve both
civilian and military personnel face challenges in full coordination
and cooperation. ITAO maintains overall management of the PRDC program
and now has an officer clearly designated as the PRDC program manager.
ITAO maintains accountability for funds, and for project review and
selection. It does not direct, however, actual execution of the
projects by the Gulf Region Division (GRD) of the U.S. Army Corps of
Engineers (USACE), which is the responsibility of GRD under the 632(b)
agreement.
The PRDC process does have many steps, each of which is necessary. For
example, the inclusion of the Iraqi-led PRDCs provides Iraqi buy-in and
sustainability. Earlier efforts to fund projects in Iraq prior to the
PRDC program that left out this step resulted in problems with asset
transfer and sustainability in some cases because the Iraqis did not
see these projects as meeting their needs or priorities. Rather than
eliminate essential steps or essential partners, we believe the best
mitigation is continued cooperation and coordination. We believe that
ITAO has achieved that through supporting the PRTs (including their
interactions with Iraqi Provincial Councils) and providing guidance to
and oversight accountability of GRD. [See comment 1]
ITAO is scheduled to close in May of 2010. Although most PRDC projects
will be completed by that time, there will be several still in progress
or under contract. State is already working with Embassy Baghdad to
identify and transition to an office that will oversee the remaining
PRDC program following ITAO's closeout. This office will continue to be
responsible for working with the multiple U.S. and Iraqi entities
involved to ensure a smooth transition of the PRDC program.
As a subset of this recommendation, we would also like to address GAO's
findings in the draft report that "the [PRDC] program's guidelines and
policies have changed frequently as has the program's direction, but
State did not adequately communicate or consult with Corps of
Engineers, the program implementer, about these changes" (page 5).
There is always room for better coordination and we would like to
provide some additional information to the GAO on this point of the
draft report. There is considerable evidence to show that GRD was
actively involved in planning at an early date. The clear purpose of
the PRDC program, from the outset, included Iraqi involvement and
participation in the development of the projects, as is shown by the
2006 Action Memo included as an attachment to the original 632(b)
agreement. These priorities were further discussed and well integrated
into the amendment to the 632(b) agreement, signed January 30, 2008 by
both State and USACE. The 632(b) agreement, as amended, sets out the
following: [See comment 2]
$85 million is also provided to the Servicing Agency, which shall
provide personnel and services to implement and deliver operations,
maintenance and planning activities in support of essential services at
the provincial level. [632(b) agreement 2008 amendment; page 2]
Additionally, the Guidelines for FY2007 Supplemental Economic Support
Funds (ESF) for PRDCs, set out in a June 23, 2007 memorandum from the
ITAO budget office to ITAO Director Mark Tokola, which was shared with
USACE officials, state that "this funding is not intended as
principally a reconstruction effort, but as a means to stimulate
engagement and capacity building at the provincial government level."
The guidelines for FY2007 funds were further clarified in an October
23, 2007 memorandum from the PRDC program manager to the ITAO Director.
Thus, in July 2008, GRD notified ITAO that it wished to formalize
informal management arrangements, and asked ITAO to concur with its
draft, which ITAO did. State plans to continue to work closely with GRD
to ensure that all parties continue to be involved in, and aware of,
policy guidance regarding the PRDC program. We will also work to
develop with GRD amendments or new program management plans, as needed
or appropriate, to implement policy guidance.
Developing outcome measures of effectiveness:
We believe GAO may have misinterpreted our October 2008 2207 Report to
Congress in its draft report: "According to an October 2008 State
report, PRDC program success is measured by the number of projects
completed and awarded and amount of funds disbursed" (page 15).
The 2207 report states that PRDC's mission is to "identify and execute
priority projects that strengthen the ability of provincial governments
to deliver essential services and key development projects to their
[Iraqi] communities." (State, Section 2207 Report to Congress, October
2008) and lists the number of projects awarded and funds disbursed as
"Accomplishments." The intention of this section of the 2207 Report is
not to claim that the success of the PRDC program hinges on the number
of projects awarded and/or money dispersed. We fully agree with the GAO
that a program focus on an expenditure rate would "not provide
information about the extent to which U.S. efforts build the capacity
of provincial governments to deliver essential services" (p. 15) and we
have resisted that measure in every forum. [See comment 3]
We agree with the importance of and accept the draft report's
recommendation to develop outcome measures of effectiveness. As this
program is intended to build local capacity to identify, plan and
deliver essential services, one possible measure would be to track the
length of project development, procurement, contracting, execution, and
oversight process to see if it improves over time, as well as the
quality of the projects completed. Another possible measure would be
the degree of constituent input in the project selection process and
the degree of transparency and anti-corruption measures in the
contracting process, the separation of powers between the executive and
legislative, the post-completion longevity of projects, and the
occurrence rate of Ministries following through and budgeting to
sustain the projects. These additional metrics, along with others,
would help to better quantify the impact of the PRDC program.
We would note that State already has a provincial-focused measurement
system in place, which we are in the process of making more robust. The
Office of Provincial Affairs (OPA) Maturity Model, reassessed quarterly
in each province, measures progress in provinces' capacity to operate
and govern effectively. Specifically, in the Governance section of the
OPA Maturity Model, PRTs rate the progress made by Provincial
Governments in their ability to deliver essential services.
Nevertheless, we believe that, while the Maturity Model helps assess
increasing provincial government capacity, some of which may be the
result of PRDC projects, additional metrics to more fully quantify the
impact of PRDC projects are important, and we are developing such
metrics.
Documenting actual Iraqi government budget allocations and expenditures
for fiscal year 2007 PRDC projects:
We agree with the GAO draft report's focus on sustainability, and the
PRDC program has made great efforts recently to help ensure the
sustainability of its projects. As noted above, the participation of
the Iraqi-led PRDCs and Provincial Councils is a vital component of
ensuring sustainable projects. In addition, ITAO has hosted workshops
in Baghdad for PRT members to discuss best practices for sustainable
projects, and developed guidance to PRTs on this subject.
At several points, GAO states in its draft report that 16 of the 40
PRDC projects sampled "had evidence that the Iraqi government agreed to
sustain the project; however the records did not specify actual
financial or budget commitments" (Introduction, pages 6, 28). When the
Government of Iraq (GOI) agrees to sustain projects, information on
actual financial or budget commitments may not be available due to the
budget creation calendar. Nevertheless, the GOI is recognizing the
project as a future GOI asset, and its need to include sustainment for
such a project in its own budget. Furthermore, we will be able to
verify the inclusion of these budget commitments once the local budget
is finalized.
On page 28 of the GAO draft report, GAO correctly distinguishes between
FY2006 projects, which did not require a letter of sustainability, and
FY2007 projects, which did. Of the FY07 approved projects that required
a letter of sustainment, two letters could not be located. But even six
of the FY2006 projects that did not require sustainment documentation
did have a letter, indicating the priority this has come to have for
PRDC projects. In the last year, 100% of projects have had such
letters. [See comment 4]
State has submitted two reports to Congress detailing 2008 Iraqi
government funds and contributions to match some FY2008 Supplemental
U.S. civilian foreign assistance programs and projects. These reports
showed that the Iraqi government already matches or exceeds U.S.
foreign assistance levels in many common areas of effort, including
programs that support national and provincial capacity development,
economic diversification, and rule of law institutions. Given the
intent for the PRDC program to ensure O&M costs are picked up by the
Iraqi local ministerial budgets, we intend to include, in our next
matching report, a special section on Iraqi government contributions
for PRDC projects, including those funded in FY2007. [See comment 4]
We appreciate GAO's audit of the PRDC program, and the recommendations
offered in the draft report. We will continue to explore how to
implement these changes in order to ensure that the PRDC program is as
effective as possible.
The following are GAO's comments on the U.S. Department of State's
letter dated May 19, 2009.
GAO Comments:
1. State implies that this GAO report calls for the elimination of
steps or partners in the process. Instead, we believe the program's
multistep complexity illustrates the importance of implementing our
recommendation to designate a program manager.
2. We added State's additional information. However, in their technical
comments, Gulf Region Division officials stated that communication and
coordination remain problems as of May 2009.
3. We have changed program "success" to program "accomplishment" in the
final report. However, the larger issue, as State acknowledges, is that
the Provincial Reconstruction Development Committee program does not
have outcome measures of effectiveness to assess how the program has
enhanced the capacity of local Iraqi councils to identify, plan, and
deliver essential services.
4. Our past work indicates that although the Iraqi government budgets
for investment activities, its actual spending for these investments,
including maintenance of projects, is limited. For instance, in 2008,
the Iraqi government spent $949 million, or about 2 percent of its
total 2008 expenditures, for the maintenance of Iraqi-and U.S.-funded
investments. In 2008, the provinces spent $2. 054 billion or 22 percent
of budgeted investment expenditures of $9.167 billion. The 2008
investment budget for the provinces, including the supplemental budget,
was $6.47 billion. The provinces spent 32 percent.
[End of section]
Appendix III: Comments from the U.S. Army Corps of Engineers:
Department Of The Army:
U.S. Army Corps Of Engineers:
441 G Street, NW:
Washington, DC 20314-1000:
Reply To Attention Of CEMP-GR:
May 22, 2009:
Mr. Joseph A. Christoff:
Director, Internal Affairs & Trade:
U.S. Accountability Office (GAO):
441 G Street, N.W.
Washington, DC 20548:
Dear Mr. Christoff:
This is the Department of Defense (DOD) response to the GAO draft
report GAO-09-526, Rebuilding Iraq: Improved Management Controls and
Iraqi Commitment Needed for Key State and USAID Capacity Building
Programs, dated May 1, 2009 (GAO Code 320587).
The Department concurs with the findings in this report. Questions your
staff may have concerning these responses maybe addressed to Ms. Sheryl
Lewis (202) 761-5750 and Mr. John Daley (202) 761-5844.
Signed by:
Joseph Tyler, P.E.
Director of Military Programs:
[End of letter]
Enclosure:
GAO Draft Report Dated May 1, 2009:
GAO-09-526 (GAO Code 320587):
Rebuilding Iraq: Improved Management Controls And Iraqi Commitment
Needed For Key State And USAID Capacity Building Programs:
Department Of Defense Comments To The GAO Recommendations:
Recommendation: The GAO recommends that the Secretary of Army ensure
that the U.S. Corps of Engineers' financial controls for payroll are
strengthened. (page 32/GAO Draft Report).
DOD Response: Concur. Prior to the GAO review, the U.S. Army Corps of
Engineers commenced implementing a number of changes to improve the
accuracy of the timesheets and labor hours recorded by the Gulf Region
Division (GRD). The GRD Rear Cell currently performing the function is
now under the supervision of accountants who provide additional review
and assistance to the timekeeping function. In addition, timesheets are
being reviewed prior to certification, all timesheets are being kept
including the original and any revised or corrected timesheets.
Additional follow up is done when signed time and attendance reports
are not received in timely manner.
The following are GAO's comments on the U.S. Army Corps of Engineers
letter dated May 22, 2009.
GAO Comment:
1. We modified our recommendation in response to the additional
information USACE provided about its initiatives to strengthen the
timekeeping process. In follow up discussions, USACE agreed to our
recommendation that the Secretary of the Army ensure the initiatives to
improve the financial controls for the timekeeping process correct the
deficiencies discussed in the report.
[End of section]
Appendix IV: Comments from the U.S. Agency for International
Development:
USAID: From The American People:
U.S. Agency for International Development:
1300 Pennsylvania Avenue, NW:
Washington, DC 20523:
[hyperlink, http://www.usaid.gov]
May 22, 2009:
Joseph A. Christoff, Director
International Affairs and Trade
U.S. Government Accountability Office 441 G Street, N.W.
Washington, D.C. 20548
Dear Mr. Christoff:
I am pleased to provide the U.S. Agency for International Development's
(USAID) formal response on the draft GAO report entitled "Rebuilding
Iraq: Improved Management Controls and Iraqi Commitment Needed for Key
State and USAID Capacity Building Programs." (GAO-09-526)
The GAO recommendation included in the report states, "We recommend
that, for the NCD program, the USAID Administrator:
(1) revise USAID policy and procedures for confirming receipt of goods
or services applicable to the NCD program in Iraq to include (a)
clarifying that confirmation of receipt of goods/or services must be
noted separately from the administrative approval or (b) documenting
reasons precluding actual confirmation such as prohibitive personal
danger or security protection costs;
(2) ensure that USAID/Iraq initiatives to improve the documentation of
the voucher examiner's required review of contractor invoices correct
the deficiencies discussed in this report: and;
(3) document actual Iraqi government budget allocations and
expenditures to ensure, funds committed to support NCD activities are
expended."
Regarding the first issue, revising the "USAID Administrative Approval
Form and Checklist", USAID is taking this matter under advisement.
Regarding the second issue, ensuring initiatives to correct the
deficiencies in the voucher examiner's documentation, the Iraq
Mission's Financial Management Office (FMO) has since November 2008,
implemented a reconciliation process to ensure that financial records
of the implementer and USAID are in agreement. This process is
mentioned in the report, although the GAO deems it too early to
determine its effectiveness.
In regard to the third issue, documenting Iraqi government budget
allocations and expenditures, our comments are as follows:
1. The GOI was not required to make a formal commitment of funds to
support USAID's NCD Program. Therefore, for the purposes of retroactive
documentation, USAID could only cite 2008 GOI budget allocations that
were generally associated with the NCD Program, and;
2. Prospectively, it is expected that the GOI will make formal and
specific resource commitments associated with USG assistance to the
Central Government beginning in FY 09. Accordingly, USAID will collect
supporting documentation of the GOI's commitments/expenditures
associated with the NCD Program.
Thank you for the opportunity to respond to the GAO draft report and
for the courtesies extended by your staff in the conduct of this
review.
Sincerely,
Signed by:
Drew W. Luten:
Acting Assistant Administrator:
Bureau for Management:
[End of section]
Appendix V: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Joseph A. Christoff, (202) 512-8979 or christoffj@gao.gov:
Asif A. Khan, (202) 512-9869 or khana@gao.gov:
Staff Acknowledgments:
Tetsuo Miyabara, Assistant Director; Mary Ellen Chervenic, Assistant
Director; Jessica Butchko; Richard Cambosos; Lynn Cothern; K. Eric
Essig; Dennis Fauber; Wilfred Holloway; Rhonda Horried; Grace Lui;
Jason Pogacnik; and Eddie Uyekawa made key contributions to this
report.
[End of section]
Footnotes:
[1] ESF funding data were obtained from three interagency agreements
between State and the U.S. Army Corps of Engineers (USACE) for PRDC and
Provincial Reconstruction Team projects. The first interagency
agreement signed in November 2006 transferred $315 million in fiscal
year 2006 ESF to USACE. Two amendments were subsequently signed to
transfer fiscal year 2007 ESF for the continuation of the PRDC program.
The first amendment, signed in August 2007, transferred $100 million.
The second amendment, signed in February 2008, transferred $285 million
of which $85 million was to be used for operations, maintenance, and
planning activities in support of PRDC projects. Under the agreement,
funds can be expended until specified performance is completed or
terminated. Moreover, funds must be returned to State if they haven't
been fully expended by a certain time. Also, the parties can terminate
the agreement before completion of the project as long as they provide
30 days written notice to the other party. Funds provided for the 2008
PRDC program, according to State and USAID's Supplemental
Appropriations Spending Plan Fiscal Year 2008, were for three programs
to (1) implement short-term projects quickly through micro-purchases,
grants, and direct procurements; (2) provide engineering experts to
help define and assess potential projects funded by the Iraqi
provincial governments; and (3) provide direct technical assistance
through Provincial Reconstruction Team advisors to Iraqi provincial
officials in governance, public finance, city planning and urban
management, public works and infrastructure management, and
agriculture.
[2] Data were obtained from USAID contract documents for the National
Capacity Development program.
[3] GAO, Internal Control and Management and Evaluation Tool,
[hyperlink, http://www.gao.gov/products/GAO-01-1008G] (Washington,
D.C.: Aug. 2001).
[4] The United States did not require letters of sustainment for fiscal
year 2006 PRDC projects, but State indicated in a memo that U.S.
assistance would be matching in nature to ensure buy-in and investment
from the local provincial government.
[5] ITAO provides a programming and oversight role to executive
departments and agencies in concluding the remaining large
infrastructure projects in Iraq. In addition, ITAO coordinates
Ministerial capacity training, as well as sustainment funds for
operations and maintenance.
[6] Other executive offices include the Civil Service Committee,
Council of Ministers Secretariat, Presidency Council, and Deputy Prime
Minister Office. Other ministries include Ministry of Agriculture,
Ministry of Human Rights, Ministry of Health, Ministry of Displacement
and Migration, Ministry of Planning and Development Coordination, and
Ministry of Municipalities and Public Works.
[7] In Arabic, the program is also known as Tatweer, which means
development.
[8] Special Inspector General for Iraq Reconstruction, Status of
Department of State Economic Support Fund Interagency Agreements with
the U.S. Army Corps of Engineers in Iraq, SIGIR-09-006 (Oct. 28, 2008).
[9] State, Section 2207 Report to Congress, October 2008.
[10] The Office of Provincial Affairs within the U.S. embassy in
Baghdad provides policy guidance and support to the PRT program.
[11] USACE reported PRDC net disbursements of about $137 million for
about 270 PRDC projects between October 2005 and June 2008, of which
about $14.2 million was for USACE employee salaries.
[12] USACE Transatlantic Program Center APPO, After Action Review
(Winchester, VA: Nov. 16, 2008). Employees detailed to Iraq complete a
time and attendance record, supervisors attest to the employee's time,
and both the employee and supervisor sign a paper copy of the time and
attendance. Timekeepers in Iraq scan and e-mail signed time and
attendances to APPO for data entry.
[13] USAID Office of the Inspector General, Audit of USAID/Iraq's
National Capacity Development Program, Audit Report No. E-267-09-001-P
(Nov. 25, 2008).
[14] USAID, ADS Chapter 630, Payables Management (Washington, D.C.:
Jun. 22, 2007).
[15] Defense Contract Audit Agency, Audit of Public Vouchers Submitted
from July 27, 2006 to September 30, 2007 Under Contract No. AEP-I-01-
05-00221-00, Report No. 6311-2008I17900003 (Aug. 28, 2008); and Audit
Report on Costs Incurred and Billed Under Contract No. AEP-I-00-00-
00024-00, Task No. 08, for the Period of June 26, 2003 through May 31,
2005, Report No. 6311-2007I17900004 (Jan. 15, 2008).
[16] The International Compact for Iraq is the Iraqi government's
initiative to form a new partnership with the international community.
The objective is to build a framework for Iraq's economic
transformation and integration into the regional and global economy.
[17] The United States did not require letters of sustainment for
fiscal year 2006 PRDC projects, but State indicated in a memo that U.S.
assistance would be matching in nature to ensure commitment and
investment from the local provincial government.
[18] GAO, Stabilizing and Rebuilding Iraq: U.S. Ministry Capacity
Development Efforts Need an Overall Integrated Strategy to Guide
Efforts and Manage Risk, [hyperlink,
http://www.gao.gov/products/GAO-08-117] (Washington, D.C.: Oct. 2007).
[19] GAO, Iraq: Key Issues for Congressional Oversight, [hyperlink,
http://www.gao.gov/products/GAO-09-294SP] (Washington, D.C.: Mar.
2009). See also [hyperlink, http://www.gao.gov/products/GAO-08-153].
[20] USAID, Mid-Month Report on the GOI's Commitment to Sustain TATWEER
Project Contributions (Sept. 2008).
[21] Although a sample of 45 projects was selected from 292 PRDC
projects, the analysis using the USACE's Resident Management System
involved only 40 construction projects. The other 5 projects were not
construction projects and were not in the Resident Management System
which tracks project status. We used the Resident Management System to
analyze project challenges and select project sites to visit.
[22] In our testing, we included two other PRDC projects that were
excluded from the sample selection population because the total net
obligation for each project was $0.
[End of section]
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