United States Government Accountability Office

GAO Testimony

Before the Committee on Armed Services, 

Subcommittee on Oversight and 

Investigations, House of Representatives 

STABILIZING IRAQ 

Preliminary Observations 

on Budget and Management 

Challenges of Iraq’s Security 

Ministries 

Statement of Joseph A. Christoff, Director 

International Affairs and Trade 

For Release on Delivery

Expected at 9:00 a.m. EDT

Thursday, March 22, 2007

 

GAO-07-637T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 22, 2007

STABILIZING IRAQ

Preliminary Observations on Budget and 

Management Challenges of Iraq's 

Security Ministries 

Highlights of GAO-07-637T, a testimony 

before the Subcommittee on Oversight 

and Investigations, Committee on Armed 

Services, House of Representatives 

In November 2005, the President 

issued the National Strategy for 

Victory in Iraq. According to the 

strategy, victory will be achieved 

when Iraq is peaceful, united, 

stable, secure, well integrated 

into the international community, 

and a full partner in the global 

war on terror. 

To help Iraq achieve this, the U.S. 

is, among other efforts, helping 

strengthen the capabilities of the 

Iraq Ministries of Defense and 

Interior (police forces) so they 

can assume greater responsibility 

for the country’s security. The 

United States has provided about 

$15.4 billion to develop Iraqi

security forces and institutions. 

In this testimony, GAO discusses 

preliminary observations on (1) 

U.S. and Iraqi funding to develop 

and sustain the Iraqi security 

forces, and (2) key challenges the 

United States and Iraq face in 

improving the security ministries’

operations and management. 

This statement is based on prior 

GAO reports, recent fieldwork in 

Iraq and Department of Defense, 

U.S. Treasury and Embassy 

budget documents. GAO added 

information to this statement in 

response to comments from 

Multinational Security Transition 

Command-Iraq. We completed 

the work in accordance with 

generally accepted government 

auditing standards. 

In March 2007, DOD reported that Iraq will increase its 2007 security budget 

from $5.4 billion to $7.3 billion (a 37-percent increase). DOD states this 

increase provides evidence of the country’s growing self-sufficiency and 

commitment to security. However, our analysis shows that some of this 

increase is due to the appreciation of the Iraqi dinar against the dollar. Using 

a constant exchange rate, Iraq’s 2007 security budget grows by 15 percent. 

Also, Iraq faced problems spending its 2006 security budget. As of November 

2006, the Iraq Ministry of Defense had spent only about 1 percent of its 

capital goods budget for weapons, ammunition, and vehicles (see figure). 

DOD has requested $5.8 billion in additional U.S. funds to help purchase 

these items for Iraq and provide assistance to its security ministries. 

The United States and Iraq face personnel and logistical challenges in 

developing ministries that can sustain Iraq’s growing security forces. For 

example, the ministries have inadequate systems to account for personnel 

and inexperienced staff with limited budgeting and technology skills. Also, 

both security ministries have difficulties acquiring, distributing, and 

maintaining weapons, vehicles, and equipment. The U.S.-led coalition has 

provided significant resources to develop Iraq’s security forces and has 215 

military and civilian advisors at the ministries. The United States signed a 

foreign military sales agreement with Iraq that, according to U.S. officials, 

allows Iraq to bypass its ineffective procurement systems to purchase

equipment directly from the United States. Iraq has deposited $1.9 billion 

into its account for foreign military sales. However, it is unclear whether this 

program will help improve the ministries’ procurement and contracting 

capacity. 

Iraq Security Ministries’ Budget Expenditures Jan.-Nov. 2006 

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

U.S. dollars (in millions)

Ministry of Defense

Capital Total

Projects

Capital

Goods

Goods &

Service

Salaries Capital Total

Projects

Capital

Goods

Goods &

Service

Salaries

Remaining

Expended

Source: GAO analysis of Iraq’s 2006 budget expenditures as of November 2006, provided by U.S. Treasury.

76% 24%

1%

expended

0%

expended 32%

Ministry of Interior

U.S. dollars (in millions)

82% 49%

expended

15%

expended 11%

expended

69%

www.gao.gov/cgi-bin/getrpt?GAO-07-637T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Joseph A. 

Christoff at (202) 512-8979 or 

christoffj@gao.gov. 
GAO-07-637T

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss our preliminary observations on 

U.S. and Iraqi funding commitments and related challenges in

strengthening the Iraqi Ministry of Defense (MOD) and Ministry of Interior

(MOI). We are presently completing reviews of U.S. efforts to help the 

Iraqi government execute its budget and build capacity in its ministries. 

The November 2005 National Strategy for Victory in Iraq articulated the

desired end-state for U.S. operations in Iraq: a peaceful, united, stable, and 

secure Iraq, well integrated into the international community, and a full

partner in the global war on terrorism. To achieve this desired end state,

the United States is, among other things, helping MOD and MOI play a 

greater role in managing and sustaining their security forces and assuming 

greater responsibility for the country’s security. The President’s fiscal year 

2008 funding request states that the Iraqi government will be largely 

capable of sustaining its security forces by 2008. From 2003 through 2006,

the United States provided about $15.4 billion to develop Iraqi security 

forces and institutions. 

My testimony discusses our preliminary observations on (1) U.S. and Iraqi 

funding to develop and sustain the Iraqi security forces, and (2) key 

challenges the United States and Iraq face in improving the security 

ministries’ operations and management. 

In developing this statement, we relied on prior GAO reports and, where 

appropriate, we updated data. To identify the U.S. and Iraqi government 

financial commitments for developing and sustaining the Iraqi security 

forces, we reviewed Department of Defense (DOD), Multinational ForceIraq (MNF-I), and Multinational Security Transition Command-Iraq 

(MNSTC-I), and Treasury budget documents and requests. We also 

analyzed data on Iraq’s 2006 and 2007 budgets and 2006 budget execution

through November 2006, which were provided to us by the U.S. Treasury 

from Iraq’s Ministry of Finance.1

 To identify the challenges the government 

of Iraq faces in developing the capacity of the Ministries of Defense and 

Interior, we reviewed MNF-I assessments of the capabilities of these 

ministries. We also conducted field work in Iraq and met with the MOD 

 1

We corroborated our analysis and findings with information from other U.S. agencies, the 

Iraqi government, and the International Monetary Fund. While we did not independently 

verify the precision of the data on Iraq’s budget execution, we found that the data are 

sufficiently reliable to show the relative differences in budget execution across Iraq’s

ministries and budget categories (e.g., capital projects versus salaries). 

Page 1
GAO-07-637T

and MOI transition teams to obtain further information on the ministries’ 

capabilities and to discuss U.S. and coalition efforts at the ministries. This 

work was conducted in accordance with generally accepted government 

auditing standards. 

In March 2007, DOD reported that Iraq will increase its 2007 security 

budget from $5.4 billion to $7.3 billion (a 37-percent increase), which DOD 

cites as evidence of the country’s growing self-sufficiency and 

commitment to security. However, our analysis shows that a portion of 

this increase is attributable to the recent appreciation of the Iraqi dinar 

against the dollar. Using a constant exchange rate, which reflects changes

in Iraq’s budget in its own currency, Iraq’s 2007 security budget will grow 

by 15 percent. Moreover, the budget of the Ministry of Defense, which 

plays the lead role in conducting counterinsurgency operations, will grow 

by only 1 percent. To help assess whether Iraq’s security ministries will be

able to spend the 2007 budgets, we analyzed their 2006 budgets and 

spending. For example, between January and November 2006, the MOD 

had spent only about 1 percent of its $864 million capital goods budget for 

weapons, ammunition, and vehicles. Overall, Iraq’s security ministries 

spent a higher share of funds budgeted for salaries than funds budgeted 

for capital goods. DOD has requested $5.8 billion for 2007 to 2008 to help

purchase these critical items for Iraq and provide additional assistance to 

Iraq’s security ministries. 

Summary 

The United States and Iraq confront personnel and logistical challenges in

developing security ministries that are capable of sustaining Iraq’s growing

security forces. The security ministries have inadequate systems to 

account for their personnel, as well as inexperienced staff with limited 

budgeting and technology skills. However, in 2007, the ministries plan to 

recruit 60,000 to 70,000 additional personnel and assume financial 

responsibility for the 150,000 security guards currently protecting Iraq’s 35 

ministries and directorates. In addition, as we previously reported, both 

ministries have difficulties planning for, acquiring, distributing, and 

maintaining weapons, vehicles, and equipment.2

 In response to these 

problems, the coalition has provided significant resources to support 

Iraq’s security ministries. In addition to financial assistance, the U.S.-led 

coalition has 215 military, civilian, and contractor personnel advising MOD 

 2

GAO, Operation Iraqi Freedom: Preliminary Observations on Iraqi Security Forces’

Logistical Capabilities, GAO-07-582T (Washington, D.C.: Mar. 9, 2007). 

Page 2
GAO-07-637T

and MOI staff on planning, budgeting, personnel, and logistics issues. 

Furthermore, the United States signed a foreign military sales agreement 

with Iraq in 2006, that according to U.S. officials, will allow the security 

ministries to bypass their ineffective procurement systems and purchase 

equipment and supplies directly from the United States. Under this 

agreement, Iraq has deposited $1.9 billion into its foreign military sales 

account and has requested to purchase helicopters, small arms, trucks, 

and light armored vehicles, among other items. However, in the long term, 

it is unclear whether Iraq’s use of this program will contribute to the 

ministries’ capacity to improve their own procurement and contracting 

systems. 

The Multinational Security Transition Command-Iraq commented on a 

draft of this statement, stating that GAO did not give the government of 

Iraq and the security ministries credit for negotiating the 2007 budget 

responsibly and openly. The Command further stated that the government

of Iraq clearly recognized its inability to responsibly make procurements 

for the military and police and thus entered into a foreign military sales 

agreement with the United States. We added information in the statement 

to reflect MNSTC-I’s comments. Both DOD and GAO agree that it will take 

considerable time and resources to address the challenges the United 

States and Iraq face in developing security ministries and capable Iraqi 

forces. 

In August 2003, the Coalition Provisional Authority (CPA) dissolved the 

military organizations of the former regime, including the Ministry of 

Defense. In March 2004, the CPA established a new Ministry of Defense. 

The MOD was ultimately to be responsible for the overall management, 

direction, and control of the Iraqi armed forces, which now include the 

Iraqi Army, Air Force, and Navy. Responsible for an estimated 200,000 civil 

servants and military personnel, the MOD is expected to conduct all 

functions needed to sustain the armed forces, including developing plans, 

programs, and budgets; and procuring needed goods. 

Background 

The CPA did not dissolve the Ministry of Interior. MOI’s role is to manage 

more than 300,000 staff in the Iraqi police services, the National Police, the 

Border Enforcement, and other services. Managerial functions include 

setting qualifications and training for the forces, vetting all police and

other employees, and conducting the budgeting and financing for MOI 

forces. The MOI directly controls the national police forces. However, the 

MOI exercises only limited administrative control over regular Iraqi police 

forces in the provinces, controlling issues such as recruiting standards and 

Page 3
GAO-07-637T

yearly budget allocations. Operational control of provincial police rests 

with the governor and his Council. 

MNF-I leads U.S. and coalition military efforts in Iraq. Under the command 

of MNF-I, MNSTC-I is responsible for leading coalition efforts to train and 

equip Iraqi security forces and to build MOI and MOD capabilities. 

MNSTC-I helps develop MOI and MOD capabilities through Ministry 

Transition Teams and the Joint Staff Transition Team, which have a total 

of about 215 coalition advisors assigned to work with Iraqi officials at the 

ministries. 

The Iraqi government and the coalition transition teams confront a 

challenging national environment to develop Iraq’s security ministries. 

Corruption is reportedly widespread and poses a major challenge to 

building an effective government. A March 2007 DOD report states that the 

Prime Minister has committed to reforming the government beginning 

with his cabinet and the ministries. This commitment recognizes the 

government’s failure to counter corruption and reduce sectarianism, 

which hampers the government’s ability to perform.3

 In addition, capacity 

building efforts are taking place amid ongoing violence and sectarian 

tension, posing a threat to Iraqi government employees. 

The 2007 increase in Iraq’s security budget is attributable to increases in 

planned expenditures and an appreciation of the Iraqi currency against the 

U.S. dollar. MOD and MOI spent the largest percentage of budgeted 

amounts on salaries but were less successful in spending funds on goods 

and services (e.g., food, uniforms, and fuel) and capital goods (e.g., 

weapons, ammunition, and vehicles). Given Iraq’s continued difficulties in

spending funds for these items, DOD has requested $5.8 billion in 

additional funds to help purchase these critical items and provide other 

assistance to Iraq’s security ministries. 

Although Iraq’s

Security Budget Has 

Grown, the United 

States Continues to 

Fund a Significant 

Portion of Iraq’s

Security Needs 

 3

DOD, Measuring Stability and Security in Iraq: Report to Congress in Accordance with

the Department of Defense Appropriations Act 2007, Section 9010, Public Law 109-289 

(Washington D.C.: Mar. 2, 2007). 

Page 4
DOD’s March 2007 report to Congress stated that the 37-percent increase 

in Iraq’s 2007 security budget is evidence of Iraq’s growing self-sufficiency

and commitment to security. However, our analysis of Iraq’s 2007 budget

shows that this reported increase is attributable to both increases in 

planned expenditures and an appreciation of the Iraqi currency against the 

U.S. dollar (Iraq’s fiscal year begins on January 1 of each year). Iraq 

implemented a 14-percent exchange rate appreciation between November 

1, 2006, and February 1, 2007, to reduce the rate of core (non-fuel) 

inflation. In 2006, inflation in Iraq averaged over 50 percent.4

Reported Increase in Iraq’s 

2007 Security Budget Is 

Partially Attributable to 

Exchange Rate 

Appreciation 

Iraq’s official budget is presented and executed in Iraqi dinars, not U.S. 

dollars. The percentage changes we calculated using a constant 2006 

exchange rate are the same as those in the official budget based on Iraqi 

dinars. For example, MOD’s 2007 budget shows a decline in the number of 

Iraqi dinars budgeted for goods and services compared with 2006. 

However, when converted to U.S. dollars at the new appreciated exchange 

rate, the budget shows an increase in planned expenditures. It is therefore 

important to know the source of changes in the budget. For imported 

products, the appreciated exchange rate (which means the Iraqi dinar 

exchanges for relatively more U.S. dollars than before) allows Iraq to buy

relatively more imported products for the same number of dinars. 

However, for expenditures made in Iraq, especially salaries, the 

appreciated exchange rate may not best reflect changes in Iraq’s budget 

expenditures. Thus, we present both calculations. 

Table 1 shows how the projected growth rate of Iraq’s security budget 

varies with the foreign exchange rate used to convert Iraqi dinars into U.S. 

dollars. When using an appreciated exchange rate, Iraq’s security budget 

grows by 37 percent in 2007. The budget of MOD, which plays a key role in

conducting counterinsurgency operations, grows by 20 percent. However, 

when using a constant exchange rate to facilitate a more direct 

comparison of the planned increases in budgeted dinars, Iraq’s security 

budget grows by 15 percent in 2007 to $6.2 billion (constant exchange 

rate), which represents 18 percent of Iraqis total 2007 budget of $34.5 

billion. Thus, the increase in Iraq’s budget in U.S. dollars is due to the 

actual increases in planned expenditures and an appreciation of the 

currency. 

 4

The 2006 and 2007 Iraqi budgets are prepared in nominal (not inflation-adjusted) Iraqi 

dinars. We have not adjusted them for inflation either because this would require 

predicting the level of inflation in Iraq in 2007. However, a high inflation rate would reduce

the purchasing power of the budget. 

Page 5 GAO-07-637T
GAO-07-637T

Table 1: Budget Projections for Ministry of Defense and Interior, 2006-2007 (Millions of U.S. dollars) 

2006 (constant) 

exchange rate

2007 (appreciated) 

 exchange rate 

Budget Category 2006 budget 2007 budget

Percentage

change from 2006 

2007 

budget 

Percentage

change from 2006

Ministry of Defense 

Salaries 912 1,201 32% 1,429 57%

Goods and services 

(e.g., food, uniforms, fuel, 

medicine, maintenance) 

1,966 1,800 -8% 2,143 9%

Non-financial assets 

(e.g, capital goods such as 

weapons, ammo, vehicles) 

530 438 -17% 521 -2%

Capital projects 33 40 20% 48 43%

Other expenditures ... ... 0% 1 19%

Total $3,442 $3,479 1% $4,141 20%

Ministry of Interior

Salaries $1,465 $2,130 45% 2,536 73%

Goods and services 

(e.g., food, uniforms, fuel, 

medicine, maintenance) 

200 230 15% 274 37%

Non-financial assets 

(e.g, capital goods such as 

weapons, ammo, vehicles) 

225 262 16% 312 38%

Capital projects 27 33 25% 40 49%

Other expenditures 3 17 570% 21 698%

Total $1,919 $2,673 39% 3,182 66%

Total Security Budget (Both Ministries)

Total $5,362 $6,152 15% 7,323 37%

Note: The 2006 exchange rate used to convert Iraq dinars into dollars was 1500/$1. Using the same 

exchange rate to convert both the 2006 and 2007 budgets to U.S. dollars retains the same 

percentage change between the two years as is found when comparing the change between the two 

years in dinars. The U.S. Treasury uses an exchange rate of 1260/$1 for the 2007 Iraq budget (the 

appreciated exchange rate in the table), reflecting the recent exchange rate appreciation of the Iraqi 

dinar relative to the U.S. dollar. Totals may not add due to rounding. Budget classification scheme is 

based on the 2007 budget. “...” refers to values that are less than one half of one million dollars. 

Source: GAO analysis of Iraq’s 2006 and 2007 budgets, provided by the U.S. Treasury. 

Although MOD’s overall budget will grow in 2007, its budget for several 

critical items needed to wage counterinsurgency operations will decline in

2007. For example, the Ministry of Defense’s 2007 budget for capital 

goods—including weapons, ammunition, and vehicles—will decrease 

Page 6
GAO-07-637T

whether using a constant exchange rate (17 percent) or appreciated

exchange rate (2 percent). 

In contrast to MOD, MOI’s 2007 budget shows positive growth rates in all

major categories. For example, the Ministry of Interior’s 2007 budget for 

capital goods—including weapons, ammunition, and vehicles—will 

increase regardless of which exchange rate is used, by 16 percent using a

constant exchange rate or by 38 percent using the appreciated exchange

rate. The MOI is receiving increased budget support for its law 

enforcement responsibilities. However, the additional budget support will 

be provided to a ministry prone to militia infiltration. For example, in 

November 2006, the Director of the Defense Intelligence Agency stated 

that the Ministry of Interior and the police were heavily infiltrated by 

militia members of the Badr Organization and the Mahdi Army. In addition, 

the MOI’s national police—a paramilitary force of about 24,000 

personnel—had conducted counterinsurgency operations in the past, but 

the Iraqi government decided in late 2006 to transform it into a civil

society force due to frequent allegations of abuse and other illegal 

activities. 

The total number of staff reportedly employed by the Ministries of Defense 

and Interior will grow from about 538,000 in 2006 to 608,000 employees in

2007 (see table 2). However, these numbers should be interpreted with 

some caution. As we reported in January 2007,5

 ghost employees comprise 

about 20 to 30 percent of Ministry of Interior staff, according to U.S. 

officials. Also, as of February 2007, the Iraqi government has yet to 

complete a census of all government employees, as required by the 

International Monetary Fund. 

 5

GAO, Securing, Stabilzing, and Rebuilding Iraq: Key Issues for Congressional

Oversight, GAO-07-308SP (Washington, D.C.: Jan. 9, 2007). 

Page 7
GAO-07-637T

Table 2: Estimated Number of Ministry of Defense and Interior Employees, 2006 and

2007 

2006 2007

Percentage change

from 2006

Ministry of Defense 160,000 200,000 25%

Ministry of Interior 378,000 408,000 8%

Total security forces and civilian 

personnel 538,000 608,000 13%

Source: GAO analysis of Iraq 2006 and 2007 budgets provided by the U.S. Treasury. 

In 2006, Ministries of 

Defense and Interior Spent 

Budgets on Salaries but 

Not Capital Items 

To help assess whether Iraq’s security ministries will be able to spend the 

2007 budgets, we analyzed the security ministries’ 2006 budgets and 

spending. Figure 1 shows the total amounts budgeted and expended by

funding category. In terms of their budgets, the MOD had both a larger 

budget ($3.4 billion compared with $1.9 billion) and a larger portion of its 

budget targeted at goods and services and capital goods, compared with 

the MOI. For the MOI, salaries dominated the budget in 2006. 

Figure 1 also shows that the ministries have had difficulty expending some 

categories of their budgets. For example, MOD and MOI spent about 76 

and 82 percent, respectively, of the $912 million and $1,471 million 

budgeted for salaries as of November 2006.6

 In contrast, MOD and MOI 

spent 1 and 15 percent, respectively, of the $864 million and $233 million 

budgeted for capital goods (e.g., weapons, ammunition, and vehicles). The 

inability or unwillingness of Iraq’s security ministries to spend budgeted 

funds on critical items raises questions about the priorities and capabilities 

of Iraq’s government to fund its security requirements. As the U.S. 

government transfers more of its security responsibilities to the Iraqi 

government, it is important that the Iraqi government demonstrate that it 

can execute its approved budgets more effectively. 

 6

The budget figures for these categories are based on Iraq’s 2006 budget. The budget figures 

presented in table 1 for both 2006 and 2007 are based on Iraq’s 2007 budget categories. 

Since the composition of some categories changed, the values in the table do not 

necessarily correspond to the values in figures 1 and 2. 

Page 8
GAO-07-637T

Figure 1: Percentage of Budgeted Amounts Expended, by Funding Category, Ministry of Defense and Ministry of Interior, 

January through November 2006 

0

500

1,000

1,500

2,000

2,500

3,000

3,500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

U.S. dollars (in millions)

Ministry of Defense

Capital Total

Projects

Capital

Goods

Goods &

Service

Salaries

Remaining

Expended

Source: GAO analysis of Iraq’s 2006 budget expenditures as of November 2006, provided by U.S. Treasury.

76%

24%

1%

expended

0%

expended

32%

Ministry of Interior

U.S. dollars (in millions)

Capital Total

Projects

Capital

Goods

Goods &

Service

Salaries

82%

49%

expended

15%

expended 11%

expended

69%

Note: Budget classification scheme is based on the 2006 budget and does not directly correspond to 

the figures provided in table 1. The values in this figure were provided to us by the U.S. Treasury from

Iraq’s Ministry of Finance. The limited spending by various Iraqi ministries in certain areas, such as

capital projects, is a known issue and receiving attention from U.S. advisors. However, we have not 

independently verified the precision of these values and they are likely to change as Iraq’s 

expenditure data for the remainder of the year become available. We provide this information for the 

purpose of demonstrating the relative differences in Iraq’s ability to expend its budget across

ministries and budget categories.

While Iraq’s security ministries have encountered difficulties in spending 

budgets for weapons, equipment, vehicles, food, fuel, and other items 

needed to mount counterinsurgency campaigns, the U.S. government 

anticipates providing additional support to these two ministries at least 

through the end of fiscal year 2008. DOD has asked for an additional $5.8

billion to develop the Iraqi security forces in its fiscal year 2007 

supplemental request and the fiscal year 2008 Global War on Terror budget 

request (see table 3). 

Page 9
GAO-07-637T

Table 3: Request for Additional Funds to Develop Iraqi Security Forces (dollars in millions) 

2007 Supplemental

2008 Global War on Terror 

Budget Request

Category MOD MOI 

Not 

Specified Subtotal MOD MOI Subtotal Total

Infrastructure 264.8 205.0 0 469.8 0 0 0 469.8

Equipment and

Transportation 

1,584.3 373.6 0 1,957.9 1,043.0 245.0 1,288.0 3,245.9

Training and Operations 51.7 52.9 0 104.6 77.0 500.0 577.0 681.6

Sustainment 1,079.6 72.9 0 1,152.5 135.0 0 135.0 1,287.5

Related Activities 0 0 157.5 157.5 0 0 0 157.5

Total 2,980.4 704.4 157.5 3,842.3 1,255.0 745.0 2,000.0 5,842.3

Source: Fiscal Year 2008 Security Forces Fund, Justification for Iraq Security and Afghan Security Forces Fund, February 2007. 

Of this amount, about $3.25 billion (about 56 percent) would purchase 

equipment and transportation for the Iraqi security forces. DOD is also 

requesting about $682 million for training and operations, including efforts 

to develop senior management capabilities within the Ministries of 

Defense and Interior, and to provide increased training for MOD 

intelligence operations, communications operations, and resource 

management. 

Iraq’s security ministries face numerous challenges if they are to more 

effectively direct and sustain Iraq’s security forces. DOD reports and our 

February 2007 fieldwork in Iraq found that the security ministries face two 

key challenges: (1) managing a growing workforce while developing 

effective personnel systems, and (2) improving the limited ability of MOD 

and MOI to manage their logistics operations. Coalition advisors are 

working with the security ministries to improve their planning, budgeting, 

personnel, and logistical systems. In addition, a 2006 Foreign Military Sales 

(FMS) agreement with Iraq will enable the security ministries to bypass 

their ineffective procurement systems and purchase needed equipment 

and supplies directly from the United States, according to U.S. officials. 

Iraq Faces Personnel 

and Logistical 

Challenges in 

Developing its 

Security Ministries’ 

Management 

Capabilities 

MOD and MOI Have a 

Growing Workforce and 

Weak Personnel 

Management Systems 

Planned changes in the size and composition of the security forces will 

complicate MOD and MOI efforts to effectively manage their personnel. 

The security ministries plan to add 60,000 to 70,000 staff to their rolls in 

2007. In addition, in December 2006, the Iraqi Prime Minister directed the

MOI to assume responsibility for paying most of the Facilities Protection 

Service (FPS), a 150,000-strong ministry guard force currently working for 

Page 10 
GAO-07-637T

27 ministries and 8 independent directorates.7 According to DOD 

reporting, the FPS lacks a coherent force structure and standardized 

equipment, and its personnel are often untrained, unreliable, and 

sometimes responsible for violent crimes. According to a senior coalition 

advisor, FPS personnel will be paid by the MOI but remain under the dayto-day supervision of the ministries, agencies, or provincial governments 

to which they are assigned. 

Although the ministries are significantly expanding their workforces, DOD 

reports that MOD and MOI cannot accurately account for the personnel 

they currently have on their payrolls. DOD notes that about 65 percent of 

authorized personnel in fielded units are present for duty at any time, but 

this figure is based on unreliable data.

8

 Similarly, MOI also has no reliable 

data to indicate how many personnel are still serving with the ministry, so 

it is unknown how many of the more than 300,000 employees on the MOI 

payroll are present for duty. MNSTC-I estimates that the number of 

employees present for duty is less than 70 percent. DOD reports that 

payments for pensions, medical care, and death benefits are currently 

included in security ministry payrolls. Thus, the security ministries’ 

personnel figures may include retired, wounded, or deceased personnel. 

DOD also found that corruption inflates both security ministries’ 

personnel figures, as corrupt leaders often collect pay and other 

compensation designated for non-existent soldiers and policemen on the 

unit rolls. 

In addition, a February 2007 MNF-I assessment stated that development of

MOD’s personnel management system was hindered in 2006 by poor 

leadership, low morale, and reliance on coalition counterparts. MNSTC-I 

commented that higher level leadership within MOD did not allow 

knowledgeable managers to implement personnel reforms and overruled 

their decisions. U.S. government documents and coalition officials also 

cited problems at MOI with militia infiltration that complicated reform 

efforts. Our recent work in Iraq also found that the ministries’ lack of 

skilled or experienced staff presents a challenge. Some coalition officials 

noted that the lack of trained staff hindered efforts to improve MOD 

 7

DOD reported that the directive transferring responsibility to MOI did not include FPS 

forces at the Ministry of Oil, the Ministry of Electricity, and the Higher Juridical Council. 

8

According to MNSTC-I, the introduction of a human resources management system at the 

end of March 2007 will enable MOD to know more precisely how many serving and nonserving military and civilian staff it is paying. 

Page 11 
GAO-07-637T

budget formulation, noting that only two or three members of the 30-

person budget office were capable of producing budget spreadsheets on a 

computer. Furthermore, these advisors stated that most ministry staff lack

basic computer and information technology skills, are unwilling to make 

decisions, and often refer problems to higher levels. 

Ministries Face Significant 

Challenges in Logistics 

Management 

DOD’s March report stated that the most significant shortcoming in MOD 

and MOI forces capabilities is in planning and executing logistics and 

sustainment requirements. The report noted that the factors underlying 

this deficiency include inadequate levels of sustainment stocks, such as 

vehicle fuel pumps and filters. Also identified as a challenge was the 

limited capacity of MOD and MOI to plan for, acquire, distribute, and 

maintain needed items. In addition, the security ministries have difficulties 

in accounting for their equipment. For example, MOI’s immature 

equipment accountability system cannot track what police weapons and 

vehicles remain in service or how much equipment authorized by the 

provincial governors MOI has purchased for their staff, which had been.

Our fieldwork found that MOD and MOI units maintain equipment 

accountability through the use of hand receipts and manual ledgers. As 

GAO previously testified, both MOD and MOI have significant logistics 

management issues to overcome before they are capable of independently

sustaining their security forces. 9

Our recent fieldwork also found that developing the security ministries’ 

logistics capacity remains a major challenge, particularly at MOI. U.S. 

officials noted that MOI cannot sustain the wide variety of equipment 

donated by the coalition. For example, GAO previously testified that the 

MOD had difficulty maintaining 21 different types of light trucks. Similarly, 

MOI has been unable to maintain the 17 makes of vehicles it has received 

for use by its personnel. According to coalition officials, the cost and 

difficulty of obtaining spare parts for these diverse vehicle fleets results in 

using some vehicles for spare parts and not repairing others. Moreover, 

the MOI has not approved the draft logistics concept proposed by the 

coalition, in part because it has yet to gain the agreement of the provinces

and is still negotiating with them on the national warehouse system. 

 9

See GAO, Operation Iraqi Freedom: Preliminary Observations on Iraqi Security Forces’

Logistical Capabilities, GAO-07 -582T (Washington, D.C.: Mar. 9, 2007). 

Page 12 
The coalition devotes significant resources to develop capacity at Iraq’s 

security ministries. As of March 2007, the U.S.-led coalition had assigned 

215 military, civilian, and contracting personnel to advise Iraqi staff at the 

MOD and MOI on establishing plans and policies, budgeting, and managing 

personnel and logistics. In comparison, the Ministries of Oil and Electricity 

had 10 and 18 advisors, respectively.

Coalition Efforts to 

Address Problems at the 

Iraqi Security Ministries 

The 111 coalition advisors at the MOD are embedded with staff from a 

number of offices, including Plans and Policies and the Iraqi Joint Staff. 

According to the advisors, they work with their Iraqi counterparts to 

improve their planning processes and capabilities. For example, a senior 

advisor to the joint staff helped MOD develop its counter insurgency 

strategy. He provided them with a planning template, reviewed their work, 

and suggested they add details such as the source of the threat, the risk 

level, and the forces required to counter the threats. He was uncertain as

to whether his Iraqi counterparts had taken ownership of the process. 

Our recent field work at the MOI found that 104 coalition advisors are 

working with Iraqi officials. Among other efforts, they are helping MOI 

develop processes for vetting Iraqi security forces, including collecting 

and storing biometric data; establishing an identification card system; and 

establishing a personnel management database that will house inventory, 

payroll, human resource, financial, and budget data. However, U.S. 

advisors stated that MOI staff has resisted efforts to computerize their 

manual processes because of the increased transparency it would provide.

Finally, MNSTC-I personnel are also assisting the MOD and the MOI in 

purchasing needed equipment from the United States through the Foreign 

Military Sales (FMS) program.10 Under FMS, the U.S. government agrees to 

sell defense articles or services (including training) to eligible 

foreign countries or international organizations. The articles or services 

usually come from DOD stocks or through purchase under DOD-managed 

contracts. In December 2006, the government of Iraq transferred $1.9 

billion into an Iraqi account for FMS purchases. According to a November 

2006 DOD report, Iraq’s use of the FMS program is intended to provide a 

way for both MOD and MOI to spend their money on complete 

 10Under FMS, defense articles or services may be sold or leased to a country or 

international organization only if the President, in accordance with the Arms Export 

Control Act, as amended, determines that the country or organization is eligible. The

President determined that Iraq was eligible to participate in the FMS program on July 21, 

2004. 

Page 13 GAO-07-637T
GAO-07-637T

procurement packages without risking the loss of funds to the corruption 

and mismanagement that hampers Iraqi government contracting. In the

latter part of 2006, DOD notified Congress of a number of possible foreign 

military sales to Iraq, including: 

• Up to $900 million on intelligence, surveillance, and reconnaissance 

aircraft, as well as related support equipment, training, spare and repair 

parts, publications and technical data, and other elements of logistics 

support; 

• Up to $750 million for troop transport helicopters, small arms, 

ammunition, vehicles, and associated logistics support; and 

• Up to about $460 million for trucks, vehicles, including light armored 

vehicles, and trailers, as well as associated equipment and services. 

According to a March 2007 DOD report,11 MOD also plans to fund a $160 

million maintenance contract through the FMS program from April 2007 

through March 2008. 

U.S. and coalition officials stated that the FMS agreement would allow 

both MOD and MOI to bypass their ineffective procurement systems and 

procure equipment and supplies more quickly and efficiently. However, in 

the long term, it is unclear whether Iraq’s use of the FMS program will 

contribute to the ministries’ capacity to improve their inefficient 

procurement and contracting systems. 

DOD expects that the Iraqi government will be capable of sustaining its 

security forces by 2008. This expectation may not be met given the 

security ministries’ past problems in spending their capital budgets and 

current personnel and logistical weaknesses. 

Conclusion 

In addition, as we previously reported, the United States and the Iraqi 

security ministries are supporting Iraqi forces that have divided loyalties, 

varying capabilities, high absenteeism, and questionable dependability.12

 11DOD, Measuring Security and Stability in Iraq. 

12GAO, Stabilizing Iraq: Factors Impeding the Development of Capable Iraqi Security 

Forces, GAO-07-612T (Washington, D.C.: Mar. 13, 2007). 

Page 14 
GAO-07-637T

Mr. Chairman, this concludes my statement. I would be pleased to answer 

any questions that you or other members may have at this time. 

The Multinational Security Transition Command-Iraq provided comments 

on a draft of this statement. The head of the Command stated, “The GAO 

testimony fails to give the government of Iraq and the two security 

ministries any credit for recognizing their financial vulnerabilities and for 

progressing far beyond the opaque and irresponsible business practices of

previous interim governments. The 2007 GOI budget was negotiated 

responsibly and openly. Though the security budget may represent ‘only’ a 

15-percent increase from the previous year in purchasing power, it is 

nearly a 20-percent share of the national budget. The government of Iraq 

has clearly recognized its inability to responsibly make procurements on 

behalf of its military and police forces and so has entered into a $1.7 

billion Foreign Military Sales Agreement with 2006 funding. We anticipate 

that another $1.55 billion investment into United States FMS this calendar 

year.” 

We added information in this statement to reflect MNSTC-I’s comments. 

However, both DOD and GAO agree that it will take considerable time and 

resources to address the challenges the U.S. and Iraqi governments face in

developing fully functioning security ministries and capable Iraqi forces. 

For questions regarding this testimony, please call Joseph A. Christoff at 

(202) 512-8979 or christoffj@gao.gov. Other key contributors to this 

statement were Nanette Barton, Daniel C. Cain, Lynn Cothern, Mattias 

Fenton, Elisabeth Helmer, B. Patrick Hickey, Bruce Kutnick, Stephen M. 

Lord, Judy McCloskey, Tetsuo Miyabara, Mary Moutsos, and Timothy 

Wedding. 

Agency Comments 

GAO Contact and 

Acknowledgments 

Page 15 (320497) 
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