a

GAO

United States Government Accountability Office

Report to Congressional Committees

July 2005 REBUILDING IRAQ

Status of Funding and 

Reconstruction 

Efforts

GAO-05-876
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-876.

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For more information, contact Joseph 

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Highlights of GAO-05-876, a report to 

congressional committees 

July 2005

REBUILDING IRAQ

Status of Funding and Reconstruction 

Efforts 

As of March 2005, the United States, Iraq, and international donors had 

pledged or made available more than $60 billion for security, governance, 

and reconstruction efforts in Iraq. The United States provided about $24 

billion (for fiscal years 2003 through 2005) largely for security and 

reconstruction activities. Of this amount, about $18 billion had been 

obligated and about $9 billion disbursed. The State department has reported 

that since July 2004, about $4.7 billion of $18.4 billion in fiscal year 2004 

funding has been realigned from large electricity and water projects to 

security, economic development, and smaller immediate impact projects. 

From May 2003 through June 2004, the Coalition Provisional Authority 

(CPA) controlled $23 billion in Iraqi revenues and assets, which was used 

primarily to fund the operations of the Iraqi government. The CPA allocated 

a smaller portion of these funds—about $7 billion—for relief and 

reconstruction projects. Finally, international donors pledged $13.6 billion 

over 4 years (2004 through 2007) for reconstruction activities, about $10 

billion in the form of loans and $3.6 billion in the form of grants. Iraq had 

accessed $436 million of the available loans as of March 2005. As of the 

same date, donors had deposited more than $1 billion into funds for 

multilateral grant assistance, which disbursed about $167 million for the 

Iraqi elections and other activities, such as education and health projects. 

The U.S. reconstruction effort in Iraq has undertaken many activities in the 

oil, power, water, and health sectors and has made some progress, although 

multiple challenges confront each sector. The U.S. has completed projects 

in Iraq that have helped to restore basic services, such as rehabilitating oil 

wells and refineries, increasing electrical generation capacity, restoring 

water treatment plants, and reestablishing Iraqi basic health care services. 

However, as of May 2005, Iraq’s crude oil production and overall power 

generation were lower than before the 2003 conflict, although power levels 

have increased recently; some completed water projects were not 

functioning as intended; and construction at hospital and clinics is under 

way. Reconstruction efforts continue to face challenges such as rebuilding 

in an insecure environment, ensuring the sustainability of completed 

projects, and measuring program results. 

Funding Distribution by Sector of $18.4 Billion for Iraq Relief and Reconstruction 

Note: Other includes democracy, education, governance, agriculture, transportation, 

telecommunications, health, employment, privatization, and administrative costs. 

Rebuilding Iraq is a U.S. national 

security and foreign policy priority 

and constitutes the largest U.S. 

assistance program since World 

War II. Billions of dollars in grants, 

loans, assets, and revenues from 

various sources have been made 

available or pledged to the 

reconstruction of Iraq. The United 

States, along with its coalition 

partners and various international 

organizations and donors, has 

embarked on a significant effort to 

rebuild Iraq following multiple 

wars and decades of neglect by the 

former regime. The U.S. effort to 

restore Iraq’s basic infrastructure 

and essential services is important 

to attaining U.S. military and 

political objectives in Iraq and 

helping Iraq achieve democracy 

and freedom. 

This report provides information 

on (1) the funding applied to the 

reconstruction effort and (2) U.S. 

activities and progress made in the 

oil, power, water, and health 

sectors and key challenges that 

these sectors face. 
Page i GAO-05-876 Rebuilding Iraq

Contents

Letter 1

Results in Brief 2

Background 4

Multiple and Diverse Funding Sources Support Iraq Reconstruction 

and Government Operations 6

Some Progress Achieved in Select Sectors While Facing Significant 

Challenges 12

Conclusions 34

Agency Comments and Our Evaluation 35

Appendixes

Appendix I: Scope and Methodology 40

Appendix II: Comments from the U.S. Agency for International 

Development 43

Appendix III: GAO Contact and Staff Acknowledgments 44

Figures Figure 1: Transition of Reconstruction Management from DOD 

Authority to State Authority 5

Figure 2: Funding Distribution by Sector of the $18.4 Billion for 

Iraq Relief and Reconstruction in the Fiscal Year 2004 

Emergency Supplemental 7

Figure 3: Iraqi Oil Production, Export, and Revenue, June 2003 

through May 2005 16

Figure 4: Daily Electricity Produced in Iraq, January 1, 2004-June 

30, 2005 23
Contents

Page ii GAO-05-876 Rebuilding Iraq

Abbreviations

bpd barrels per day

CERP Commander’s Emergency Response Program

CPA Coalition Provisional Authority

DFI Development Fund for Iraq

DOD Department of Defense

IAMB International Advisory and Monitoring Board

IMF International Monetary Fund

IRFFI International Reconstruction Fund Facility for Iraq

IRMO Iraq Reconstruction and Management Office

PCO Project Contracting Office

PMO Project Management Office

UN United Nations

USACE U.S. Army Corps of Engineers

USAID U.S. Agency for International Development

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Page 1 GAO-05-876 Rebuilding Iraq

United States Government Accountability Office

Washington, D.C. 20548

A

July 28, 2005 Letr

Congressional Committees

Rebuilding Iraq is a U.S. national security and foreign policy priority and 

constitutes the largest U.S. assistance program since World War II. In 

October 2003, the World Bank and United Nations reported that in the 

summer of 2003 most Iraqis had limited or no access to essential services, 

that water supplies were contaminated, and that the health system was 

overburdened. In addition, the lack of basic infrastructure and services, 

particularly in the electricity sector, had contributed to a lack of security in 

various parts of the country.1

 As of March 31, 2005, billions of dollars in 

grants, loans, assets, and revenues from various sources had been made 

available or pledged to the reconstruction of Iraq. The U.S. effort to restore 

these services is important to attaining U.S. military and political objectives 

in Iraq and helping Iraq achieve democracy and freedom.

The reconstruction of Iraq is occurring in a difficult environment. Looting 

and sabotage of many infrastructure facilities and offices were pervasive 

after Operation Iraqi Freedom and have continued to varying degrees. In 

addition, according to senior military officials, the insurgency in Iraq has 

grown in size, complexity, and intensity and has affected reconstruction 

priorities. Infrastructure in such areas as the oil, water, and electricity 

sectors has been subject to attacks. In addition, workers have been 

threatened, the ability to safely transport materials has been compromised, 

and access to work sites has been hindered. Another complicating factor in 

the reconstruction effort, according to Coalition Provisional Authority 

(CPA) and U.S. officials, has been the state of some Iraqi infrastructure, 

which was more severely degraded than officials anticipated or initial 

assessments indicated and was exacerbated by post-2003 conflict looting 

and sabotage.

This report is part of our effort under the Comptroller General’s authority 

to monitor Iraq reconstruction and is being addressed to you because of 

your committee’s jurisdictions. It provides a broad overview of funding 

made available for the relief and reconstruction of Iraq, U.S. relief an 

reconstruction activities for select sectors in Iraq, and challenges 

associated with these sectors. This report does not link the funding to

1

United Nations/World Bank, Joint Iraq Needs Assessment (New York, October 2003).
Page 2 GAO-05-876 Rebuilding Iraq

program results, nor does it evaluate the quality of program results. 

Specifically, this report provides information on (1) the funding applied to 

the reconstruction effort and (2) U.S. activities and progress made in the 

oil, power, water, and health sectors and key challenges that these sectors 

face. 

To address these objectives, we obtained and analyzed records, reports, 

and data from government officials and contractors, as well as multiple 

funding databases. We also examined reports of other oversight entities 

that performed reviews related to contract management, internal controls, 

and oversight of some CPA and U.S. relief and reconstruction activities. We 

interviewed U.S. government and former CPA officials and contract 

personnel in the United States and Iraq. Although we did not travel to Iraq 

to make project site visits during this period due to security concerns, we 

interviewed U.S. and Iraqi officials via teleconference and, when possible, 

in person when these officials traveled to the United States. (See app. 1 for 

details on our scope and methodology.) We conducted this part of our 

review from September 2004 through May 2005 in accordance with 

generally accepted government auditing standards. 

Results in Brief As of March 2005, more than $60 billion had been pledged or made 

available from U.S. appropriations, Iraqi resources, and international 

sources for Iraq’s reconstruction and government operations. Of this 

amount, the United States provided about $24 billion from fiscal year 2003 

through 2005, largely for reconstruction activities in security and essential 

services. As of March 2005, about $18 billion of this amount provided by the 

United States had been obligated and about $9 billion disbursed for 

activities including infrastructure repair of the electricity and oil sectors; 

infrastructure repair, training, and equipping of the security and law 

enforcement sector; and CPA and U.S. administrative expenses. Over the 

course of the reconstruction effort, this funding has been realigned several 

times from large-scale infrastructure projects in electricity and water to 

meet immediate needs in security and economic development and to fund 

smaller, more visible reconstruction projects. Since July 2004, the United 

States has reportedly reallocated about $4.7 billion of the $18.4 billion fiscal 

year 2004 emergency supplemental among the various sectors, as priorities 

have changed. Iraqi revenues and assets—which totaled about $23 billion 

in cumulative deposits from May 2003 through June 2004—have largely 

funded Iraqi government operations. A smaller portion of these funds, 

approximately $7 billion, was allocated for relief and reconstruction 

projects, primarily for the import of refined fuel products, security, regional 
Page 3 GAO-05-876 Rebuilding Iraq

programs, and oil and power projects. Finally, most of the $13.6 billion 

pledged by international donors for reconstruction assistance from 2004 

through 2007 is in the form of loans—about $10 billion. The remainder is in 

the form of grants to be provided multilaterally or bilaterally. As of March 

2005, Iraq had accessed $436 million of the available amount pledged in 

loans. Donors have deposited grants of more than $1 billion into a funding 

mechanism for multilateral assistance to Iraq, which had obligated $683 

million and disbursed about $167 million to individual projects as of March 

2005. These funds were used primarily for reconstruction activities in 

public and essential services, including support for the Iraqi elections and 

infrastructure rehabilitation, capacity building, and governance and public 

sector reform projects.

The United States has undertaken many relief and reconstruction activities 

in the oil, power, water, and health sectors in Iraq and has made some 

progress; however, multiple challenges confront each sector. The U.S. 

program has accomplished activities focused on restoring basic essential 

services, such as rehabilitating oil wells and refineries to restart Iraq’s oil 

production and export, increasing electrical generating capacity by 

reportedly adding about 1900 megawatts of generation capacity to Iraq’s 

power grid, restoring some water treatment plants, and reestablishing Iraqi 

health services by providing vaccines and completing initial health clinic 

rehabilitation and training projects. However, restoring and sustaining 

Iraq’s crude oil production and export capacity have been slower than 

originally planned, and these levels were lower in May 2005 than in March 

2003. Similarly, Iraq’s overall power generation through May 2005 was 

lower than before the 2003 conflict, although power generation exceeded 

this level in the latter part of June 2005. Progress in the water sector is 

difficult to measure, and some completed water construction projects are 

not functioning as intended. Finally, health care projects to expand the 

availability of basic health care, such as constructing facilities and 

providing medical equipment, are under way as of May 2005. 

Reconstruction efforts continue to face challenges, such as rebuilding in an 

insecure environment, ensuring the sustainability of projects to be turned 

over to the Iraqis, and measuring program results.

In commenting on a draft of this report, the U.S. Agency for International 

Development (USAID) disagreed with our statement that agency metrics 

for tracking water projects do not show how the U.S. program affects the 

Iraqi people. USAID stated that the agency tracks increases in the amount 

of water treated and estimates increases in beneficiary numbers. However, 

these metrics do not address the quality of water and sanitation services in 
Page 4 GAO-05-876 Rebuilding Iraq

Iraq, which may hinder the U.S. ability to gauge progress toward its goal of 

providing essential services. The Departments of Defense and State and 

USAID also provided technical comments.

Background From May 2003 through June 2004, the CPA was the UN-recognized 

coalition authority led by the United States and the United Kingdom that 

was responsible for the temporary governance of Iraq and for overseeing, 

directing, and coordinating the reconstruction effort. Within the CPA, the 

Project Management Office (PMO) was established to provide 

prioritization and management of projects and contract support of 

U.S.-funded reconstruction projects. In May 2004, the President issued a 

National Security Presidential Directive, which stated that after the 

transition of power to the Iraqi government, the Department of State 

(State) through its ambassador to Iraq would be responsible for all U.S. 

activities in Iraq, with the exception of U.S. efforts relating to security and 

military operations, which would be the responsibility of the Department of 

Defense (DOD). On June 28, 2004, the CPA transferred power to a 

sovereign Iraqi interim government, and the CPA was officially dissolved. 

At that time, the U.S. role—under DOD leadership—changed from being 

part of the coalition-recognized authority for temporary governance of Iraq 

to supporting the sovereign Iraqi government as an ally and friend, under 

State leadership. Management authority and responsibility of the U.S. 

reconstruction program also transitioned at that time from DOD to State. 

The Presidential Directive also established two temporary offices: the Iraq 

Reconstruction and Management Office (IRMO) to facilitate transition of 

reconstruction efforts to Iraq; and the Project and Contracting Office 

(PCO) to facilitate acquisition and project management support for 

U.S.-funded reconstruction projects. Iraq-based personnel from both 

offices are under U.S. chief of mission authority in Baghdad, although the 

U.S. Department of the Army funds, staffs, and oversees the operations of 

the PCO. IRMO is a State Department organization and its responsibilities 

include strategic planning, prioritizing requirements, monitoring spending, 

and coordinating with the military commander. Under the authority of the 

U.S. Chief of Mission in Baghdad, the PCO’s responsibilities include 

contracting for and delivering services, supplies, and infrastructure funded
Page 5 GAO-05-876 Rebuilding Iraq

by $12.4 billion of the $18.4 billion for Iraq relief and reconstruction in the 

fiscal year 2004 emergency supplemental passed by the Congress.2

 (See

fig. 1.) 

Figure 1: Transition of Reconstruction Management from DOD Authority to State 

Authority

Other U.S. government agencies also play significant roles in the 

reconstruction effort. For example, USAID is responsible for projects to 

restore Iraq’s infrastructure, support healthcare and education initiatives, 

expand economic opportunities for Iraqis, and foster improved 

governance. The U.S. Army Corps of Engineers (USACE) provides 

engineering and technical services to the PCO, USAID, and military forces 

in Iraq, including planning, design, and construction management support 

for military and civil infrastructure construction. 

2

This was the amount apportioned to PCO as of April 2005. See Emergency Supplemental 

Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan, 2004, 

P.L. 108-106.

Coalition Provisional Authority 

(DOD)

U.S. Mission, Baghdad 

(State)

Contracting, prioritizing, and 

management support of 

U.S.-funded projects.

Prioritizing and managing 

of U.S.-funded projects.

Contracting support of 

U.S.-funded projects

Project and Contracting 

Office

(DOD)

Iraq Reconstruction 

Management Office

(State)

Program Management Office 

(DOD)

Sources: Departments of Defense and State; GAO (analysis).

Supporting Sovereign Iraqi Government 

(July 2004-present)

Coalition Provisional Authority 

(May 2003-June 2004)
Page 6 GAO-05-876 Rebuilding Iraq

Multiple and Diverse 

Funding Sources 

Support Iraq 

Reconstruction and 

Government 

Operations

As of March 2005, U.S. appropriations, Iraqi revenues and assets, and 

international donor pledges totaling about $60 billion had been made 

available to support the relief and reconstruction and government 

operations of Iraq. U.S. appropriations of more than $24 billion for relief 

and reconstruction activities have been used largely for security and 

essential services—including the repair of infrastructure, procurement of 

equipment, and training of Iraqis—and have been reallocated over time as 

priorities have changed.3

 Iraqi revenues and assets, which totaled about $23 

billion in cumulative deposits, were turned over to the new Iraqi 

government in June 2004 and have largely funded the operating expenses of 

the Iraqi government. International donor funds have been primarily used 

for public and essential service reconstruction activities; however, most of 

about $13.6 billion pledged over a 4-year period is in the form of potential 

loans that have not been accessed by the Iraqis.4

U.S. Appropriated Funding 

Focused on Infrastructure 

Repair and Training of 

Forces; Funding Has Been 

Reallocated as Priorities 

Changed

As of March 2005, of the $24 billion in appropriated U.S. funds made 

available for relief and reconstruction in Iraq from fiscal years 2003 through 

2005, about $18 billion had been obligated and about $9 billion had been 

disbursed.5

 These funds were disbursed for activities that include 

infrastructure repair of the electricity and oil sectors; infrastructure repair, 

training, and equipping of the security and law enforcement sector; and 

CPA and U.S. administrative expenses. Many current U.S. reconstruction 

efforts are consistent with initial efforts the CPA developed before June 

2004. As priorities changed, particularly since the transition of power to the 

Iraqi Interim Government, the U.S. administration reported that it had 

3

Reconstruction activities include infrastructure rehabilitation and construction, equipment 

procurement, operations and maintenance training, and capacity building.

4

The World Bank Group defines a pledge as an indication of intent to mobilize funds for 

which an approximate sum of contribution is specified. International donor pledges for Iraq 

range from $13.6 billion to $17.3 billion, reflecting the range of loans pledged by the World 

Bank and International Monetary Fund (IMF). This amount does not include identified 

humanitarian assistance or export credits and guarantees. Given the uncertainty of the 

ultimate amount of loans to be provided by the World Bank and IMF, we have used the lower 

pledge amount in this report. 

5

This amount does not include $5.7 billion appropriated in May 2005 for assistance to the 

Iraqi security forces in the Emergency Supplemental Appropriations Act for Defense, the 

Global War on Terror and Tsunami Relief, 2005, P.L. 109-13. In addition, it does not include 

$325 million from the same Act, which according to DOD, was released for the 

Commander’s Emergency Response Program in Iraq.
Page 7 GAO-05-876 Rebuilding Iraq

reallocated about $4.7 billion of the $18.4 billion fiscal year 2004 emergency 

supplemental among the various sectors. (See fig. 2.) These reallocations 

were reported in October 2004, January 2005, and April 2005. As of May 

2005, the administration was assessing whether additional reallocations 

would be needed for short-term reconstruction efforts. 

Figure 2: Funding Distribution by Sector of the $18.4 Billion for Iraq Relief and Reconstruction in the Fiscal Year 2004 

Emergency Supplemental

Note: Other includes democracy, education, governance, agriculture, transportation, 

telecommunications, health, employment, privatization, and administrative costs.

In October 2004, the administration reported that it had reallocated 

appropriated funds from the $18.4 billion fiscal year 2004 emergency 

supplemental based on a review of all U.S. reconstruction funding 

priorities. The administration reported that it had reprogrammed about 

$1.8 billion to security and law enforcement and about $1.2 billion to 

economic and private sector development and governance activities. These 

funds were reallocated from future water and electricity infrastructure 

projects. In addition, about $450 million in the oil sector had been 

reprogrammed from refined fuel imports to oil reconstruction projects. 

As of July 2004 As of October 2004 As of April 2005

Oil

Other

Water

Security

and

justice

Electricity

Oil

Water

Other

Electricity

Water

Security

and

justice

Oil

Electricity

Other

Source: GAO analysis of State Department data.

23%

23%

30%

33%

24% 13%

21%

34%

23%

22%

9%

12%

Security

and

justice

15%

9%

9%

Other

Security and justice

Essential services
Page 8 GAO-05-876 Rebuilding Iraq

This review, prompted by both the transition from the CPA to a new State 

Department-led mission and a significant increase in insurgent activity in 

mid-2004, determined that the deteriorating security situation, the desire of 

the interim Iraqi government to quickly expand its security forces, and the 

need to create more jobs for the Iraqi people demanded a significant 

reallocation of funding.

In January 2005, the administration reported that it had reallocated $457 

million. The administration reported that $246 million of this amount was 

for smaller projects to provide immediate and visible essential services in 

four cities—Fallujah, Samarra, Najaf, and Sadr City—affected by coalition 

battles with the insurgents. According to agency documents and officials, 

these services included critical health needs, power distribution, and 

potable water projects. This funding was shifted from longer term power 

generation, transmission, water, and hospital projects. The remaining $211 

million of the reallocated funds was redistributed within the electricity 

sector from longer range transmission projects to more immediate needs, 

such as spare parts procurements, turbine upgrades, and repair and 

maintenance programs. 

In April 2005, the administration reported that it had reallocated $832 

million—$225 million for job creation activities and $607 million for 

essential services projects and programs. To fund these efforts, the 

embassy cancelled five longer term potable water projects and future 

energy projects. The $225 million reallocation for job creation activities 

primarily includes activities in targeted Baghdad neighborhoods and 

through USAID’s Community Action Program throughout Iraq.6

 Of the $607 

million reallocation for essential services, $444 million is for the electricity 

sector, including operations and maintenance projects at a number of 

strategic power plants to reportedly enhance the sustainability of ongoing 

projects, the completion of several electricity generation and rehabilitation 

projects, and the coverage of cost growth due to increased security costs in 

the electricity sector. The remaining funds allocated for essential services 

programs include funds for gas/oil separation plants, operations and 

maintenance projects for water treatment plants recently turned over to 

the Iraqis, and prison and courthouse security projects. 

6

Subsequently, in July 2005, the administration reported that in response to congressional 

action it intended to reallocate $20 million of this amount to democracy-building activities.
Page 9 GAO-05-876 Rebuilding Iraq

Iraqi Revenues and Assets 

Funded Iraqi Government 

Operations with Limited 

Focus on Reconstruction 

Iraqi funds, which totaled about $23 billion in cumulative deposits from 

May 2003 through June 2004, are a mix of revenues and assets that the CPA 

used primarily to support the Iraqi budget for operating expenses, such as 

salary payments and ministry operations. A smaller portion of the $23 

billion—approximately $7 billion—was allocated for relief and 

reconstruction projects, primarily for the import of refined fuel products, 

security, regional programs, and oil and power projects. These Iraqi funds 

came from revenues in the Development Fund for Iraq (DFI)7

 and vested 

and seized assets from the previous Iraqi regime. Of the $23 billion, nearly 

$17 billion had been disbursed as of June 28, 2004. 

The DFI was initially comprised of Iraqi oil proceeds, UN Oil for Food 

program surplus funds, and returned Iraqi government and regime financial 

assets.8

 From May 2003 to June 2004, nearly $21 billion had been deposited, 

$17 billion allocated, and $14 billion disbursed. The CPA turned DFI 

stewardship over to the new Iraqi government in June 2004.9

 The majority 

of the funding had been used for Iraqi ministry operations, including 

salaries and other Iraqi budget support. Iraqi oil revenues continued to be 

deposited into the DFI after June 28, 2004. According to State Department 

estimates, about $18 billion in oil revenues had been deposited into the DFI 

since the transition from the CPA to the interim Iraqi government, as of 

May 31, 2005. 

7

According to U.N. Security Council Resolution 1483, the funds deposited into the DFI were 

to be used to meet the costs of Iraqi civilian administration, humanitarian needs, 

infrastructure repairs, economic reconstruction, and other purposes benefiting the people 

of Iraq. The resolution also noted that independent public accountants, approved by the 

International Advisory and Monitoring Board (IAMB), are to audit the DFI. The IAMB’s 

terms of reference define its oversight responsibilities, which include evaluating the public 

accountant’s reports, monitoring internal controls and financial reporting, and directing 

special audits.

8

As directed under U.N. Security Council Resolution 1483, 95 percent of oil proceeds are to 

be deposited into the DFI. The remaining 5 percent of oil proceeds are to be deposited into a 

U.N. Compensation Fund account to process and pay claims for losses resulting from Iraq’s 

invasion and occupation of Kuwait.

9

According to agency documents and officials, after the transition, the Iraqis approved the 

transfer of about $3 billion in funds for remaining obligations that had been made by the 

CPA before June 28, 2004. As of April 30, 2005, about $1 billion of this $3 billion remained to 

be disbursed.
Page 10 GAO-05-876 Rebuilding Iraq

The vested assets were former Iraqi regime funds frozen and held in U.S. 

financial institutions after the first Persian Gulf War and subsequently 

vested by the President in the U.S. Treasury in March 2003.10 In addition, 

assets of the former regime were seized by coalition forces within Iraq. 

These combined vested and seized assets totaled about $2.65 billion and 

had largely been obligated and disbursed by the time the CPA transferred 

authority to the Iraqi Interim Government.11 The vested and seized assets 

were used primarily on ministry operations, salaries, and regional 

programs, such as the Commander’s Emergency Response Program.12 

International 

Reconstruction Assistance 

Supports Public and 

Essential Service 

Reconstruction Activities, 

but Pledges Are Mostly 

Loans

International donors’ funds have been largely used to support public and 

essential service reconstruction activities; however, most of donors’ 

pledges are in the form of loans that have not been accessed by the Iraqis. 

International donors have pledged about $13.6 billion in support of Iraq 

reconstruction over a 4-year period from 2004 through 2007. Of this 

amount, about $10 billion, or 70 percent, is in the form of loans, primarily 

from the World Bank and International Monetary Fund (IMF). Donors have 

pledged the remaining $3.6 billion as grants, to be provided multilaterally or 

bilaterally. 

Of the $10 billion in loans pledged over the 4-year period, about $1 billion 

was pledged to be provided to Iraq in 2004. As of March 31, 2005, Iraq had 

accessed $436 million of the available amount. The IMF provided a $436 

million emergency post-conflict assistance loan to Iraq in September 2004 

to facilitate Iraqi debt relief. According to a State Department official, the 

Iraqi government is currently in discussions with the World Bank and the 

government of Japan about lending programs, which total $6.5 billion.

10In March 2003, the President used authorities in the International Emergency Economic 

Powers Act (50 USC § 1701 et seq.), as amended by provisions in the USA PATRIOT Act of 

2001 (P.L. 107-56), to confiscate the property of the former Iraqi regime under U.S. 

jurisdiction and vest the assets in the U.S. Treasury.

11As of April 30, 2005, about $145 million remained to be paid against liabilities incurred 

using these assets, according to agency documents and officials.

12As of June 2005, the Commander’s Emergency Response Program (CERP) has received 

about $1.4 billion, which includes DFI, Iraqi seized assets, and appropriated funds, 

according to DOD. According to agency documents and officials, these funds are disbursed 

in the form of small grants to military commanders to support a range of local relief, 

reconstruction, and rule of law activities.
Page 11 GAO-05-876 Rebuilding Iraq

Of the $3.6 billion in grants pledged over the 4-year period, about $700 

million was pledged to be provided to Iraq in 2004, some of which would be 

provided multilaterally and some bilaterally. The established mechanism 

for channeling multilateral assistance to Iraq is the International 

Reconstruction Fund Facility for Iraq (IRFFI), which is composed of two 

trust funds, one run by the United Nations Development Group and the 

other by the World Bank Group. As of March 31, 2005, more than $1 billion 

had been deposited into these funds; the largest deposits were made by 

Japan ($491 million), the European Commission ($227 million), and the 

United Kingdom ($127 million). Of that amount, about $683 million had 

been obligated and about $167 million had been disbursed to individual 

projects. 

Of the $167 million disbursed by the IRFFI, the UN trust fund had disbursed 

about $155 million for projects in 11 categories, as of March 2005. 

Currently, the largest portion of UN trust fund disbursements has been 

made to activities that support the electoral process (about $87 million), 

education and culture (about $25 million), health (about $13 million), and 

infrastructure and housing (about $12 million). The remaining 

disbursements have supported activities in refugee assistance; agriculture, 

water resources, and the environment; food security; governance and civil 

society; water and sanitation; poverty reduction and human development; 

and mine action. Funds for projects are disbursed to participating UN 

agencies for implementation. The World Bank trust fund has disbursed $12 

million for projects that include capacity building, textbooks, school and 

health rehabilitation, water and sanitation projects, and private sector 

development. The World Bank is implementing a capacity-building project, 

and the Iraqi ministries are implementing the remaining projects. 

Donors have also provided bilateral assistance for Iraq reconstruction 

activities; however, complete information on this assistance is not readily 

available. As of April 6, 2005, the State Department had been able to 

identify about $1.3 billion—of the $13.6 billion pledged—in funding that 

donors had provided as bilateral grants directly to Iraqi institutions, 

implementing contractors, and non-governmental organizations for 

reconstruction projects outside the International Reconstruction Fund 

Facility for Iraq. As we reported in June 2004, the United States was 

working with the Iraqis to develop a database for tracking all bilateral 

commitments made to reconstruction activities in Iraq. One year later, this 

database for tracking all donor assistance projects in Iraq remained under
Page 12 GAO-05-876 Rebuilding Iraq

development with assistance from the United States and the UN.13 In March 

2005, the UN gave Iraqi staff of the Ministry of Planning and Development 

Cooperation a 7-day training session in the use and management of this 

database. The UN plans to provide technical and management support to 

the ministry and additional training over the next year. According to a State 

Department official, the database was planned to be operational in time for 

the IRFFI Donor Committee meeting in Amman, Jordan, which was held 

July 18-19, 2005.

Some Progress 

Achieved in Select 

Sectors While Facing 

Significant Challenges

The U.S. efforts to reconstruct Iraq’s essential services sectors have shown 

some progress to date yet continue to face significant challenges. Of the 

approximately $9 billion of appropriated funds the United States had 

disbursed for reconstruction, as of March 31, 2005, approximately $3.1 

billion had been spent on restoring Iraq’s oil, electricity, water and health 

sectors.14 Overall, the U.S. program in these sectors has accomplished 

activities that focused on essential services restoration, such as 

refurbishing and repairing oil facilities, increasing electrical generating 

capacity, restoring water treatment plants, and expanding the availability of 

basic health care. Initial activities to restart the oil infrastructure have 

largely been completed; however, activities to sustain production and 

export levels have been slower than originally planned and these levels 

remained below pre- March 2003 conflict capacity, as of May 2005. Progress 

has been made in rehabilitating electric facilities and generation capacity 

has been increased. Overall production levels for the electricity sector 

were lower in May 2005 than before the March 2003 conflict, although 

power generation exceeded this level for the latter part of June 2005. While 

the water and sanitation program has made some progress toward 

completing a reduced scope of activities, this progress has been difficult to 

measure and some completed projects have not functioned as intended. 

The U.S. program to expand basic health care has made progress in helping 

reestablish health services in Iraq, but larger health infrastructure projects 

remained under way as of May 2005. Implementation of the U.S. 

13In response to our draft report, the State Department told us that this database had been 

transferred to the Iraqis.

14This amount does not include appropriated funding for reconstruction activities in these 

sectors under the Commander’s Humanitarian Relief and Reconstruction Program, 

Commander’s Emergency Response Program, USAID’s Community Action Program, 

USAID’s Office of Transition Initiatives, or Office of Foreign Disaster Assistance programs.
Page 13 GAO-05-876 Rebuilding Iraq

reconstruction program in these sectors continues to face challenges, such 

as security, sustainability, and the measurement of program results. 

Restoring and Sustaining 

Iraq’s Crude Oil Production 

and Export Have Been 

Slower Than Originally 

Planned

U.S. efforts in the oil sector have focused largely on (1) restoring Iraq’s oil 

infrastructure to prewar production and export capacity, (2) delivering 

refined fuels for domestic consumption, and (3) developing oil security and 

pipeline repair teams. More than $5 billion in U.S. and Iraqi funds has been 

made available for these efforts. Progress to date on U.S. activities has 

been slower than planned due to a number of factors, including the security 

environment and difficulties associated with funding, project prioritization, 

contractor reporting, the contract management processes, and Iraq’s 

political transitions. The oil sector faces challenges that include 

establishing effective infrastructure security forces and pipeline repair 

teams; addressing issues related to domestic refined fuel supply and 

consumption; and defining the oil sector’s organizational structure, foreign 

investment framework, and energy priorities. 

Background Iraq’s economy is highly dependent on revenues from crude oil export, and 

its population is dependent on having sufficient refined fuels for power 

generation, cooking, heating, and transport. According to the State 

Department, Iraq’s oil export revenues are expected to account for at least 

90 percent of Iraq’s projected 2005 budget revenues. This revenue is 

essential to Iraq’s ability to provide for its own needs, including 

reconstruction. Iraq’s oil infrastructure is an integrated network that 

includes oil fields and wells, pipelines, pump stations, refineries, gas/oil 

separation plants, gas processing plants, and export terminals and ports. 

This infrastructure has deteriorated significantly over past decades due to 

war damage, inadequate maintenance, and the limited availability of spare 

parts, equipment, new technology, and financing. U.S. agency documents 

estimated Iraq’s 2003 actual pre war crude oil production at 2.6 million 

barrels per day (bpd) and export levels at 2.1 million bpd.15 Considerable 

looting after Operation Iraqi Freedom and continued attacks on crude and 

refined product pipelines have contributed to Iraq’s reduced oil production 

and export capacities.

15According to Iraqi estimates, 2002 production and export levels averaged about 2.2 million 

bpd and 1.5 million bpd, respectively, and 2003 crude production levels reached 2.8 million 

bpd. 
Page 14 GAO-05-876 Rebuilding Iraq

U.S. Activities and Projects About $2.7 billion of U.S. appropriated funds and $2.7 billion in Iraqi funds 

have been made available for U.S. efforts to support Iraq’s oil sector.16

These efforts focus largely on (1) restoring Iraq’s oil infrastructure to 

sustainable prewar crude oil production and export capacity, (2) delivering 

and distributing refined fuels for domestic consumption, (3) developing oil 

security and pipeline repair teams, and (4) providing technical assistance 

for organizing and sustaining Iraq’s oil industry. Specific U.S. activities and 

projects for the restoration of Iraqi’s oil production and export capacity 

include restoring the Qarmat Ali water reinjection and treatment plant to 

create and maintain sufficient oil field pressure in the Rumailah oil field; 

repairing the Al-Fathah oil pipeline crossing; restoring several gas and/or 

oil separation plants near Kirkuk and Basrah; and repairing natural gas and 

liquefied petroleum gas plant facilities in southern Iraq.17 U.S. activities also 

include the restoration of wells, pump stations, compressor stations, 

export terminals, and refineries, and providing electrical power to many of 

these oil facilities.18 According to agency and contracting officials, the 

United States provides primarily procurement, engineering, technical 

expertise and some construction services for these projects. Iraq oil 

company employees conduct some repair operations and construction. 

16Iraqi fund amounts are based on reporting by U.S. government officials and KPMG, the 

external auditor for the International Advisory and Monitoring Board, and are as of 

December 31, 2004. 

17According to USACE documents, Iraq’s gas/oil separation plants, or GOSPs, separate crude 

from natural gas liquids and serve approximately 12 to 50 oil wells. Processing some of 

these liquids results in the production of liquefied petroleum gas, which is used primarily in 

Iraq for cooking and heating. 

18The electrical power element of this activity is specifically dedicated to oil production, 

pumping, refining, and other oil sector operations separate from the national electricity 

system. 
Page 15 GAO-05-876 Rebuilding Iraq

In addition to infrastructure restoration activities, the United States 

facilitated and oversaw the purchase, delivery, and distribution of refined 

fuels throughout Iraq, primarily using DFI funds from late May 2003 

through August 2004. Used for cooking, heating, personal transportation, 

and private power generation, these imports were required to supplement 

domestic production due to increased demand and Iraq’s limited refining 

capacity.19 The responsibility for this effort was transferred to Iraq’s State 

Oil Marketing Organization after August 2004. The United States also 

assisted in developing an oil security force and pipeline repair teams to 

respond to looting, sabotage, and sustained attacks, primarily on oil 

pipelines. Finally, the United States also provided technical assistance and 

support to the Iraqi Ministry of Oil to define Iraq’s operational, legal, policy, 

and investment frameworks for the industry. 

Assessment Although some activities to restart Iraq’s oil production and export have 

been completed, the implementation of the U.S. program to assist in 

restoring and sustaining Iraq’s crude oil production and export levels to 

pre-March 2003 capacity has been slower than originally planned. Of the 

$2.7 billion in appropriated funds for the oil sector, the United States had 

obligated about $2 billion and disbursed $1.1 billion, as of March 31, 2005. 

In addition, of the $2.7 billion in Iraqi funds, about $215 million had been 

spent on these infrastructure restoration efforts. Initial production and 

export targets were reached in 2003 and early 2004 as U.S. efforts were 

made to complete assessments and quick repair projects, provide 

dedicated power, and procure spare parts and equipment.20 Since 

November 2004, however, crude oil production and export levels have not 

been sustained primarily due to pipeline attacks and a natural decline in 

production resulting from years of improper reservoir management, 

according to U.S. and former CPA officials. From December 2004 through 

May 2005, estimated production and export levels remained relatively 

constant at about 2.1 million bpd and 1.4 to 1.6 million bpd, respectively. 

19U.S. activities to improve refineries have focused on assisting the Iraqis in improving the 

reliability and capacity of existing refineries. According to agency officials, this included 

providing expertise to help identify key areas for project improvements and procuring 

associated spare parts, materials, and equipment to operate the refineries at levels close to 

maximum capacity. 

20As of June 2005, DOD and the contractor were reaching agreement on the number and 

final cost of these oil restoration projects, including the expected price of the work 

completed.
Page 16 GAO-05-876 Rebuilding Iraq

(See fig. 3.) Targets for December 2005 are to reach 2.8 million bpd in 

production and 1.8 million bpd in exports.21

Figure 3: Iraqi Oil Production, Export, and Revenue, June 2003 through May 2005 

21A large portion of the crude oil that is not exported is used to create refined fuels for 

domestic use, such as liquefied petroleum gas for cooking. According to a UN document, 

600,000 bpd of crude oil is needed to meet the domestic requirement. Iraq’s 2005-2007 

National Development Strategy stated that Iraq’s refining capacity is approximately 550,000 

bpd. In commenting on our draft report, State noted that actual performance of the refining 

sector has been less than 500,000 bpd.

Thousands of barrels per day Billions of dollars

Source: Department of State estimates.

Year

0

500

1,000

1,500

2,000

2,500

3,000

0.0

0.5

1.0

1.5

2.0

2.5

Revenue

Exports

Production

Apr.

May '05

 '05

Mar. '05

Jul

Aug. '04

Sept. '04

Oct. '04

Nov. '04

Dec. '04

Jan. '05

Feb. '05

y '04

Apr.

May '04

June '04

 '04

Mar. '04

Aug

Sept. 03

Oct. '03

Nov. '03

Dec. '03

Jan. '04

Feb. '04

. '03

July '03

June '03
Page 17 GAO-05-876 Rebuilding Iraq

Several U.S. government, former CPA, and contractor officials stated that 

funding uncertainties, project reprioritizations, inadequate contractor 

reporting,22 and frequent changes in contract management procedures or 

processes have impeded progress. In addition, some officials stated that 

the overall security environment has slowed their ability to obtain or move 

equipment, materials, and personnel, in some cases delaying project 

progress. Some officials estimated that a combination of these factors have 

contributed to delays of 2 to 6 months at different points in the oil sector 

program’s overall implementation. Some significant projects experienced 

further delays from late 2004 to early 2005 due to security, technical, or 

legal problems that over the past several months, according to agency 

officials, resulted in lower crude oil production or export. For example, 

one significant project to provide water and field pressure maintenance in 

southern Iraq could not be fully utilized, primarily due to associated 

infrastructure degradation, thus limiting the facility’s operations and Iraq’s 

level of crude oil production. In general, most larger scale, higher dollar 

projects are either under way or scheduled to begin by August 2005, and 

IRMO officials stated that sector efforts are focused on a defined set of 

projects that the Ministry of Oil agreed to in November 2004. As of May 

2005, U.S. officials and reporting indicated that the overall program is 

scheduled to be completed by mid- to late-2006.

U.S. efforts directly facilitated the CPA’s purchase and delivery of imported 

gasoline, liquefied petroleum gas, kerosene, and diesel for domestic use in 

Iraq. About $2.3 billion of the $2.7 billion in Iraqi funds was used to 

purchase, supply, and distribute these refined fuel products. These efforts 

required the coordination of significant trucking operations and military 

convoys to move considerable quantities of fuels and to increase the 

capacity to download these fuels at several supply points throughout Iraq. 

Although no longer responsible for the purchase and delivery of these 

refined fuels, U.S. agencies continue to monitor Iraq’s efforts to maintain a 

15-day supply of refined fuel stocks. Although estimated national supply 

levels were low from November 2004 to March 2005, U.S. agency 

documents report that levels of these products improved and, as of May 

22U.S. officials and documents reported that a prime contractor’s inadequate reporting of 

costs has been detrimental to the oil sector program’s ability to accurately assess project 

progress and associated costs. According to U.S. officials and documents, primarily due to 

this issue, some remaining unawarded work was moved from this contractor to another 

contractor. According to agency and contractor officials and documents as of June 30, 2005, 

the action taken by the contractor to improve its reporting had been determined to meet 

government requirements. 
Page 18 GAO-05-876 Rebuilding Iraq

2005, only diesel stocks remained significantly below the 15-day supply 

targets. However, agency reporting also noted distribution problems such 

as criminal attacks on delivery trucks, sabotage to domestic product lines, 

and black market activity related to the sale of these products. These 

problems continue to negatively affect the population’s access to these 

fuels for their daily needs. 

Of the $2.7 billion of Iraqi funds made available for the oil sector, about 

$170 million was used to develop oil security and pipeline repair teams.23

CPA oil security efforts included the establishment of a U.S. task force to 

manage the training and equipping of an oil security force. This effort 

began in late 2003 and focused primarily on guarding fixed facilities and, to 

a lesser extent, patrolling pipelines. The oil security force numbers reached 

over 14,000 as of June 2004, according to agency officials; however, in 

responding to our draft report State indicated that this force was not 

staffed, trained, or equipped to patrol pipelines. Because the number and 

intensity of pipeline attacks increased during the summer and fall of 2004, 

the overall effectiveness of this force has been difficult to gauge. In 

responding to our draft report, State indicated that this level of attacks 

demonstrates the effectiveness of the insurgency in Iraq and the inability of 

coalition forces to register the security of the oil infrastructure as a high 

priority. According to agency documents, the Ministry of Oil assumed 

responsibility for these security personnel in December 2004. 

In a related effort, the CPA established an emergency response 

organization in early 2004 to rapidly return damaged pipelines to service. 

The primary contractor was responsible for a certain number of repairs; it 

was also responsible for training repair crews and providing new tools and 

techniques to sustain this effort after its August 2004 contract expiration. In 

July 2004, the U.S. government indicated that the contractor’s performance 

was unsatisfactory and withheld funds. According to U.S. officials and

documents, in August 2004 IRMO mobilized an emergency repair team; in 

February 2005, the Ministry of Oil mobilized a second emergency repair 

team; and responsibilities for these efforts were being transitional to the 

Iraqis as of June 2005. 

Challenges Iraq’s economy relies on oil revenues to support its budget. In the near 

term, Iraq is dependent on the completion of several of the U.S. program’s 

23According to agency documents and officials, $9 million of U.S. appropriated funds were 

also set aside for emergency pipeline response repair. 
Page 19 GAO-05-876 Rebuilding Iraq

infrastructure projects, whose successful operations are expected to 

generate revenues to support Iraq’s 2005 budget. In addition to this 

challenge, the Iraqis face shorter and longer term oil sector challenges that 

include training, equipping, and funding effective infrastructure security 

forces and pipeline repair teams; addressing issues related to domestic 

refined fuel supply and consumption; and defining the oil sector’s 

organizational structure, foreign investment framework, and energy 

priorities, among others.

• Attacks against the oil infrastructure continue and limit Iraq’s ability to 

export crude oil and distribute refined products domestically. The 

United States and Iraq have attempted to establish infrastructure 

security forces as well as emergency response teams to address this 

issue. However, difficulties in determining organizational responsibility 

and funding for such efforts have impeded their completion and 

contributed to insufficient protection of oil infrastructure, particularly 

pipelines. According to agency reporting in April 2005, plans were being 

discussed to provide mobile security for pipelines. In addition, in 

response to our draft report DOD told us in July 2005 that the Iraqi 

government, with Coalition support, is leading an effort to enhance oil 

infrastructure security.

• CPA and U.S. officials have emphasized the importance of restoring 

Iraq’s refinery capacity to increase the supply of refined fuel products 

for domestic use and to decrease the amount spent on refined product 

imports. According to a former agency official, replacing existing 

refineries with modern technology facilities may require $6 to $7 billion 

over a 10-year period, while fuel imports cost over $2 billion annually. 

Iraq subsidizes the refined fuels it imports and produces, and the price 

of these fuels is less than a few cents per liter. U.S. officials have 

reported that low prices also encourage black market activity such as 

smuggling or the purchase and resale of refined products, both of which 

can ultimately result in local distribution shortages and insufficient 

access to these needed fuels. CPA and U.S. officials have provided 

assistance to the Iraqis in developing refined fuel pricing reform 

strategies. Iraq committed to increase the domestic prices of refined 

products to generate an estimated $1 billion in revenues in 2005, 

according to IMF and agency documents. However, potentially negative 

popular reaction may make it difficult for the Iraqis to implement any 

repricing strategies at this time. 
Page 20 GAO-05-876 Rebuilding Iraq

• Iraq’s framework for managing its oil industry and the use of its energy 

resources is not yet defined. Decisions by Iraq’s new government may 

alter how the country runs its oil operations and may also influence the 

amount and type of capital investment that Iraqis and foreigners are 

willing to provide. In addition, establishing regulations for resource 

management and revenue distribution are part of the Iraqi government’s 

current effort to draft a constitution. Outcomes of these activities will 

affect Iraq’s overall economic goals and priorities.

Electricity Production 

Lower in May 2005 Than 

before the March 2003 

Conflict

U.S. efforts in the electricity sector have focused on restoration and 

construction of Iraq’s electrical system. As of March 31, 2005, about $5.7 

billion—about $4.9 billion in appropriated funds and $816 million in Iraqi 

funds—had been made available to provide electricity services that meet 

Iraq’s national needs. Some progress was made in restoring Iraq’s 

electricity infrastructure, reportedly adding about 1900 megawatts24 of 

generating capacity to Iraq’s power grid between March 2003 and May 2005. 

Iraq’s overall power generation was lower through May 2005 than before 

the 2003 conflict, although power generation exceeded this level for the 

latter part of June 2005. The causes for lower overall power generation 

included planned and unplanned maintenance needs for power stations 

and fuel shortages. The electricity sector faces a number of challenges to 

meeting Iraq’s electricity needs, including the lack of appropriate fuel 

supplies, Iraqi operation and maintenance capacity, the unstable security 

environment, financing needs for distribution projects, and effective 

management of electricity generation and distribution. 

Background According to senior U.S. agency officials, Iraq’s electricity infrastructure 

was in worse condition following the 2003 conflict than initially anticipated 

or reported in the 2003 UN/World Bank needs assessment. The report noted 

the severe degradation of Iraq’s generating capacity—from about 5,100 

megawatts in 1990 to about 2,300 megawatts post-1991 Gulf War—largely 

due to war damage to generation stations. Although the report notes that 

production was restored to about 4,500 megawatts before the 2003 conflict, 

U.S. officials said that Iraq’s electrical infrastructure had experienced 

significant deterioration due to the war and years of neglect under 

Saddam’s regime. Spare parts were largely unavailable when UN sanctions 

24A megawatt is a measurement of the rate at which electric energy can be transferred and is 

used as a measure of electric generation capacity.
Page 21 GAO-05-876 Rebuilding Iraq

were in place between 1991 and 2003. Equipment and facilities had not 

been maintained and required significant overhauls. In addition, some 

facilities and transmission lines were damaged by U.S. forces during the 

1991 Gulf War or by the looting and vandalism of facilities following the 

2003 conflict. 

U.S. Activities and Projects About $4.9 billion in appropriated and $816 million in Iraqi funds from the 

DFI have been made available for U.S. reconstruction efforts in the 

electricity sector. These efforts focus on restoring or constructing 

generation, transmission, distribution, and automated monitoring and 

control systems in Iraq’s electrical system. Other projects have included 

capacity building25 and training security forces to protect the electrical 

infrastructure. According to agency documentation, the majority of 

financial assistance in this sector has focused on generation projects, such 

as rehabilitating and repairing existing equipment or procuring and 

installing new turbines and generators. Transmission projects, such as 

erecting transmission towers and stringing transmission lines, have been 

another significant focus.

Assessment Although some progress has been made in rehabilitating many Iraqi electric 

facilities as of May 2005, electricity production in Iraq was lower than 

before the March 2003 conflict. However, for the latter part of 2005 power 

generation exceeded this level. Of the $4.9 billion appropriated as of March 

31, 2005, the United States had obligated $3.7 billion and disbursed $1.7 

billion, mostly for generation projects to repair existing equipment or 

procure new turbines and generators for power plants.26 In addition, of the 

$816 million in Iraqi funds authorized for U.S. activities in the electricity 

sector, about $758 million had been disbursed as of March 31, 2005. 

25Capacity building includes training to build management capability within the ministry and 

operations and maintenance capability at the power stations.

26This amount does not include appropriated or Iraqi funding disbursed for electricity sector 

activities from the Commander’s Humanitarian Relief and Reconstruction Program, 

Commander’s Emergency Response Program, Rapid Regional Response Program, 

Accelerated Iraqi Reconstruction Program, or USAID’s Community Action Program, Office 

of Transition Initiatives programs, or Office of Foreign Disaster Assistance programs.
Page 22 GAO-05-876 Rebuilding Iraq

Two key targets of the U.S. reconstruction effort are increasing total 

generating capacity and daily megawatt hours of electricity produced. The 

first key target is to increase Iraq’s total generating capacity by 3,100 

megawatts by June 2005.27 As of May 2005, U.S.-funded projects reportedly 

had added or restored about 1900 megawatts of generating capacity to 

Iraq’s power grid. However, U.S. program and contracting officials have 

raised concerns about the ability of the Ministry of Electricity and local 

power plant operators to sustain the added generation capacity. 

The other key target has been to help Iraq produce 120,000 megawatt-hours 

of electricity per day by June 2005. In May 2005, agency reports show this 

target was revised to producing 110,000 megawatt-hours by December 

2005. As shown in figure 4, Iraq produced more than 100,000 

megawatt-hours of electricity most days between July and November 2004; 

however, production dropped below prewar production levels through May 

2005, varying between 51,000 and 99,800 megawatt-hours daily. Agency 

reports attribute the decreased production figures to several causes, 

including planned and unplanned maintenance on power stations, fuel 

shortages due to insurgent attacks on oil pipelines that provide fuel to the 

power plants, and limited supply of fuels allocated by the Ministry of Oil. In 

commenting on our draft report, State noted that planned outages are 

necessary operational procedures to ensure reliable and sustainable 

operations at the plants and that the central reason for high unplanned 

outages is that Ministry of Electricity workers do not yet have the 

necessary skills to ensure adequate operations and maintenance practices. 

As of June 2005, Iraq’s electricity production was increasing to meet greater 

summer demand and exceeded 100,000 megawatts in the latter half of the 

month. U.S. officials attributed the increased production to (1) power 

plants that were returned to service after maintenance was completed, (2) 

imported power and fuel supply from neighboring countries, and (3) 

activation of U.S. funded power projects.

27The date for meeting this target was extended to December 2005.
Page 23 GAO-05-876 Rebuilding Iraq

Figure 4: Daily Electricity Produced in Iraq, January 1, 2004-June 30, 2005

Challenges The electricity sector faces a number of challenges to meeting Iraq’s 

electricity needs. These challenges include the lack of appropriate fuel 

supplies, Iraqis lack of capacity in operation and maintenance, the unstable 

security environment, financing needs for distribution projects, and 

ineffective management of electricity generation and distribution.

• Iraq’s limited accessible supply of natural gas and diesel fuel affects the 

operation of the new gas combustion turbines provided by the United 

States28 and continues to affect the operations and production capacity 

of Iraq’s electrical power plants. The United States purchased and 

installed gas combustion turbines to operate several Iraqi power plants, 

including Bayji and Qudas. These turbines were readily available for 

0

20,000

40,000

60,000

80,000

100,000

120,000

1/1/2005

2/1/2005

3/1/2005

4/1/2005

5/1/2005

6/1/2005

10/1/2004

11/1/2004

12/1/2004

1/1/2004

2/1/2004

3/1/2004

4/1/2004

5/1/2004

6/1/2004

7/1/2004

8/1/2004

9/1/2004

Megawatt hours

Date

Prewar

Target

7 day average

Actual

Sources: U.S. Department of State and USAID estimates.

28The UN Oil for Food Program also purchased gas combustion turbines for Iraq’s electricity 

sector.
Page 24 GAO-05-876 Rebuilding Iraq

purchase, could be installed in less than 1 year, and could also be 

modified to burn oil-based fuels, although with some negative effect on 

the turbines’ efficiency and operation. Although Iraqi power plants have 

largely relied on steam turbines that use crude oil or oil-derived fuels, 

these turbines are less readily available for purchase on the world 

market and require a longer installation time. Due to limited access to 

natural gas, some gas combustion turbines at Iraqi power plants are 

operating on low grade, oil-based fuels. The use of liquid fuels, without 

adequate equipment modification and fuel treatment, decreases the 

power output of the turbines by up to 50 percent, requires three times 

more maintenance, and could result in equipment failure and damage 

that significantly reduces the life of the equipment, according to U.S. 

and Iraqi power plant officials. 

• U.S. agencies report they have incorporated operations and 

maintenance training into the reconstruction program. However, the 

Iraqis’ capacity to operate and maintain the power plant infrastructure 

and equipment provided by the United States remains a challenge. 

Contractors cited several instances where the Iraqis had significant 

problems operating and maintaining projects after they were transferred 

to the government. For example, in December 2004, the Iraqis’ inability 

to operate a recently overhauled plant at Bayji led to a widespread 

power outage. U.S. officials said that contractors installed the 

equipment and provided the Iraqis onsite training in operating the new 

or refurbished equipment. However, Iraqi power plant officials from 13 

locations throughout Iraq, including Bayji, indicated that the training did 

not adequately prepare their staff to operate and maintain the new gas 

turbine engines. U.S. officials have acknowledged that more needs to be 

done to train plant operators and ensure that advisory services are 

provided after the turnover date of the projects. To address this issue, in 

February 2005, USAID implemented a project to train selected 

electricity plant officials (plant managers, supervisors, and equipment 

operators) in various aspects of plant operations and maintenance.29

According to DOD, PCO also has awarded one contract and is 

developing another to address operations and maintenance concerns. A 

June 29, 2005, USAID Inspector General report stated that until the 

operations and maintenance challenges are addressed at both the Iraqi 

power plants and ministry levels and practices at the power plants are 

29USAID-sponsored training is being provided for select participants in Amman, Jordan, and 

Atlanta, Georgia.
Page 25 GAO-05-876 Rebuilding Iraq

significantly improved, reports of damaged equipment and 

infrastructure will continue and the electrical infrastructure rebuilt and 

refurbished by USAID’s program will remain at risk of sustaining 

damage following its transfer to the Ministry of Electricity. In comments 

on our draft report, State department said that there has not been 

enough focus on strengthening operations and maintenance capacity 

and that such strengthering had not been a U.S. government priority in 

the early phases of the reconstruction effort. 

• Providing security for power plants, transmission lines, and distribution 

stations is another key challenge to electricity reconstruction projects 

and to meeting Iraq’s electricity needs. According to U.S. agency 

officials and contractors, insurgent attacks on people and infrastructure 

have increased project costs and caused scheduling delays. Our 

analyses of five U.S.-funded electricity sector contracts indicate that 

security costs to obtain private security services and security-related 

equipment as of December 31, 2004, ranged from 10 to 36 percent of 

project costs.30 In March 2004, the United States awarded a $19 million 

contract to train and equip Iraq’s Electrical Power Security Service to 

protect electrical infrastructure, including power plants, transmission 

lines, and Ministry of Electricity officials. Although the program was 

designed to train 6,000 guards over a 2-year period, fewer than 340 

guards had been trained when the contract was terminated early. 

According to agency reporting in April 2005, current plans are for the 

Iraqi Ministry of Defense to provide mobile security for linear assets 

such as transmission lines and pipelines. 

• The Iraqi electricity sector will require additional financial assistance to 

restore its infrastructure to meet the national needs. The Ministry of 

Electricity estimates that Iraq needs about $20 billion to restore its 

electricity sector, including over $3 billion to update the distribution 

network system, that provides electricity from the distribution station to 

the end user. The activities of the U.S. assistance program have focused 

on generation, transmission, and distribution projects to improve the 

electricity sector and have provided about $100 million to address the 

provision of power from the distribution station to the end user. 

30Several contractor officials noted the cost of security relative to total contract costs can 

vary over time. For example, they noted that initial security costs, such as for mobilizing and 

equipping security personnel and purchasing armored vehicles, can be considerable in 

relation to the amount of reconstruction work authorized. As additional work is authorized, 

the relative percentage accounted for by security costs could decrease considerably.
Page 26 GAO-05-876 Rebuilding Iraq

• Effective management of electricity generation, transmission, and 

distribution is affected by illegal connections to existing power lines and 

the lack of metering. According to industry officials, the inability of 

system operators to balance the amount of electric generation with 

consumer demand can cause severe failures in both equipment and 

service, as evidenced in January 2005 when the national grid collapsed 

following an electrical circuit imbalance near Bayji. Further, limited and 

inaccurate metering in Iraqi homes precludes the Ministry of Electricity 

from measuring the amount of electricity that end users consume. 

Experts indicate that the demand for electricity has increased 

dramatically since UN sanctions were removed in 2003 and estimate 

that the demand for electricity will exceed 8,500 megawatts this 

summer. In commenting on our draft report, the State department stated 

that the demand had passed 8,500 megawatts and may reach 9,000 

megawatts.

Progress in the Water Sector 

Is Difficult to Measure and 

Some Completed Projects 

Are Not Functioning

U.S. reconstruction efforts in the water and sanitation sector focus on 

improving Iraq’s potable water, sewage, and sanitation systems. State 

reallocations have reduced available U.S. funding for improving Iraq’s 

severely degraded water and sanitation sector from a peak of $4.6 billion to 

a current level of $2.4 billion. The United States has made some progress in 

completing large and small water and sanitation projects, but it is difficult 

to determine the impact of its reconstruction effort on this sector due to 

limited performance data and measures. The U.S. reconstruction program 

has also suffered from delays in completing projects, and some completed 

projects lack sufficient Iraqi staff and supplies to function properly or are 

not operating at all due to a lack of electricity and diesel fuel.

Background Water and sanitation services in Iraq deteriorated significantly after the 

1991 Gulf War due to the lack of maintenance, inadequate skilled 

manpower, and war damage. In 2003, post war looting destroyed equipment 

and materials needed to operate treatment and sewerage facilities. Before 

the 1991 Gulf War, Iraq produced enough water to supply more than 95 

percent of urban Iraqis and 75 percent of rural Iraqis, according to the 2003 

UN/World Bank needs assessment. Actual access was much lower due to 

significant losses from leaks in the delivery network. By 2003, these 

production levels had fallen to 60 percent of urban Iraqis and 50 percent of 

rural Iraqis. According to the same assessment, the sewage system 

primarily served Baghdad, where it reached about 80 percent of the 

population. However, according to the report the sewage system was 

inadequate for moving and processing waste, leading to backups of raw 
Page 27 GAO-05-876 Rebuilding Iraq

sewage in the streets and treatment plants were not operational. Less than 

10 percent of the urban population outside Baghdad was served by sewage 

systems. The rural areas and northern Iraq—including the cities of Kirkuk 

and Erbil—had no access to piped sewage systems. According to the 

UN/World Bank report, some of these areas had access to pour flush 

latrines.

U.S. Activities and Projects U.S. reconstruction efforts in the water and sanitation sector focus on 

projects to improve Iraq’s potable water, sewage, and sanitation systems. 

Specific activities funded by the U.S. reconstruction program include 

repairing water and sewage treatment plants, rehabilitating dam facilities, 

and conducting irrigation projects. Work has been implemented through a 

combination of longer term, large scale projects and quick impact, smaller 

scale projects. Agencies are executing most of their largest efforts through 

five large contracts with three U.S. companies. These efforts include 

rehabilitation of water and sewage treatment plants, dams, pump station, 

and irrigation canals, as well as repairs of sewer lines and drinking water 

canals. Smaller scale projects include neighborhood cleanups, water 

supply improvements, and the rehabilitation of smaller scale sewage 

systems and water treatment plants.

Assessment The U.S. reconstruction program in Iraq’s water and sanitation sector has 

made some progress toward completing a reduced scope of activities. As of 

April 5, 2005, the State Department had reallocated funding for water and 

sanitation to other priorities such as security, thus reducing available 

funding by 48 percent to about $2.4 billion.31 As of the end of March 2005, 

U.S. agencies had obligated about $1.2 billion, or 50 percent, and disbursed 

about $280 million, or 12 percent, of the U.S. funding to specific projects for 

the sector.32 USAID’s accomplishments included the repair of six sewage 

treatment plants, two water treatment plants, and a primary urban water 

supply in southern Iraq. As of April 3, 2005, State reported that 64 projects 

were complete and 185 were in progress. However, State was unable to 

31As of March 31, 2005, the amount apportioned to U.S. agencies from this total was about $2 

billion.

32This disbursement amount is an estimate and does not include appropriated or Iraqi 

funding disbursed for water sector activities from the Commander’s Humanitarian Relief 

and Reconstruction Program, Commander’s Emergency Response Program, Rapid Regional 

Response Program, Accelerated Iraqi Reconstruction Program, USAID’s Community Action 

Program, or USAID’s Office of Transition Initiatives programs, or USAID’s Office of Foreign 

Disaster Assistance programs. 
Page 28 GAO-05-876 Rebuilding Iraq

provide a list of those completed projects, which would enable us to 

evaluate the significance of the project numbers in terms of scope of work, 

cost, or size. The United States has also funded a number of smaller scale, 

quick impact projects. The primary goals of these quick impact projects 

have been to meet pressing local needs and provide employment for the 

Iraqi people. Although they are designed to show impact more quickly in 

some cases small-scale projects do not have the potential long-term effect 

of the larger projects.

Reduced funding and increased costs have limited the work done in the 

water and sanitation sector. As of March 2005, PCO had begun 52 projects. 

Although PCO initially planned to execute 137 projects with fiscal year 

2004 appropriated funds, the full list of 137 projects will not be completed 

using appropriated funds given the funding reallocations and State’s focus 

on completing projects under way and sustaining completed projects. The 

reduction in the number of planned projects is the result of a more than $2 

billion decrease in program funding and underestimates of the cost of 

doing business in Iraq. According to PCO, the initial CPA cost estimates for 

completing projects in Iraq were too low. Increased security requirements, 

inflation in the cost of construction materials and labor, and the 

unexpectedly poor condition of Iraqi facilities have all contributed to 

increases in project cost. 

In commenting on the draft of this report, the U.S. Agency for International 

Development (USAID) disagreed with our statement that agency metrics 

for tracking water projects do not show how the U.S. program affects the 

Iraqi people. USAID stated that the agency tracks increases in the amount 

of water treated and estimates increases in beneficiary numbers. However, 

these metrics do not address the quality of water and sanitation services in 

Iraq, which may hinder the U.S. ability to gauge progress toward its goal of 

providing essential services. 

Challenges The effect of U.S. water and sanitation sector reconstruction is difficult to 

quantify, and metrics used by U.S. agencies to track progress do not 

provide a complete picture of results. The program has encountered delays 

in execution due to security conditions and other factors, and completed 

projects are at risk of failing due to lack of needed staff and supplies after 

transfer to the Iraqis. 

• Iraq has no comprehensive metering of water usage. Without metering, 

the ministries lack information on the amount of water consumed or 

lost. U.S. officials estimate that approximately 60 percent of water 
Page 29 GAO-05-876 Rebuilding Iraq

produced in Iraq is unaccounted for—lost to illegal taps, unmetered 

usage, and leaking water pipes. Because of water losses and the lack of 

metering, the extent to which clean potable water from improved 

facilities is reaching users is unknown.

• Agency metrics for tracking progress in the water and sanitation sector 

do not show how the U.S. program is affecting the Iraqi people. PCO and 

State have developed metrics to track the progress of the U.S. water and 

sanitation reconstruction program in terms of projects completed, 

treatment capacity, and agricultural area irrigated. While these measures 

provide some insights on progress, they do not track the contribution of 

projects toward the overall objective of providing essential services or 

measure increased access to clean water and improved sanitation in 

Iraq, as this data from the end user is difficult to gather. In commenting 

on our draft report, USAID said that the agency tracks increases in the 

amount of water treated and estimates increases in beneficiary 

numbers. However, these metrics do not address the quality of water 

and sanitation services in Iraq, which may hinder the U.S. ability to 

gauge progress toward its goal of providing essential services. For 

example, because of problems with the distribution network, water that 

is potable at the treatment plants may be contaminated by the time it 

reaches users. According to a senior PCO official in the water sector, 

potable water and sewage mains in Iraq are sometimes adjacent to each 

other, allowing leaking sewage to enter the water mains. In response to 

our draft report, State also noted that there are significant difficulties in 

accurately measuring water quantity and water quality delivered to Iraqi 

households and that the measurement of access to potable water and 

improved sanitation is generally done through the use of surveys. 

However, State commented that the department has elected not to 

reallocate funding away from projects to conduct regular surveys on 

essential services.

• The U.S. effort to rehabilitate Iraq’s water and sanitation sector has 

faced challenges from the insurgency, coordination and management 

difficulties, and poor onsite conditions. Contractor and agency reporting 

cite numerous instances of project delays due to unsafe conditions. PCO 

has estimated that deteriorating security has added an average of about 

7 percent to project costs in the water and sanitation sector. Contractors 

and agency officials also cited difficulties in defining project scope and 

coordinating with Iraqi ministries as further impeding progress. For 

example, Iraqi ministry and local officials disagreed on the proper scope 

of one project, and PCO’s resolution of the issue was delayed by security 
Page 30 GAO-05-876 Rebuilding Iraq

conditions limiting its ability to meet with Iraqi officials. Unusable 

project sites and the unexpectedly poor condition of Iraqi facilities have 

also contributed to delays and increased costs. USAID abandoned one 

landfill project, projected to cost $20 million if completed, because the 

Iraqi government provided an unusable site. Contractors arriving in the 

field also found unanticipated conditions, such as sewer blockages and 

treatment equipment that required repair. 

• Both USAID and PCO have incorporated employee and management 

training efforts into their reconstruction programs. However, the 

projects completed by USAID and PCO have encountered significant 

problems in facility operations and maintenance after project handover 

to Iraqi management. Iraqis lacked adequate resources and personnel to 

operate these facilities in the long term. To address these issues, in April 

2005 State reallocated $25 million for a USAID pilot project to provide 

continuing operations, maintenance, and supply acquisition training and 

support at selected sites after handover. PCO has also developed a risk 

assessment process designed to anticipate potential sustainability 

issues by evaluating various factors that contribute to the successful 

transition of projects to the Iraqis. 

Progress Made in 

Expanding Basic Heath 

Care, and Larger 

Infrastructure Projects Are 

Under Way

U.S. reconstruction efforts in the health sector focus on restoring and 

expanding the availability of basic health care in the country. The United 

States has provided about $866 million in appropriated funds for health 

activities to reestablish, restore, and expand the availability of health care 

in Iraq. The majority of this funding—about $750 million—is focused on 

infrastructure projects and medical equipment supplies; the remainder 

provides for medical staff training and management training for the 

Ministry of Health. While U.S. agencies have completed initial activities to 

reestablish Iraqi health services, larger infrastructure, equipment, and 

training projects to restore and expand the availability of basic health care 

are still under way. The Iraqi health sector faces a number of challenges in 

providing basic and preventive health services, including procurement and 

delivery of medical equipment and supplies and measuring program 

results. At the same time, long-term technical assistance will be required to 

build the management and infrastructure capacity needed to provide 

access to a quality health care system over time. 

Background More than 30 years ago, Iraq was a regional leader in health care, but years 

of neglect and mismanagement under Saddam’s regime left the Iraqi health 

system in a deteriorated state and a segment of the Iraqi population and the 
Page 31 GAO-05-876 Rebuilding Iraq

poor with little or no health care. The 2003 UN/World Bank needs 

assessment described the Iraqi health care system as inefficient and 

inequitable, noting that health care facilities and equipment were in poor 

condition. The Iraqi health system was a hospital-oriented model that did 

not emphasize sustainable health development; care was centralized in 

urban areas and services only partially matched the needs of the 

population. The 2003 UN/World Bank needs assessment further noted that 

the health system did not provide equitable access to basic health services; 

lacked cost-effective public health interventions; required large-scale 

imports of medicines, medical equipment, and health workers; and 

collected little health service data. The 2003 assessment determined that 

basic health care services needed to be restored and that the system 

needed to be transformed into a national health care system based on 

primary care, that provides health services reflecting population needs and 

priorities with a focus on prevention and treatment.33

According to the 2003 UN/World Bank needs assessment, Iraqi health care 

spending during the 1990s had fallen by as much as 90 percent and Iraq’s 

health outcomes were among the poorest in the region—well below the 

levels found in comparable income countries. Infant, child, and maternal 

mortality rates more than doubled from 1990 to 1996 with 65 percent of 

births occurring outside of health institutions; adult mortality increased, 

and life expectancy fell to 60 years of age. Widespread looting after 

Operation Iraqi Freedom, the subsequent unpredictability of electricity and 

the water supply, and attacks by insurgents further weakened the 

functional capacity of Iraqi health care services. According to the Iraqi 

Ministry of Health, about one-third of primary care clinics, more than 12 

percent of hospitals, 30 percent of family planning clinics, and 15 percent of 

child care clinics were looted or damaged or both; two main public health 

laboratories were destroyed; and four of seven central warehouses for 

storage of drugs and supplies were partially looted and their vaccine supply 

was lost.34

33The World Health Organization defines primary health care by the principles outlined in 

the 1978 Declaration of Alma-Ata, which states that primary health care is essential health 

care based on practical, scientifically sound and socially acceptable methods and 

technology made universally available to individuals and families in the community through 

their full participation and at a cost the community and the country can afford to maintain.

34Iraqi Ministry of Health, Health in Iraq: A Review of the Current Health Situation, 

Challenges Facing Reconstruction of the Health Sector, and Our Vision for the Immediate 

Future (September 2004).
Page 32 GAO-05-876 Rebuilding Iraq

Activities and Projects The U.S. program for the Iraqi health sector is primarily focused on 

restoring and expanding the availability of basic health care, including 

maternal and child health care, to the majority of the population. Activities 

funded by the U.S. reconstruction program (1) address medical facility 

needs to support an evolving health care model for equitable access to 

basic health care;35 (2) provide medical equipment and training of medical 

staff; and (3) provide training to strengthen management by the Ministry of 

Health. The majority of U.S. financial assistance in this sector—over 80 

percent—is focused on rehabilitating and constructing hospitals and health 

care centers and supplying medical equipment for hospitals and clinics. 

The remainder of this assistance provides for the training of medical staff 

and capacity building within the Ministry of Health, including management 

training for infectious disease control, national health policy reform, and 

decentralization of health care activities at the local, governorate, and 

ministry levels. U.S. activities in the Iraqi health sector fall into four key 

areas: health phase I ($80 million36), nationwide hospital and clinic 

improvements ($439 million), equipment procurement and modernization 

training ($297 million), and the construction of the Basrah Pediatric 

Facility ($50 million).

Assessment The United States has made some progress in its effort to restore and 

expand the availability of basic health care in Iraq; however, the majority of 

large-scale infrastructure projects remain under construction. As of March 

31, 2005, U.S. agencies had obligated $533 million and disbursed $116 

million of the $866 million allocated for health activities in Iraq.37 According 

to agency reporting, initial activities to reestablish Iraqi health services 

35According to the Iraqi Ministry of Health, the core elements of its health system reform 

include population empowerment with patient choice, community involvement, integration 

of health services delivery system with strengthened primary healthcare, financial risk 

protection, health provider management autonomy, quality improvement, and human 

resources supply and development. 

36The Health Phase I program reflected USAID activities funded by fiscal year 2003 

appropriated funds for the reestablishment of health services. Activities included the 

rehabilitation of primary health clinics, a vaccination program for Iraqi children against 

measles, mumps, rubella and polio, procurement of equipment for primary health clinics, 

and technical assistance to the Iraqi Ministry of Health.

37This amount does not include appropriated or Iraqi funding disbursed for health sector 

activities from the Commander’s Humanitarian Relief and Reconstruction Program, 

Commander’s Emergency Response Program, Rapid Regional Response Program, 

Accelerated Iraqi Reconstruction Program, or USAID’s Community Action Program, Office 

of Transition Initiatives programs, and Office of Foreign Disaster Assistance programs.
Page 33 GAO-05-876 Rebuilding Iraq

have been largely completed, including the vaccination of 70 percent of 

eligible Iraqi children, about 5 million Iraqi children against measles, 

mumps, and rubella and 3 million children against polio; rehabilitation of 

110 health clinics; training of about 700 health care trainers; and the 

procurement of medical equipment kits for 600 health centers. However, 

due to the security environment and procurement delays, 37 of 600 medical 

equipment kits had not been delivered as of May 20, 2005, according to U.S. 

officials.

Further efforts to improve hospitals and clinics, procure equipment, and 

provide training are under way. For example, according to IRMO reporting, 

as of April 6, 2005, of the planned renovations for 20 hospitals and new 

construction for 1 hospital, the United States had started planned 

renovations on the 20 hospitals and begun construction of the Basrah 

Pediatric Facility. According to agency documentation, the execution 

phase of these health projects took longer than expected to complete due 

to the complex designs for health care facilities, long lead times for medical 

equipment manufacturing and delivery, construction delays due to land 

ownership issues, the poor quality of sites, and security issues related to 

the contractors and the delivery of construction supplies. In addition, 

according to U.S. officials, the training program for the medical staff for the 

new primary health clinics was expected to begin in June 2005.

Challenges Iraq’s health sector needs long-term financial support for its health care 

system. In addition, the U.S. program to restore and expand the availability 

of basic health care faces challenges in the procurement and delivery of 

medical equipment and supplies and in measuring program results. 

• According to the UN/World Bank assessments, Iraqi and agency 

documents, and U.S. officials, the Iraqi health sector will require 

continued long-term financial assistance to restore and strengthen its 

health system to modern day medical levels; support infrastructure 

maintenance and medical supply requirements; and support 

management operations—assistance that is not available in the U.S. 

program or through the international community. The activities of the 

U.S. assistance program—largely focused on improving the physical 

infrastructure of the health system—is likely to have a longer term 

impact on the health sector; however, the impact of these infrastructure 

improvements is not likely be visible until construction is complete, new 

equipment is in service, and management capacity of the Iraqi health 

ministry has been strengthened. U.S. officials acknowledge that 

additional resources will be needed over the next 3 to 5 years for Iraq to 
Page 34 GAO-05-876 Rebuilding Iraq

address health services and strengthen the delivery of primary health 

care services, although the continuation of such activities is not an 

element of the U.S. program in Iraq at this time.

• The U.S. program to provide medical equipment and supplies to 

hospitals and health clinics across Iraq is an important element in 

strengthening Iraqi health service delivery. Delays in the delivery of 

U.S.-provided equipment may affect the Iraqis’ ability to provide primary 

health care. For example, the completed delivery of USAID-funded 

health kits, coupled with primary health care provider training, is 

expected to result in an increase in the capability of primary health care 

providers to deliver care to the Iraqi population. Although the equipment 

items for these health kits were received by May 2004, the delivery of 

these kits to Iraqi health clinics was still incomplete, as of May 2005. 

Agency documents and officials indicated several reasons why medical 

equipment had not been delivered, including long lead times for medical 

equipment manufacturing and delivery, the security environment, the 

timing of equipment delivery with the completion of infrastructure 

construction, and the need to obtain agreement on equipment lists from 

the Ministry of Health. To address the Ministry of Health’s limited 

capacity to accept, store, and distribute large shipments of supplies and 

equipment, the PCO has developed a revised distribution plan, 

according to a U.S. official. Further, as of May 2005, the construction 

plans for 150 primary health clinics did not have an identified 

procurement plan for backup power generators, furniture, consumable 

supplies, incinerators, or a security perimeter. According to a U.S. 

official, without full power supply—by generators or from the power 

grid—these clinics will be able to provide only the most basic services 

and limited or no maternal and/or pediatric services. In response to our 

draft, DOD told us that they plan to build 142 primary health clinics 

supplied with generators, furniture, and three months of consumables.

• IRMO has developed metrics to track the progress of the U.S. health 

reconstruction program in Iraq. Limitations to the available metrics and 

data make it difficult to assess the outcome of U.S. activities in the 

health sector. For example, IRMO’s measurements of progress track the 

completion of facilities, which is an indicator of increased access to 

health care. However, the measures available do not indicate how well 

these facilities are equipped or staffed to provide primary health care 

services. The measures used by IRMO do not relate the progress of U.S. 

projects to the overall effort of improving the quality and access of 

health care in Iraq.
Page 35 GAO-05-876 Rebuilding Iraq

Conclusions The United States, along with its coalition partners and various 

international organizations and donors, has undertaken a challenging and 

costly effort to stabilize and rebuild Iraq. Over the past 2 years, the United 

States, coalition partners, and, more recently the Iraqis have undertaken 

and accomplished numerous activities to stabilize and rebuild Iraq, 

including efforts to help restore basic essential and social services. This 

enormous effort has been undertaken in an unstable security environment, 

and is concurrent with the institutional development of Iraqis to govern and 

secure the country. As we reported in June 2004, these challenges continue 

to affect the pace and cost of reconstruction. A key challenge to the 

success of the rebuilding effort will be the Iraqis’ ability to sustain the 

rehabilitated and new infrastructure and to address continuing 

maintenance and basic service needs. U.S. reconstruction efforts include 

requirements to build operational and ministerial capacity to sustain this 

infrastructure. As U.S. activities that have already started reach completion 

by the end of the year, the options and plans developed and actions taken 

to address this challenge will be critical to the success of the U.S. 

reconstruction program and the overall reconstruction effort in Iraq. 

Agency Comments and 

Our Evaluation

We provided drafts of this report to the Departments of Defense and State 

and the U.S. Agency for International Development. The Departments of 

Defense and State did not provide written comments; however, they 

provided technical comments, which we incorporated where appropriate. 

The U.S. Agency for International Development provided written 

comments, which are reprinted in appendix II. In particular, in response to 

our statement that agency metrics for tracking water projects do not show 

how the U.S. program is affecting the Iraqi people, USAID stated that the 

agency tracks increases in the amount of water treated and estimates 

increases in beneficiary numbers. However, these metrics do not address 

the quality of water and sanitation services in Iraq, which may hinder the 

U.S. ability to gauge progress toward its goal of providing essential 

services. For example, because of problems with the distribution network, 

water that is potable at the treatment plants may be contaminated by the 

time it reaches users. 

USAID also provided technical comments, which we incorporated where 

appropriate.
Page 36 GAO-05-876 Rebuilding Iraq

We are sending copies of this report to interested congressional 

committees. We will also make copies available to others on request. In 

addition, this report is available on GAO’s Web site at http://www.gao.gov. 

If you or your staff have any questions, 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 III.

Joseph A. Christoff

Director, International Affairs and Trade
Page 37 GAO-05-876 Rebuilding Iraq

List of Committees

The Honorable Thad Cochran

Chairman

The Honorable Robert C. Byrd

Ranking Minority Member

Committee on Appropriations

United States Senate

The Honorable Mitch McConnell

Chairman

The Honorable Patrick J. Leahy

Ranking Minority Member

Subcommittee on State, Foreign Operations, 

 and Related Programs

Committee on Appropriations

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel Inouye

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Richard G. Lugar

Chairman

The Honorable Joseph R. Biden, Jr.

Ranking Minority Member

Committee on Foreign Relations

United States Senate
Page 38 GAO-05-876 Rebuilding Iraq

The Honorable Susan M. Collins 

Chairman 

The Honorable Joseph I. Lieberman

Ranking Minority Member 

Committee on Homeland Security

 and Governmental Affairs

United States Senate

The Honorable C. W. Bill Young

Chairman 

The Honorable John P. Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives

The Honorable Jim Kolbe

Chairman

The Honorable Nita M. Lowey

Ranking Minority Member

Subcommittee on Foreign Operations, 

 Export Financing, and Related Programs

Committee on Appropriations

House of Representatives

The Honorable Duncan Hunter

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

The Honorable Tom Davis

Chairman

The Honorable Henry A. Waxman

Ranking Minority Member

Committee on Government Reform

House of Representatives
Page 39 GAO-05-876 Rebuilding Iraq

The Honorable Christopher Shays

Chairman

The Honorable Dennis J. Kucinich

Ranking Minority Member

Subcommittee on National Security, 

 Emerging Threats, and International Relations

Committee on Government Reform

House of Representatives

The Honorable Henry J. Hyde

Chairman

The Honorable Tom Lantos

Ranking Minority Member

Committee on International Relations

House of Representatives
Page 40 GAO-05-876 Rebuilding Iraq

Appendix I

Scope and Methodology ApApenednxidexiIs

In monitoring resources supporting the reconstruction of Iraq, we focused 

on the sources and uses of U.S., Iraqi, and international funding. U.S. 

agencies provided us with electronic data files for appropriated funds, the 

Development Fund for Iraq (DFI), vested assets, and seized assets. These 

files generally included objective or project descriptions with allocated, 

obligated, and disbursed amounts. We assigned each of the funding line 

items to broad categories based on the descriptive information available in 

the data files. To assign the data to a category, we relied on project 

descriptions from agency data files. 

In addressing the amount of U.S. funds that have been appropriated, 

obligated, and disbursed for the Iraq reconstruction effort, we collected 

funding information from the Department of Defense (DOD), including the 

Project and Contracting Office (PCO), the U.S. Army Corps of Engineers 

(USACE), and others; Department of State; the Department of the Treasury; 

U.S. Agency for International Development (USAID); and the Coalition 

Provisional Authority (CPA). Data for U.S. appropriated funds are as of 

March 31, 2005. We also reviewed Defense Contract Audit Agency reports, 

U.S. agency inspector generals’ reports, Special Inspector General for Iraq 

Reconstruction (SIGIR) reports, other audit agency reports, and Office of 

Management and Budget (OMB) documents. Although we have not audited 

the funding data and are not expressing our opinion on them, we discussed 

the sources and limitations of the data with the appropriate officials and 

checked them, when possible, with other information sources. We 

determined that the data were sufficiently reliable for broad comparisons 

in the aggregate and the category descriptions we have made.

To identify sources and uses of DFI funds, vested assets, and seized assets, 

we relied on funding data from the CPA and DOD through June 28, 2004. To 

determine the reliability of these data, we examined the financial files and 

interviewed CPA officials responsible for the data. Based on these 

evaluations, we determined the data are sufficiently reliable to describe the 

major deposits to the DFI and the allocations and disbursements by major 

categories. We did not audit these data and are not expressing our opinion 

on them. After June 28, 2004, the stewardship of the DFI was turned over to 

the Iraqi Interim Government. We continued to obtain data from DOD 

regarding DFI funds obligated before June 28, 2004, and vested and seized 

funds balances. 

To address international assistance for rebuilding Iraq, we collected and 

analyzed information provided by the State Department’s Bureau of 

Economic and Business Affairs. We also collected and reviewed reporting 
Appendix I

Scope and Methodology

Page 41 GAO-05-876 Rebuilding Iraq

documents from the International Reconstruction Fund Facility for Iraq 

(IRFFI). To describe the activities of international donors, we reviewed 

documents pertaining to the international donor conferences and the IRFFI 

and interviewed U.S. officials. To assess the reliability of the data on the 

pledges, commitments, and deposits made by international donors, we 

interviewed officials at State who are responsible for monitoring data 

provided by the IRFFI and donor nations. We determined that the data on 

donor commitments and deposits made to the IRFFI were sufficiently 

reliable for the purposes of reporting at the aggregate level. 

For the U.S. reconstruction program, we focused our effort on U.S. 

activities in the Iraqi oil, electricity, water, and health sectors. Specifically, 

we focused on the condition of the sectors, the status of the U.S. effort in 

these sectors, and the challenges affecting overall sector progress. To 

determine the condition of the sectors, we reviewed assessments made by 

the United Nations and World Bank, USAID, CPA, and contractors. We also 

discussed sector conditions with cognizant U.S. agency officials, 

contractors, and Iraqi officials. 

To determine the status of the U.S. effort in the oil, electricity, water, and 

health sectors, we reviewed documents obtained from the United Nations, 

World Bank, CPA, State’s Iraq Reconstruction Management Office (IRMO), 

the PCO, USAID, the USACE, agency contractors, and selected Iraqi 

ministries. We reviewed reports and planning documents prepared by 

USACE, USAID, CPA, State, PCO, and contractors. We also interviewed 

U.S. government and former CPA officials and contract personnel in the 

United States and Iraq and participated in videoconferences between 

USACE headquarters and Baghdad personnel. Specifically, we interviewed 

USAID, State, PCO, USACE, and former CPA officials, in Washington, D.C. 

and Iraq and their contractor representatives in the United States and Iraq.

To determine the challenges affecting sector progress, we reviewed 

contractor and agency reporting and interviewed agency officials in the 

United States and Iraq. Specifically, we reviewed CPA, PCO, State, USAID, 

the USACE, and other reporting. We also interviewed agency officials in 

Washington, D.C. and Iraq from USAID, State, PCO, USACE, Defense 

Intelligence Agency, and former CPA officials; their contractor 

representatives in the United States and Iraq; and Iraqi representatives 

from the Ministry of Electricity, including Iraqi plant operators. 

To assess the reliability of the data in the oil, power, water, and health 

sectors, we interviewed officials at CPA, DOD, State, and USAID 
Appendix I

Scope and Methodology

Page 42 GAO-05-876 Rebuilding Iraq

responsible for gathering and monitoring data on reconstruction efforts. 

We reviewed the data for discrepancies and checked them against other 

sources, when available. We determined that the data were sufficiently 

reliable to report general trends in each sector. Data obtained on crude oil 

production and refined fuels inventories are based on Iraqi estimates 

provided to State. Data on exports are based on U.S. agency estimates 

related to daily export activities at terminals. Data on revenue are based on 

U.S. agency estimates that use internationally recognized financial sources 

for pricing calculations, such as Bloomberg and Platts. According to State, 

the information that it periodically reports on production, export, and 

revenue represents analysis based on the best available information. Data 

obtained on daily electricity produced are from Iraqi, USAID, or DOD 

estimates provided to State.

We conducted this part of our review from September 2004 through May 

2005 in accordance with generally accepted government auditing 

standards. Although we did not travel to Iraq to make project site visits 

during this period due to security concerns; we interviewed U.S. officials 

via teleconference and videoconference. In addition, when possible we 

interviewed Iraqi officials when these officials traveled to the United 

States.
Page 43 GAO-05-876 Rebuilding Iraq

Appendix II

Comments from the U.S. Agency for 

International Development ApendxiI
Page 44 GAO-05-876 Rebuilding Iraq

Appendix III

GAO Contact and Staff Acknowledgments ApendxiI

GAO Contact Joseph A. Christoff, (202) 512-8979.

Staff 

Acknowledgments

Key contributors to this report include Monica Brym, Lynn Cothern, 

Aniruddha Dasgupta, Muriel Forster, Charles D. Groves, B. Patrick Hickey, 

John Hutton, Sarah J. Lynch, Jodi Prosser, Michael Simon, and Audrey 

Solis. Martin de Alteriis, Sharron Candon, Patrick Dickriede, Philip Farah, 

Hynek Kalkus, Mary Moutsos, Nanette Ryen, Josie Sigl, and George Taylor 

provided technical assistance.

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