OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

TTRRAANNSSFFEERRRRIINNGG RREECCOONNSSTTRRUUCCTTIIOONN

PPRROOJJEECCTTSS TTOO TTHHEE GGOOVVEERRNNMMEENNTT OOFF

IIRRAAQQ:: SSOOMMEE PPRROOGGRREESSSS MMAADDEE BBUUTT

FFUURRTTHHEERR IIMMPPRROOVVEEMMEENNTTSS NNEEEEDDEEDD

TTOO AAVVOOIIDD WWAASSTTEE

SSIIGGIIRR--0088--001177 AAAPPPRRRI

IILLL222888,

,, 222000000888
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

April 28, 2008 

MEMORANDUM FOR U.S. AMBASSADOR TO IRAQ 

COMMANDING GENERAL, MULTI-NATIONAL FORCE-IRAQ 

COMMANDING GENERAL, MULTI-NATIONAL SECURITY 

TRANSITION COMMAND-IRAQ 

COMMANDING GENERAL, GULF REGION DIVISION, U.S. 

ARMY CORPS OF ENGINEERS 

MISSION DIRECTOR-IRAQ, U.S. AGENCY FOR 

INTERNATIONAL DEVELOPMENT 

COMMANDER, JOINT CONTRACTING COMMANDIRAQ/AFGHANISTAN 

DIRECTOR, IRAQ TRANSITION ASSISTANCE OFFICE 

SUBJECT: Transferring Reconstruction Projects to the Government of Iraq: Some Progress 

Made but Further Improvements Needed to Avoid Waste (SIGIR- 08-017) (Project 8012) 

This is the latest in a series of Special Inspector General for Iraq Reconstruction (SIGIR) reports 

on the transfer of U.S. government-funded reconstruction assets1 to the Government of the 

Republic of Iraq (GOI). As SIGIR reported in July 2007,2 an effective capital project transfer 

process is essential for three principal reasons: First, it allows the GOI to recognize that a project 

is complete and that the U.S. has provided all necessary documentation and training. Second, it 

validates that the GOI accepts responsibility for project operation and maintenance and capital 

replacement. Third, GOI acceptance and maintenance of projects is critical to ensure that the 

billions of dollars in U.S. reconstruction assistance is ultimately not wasted because capital 

assets are not adequately maintained and utilized. 

SIGIR has previously identified problems in the asset transfer process, including the lack of a 

uniform process among U.S. agencies for transferring completed projects to the GOI, and 

unilaterally transferring projects to individual ministries—such as electricity—or transferring 

projects to provincial or local officials without assurances that ministry officials with budget 

authority were prepared to sustain the transferred asset. SIGIR recommendations included steps 

to improve the process and also to improve prospects that the GOI would adequately maintain 

the transferred asset. 

 

1

 The Iraq Transition Assistance Office’s Interagency Agreement on Procedures for the Transfer and Recognition of 

U.S. Government Funded Capital Assets to the Government of the Republic of Iraq defines a capital asset as 

“physically tangible property, valued at $250,000 or more, which cannot be easily converted into cash and which is 

expected to be held for a long period, generally five (5) years or more, including buildings, real estate, and 

equipment.” 

2 Transferring Iraq Relief and Reconstruction Fund Capital Projects to the Government of Iraq, (SIGIR 07-004, 

July 25, 2007) 

1
Objectives 

The objective of this review was to determine U.S. progress on implementing one key SIGIR 

recommendation directed at improving the adequacy of U.S. policies, plans, and procedures for 

transferring U.S.-funded reconstruction projects to the GOI. Future reports will address other 

SIGIR asset transfer recommendations, as well as GOI efforts to sustain transferred assets. 

Results 

U.S. agencies involved in reconstruction activities have taken steps to improve the asset transfer 

policies, plans, and processes, but further actions are needed to address longstanding problems 

that have hindered the program’s effective implementation. The Departments of State (DoS), 

Defense (DoD) and the Agency for International Development (USAID) have responsibilities for 

managing asset transfer activities. The principal organization charged with managing these 

efforts—DoS’ Iraq Transition Assistance Office (ITAO) —has established an Asset Recognition 

and Transfer Working Group (ARTWG). The ARTWG includes members of the other 

implementing agencies and has led efforts to develop a draft Interagency Agreement (IA) on a 

U.S. transfer process that would be used by all of the implementing agencies. This action 

addresses previous SIGIR concerns that all agencies were not a party to a 2006 agreement to use 

a common transfer policy. ITAO also drafted a Memorandum of Understanding (MOU) in 

November 2007 with the GOI on respective asset transfer roles and responsibilities. 

Nevertheless, planned procedural changes in the draft IA and the draft MOU still do not fully 

address certain critical deficiencies in the transfer process. These deficiencies, if not adequately 

addressed, will place the overall U.S. investment in many capital asset projects at risk of being 

ineffectively and inefficiently used, and in the worst case scenario, not used at all. Such an 

occurrence would greatly increase existing concerns over waste related to U.S. reconstruction 

activities in Iraq. Specific areas that need to be addressed are: 

• The program currently lacks clear management accountability among the involved 

agencies—State, USAID and DoD—for the transfer process. The program’s overall 

management structure is fragmented, thus leading to inefficient and ineffective asset 

transfer practices. For example, the draft IA only includes projects funded out of the Iraq 

Relief and Reconstruction Funds (IRRF). As a result, projects with a total value of over

$2.2 billion—but funded out of the USAID-managed Economic Support Fund (ESF), and 

the DoD managed Iraq Security Forces Fund (ISFF) and Commander’s Emergency 

Response Program (CERP)—are excluded. Further, the working group is an informal 

body that relies on member cooperation rather than clear lines of management authority 

and responsibility and implementing policies and practices. As such, there is no 

mechanism to ensure accountability. 

• The draft IA between U.S. reconstruction agencies does not standardize the asset transfer 

process, but rather provides guidance for agencies to follow as they implement their own 

policies and procedures. This stove-piping of responsibilities creates a proliferation of 

different standards and procedures which contributes to a lack of transparency for the 

transfer process and creates confusion in both the U.S. and the GOI. During the course of 

this audit, officials from USAID, the U.S. Army Corps of Engineers’ Gulf Region 

Division (GRD) and the Multi-National Security Transition Command-Iraq (MNSTC-I) 

2
informed us that U.S. reconstruction agency officials may search for Iraqi officials 

willing to sign for and accept the projects at a myriad of levels, including ministries, 

provinces, and local communities. In response and as a last resort, U.S. officials in some 

cases have unilaterally transferred projects when efforts to obtain GOI formal acceptance 

of the project have failed. Although the draft IA provides guidance on the use of 

unilateral transfers, the volume of transfers may be well beyond what was envisioned. 

For example, in December 2007, MNSTC-I notified two ministries that it was unilaterally 

transferring 575 IRRF projects; MNSTC-I subsequently revised this number to 388 IRRF 

projects, which SIGIR estimated were valued at over $1 billion. Some of the projects had 

been “informally transferred” previously. Unilateral transfer by its inherent nature places 

investments at greater risk of not being properly maintained. 

• Lastly, U.S. efforts to obtain GOI signature to the MOU on asset transfer roles and 

responsibilities have come to a stalemate. The Deputy Prime Minister has not responded 

to the MOU delivered in November 2007. Furthermore, even if signed, the MOU may not 

yield significant improvements: it states that the document’s requirements are not binding 

on either party. Moreover, the absence of a signed agreement with the GOI raises the 

concern that the GOI will not invest the resources—staff, training, and funding—

necessary to realize the full benefit of the U.S. reconstruction investment. As discussed 

below, the GOI needs to become a more active partner in the process. 

Background 

There are four organizations with responsibilities for the asset transfer process: (1) ITAO,3 (2) 

USAID, (3) MNSTC-I, and (4) GRD.4 These U.S. agencies work independently with Iraqi 

ministries to transfer completed projects, including the Iraqi Ministry of Finance, the Ministry of 

Planning, and other functional ministries, such as for electricity or defense. Personnel from these 

organizations make up the membership of the informal ARTWG, which meets to discuss transfer 

issues. ITAO reports organizationally to the U.S. Embassy’s Economic Minister, as does 

USAID. MNSTC-I and GRD report to the Commander of Multi-National Force-Iraq. To date, 

agencies have generally been operating under an agreement on asset transfer procedures signed 

in 2006.5

Asset Transfer Data 

Available data systems do not readily provide accurate information on the transfer status of 

completed U.S. reconstruction projects. For example, a thousand dollar communications 

equipment transfer is counted equally with a multimillion dollar transfer of a large infrastructure 

project in the primary data collection system, the Iraq Reconstruction Management System 

(IRMS). Nevertheless, the IRMS data provides an order of magnitude on the number of projects 

transferred in the asset transfer process. As of early March 2008, IRMS reports the DoD 

completed nearly 27,000 projects, with more than three quarters awaiting transfer to the GOI. In 

 

3

 Prior to 2007, ITAO was known as the Iraq Reconstruction Management Office (IRMO). ITAO’s current mission 

carries forward the work of IRMO. 

4

 Asset transfer is one aspect of the overall project management process. Thus, each agency is responsible for 

transferring assets it has responsibility for constructing. 

5 Procedure for the Transfer and Recognition of USG-Funded Capital Assets to the Government of Iraq, April 23, 

2006 

3
responding to our draft report GRD took exception to these data stating that while it may be true 

that an Iraqi government official at the national level had not signed for three quarters of the 

projects, it was not true that the Iraqi people had not taken possession of them. GRD stated that it 

is estimated that ninety percent of all projects have been transferred to the people of Iraq at the 

local level. As we discuss later in the report, however, turnovers at the local level do not assure 

that the GOI will provide the support to sustain them. 

Prior SIGIR Reports 

Improving the effectiveness of the asset transfer process has proven to be a complex and 

longstanding problem. SIGIR has issued five audit reports devoted exclusively to the issue of 

transferring assets to the GOI. The first three, issued between January and April 2006, examined 

the policies and procedures used to transfer IRRF assets to the GOI from the Gulf Region 

Division/Project and Contracting Office (GRD/PCO) of the U.S. Army Corps of Engineers,6

MNSTC-I,7 and USAID.8 SIGIR recommended the agencies, in coordination with the Iraq 

Reconstruction Management Office (IRMO)—ITAO’s predecessor organization—complete the 

development of a common policy facilitating the transfer of completed project assets to the GOI. 

At a minimum, SIGIR noted the process should provide formal notification of the project’s 

transfer to the Iraqi Ministry of Planning, Ministry of Finance, and the appropriate operating 

ministry. SIGIR also stated that the notification should include relevant data such as operational 

start date, asset cost, estimated short-term and long-term sustainability costs, terms of warranties, 

and the location of maintenance and systems manuals. 

In July 2006, SIGIR issued a fourth report9 addressing the progress agencies made in 

implementing our recommendations addressing the transfer, and short-term sustainment of, 

IRRF-funded assets. It also looked at the support provided to the Iraqi government to enhance its 

capacity to manage and operate the assets. The report recommended that IRMO develop a single 

uniform process for asset recognition and transfer of all completed projects to the GOI, that this 

process be followed by all IRRF implementing agencies, and that sufficient resources be made 

available to implement the process in time for the GOI’s use in budget planning. SIGIR believed 

this recommendation would continue to hold agencies accountable for developing a unified 

process and thus closed out previous recommendations to the implementing agencies. The report 

included five other recommendations for reporting requirements and program improvements. 

In July 2007, SIGIR issued its fifth report assessing the progress in the development and 

implementation of plans for the transition of IRRF projects to GOI.10 The report recommended 

 

6 GRD-PCO Management of the Transfer of IRRF-Funded Assets to the Iraqi Government, (SIGIR 05-028, January 

24, 2006) 

7 Multi-National Security Transition Command - Iraq Management of the Transfer of Iraq Relief and Reconstruction 

Fund Projects to the Iraqi Government, (SIGIR 06-006, April 29, 2006) 8 U.S. Agency for International Development Management of the Transfer of Iraq Relief and Reconstruction Fund 

Projects to the Iraqi Government, (SIGIR 06-007, April 29, 2006) 9 Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi Government, (SIGIR 06-017, July 28, 

2006) 

10 Transferring Iraq Relief and Reconstruction Fund Capital Projects to the Government of Iraq, (SIGIR 07-004, 

July 25, 2007) 

4
that the U.S. Ambassador to Iraq provide senior-level support to finalize an agreement between 

the United States and GOI on asset transfer. 

The Lack of Management Controls And The Lack of 

A Working Agreement With the Government of Iraq 

Places U.S. Reconstruction Investment at Risk 

SIGIR found three key problems related to the program’s plans, policies, and procedures that, if 

not effectively addressed, will place the transfer program at risk of not achieving its objectives. 

Specifically, the program lacks a management structure with clear accountability for managing 

the transfer of assets. Secondly, current efforts do not create standardized and transparent 

policies and procedures. Finally, the U.S. government and the GOI have not finalized a MOU 

delineating the roles and responsibilities of the various entities involved in the asset transfer 

process. Without resolution of these issues, the transfer program provides little assurance that the 

GOI will fully realize the benefit of the U.S. reconstruction investment. This undermines the 

effective management of these assets, from community health clinics to national power 

generation systems, for the economic and political benefit of Iraq and increases the risk that the 

U.S. investment may be wasted. 

Fragmented Program Management Accountability 

The U.S. government’s management of asset transfer to the GOI is fragmented among several 

agencies. Presidential Directives and Executive Orders assign project management based on both 

purpose and funding sources. As a result, ITAO states that it does not have the responsibility to 

coordinate all asset transfers. Consequently, there is no single entity accountable for ensuring 

that completed projects are transferred to the GOI in a manner that helps to ensure the assets are 

effectively maintained. 

On May 9, 2007, the President signed an Executive Order establishing ITAO.11 The EO stated 

that ITAO was to be a temporary organization within the Department of State and that its 

purpose was to “perform the specific project of supporting executive departments and agencies 

in concluding remaining large infrastructure projects expeditiously in Iraq, in facilitating Iraq’s 

transition to self-sufficiency, and in maintaining an effective diplomatic presence in Iraq.” 

However, the order specifically states that ITAO is responsible for the “coordination, oversight 

and reporting concerning remaining Iraq Relief and Reconstruction Fund monies.” The May 11, 

2004 National Security Presidential Directive12 provides that the Secretary of State shall be 

responsible for the continuous supervision and general direction of all assistance for Iraq, but 

stipulates that the U.S. military has control over military assistance-related monies. Specifically, 

 

11 “Establishment of Temporary Organization to Facilitate United States Government Assistance for Transition in 

Iraq”, Executive Order 13431, May 9, 2007 12 “United States Government Operations in Iraq”, National Security Presidential Directive 36, May 11, 2004 

5
the NSPD stated that “Commander, U.S. Central Command13 (USCENTCOM), with the policy 

guidance of the Chief of Mission, shall direct all United States Government efforts and 

coordinate international efforts in support of organizing, equipping, and training all Iraqi security 

forces.” 

Both the draft IA and the draft MOU with the GOI reflect the separation in asset transfer 

management as each addresses policies and procedures only for IRRF-funded capital asset 

projects. This exclusion leaves a significant portion of U.S. funding for reconstruction projects 

outside of the formal transfer process. Specifically, IRRF-funded projects shown in IRMS total 

over $6 billion. However, IRMS reports projects valued at over $2.2 billion and funded from 

sources such as ISFF, ESF, and CERP which are not covered in the draft agreements. 

Plans Do Not Call for Standard and Transparent Asset Transfer Process 

A longstanding concern reported by SIGIR is the need for a common set of asset transfer policies 

and procedures. ITAO has taken positive steps in forging agreements among U.S. agencies on 

basic principles to employ in transferring assets. In 2007, we noted that GRD and MNSTC-I 

agreed to a common policy outlined in an April 2006 memo. USAID, however, decided to use its 

own procedures and deal directly with Iraqi ministries. Current efforts again provide general 

goals in the transfer of assets, but do not establish a common set of procedures. During the 

course of this audit, officials from USAID, GRD and MNSTC-I informed us that U.S. 

reconstruction agency officials may search for Iraqi officials willing to sign for and accept the 

projects at a myriad of levels, including ministries, provinces, and local communities. This 

creates a lack of transparency about the asset transfer process within both the U.S. and GOI. 

ITAO, in coordination with the representatives from the ARTWG, drafted an IA14 to formalize 

guidance for use by all implementing agencies and departments that complete projects in Iraq 

using the IRRF. (According to ITAO, the draft IA has been approved by all the implementing 

agencies except for the State Department, where it is awaiting legal review). ITAO informed us 

that they achieved buy-in on the IA from all parties involved in asset transfer, including USAID, 

on its general principals. The draft IA proposes to reestablish the Asset Recognition and Transfer 

Operations Group (ARTOG) as the main focal point for all U.S. government IRRF-funded asset 

transfers.15 The IA notes that the implementing agencies will contribute members to the ARTOG 

to collaborate on the development, improvement, and implementation of policies and procedures 

to achieve an effective, formal capital asset transfer process, and states ARTOG will deal directly 

with its GOI counterpart in the process. As such, the ARTOG will assume a number of related 

responsibilities, including responsibility for keeping a record of all capital assets transferred to 

GOI by all U.S. agencies, and for providing the GOI with a complete inventory of assets 

transferred, including sustainment information (such as annual sustainment cost estimates for 

each capital asset). 

 

13 U.S. Central Command is a Unified Combatant Command responsible for military activities in the Middle East, 

Central Asia, and the Horn of Africa. 

14 Interagency Agreement on Procedures for the Transfer and Recognition of U.S. Government Funded Capital 

Assets to the Government of the Republic of Iraq (Draft Version) 15 The ARTOG was first established in early 2006 by IRMO and GRD in coordination with the Iraqi Ministry of 

Finance. The ARTOG essentially ceased operation in May 2006 with the election of a new Iraqi government and a 

new Finance Minister who was not supportive of ARTOG transfer processes. 

6
Among other processes, the draft IA provides remedies for addressing refusal on the part of the 

GOI to formally accept projects. Agencies may employ a process, described as unilateral 

transfer, as a last resort and, according to the IA, only at the approval of each agency’s ranking 

in-country official (the designation of which will be decided by each individual agency). 

Unsuccessful attempts to transfer assets must be documented and the necessity for unilateral 

transfer must be provided to the GOI, which is then given 30 days to respond. 

ITAO’s efforts are important steps to improve the asset transfer process but they do not create a 

standardized and transparent process for transferring assets to the GOI. The IA allows each 

implementing agency to use its own policies and procedures to transition assets to the GOI. This 

provision continues to create a stove piped approach and would not address SIGIR’s previously 

reported concern that the use of a multitude of processes hampers the successful acceptance of 

capital assets by the GOI. 

To illustrate, SIGIR’s current review found that agency’s individual policies and procedures may 

not comply with even the general guidance contained in the 2006 agreement currently in force. 

In discussing asset transfer and documentation, for example, the 2006 agreement details that the 

turnover will include where applicable all designs, drawings, operation and maintenance 

manuals, warranty information and other information. In March 2008 SIGIR reviewed transfer 

documents for twelve GRD and MNSTC-I projects that had been transferred to the GOI and 

found varying levels of detail. For example, one agency detailed all asset values and maintenance 

information in its transfer packages while another agency did not provide any information. 

Additionally, SIGIR found that the composition of transfer documents provided to the GOI 

varies among agencies. 

The resulting lack of coordination among and within implementing agencies creates confusion 

and ultimately jeopardizes the continued sustainability and operation of U.S.-funded capital 

assets. To illustrate, in March 2008, representatives from the Iraqi Ministry of Defense (MOD) 

expressed some concern to SIGIR staff at the deterioration of some projects which they said they 

did not know had been transferred to its control. They attributed this problem to U.S. officials 

not notifying the proper entities at the ministerial level of the transfer of the projects to Iraqi 

control. Additionally, the Board of Supreme Audit noted in a November 200716 report that many 

of the Iraqi ministries it audited did not possess records detailing the existence of many U.S.-

funded projects supposedly under the ministry’s control. In both of these cases, the Iraqi officials 

informed us because the appropriate Iraqi agency wasn’t notified, these projects did not receive 

the needed maintenance to ensure their continued sustainment. 

Agreement with Government of the Republic of Iraq Stalled 

The inability to obtain GOI concurrence and support for procedures to accept responsibility for 

completed U.S.-funded projects has been particularly problematic. As a result, the number of 

actual transfers has gone through periods of high volume, and periods when transfers came to a 

halt. The U.S. continues to seek GOI support for an agreement laying out procedures and roles 

and responsibilities. To date, however, little progress has been made and given past history, the 

prospects for such an agreement do not appear encouraging. As a result, the U.S. has sought 

 

16 Report on Projects Funded By U.S. Funds (Republic of Iraq, Board of Supreme Audit, November 25, 2007) 

7
alternative approaches to break the bottleneck, such as unilaterally transferring projects to the 

GOI. 

In February 2008, ITAO informed SIGIR that there had been no progress or contact with the 

GOI since a draft MOU on asset transfer was submitted in November 2007 to the Iraqi Deputy 

Prime Minister. In commenting on the draft report, DoS officials stated they are discussing this 

issue with GOI officials. Again, ITAO officials emphasized the importance of such an 

agreement. They noted that the purpose of the MOU is to achieve a consensus on each side’s 

roles and responsibilities regarding the transfer of assets, and to establish a central point of 

contact within the Iraqi government on asset transfer issues. Moreover, the MOU laid out each 

country’s objectives with respect to its responsibilities, and what each country intended to do to 

meet its responsibilities. It was considered important to designate a senior-level point of contact 

within the GOI with a sufficient level of authority so that this official could affect the process on 

the Iraqi side on a regular basis. At this time, the GOI does not have a single government official 

responsible for asset transfer issues. Rather, each U.S. agency develops its own contacts within 

the Iraqi ministries or local provincial governments the agency believes are best suited to take 

responsibility for assuming and maintaining each asset. Despite the importance of such an 

agreement, ITAO officials said they do not know when the GOI might respond, or what priority 

the GOI has given to the approval of the MOU. 

As SIGIR concluded in 2007, the absence of an MOU is having a negative impact on the asset 

transfer process. To illustrate, officials from the Ministry of Defense told SIGIR in March 2008 

that failure to notify the appropriate officials of asset transfers prevents the MOD from preparing 

a budget that would allow for the proper funding for maintenance and support of the assets that 

would be beneficial to the ministry’s mission. USAID, to address similar concerns with the 

ministries it works with, informed us that they employ an Iraqi engineer who acts as an 

intermediary between the agency and its Iraqi counterparts. USAID believes this relationship 

helps facilitate the transfer of assets and keeps both parties informed of each other’s progress and 

concerns in the transfer process. 

In the absence of an agreement, U.S. agencies have employed alternative means to overcome 

Iraqi reluctance to formally accept completed projects. One such approach is the unilateral 

transfer of projects to the GOI. To illustrate, in December 2007, MNSTC-I unilaterally 

transferred 575 projects. Specifically, MNSTC-I notified the Ministry of Defense by letter that it 

was unilaterally transferring 159 infrastructure assets which had been informally accepted and 

used by Iraqi entities for periods up to three years without formal transfer. Similarly, MNSTC-I 

transferred 416 projects to the Ministry of the Interior by letter in December 2007 under the same 

conditions. In April 2008, MNSTC-I informed SIGIR that it found that it had previously 

transferred 182 of these projects to Iraqi control. Additionally, MNSTC-I could not account for 

five projects thought to have been part of the December unilateral transfer. As such, MNSTC-I 

reduced the total number of projects unilaterally transferred on December 31, 2007 to 388. 

According to SIGIR’s analysis of IRMS data, the total value of these projects exceeded $1 

billion. Such an occurrence raises further concerns about MNSTC-I’s visibility over the status of 

its completed projects, and highlights the risk of unilaterally transferring assets on a large scale. 

In our 2007 report GRD responded that the U.S. should consider including a unilateral transfer 

provision in any bilateral agreement whereby the U.S. would unilaterally transfer projects to the 

8
GOI when ministries take longer than 30 days to formally recognize and accept transferred 

assets. SIGIR noted that while it had not fully evaluated the option, the concept appeared to merit 

consideration; such an option is now provided for in the draft IA. However, SIGIR had not 

envisioned that an agency would use such an option on the scale of the December transfer. At 

this point, SIGIR believes this option should be used on an exception basis involving low risk 

projects—those with low investment and lower technology sustainability requirements. To 

illustrate, MNSTC-I has not yet evaluated whether its unilateral transfer approach has resulted in 

the GOI taking responsibility for sustaining the transferred assets. 

In commenting on a draft of this report, the DoS said that once the MOU with the GOI is in 

place, it would again transfer projects to GOI control that had formerly been transferred through 

the unilateral process. It also said that it shares SIGIR’s concern regarding the previous transfer 

of assets under a “unilateral transfer process” and believes that by re-transferring these projects 

using the new procedures the GOI will acknowledge its liability and responsibility for the 

operation and maintenance of the unilaterally transferred projects. 

Conclusion 

ITAO, DoD, and USAID have made efforts to improve plans, policies and procedures for the 

transfer of assets to the GOI. However, the U.S. program continues to have serious weaknesses 

that ultimately could place much of the U.S. reconstruction investment at risk. The U.S. program 

suffers from the lack of a management structure that provides clear authority and accountability, 

as well as a transparent set of uniform transfer policies and procedures. These program 

weaknesses are further compounded by the lack of a timely response to a formal asset transfer 

agreement proposed by the U.S. government. 

Recommendations 

To address longstanding issues that have affected-and will likely continue to adversely affect-the 

implementation of the asset transfer program, and to reduce the risk that U.S.-funded capital 

assets in Iraq are not utilized, or in some cases wasted, SIGIR recommends that the U.S. 

Ambassador and Commander, Multi-National Forces-Iraq (MNF-I), working jointly, direct that 

the following actions be taken: 

• Assess the current management structure for the asset transfer process and develop a new 

structure that provides clear lines of authority, responsibility and accountability; 

• Direct that a single set of transparent uniform set of policies, processes, and procedures 

on asset transfer be developed for use by all involved agencies and for all U.S. projects 

regardless of funding source; 

• Establish specific criteria for using unilateral transfers as a “last resort” method of 

transferring low risk assets. These criteria should make clear that unilateral transfers 

should be the exception rather than a common practice, and that investment costs and the 

complexity of sustainability should be considered, and; 

• Immediately enter into high level discussions with the GOI on the MOU for the transfer 

of assets completed by all U.S. reconstruction agencies from all funding sources. 

9
Management Comments and Audit Response 

The Iraq Transition Assistance Office and GRD provided written comments on a draft of this 

report. MNF-I and MNSTC-I informed us by email that they did not have any comments and 

that they concurred with the report. We did not receive comments from USAID. Moreover, 

ITAO, as the Embassy representative, did not address our recommendations in its response. 

Since the recommendation was addressed to the U.S. Ambassador, we request that the U.S. 

Embassy provide comments that conform to the requirements of OMB Circular No. A-50, 

including indicating concurrence, nonconcurrence, and planned actions relating to the report 

recommendations within 30 days. 

In its written comments ITAO did not agree that responsibility for transferring projects was 

fragmented. According to ITAO, given the wide and disparate nature of various U.S. government 

funded projects, it believes it should only be responsible for the transfer of DoS funded projects, 

including those funded by IRRF, ESF and other foreign assistance accounts. With respect to 

these projects, ITAO reports that there is no fragmentation of responsibility. The response stated 

that by nature, DoD funded projects tend to have a different scope and different targeted impacts 

and, as such, the ITAO position is that DoD-funded assets should be managed and transferred by 

the DoD. ITAO does, however, share SIGIR’s concern regarding the previous transfer of assets 

under a “unilateral transfer process.” 

Regarding the MOU, ITAO responded that is working with high level GOI officials to 

appropriately catalog DoS-funded assets and discuss a comprehensive way forward on the issue 

of asset transfer. The MOU being discussed with GOI counterparts would specifically set forth 

mutually shared understandings applicable to all State Department-funded assets transferred to 

the GOI, including that the GOI accepts these assets from the U.S. government, that no claims be 

made against the U.S. government in connection with U.S. government-funded assets, and the 

GOI is responsible for all operation and maintenance costs following the transfer of capital 

assets. Once this process is in place, DoS plans to bring all projects that were previously 

unilaterally transferred under this process. 

SIGIR does not agree with ITAO’s position that each agency develop its own asset transfer 

process. SIGIR believes that the current process as described in this report is inefficient and 

confusing to the GOI and U.S. agencies. SIGIR understands that DoD-funded projects should be 

managed and transferred by DoD. Our position is that the same process should be used by all 

agencies. SIGIR is particularly concerned that there be one policy/procedure for unilateral 

transfers. SIGIR clarified its draft recommendation for DoD and DoS to work jointly to put a 

process in place. Our final report recommendations make it clear that agreements – both the IA 

and the MOU with the GOI - should cover projects completed by all agencies and all funding 

sources. 

GRD’s written comments stated that the draft report did not clearly differentiate between the 

objectives of two programs. GRD noted that the purpose of their Assets Recognition Process is 

to turnover completed construction projects at the local level so that local entities can occupy and 

use the asset. They differentiated this from national transfer notification to the GOI which 

allows the GOI to plan and budget for sustainment. Moreover, GRD stated that it disagreed with 

our concern that the use of different processes and procedures is hampering the U.S. government 

10
turnover of assets to the GOI and that although not all contracting procedures are uniform, there 

is no adverse impact on contracting operations. GRD further stated that the report needed to 

focus on the GOI and the improvements it needs to make in its asset management program to 

avoid waste. 

SIGIR recognizes and supports GRD’s efforts to improve its contract management and 

recognizes its desire to turn over completed construction projects to Iraqi beneficiaries. 

However, our concerns relate to the process used in turning over completed projects to the GOI 

and ensuring it is done in such a manner as to provide assurances that the U.S. investment is not 

wasted. SIGIR’s work indicates that turnovers at the local level without assurances that GOI 

officials will sustain the facility, pose a risk that the U.S. investment may not be sustained and 

therefore wasted. As such, SIGIR believes in the need for an overarching strategy that can 

address contract management requirements and long term sustainment requirements. SIGIR 

agrees with GRD that GOI commitment to sustain U.S.-funded projects is critical to an effective 

process and will address this issue more fully in future reports. 

GRD also provided technical comments which we have addressed in this report as appropriate. 

GRD did not take a position on our recommendations. 

DoS’s and GRD’s comments are printed in their entirety in Appendix C. 

- - - - - 

We appreciate the courtesies extended to all SIGIR staff. For additional information on this 

report, please contact Mr. Glenn Furbish, Deputy Assistant Inspector General for Audits at (703) 

428-1058 or via email at glenn.furbish@sigir.mil. You can also contact Mr. Adam Hatton at 

(703) 428-1100 or via email at adam.hatton@sigir.mil. For a list of the audit team members, see 

Appendix C. 

 

Stuart W. Bowen, Jr. 

Inspector General 

11
Appendix A—Objective, Scope, and Methodology 

SIGIR initiated this review in January 2008 (Project 8012) as part of a series of reviews to assess 

U.S. efforts toward transferring assets to the Government of the Republic of Iraq. The objective 

of this review was to determine U.S. progress on implementing one key SIGIR recommendation 

directed at improving the adequacy of U.S. policies, plans, and procedures for transferring U.S.-

funded reconstruction projects to the GOI. 

To determine current U.S. efforts to strengthen management, SIGIR examined proposed 

agreements among implementing agencies and with the GOI. SIGIR met with representatives 

from the Iraq Transition Assistance Office, U.S. Army Corps of Engineers-Gulf Region 

Division, Multi-National Security Transition Command-Iraq, and U.S. Agency for International 

Development, as well as attended a meeting of the Asset Recognition Transfer Working Group 

and met with Iraqi officials from the Ministry of Defense. SIGIR reviewed internal management 

practices and draft agreements for specific plans, policies, and procedures that would be 

designed to improve these efforts. For example, SIGIR addressed the need for a unified process 

across the various implementing agencies covering all sources of U.S. funding for reconstruction 

activities. 

This audit was performed under the authority of Public Law 108-106, as amended, which also 

incorporates the duties and responsibilities of inspectors general under the Inspector General Act 

of 1978. SIGIR conducted this performance audit from January 2008 through April 2008 in 

accordance with generally accepted government auditing standards. Those standards require that 

we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based on our 

audit objectives. 

Use of Computer-processed Data 

To achieve the audit’s objectives, SIGIR relied on computer-processed data in IRMS. We did not 

establish the reliability of the data. We did not validate the data but recognize that this data is 

used by management in its own reporting of the number and value of projects completed, 

transferred, and/or awaiting transfer. We did not test any of the general and application controls 

of the automated system utilized. 

Prior Coverage 

SIGIR reviewed and relied on these reports for background information and in making our 

analysis of the actions taken on our prior recommendation: 

• GRD-PCO Management of the Transfer of IRRF-funded Assets to the Iraqi Government

(SIGIR 05-028, January 24, 2006) 

12
• Multi-National Security Transition Command-Iraq Management of the Transfer of Iraq 

Relief and Reconstruction Fund Projects to the Iraqi Government (SIGIR 06-006, April 

29, 2006) 

• U. S. Agency for International Development Management of the Transfer of Iraq Relief 

and Reconstruction Fund Projects to the Iraqi Government (SIGIR 06-007, April 29, 

2006) 

• Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi Government

(SIGIR 06-017, July 28, 2006) 

• Transferring Iraq Relief and Reconstruction Fund Capital Projects to the Iraqi 

Government (SIGIR 07-004, July 25, 2007) 

13
Appendix B—Acronyms 

ARTOG Asset Recognition and Transfer Operations Group 

ARTWG Asset Recognition and Transfer Working Group 

CERP Commander’s Emergency Response Program 

DoD Department of Defense 

DoS Department of State 

ESF Economic Support Fund 

GOI Government of the Republic of Iraq 

GRD U.S. Army Corps of Engineers-Gulf Region Division 

IA Interagency Agreement 

IRMO Iraq Reconstruction Management Office 

IRMS Iraq Reconstruction Management System 

IRRF Iraq Relief and Reconstruction Fund 

ISFF Iraq Security Forces Fund 

ITAO Iraq Transition Assistance Office 

MNF-I Multi-National Forces-Iraq 

MNSTC-I Multi-National Security Transition Command-Iraq 

MOD Ministry of Defense 

MOU Memorandum of Understanding 

SIGIR Special Inspector General for Iraq Reconstruction 

USAID U.S. Agency for International Development 

USCENTCOM U.S. Central Command 

14
Appendix C—Management Comments 

U.S. Army Corps of Engineers GRD 

15
16
17
18
Management Comments 

Iraq Transition Assistance Office 

19
20
21
Appendix D—Audit Team Members 

This report was prepared and the audit work was conducted under the direction of David R. 

Warren, Assistant Inspector General for Audit, Office of the Special Inspector General for Iraq 

Reconstruction. 

Staff members who contributed to the report include: 

Adam Hatton 

Joan Hlinka 

Craig Lowman 

Frank Slayton 

22
SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, and 

operations in Iraq, the Special Inspector General for Iraq 

Reconstruction provides independent and objective: 

• oversight and review through comprehensive audits, 

inspections, and investigations 

• advice and recommendations on policies to promote 

economy, efficiency, and effectiveness 

• deterrence of malfeasance through the prevention and 

detection of fraud, waste, and abuse 

• information and analysis to the Secretary of State, the 

Secretary of Defense, the Congress, and the American 

people through Quarterly Reports 

Obtaining Copies of SIGIR 

Reports and Testimonies 

To obtain copies of SIGIR documents at no cost, go to 

SIGIR’s website (www.sigir.mil). 

To Report Fraud, Waste, 

and Abuse in Iraq Relief 

and Reconstruction 

Programs 

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline: 

• Web: www.sigir.mil/submit_fraud.html 

• Phone: 703-602-4063 

• Toll Free: 866-301-2003 

Congressional Affairs Hillel Weinberg 

Assistant Inspector General for Congressional 

 Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1059 

Email: hillel.weinberg@sigir.mil 

Public Affairs Kristine R. Belisle 

Director for Public Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1217 

Fax: 703-428-0818 

Email: PublicAffairs@sigir.mil 

23