OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

CCOOSSTT--TTOO--CCOOMMPPLLEETTEE RREEPPOORRTTIINNGG

FFOORR IIRRAAQQ RREECCOONNSSTTRRUUCCTTIIOONN

PPRROOJJEECCTTSS

SSIIGGIIRR--0077--000033 JJJUUULLLYYY 222666,,,222000000777
Cost-to-complete Reporting for Iraq 

Reconstruction Projects 

SIGIR-07-003 July 26, 2007

400 Army Navy Drive • Arlington, Virginia 22202 

MEMORANDUM FOR THE CHAIRMAN, SENATE APPROPRIATIONS COMMITTEE 

 RANKING MEMBER, SENATE APPROPRIATIONS 

COMMITTEE 

 CHAIRMAN, HOUSE APPROPRIATIONS COMMITTEE 

 RANKING MEMBER, HOUSE APPROPRIATIONS 

COMMITTEE 

 SECRETARY OF STATE 

 U.S. AMBASSADOR TO IRAQ 

 DIRECTOR, IRAQ TRANSITION ASSISTANCE OFFICE 

 PRINCIPAL DEPUTY ASSISTANT SECRETARY, 

 BUREAU OF NEAR EASTERN AFFAIRS, 

 DEPARTMENT OF STATE 

 COMMANDING GENERAL, GULF REGION DIVISION, 

U.S. ARMY CORPS OF ENGINEERS 

SUBJECT: Cost-to-complete Reporting for Iraq Reconstruction Projects 

This report discusses the results of the Special Inspector General for Iraq Reconstruction 

(SIGIR) review of cost-to-complete reporting and follows up on our earlier reviews to 

determine the progress in implementing our previous recommendations. For the details on 

our objectives, scope, and methodology see Appendix A. 

Summary

As of the quarter ending March 31, 2007, the Department of State (DoS) has yet to meet its 

mandate to provide the Congress with information on the uses of all Iraq Relief and 

Reconstruction Funds (IRRF) monies on a project-by-project basis, including the cost to 

complete each project. We were told that systems limitations related to automating the data 

have continued to result in unreliable data. In a written response to a SIGIR inquiry as to why 

cost-to-complete reports were not being submitted to the Congress, a DoS Bureau of Near 

Eastern Affairs (NEA) senior official said that NEA did not submit the required cost-tocomplete information to the Congress because over the course of two and a half years, the 

Congress had not requested it. 
2

However, during our review we found that the Gulf Region Division (GRD) of the U.S. 

Army Corps of Engineers prepared and reported project status to the Iraq Reconstruction 

Management Office (IRMO) Deputy Director and these reports contained detailed 

project-level cost-to-complete information. Since May 8, 2007, GRD has provided these 

reports to IRMO’s successor, the Iraq Transition Assistance Office (ITAO).1

 We believe 

that this project status information meets the intent of what the Congress has requested, 

yet neither IRMO nor ITAO have forwarded the GRD reports to NEA. We also believe 

that utilizing this project status report would not impose any additional reporting 

requirement on GRD—the organization with project oversight for most of the ongoing 

IRRF-funded reconstruction projects. 

Follow-up on Prior Report Recommendations 

In our previous reports on this subject, we made a total of 20 recommendations for 

improving cost-to-complete reporting—5 recommendations to IRMO and 15 

recommendations to the three implementing agencies: GRD, the U.S. Agency for 

International Development (USAID), and the Department of Defense’s Multi-National 

Security Transition Command-Iraq (MNSTC-I). Two recommendations remain open 

because of actions not taken: 

• IRMO did not provide data to the Congress on the adequacy of cost-to-complete 

methodologies in sectors other than the Facilities and Transportation sector. This 

recommendation remains applicable to ITAO, which is to continue coordination, 

oversight, and reporting on remaining IRRF funds under Presidential Executive 

Order 13431. 

• GRD has not reported significant scope changes to projects in its cost-to-complete 

reports, but it has included this requirement in its Standard Operating Procedure 

(SOP) No. PR-128, “Developing Cost to Complete Reports” (April 4, 2006). 

Background 

The Congress established a requirement in Section 2207 of Public Law (P.L.)108-106, 

“Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of 

Iraq and Afghanistan, 2004,” to report quarterly estimates of cost to complete on a 

project-by-project basis for all projects funded by IRRF. This report, known as the 

Section 2207 Report, is currently compiled by NEA from information provided by the 

principal agencies involved in Iraq relief and reconstruction—USAID, GRD, and 

MNSTC-I (formerly through IRMO). The requirement for the Section 2207 Report

expires on October 1, 2008, as set forth in Public Law 109-234, Section 1302 (a). See 

Appendix B for the detailed requirements of Section 2207. 

 

1

 On May 8, 2007, by Executive Order 13431, the President established the Iraq Transition Assistance 

Office (ITAO) as the successor to the Iraq Reconstruction Management Office (IRMO). 
3 

According to the October 2005 Section 2207 Report; DoS advised the Congress that the 

cost-to-complete information would be reported as a companion document to the Section 

2207 Report. The format for this report was developed in late 2005 by an interagency 

assessment team sent to Baghdad in March 2005 to address the information shortfall. The 

assessment team’s work resulted in an action plan to provide cost-to-complete data in a 

Project Assessment Report (PAR) format on all projects more than $6.5 million, for a 

total of 151 projects. 

SIGIR has issued three prior reports on cost-to-complete reporting: 

• In July 2005, we reported that the agencies responsible for preparing the cost-tocomplete information were not reporting cost-to-complete estimates or did not 

have adequate internal controls in place to provide accurate and transparent costto-complete information. 

• In October 2005, we reported that IRMO was not receiving the required 

information to submit to the Congress, but IRMO was making progress in 

securing improved reporting from the implementing agencies. 

• In January 2006, we reported that MNSTC-I had not submitted a report for the 

quarter ending September 30, 2005, and that GRD and USAID submitted reports 

with errors that were significant enough to undermine users’ confidence in the 

reporting. We further reported that GRD and IRMO were taking actions to 

improve the reporting. 

All three SIGIR reports included recommendations to IRMO and the three implementing 

agencies. The recommendations to IRMO focused on the need to develop, formalize, and 

provide guidance to the three principal agencies to ensure that the agencies report 

consistent cost-to-complete information. The recommendations to the implementing 

agencies primarily related to their developing methodologies to ensure they report 

accurate cost-to-complete information. 

Findings 

In its June 29, 2007, Program Review Board, GRD reported it had more than $2.2 billion 

in IRRF-funded construction projects remaining. This includes an estimated $2.2 billion 

for 372 IRRF projects started but not completed, and for 11 projects awarded but not 

started. GRD also reported $934.2 million in IRRF unliquidated obligations. In the same 

report, MNSTC-I data included 9 projects started but not completed, and 9 projects 

awarded but not started. These projects have an estimated cost of approximately 

$16.8 million. Also, MNSTC-I has only $5 million in unliquidated obligations. As of 

June 29, 2007, USAID did not have any IRRF-funded projects. 

SIGIR continues to believe that the lack of complete, accurate reporting of cost-tocomplete information on a project-by-project basis deprives the Congress and senior 

decision-makers of the ability to make informed judgments on resource priorities. At this 

point, however, most IRRF-funded projects are complete, and GRD is managing most of 
4 

the remaining projects. Rather than expend further effort to correct problems with the 

current PAR format, an alternative may be to use the existing project status report that 

GRD uses to brief the ITAO Deputy Director. This report contains project-level 

information and would provide the information expected by the Congress without 

imposing an additional reporting requirement on GRD.

IRMO and GRD review the projects using monthly cost-to-complete reports that have 

more detail and are prepared with more direct involvement from the GRD sectors than 

the PAR. It is clear that IRMO, GRD, USAID, and MNSTC-I recognized the value of 

accurate, complete cost-to-complete reporting and placed considerable emphasis in this 

arena, particularly with respect to their monthly cost-to-complete sector reviews 

conducted by IRMO and briefed to the Deputy Director of IRMO. Further, our review of 

the GRD monthly cost-to-complete reports showed that data was reported at the projectby-project level, which is more aligned with the requirements of Section 2207. Our 

comparison of the PAR data fields to those of the monthly cost-to-complete report shows 

that the two reports have 27 data fields in common, including all the data fields used in 

computing the project’s cost to complete. However, we also identified ten additional 

miscellaneous fields that the two reports do not share, but it should be a minimal effort 

for management to review and consolidate. Finally, based on this review, we raise the 

question regarding potentially duplicative preparation and reporting of cost-to-complete 

information—with the PAR being less responsive to the legislative requirement.

 

New Iraq Funding and Cost-to-complete Reporting

The Congress has appropriated an additional $10.2 billion for Iraq through the Economic 

Support Fund (ESF) and the Iraq Security Forces Fund (ISFF). Neither law included a 

requirement for cost-to-complete reporting. IRMO reported the accomplishments for ESF 

construction and non-construction projects in Appendix III of the January 2007 Section 

2207 Report and did not plan to report cost-to-complete information for ESF-funded 

construction projects. MNSTC-I also reports accomplishments for ISFF-funded projects 

in Iraq through the quarterly Section 9010 Report to the Congress,2 which does not 

require information on the cost to complete projects. 

Recommendations 

To comply with the project level cost-to-complete reporting requirements of Section 

2207 of Public Law 108-106: 

1. We recommend that the Commanding General, GRD, direct GRD management to 

submit its project level cost-to-complete report to ITAO for the quarter ending 

September 30, 2007, as a replacement to its current quarterly cost-to-complete 

PAR report. 

 

2 Section 9010 of the Department of Defense Appropriations Act, 2007 (Public Law 109-289) requires 

quarterly reports from the Secretary of Defense to Congress on the military operations of the Armed Forces 

and the reconstruction activities of the Department of Defense in Iraq. 
5 

2. We recommend that the Director, ITAO, use the GRD project-level cost-tocomplete report as a replacement for the current PAR report and submit it 

quarterly to NEA to accompany the Section 2207 Report to the Congress. 

3. We recommend that the Principal Deputy Assistant Secretary of NEA ensure that 

the GRD cost-to-complete report is submitted with the Section 2207 Report to the 

Congress beginning with the quarter ending September 30, 2007. 

Lesson Learned

DoS should have asked for clarifying instructions of the congressional requirement for 

reporting on cost to complete. According to a senior NEA official, NEA did not submit 

more detailed information beyond that provided in the Section 2207 Report because over 

the course of two and a half years, the Congress had not requested it. Nonetheless, IRMO 

and the implementing agencies put forth a considerable effort to gather the data and 

forward it to NEA; SIGIR believes that NEA was well aware of this effort. For NEA to 

have allowed this effort to continue without either providing the reports to or seeking 

clarification from the Congress was wasteful. The lesson learned is that when there is 

confusion about a congressionally-directed requirement, agencies should seek 

clarification from the Congress rather than ignore the requirement, waste resources, and 

hamper congressional oversight. 

The Congress should consider requiring agencies to provide the methodology that will 

be used to meet required reports. During our four reviews of the progress being made in 

reporting the cost to complete IRRF-funded projects, agency officials responsible for 

preparing the required reports questioned the definition of the term project. Even as late 

as June 2007, senior managers at NEA were questioning the definition of project cost to 

complete, yet did not seek clarification. If the Congress had required a methodology or 

even a report on how the IRRF implementing organizations were going to satisfy the 

reporting requirement this would have been identified early on and most likely been 

resolved. As a result, GRD prepared a standard operating procedure that responds to the 

congressional intent through its coverage of general policies, roles and responsibilities, 

and report format. 

Management Comments and Audit Response

A draft of this report was provided to GRD, USAID, ITAO, and NEA. SIGIR received 

written comments from GRD and ITAO. We received technical comments from USAID. 

We considered the technical comments received from all three respondents and made 

changes where appropriate. 

GRD and ITAO concurred with recommendation 1, and we consider their concurrence to 

replace the PAR with the GRD monthly cost-to-complete report to be fully responsive. 
6 

Neither GRD nor ITAO agreed with recommendations 2 or 3, each generally interpreting 

the requirements of Section 2207 of P.L. 108-106 as not requiring that project-level, costto-complete information—in any type of report—accompany the quarterly Section 2207 

Report to the Congress. 

We disagree with this interpretation. Both P.L. 108-106 and an October 17, 2005, 

memorandum3

 from the IRMO Director to the U.S. Ambassador to Iraq discuss the 

inclusion of project-level, cost-to-complete information with the quarterly submission of 

the Section 2207 Report to the Congress. According to the IRMO Director, the 

mechanism to comply with the law was the submittal of the PAR report with the Section 

2207 Report. We believe this memorandum supports the intent of recommendation 2. 

We also provided a draft of this report to the U.S. Senate and House Committees on 

Appropriations for their consideration of the Lessons Learned discussed in this report. 

- - - - - 

Thank you for the courtesies extended to the staff. For a listing of the staff members who 

contributed to the audit and report, see Appendix D. For additional information on this 

report, please contact Mr. Glenn Furbish at (703) 428-1058 or glenn.furbish@sigir.mil. 

For the report distribution, see Appendix C. 

Stuart W. Bowen, Jr. 

Special Inspector General for Iraq Reconstruction 

Appendices 

cc: See Distribution 

 

3

 The October 17, 2005, Embassy memorandum is marked “Sensitive But Unclassified”, therefore, it is not 

included as an exhibit in this report. 
7 

Appendix A—Objective, Scope, and Methodology

In January 2007, we initiated the audit (Project No. 7003) to determine the adequacy of 

methodologies and controls used by IRMO, USAID, GRD, and MNSTC-I to report 

financial data in required reports to the Congress, as prescribed by Section 2207 of Public 

Law 108-106. We reviewed the status of agency action on previous SIGIR 

recommendations. We also reviewed the impact of inaccurate reporting and the impact of 

new sources of funds on financial management reporting. 

We limited the scope our audit to IRMO and the three agencies that received the largest 

apportionment of the IRRF funds—GRD, USAID, and MNSTC-I. To determine agency 

action on SIGIR recommendations, we interviewed responsible personnel at IRMO, 

GRD, USAID, and MNSTC-I. We also obtained and reviewed available procedures, both 

formal and in-progress, that described the processes, methodology, responsibilities, 

documentation standards and formats for cost-to-complete reporting. We obtained PARs 

compiled by GRD and USAID for the quarters ending September 30, 2006, and 

December 31, 2006. We also obtained the last PARs compiled by MNSTC-I for the 

quarter ending June 30, 2006. 

To determine the reliability of the PAR data and to determine if significant changes in 

resource requirements are identified, we performed an analysis of the September 30, 

2006, and December 31, 2006, PARs to determine the completeness of the data. 

Furthermore, we interviewed knowledgeable IRMO, GRD, and MNSTC-I personnel 

regarding the reliability of the computer data generated by the Corps of Engineers 

Financial Management System (CEFMS). In addition, we obtained and reviewed IRMO 

policy and procedures regarding use of expired funds and de-obligation/re-obligation of 

funds. We also attended monthly briefings of cost-to-complete data to the Deputy 

Director of IRMO. 

To determine the impact of inaccurate data in the PAR, we interviewed knowledgeable 

personnel at the agencies. We also attended the monthly sector meetings where IRMO 

and GRD use cost-to-complete data to manage funding for the IRRF projects. 

To determine the impact of new sources of funding—the Economic Support Fund (ESF) 

and the Iraq Security Forces Fund (ISFF)—we reviewed the applicable laws authorizing 

those funds, and we interviewed knowledgeable agency personnel regarding the use and 

reporting of those funds. We obtained and reviewed IRMO interagency agreements with 

GRD regarding ESF, and we reviewed the reporting of the ESF projects in Appendix III 

of the January 2007 Section 2207 Report. 

We performed this audit from January 23, 2007, through June 29, 2007, in accordance 

with generally accepted government auditing standards. 
8 

Use of Computer-Processed Data 

We reviewed cost-to-complete reports that were compiled in Excel spreadsheets based on 

data taken from reports run in financial accounting computer systems. The data in the 

GRD cost-to-complete reports was taken from reports run in CEFMS. The data in the 

USAID cost-to-complete reports was taken from the Phoenix financial accounting 

system. We did not audit CEFMS4 or Phoenix. 

Prior Coverage 

Prior reports related to cost-to-complete reporting issued by SIGIR can accessed on its 

website http://www.sigir.mil. 

• “Methodologies for Reporting Cost-To-Complete Estimates” (SIGIR 05-027, 

January 27, 2006), concluded the three organizations responsible for IRRF 

projects – the Project and Contracting Office (PCO), USAID, and MNSTC-I –

were required by P.L. 108-106 to submit cost-to-complete information to IRMO 

for the PAR for the quarter ending September 30, 2005. However, MNSTC-I did 

not submit a cost-to-complete report for the quarter. In addition, the three 

reporting entities failed to develop proper guidance, adequately review reports 

before submission, document the calculation of critical numbers, and note 

significant scope changes in the reporting. IRMO and the three reporting agencies 

did not develop methodologies to assure reliable and transparent cost-to-complete 

reporting. 

• “Management of Iraq Relief and Reconstruction Fund Programs: Cost-toComplete Estimate Reporting” (SIGIR 05-021, October 24, 2005), concluded the 

three organizations responsible for IRRF projects – PCO, USAID, and MNSTC-I 

– have been required, since January 2004, to report cost-to-complete information 

for their IRRF projects in quarterly reports to the Congress. However, these 

organizations did not begin providing reasonably comprehensive cost-to-complete 

data to IRMO until the summer of 2005. 

 

“Cost-to-Complete Estimates and Financial Reporting for the Management of the 

Iraq Relief and Reconstruction Fund” (SIGIR 05-011, July 26, 2005), included a 

review of PCO’s input to the April 2005 Section 2207 Report and found that PCO 

did not provide cost-to-complete information to IRMO for the Section 2207 

Report. PCO maintained that (1) project data was not sufficiently mature to 

develop reasonable estimates at completion; an (2) they could not consolidate 

information from their management information systems because they were not 

integrated. 

 

4

 For more information on the reliability of data from CEFMS, see the Government Accountability Office 

(GAO) report 02-589 “Corps of Engineers Making Improvements But Weaknesses Continue”, June, 2002. 
9 

Appendix B—Sections 2207 and 2208 of Public 

Law 108-106 
10

Appendix C—Report Distribution 

Department of State 

Secretary of State 

Senior Advisor to the Secretary and Coordinator for Iraq 

Director of U.S. Foreign Assistance/Administrator, U.S. Agency for 

International Development 

 Director, Office of Iraq Reconstruction 

 Assistant Secretary for Resource Management/Chief Financial Officer, 

 Bureau of Resource Management 

Principal Deputy Assistant Secretary, Bureau of Near Eastern Affairs* 

U.S. Ambassador to Iraq* 

Director, Iraq Transition Assistance Office* 

Coordinator, Office of Provincial Affairs 

Mission Director-Iraq, U.S. Agency for International Development 

Deputy Assistant Administrator, Bureau for Asia and the Near East, U.S. Agency 

 for International Development* 

Inspector General, Department of State 

Inspector General, U.S. Agency for International Development 

Regional Inspector General-Iraq, U.S. Agency for International Development* 

Department of Defense 

Secretary of Defense 

Deputy Secretary of Defense 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

 Deputy Chief Financial Officer 

 Deputy Comptroller (Program/Budget) 

Deputy Assistant Secretary of Defense-Middle East, Office of Policy/International 

Security Affairs 

Inspector General, Department of Defense 

Director, Defense Contract Audit Agency 

Director, Defense Finance and Accounting Service 

Director, Defense Contract Management Agency 

Department of the Army 

Assistant Secretary of the Army for Acquisition, Logistics, and Technology 

Principal Deputy to the Assistant Secretary of the Army for Acquisition, 

Logistics, and Technology 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Commanding General, Joint Contracting Command-Iraq/Afghanistan 

Assistant Secretary of the Army for Financial Management and Comptroller 

Chief of Engineers and Commander, U.S. Army Corps of Engineers 

 Commanding General, Gulf Region Division* 

Chief Financial Officer, U.S. Army Corps of Engineers 

Auditor General of the Army 

*Recipient of the draft audit report. 
11 

U.S. Central Command

Commanding General, Multi-National Force-Iraq 

Commanding General, Multi-National Corps-Iraq 

Commanding General, Multi-National Security Transition Command-Iraq 

Commander, Joint Area Support Group-Central 

Other Federal Government Organizations 

Director, Office of Management and Budget 

Comptroller General of the United States 

Inspector General, Department of the Treasury 

Inspector General, Department of Commerce 

Inspector General, Department of Health and Human Services 

President, Overseas Private Investment Corporation 

President, U.S. Institute for Peace 

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

Senate Committee on Appropriations* 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations, and Related Programs 

Senate Committee on Armed Services 

Senate Committee on Foreign Relations 

Subcommittee on International Development and Foreign Assistance, Economic 

Affairs, and International Environmental Protection 

Subcommittee on International Operations and Organizations, Democracy and 

Human Rights 

Subcommittee on Near Eastern and South and Central Asian Affairs 

Senate Committee on Homeland Security and Governmental Affairs 

Subcommittee on Federal Financial Management, Government Information, 

Federal Services, and International Security 

Subcommittee on Oversight of Government Management, the Federal 

Workforce, and the District of Columbia 

Permanent Subcommittee on Investigations 

U.S. House of Representatives 

House Committee on Appropriations* 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations, and Related Programs 

House Committee on Armed Services 

House Committee on Oversight and Government Reform 

Subcommittee on Government Management, Organization, and Procurement 

Subcommittee on National Security and Foreign Affairs 

House Committee on Foreign Affairs 

Subcommittee on International Organizations, Human Rights, and Oversight 

Subcommittee on the Middle East and South Asia 

*Recipient of the draft audit report.
12

Appendix D—Audit Team Members 

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

Joseph T. McDermott, Assistant Inspector General for Audit, Office of the Special 

Inspector General for Iraq Reconstruction. 

Staff members who contributed to the report include: 

Karen Bell 

Ben Comfort 

Glenn Furbish 

Justin Martell 

Nadia Shamari 

William Shimp 

Clifton Spruill 
13

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 Web site (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 Denise Burgess 

Assistant Inspector General 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