OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

INFORMATION ON GOVERNMENT OF

IRAQ CONTRIBUTIONS TO

RECONSTRUCTION COSTS

SIGIR 09--018

APPRRIILL 29,, 2009
Special Inspector General for Iraq 

SIGIR

Reconstruction

For more information, contact SIGIR Public Affairs 

at (703) 428-1100 or PublicAffairs@sigir.mil Special Inspector General for Iraq Reconstruction

Summary of Report: SIGIR 09-018

Why SIGIR Did This Study

The Congress has appropriated more than 

$50 billion for Iraq reconstruction including the 

Iraq Relief and Reconstruction Fund, the 

Economic Support Fund, the Commander’s 

Emergency Response Program, and the Iraq 

Security Forces Fund. Since the start of the 

U.S. reconstruction effort, the U.S. government 

has increased requests for the Government of 

Iraq (GOI) to assume a greater share of the costs

of reconstruction. In October 2008, the Special 

Inspector General for Iraq Reconstruction 

(SIGIR) initiated an audit related to these 

requests. The objectives of this report are to 

provide:

1. Information on Executive Branch

guidance for soliciting GOI 

contributions for U.S. development 

programs

2. Examples of GOI contributions to the 

U.S. reconstruction program.

This audit was done 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.

What SIGIR Recommends

SIGIR provides no recommendations.

Management Comments 

No agency comments were required because 

SIGIR did not make recommendations in this 

report. Nevertheless, USAID and the MultiNational Corps-Iraq provided technical 

comments, which we incorporated as 

appropriate. Additionally, USAID provided a 

copy of recently developed guidelines for Iraq 

cost sharing which we included in Appendix D.

April 29, 2009

INFORMATION ON GOVERNMENT OF IRAQ CONTRIBUTIONS 

TO RECONSTRUCTION COSTS

What SIGIR Found

The United States and other international donors have identified the need for 

host-country participation as a central factor in effective developmental 

programs. Such participation takes many forms, including host-country 

financial and/or in kind contributions. The Department of State (DoS) points 

to Government of Iraq (GOI) budget expenditures for cost sharing, the 

Department of Defense (DoD) points to specific GOI expenditures for 

security requirements, and the U.S. Agency for International Development 

(USAID) points to GOI’s direct support for individual programs. These 

agencies provided the following examples:

According to DoS, the matching requirement only applies to six of 

its foreign assistance programs and the GOI capital budget for 2008

contained $12 billion for these six programs, which more than 

matches U.S. assistance as required by legislation. Moreover, DoS 

reported that the GOI increased its total capital budgets from $3.2 

billion in 2004 to $21.1 billion in 2008 and that 2008 GOI data 

indicate a budget execution rate of nearly 70 percent of the full 

appropriation.

DoD noted that the GOI had spent more than $8 billion to support its 

security and police forces from 2004 through 2008 and more than 

$4 billion to purchase U.S. military equipment and supplies. The 

GOI also provided financial or in-kind support for individual U.S.-

funded projects, such as the Sons of Iraq.

USAID manages programs that incorporate cost-sharing elements at 

the project level.

The Congress recently expressed its desire that the GOI assume greater 

responsibility for Iraq’s reconstruction. To that end, the Congress has 

directed U.S. agencies to obtain increased GOI contributions for specific 

programs, such as the Sons of Iraq and Economic Support Fund projects.

Until recently, DoD, DoS, and USAID did not have policies or procedures 

governing cost-sharing for Iraq, as they were not required to do so. USAID 

officials indicated that congressional guidance is unclear. To address this 

concern, DoS and USAID developed policy guidelines for obtaining GOI 

contributions. According to USAID officials, they submitted these 

guidelines to the Congress with the FY 2009 supplemental budget request. 

Their goal is to reach consensus on what the Congress wants and what DoS 

and USAID are expected to do.
SPE CI AL I NSPE CT O R GE NE R AL FO R I R AQ RE C ONST R UCT I O N

400 Army Navy Drive • Arlington, Virginia 22202

April 29, 2009

MEMORANDUM FOR U.S. AMBASSADOR TO IRAQ

COMMANDING GENERAL, MULTI-NATIONAL FORCE-IRAQ

COMMANDING GENERAL, MULTI-NATIONAL SECURITY 

TRANSITION COMMAND-IRAQ

COMMANDING GENERAL, MULTI-NATIONAL CORPS-IRAQ

COORDINATOR FOR ECONOMIC TRANSITION IN IRAQ

DIRECTOR, OFFICE OF IRAQ RECONSTRUCTION, U.S. 

AGENCY FOR INTERNATIONAL DEVELOPMENT

DIRECTOR, IRAQ TRANSITION ASSISTANCE OFFICE

SUBJECT: Information on Government of Iraq Contributions to Reconstruction Costs

(SIGIR-09-018)

We are providing this audit report for your information and use. It discusses our review of costsharing between the United States and the Government of Iraq for the reconstruction of Iraq.

This audit was conducted as Special Inspector General for Iraq Reconstruction (SIGIR) 

project 8034. It 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.

This report does not contain recommendations; accordingly, the addressees were not required to 

provide comments. However, the U.S. Agency for International Development and the MultiNational Force-Iraq provided technical comments, which we incorporated as appropriate.

We appreciate the courtesies extended to our staff. For additional information on this report, 

please contact Mr. Glenn Furbish (glenn.furbish@sigir.mil, 703-428-1058, or Ms. Nancee 

Needham (nancee.needham@iraq.centcom.mil, 240-553-0851, ext 3793).

Stuart W. Bowen, Jr.

Inspector General
Table of Contents

Introduction 1

Cost Contributions Take Many Forms, Depending on Funding

Guidance 2

Guidance on Host Government Contributions to Reconstruction Costs 2

Executive Branch Direction on Sharing Costs 3

Government of Iraq Matching Support for U.S. Funding 3

Government of Iraq Support for Military Development through Foreign 

Military Sales Purchases and Budget 5

Government of Iraq Support for U.S.-Sponsored Assistance Programs 6

Government of Iraq Support for U.S.-Funded Infrastructure Projects 8

Conclusions 9

Management Comments and Audit Response 9

Appendices

A. Scope and Methodology 10

B. Congressional Guidance on Obtaining Government of Iraq Support 12

C. Financial Data Reported by U.S. Agencies for Funds Subject to 

P.L. 110-252, Section 1402(e) Requirements 16

D. Department of State and USAID Policy Guidelines for Government of 

Iraq Contributions to U.S. Reconstruction Efforts 17

E. Acronyms 20

F. Audit Team Members 21
1

Introduction

The United States (U.S.) and other international donors have identified the need for host country 

participation as a central factor in effective developmental programs. Such participation takes 

many forms, including host country financial and/or in-kind contributions. The ―Paris 

Declaration on Aid Effectiveness,‖ which was endorsed by the United States and other donor and 

recipient nations, identifies the need, and steps to take, to make aid more effective. It requires

donors and recipient nations to work together more collaboratively and requires that host 

countries exercise leadership over their development policies and strategies. The U.S. Agency 

for International Development’s (USAID) Global Development Alliance encourages partnering 

with entities such as host-country governments and indigenous nongovernmental organizations

to mobilize the strengths and participation of the host country and enhance the developmental 

impact of the assistance. When such relationships are forged, USAID expects the partner to 

make financial and/or in-kind contributions to increase the impact and sustainability of 

development efforts.

The Congress has appropriated more than $50 billion for Iraq reconstruction including the Iraq 

Relief and Reconstruction Fund, the Economic Support Fund (ESF), the Commander’s 

Emergency Response Program (CERP), and the Iraq Security Forces Fund (ISFF) to support Iraq 

reconstruction. The Congress has increased requests for the Government of Iraq (GOI) to 

assume a greater share of reconstruction costs.

This review was done under the authority of Public Law (P.L.) 108-106, as amended, which also 

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

of 1978. The objectives of this report are to provide:

1. Information on Executive Branch guidance on soliciting GOI contributions for U.S. 

development programs

2. Examples of GOI contributions to the U.S. reconstruction program

For a discussion of the audit scope and methodology, see Appendix A. For a description of the 

legislation addressing support from the GOI, see Appendix B. For financial information on those

U.S. government ESF programs requiring GOI matching contributions, see Appendix C. For the 

Department of State and USAID guidelines on obtaining GOI contributions to U.S. 

reconstruction efforts, see Appendix D. For acronyms used, see Appendix E, and for a list of the 

audit team members, see Appendix F.
2

Cost Contributions Take Many Forms, Depending on 

Funding Guidance

Until recently, the Departments of State (DoS) and Defense (DoD) and USAID had provided little 

guidance on obtaining contributions from the GOI for the U.S. reconstruction effort. Nevertheless,

agency officials in Iraq point to a number of different forms in which the GOI contributes to the costs of 

U.S. efforts in Iraq. According to DoS, the matching requirement of Public Law 110-252 only 

applies to six of its foreign assistance programs and the GOI capital budget for 2008 contained 

$12 billion for these six programs, which more than matches U.S. assistance as required by the 

legislation. Moreover, DoS reported that the GOI increased its total capital budget from $3.2 

billion in 2004 to $21.1 billion in 2008 and that 2008 GOI data indicate a budget execution rate 

of nearly 70 percent of the full appropriation.

DoD points to GOI’s expenditures for security requirements, such as equipment purchases, as a 

measure of cost-sharing. DoD notes that the GOI has spent more than $4 billion to purchase 

military equipment and supplies. Additionally, DoD stated that GOI support for individual DoD 

programs, such as the Sons of Iraq (SOI), is another indicator of cost sharing. On the other hand,

USAID pointed to GOI’s direct support for individual USAID-sponsored programs as its 

principal means of obtaining GOI contributions. USAID officials stated that they have obtained 

Iraqi support for a number of individual programs and that Iraq will soon assume control for their 

management and funding.

Guidance on Host Government Contributions to Reconstruction 

Costs

The U.S. government enacted legislation governing U.S. foreign assistance programs and 

legislation specific to Iraq reconstruction that provide overall guidance for U.S. agencies to seek 

contributions from the GOI to fund U.S. development efforts in Iraq. Moreover, in the case of 

Iraq, the Congress recently expressed its desire that the GOI assume greater responsibility for 

Iraq’s reconstruction. To that end, the Congress directed U.S. agencies to obtain from GOI 

increased contributions for specific programs, such as the SOI, and for the ESF and CERP, 

which are used for Iraq reconstruction projects.1

 

1

See Appendix B for a description of legislation addressing cost-sharing.
3

Executive Branch Direction on Sharing Costs

The Executive Branch may provide direction through the President or in agency policy on host 

government support for U.S. foreign assistance. During the course of our review, DoD, DoS,

and USAID officials informed us that they had not developed specific guidance for obtaining 

GOI support for U.S. assistance programs. We requested and reviewed documents governing 

U.S. reconstruction in Iraq and did not find a specific policy governing Iraqi support for U.S. 

efforts. According to USAID officials, their agency-wide cost-sharing requirement is not 

applicable to Iraq. The guidance requires cost-sharing for those programs funded from the 

Development Assistance and Child Survival accounts, which is not used in Iraq. As such, they 

seek Iraqi support ―to the extent that it makes sense.‖ For example, if they sign an agreement 

with a nongovernmental organization (NGO) to implement a specific program, they would not 

likely seek GOI support at the national level as the GOI might then try to take over and direct the 

NGO. The NGO would, however, work with local government entities or community groups to 

obtain their support, which is usually provided through in-kind contributions.

USAID cost-sharing guidance is built-in for some project agreements. For example, USAID 

seeks host government support for individual programs that benefit the host government. 

Consequently, many USAID projects include cost-sharing elements because this helps obtain the 

host county's buy-in. These cost-sharing arrangements take a number of forms from 

memorandums of understanding to joint program planning. Technical and programmatic 

considerations determine which type of cost-sharing, if any, is appropriate for a given USAID 

project or assistance award. USAID has no set formula for cost-sharing, and it may take many 

forms, such as in-kind and cash contributions.

USAID officials informed us that DoS’s Legal Bureau, in conjunction with USAID’s General 

Counsel, reviewed legislation regarding cost sharing with the GOI and provided guidance for its 

implementation. However, USAID noted that it found varying interpretations on what was 

legislatively required. To respond to congressional concerns and provide clarification for U.S. 

government civilian agencies implementing assistance programs, DoS and USAID drafted an 

Iraq-specific cost-sharing policy statement. USAID notes that this statement is based on its

worldwide host country contribution policy for Development Assistance and Child Survival 

funds. According to USAID, DoS and USAID submitted these guidelines with their fiscal year 

(FY) 2009 supplemental budget request.

GOI Matching Support for U.S. Funding

On September 8, 2008, DoS certified that Iraq was making dollar-for-dollar contributions in 

accordance with P.L. 110-252, Section 1402(e). The act required that the Secretary of State

certify to the Committees on Appropriations, not later than September 30, 2008, and 180 days 

thereafter, that the GOI had committed to obligate matching funds on a dollar-for-dollar basis.

The Deputy Secretary of State certified ―that the Government of Iraq has committed to obligate 
4

funds matching funds appropriated in Title I, Chapter 4 of the Act for assistance for Iraq, on a 

dollar-for-dollar basis.‖ The accompanying memorandum of justification cited a letter from the 

Deputy Prime Minister of Iraq, who was also the Chairman of the Economic Affairs Committee, 

to the U.S. Ambassador to Iraq in which he affirmed the GOI’s commitment to meet and exceed 

the matching funds required by the act.

DoS quantified GOI’s support in its Report to Congress on Status of Obligations and 

Expenditures by the Government of Iraq to Match Foreign Assistance Funds, which was sent to 

the Congress on October 7, 2008. The report reiterated the DoS certification letter of 

September 8, 2008, identified six U.S. government programs covered under the act, and 

presented a list of similar programs budgeted for and expended against in the GOI 2008 budget.

From the reported $948 million in U.S. foreign assistance aid for Iraq in FY 2008, the report 

identified $496.5 million that the GOI was required to match dollar for dollar. According to the 

DoS report, the GOI had budgeted more than $12 billion and expended more than $3 billion for 

initiatives the DoS determined to be similar to U.S. programs, including:

Provincial Reconstruction Team Programs

Community Stabilization Program

Operation and Maintenance of U.S. Government-Funded Infrastructure

Provincial Economic Growth

National Capacity Development for Critical Ministries

Criminal Justice and Rule of Law

Our analysis of the data DoS reported indicates that about two-thirds of the GOI funds expended 

were for grants to provincial governments to support provincial and municipal reconstruction 

efforts, such as small-scale infrastructure projects.

As of March 31, 2009, U.S. government agencies had reported obligating nearly $273 million in 

four of five ESF programs that require GOI matching support and expending more than

$48 million, mostly for USAID’s Community Stabilization Program.

2

DoD data show that between 2004 and 2008, the GOI contributed more than $8 billion to support 

the Ministries of Defense and Interior. Most of these funds—$6.7 billion—went to support the 

Ministry of Defense forces, primarily for life support and maintenance ($2.9 billion) and 

equipment and weapons ($3.3 billion). Much smaller amounts supported construction 

 

2

See Appendix C for allotments, obligations, and disbursements for the five U.S. government 

ESF programs that require GOI matching support.
5

($395 million) and training ($47 million). The Ministry of the Interior received $1.5 billion 

during the time period. Life support and maintenance, and equipment received the bulk of the 

funding, $779 million and $693 million, respectively.

Some believe that the earliest source of GOI support for reconstruction efforts was the use of the 

Development Fund for Iraq (DFI). The DFI was the primary financial vehicle to channel 

revenue from ongoing Iraqi oil sales, unencumbered Oil for Food deposits, and repatriated 

national assets to the relief and reconstruction efforts for Iraq.3 United Nations Security Council 

Resolution 1483, passed in 2003, assigned responsibility for managing the DFI to the Coalition 

Provisional Authority. Resolution 1483 noted that the DFI funds should be disbursed at the 

direction of the Coalition Provisional Authority in consultation with the Iraqi interim 

administration. In addition, it required that the DFI funds be used in a transparent manner for the 

following purposes: to meet the humanitarian needs of the people, for economic reconstruction 

and repair of infrastructure, for continued disarmament, for the costs of civilian administration,

and for other purposes benefiting the people of Iraq.

GOI Support for Military Development through Foreign Military 

Sales Purchases and Budget

U.S. officials stated that they view GOI purchases of military equipment and training through the 

Foreign Military Sales program as a GOI contribution to the U.S. reconstruction effort. The 

Foreign Military Sales program is the government-to-government method for selling U.S. 

defense equipment, services, and training. Using their own funds, foreign militaries make their 

purchases through the U.S. military rather than directly from a U.S. company. The purpose of 

this program is to foster responsible arms sales that further national security and foreign policy 

objectives by strengthening bilateral defense relations, supporting coalition building, and 

enhancing interoperability between U.S. forces and militaries of friends and allies.

Since April 2005, Multi-National Security Transition Command-Iraq has helped the GOI execute 

121 Foreign Military Sales procurement cases with sales valued at more than $4.5 billion. These 

procurements range from basic military equipment to M1A1 tanks and C-130J aircraft.

Additionally, 14 cases, totaling $707 million, have been signed and are awaiting funding from 

GOI.

 

3

SIGIR Audit 08-012, ―Attestation to Development Fund for Iraq Cash in the Possession of the 

Joint Area Support Group-Central,‖ 3/13/2008.
6

GOI Support for U.S.-Sponsored Assistance Programs

DoD and USAID provided the following programs as examples of the GOI’s partnering with the 

United States either to achieve a specific reconstruction goal or to share the financial burden.

Government of Iraq Commander’s Emergency Response Program (I-CERP)

The GOI established and first funded the I-CERP in April 2008 when it transferred $270 million 

to the Multi-National Corps-Iraq. The I-CERP is modeled after the CERP. The GOI has notified

U.S. officials that it intends to provide an additional $250 million to the U.S. government.

According to DoD officials, this is both an example of the GOI’s sharing costs of activities and a 

training opportunity. The intent is that, over time, the I-CERP will strengthen the capacity of 

local governments to meet constituents’ needs and execute budgets to deliver essential services

so that the management of the I-CERP-funded projects will be transferred to the Iraqi Security 

Force and provincial government counterparts. However, SIGIR was informed that, as of 

April 6, 2009, the GOI had not yet transferred to the U.S. government the promised $250 million 

in additional funding.

Sons of Iraq

The U.S. established the SOI program at the national level in June 2007 as a means to help quell 

violence and restore order by enhancing security in unstable locations throughout Iraq. In 

September 2008, the GOI began to assume responsibility for nearly 94,000 SOI personnel. The 

first transfer of the SOI responsibility occurred in October 2008 when the United States

transferred more than 50,000 SOI personnel in the Baghdad area to the GOI. As of March 2009, 

more than 80,000 SOI personnel had been transferred to GOI control. Through January 2009, 

the U.S. government had invested more than $400 million in the program with a median monthly 

cost of more than $21 million, peaking at nearly $39 million in March 2008. However, with 

increased GOI support and management of these forces, U.S. costs dropped significantly, to 

nearly $9 million in January 2009. DoD explained that the GOI had pledged to assume fiscal 

responsibility for all the SOI personnel by April 2009 and control for SOI personnel by May 1, 

2009.

Community Stabilization Program

USAID officials stated that the Community Stabilization Program has evolved over the years as 

the Iraqi Security Forces assumed more control of the country. Originally, the program was 

developed to follow U.S. forces into an area impacted by insurgent activity. According to 

USAID, its assistance helped the U.S. forces provide stability to communities while building the 

foundation for long-term development. The program has done so by creating jobs and providing 

vocational and life skills and educational programs and opportunities and by revitalizing business 

districts, refurbishing youth centers, and supporting youth clubs and sports teams that offer 

creative outlets for young Iraqis.
7

As the Iraqi military has assumed greater control of the country, USAID agreements and support 

have switched from support to the U.S. military to support for the Iraqi military. Currently, 

USAID implements this program through cooperative agreements with the Iraqi government at 

both the national and local levels. The agreements generally include a cost-sharing requirement 

equaling 14 percent of the total value of the award; the specifics of individual projects under this 

program, as well as cost-sharing arrangements, are worked out at the local level where the 

project is to take place. For example, in Haditha, the Community Stabilization Program 

implemented a $450,000 project to rehabilitate seven shops in a popular market area. USAID 

informed us that the local council proposed a contribution of $110,000 worth of labor and 

equipment, but USAID did not inform us whether this contribution was in fact made.

USAID officials further stated that this program is scheduled to end in the fall 2009 and that in 

the past year the GOI had developed a comparable program.

Community Action Program II

According to USAID officials, this program is also evolving as local Iraqi governments assume

greater responsibility. Community action Program II helps communities identify and prioritize 

local needs—such as school renovations, literacy programs, neighborhood cleanups, and water 

and sewerage system rehabilitations—and then develops and implements projects that address 

those needs. This USAID program is implemented through a cooperative agreement with an 

NGO (implementing partner), which requires that local entities contribute 7 percent of the total 

value of the award. The implementing partner works with local community action groups to 

design projects and determine Iraqi contributions. Local community and governmental 

organizations (lower than the provincial level) enter into cost-sharing arrangements through 

written letters of commitment with the neighborhood councils and community groups, who are 

responsible for implementing the program. These implementing partners are responsible for 

verifying cost-sharing contributions after each project is finished. Cost-sharing contributions 

may be in the form of cash, land, salaries, supplies, labor, materials, and supplies.

Quick Response Fund/Iraq Rapid Assistance Program

This USAID Program is implemented through a contract with a private development company.

The Quick-Response Fund/Iraq Rapid Assistance Program contract allows Provincial 

Reconstruction Teams and embedded Provincial Reconstruction Teams to provide grants to 

support economic and social development programs and civil society conflict-mitigation efforts. 

The grants range from $25,000 to $500,000. The grants do not specifically require local entities 

to contribute to the cost of the projects. Nevertheless, according to USAID officials, grantees 

that have provided assistance generally do so in an on an in-kind basis as opposed to cash, and 

they track all cost-sharing—whether cash or in-kind—provided by Iraqi entities (GOI or NGOs,

such as neighborhood councils and community groups). USAID estimates that such 

contributions are generally equal to nearly 2 percent of the costs.
8

GOI Support for U.S.-Funded Infrastructure Projects

DoD has obtained specific agreements with the GOI to fund a portion of selected U.S.-funded 

projects. We did not attempt to determine the full extent of such agreements because 

information is contained in individual project files. Nevertheless, SIGIR’s inspections of U.S.-

constructed projects provide some examples of how such agreements work.

Erbil Police Academy

The U.S. Army Corps of Engineers awarded a firm-fixed price design and construction contract 

with 21 contract line item projects totaling nearly $21.2 million for which the U.S. government

prioritized and exercised 10 contract line items valued at more than $10 million. As part of a 

cost-sharing agreement between the U.S. government and the Kurdistan regional government, 

the Kurdistan regional government funded 7 of the 21 contract line items at a cost of more than

$5.4 million. For example, the U.S. government was responsible for funding an education 

building priced at more than $2.4 million, while the Kurdistan regional government was 

responsible for a management building priced at more than $1.6 million.4

Kirkuk to Baiji Pipeline Exclusion Zone

To complement the U.S. government’s approximately $34.4 million investment, the GOI agreed 

to contribute approximately $12.3 million to the pipeline project. The GOI-awarded contract 

provided extra security by constructing 185 guard towers, 16 Iraqi Army company headquarters,

and 4 Iraqi Army battalion headquarters. The GOI also provided troops to staff the guard 

towers.5

Falluja Waste Water Treatment System

The Falluja Waste Water Treatment System (system) was originally planned to cost 

$32.5 million, be completed in January 2006 (18 months) by one contractor, and serve the entire 

city of Falluja. In October 2008, SIGIR Inspections reported that the project was two years 

behind schedule, had been de-scoped, and had tripled in cost.

Additional funding was obtained in late 2005 and early 2006 to complete a portion of the project.

Included in the additional funding were $18 million in DFI and $9 million in the CERP funds.

The use of separate funding sources required a greater level of integration and coordination of 

the multiple contracts required to manage the overall project. By early April 2007, contractor 

invoices were outstanding for the four construction DFI contracts totaling more than $3 million. 

Despite U.S. and Iraqi government attempts to obtain payment on the invoices, on December 31, 

 

4

SIGIR Inspection PA-07-115, ―Erbil Police Academy –Under the Iraq Security Forces Fund,‖ 

1/22/2008.

5

SIGIR Inspection PA-08-137, ―Kirkuk to Baiji Pipeline Exclusion Zone – Phase 3,‖ 7/24/2008.
9

2007, the four DFI contracts still had outstanding balances of more than $2 million. As a result 

of the lack of payments, some of the DFI-funded construction contractors stopped work because

some of the contractors responsible for equipment procurement refused to execute their 

contracts. The subsequent work stoppages and lack of equipment impacted progress on the 

contracts and contributed to the delays in completing the system.6

At the time of the SIGIR assessment, the costs of the system had increased to approximately 

$98 million, of which $18.7 million had been expended under a delivery order and $79.3 million 

had been obligated for 45 subsequent contracts to complete the System. Furthermore, the 

System would be only partially completed in April 2009 (56 months) and serve only 38 percent 

of the city of Falluja.

Conclusion

As illustrated in the preceding sections, agencies have identified many differing arrangements for 

GOI to share reconstruction costs. The Congress, in recent legislation, provided guidance related

to cost sharing for ESF programs, and DoS and USAID have developed policy guidelines for 

implementing cost-sharing arrangements for civilian-funded U.S. assistance programs.

Congressional reaction to that policy remains to be seen. In the absence of a cost-sharing policy

for the other Iraq reconstruction programs, cost-sharing will likely continue to be achieved by the 

varying arrangements in use.

Management Comments and Audit Response

No management comments were required because SIGIR did not make recommendations.

Nevertheless, USAID and the Multi-National Force-Iraq provided technical comments, which we 

incorporated as appropriate. Additionally, USAID provided a copy of recently developed 

guidelines for GOI financial participation in U.S. government-funded civilian foreign assistance 

programs. We included these guidelines in Appendix D.

 

6

SIGIR Inspection PA-08-144 to 08-148, ―Falluja Waste Water Treatment System,‖ 10/27/2008.
10

Appendix A—Scope and Methodology

SIGIR initiated this audit in October 2008 to develop information on GOI contributions that 

support U.S. reconstruction efforts in Iraq.

To include information on legislative guidance, SIGIR’s General Counsel reviewed public laws

and other documents related to cost-sharing.

To provide information on Executive Branch guidance on soliciting Iraq contributions to U.S. 

development programs, we:

Met with officials from Multi-National Security Transition Command-Iraq, MultiNational Corps-Iraq, DoS, and USAID

Requested and reviewed related policies, procedures, and other documents to determine 

whether the documentation provided any direction or guidance on obtaining GOI support 

for the reconstruction effort

Spoke with USAID officials from their Washington, D.C., headquarters

Reviewed DoS reports on GOI contributions to reconstruction

To provide examples of GOI contributions to the U.S. reconstruction effort, we:

Interviewed appropriate DoD, DoS, and USAID officials in Iraq about existing formal 

and informal arrangements to obtain Iraqi contributions to the reconstruction effort

Requested and obtained information on specific projects to which either the GOI at the 

national or local level or community groups had contributed to the U.S. reconstruction 

effort

SIGIR’s intent was not to provide a comprehensive inventory of the GOI’s support for U.S. 

projects or the reconstruction effort as a whole. Nor did we attempt to verify the data on cost 

estimates that agencies provided us.

We performed this audit under authority of P. L. 108-106, as amended, which also incorporates 

the duties and responsibilities of inspectors general under the Inspector General Act of 1978, as 

amended. We conducted this review between October 2008 and April 2009 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that the evidence obtained 

provides a reasonable basis for our findings and conclusions based on our audit objectives.
11

Use of Computer-Processed Data

We did not rely on computer-processed data to perform this audit.

Internal Controls

We identified and reviewed internal controls, or the policies and procedures, for DoD, DoS, and 

USAID cost sharing with GOI as part of our audit objective to provide information on Executive 

Branch guidance on soliciting GOI contributions for U.S. development programs. The results of 

this review are incorporated in the body of the report.

Related Reports by SIGIR

SIGIR-09-012, ―The U.S. Has Reduced Its Funding for the Iraqi Security Forces, but 

Continued Support Will Be Necessary,‖ 1/26/2009.

SIGIR PA-08-144 to 08-148, ―Falluja Waste Water Treatment System,‖ 10/27/2008.

SIGIR-08-022, ―Government of Iraq Increasingly Funding Iraqi Security Forces 

Infrastructure Development, but Substantial U.S. Support Remains,‖ 7/26/2008. The 

report was revised on 8/11/2008.

SIGIR PA-08-137, ―Kirkuk to Baiji Pipeline Exclusion Zone–Phase 3,‖ 7/24/2008.

SIGIR-08-006, ―Commander’s Emergency Response Program in Iraq Funds Many 

Large-Scale Projects,‖ 1/25/2008.

SIGIR PA-07-115, ―Erbil Police Academy–Under the Iraq Security Forces Fund,‖ 

1/22/2008.
12

Appendix B—Congressional Guidance on Obtaining 

Government of Iraq Support

Congress Restricts Use of Economic Support Fund for Iraq 

Reconstruction

The Congress appropriated $3.54 billion to the Economic Support Fund (ESF) for reconstruction 

projects in Iraq. However, in a report accompanying the FY 2008 appropriations bill for the 

State Department’s foreign operations and related programs (H.R. 2764),7the House 

Appropriations Committee noted that it had recommended that the Department of State’s ESF 

include no funds for programs in Iraq, which was $298,000,000 below the requested amount.8

The Committee said that it believed the Government of Iraq (GOI) should assume more

responsibility ―for the reconstruction of Iraqi infrastructure and the provision of essential 

services.‖9 As enacted,

10 the bill stated that none of the funds appropriated or otherwise 

available under the act could be used for assistance for Iraq except for specified purposes, for 

example, to aid Iraqi scholars and war victims, refugees, and internally displaced persons.

11

The Congress addressed this issue again in the 2008 supplemental appropriations act.

12 While 

appropriating additional ESF for use in Iraq, the act stipulated that none of the funds 

appropriated for infrastructure maintenance activities in Iraq could be used until the Secretary of 

State certifies and reports to the Committees on Appropriations that the governments of the 

 

7 H.R. REP. NO. 110-197 (2007).

8 H.R. REP. NO. 110-197 at 72 (2007). ESF is formally requested by the administration in a lump 

sum subject to a detailed justification document indicating the intended uses of the funds. It is 

appropriated in a lump sum, subject to certain statutory earmarks and restrictions.

9

Ibid. The Committee also said that ―funds provided [for Iraq] in the fiscal year 2007 

Supplemental Appropriations Act‖ should be ―fully obligated‖ before it would consider requests 

for additional funds. Ibid.

10 Consolidated Appropriations Act, 2008, Pub. L. No. 110-161, 121 Stat. 1844 (12/26/2007). 

11 Ibid, Pub. L. No. 110-161, Sec. 699K, 121 Stat. 1844, 2373.

12 Supplemental Appropriations Act, 2008, Pub. L. No. 110-252, Ch. 4, 122 Stat. 2323, 2328 

(6/30/2008).
13

United States and Iraq have an agreement that the GOI will maintain the U.S.-funded 

infrastructure in Iraq.13 

The act also requires that funds appropriated to the Department of State (DoS) and foreign 

operations for assistance to Iraq will be made available only to the extent that the GOI matches 

the assistance on a dollar-for-dollar basis.

14 The Economic Support Fund would fall under this 

restriction. The 2008 supplemental appropriations act provides no further explanation about how 

the matching requirement should be implemented. In the FY 2009 omnibus appropriations act, 

the Congress extended the matching requirement of the 2008 supplemental to apply to assistance 

for Iraq in FY 2009 (again without further elaboration).15

Congress Imposes Restrictions on the Use of Additional Program

Funds for Iraq Reconstruction

The FY 2009 defense authorization act16 places additional limitations, prohibitions, and other 

requirements on the following categories of assistance to Iraq:

Commander’s Emergency Response Program (CERP): The act caps at $2,000,000 any 

CERP-funded project in Iraq that is begun after the law was enacted (10/14/2008).17 Further, no 

CERP project begun after the law’s enactment may exceed $1,000,000 unless the Secretary of 

Defense certifies that the project addresses ―urgent humanitarian relief and reconstruction 

requirements that will immediately assist the Iraqi people.‖18 The act expresses the sense of the 

Congress that the GOI should assume greater responsibility for funding and carrying out projects 

 

13 Ibid, Pub. L. No. 110-252, Sec. 1402(a)(1), 122 Stat. 2323, 2334.

14 Ibid, Pub. L. No. 110-252, Sec. 1402(e)(1), 122 Stat. 2323, 2335. Section 1402(e)(2) provides 

limited exceptions to the matching requirement for democracy and human rights programs and 

certain humanitarian assistance.

15 Omnibus Appropriations Act, 2009, Pub. L. No. 111-8, Sec. 7042(b) (3/11/2009). 

16 Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub. L. No. 110-

417, 122 Stat. 4356 (10/14/2008).

17 Ibid, Pub. L. No. 110-417, Sec. 1214(c), 122 Stat. 4356, 4631. This section permits the 

Secretary of Defense to waive the $2,000,000 limit if ―required to meet urgent humanitarian 

relief and reconstruction requirements that will immediately assist the Iraqi people‖ and the 

Secretary so notifies Congress. Ibid.

18 Ibid, Pub. L. No. 110-417, Sec. 1214(d), 122 Stat. 4356, 4632.
14

that the United States currently funds through CERP and ―should assume all costs associated 

with the Sons of Iraq program as expeditiously as possible.‖19

Iraq Security Forces Fund (ISFF): The act requires the U.S. government to ―take actions to 

ensure‖ that Iraq funds are used to pay the costs of the salaries, training, equipping, and 

sustainment of Iraqi Security Forces.20 No funds authorized for the ISFF appropriations or for 

any purpose in the FY 2009 defense bridge fund appropriations provided for in the 2008 

supplemental appropriations act may be obligated or spent for the acquisition, conversion, 

rehabilitation, or installation of facilities in Iraq for the use of the GOI or its forces.

21

Cost-Sharing Agreement: The act requires the U.S. government to negotiate with the GOI on 

an agreement to share the costs of combined operations of the GOI and the Multi-National 

Force-Iraq undertaken as part of Operation Iraqi Freedom.

22

In reporting the Senate version of the bill that (with amendments) became the 2009 defense 

authorization act, the Senate Armed Services Committee commented that the amount authorized 

for the ISFF would be dramatically reduced from the FY 2008 level23 in light of the Iraqi 

 

19 Ibid, Pub. L. No. 110-417, Sec. 1214(e), 122 Stat. 4356, 4632.

20 Ibid, Pub. L. No. 110-417, Sec. 1508(c)(1), 122 Stat. 4356, 4652. The phrase ―take actions to 

ensure‖ implies the absence of a requirement that U.S. funds immediately or at any particular 

time cease being used to pay the costs mentioned. Section 1508(c)(2) of the act requires periodic 

reports on progress toward meeting the requirement of section 1508(c)(1), a further indication 

that the act does not require immediate changes in the practices of the U.S. government.

21 Ibid, Pub. L. No. 110-417, Sec. 1508(a)(1), 122 Stat. 4356, 4651-4652. This prohibition does 

not apply to authorized CERP projects, certain Title 10 U.S. military construction, and technical 

assistance to the Government of Iraq to carry out facilities projects on its own behalf. Ibid, Pub. 

L. No. 110-417, Sec. 1508(a)(2), 122 Stat. 4356, 4652.

22 Ibid, Pub. L. No. 110-417, Sec. 1508(b)(1), 122 Stat. 4356, 4652.

23 The Committee had recommended an authorization of an additional $200,000,000 for the 

FY 2009 ISFF. See S. REP. NO. 110-335 at 428 (2008). As enacted, the 2009 defense 

authorization act did not provide additional ISFF funding but did authorize the previously 

appropriated amount of $1 billion for ISFF that had been part of the defense bridge fund 

appropriations contained in the 2008 supplemental appropriations act. The requirements of the 

authorization act thus became effective with respect to the previously-appropriated funds. See

Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub. L. No. 110-417, 

Sec. 1501(a) (citing the Supplemental Appropriations Act, 2008, Pub. L. No. 110-252, Title IX, 
15

government’s ability to finance its own security forces from the significant increases in Iraqi oil 

revenues and the large balances of unspent Iraqi funds. The Committee said that funding 

authorized for this program is intended only for areas where the United States is in a position to 

make a unique contribution to Iraqi security, particularly in the area of training, and that no funds 

are authorized for infrastructure programs for the Iraqi security forces for FY 2009. The 

Committee also said that it believes the Iraqi government is well able to finance its own 

infrastructure needs at this point.24

Congress Requires Reporting of GOI Contributions

Recent legislation mandating reporting on GOI cost-sharing (P.L. 110-252 and P.L. 110-417)

further supports congressional intent on the need for the GOI to provide a greater share of funds 

for reconstruction. To illustrate, P.L. 110-252 requires the DoS to certify and report on Iraq’s

matching funds25 and requires the Department of Defense (DoD) to report to the Congress

regarding CERP funds.26 The DoS report was due to the Congress not later than September 30, 

2008, and 180 days thereafter.

27 The DoD is to report ―...a comprehensive set of performance 

indicators and measures for progress toward military and political stability in Iraq.28 DoD

responded to the requirements of the act in the September 2008 quarterly report to the Congress.

P.L. 110-417 established additional quarterly reporting requirements on all CERP projects 

exceeding $500,000, including the amount of funds provided by the GOI, and a description of 

the plan to turn over the project to Iraq and a plan for sustaining the projects.29

 

Ch. 2, 122 Stat. 2323, 2405-2414 (June 30, 2008)), and Sec. 1505, 122 Stat. 4356, 4649, 4651 

(10/14/2008).

24 S. REP. NO. 110-335 at 428 (2008).

25 Pub. L. No. 110-252, Sec. 1402(e)(3), 122 Stat. 2323, 2335.

26 Pub. L. No. 110-252, Sec. 9104(b), 122 Stat. 2323, 2404.

27 Pub. L. No. 110-252, Sec. 1402(e)(3), 122 Stat. 2323, 2335.

28 Pub. L. No. 110-252, Sec. 9204(a), 122 Stat. 2323, 2410.

29 Pub. L. No. 110-417, Sec. 1214(b)(3), 122 Stat. 4356, 4630.
16

Appendix C—Financial Data Reported by U.S. 

Agencies for Funds Subject to P.L. 110-252, 

Section 1402(e) Requirements

Allotments, Obligations and Disbursements as of March 31, 2009 ($ millions)

Program 1 Allotment Obligation Disbursement

Provincial Reconstruction 

Team Programs

Quick Response Fund

(OPA/USAID) $ 87.0 $ 67.3 $13.6

Local Governance 

Program

(USAID) 

87.0 87.0 1.1

Community Stabilization 

Program

(USAID) 

132.5 33.5 33.5

Operation & Maintenance

(ITAO) 2 10.0 0 0

Provincial Economic Growth

(USAID) 25.0 25.0 0

Capacity Development

(USAID/ITAO) 70.0 59.8 0

Total $411.5 $272.6 $48.2

Notes:

1

Each of these programs incorporates prior year money. These programs are funded by the Economic Support Fund;

the table does not include the Criminal Justice/Rule of Law program, which is funded through a different source.

2

The $10 million will not be released for obligation until asset transfer agreements are finalized.

Source: Iraq Transition Assistance Office.
17

Appendix D—Department of State and USAID Policy 

Guidelines for Government of Iraq Contributions to 

U.S. Reconstruction Efforts

USAID provided the following guidelines.
18
19
20

Appendix E—Acronyms

Acronym Description

CERP Commander’s Emergency Response Program

DFI Development Fund for Iraq

DoD Department of Defense

DoS Department of State

ESF Economic Support Fund

FY fiscal year

GOI Government of Iraq

I-CERP Government of Iraq Commander’s Emergency Response 

Program

ISFF Iraq Security Forces Fund

ITAO Iraq Transition Assistance Office

NGO Nongovernmental organization

OPA Office of Provincial Affairs

P.L. Public Law

SIGIR Special Inspector General for Iraq Reconstruction

SOI Sons of Iraq

U.S. United States

USAID U.S. Agency for International Development
21

Appendix F—Audit Team Members

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

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

Reconstruction.

The staff members who conducted the audit and contributed to the report include:

Paula A. Braun

Walt R. Keays

Milton L. Naumann

Nancee K. Needham
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 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
23

Arlington, VA 22202-4704

Phone: 703-604-0368

Email: hillel.weinberg@sigir.mil

Public Affairs Daniel Kopp

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