OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

ASSET-TRANSFER PROCESS FOR IRAQ

RECONSTRUCTION PROJECTS LACKS

UNITY AND ACCOUNTABILITY

SIGIR 09--016

AAPPRRIILL2266,,22000099
 

 

April 26, 2009

Asset-transfer Process for Iraq Reconstruction Projects 

Lacks Unity and Accountability

What SIGIR Found

U.S. Iraq reconstruction agencies have yet to develop a uniform process and 

procedure for transferring completed projects to the GOI. Each U.S. agency 

has its own internal process for transferring assets to the Iraqis. Management 

oversight of the process lacks clear authority and accountability, a core 

problem that SIGIR has identified in previous asset-transfer reports.

Most asset-transfers occur at the local level. Thus, the GOI and its ministries 

that are responsible for planning the sustainment and integration of assets 

generally have incomplete information on what the United States has 

provided. Iraq Transition Assistance Office (ITAO) data shows that only 13 

percent of projects have been transferred nationally, while 72 percent have 

been transferred locally.

The failure of the Embassy and the GOI to finalize a memorandum of 

understanding on their respective asset-transfer roles and responsibilities has 

contributed to the problem. A draft memorandum was prepared in November 

2007 but, as yet, the memorandum has not yet been finalized. ITAO officials 

told SIGIR that the GOI Council of Ministers (Council) met on December 16, 

2008, and issued a decision that established rules and procedures on how the 

GOI would accept completed projects. Essentially the decision states that U.S. 

projects will be accepted as a gift, with no financial obligation between the 

two countries. The Council decision also reiterated the recommendation that 

a memorandum of understanding be negotiated between the two governments 

on asset transfer. A final agreed-to version of the memorandum has not been 

completed or signed. 

Unreliable data in the Iraq Reconstruction Management System (IRMS)

continues to make it difficult for managers to track the status of reconstruction 

projects. IRMS was intended to be the central repository for Iraq 

reconstruction project information, however, as SIGIR has reported, IRMS

does not contain complete or accurate data. For example, a SIGIR report 

issued in July 2008 pointed out that information on billions of dollars in 

projects is missing from the system and information on project completions is 

inaccurate and incomplete.

In addition to erroneous reporting to the GOI, the IRMS problems also prevent 

the Embassy from providing the Congress and the public a complete 

accounting of what has been accomplished and the status and current condition 

of the facilities that were constructed. The lack of reliable data also impedes 

U.S. efforts to monitor projects and make assessments about the type and 

extent of further assistance the United States may consider providing.

As a result of these conditions, a substantial portion of the billions of dollars 

invested in reconstruction is at risk of being wasted. These conditions also 

provide key lessons learned for other contingency reconstruction operations, 

such as Afghanistan.

Special Inspector General for Iraq Reconstruction

For more information, contact SIGIR Public Affairs 

at (703) 428-1100 or PublicAffairs@sigir.mil

Summary of Report: SIGIR-09-016

Why SIGIR Did This Study

After more than four years of reconstruction 

activity, U.S. reconstruction agencies continue 

to experience difficulties transferring 

completed projects to the Government of Iraq 

(GOI). GOI recognition of projects is 

important to ensure ongoing support for the 

projects, to inform its own reconstruction 

planning, and to leverage completed projects 

to obtain financing for future initiatives from 

world markets. This review follows up on 

SIGIR’s earlier work to determine (1) the 

extent to which U.S. reconstruction agencies 

working in Iraq have made progress in 

establishing a uniform policy and procedure 

for transferring projects to the GOI, and (2) 

whether the Embassy has made progress in 

obtaining GOI support for a formal assettransfer agreement.

What SIGIR Recommends

SIGIR previously recommended that the 

Ambassador and the Commanding General, 

Multi-National Force-Iraq (MNF-I) take these 

actions:

Direct that a single set of policies, 

processes, and procedures for transferring 

assets be developed for use by all 

involved agencies and for all U.S. 

projects, regardless of funding source. 

This recommendation remains open.

Enter into high-level discussion with the 

GOI on developing a memorandum of 

understanding (MOU) for the transfer of 

assets. SIGIR is modifying this 

recommendation to clarify our intent that 

the discussions result in an MOU and we 

are reopening the recommendation. 

Management Comments

The U.S. Embassy-Iraq, and the U.S. Army 

Corps of Engineers Gulf Region Division 

provided written comments on this report. 

The Embassy did not concur with our 

recommendations. GRD generally agreed 

with the facts as presented in the draft report. 

SIGIR continues to believe its 

recommendations have merit and the report 

details the basis for SIGIR’s position.

Special Inspector General for IRAQ

SIGIR

Reconstruction
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

April 26, 2009

MEMORANDUM FOR U.S. SECRETARY OF STATE

U.S. AMBASSADOR TO IRAQ

MINISTER FOR ECONOMIC AFFAIRS/COORDINATOR FOR 

ECONOMIC TRANSITION IN IRAQ

DIRECTOR, IRAQ TRANSITION ASSISTANCE OFFICE

MISSION DIRECTOR-IRAQ, U.S. AGENCY FOR 

INTERNATIONAL DEVELOPMENT

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

SUBJECT: Asset-transfer Process for Iraq Reconstruction Projects Lacks Unity and 

Accountability (SIGIR-09-016)

We are providing this audit report for your information and use. It pertains to efforts by the U.S. 

government reconstruction agencies to transfer completed projects to the Government of Iraq. 

The audit was conducted by the Special Inspector General for Iraq Reconstruction (SIGIR) as 

project 8022, 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.

We considered comments from the U.S. Embassy Iraq, and the U.S. Army Corps of Engineers, 

Gulf Region Division when preparing the final report. The comments are addressed in the report, 

where applicable, and copies are included in the Management Comments section of this report.

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

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

Needham at (nancee.needham@iraq.centcom.mil / 240-553-0581, ext. 3793). 

Stuart W. Bowen, Jr.

Inspector General
Table of Contents

Executive Summary i

Introduction 1

Background 1

Objectives 4

The Asset-transfer Process Lacks an Effective Management 

Structure and Accountability 5

Programs for Monitoring Transferred Assets Do Not Exist 7

SIGIR Audits and Inspections report Sustainment Issues in Assets 

Transferred to the GOI 8

A Memorandum of Understanding with the GOI on Asset Transfer

Has Not Been Finalized 9

Incomplete and Inaccurate Data in IRMS Contributes to Asset Transfer 

Problems 9

Conclusion and Recommendation 11

Recommendation 11

Management Comments and Audit Response 11

Matter for Consideration by the Congress 12

Lessons Learned 12

Appendices

A. Scope and Methodology 14

B. Current U.S. Agency Asset Transfer Processes 17

C. Summary of Prior SIGIR Audit Reports on Asset Transfer 18

D. SIGIR Inspections Reports Identifying Sustainment Issues 21
E. Acronyms 

22

F. Audit Team Members 23

G. Management Comments24
i

Asset-transfer Process for Iraq Reconstruction Projects

Lacks Unity and Accountability

SIGIR 09-016 April 26, 2009

Executive Summary

Introduction

Since reconstruction began, tens of thousands of reconstruction projects have been completed in 

all sectors of Iraqi governance, including electricity, water, health care, and transportation. 

Nevertheless, the U.S. Embassy, and the primary reconstruction agencies─including the MultiNational Security Command-Iraq (MNSTC-I), the U.S. Agency for International Development 

(USAID), and the Gulf Region Division of the U.S. Army Corps of Engineers (GRD)─have yet 

to finalize an agreement on a process for transferring responsibility for the projects to the 

Government of Iraq (GOI). U.S. agencies have used their own procedures to deliver completed 

projects to the Iraqi citizens they were meant to benefit. Projects have been turned over at 

various governmental levels, from local governments to Iraqi ministries, using a variety of 

procedures, including unilateral transfers. Projects have been transferred even though there is no 

complete or accurate database or list of what has been turned over, and no assurance that the 

Iraqis have received all necessary documentation and training, or that the GOI accepts 

responsibility for project operation, maintenance, and capital replacement.

Because of the importance of this issue to the success of the overall U.S. reconstruction program, 

the Special Inspector General for Iraq Reconstruction (SIGIR) has issued six reports on the 

transfer of completed U.S.-funded projects to the GOI since January 2006. In each report, SIGIR 

recommended that U.S. reconstruction agencies work together to develop a common policy and 

process to transfer completed projects to the GOI. The most recent report, issued in April 2008, 

noted that although U.S. agencies had made efforts to improve plans, policies, and procedures for 

the transfer of assets, they had been unable to agree on a uniform set of procedures. 

The Congress has also called for transfer agreements and assurance that the GOI will maintain 

projects. In the Fiscal Year 2008 Supplemental Appropriations Act1the Congress made the 

availability of certain funds conditional on action by the Department of State (DoS) to secure and 

implement an agreement with GOI on the transfer of completed projects to the GOI. However, 

when SIGIR issued the report in April 2008, DoS had been unable to finalize an agreement. 

 

1

Public Law 110-252, Section 1402 (a) (1)
ii

Also, the Omnibus Appropriations Act, 20092, requires DoS to report on its plans to transition 

certain programs and activities to the GOI.

The objectives of this review are:

1. Determine the extent to which U.S. reconstruction agencies working in Iraq have made 

progress since April 2008 in establishing a uniform policy and procedure for transferring 

projects to the GOI.

2. Determine whether the Embassy has made progress in obtaining GOI support for a 

formal asset-transfer agreement.

Results

SIGIR’s review found little progress on creating uniform policies and procedures or reaching 

agreement with the GOI on an asset transfer process. Since SIGIR’s previous report in April 

2008, the U.S. agencies involved in Iraq reconstruction still have not developed a uniform 

process and procedure for transferring completed projects to the GOI. Each U.S. agency 

continues to follow its own internal process for transferring projects to the GOI. The 

management of the process continues to lack clear authority and accountability, a core problem 

SIGIR has identified in previous reports. And because most transfers occur at the local level, the 

GOI and the ministries responsible for planning the sustainment and integration of assets 

generally have incomplete information on what the United States has provided.

The inability of the Embassy and the GOI to finalize a memorandum of understanding with the 

GOI on their respective asset transfer roles and responsibilities continues to contribute to the 

problem. Such an agreement could help U.S. reconstruction agencies in standardizing their asset 

transfer processes. A draft memorandum was prepared in November 2007, but the memorandum 

has not yet been finalized. Iraq Transition Assistance Office (ITAO) officials told SIGIR that the 

GOI Council of Ministers (Council) met on December 16, 2008, and issued a decision 

establishing rules and procedures on how the GOI would accept completed projects. Essentially 

the decision states that U.S. projects will be accepted as a gift, with no financial obligation 

between the two countries. The Council decision reiterated the recommendation that a 

memorandum of understanding be negotiated between the two governments on asset-transfer. A 

final agreed-to version of the memorandum has not been completed or signed.

Unreliable data in the Iraq Reconstruction Management System (IRMS) continues to make it 

difficult for planners to track the status of reconstruction projects. IRMS was intended to be the 

central repository for Iraq reconstruction project information, however, as SIGIR has reported, 

IRMS does not contain complete or accurate data. For example, a SIGIR report issued in July 

2008 pointed out that information on billions of dollars in projects is missing from the system.

3

As a result, ITAO cannot provide a complete or consistent picture of reconstruction activities 

 

2 Omnibus Appropriations Act, 2009, Public Law 111-8, Section 7042, subsection c.

3

“Comprehensive Plan Needed to Guide the Future of the Iraq Reconstruction Management System,” SIGIR-08-021 

dated July 25, 2008, and “Interim Report on Iraq Reconstruction Contract Terminations,” SIGIR-08-013 dated April 

28, 2008.
iii

because the executing agencies did not regularly enter their data into IRMS. Nevertheless, ITAO 

uses this data to prepare a monthly report to the GOI on transferable assets. According to the 

October 2008 report, of $13.5 billion in completed projects, 72% has been transferred locally, 

and 13% has been transferred nationally. However, because the IRMS asset-transfer data is 

unreliable, the data provided to the GOI is also undependable. In addition to erroneous reporting 

to the GOI, the lack of reliable data also prevents DoS from providing the Congress and the 

public with a complete accounting of the current status and condition of the facilities that were 

constructed. The IRMS asset-transfer data problem also impedes U.S. efforts to monitor projects 

to ensure they are being maintained and used effectively.

Recommendation

SIGIR has previously recommended that the Ambassador and the Commanding General, MultiNational Force-Iraq (MNF-I) direct that a single set of policies, processes, and procedures for 

transferring assets to the GOI be developed for use by all involved agencies and for all U.S. 

projects regardless of funding source. This recommendation has not been implemented and will 

remain open.

1. SIGIR also recommended that the Ambassador and the Commanding General, MNF-I 

enter into high-level discussions with the GOI on developing a memorandum of 

understanding with the GOI for the transfer of assets. In December 2008, SIGIR closed 

this recommendation based on talks that were ongoing at that time between the Embassy 

and the GOI. However, the talks were not successful. Even though the GOI has 

established rules and procedures for accepting assets, SIGIR continues to believe that a 

formal agreement is needed. The Embassy questioned SIGIR’s reopening the 

recommendation because it has conducted discussions on asset transfer with the GOI. 

However, SIGIR’s intent was that the discussions should result in a memorandum of 

understanding. Consequently, SIGIR is modifying the recommendation to clarify our 

intent that the discussion result in a memorandum of understanding and is reopening this 

recommendation. SIGIR’s recommendation is that the Ambassador and the 

Commanding General, MNF-I develop a memorandum of understanding with the GOI 

for the transfer of assets

Management Comments and Audit Response

U.S. Embassy-Iraq, and GRD provided written comments on a draft of this report. We did not 

receive comments from USAID. The Embassy did not concur with either our earlier 

recommendation, or reopening our previously closed recommendation. SIGIR notes, however, 

that the Embassy had previously agreed with both recommendations. 4 GRD generally agreed 

with the facts as presented in the report.

 

4 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 Government of Iraq, (SIGIR 07-004, July 

25, 2007)
iv

The U.S. Embassy did not agree that the U.S. reconstruction agencies should develop a single set 

of policies, processes, and procedures for transferring assets to the GOI. According to the 

Embassy, the agencies have their own documents, requirements, and regulations, and it sees no 

compelling reason that these should be abandoned for a common set of procedures. However, in 

SIGIR’s view the Embassy’s response focuses too much on the process and too little on what the 

process was intended to accomplish. As SIGIR discusses in the report, in the absence of a 

standardized process or procedures for transitioning assets to the GOI each agency uses its own 

procedures. The result is that assets are turned over at various governmental levels and the GOI 

and the ministries responsible for planning the sustainment and integration of assets generally 

have incomplete information on what the U.S. has provided. This situation illustrates the need 

for an integrated approach among agencies for managing contingency reconstruction programs. 

Therefore, SIGIR continues to believe the recommendation is appropriate. SIGIR also notes that 

the Embassy agreed with this recommendation when it was made in an earlier report.5

The U.S. Embassy also did not concur with our recommendation that the Ambassador and 

Commanding General MNF-I immediately enter into high level discussions with the GOI on 

developing a memorandum of understanding for the transfer of assets. SIGIR understands that 

there have been high-level discussions between the U.S. Embassy and the GOI regarding assettransfer. The Council of Ministers Decision Number 444, stated that immediately after the 

takeover of the projects, the Ministries concerned should be responsible for their operation and 

maintenance of the projects. Additionally, the Decision states that the Ministry of Planning and 

Development Cooperation shall undertake the task of drafting a memorandum of understanding 

that establishes suitable mechanisms for taking over the projects. However, the intent of 

SIGIR’s recommendation was that the discussions with the GOI result in a formal memorandum 

of understanding on asset transfers. SIGIR has modified the recommendation to clarify this 

point. Again, SIGIR notes that the Embassy agreed with this recommendation when it was made 

in an earlier report.6

GRD provided written comments that were reviewed and approved by MNF-I. GRD stated that 

it generally agreed with the facts as presented in the draft report. GRD also provided technical 

comments that we have addressed in the report as appropriate. 

Matter for Consideration of the Congress

To enhance the accounting for the status of U.S.-funded reconstruction projects, the Congress 

may wish to consider directing implementing agencies to gather and provide a uniform set of 

data that clearly identifies all projects initiated and completed, their cost, and whether they have 

been transferred and are being sustained.

 

5 Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi Government, (SIGIR 06-017, July 28, 

2006).

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

25, 2007).
v

Lessons Learned

The Iraq asset-transfer program yields several key lessons learned for other contingency 

reconstruction operations, such as Afghanistan, that should be applied as early in the operation as 

possible. They are the following: 

A management structure must be established that provides unity of command among the 

involved agencies to achieve uniform asset transfer processes and procedures.

An accurate and comprehensive project management information system must be 

established and maintained throughout the reconstruction program.

U.S. officials must engage host country officials to establish formal agreements on asset 

transfer and project sustainment.
1

Introduction

Because of the importance of this issue to the success of the overall U.S. reconstruction program, 

the Special Inspector General for Iraq Reconstruction (SIGIR) has issued six reports on 

transferring completed U.S. government-funded reconstruction projects to the Government of 

Iraq (GOI) since January 2006. As SIGIR reported in July 2007,

7

an effective asset transfer 

process is essential for two 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. The GOI’s acceptance of projects and its commitment to maintain them are 

important steps in ensuring that the billions of dollars in U.S. reconstruction assistance are not 

wasted because the projects are not maintained and used.

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, the 

unilateral transfer of projects to individual ministries, and the transfer of projects to provincial or 

local officials without assurance that ministry officials with budget authority were prepared to 

sustain the transferred assets.

The Congress has also called for transfer agreements and assurance that the GOI will maintain 

projects. In the Fiscal Year 2008 Supplemental Appropriations Act8the Congress made the 

availability of certain funds conditional on action by the Department of State (DoS) to secure and 

implement an agreement with the GOI on the transfer of completed projects. However, when 

SIGIR issued the report in April 2008, DoS had been unable to finalize an agreement. Also, the 

Omnibus Appropriations Act, 2009,9requires DoS to report on its plans to transition certain 

programs and activities to the GOI.

The objectives of this review are to determine (1) the extent to which U.S. reconstruction

agencies working in Iraq have made progress in establishing a uniform policy and procedure for 

transferring projects to the GOI, and (2) whether the Embassy has made progress in obtaining 

GOI support for a formal asset transfer agreement.

Background

An asset transfer process is essential to both the United States and Iraq. First, it allows the GOI 

to recognize ownership of the project, agree that the project is complete, that all necessary 

project-specific documentation is in place, and that the U.S. government has provided the 

necessary training and orientation to the local Iraqi staff that will have responsibility to manage 

operate, and maintain the new or refurbished facility. Second, it validates that the GOI is now

responsible for project operation and maintenance and capital replacement. It also enables the 

 

7

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

July 25, 2007.

8

Public Law 110-252, Section 1402 (a) (1). 

9 Omnibus Appropriations Act, 2009, Public Law 111-8, Section 7042, subsection c.
2

Iraqi Ministry of Finance to leverage completed projects to obtain financing for future initiatives 

from world markets, including the International Monetary Fund, World Bank, and donor nations.

There are four organizations primarily involved with Iraq reconstruction:

The Iraq Transition Assistance Office (ITAO) is a temporary organization within the U.S. 

Mission-Iraq.10 According to the Joint Campaign Plan, ITAO is the lead U.S. 

organization to influence and work with the GOI to assume full ownership and 

responsibility for operation and maintenance of U.S. government funded projects.11

The U.S. Agency for International Development (USAID) implements programs in 

coordination with the United Nations, World Bank, International Monetary Fund, 

coalition country partners, nongovernmental organizations, and private sector partners. 

USAID programs are in education, health care, food security, economic growth, 

community development, local governance, and transition initiatives. This is 

accomplished through its Mission headquarters in Baghdad and five field offices located 

throughout Iraq.

The Multi-National Security Transition Command-Iraq (MNSTC-I) is a component of the 

U.S. Central Command’s Multi-National Force-Iraq. MNSTC-I assists in building the 

capacity of the Iraqi Security Forces through a program of recruitment, training, 

equipping, mentoring, and monitoring.

The Gulf Region Division of the U.S. Army Corps of Engineers (GRD) provides 

engineering and construction services to the Multi-National Force-Iraq and the Iraqi 

government in support of military and civil construction. This is accomplished through 

its Baghdad headquarters, three district offices, and numerous field offices located 

throughout Iraq.

ITAO established an Asset Recognition and Transition Operational Group (ARTOG) that

includes the following implementing agencies: (1) GRD, (2) Multi-National Corps-Iraq; (3) 

MNSTC-I, and (4) USAID.12 Additionally, representatives from the U.S. Army Corps of 

Engineers, Multi-National Force-Iraq, the U.S. Treasury Attaché, the Iraq Ministry of Finance 

and Iraq Ministry of Planning and Development Cooperation are also invited to attend ARTOG 

meetings. The ARTOG’s mission is to develop, improve, and implement a single set of overall 

transparent policies and procedures to achieve an effective, formal capital asset transfer process; 

providing clear lines of authority, responsibility and accountability.

 

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

carries forward the work of IRMO.

11 The Joint Campaign Plan was developed and approved by the U.S. Embassy in Iraq and the Multi-National ForceIraq as a top-level strategic planning document for achieving long-term partnership with Iraq.

12 The ARTOG defines capital assets as physically tangible property which cannot easily be converted into cash and 

is expected to be held for a long period, generally five (5) years or more. Generally, these assets have a value above 

$250,000. Examples of capital assets include buildings, real estate, and equipment. Capital assets do not include 

services, technical assistance, or training; although such expenses may be rolled into the total value of an asset when 

part of the same project and being relevant to its completion.
3

Since January 2006, SIGIR has issued six audit reports on the Iraq reconstruction agencies’

efforts to implement an asset transfer process. These reports are identified in Appendix C. In 

summary, the reports said the following:

A January 2006 report on the asset process used by GRD and the Project and Contracting 

Office found that their process was geared toward asset transfer to Iraqi government 

representatives at the local level and did not address the information needs of the GOI 

and the Iraqi Ministries responsible for integrating the assets into a nation-wide 

infrastructure plan, and budgeting for the sustainment of completed projects.

An April 2006 report on MNSTC-I’s asset transfer process found that MNSTC-I had 

developed procedures for transferring defense-related assets to the Ministry of Defense 

based upon DoD standard facilities management policies and procedures, but had less 

success in transferring law-enforcement related assets to the Ministry of Interior. SIGIR 

also found that a process was not in place for transferring projects to the GOI but that 

MNSTC-I was a part of a DoS working group that was addressing the issue.

An April 2006 report on USAID’s asset transfer process found that USAID was using 

USAID agency-wide procedures for its Iraq asset transfers and did not believe that it 

should have to use a common process. USAID also did not have a process for 

transferring assets to the national government, but was a part of the DoS working group

that was working toward that goal.

A July 2006 report followed up on earlier reports on the transition of completed projects 

funded by the Iraq Relief and Reconstruction Fund (IRRF) to the Iraqi government. 

Generally, the review found that the IRRF-implementing organizations had formed a 

number of working groups that were addressing key transaction issues; nevertheless, 

coordinated processes for the transfer of IRRF assets to the Iraqi government─including 

sustainment and capacity building─had not been finalized.

A July 2007 report followed up on the earlier reports and found that ITAO and its 

partners had coordinated a process with the GOI’s Ministry of Finance and successfully

transferred several hundred projects. However, a new Minister of Finance was appointed 

in May 2006 and subsequently changed the GOI conditions, effectively halting further 

transfers at the national level. ITAO and its partners then tried to negotiate directly with 

the individual Iraqi line ministries and at the conclusion of the audit were still trying to 

negotiate an agreement. The report also found that USAID had still chosen not to follow 

the DoS working group and was working to negotiate its own agreements with the Iraqi 

line ministries.

An April 2008 report found that ITAO and the other agencies had made progress. For 

example, they had drafted an Interagency Agreement on a U.S. asset transfer policy and a 

Memorandum of Understanding with the GOI on respective asset transfer roles and 

responsibilities. SIGIR’s review of the agreement, however, found that it only provided 

guidance for agencies to follow while implementing their own policies and procedures. 

This “stove-piping” of responsibilities created a proliferation of different standards and 

procedures. For example, some agencies were using unilateral transfers when efforts to 
4

obtain GOI acceptance had failed. In a unilateral transfer the U.S. sends the Iraqis a letter 

stating that they are now responsible for the project. SIGIR also found that U.S. efforts 

to obtain GOI signature to the Memorandum of Understanding had come to a stalemate 

and that wording in the Memorandum stated that it was not binding on either party.

Objectives

The objectives of this review are to determine (1) the extent to which U.S. reconstruction 

agencies working in Iraq have made progress in establishing a uniform policy and procedure for 

transferring projects to the GOI, and (2) whether the Embassy has made progress in obtaining 

GOI support for a formal asset transfer agreement.

For a discussion of the audit scope and methodology, see Appendix A. For information on U.S. 

agency asset-transfer processes, see Appendix B. Appendix C provides a summary of prior 

SIGIR audit reports on asset transfer. For more information on recent SIGIR Inspections reports 

identifying sustainment issues, see Appendix D. For a list of acronyms used in this report, see 

Appendix E. For a list of the audit team members, see Appendix F. For management comments, 

see Appendix G.
5

The Asset Transfer Process Lacks an Effective 

Management Structure and Accountability

In SIGIR’s April 2008 report, we discussed ITAO’s and the implementing agencies’ efforts to 

develop a common set of asset transfer procedures. These efforts have been ongoing since 2005. 

However, after still another year of work, the current asset transfer process suffers from the lack 

of a management structure that provides clear authority and accountability, as well as uniform 

transfer policies and procedures.

In the April report, SIGIR noted that an Asset Recognition and Transfer Working Group, 

comprised of all the key players involved in Iraq reconstruction, had drafted an Interagency 

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

Assets to the Government of the Republic of Iraq to formalize guidance. ITAO officials told us 

at the time that the draft interagency agreement had been approved by all the implementing 

agencies except for DoS, where it was awaiting legal review. The draft interagency agreement 

proposed to establish an Asset Recognition and Transfer Working Group13 as the focal point for 

all U.S. government IRRF-funded asset transfers. The Working Group was to deal with its GOI 

counterpart in developing the asset transfer process and would assume a number of related 

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

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

transferred, including sustainment information.

ITAO officials stated that the ARTOG has developed an informal asset transfer process but the 

process is still in draft and has not been signed and implemented by all members. ITAO officials 

stated that finalizing the asset transfer process is pending the finalized Memorandum of 

Understanding between the U.S. and the GOI on asset transfer. According to the official, the 

plan is to provide documentation on completed projects each month to the Iraqi Ministry of 

Planning Development and Cooperation. DoS is working with the Ministry to determine the 

form and content regarding how the ministries want to receive the asset inventory information. 

Until the Ministry agrees, the ARTOG cannot finalize the process. Table 1 shows the asset 

transfer process as currently envisioned with step three still under development pending the 

finalization of the Memorandum of Understanding.

 

13 The Asset Recognition and Transfer Working Group is now known as the Asset Recognition and Transition 

Operational Group
6

Table 1—Asset Transfer Process

Source: Iraq Transition Assistance Office

In our previous reports, and again in this report, SIGIR found that the inability to develop project 

management systems with accurate information on the projects initiated and their ultimate 

disposition can be attributed to a lack of unity of command and program accountability. For 

example, in April 2008, we reported that the U.S. government’s management of the asset transfer 

function is fragmented among several agencies. Presidential Directives and Executive Orders 

assign project management based on both purpose and funding source. As a result, ITAO states 

that it did not have the responsibility to coordinate all asset transfers. Consequently, there was

no single entity responsible for ensuring that competed projects are transferred to the GOI in a 

uniform manner. Without one agency in charge, U.S. reconstruction agencies have pursued the 

goal of developing a common asset turnover process for over three years without success, and 

the U.S. Embassy has been unable to compel agencies to provide the data necessary to detail the 

extent and outcome of U.S. reconstruction activities in Iraq.

Agency officials have stated that they do not believe that a common process at the local level is 

necessary. For example, in its written response to our April report, GRD said that while an Iraqi 

government official may not have signed for a project, it does not mean that the Iraqi people 

have not taken possession of the asset either by constructive acceptance or by beneficial 

occupancy at the local level. SIGIR agrees that assets are being turned over at the local level. 

However, we continue to believe that a common process is needed to assure that the GOI is 

aware of the billions of dollars of projects that have been completed. This information is 

necessary so the GOI can support the projects, leverage completed projects to obtain financing 

for future initiatives from world markets, including the International Monetary Fund, World 

Bank, and donor nations, and have complete knowledge of what is occurring in each sector so it 

can conduct its own reconstruction and assistance plans. For example, a November 2007 report 

from the Iraqi Board of Supreme Audit said that many of the Iraqi ministries it audited had no 

Step One: 

Approval Process

•A project is proposed by a U.S. 

government agency. 

•The U.S. executing agency seeks to 

obtain a “letter of sustainment” 

from the GOI. The “letter of 

sustainment” will provide 

affirmation that the GOI will accept 

and sustain the asset in the future. 

•The U.S. executing agency 

approves and determines the 

programmatic funding for the 

project. 

•Funding is obligated and the 

project begins construction

Step Two: 

Functional Level Transfer (Local 

Transfer)

•The project is completed by the 

U.S. government executing agency. 

If necessary, training is conducted 

for the government of Iraq ministry 

that is receiving the asset. 

•Documentation on the asset is 

provided to the GOI. 

•A functional transfer letter is 

signed by the U.S. executing 

agency and the GOI. 

•The project information, functional 

transfer letter and other 

documentation are uploaded into 

IRMS by the U.S. government 

executing agency. 

Step Three: 

Legal Transfer (National/Ministry 

Level Transfer)

•Notification of capital asset 

transfers provided to MoPDC 

through a monthly ARTOG report 

provided by ITAO. 
7

records detailing the existence of many U.S.-funded projects supposedly under the ministry’s 

control. Further, in our last report we stated that Iraqi Ministry of Defense told SIGIR that the 

failure to notify appropriate officials of asset transfers prevents the Ministry from preparing a 

budget that would allow for the proper maintenance and support funding for the assets. SIGIR 

recognizes that the reconstruction agencies cannot hold on to assets while awaiting GOI 

notification, and that local turnover of assets has been necessary. However, notification to the 

GOI remains an important part of the process and should be pursued.

An information system with accurate data on project starts, costs, and disposition is also 

important to the DoS. As the agency responsible for the civil reconstruction effort, it is 

accountable to the Congress and the American people for the billions invested. A system with 

accurate project information is also important to the overall management of the reconstruction 

program in terms of reconstruction planning and end-use monitoring of projects to determine 

where additional assistance may be needed.

Programs for Monitoring Transferred Assets Do Not Exist

Although agencies do not have formalized sustainment programs, each agency, on an ad-hoc 

basis, will involve itself in some sustainment efforts if needed. For example, ITAO officials 

stated that it is currently developing a statement of work for a $30 million contract for the 

sustainment of Provincial Reconstruction Development Council programs and projects. GRD’s

sustainment efforts are generally written into its contracts and it has issued some short-term 

sustainment contracts for specific equipment. MNSTC-I officials stated that after an asset has 

been transferred, the GOI is responsible for maintenance and sustainment of the asset. MNSTC-I 

does provide the Iraqis with an estimate of the funds required for maintenance and sustainment 

for each project. MNSTC-I recommends that the Iraq Ministry of Defense budget one to three 

percent annually of the initial project cost for operation and maintenance of the transferred 

facilities. However, MNSTC-I may get involved after an asset is transferred if there is a 

warranty issue with the asset. USAID officials stated that USAID does not monitor or sustain an 

asset once it has been transferred to the GOI. However, USAID is currently working with the 

Iraqi government on how to properly sustain, budget, and maintain its assets.

The ARTOG has drafted an end use monitoring plan. The plan calls for members of the ARTOG 

to prepare, on a quarterly basis, a list of projects to be visited. Site visits are to be conducted by 

the implementing agency or through the assistance of another U.S. government agency 

participating in the ARTOG. High-cost and high-profile assets will receive priority on the list. 

The agency conducting the site visit will provide an after action report to the group. ITAO will 

prepare a monthly and quarterly report for the group and for further dissemination. The MNFI/U.S. Embassy Joint Campaign Plan, Annex B, Task 1.1.5, identifies ITAO as the lead U.S. 

government organization to influence and work with the GOI to assume full ownership and 

responsibility for operation and maintenance of U.S. government funded projects. To date the 

end use monitoring plan has not been implemented.
8

SIGIR Audits and Inspections Report Sustainment Issues in Assets 

Transferred to the GOI

SIGIR Audits have raised concerns about the GOI’s need to prepare to take responsibility for 

project operations, security, and sustainability. In a capping report that looked at 122 SIGIR 

audit reports, one common theme was the need for U.S. recognition of the importance of 

working with appropriate GOI ministries in the transfer of reconstruction projects to ensure longterm sustainability of the projects completed. Additionally, recent SIGIR Inspections reports 

showed a reoccurring theme regarding sustainment issues once an asset has been transferred to 

the GOI: long-term operations and maintenance practices were not being followed, and routine 

maintenance was not being done. The lack of adequate oversight on these projects has put these 

projects in jeopardy of failure or in need of repair far sooner than expected. For more 

information on four recent SIGIR Inspections reports identifying sustainment issues, see 

Appendix D.
9

A Memorandum of Understanding with the GOI on 

Asset Transfer Has Not Been Finalized

The Embassy’s inability to finalize a memorandum of understanding with the GOI on their 

respective asset transfer roles and responsibilities continues to contribute to the asset-transfer 

problem. Such an agreement could help U.S. reconstruction agencies in standardizing their 

asset-transfer processes. A draft memorandum was prepared in November 2007, but the 

memorandum was not finalized. ITAO officials told SIGIR that the GOI Council of Ministers

(Council) had formed an asset transfer committee to develop an asset transfer process with the 

U.S. government. The Council met on December 16, 2008, and issued Decision number 444 on 

establishing rules and procedures on how the GOI would accept transferred projects executed by 

the United States. However, when the document was translated on December 22, 2008, ITAO 

discovered that the decision was re-worded and the clause removing the U.S. from financial 

liability had been taken out.

Upon further discussion it was discovered the Council of Ministers Secretary was responsible for 

the deletion of the statement and it was not the intent of the Council to have it removed. On 

January 13, 2009, the Council issued an amended Decision number 444, stating that all U.S. 

government asset transfers would be received as a gift with no financial obligations between the 

two governments. The decision also recommended that the two governments negotiate a 

memorandum of understanding on asset transfer. A final agreed-to version of the memorandum 

has not been completed or signed.

Although no memorandum between the Embassy and the GOI has been negotiated, other 

agencies have negotiated asset-transfer agreements at the provincial level. For example, the 

Governor of Baghdad Province, the Commanding General, Multinational Division Baghdad, the 

GRD Commanding General, the Commander, Joint Contracting Command-Iraq/Afghanistan, 

and the Team Leader for the Provincial Reconstruction Team-Baghdad signed a memorandum of 

understanding that details how assets will be transferred in the Baghdad province. The 

memorandum provided a sample letter that the Province Governor and the appropriate Iraqi 

Ministry and office are to sign accepting the asset and promising to sustain and maintain the 

asset after the transfer.

Incomplete and Inaccurate Data in IRMS Contributes to Asset 

Transfer Problems

Unreliable data in the Iraq Reconstruction Management System (IRMS) continues to make it 

difficult for planners to track the status of reconstruction project. IRMS was intended to be the 

central repository for Iraq reconstruction project information, however, as SIGIR has reported, 

IRMS does not contain complete or accurate data. Nonetheless, prior to October 2008, ITAO 

was providing a monthly report to GOI on transferable capital assets even though ITAO is aware 

that the data in the report are inaccurate. For example, the report showed all completed capital 

assets whether or not transferred; USAID projects are not included, and the data includes 

unilateral transfers. SIGIR also found that the GOI individual designated to receive the data has 
10

been gone for several months, no asset-transfer data has been provided to GOI since October 

2008, and ITAO has not retained copies of the prior reports. Consequently, there is no master 

record of projects transferred by ITAO to the GOI. Actions are currently underway by the IRMS 

Interagency Working Group to correct data inaccuracies for each of the reconstruction agencies 

data sets and this initiative will continue. In addition, GRD has upgraded or refreshed system 

software and replaced outdated hardware for IRMS.

Even though the IRMS asset transfer data are incomplete and inaccurate, the data can be used for 

high level analysis of national and local level asset-transfer practices. In total, IRMS shows that 

as of December 2008, $13.5 billion of assets have been transferred. Of this amount, $9.7 billion

(72%) was transferred locally and $1.7 billion (13%) was transferred nationally.
11

Conclusions and Recommendation

The Iraq reconstruction program and its associated management structures evolved over time and 

were accomplished in a difficult security environment. Nonetheless, the implementing agencies 

for Iraq reconstruction projects have, after four years of effort, been unsuccessful at 

implementing an asset-transfer program that has uniform policies and procedures among the 

involved agencies, and accurate information on project construction, transfer, and operational 

status.

This situation leaves the implementing agencies and the GOI without the fundamental 

information needed to effectively manage the program, particularly as it relates to assets yet to be 

transferred and to actions that may need to be taken to address current and future sustainment 

issues. As a result, a substantial portion of the billions of dollars invested in reconstruction is at 

risk of being wasted.

On the U.S.-side, the longstanding lack of unity of command has created a situation where 

organizational accountability for addressing these issues does not exist. On the GOI side, there 

must be a willingness to reach a timely agreement for receiving and accepting the assets that are 

ready for transfer.

Recommendation

SIGIR has previously recommended that the Ambassador and the Commander, Multi-National 

Force-Iraq (MNF-I) direct that a single set of policies, processes, and procedures for transferring 

assets be developed for use by all involved agencies and for all U.S. projects regardless of 

funding source. This recommendation has not been implemented and will remain open. 

1. SIGIR also recommended that the Ambassador and the Commanding General, MNF-I 

enter into high-level discussions with the GOI on developing a memorandum of 

understanding with the GOI for the transfer of assets. In December 2008, SIGIR closed 

this recommendation based on talks that were ongoing at that time between the Embassy 

and the GOI. However, the talks were not successful. Even though the GOI has 

established rules and procedures for accepting assets, SIGIR continues to believe that a 

formal agreement is needed. The Embassy questioned SIGIR’s reopening the 

recommendation because it is conducting discussions on asset transfer with the GOI. 

However, SIGIR’s intent was that the discussions result in a memorandum of 

understanding. Consequently, SIGIR is modifying the recommendation to clarify our 

intent that the discussion result in a memorandum of understanding and is reopening this 

recommendation. SIGIR’s recommendation is that the Ambassador and the 

Commanding General, MNF-I negotiate a memorandum of understanding with the GOI 

for the transfer of assets
12

Management Comments and Audit Response

The U.S. Embassy-Iraq, and GRD provided written comments on a draft of this report. We did 

not receive comments from USAID. The Embassy did not concur with either our earlier 

recommendation, or reopening our previously closed recommendation. SIGIR notes, however, 

that the Embassy had previously agreed with both recommendations. 14 GRD generally agreed 

with the facts as presented in the report.

The Embassy did not agree that the U.S. reconstruction agencies should develop a single set of 

policies, processes, and procedures for transferring assets to the GOI. According to the 

Embassy, the agencies have their own documents, requirements, and regulations, and it sees no 

compelling reason that these should be abandoned for a common set of procedures. However, in 

SIGIR’s view the Embassy’s response focuses too much on the process and too little on what the 

process was intended to accomplish. As SIGIR discusses in the report, in the absence of a 

standardized process or procedures for transitioning assets to the GOI each agency uses its own 

procedures. The result is that assets are turned over at various governmental levels and the GOI 

and the ministries responsible for planning the sustainment and integration of assets generally 

have incomplete information on what the U.S. has provided. This situation illustrates the need 

for an integrated approach among agencies for managing contingency reconstruction programs. 

Therefore, SIGIR continues to believe the recommendation is appropriate.

The Embassy also did not concur with our recommendation that the Ambassador and 

Commanding General MNF-I immediately enter into high level discussions with the GOI on 

developing a memorandum of understanding for the transfer of assets. SIGIR understands that 

there have been high-level discussions between the Embassy and the GOI regarding assettransfer. The Council of Ministers Decision Number 444, stated that immediately after the 

takeover of the projects, the Ministries concerned should be responsible for their operation and 

maintenance of the projects. Additionally, the Decision states that the Ministry of Planning and 

Development Cooperation shall undertake the task of drafting a memorandum of understanding 

that establishes suitable mechanisms for taking over the projects. However, the intent of 

SIGIR’s recommendation was that the discussions with the GOI should result in a formal 

memorandum of understanding on asset transfers. SIGIR has modified the recommendation to 

clarify this point.

GRD provided written comments that were reviewed and approved by MNF-I. GRD stated that 

it generally agreed with the facts as presented in the draft report. GRD also provided technical 

comments that we have addressed in the report as appropriate. 

 

14 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 Government of Iraq, (SIGIR 07-004, July 

25, 2007)
13

Matter for Consideration by the Congress

To enhance the accounting for the status of U.S.-funded reconstruction projects, the Congress 

may wish to consider directing implementing agencies to gather and provide a uniform set of 

data that clearly identifies all projects initiated and completed, their cost, and current disposition

regarding transfer and sustainability status.

Lessons Learned

The Iraq asset-transfer program yields several key lessons learned for other contingency 

reconstruction operations, such as Afghanistan, that should be applied as early into the program 

as possible. They are the following: 

A management structure must be established that provides unity of command among the 

involved agencies to achieve uniform asset transfer processes and procedures.

An accurate and comprehensive project management information system must be 

established and maintained throughout the reconstruction program.

U.S. officials must engage host country officials to establish formal agreements on asset 

transfer and project sustainment.
14

Appendix A— Scope and Methodology

SIGIR initiated this review in May 2008 to assess U.S. efforts in transferring assets to the 

Government of Iraq. Shortly thereafter, SIGIR suspended its work until August 2009 because of 

security issues. The objectives of this review are to determine (1) the extent to which the U.S. 

reconstruction agencies working in Iraq have made progress in establishing a uniform policy and 

procedure for transferring projects to the GOI, and (2) whether the Embassy has made progress 

in obtaining GOI support for a formal asset transfer agreement. This review was conducted as 

SIGIR project 8022.

To determine the extent to which U.S. reconstruction agencies have made progress in 

establishing a uniform policy and procedure for transferring assets, SIGIR interviewed 

representatives from the Iraq Transition Assistance Office (ITAO), U.S. Army Corps of 

Engineers Gulf Region Division (GRD), the Multi-National Security Transition Command-Iraq

(MNSTC-I), and U.S. Agency for International Development (USAID). We also attended a 

meeting of the Asset Recognition Transfer Operational Group (ARTOG), and examined 

proposed agreements among implementing agencies. SIGIR reviewed internal management 

practices and draft agreements for specific plans, policies, and procedures that may be used to 

improve these efforts.

To determine the extent to which the Embassy has made progress in obtaining GOI support for a 

formal asset transfer agreement, SIGIR interviewed representatives from ITAO, GRD, the 

MNSTC-I, and USAID.

To determine the processes in place for end use monitoring of transferred assets, SIGIR 

interviewed representatives from the ITAO, GRD, MNSTC-I, and USAID. SIGIR reviewed 

internal management practices and draft agreements for specific plans, policies, and procedures 

for end use monitoring of assets.

To determine if the information the U.S. government provides to the GOI on transferred assets 

was accurate, SIGIR interviewed representatives from the ITAO, GRD, MNSTC-I, and USAID. 

SIGIR examined the Iraq Reconstruction Management System (IRMS) and the United Nations 

Donor Assistance Database. SIGIR’s information on IRMS was largely based on information we 

obtained in the course of our July 2008 review of IRMS.15

SIGIR performed this audit under the authority of Public Law 108-106, as amended, which 

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

of 1978, as amended. The audit was conducted between May 2008 and March 2009 in 

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

SIGIR 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. SIGIR believes 

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

our audit objectives.

 

15 Comprehensive Plan Needed to Guide the Future of the Iraq Reconstruction Management System, SIGIR 08-021, 

7/26/2008.
15

Internal Controls

We reviewed the effectiveness of management controls over the asset-transfer program. We 

identified and reviewed policies and procedures to assess their effectiveness. We also reviewed 

the overall effectiveness of the program’s management structure with a particular emphasis on 

the issue of program accountability. The focus of the report’s recommendations addresses ways 

to improve program management controls.

Use of Computer-Processed Data

To achieve our assignment’s objective, we extensively used computer-processed data contained 

in the Iraq Reconstruction Management System (IRMS). Our prior work has assessed this 

system and reported on its weaknesses. Our current review indicated that limitations in the 

data’s completeness and accuracy continue to exist. However, these data are the best source 

available for purposes of our review. Where we used this data for analysis, we identified 

associated limitations.

Prior Coverage

We reviewed the following SIGIR reviews and relied on them in conducting this audit:

SIGIR Inspections

Report on Project Sustainment Assessment of the Haditha Primary Healthcare Center, Haditha, 

Iraq, PA-08-134, January 28, 2009. 

Report on Rebuilding of the Al Iqitadar School in Anbar Province, Iraq, PA-08-141, January 26, 

2009. 

Heet Primary Healthcare Center, PA-08-133, January 23, 2009. 

Report on Plumbing Repairs at the Baghdad Police College, Baghdad, Iraq, PA-08-154 to 156, 

January 22, 2009.

SIGIR Audits

Comprehensive Plan Needed to Guide the Future of the Iraq Reconstruction Management 

System, SIGIR-08-021, July 2008.

Transferring Reconstruction Projects to the Government of Iraq: Some Progress Made but 

Further Improvements Needed to Avoid Waste, SIGIR- 08-017, April 2008.

Interim Report on Iraq Reconstruction Contract Terminations, SIGIR-08-013, April 2008.

Transferring Iraq Relief and Reconstruction Fund Capital Projects to the Government of Iraq, 

SIGIR-07-004, July 2007.
16

Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi Government, SIGIR-06-

017, July 2006.

Audit Report on 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 2006.

Audit Report on 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

2006.

GRD-PCO Management of the Transfer of IRRF-funded Assets to the Iraqi Government, SIGIR05-028, January 2006.
17

Appendix B—Current U.S. Agency Asset-transfer 

Processes

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

Asset Transfer Process: GRD turns assets over at the local level to the Iraqi Directorate 

General. GRD provides a DD Form 1354 “Transfer and Acceptance of Military Real Property” 

to document that the asset has been transferred to the GOI. The local Directorate General signs 

and formally accepts the asset. 

Multi-National Security Transition Command-Iraq (MNSTC-I)

Asset Transfer Process: MNSTC-I provides notification to the GOI 30 days prior to the 

estimated completion of an asset. On larger scale projects MNSTC-I may also send out 60- and 

90-day letters. In addition, MNSTC-I also sends out to the Iraq Ministry of Defense and Iraq 

Ministry of Interior a 30/60/90 Day Biweekly Project Notification that contains a list of projects 

expected to be completed and ready to be transferred. According to MNSTC-I, the advisors 

inform both Iraqis and Multinational Corps Iraq chain of command that assets are completed. At 

the completion of the construction, there is a joint inspection between MNSTC-I and the Iraqis 

prior to the GOI accepting the asset. An Asset Recognition Transfer Letter is then executed 

between the Iraqis and the U.S. government and a DD Form 1354 “Transfer and Acceptance of 

Military Real Property” is prepared to document that the asset has been transferred to the GOI. 

U.S. Agency for International Development (USAID)

Asset Transfer Process: USAID generally requires the execution of a bilateral grant agreement 

between the foreign government and USAID prior to the start of a project and before 

disbursement of any project funds. The grant agreement specifies various terms, requirements, 

and preconditions that must be met by the host government. They can include items such as the 

project dollar amount being granted, the host government’s contribution, the estimated project 

completion date, the ability to sustain the project after completion, and the expected results. 

USAID officials accept completed construction projects from the prime contractor in accordance 

with standard contracting procedures. USAID then transfers responsibility for the security, 

control, operation and maintenance of the completed projects to the appropriate Iraqi operating 

ministry (Electricity, Water, Health, Education, Transportation, Roads, and Communications). 

This is accomplished through a “care and custody” letter provided to an operating ministry 

official. The letter also assigns all warranties to the operating ministry and provides contact 

points for warranty claims. 
18

Appendix C—Summary of Prior SIGIR Reports on 

Asset-transfer

In addition to our report on the asset transfer process discussed above, SIGIR has issued six 

additional audit reports on concerns and recommendations on assets transferred to the GOI. 

GRD-PCO Management of the Transfer of IRFF-funded Assets to the Iraqi Government, SIGIR05-028, January 2006

We recommended that the Commanding General, Gulf Region Division, U.S. Army Corps of 

Engineers direct the GRD-PCO, in coordination with the Iraq Reconstruction Management 

Office, to complete the development of a common policy and process facilitating the transfer of 

completed project assets to the Government of Iraq. That process should, at a minimum, provide 

formal notification of the project asset transfer to the Iraqi Ministry of Planning, Ministry of 

Finance, and the appropriate operating ministry central headquarters (Electricity, Water, Oil, 

Health, Education, Transportation, Roads, Communications, Justice, Interior and Defense). 

Notification should also include, at a minimum, relevant data such as operation start date, asset 

cost, estimated short-term and long-term sustainability costs, terms of warranties, and the 

location of maintenance and systems manuals and instructions.

Audit Report on 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 

2006

We recommended that the Commanding General, Multi-National Security Transition CommandIraq continue to support the evolving policies and procedures for transferring completed projects 

to the Iraqi Ministries of Finance and Planning and, once those procedures are finalized, ensure 

sufficient resources are made available to fully implement the procedures in sufficient time that 

the information can be used by the Iraqi government in formulating its calendar year 2007 

budget.

Audit Report on 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 

2006

We recommended that USAID, in coordination with the Iraq Reconstruction Management 

Office, complete the development of a common policy and process facilitating the transfer of 

completed project assets to the Iraqi government. That process should, at a minimum, provide 

formal notification of the project asset transfer to the Iraqi Ministry of Finance, Ministry of 

Planning, and the appropriate operating ministry central headquarters (Electricity, Water, Oil, 

Health, Education, Transportation, Roads, Communications, Justice, Interior and Defense). We 

further noted that completed assets should also include, at a minimum, relevant data such as 

operation start date, asset cost, estimated near and long-term sustainability costs, terms of 

warranties, and the location of maintenance and systems manuals and instructions.
19

Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi Government, SIGIR06-017, July 2006 

We recommended that the U.S. Ambassador to Iraq direct the Director of IRMO to do the 

following:

1. Develop a single, uniform process for asset recognition and transfer of all completed projects 

to the Iraqi government. This process should be followed by all of the IRRF-implementing 

agencies, and sufficient resources should be made available to implement the process in time 

for the Iraqi government’s use in budget planning;

2. Provide a bi-weekly report to the Deputy Chief of Mission on the progress and impediments 

to the implementation of the asset recognition and transfer process;

3. Develop a sustainment plan to guide U.S. activities past June 2007 emphasizing capacitydevelopment activities to ensure that established infrastructure management processes are in 

place in the Iraqi ministries;

4. Complete an assessment to determine the capacity of the Iraqi government for maintaining 

the IRRF projects;

5. Formulate and implement a plan as part of the Joint Campaign Plan, with clear goals and 

objectives for developing the capacity of the Iraqi ministries; and

6. Ensure the capacity-development plan is linked to and supported by the necessary 

sustainment funding to ensure the viability of all IRRF-funded projects. This plan should 

include the $134 million requested for this purpose in the U.S. budget for fiscal year 2007. It 

should also identify any shortfalls and the impacts of the shortfalls on the IRRF investment.

Transferring Iraq Relief and Reconstruction Fund Capital Projects to the Government of 

Iraq, SIGIR-07-004, July 2007 

We recommended that the U.S. Ambassador to Iraq provide senior-level support to finalize a 

bilateral agreement between the United States and Iraq on asset transfer to the Government of 

Iraq. 

Transferring Reconstruction Projects to the Government of Iraq: Some Progress Made but 

Further Improvements Needed to Avoid Waste, SIGIR- 08-017, April 2008

SIGIR recommended that the U.S. Ambassador and Commander, Multi-National Forces-Iraq 

(MNF-I), working jointly, direct that the following actions be taken, to:

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

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

2. 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; 

3. 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; 
20

4. 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. 
21

Appendix D—Recent SIGIR Inspection Reports 

Identifying Sustainment Issues

Project Sustainment Assessment of the Haditha Primary Healthcare Center, Haditha, Iraq,

PA-08-134, January 28, 2009

The inspection found that the medical equipment was improperly installed and Iraqi personnel 

had not been trained to use the equipment. GRD officials also stated that little preventative 

maintenance is performed for items such as generators once the healthcare facilities are turned 

over to the Iraqi government. Consequently, the facilities and equipment are failing at a rate 

much faster than would be expected.

Rebuilding of the Al Iqitadar School in Anbar Province, Iraq, PA-08-141, January 26, 2009

The inspections found that routine facility maintenance was not being conducted even though the 

Project Operation and Maintenance Plan, signed by the Ministry of Education and the Fallujah

Director General of Schools, required that, at the completion of the project, the facilities would 

be properly maintained.

Heet Primary Healthcare Center, PA-08-133, January 23, 2009

The inspection found that the medical equipment had not been properly installed and that Iraqi 

personnel had not been trained to use the equipment. GRD officials also stated that little 

preventative maintenance is performed for items such as generators once the healthcare facilities 

are turned over to the Iraqi government. Consequently, the facilities and equipment are failing at 

a rate much faster than would be expected.

Plumbing Repairs at the Baghdad Police College, Baghdad, Iraq, PA-08-154_to_156, 

January 22, 2009

The inspection found significant vandalism, the theft of plumbing, heating, and ventilating 

equipment, and an unsatisfactory level of maintenance in the latrine buildings. SIGIR inspections 

of representative barracks confirmed that the buildings were well maintained and the barracks’

plumbing on the first floors had been repaired and was generally in good shape. The GOI did not 

repair the damage caused by vandalism or replace the items that had been removed by apparent 

theft from the new latrines. As a result, only portions of the two new latrine buildings and none 

of the eight latrine trailers appeared usable. The eight latrine trailers were particularly filthy 

thereby creating a health hazard. 
22

Appendix E—Acronyms

Acronym Definition

ARTOG

DoD

Asset Recognition and Transition Operational Group

Department of Defense

DoS Department of State

GOI Government of Iraq

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

IRMS Iraq Reconstruction Management System

IRRF Iraq Relief and Reconstruction Fund

ITAO Iraq Transition Assistance Office

MNF-I Multi-National Force-Iraq

MNSTC-I Multi-National Security Transition Command-Iraq

SIGIR Special Inspector General for Iraq Reconstruction 

USAID U.S. Agency for International Development
23

Appendix F—Audit Team Members

This report was prepared and the review was 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: 

Clarence Brooks

W. Dan Haigler

Dorian Herring

Waheed Nasser

Nancee Needham
24

Appendix G-Management Comments - U.S. Embassy
25
26

Management Comments-MNF-I (incorporates GRD comments)
27

Management Comments- GRD
28
29
30
31
32

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 Daniel Kopp

Director of 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