Rebuilding Iraq: Resource, Security, Governance, Essential Services, and Oversight Issues
Published: 2004-06-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Rebuilding Iraq is a U.S. national security and foreign policy priority. According to the President, the United States intends to help Iraq achieve democracy and freedom and has a vital national interest in the success of free institutions in Iraq. As of April 30, 2004, billions of dollars in grants, loans, assets, and revenues from various sources have been made available or pledged to the reconstruction of Iraq. The United States, along with its coalition partners and various international organizations and donors, has embarked on a significant effort to rebuild Iraq following multiple wars and decades of neglect by the former regime. The Coalition Provisional Authority (CPA), established in May 2003, was the U.N.-recognized coalition authority led by the United States and the United Kingdom that was responsible for the temporary governance of Iraq. Specifically, the CPA wasresponsible for overseeing, directing, and coordinating the reconstruction effort. On June 28, 2004, the CPA transferred power to a sovereign Iraqi interim government, and the CPA officially dissolved. To pave the way for this transfer, the CPA helped the Iraq Governing Council develop the Law of Administration for the State of Iraq for the Transitional Period in March 2004. The transitional law provides a framework for governance of Iraq while a permanent government is formed. In June 2004, U.N. Security Council Resolution 1546 provided international support to advance this process, stating that, by June 30, CPA will cease to exist and Iraq will reassert full sovereignty. Resolution 1546 also endorsed the formation of a fully sovereign Iraqi interim government; endorsed a timetable for elections and the drafting of an Iraqi constitution; and decided that the United Nations, at the Iraq government's request, would play a leading role in establishing a permanent government. Resolution 1546 further noted the presence of the multinational force in Iraq and authorized it to take all necessary measures to contribute to security and stability in Iraq, in accordance with letters annexed to the resolution. Such letters provide, in part, that the multinational force and the Iraqi government will work in partnership to reach agreement on security and olicy issues, including policy on sensitive offensive operations. Resolution 1546 stated that the Security Council will review the mandate of the multinational force in 12 months or earlier if requested by the government of Iraq and that it will terminate the mandate if requested by the government of Iraq. As part of our broad effort to monitor Iraq reconstruction, which we undertook at the request of Congress, this report provides information on the status of the issues we have been monitoring, as well as key questions that will assist Congres in its oversight responsibilities. Specifically, this report focuses on issues associated with (1) resources, (2) security, (3) governance, and (4) essential services. For the essential services issue, we focused on the Army Corps of Engineers' Restore Iraqi Electricity project, a major component of the U.S. assistance effort to rebuild the power sector.
section_title: What GAO Found
paragraphs: As of the end of April 2004, about $58 billion in grants, loans, assets, and revenues from various sources had been made available or pledged to the relief and reconstruction of Iraq. Resource needs are expected to continue after the transfer of power to a sovereign Iraqi interim government. Of the funds available, the United States obligated about $8 billion of the available $24 billion in U.S. funds. The CPA obligated about $15.5 billion of the nearly $21 billion in available Iraqi funds. The international community pledged nearly $14 billion. In December 2003, the CPA put into effect an Iraqi-led process to coordinate reconstruction efforts. An October 2003 U.N./World Bank assessment noted that Iraq's ability to absorb resources as the country gains sovereignty and decision-making authority will be one of the most significant challenges to reconstruction. The security situation in Iraq has deteriorated since June 2003, with significant increases in attacks against the coalition and coalition partners. The increase in attacks has had a negative impact on military operations and the work of international civilian organizations in Iraq. As part of the effort to provide stability, the coalition plans to transfer security responsibilities from the multinational force to Iraqi security forces and to dissolve Iraqi militias operating outside the central government's control. During the escalation of violence that occurred during April 2004, these security forces collapsed in several locations. However, key elements of the CPA's transition and reintegration process remain to be finalized. With U.S. and others' assistance, Iraqis have taken control of government institutions at the national and subnational levels. National ministries are providing some services to citizens as their facilities are being rebuilt, reforms are being introduced, and their staffs trained. According to the head of the now-dissolved CPA, all ministries were under Iraqi authority as of the transfer of power on June 28, 2004. However, the security situation hinders the ability of the ministries to provide needed services and maintain daily operations. To reform the rule of law, ongoing efforts have begun to establish a functioning independent judiciary, although courts are not at their pre-war capacity. However, efforts to rebuild Iraq's judicial system and restore the rule of law face multiple challenges. U.S. officials said that rehabilitating and reforming Iraq's judicial system will likely take years. The Coalition considers reconstruction of the power sector critical to reviving Iraq's economy, supporting essential infrastructure, improving daily well-being, and gaining local support for the coalition presence in Iraq. The CPA set a goal of 6,000 megawatts of generating capacity by June 30, 2004, in anticipation of the higher demand for power during the summer months. As part of the overall effort to achieve this goal, the U.S. Army Corps of Engineers (Corps) has undertaken $1.4 billion in work under the Restore Iraqi Electricity (RIE) program. As of late May, the Corps anticipated that 59 of the 66 RIE projects expected to help meet the goal would be completed by June 30. However, electrical service in the country as a whole has not shown a marked improvement over the immediate postwar levels of May 2003 and has worsened in some governorates. RIE contractors report numerous instances of project delays due to difficulties in getting employees and materials safely to project sites. Further, the security environment continues to affect the cost of rebuilding the power sector.

section_title: Letter
paragraphs: Rebuilding Iraq is a U.S. national security and foreign policy priority.  According to the  President, the United States intends to help Iraq achieve democracy and freedom and has  a vital national interest in the success of free institutions in Iraq.  As of April 30, 2004,  billions of dollars in grants, loans, assets, and revenues from various sources have been  made available or pledged to the reconstruction of Iraq.  The United States, along with its  coalition partners and various international organizations and donors, has embarked on  a significant effort to rebuild Iraq following multiple wars and decades of neglect by the  former regime. The Coalition Provisional Authority (CPA), established in May 2003, was  the U.N.-recognized coalition authority led by the United States and the United Kingdom  that was responsible for the temporary governance of Iraq.  Specifically, the CPA was  responsible for overseeing, directing, and coordinating the reconstruction effort.
On June 28, 2004, the CPA transferred power to a sovereign Iraqi interim government,  and the CPA officially dissolved.  To pave the way for this transfer, the CPA helped the  Iraq Governing Council develop the Law of Administration for the State of Iraq for the  Transitional Period in March 2004.  The transitional law provides a framework for  governance of Iraq while a permanent government is formed.  In June 2004, U.N. Security  Council Resolution 1546 provided international support to advance this process, stating  that, by June 30, CPA will cease to exist and Iraq will reassert full sovereignty.   Resolution 1546 also endorsed the formation of a fully sovereign Iraqi interim  government; endorsed a timetable for elections and the drafting of an Iraqi constitution;  and decided that the United Nations, at the Iraq government’s request, would play a  leading role in establishing a permanent government.  Resolution 1546 further noted the  presence of the multinational force in Iraq and authorized it to take all necessary  measures to contribute to security and stability in Iraq, in accordance with letters  annexed to the resolution.  Such letters provide, in part, that the multinational force and  the Iraqi government will work in partnership to reach agreement on security and policy  issues, including policy on sensitive offensive operations.  Resolution 1546 stated that  the Security Council will review the mandate of the multinational force in 12 months or  earlier if requested by the government of Iraq and that it will terminate the mandate if  requested by the government of Iraq.
As part of our broad effort to monitor Iraq reconstruction, which we undertook at your  request, this report provides information on the status of the issues we have been  monitoring, as well as key questions that will assist you in your oversight responsibilities.   Specifically, this report focuses on issues associated with (1) resources, (2) security, (3)  governance, and (4) essential services.  For the essential services issue, we focused on  the Army Corps of Engineers’ Restore Iraqi Electricity project, a major component of the  U.S. assistance effort to rebuild the power sector.  We updated the information in this  report on June 17, 2004, with the most currently available data, as noted in each  enclosure.  We conducted our review from March 2004 through June 2004 in accordance  with generally accepted government auditing standards.
As of the end of April 2004, about $58 billion in grants, loans, assets, and revenues from  various sources had been made available or pledged to the relief and reconstruction of  Iraq.  Resource needs are expected to continue after the transfer of power to a sovereign  Iraqi interim government.  Of the funds available, the United States obligated about $8  billion of the available $24 billion in U.S. funds.  The CPA obligated about $15.5 billion of  the nearly $21 billion in available Iraqi funds.  These funds were used to support ministry  operations and expenses; the restoration of essential services, such as power, oil, and  water; and humanitarian and other human services, including the importation of liquid  petroleum gas and food.  The international community pledged nearly $14 billion.  In  December 2003, the CPA put into effect an Iraqi-led process to coordinate reconstruction  efforts.  However, the capability to track the total amount of bilateral assistance flowing  into Iraq and to identify sectors that do not receive assistance is still under development.   An October 2003 U.N./World Bank assessment noted that Iraq’s ability to absorb  resources as the country gains sovereignty and decision-making authority will be one of  the most significant challenges to reconstruction.  The CPA faced a number of challenges  in identifying, obtaining, and organizing the human resources required to help stabilize  and reconstruct Iraq. The CPA’s staffing requirements also changed over time as the  mission evolved from a reconstruction and humanitarian effort to the temporary  administration of the Iraq government.  The CPA was dependent on personnel from  multiple sources and generally operated with about one-third fewer staff than it required.   After the transition, the U.S. Mission in Baghdad and its temporarily established Iraq  Reconstruction Management Office are likely to continue to draw upon staff from  multiple sources.
Security: Trends and Issues  The security situation in Iraq has deteriorated since June 2003, with significant increases  in attacks against the coalition and coalition partners. Anti-coalition attacks have  generally become more sophisticated, widespread, and effective.  In May 2004, the  Secretary of Defense and the Commander of the U.S. Central Command projected that  the level of violence could continue to increase as Iraq moves to elect a transitional  government.  The increase in attacks has had a negative impact on military operations  and the work of international civilian organizations in Iraq.  The United States decided to  maintain a force level of about 138,000 troops at least until the end of 2005, rather than  drawing down to 105,000 troops by May 2004, as DOD had announced in late 2003.  The  United Nations, numerous nongovernmental organizations, and a range of civilian  contractors have reduced their presence or completely shut down operations.  As part of  the effort to provide stability, the coalition plans to transfer security responsibilities from  the multinational force to Iraqi security forces and to dissolve Iraqi militias operating  outside the central government’s control.  As of June 2004, Iraq had security forces  numbering about 220,000, including the Iraqi Police, Iraqi Civil Defense Corps, and Iraqi  Armed Forces.  During the escalation of violence that occurred during April 2004, these  security forces collapsed in several locations.  As of June 2004, efforts to disband Iraq’s  militias have produced formal agreements between the CPA and nine major political  parties that possess militias. However, key elements of the CPA’s transition and  reintegration process remain to be finalized.
Governance: Reforming and Rebuilding Iraq’s Government With U.S. and others’ assistance, Iraqis have taken control of government institutions at  the national and subnational levels.  National ministries are providing some services to  citizens as their facilities are being rebuilt, reforms are being introduced, and their staffs  trained.  According to the head of the now-dissolved CPA, all ministries were under Iraqi  authority as of the transfer of power on June 28, 2004.  However, the security situation  hinders the ability of the ministries to provide needed services and maintain daily  operations.  To reform the rule of law, ongoing efforts have begun to establish a  functioning independent judiciary, although courts are not at their pre-war capacity.  As  of June 2004, the CPA had completed a review of all Iraqi judges, took steps to reform  Iraq’s legal code, and issued orders to restore judicial independence.  However, efforts to  rebuild Iraq’s judicial system and restore the rule of law face multiple challenges,  including providing adequate security for judges and other court personnel, some of  whom have been assassinated; ensuring the independence of the court system so that it  operates without influence from the executive branch of the government; and providing  adequate training for judges and attorneys. U.S. officials said that rehabilitating and  reforming Iraq’s judicial system will likely take years.
Essential Services: Restore Iraqi Electricity The Coalition considers reconstruction of the power sector critical to reviving Iraq’s  economy, supporting essential infrastructure, improving daily well-being, and gaining  local support for the coalition presence in Iraq.  The CPA set a goal of 6,000 megawatts of  generating capacity by June 30, 2004, in anticipation of the higher demand for power  during the summer months.  As part of the overall effort to achieve this goal, the U.S.  Army Corps of Engineers (Corps) has undertaken $1.4 billion in work under the Restore  Iraqi Electricity (RIE) program.  As of late May, the Corps anticipated that 59 of the 66  RIE projects expected to help meet the goal would be completed by June 30.  However,  even if the 6,000-megawatt goal is met, generating capacity will fall short of the estimated  summer peak demand of 7,000 to 8,000 megawatts.  Some improvements have been made  in restoring electricity; for example, Iraq’s daily peak generation capacity increased from  about 3,400 megawatts on September 25, 2003, to about 4,200 megawatts on June 1, 2004.   However, electrical service in the country as a whole has not shown a marked  improvement over the immediate postwar levels of May 2003 and has worsened in some  governorates.  For example, in May 2003, 7 of Iraq’s 18 governorates had 16 or more  hours of electricity a day, but as of late May 2004, only one governorate in northern Iraq  was at that level.  RIE contractors report numerous instances of project delays due to  difficulties in getting employees and materials safely to project sites.  Further, the  security environment continues to affect the cost of rebuilding the power sector.   Preliminary estimates of security-related costs for one RIE contractor are almost 18  percent of total costs.  The possibility that electrical capacity will not meet the peak  summer demand raises concerns about the ability of the coalition to support power- dependent infrastructure, improve Iraq’s economy, and promote stability in Iraq.
The United States, along with its coalition partners and various international  organizations and donors, has undertaken a challenging and costly effort to stabilize and  rebuild Iraq.  Several key challenges will affect the political transition, the pace and cost  of reconstruction, and the type of assistance provided by the international community.   These include the unstable security environment, the evolving capacity of the Iraqi  institutions to govern and secure the country, the availability and coordination of  international assistance, and the need for adequate oversight.  Given the instability and  uncertainty in Iraq, there are also questions about what options and contingency plans  are being developed to address these ongoing and future challenges.  The following  enclosures elaborate on the progress made as of June 2004 in key aspects of the  stabilization and rebuilding effort.  We also provide key questions for Congress to  consider as it assesses progress and provides oversight of reconstruction efforts.
Agency Comments and Our Evaluation We provided drafts of this report to the Coalition Provisional Authority; the Departments  of Defense, State, Justice, and Treasury; and the U.S. Agency for International  Development.  These agencies were unable to provide us written comments in the  limited time given.  However, we worked with the agencies to obtain oral comments on  individual enclosures.  Agencies provided technical comments on many of the  enclosures, which we incorporated where appropriate.
CPA commented that the general tone of the report was accurate, but stated that the  report was not sufficiently critical of the judicial reconstruction effort (enclosure IX).  In  particular, CPA said the capacity of the courts is less than pre-war levels.  We modified  the report to increase the emphasis on the challenges that Iraq faces in reforming its  judicial system and added additional information CPA provided.  CPA also commented  on enclosure VI (Iraqi security forces), stating that delays in providing equipment to Iraqi  security forces were caused by a range of factors, and not just contracting problems.  In  commenting on our description of the Iraqi police force’s response to insurgent activity  in April, CPA noted that the Iraqi police were not intended to combat insurgents, but did  stand up to them in some locations.   We modified enclosure VI by including the range of  factors that delayed equipping Iraqi security forces and incorporated CPA’s comments as  appropriate.
Individual units of the Department of Defense, including the Army Corps of Engineers,  provided technical comments on resource issues (enclosures I, II, IV); security  (enclosures V, VI, and VII); and essential services (enclosure X), which we incorporated  as appropriate.  State provided technical comments on international funding (enclosure  II), which we incorporated as appropriate.  Justice provided technical comments on  judicial reform (enclosure IX), which we incorporated as appropriate.  Treasury had no  comment on the report.  USAID provided technical comments on governance issues  (enclosure VIII), which we incorporated as appropriate.
As part of our overall monitoring effort, we focused on issues involving resources,  security, governance, and essential services.  For each area, we obtained documents and  interviewed relevant officials from the various agencies involved in rebuilding Iraq,  including the Coalition Provisional Authority, the Departments of Defense, Justice, State,  and the Treasury, the U.S. Agency for International Development, the Army Corps of  Engineers, the multinational force, and nongovernmental organizations.  We reviewed  key documentation, orders, memoranda, reports, budget documents, and plans.  In  reviewing agency data on the issues included in this report, we determined that the data  are sufficiently reliable for the purposes used.  We did not audit the funding data and are  not expressing our opinion on them.  However, we took several steps to ensure that the  funding data were sufficiently reliable for the purposes of this report as discussed in  enclosure XI.  Complete details on our scope and methodology are presented in  enclosure XI.  - - - - -       We are sending copies of this letter to interested congressional committees.  This letter is  also available on GAO’s Web site at http://www.gao.gov.  If you or your staff have  questions, please contact Joseph Christoff at (202) 512-8979 or christoffj@gao.gov.  For  press inquiries, please contact Jeff Nelligan at (202) 512-4800 or nelliganj@gao.gov.  Key  contributors to this report are included in enclosure XII.
David M. Walker  Comptroller General of the United States Enclosures (12)
subsections: section_title: Results in
paragraphs: The United States, along with its coalition partners and various  international organizations and donors, have committed billions of dollars  to the reconstruction of Iraq in the face of an unstable security situation and  other challenges.  These funds have come from multiple and diverse  sources, the effective use of which requires significant oversight and  cooperation.  The Coalition Provisional Authority (CPA) has been  responsible for the allocation of U.S. and Iraqi funds.  The Departments of  Defense and State, and the U.S. Agency for International Development,  among others, have played play a primary role in U.S. efforts to fund and  execute the reconstruction effort.  To a large extent, these agencies have  used contracts and personal services contractors to implement their  programs.  Agency inspectors general, the CPA inspector general, and other  auditing authorities are responsible for auditing aspects of the  reconstruction effort. This enclosure describes (1) the sources and amounts  of funds that have been made available for the reconstruction of Iraq, and  (2) the amounts of U.S. and Iraqi funds that have been obligated and  disbursed as of April 30, 2004,and the uses to which those funds have been  applied.  Funds for U.S. military operations are not described in this  enclosure.
section_title: Brief
paragraphs: Data for U.S. appropriated funds are as of April 30, 2004, with the exception of some CPA  Program Management Office obligations and disbursements, which are as of May 25 and  June 16, respectively.  Iraqi funds data are as of May 6, 2004.
CPA established the Development Fund for Iraq to accommodate Iraqi funds that would be  used to benefit the Iraqi people and facilitate the reconstruction of their country. from the deposed regime. Of the funding available for the reconstruction  effort, about $24 billion had been obligated as of the end of April 2004.  Of  this amount, about $13 billion came from the Development Fund for Iraq  and about $8 billion from U.S. appropriated funds.  About $4 billion of the  $4.5 billion in U.S. funds appropriated in 2003 and about $4.2 billion of the  $19.6 billion in U.S. funds appropriated in 2004 have been obligated.  The  remaining $2.5 billion in obligated funds came from vested and seized  assets.  Obligations to date have primarily been applied to the operating  expenses of the Iraqi ministries; restoration of essential services such as oil,  water, and power; and humanitarian and human services, including the  procurement of food and liquid petroleum gas for domestic consumption.
Figure I.1: Total Funds Available, Obligated, and Disbursed for Iraq Reconstruction by  Source, as of April 2004   Of the $13.6 billion pledged, donors have committed about $1 billion to the International Reconstruction Fund  Facility for Iraq. “Vested assets” refers to former Iraqi regime assets held in U.S. financial institutions that  the President confiscated in March 2003 and vested in the U.S. Treasury.  The United States  froze these assets shortly before the first Gulf War.  The U.S.A. PATRIOT Act of 2001  amended the International Emergency Economic Powers Act to empower the President to  confiscate, or take ownership of, certain property of designated entities, including these  assets, and vest ownership in an agency or individual. The President has the authority to  use the assets in the interests of the United States.  In this case, the President vested the  assets in March 2003 and made these funds available for the reconstruction of Iraq in May  2003.  Seized assets refer to former regime assets seized within Iraq.
An obligation is a binding agreement that will result in immediate or future outlays of  funds.
section_title: Funding Pledged or Made Available for Iraq
paragraphs: The reconstruction of Iraq has been supported from multiple sources of  funds.  The largest share of these funds has come from U.S. appropriations.   The other sources, in descending order of amounts, are the DFI, vested  assets, and seized assets (see fig. I.2).  In addition, international donors have  pledged about $14 billion to the reconstruction effort.
Congress has appropriated about $24 billion of the approximately $58  billion provided to date for the relief and reconstruction of Iraq.  The funds  appropriated in fiscal year 2003 were made available until September 30,  2004; those appropriated in fiscal year 2004 were made available until  September 30, 2006.
In April 2003, Congress enacted the Emergency Wartime Supplemental  Appropriations Act, which, when combined with previously appropriated  funds, provided about $4.5 billion for the reconstruction of Iraq.  Of this $4.5  billion, the act provided $2.475 billion for an Iraq Relief and Reconstruction  Fund (IRRF).  The act also included a provision for the Iraq Freedom Fund  (IFF) to support ongoing military operations in Iraq, among other things,  and for a Natural Resources Risk Remediation Fund to finance emergency  firefighting, repair damaged oil facilities, and preserve oil distribution  capability.  In addition, some funds were transferred from the IFF to  support the new Iraqi Army (about $50 million) and for CPA operating  expenses (about $600 million).  The Natural Resources fund provided about  $800 million to the reconstruction effort.  In addition, agencies have also  been reimbursed about $575 million for expenses incurred before the  passage of the supplemental appropriations act.
In November 2003, Congress enacted another emergency wartime  supplemental appropriation, of which $18.4 billion was provided for Iraq  relief and reconstruction.  In addition, under the same act, the CPA received  its own funding authority of $983 million for operating expenses.  Further,  $140 million was transferred from the IFF to support regional emergency  response programs.
As of May 6, 2004, the DFI had received deposits of about $18 billion. This  fund, established by the CPA in May 2003 and noted by U.N. Security  Council Resolution 1483, was created to benefit the Iraqi people and  facilitate the reconstruction of their country. The U.N. resolution provided  for an initial deposit of $1 billion from unencumbered Oil for Food program  funds. The resolution further authorized the subsequent deposits of (1)  proceeds from the sale of Iraqi oil, natural gas, and petroleum products; (2)  U.N. funds such as unused Oil for Food program funds; and (3) transferred  assets from the former Iraqi regime that U.N. member states had frozen in  the 1990. The DFI does not include U.S. appropriated funds.  See enclosure  III for more detailed information on the DFI.
Vested Assets and Assets Seized in Iraq  Approximately $2.7 billion in assets the United States confiscated and  seized from the former regime have been made available for use in Iraq’s  reconstruction.  In March 2003, the U.S. government confiscated more than  $1.7 billion in Iraqi assets located in U.S. financial institutions and vested  them in the U.S. Treasury.  These funds were Iraqi government funds  originally frozen in 1990 consistent with a U.N. Security Council Resolution  and held in U.S financial institutions from 1990 to 2003.  From May to  September 2003, the United States transferred these funds to Iraq.  As of  May 2004, coalition forces seized more than $900 million of regime assets in  Iraq.
The Oil for Food program was established by the United Nations and Iraq in 1996 to  address concerns about the humanitarian situation in Iraq after the imposition of  international sanctions in 1990.  The program allowed the Iraqi government to use the  proceeds of its oil sales to pay for food, medicine, and humanitarian goods for the benefit  of the Iraqi people. U.N. Security Council Resolution 1483 provides for the deposit of oil  revenues and some Oil for Food program funds in the DFI until an internationally  recognized, representative government of Iraq has been constituted.  See U.S. General  Accounting Office, United Nations: Observations on the Management and Oversight of the  Oil for Food Program, GAO-04-730T (Washington D.C.: Apr. 28, 2004).
The international donors described in this enclosure include individual  nations, the European Commission, and international financial institutions.   International donors, exclusive of the United States, have pledged or  committed nearly $14 billion to the reconstruction of Iraq through 2007.   These contributions will be made either bilaterally or through a newly  established multilateral mechanism known as the International  Reconstruction Fund Facility for Iraq. For detailed information on  international donors, see enclosure II.
section_title: U.S. and Iraqi Funds Obligated and Disbursed
paragraphs: Overall, about $24 billion in U.S. and Iraqi funds has been obligated for the  reconstruction effort in Iraq as of April 30, 2004.  About $13 billion in  obligations has come from the DFI, and about $8 billion from U.S.  appropriated funds. The remaining $2.5 billion in obligations has come  from vested assets and seized assets.  Reliable information on the  international donors’ obligations and expenditures is not available.  Table  1.1 provides a detailed breakdown of obligations by sources of funding for  the broad range of activities associated with the reconstruction of Iraq, not  solely for infrastructure.
The World Bank Group defines a pledge as an indication of intent to mobilize funds for  which an approximate sum of contribution is specified.  International donor pledges range  from $13.6 billion to $17.3 billion, reflecting the range of loans pledged by the World Bank  and International Monetary Fund (IMF).  Given the uncertainty of the ultimate amount of  loans provided by the World Bank and IMF, we have used the lower pledge amount in this  report.
Table I.1:  U.S., DFI, Vested and Seized Funds Obligated by Activity, as of April 2004  U.S.
section_title: Enclosure I
section_title: 1. What accounting and monitoring controls are in place to ensure effective
paragraphs: oversight of the U.S., Iraqi, and international funds used to rebuild Iraq?  2.  To what extent are existing accounting and management information  systems adequate to provide complete and reliable reporting on the  implementation of the reconstruction effort?  3.  What are the roles and responsibilities of the CPA Inspector General  with the transfer of power to the Iraqis? What is the relationship  between the CPA Inspector General, the State Department Inspector  General, and U.S. ambassador to Iraq?  4.  To what extent has the unstable security environment affected the U.S.  government’s ability to provide adequate oversight of the reconstruction  effort, including the auditing of contracts and funding expended?  5.  What effect does the transfer of authority to the Iraqis have on the U.S.  agencies’ ability to monitor and audit the reconstruction investment  made with these funds?
The size and scope of Iraq’s reconstruction needs through 2007 have been  estimated to total about $56 billion.
The United Nations Development Group and the World Bank Group prepared a needs  assessment from June 2003 through August 2003 to define Iraq reconstruction  requirements. According to the October 2003 assessment, Iraq needs an estimated $36  billion from 2004 through 2007.  Sectors covered by this assessment include education,  health, electricity, transportation, agriculture, and cross-cutting areas such as human rights  and the environment. The assessment also notes that the Coalition Provisional Authority  (CPA) estimates that an additional $20 billion will be needed from 2004 through 2007 to  rebuild other critical sectors (e.g., security and oil) outside the scope of the U.N./World  Bank assessment.
The World Bank Group defines a pledge as an indication of intent to mobilize funds for  which an approximate sum of contribution is specified. reconstruction projects in 2004.  An Iraqi-led process, endorsed by the Iraqi  Governing Council and put into effect by the Administrator of the Coalition  Provisional Authority, is responsible for coordinating all international  assistance for rebuilding and reforming institutions in Iraq.  However, this  process has not had the capability to track the total amounts of bilateral  assistance flowing into Iraq.  The ability to track all international  contributions made to support Iraq’s reconstruction, including bilateral  assistance, is an important element for identifying the sectors receiving  assistance, identifying any gaps in assistance, and ensuring that assistance  is coordinated.
section_title: Enclosure II
section_title: Enclosure II
paragraphs: As of May 26, 2004, the European Commission and 18 donor countries had  committed  The World Bank and the U.N.  Development Program administer the IRFFI in coordination with  international donors and Iraqi authorities.  The Donor Committee, with  members from 14 countries and the European Commission, is to oversee  the activities of the IRFFI and endorse its priorities.  At a February 2004  international donors meeting held in Abu Dhabi, participants focused on  IRFFI’s operation and funding.   Specifically, information was shared with  donors on Iraq’s reconstruction plans and project priorities, U.S. assistance  spending plans, and the IRFFI’s preferred spending and project plans.  Table  II.2 presents a summary of the donors’ commitments and deposits made to  the IRFFI as of May 26, 2004.
According to State Department officials, commitments refer to a firmer declaration of the  amount that a country has pledged to provide.
section_title: Humanitarian and human services
paragraphs: $1.86 billion was allocated for imports of liquid petroleum gas for  domestic heating and cooking; about $1.07 billion was disbursed. $272 million was allocated for food procurement, transport, security,  and production; about $204 million was disbursed. $22 million was allocated for agriculture; nearly $12 million was  disbursed. $972 million was allocated for power infrastructure; about $157  million was disbursed. $437 million was allocated for oil infrastructure; about $150 million  was disbursed. $30 million was allocated for transportation and telecommunications;  about $10 million was disbursed. $842 million was allocated in late April and early May 2004 to address  increased security needs, including resources for the Iraq security  forces; about $2 million was disbursed. $52 million was previously allocated for police and security  equipment; $20 million was disbursed. $197 million was allocated for the currency exchange; about $180  million was disbursed. $27 million was allocated for microloans and employment programs;  about $2 million was disbursed. $21 million was allocated and disbursed for regional governance.
Public buildings, miscellaneous ministry projects, and other reconstruction $18 million was allocated for a Program Management Office/Iraqi  Ministry of Planning and Development Cooperation business  complex; about $6 million was disbursed. $9 million was allocated for legal fees and settlements; about $3  million was disbursed.
According to the CPA, since May 6, 2004, the CPA Administrator approved  additional PRB-recommended allocations totaling about $1.5 billion for the  essential services, humanitarian and human services, and economic  reconstruction projects, and for other purposes.  Essential services projects  include $460 million for the oil infrastructure and $315 million for the  electricity sector.  Humanitarian and human services projects include $200  million to maintain current levels of food procurement through 2004 and  $65 million for agriculture development.  Economic reconstruction projects  include $65 million for vocational training and $65 million to provide capital  to critical state-owned enterprises.  Examples of other allocations include  $180 million for the Iraq Property Claims Commission, $125 million to  protect the Iraqi budget from oil revenue volatility, and $25 million for the  Victims’ Compensation Fund.
The Commanders’ Emergency Response Program and the Rapid Regional  Response Program have been allocated DFI funds for local humanitarian,  essential services, economic, general construction, security, and  governance projects, as discussed below.
Under the Commanders’ Emergency Response Program, the CPA  allocated $353 million through the multinational force to military  division and brigade commanders; about $214 million was disbursed.   According to multinational force officials, commanders have  completed more than 21,000 small high-impact projects at an average  cost of about $11,000.  For example, as of May 8, 2004, multinational  force officials reported that about $45 million had been disbursed for  more than 4,100 education projects.
The activities of the Rapid Regional Response Program incorporate  and expand upon previous authorities of the Construction Initiative  and the Directors’ Emergency Response Program.  Under the  program, about $265 million in DFI funds was allocated to regions  and governorates; about $120 million was disbursed.  According to  CPA, more than 2,100 regional projects designed to create jobs,  support local industry, and respond to community needs have been  initiated across the northern, Baghdad central, southern central, and  southern regions.
section_title: In May 2004, the CPA began to decrease personnel in anticipation of the transition of authority to the Iraqis and the dissolution of the CPA at the end of June 2004. As of June 2, the CPA had a total of 1,050 personnel in Iraq who directly supported the mission. Several elements of the CPA were identified to continue the U.S. effort in Iraq after the transition. According to CPA officials, preliminary plans called for a continued ministry advisory team, a headquarters support group, military and police training teams, and governance teams. A May 11, 2004, National Security Presidential Directive stated that the U.S. Mission in Baghdad and its temporarily established Iraq Reconstruction Management Office will assume those authorities and responsibilities that will continue after the termination of the CPA. The directive also states that the United States Central Command shall continue to be responsible for U.S. security and military operation efforts.
paragraphs: The process for meeting the CPA requirements for U.S. personnel evolved  as the CPA’s mission changed.  The original mission of CPA’s predecessor,  the Office for Reconstruction and Humanitarian Assistance, was to  coordinate the efforts addressing the humanitarian, reconstruction, and  administration challenges facing Iraq—not to govern the country. In May  2003, CPA replaced ORHA when it became the temporary authority  governing Iraq during the period of transitional administration.
The initial staffing process for the reconstruction effort was not always well  coordinated between Washington and Baghdad.  CPA officials stated that,  prior to the CPA’s establishment, the requirements for staff were identified  and personnel were recruited in an ad hoc manner.  For example, U.S.  officials from the CPA and the State Department stated that, due to the  independent recruiting of staff by some detailees in Baghdad, agency  personnel authorities were unaware of personnel who went to Iraq after the  initial deployment in March 2003.  Further, officials from the State  Department responsible for staffing personnel to Iraq stated that they  ultimately sent a representative to Baghdad to physically account for all  State Department personnel present in the country.  According to a CPA  official, by July 2003, the process for identifying personnel requirements  was centralized in Baghdad under the guidance of the CPA administrator.
In addition, the CPA had generally operated with about one-third of its  direct positions vacant.  U.S. and CPA officials most frequently cited the  hardship of the posting and the budgetary implications as the reasons for  this situation.  The hardship of the posting has affected some civilian  agencies’ abilities to meet their staffing requirements.  The security situation  in Iraq has also made it difficult to attract and retain personnel.  For  example, USAID officials cited the security situation as a reason for the  early return of some staff and the difficulty in filling direct-hire positions in  Iraq.  Further, State Department officials stated that some qualified agency  personnel who had volunteered to go to Iraq were unable to meet the  required medical standards.  Another dimension of the hardship of the  posting is the limitations of family accompaniment.  Beginning in November  2003, the CPA requested that all personnel serve a minimum of 6 months.   According to USAID officials, in some cases this required Foreign Service  personnel to relocate family members from their previous posts to the  United States.  State Department officials also cited family relocation issues  and travel plans as reasons for delays in providing personnel to Iraq.
State Department officials stated that they had no difficulty in recruiting  volunteers for positions in Iraq, attributing this largely to Secretary Powell’s  support for the mission, incentive packages, and the department’s efforts to  ensure that those who served in Iraq were not disadvantaged. Other  agencies, such as USAID and the U.S. Army Corps of Engineers, while also  relying on volunteers, stated that they were constrained in their ability to  meet staffing requirements.  USAID and Army Corps of Engineers officials  said that prior downsizing had left their agencies with a smaller pool of  personnel from which to draw.  Additionally, some requirements that the  CPA attempted to meet were beyond the capability of the agency tasked.  For example, according to Department of Justice officials, the department  was requested to provide three international law litigators to the CPA but  had only three such personnel.  To meet the requirement, Justice provided  one litigator to the CPA.
In addition, providing personnel on a nonreimbursable basis to the CPA  creates an unbudgeted expense to the supplying agency.  Replacing  detailees creates additional costs for the agencies that their budgets may  not be able to sustain.  Further, detailing of staff not only creates gaps in the  supplying agency but increases the workload of those remaining.  According  to State Department officials, this burden could not be sustained beyond 6  to 12 months.
To counter these challenges, the CPA and executive branch agencies have  relied on a number of mechanisms to support the staffing effort, including  the use of special hiring authorities, temporary tours of duty (60 to 180  days), and incentive packages.  The CPA had relied on a special hiring  authority under 5 USC 3161 to obtain temporary civilian employees.   Personnel obtained under this authority constituted about 20 percent of  CPA staff.  The passage of the emergency supplemental in November 2003  provided a specific budget to the CPA.  According to a CPA official, this  budget imposed a funding limit on CPA’s ability to hire personnel under the  3161 authority.  In addition, agencies used temporary tours of duty to supply  personnel to the CPA due to the hardship of the posting.  Agencies also used  incentive packages to compensate civilian personnel, which included  danger-pay allowances and hardship differential payments.
section_title: In late May 2004, the President said there is likely to be more violence in Iraq after the transfer of power. He noted that there are difficult days ahead, and the way forward may sometimes appear to be chaotic. One week earlier, the Commander of the U.S. Central Command had predicted that the situation in Iraq will become more violent after the transfer of power as the country moves toward elections for a new government, which are currently scheduled to be held by January 2005. Further, the Secretary of Defense said in early May 2004 that there will be uncertainty in Iraq and increased attacks against the coalition, Iraqis, and the United States during the period leading up to the elections.
paragraphs: In April and May 2004, the Deputy Secretary of Defense said that the  multinational force was engaged in combat and a continuing war in Iraq,  rather than peacekeeping as had been expected.  The increase in attacks  has had a negative impact on the presence and operations of international  military and civilian personnel in Iraq.  It has led to an increase in U.S. force  levels and to a decrease in freedom of movement for international civilians  working to rebuild Iraq and assist in its political transition.
United States and United Kingdom Increased Troop Levels as Other  Coalition Members Reduced Them As a result of the increase in violence during April 2004, the United States  and the United Kingdom decided to increase their overall force levels in the  country.  The United States decided to maintain a force level of about  138,000 troops until at least the end of 2005, keeping about 33,000 more  troops in Iraq as of May 2004 than the 105,000 troops originally planned.  On  May 24, 2004, the President said that if military commanders determine that  they need more troops to fulfill the mission, he would send them.  The  following week, the United Kingdom announced that it would send an  additional 370 troops to southern Iraq in response to the increased violence,  bringing its total troop contribution to the multinational force to about 8,900  military personnel.  This figure includes 170 engineering personnel who  would deploy for 3 months to help fortify U.K. military bases and facilities  in Iraq against the increased threat of mortar and rocket attacks.
In mid-April 2004, the new government of Spain announced that it would  withdraw its 1,300 troops from Iraq.  The government withdrew the troops  much earlier than the United States expected, after violence escalated in the  Spanish area of operations in Iraq.  Shortly thereafter, Honduras and the  Dominican Republic announced they would also withdraw their national  contingents from the multinational force.
During April 2004, the United States redeployed forces from Baghdad and  northern areas of Iraq to cities in the south that had come under the control  of a radical Shi’a militia.  The United States did so because Iraqi security  forces and at least one contingent of the multinational force would not or  could not fight the insurgents.  For example, according to a CPA official,  Iraqi police in the cities of Karbala, Najaf, and Kut collapsed in April when a  radical Shi’a militia overran the cities and took control of police stations.   Moreover, according to a USAID report, after heavy fighting in the city of  Kut, a non-U.S. contingent of the multinational force withdrew from the city  as the militia overran it.
International Civilian Organizations Have Reduced Operations in Iraq and  Have Faced Increased Security Requirements  The deteriorating security situation has also adversely affected the  operations of civilian organizations in Iraq.  The dangerous environment has  led many to halt operations completely or to reduce activity by severely  restricting staff movement around the country.  No systematic data exist on  the effect of these restrictions on efforts to assist in Iraq’s political  transition and reconstruction.  Anecdotal evidence suggests, however, that  the efforts overall have been scaled back.
In general, international civilian staff have had increasingly little contact  with the Iraqi people, and Iraqi staff working for the coalition, including  interpreters, have been increasingly threatened for cooperating with foreign  organizations.  Many important reconstruction efforts had to at least  temporarily cease operation.  Civilian organizations that continue to operate  in the country face increased security measures for their personnel and  compounds in the country.  The following examples show the effect of the  security situation on the operations of the CPA and supporting U.S.  agencies, reconstruction contractors, international organizations, and  nongovernmental aid organizations.
Due to the unsafe security environment, the CPA and its supporting U.S.  agencies have had difficulty staffing their operations, opening offices  throughout the country, and providing protection for U.S. civilian  personnel as they travel around the country.  U.S. agencies, particularly  USAID, had difficulty in attracting and retaining personnel because of  security concerns.  In addition, according to a CPA official, as the  security situation worsened during 2003, the CPA abandoned plans to  fully staff offices throughout Iraq to assist in Iraq’s political transition  and reconstruction and instead established a much smaller field  presence.  Further, the CPA established stringent security measures that  U.S. government staff had to follow in traveling outside the Green Zone,  the coalition’s “safe area” in Baghdad, thereby making it difficult for  them to move around the country.  In late February 2004, the  Department of Homeland Security decided to stop sending teams of  customs investigators to assist CPA.  They could no longer do their jobs  because it had become too dangerous for them to move around the  country.  CPA officials also stated that they were concerned about the  safety of their Iraqi employees, particularly their interpreters, as  insurgents had increasingly targeted them for cooperating with the  coalition.
In an April 17, 2004, document, the CPA administrator stated that lack of  security is the key obstacle to reaching reconstruction objectives.   Referring to the entire reconstruction program, the administrator stated  that a worsened security situation would mean that projects would take  longer to complete and that the kinds of projects undertaken and their  costs would change to an unknown extent.  Our review of selected  electricity projects showed that the security situation delayed the  implementation of key projects, thereby contributing to the CPA not  meeting its objective of providing 6,000 megawatts of electrical  generating capacity to the Iraqi people by its original goal of June 1,  2004.  In late March 2004, the CPA Inspector General reported that that  rising security concerns were a significant cost driver for CPA activities  and contractor projects, representing at least 10 percent to 15 percent of  total costs.
The United Nations and its programs have faced significant setbacks as  a result of the deteriorating security situation.  Most importantly, after  the attacks on the U.N. headquarters in Baghdad in August and  September 2003, the U.N. Secretary General redeployed all U.N.  international personnel from Baghdad, Basra, and other area offices to  neighboring countries, particularly Jordan and Kuwait, where they have  continued to support assistance operations inside Iraq.  As of late May  2004, the United Nations had not allowed most of its international  personnel to return to Iraq.   Although Iraqi staff continued some U.N.  programs, the United Nations had to scale down or delay both ongoing  activities and new initiatives.  The United Nations sent three separate  assessment teams to Iraq during the first half of 2004 to assist Iraqis in  assessing options for forming an interim government and in preparing  for national elections.  The dangerous security situation forced these  teams to restrict their travel around Iraq during the first half of 2004,  thereby limiting their interaction with Iraqis during important political  discussions about the country’s future.
In discussions during the fall of 2003 and the spring of 2004,  nongovernmental organization representatives stated that the  deteriorating security situation has forced numerous nongovernmental  aid organizations to reduce or shut down operations in Iraq.  In response  to the dangerous security environment, many nongovernmental  organizations and contractors that we interviewed have hired private  security to provide protection for their staff and compounds.  In  addition, one representative emphasized his view that as more  international workers leave Iraq, insurgents will increasingly focus their  efforts on killing Iraqi nationals who are seen as collaborators.
U.N. officials and documents have expressed concern that the lack of  security could threaten Iraq’s transition toward a democratic government.   According to a U.N. assessment, the lack of security may lead to major  disturbances that could undermine the administration of the elections, alter  the established timetable, and compromise the overall credibility of the  process.  By mid-April 2004, the multinational force had begun to consider  how it could provide security, logistical, and other support for the elections,  but the United Nations and others had not yet developed a specific plan for  important tasks such as the registration of political parties, voters, and  candidates or the number and locations of polling sites.
section_title: The total number of Iraqi security forces as of March 26, 2004, just prior to the insurgent activities of early April, was 203,000—approximately 86 percent of the goal set by the multinational force. Of these forces, the Iraqi Armed Forces is the only force specifically trained and equipped for the defense of Iraqi territory and population. However, in March 2004 this force experienced the greatest shortfall in personnel, with only 8 percent of the troops needed. (See figure VI.1 for a breakdown of the numbers for each component and its goals.)
section_title: Iraqi Civil Defense Corps units also collapsed during April, with soldiers staying home, declaring a neutral stance, or resigning throughout central and western Iraq. According to the multinational force interim assessment, desertion was most prevalent between April 2 and April 16. During this time, up to 12,000 Iraqi Civil Defense Corps soldiers did not show up for duty. Table VI.2 shows the decrease in the corps during this time.
section_title: Effective Iraqi security forces are critical for transitioning security responsibilities to Iraq. However, Iraqi security forces proved unready to take over security responsibilities from the multinational force, as demonstrated by their collapse during April 2004. Of these forces, only the Iraqi Armed Forces are specifically mandated for the military defense of Iraq, while the others are intended exclusively for civil law enforcement and protection duties. The multinational force identified problems in the training and equipping of the Iraqi forces as reasons for poor performance. Although the multinational force is beginning to address these problems, it is unclear what impact April’s security collapse will have on the plans for transitioning Iraq’s security to Iraqi security forces or the extent to which these forces will be capable of providing security during the Iraqi election process. What is clear, however, is that the development of effective Iraqi security forces will continue after the transfer of power to an interim Iraqi government.
paragraphs: 1.  How will the Iraqi security forces coordinate with the multinational  force after the transfer of power, and how will they resolve  potentially differing views on security issues?  What arrangements  have been made to facilitate coordination between the multinational  force and the interim Iraqi government?  2.  What kind of provisioning process will be used to equip the Iraqi  security forces after the transfer of power?  Will this be administered  by the Ministries of Defense and Interior, the multinational force, or  another body?  3.  What level of support does the multinational force expect Iraqi  security forces to provide during Iraq’s upcoming election process,  and what options and contingency plans are being explored?
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A large but unknown number of militias are operating outside the control  of the central government in Iraq.  Some of these militias have taken hostile  action against the coalition and Iraqi security forces, while others have  remained neutral or are participating in Iraq’s political transition.  In a  February 2004 report, the United Nations warned that the existence of  militias—especially those connected with political movements—could be a  source of coercion and intimidation that would undermine the political  credibility of Iraq’s upcoming elections, which are currently scheduled to be  held by the end of January 2005.