Rebuilding Iraq: Improved Management Controls and Iraqi Commitment Needed for Key State and USAID Capacity-Building Programs
Published: 2009-06-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Since 2003, the United States has provided $49 billion to help rebuild Iraq. To build the capacity of Iraq's central and provincial governments to sustain this effort, the United States is implementing programs including Department of State's (State) Provincial Reconstruction Development Committee (PRDC) and the U.S. Agency for International Development's (USAID) National Capacity Development (NCD). The use of key management controls, such as appropriate organizational structure and program monitoring, helps ensure programs achieve their objectives. Through field visits in Iraq, interviews with program officials, analyses of official reports, and examination of a sample of projects, we assessed whether the PRDC and NCD's management controls support the programs' objectives of building the capacity of Iraq's government. We also assessed Iraq's commitment to sustaining these U.S. programs.
section_title: What GAO Found
paragraphs: Through the PRDC program, State and USACE work with Iraqis in the provinces to develop proposals and undertake small-scale projects such as building schools, repairing roads, and developing water facilities. However, weaknesses in State's management controls hinder achieving the program objective to build provincial government capacity. First, the program involves multiple organizations and a complex process but had no clearly identified program manager until May 2009 when State designated one in response to GAO's findings. Second, State lacks a performance monitoring system that measures progress toward building provincial capacity to deliver essential services. Third, the program's guidelines and policies have changed frequently, but State did not adequately communicate or consult with the USACE, the program implementer, about these changes. Finally, USACE's financial controls for the timekeeping process did not ensure adequate documentation of time and attendance records for labor charges on projects. USAID's management controls generally supported the NCD program's objective of building ministry capacity by training Iraqi employees in administrative skills such as planning and budgeting and supporting Iraqi training centers. First, USAID's organizational structure is clear, including who is responsible for overall program management. Second, in response to an audit report, USAID narrowed the NCD program objective to improving ministries' administrative capabilities and clearly linked them to measures of outcome. Some of these measures include Iraqi ministries' execution of their capital budgets, including the number of capital projects approved and the rate of spending on capital projects. USAID reported it was on track to meet or exceed its 2008 targeted results. However, as of March 2009, final data on results were not available. Third, USAID's guidelines and program expectations for NCD are documented, clear, and communicated throughout the organization. However, with regard to financial controls, GAO found that USAID officials did not confirm receipt of goods and services for invoices totaling about $17 million of $79 million, prior to payment. The officials did not always document reasons such as security risks, when confirmation was not possible. Iraq has committed to sustaining U.S.-funded programs and sharing in their costs, but actual budget expenditures for such activities are unclear. For the PRDC program, 16 of the 40 projects in our sample had evidence that the Iraqi government agreed to sustain the project; however, the records did not specify actual financial or budget commitments. For the NCD program, the Iraqi government is supporting the program by providing trainers and allocating funds in their 2009 budgets for training center equipment and other NCD efforts. These funds are to be spent in 2009. We have previously reported that the Iraqi government includes funding in its budgets for investment activities such as operating and maintaining U.S.-funded reconstruction projects and training, but does not subsequently expend these funds.

section_title: Letter
paragraphs: Since 2003, the United States has provided $49 billion to rebuild and  stabilize Iraq, including the reconstruction of large water and power  plants. Since fiscal year 2008, U.S. agencies have stated that reconstruction  has ended and the focus will be on helping Iraq build a sustainable,  accountable, and responsive government that can maintain and continue  U.S. efforts. Two programs intended to build the capacity of Iraq’s  government are the Department of State’s (State) Provincial  Reconstruction Development Committee (PRDC) program and the U.S.  Agency for International Development’s (USAID) National Capacity  Development (NCD) program. The PRDC program funds and implements  Iraqi proposals for small-scale projects such as schools, road repair, and  water facilities in Iraq’s provinces. By having Iraqi officials develop and  agree on proposals, State intends to build provincial and local government  capacity to identify, plan, and deliver essential services. The NCD program  trains Iraqi government employees in administrative skills such as  planning and budgeting and supports Iraq’s national and regional training  centers and individual ministry training programs. Finally, the NCD  program advises Iraq’s national ministries, including the electricity, oil,  water, and planning ministries. The PRDC and NCD programs are funded  through the Economic Support Fund (ESF) for Iraq. The PRDC program  received $700 million in ESF funds between November 2006 and February  2008. The NCD program received $209 million in ESF funds in July 2006,  and another $59.8 million in September 2008 and is scheduled to end in  January 2011.
A key factor in U.S. agencies’ ability to achieve their missions and improve  accountability is the implementation of appropriate management controls.  Management controls help provide reasonable assurance that programs  are focused on and can achieve their objectives. Key controls include (1) a  clear organizational structure with adequate managerial and staff capacity  that establish an effective control environment; (2) monitoring systems  that track progress toward achieving desired outcomes; (3) policies and  procedures that ensure management directives are carried out and the  prompt communication of those policies and procedures; and (4) financial  controls that accurately record and document financial transactions in a  timely manner.
This report uses management control elements as criteria to evaluate the  PRDC and NCD programs. Specifically, we assessed whether (1) PRDC’s  management controls support the objective of building provincial  government capacity, (2) NCD management controls support the objective  of improving the capabilities of national ministries to develop budgets and  programs, and (3) State and USAID ensure that the Iraqi government is  committed to sustaining the PRDC and NCD program efforts. Due to broad  congressional interest in issues related to Iraq, we completed this report  under the Comptroller General’s authority to conduct evaluations on his  own initiative.
To assess the management controls, we analyzed project contracts,  program files, agency reports, guidelines, financial and programmatic  databases, and assessments for both the PRDC and NCD programs. We  interviewed officials at State, USAID, and U.S. Army Corps of Engineers  (USACE) in Washington, D.C.; Millington, Tennessee; and Winchester,  Virginia. In Iraq, we interviewed officials in the Iraq Transition Assistance  Office (ITAO), the Office of Provincial Affairs (OPA), the Gulf Regional  Division (GRD) and its district offices, at USAID in Baghdad, and the NCD  training compound in Karada. We also selected 40 PRDC construction  projects that were initiated with fiscal years 2006 and 2007 funds to  examine the project monitoring conducted, the process used to implement  the projects, and challenges to implementing them. We visited several  projects in Babil, Baghdad, Basra, Muthanna, and Thi Qar provinces to  verify the information and observe project implementation. To evaluate  U.S. efforts to ensure Iraqi government commitment to sustaining U.S.  program efforts, we analyzed two elements of commitment—letters or  other evidence that the Iraq government pledged to sustain or maintain the  programs and projects and evidence that the Iraqi government is sharing  the cost of U.S. efforts.
We conducted this performance audit from March 2008 to June 2009 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives. A detailed description of our scope and  methodology is included in appendix I.
subsections: section_title: Background
paragraphs: To help Iraq assume responsibility for sustaining U.S. reconstruction  efforts, U.S. agencies are implementing programs to build the capacity of  Iraq’s central and provincial governments, including State’s PRDC program  to strengthen the capacity of Iraqi provincial governments to deliver  essential services such as water and electricity and USAID’s NCD program  to assist the Iraqi government in improving the administrative capacity of  several ministries and executive offices through training.
subsections: section_title: Provincial Reconstruction Development Committee Program
paragraphs: In 2005, the United States created PRDCs to give the provinces a voice in  deciding how to spend U.S. reconstruction funds for Iraq. The PRDCs  comprise members of Iraq’s Provincial Councils, representatives of the  governor, and the Director Generals of Iraq’s Central Ministries. The PRDC  role is to identify needs within their province, prioritize the needs, and  develop a list of projects to address those needs. The primary U.S.  objective of the PRDC program is not reconstruction but strengthening the  capacity of Iraqi provincial governments to develop and implement  essential service projects, according to State.
Congress appropriates funds to State, which are used, for the PRDC  program to State, and the USACE’s Gulf Regional Division (GRD)  implements the program. ITAO coordinates and oversees the selection  process for specific projects and according to State provides overall  program management, and GRD provides project management.  The  Office of Provincial Affairs within the U.S. Embassy Baghdad provides  policy guidance and support to the Provincial Reconstruction Teams  (PRT) program. The PRTs serve as the coordinating body for this funding,  assisting PRDCs with identifying, prioritizing, and developing project  request packages. Each PRDC creates a prioritized list of reconstruction  projects that address provincial needs; these are then discussed in a public  forum. The project list is submitted to the Provincial Council for review  and approval. Approved projects are forwarded to the PRT provincial  program manager who reviews them to ensure they meet U.S. government  policies and legal requirements. The PRT provincial program manager  forwards the list to ITAO for review and approval. The National Embassy  Team reviews and approves projects. The Gulf Region Division (GRD)  scopes, estimates, bids, and awards project contracts. As the implementer,  GRD assists ITAO by providing program and project oversight, which  includes awarding contracts and providing quality assurance and quality  control. The PRT engineer provides teaching, mentoring, training,  guidance, and support for the PRDCs in preparing scopes of work, bills of  quantities, estimates, and project nomination forms. The program funds  small-scale projects proposed by the PRDCs, including water and electric  plants, roads, bridges, schools, health clinics, airports, and fire stations.  For fiscal year 2007 funds, the PRDC program shifted focus to provide  funds to help provincial governments sustain and plan essential service  projects. Figure 1 is an example of a PRDC project we visited in Iraq in  November 2008.
Through three interagency agreements between State and USACE, State  obligated $700 million for fiscal years 2006 and 2007 to reimburse the  USACE for costs incurred and awards made for the PRDC program.  Specifically, State obligated $315 million and $385 million for fiscal years  2006 and 2007, respectively, under the agreements.
As table 1 shows, for fiscal year 2006, USACE had entered into contracts  to implement the program totaling about $259 million and about 135 out of  213 projects had been completed by April 2009, according to GRD. For  fiscal year 2007, USACE had entered into contracts amounting to about  $207 million and about 40 out of 185 projects had been completed by April  2009, according to GRD.
section_title: National Capacity Development Program
paragraphs: In July 2006, USAID created the National Capacity Development (NCD)  program to build the capacity of Iraq’s central government. The program  focuses on building the skills and capabilities of several Iraqi government  executive offices, such as the Prime Minister’s Office, and 10 key Iraqi  ministries, such as the Ministries of Electricity, Oil, and Water. Key tasks  include (1) raising the skill levels of Iraqi public managers in project  management, fiscal management, human resources, budgeting, and  information technology; (2) advising key ministries in strategy  development, program planning, and capacity building; and (3) expanding  the Iraqi government’s training capacity at its national training center and  in the provinces. Additional activities for the program included providing  equipment, furniture, and support to develop Iraq’s training centers, and  providing overseas scholarships to Iraqi civil servants. To help reform the  Iraqi government’s procurement system, USAID purchased equipment for  administrative tribunal courtrooms at the Ministry of Planning and  Development Cooperation, which rules on disputes over Iraqi government  contract awards (see figure 2).
USAID is responsible for the NCD program and has hired a contractor,  Management Systems International, to implement the program. The initial  contract was for $165 million for a 3-year period. Various modifications  increased the program funding, changed the scope of work, and extended  the completion date to January 31, 2011. A modification made in  September 2008 increased the total contract amount to $339 million.  According to the USAID’s financial management system, as of April 2009,  the program has obligated $259 million, and of that amount about $152  million has been disbursed.
section_title: State Cannot Ensure That the PRDC Program Is Achieving Its Objective to Build Capacity
paragraphs: State’s PRDC program has management control weaknesses in  organization, monitoring, and communication that hinder the achievement  of its goal of building provincial government capacity. First, State’s  organization of the program does not clearly define who is responsible for  the overall management of the program, and the multistep process for  implementing the program adds to this ambiguity. Second, State lacks a  performance monitoring system that measures progress toward building  the capacity of provincial governments. Third, State’s guidelines and  policies have changed frequently, as has the direction of the program, but  State did not fully communicate or consult with program implementers  about these changes. Finally, USACE labor costs for the program are not  always supported by adequate documentation, increasing the risk that  USACE’ requests to State for reimbursement of labor costs may be  overstated or understated.
subsections: section_title: PRDC’s Organization Does Not Clearly Delineate Responsibility, and the Program Has Experienced Staffing Challenges
paragraphs: Management control standards require a well-managed and properly  structured organization that clearly delineates authority and responsibility.  In addition, management control standards call for qualified staff in place  without excessive personnel turnover in key functions, such as program  management, to implement proper management controls.
subsections: section_title: State’s PRDC Program Lacked a Manager to Oversee Program Challenges
paragraphs: State’s PRDC program has multiple entities responsible for managing parts  of its complicated, multistep process to approve and implement projects.  However, no single program manager was clearly responsible for overall  management of the program until May 2009, when State designated one in  response to GAO’s findings. The PRDC process for approving and  implementing projects includes at least 7 entities and 7 steps involving  project development, project management, and project execution. Figure 3  illustrates the PRDC’s complex organizational structure and process as  reported by State.
Until May 2009, no single entity was accountable for the program in its  entirety or responsible for ensuring that the program’s objectives were  met. For instance, although ITAO has a PRDC program manager, in  response to an October 2008 report on ESF in Iraq, State indicated that  ITAO coordinates and oversees project selection. The other entities also  do not have responsibility for managing and ensuring that the overall  program objectives are met. For instance, the Provincial Reconstruction  Teams (PRT), through the PRT provincial program manager and PRT  engineer, focus on helping the PRDC identify, prioritize, and develop  project proposals. The PRDCs create prioritized lists of reconstruction  projects that are submitted to the Provincial Council for review and  approval. According to a State document, the PRT provincial program  manager guides the process; however, a PRT provincial program manager  is located at each PRT and therefore guides the process for that individual  PRT and does not manage the entire process. ITAO and the National  Embassy Team review and approve projects and then forward these to the  program implementer, the USACE Gulf Regional Division (GRD). GRD  focuses on scoping projects, estimating their costs, receiving bids,  awarding projects, and providing quality assurance and quality control. As  a result, no entity was responsible for managing the overall program and  ensuring the program’s goals are achieved.
Without an overall program manager, no one oversees the entire program  process and has overall responsibility for addressing systemic problems  such as coordination issues. For instance, although coordination between  U.S. and Iraqi officials is essential to building provincial capacity, it  remains one of the program’s key challenges. In our sample of 40 PRDC  projects, we found that about 16 projects had problems coordinating with  local Iraqi authorities. For example, determining and verifying land  ownership is a major challenge in Iraq and is one of the most common  causes for delays in awarding project contracts. In another instance, a $1.5  million potable water network to service Baghdad’s Mansour district lost  nearly 7 months waiting for the necessary building permits and test  results. Other coordination challenges have also resulted in delays, cost  increases, and project terminations. For example, on a $1.4 million  Baghdad water network project, a local government office did not follow  established guidance in requiring certain technical tests to be performed  and rejected subsequent test results because they were conducted by an  independent laboratory. The municipality suspended all work at the site  and threatened to arrest personnel who continued to work. With about  $400,000 already spent, the project is in the process of being terminated. In  May 2009, State designated ITAO as the program manager in response to  one report finding.
section_title: PRDC Has Experienced Staffing Changes and Shortages
paragraphs: Both ITAO and GRD have staffing challenges. Our review of ITAO  documents found that ITAO’s PRDC point of contact, who coordinates and  oversees the selection process for specific projects, changed six times  since December 2006. Specifically, from January 2008 to September 2008,  ITAO had three different PRDC managers. According to GRD, these  frequent changes in ITAO’s PRDC managers contributed to inconsistent  information about program direction. For example, in January 2008, when  the PRDC program shifted from building infrastructure to helping  provincial governments in sustaining and planning essential services, ITAO  failed to consult GRD about developing a new program management plan  until September 2008.
Gulf Region South officials stated that they have had difficulty obtaining  staff with the skills and training to manage reconstruction projects. To  address staffing shortages, Gulf Region South hired Iraqi associates to  inspect projects in the field. In addition, Iraqi associates have been hired  to contribute to a trained local work force, build local infrastructure, and  ensure continued project sustainability, according to USACE officials.  During our site visits, we observed that the Iraqi engineers were able to  visit the sites more frequently, and because they spoke Arabic, they could  interact with the Iraqi contractors. Senior GRD management stated that  Iraqi workers have been essential, particularly when security conditions  deteriorated.
section_title: PRDC Program Lacks a Monitoring System to Track Performance Toward Building Provincial Capacity
paragraphs: Standards for management control require performance measures and  indicators to monitor progress in achieving program objectives.
The PRDC program has no performance measurement system to assess  whether the program is achieving its objective of helping build provincial  government capacity to deliver essential services, according to State  officials. According to an October 2008 State report, PRDC program  accomplishments are measured by the number of projects completed and  awarded and amount of funds disbursed. However, this is a measure of  State’s ability to obtain and use U.S. funds. The indicator does not provide  information about the extent to which U.S. efforts build the capacity of  provincial governments to deliver essential services, particularly since  only U.S. funds are involved in program funding. Further guidance for  PRDC states that the program’s capacity building will be demonstrated  when operations and maintenance services and provincial planning  projects are identified and programmed into the provincial budgets for  2008. However, at the time our review, ITAO and the Office of Provincial  Affairs (OPA) could not provide us with this information.
PRT engineers are responsible for assisting PRDC officials by teaching,  mentoring, training, guiding, and supporting the preparation of all project  scopes of work, bills of quantities, estimates, and project nomination  forms. During site visits, we found that PRT engineers conducted training  through the local GRD district offices to help Iraqi contractors prepare  technical contract proposals. Similarly, OPA provided anecdotal examples  to show how PRT engineers are building capacity in two provinces.  However, these examples cannot be reliably used to track progress and  outcomes in building capacity.
Although there is no system to monitor program outcomes, GRD tracks  project implementation through the Resident Management System. For  example, based on a random sample of 40 projects, we found that 16  projects had missed their milestones; 9 projects were on or ahead of  schedule; 6 projects had construction cancelled or terminated; and  6  projects had been completed and accepted by the U.S. government for  transferring to the Iraqi government. The most common challenges cited in  these projects were contractor inefficiency, poor security, and  coordination with local Iraqi authorities. Over two-thirds of the 40 projects  we analyzed described numerous problems with contractors’ work. The  challenges of conducting reconstruction work in a conflict environment  hindered PRDC project execution in nearly half of the projects in our  sample. For example, according to officials, dangerous security conditions  in Maysan province prevented regional office U.S. personnel from visiting  any projects in that province for an 18-month period ending in September  2008. In December 2008, a senior official at the U.S. embassy in Baghdad  said the embassy was creating an official process for obtaining the status  of all U.S.-funded reconstruction projects with problems that would  include a review of the project schedule, budget, project status, and  project quality. However, these indicators will not monitor or assess U.S.  efforts to build the capacity of provincial government officials to deliver  essential services.
In commenting on a draft of the report, State agreed with the need to  develop outcome measures of effectiveness. State proposed measures to  track the length of project development, procurement, contracting,  execution, and oversight process to see if it improves over time, as well as  the quality of the projects completed. Other possible measures included  the degree of constituent input in the project selection process, the degree  of transparency and anti-corruption measures in the contracting process,  the separation of powers between the executive and legislative, and the  rate of Ministries, to follow-through to budget for and sustain the projects.
section_title: Frequent Changes in PRDC Guidelines Were Not Adequately Communicated
paragraphs: Effective management controls call for the design and implementation of  policies and procedures to ensure that management directives are carried  out and that information is communicated clearly and in a timely fashion.
ITAO issued PRDC program guidelines through action memorandums that  specified funding allocations, types of projects that would be approved,  priorities, and the general process for project approval. However, the  guidelines were revised or clarified six times between August 2006 and  July 2008. The program implementer—GRD—expressed concern about  these frequent changes, particularly the lack of communication and  consultation. In addition, according to a senior GRD official, ITAO had not  communicated adequately and consistently about the guidelines and  changes. For example, in January 2008, State shifted the focus of the  PRDC program from building infrastructure to maintaining and sustaining  projects. According to ITAO officials, State emphasized sustaining local  operations and maintenance services of U.S.-procured infrastructure,  strategic planning for the infrastructure projects, and capacity building for  provincial governments’ professional staff. However, according to GRD  officials, ITAO waited until September 2008 to consult with GRD on  developing a new management plan to implement these changes. As a  result, according to GRD documents, in 2008, the GRD district offices  developed 109 project proposals with a value of $158 million. According to  a senior GRD official, staff wasted resources developing these  infrastructure project proposals because these projects were no longer the  focus of the program.
In commenting on a draft of this report, State indicated that GRD was  involved in planning at an early date and that GRD received copies of all  changes to the PRDC program via memos. However, according to GRD  officials, in July 2008, ITAO directed the National Embassy Team to  approve projects for award without any GRD involvement in the approval  process. As of May 2009, GRD officials stated that the limited involvement  of GRD in the strategic planning process for the PRDC program has  hindered the ability of GRD to understand the shifts in program focus and  realign resources in an efficient and effective manner to meet the needs of  State Department and the program.
section_title: PRDC Labor Cost Could Be Overstated or Understated
paragraphs: Standards for internal control call for federal agencies to retain evidence  that transactions and events are appropriately classified and promptly  recorded throughout the life cycle of each transaction, including final  classification in summary records from which reports are prepared.
Our tests of USACE’s established controls to help ensure financial  accountability for the PRDC program identified deficiencies in the  maintenance of adequate documentation to support labor costs that  USACE charged to PRDC projects. Inadequate documentation highlights a  control weakness that may cause the USACE reported cost for specific  PRDC projects to be inaccurate. Further, USACE’s requests to State for  reimbursement of labor costs may be overstated or understated. Our  review of time and attendance records for 152 USACE employees, totaling  about $2.5 million in net labor charges to 36 PRDC projects, disclosed that  about 26 percent of these charges did not have adequate supporting  documentation.
Our review disclosed that APPO timekeepers’ files did not contain  complete time and attendance records. USACE procedures require  timekeepers in Iraq to send time and attendance documentation to the  Administrative Personnel Processing Office (APPO) in Winchester,  Virginia, for data entry into the USACE financial management system and  retention in APPO files. We also found instances where the hours on the  time and attendance records that were located did not agree with the  hours entered into the USACE financial management system. However,  neither we nor the APPO staff could readily determine the reason for these  inconsistencies. Furthermore, a November 2008 APPO review of time and  attendance practices in Iraq also identified problems regarding the  accuracy of labor hour charges to PRDC projects. For example, the  review disclosed that employee supervisors did not routinely verify that  hours entered into the financial management system agreed with hours on  original time and attendance records. USACE officials also stated that,  although certain managers were authorized to correct labor charges that  were incorrectly charged to a project in a prior pay period, evidence of the  correction was not required to be maintained in the APPO timekeepers’  files because APPO timekeepers were not responsible for recording these  corrections in the financial management system. Additionally, an APPO  official stated that, in 2006 and 2007, APPO timekeepers sometimes  discarded original time and attendance records when corrected time and  attendance records were subsequently received to avoid having two or  more time and attendance records for the same pay period. Although the  official explained that the current procedure is to attach corrected copies  of time and attendance documentation to the original documentation,  these procedures have not been formally documented. Discarding original  time and attendance records precludes the ability to determine why  corrections were made to the original entry.
GRD program managers use financial reports derived, in part, from time  and attendance records and adjustments to monitor a project’s financial  status and labor resources expended. In addition, USACE uses time and  attendance data to bill State for reimbursement of PRDC labor costs in  accordance with an interagency agreement between the USACE and State  that provides funding to USACE to implement the PRDC program. The  APPO November 2008 review noted that some steps were being initiated  to help improve the documentation of time and attendance transactions,  which, if successfully implemented, should help improve time and  attendance internal controls.
However, as of January 2009, APPO informed us that time and attendance  reporting problems continue to be identified. To help improve  timekeeping, in April 2009, the GRD Finance and Accounting Officer  informed us that the timekeeping function would be moved from APPO to  the GRD office in Winchester, Virginia, by May 2009. According to the GRD  Finance and Accounting Officer, the intent is to hire a team of three  people to work exclusively on timekeeping matters with personnel in Iraq  to increase timekeeping accuracy. APPO had been tasked with preparing  personnel for deployment and travel in addition to timekeeping. We were  also informed that the timekeepers are being trained on labor costing and  the importance of proper labor charging. In addition, the GRD timekeepers  will be responsible for documenting timekeeping problems and informing  personnel in Iraq about needed improvements.
section_title: NCD Management Controls Support the Goal of Building the Capacity of Iraqi Ministries but Do Not Adequately Verify Expenditures
paragraphs: The goal of USAID’s NCD program is to build the planning and  administrative capacity of Iraqi ministers and officials. The organization of  the program clearly lays out roles and responsibilities of key players in  training and consulting with Iraqi ministries and identifies the reporting  chain up to the individual responsible for the overall program. In response  to a 2008 USAID Inspector General report, USAID scaled back the NCD  program objective of improving ministry service delivery to more  achievable objectives such as improving the ministries’ administrative  systems and budget execution. For 2008, NCD monitors and tracks both  outputs and outcomes for its new objectives and provides regular  reporting on the results. USAID’s polices and procedures provide guidance  for implementing the program by laying out explicit expectations for  contract modifications and task orders in USAID’s automated directive  system. Nevertheless, we found that the controls for documenting  program expenditures are weak; we found invoices totaling about $17  million that did not have confirmation of receipt.
subsections: section_title: NCD’s Organization Provides Clear Lines of Accountability and Authority and Is Increasingly Relying on Iraqis to Execute the Program
paragraphs: The organization and structure of the NCD program is clearly laid out, and  related guidance details the roles of the key players. The units responsible  for training Iraqi officials and working with the ministries are clearly  identified, and the chain of command is unambiguous. Figure 4 shows the  organization of the NCD program.
As the figure shows, the director of the Capacity Building Office (CBO) in  Iraq has overall responsibility for the program. The deputy director  coordinates the program and acts as the liaison with the Iraqi government  and the U.S. agencies in Iraq, according to NCD guidance. The deputy  director directs and coordinates NCD activities through the contractor  chief of party, who is responsible for training Iraqi civil servants,  consulting at the ministries, developing Iraqi training centers, and  completing progress reports as requested by USAID.
To carry out these activities, the program relies on Arabic-speaking  employees for all aspects of its operations. As of February 2009, NCD  program staff comprised 278 contract staff, of which about 70 percent are  Iraqi nationals and the rest are expatriates from the United States and  third countries. These staff work within Iraqi ministries, including the  Ministries of Planning, Health, Agriculture, Oil, and Electricity. The staff  also conducts training at three U.S. compounds in Baghdad and assists in  developing the training programs at Iraqi provincial training centers in  Basra, Ramadi, and Hilla. According to USAID, early in its implementation,  the program faced the challenge of recruiting qualified Arabic-speaking  instructors and training advisors who would reside in Baghdad under the  security conditions present in Iraq in early 2007. To address this challenge,  the program emphasized hiring qualified Iraqis to teach these courses,  such as at the Karada compound we visited in October 2008 (see figure 5).  By the end of its second year, the NCD program trained more than 25,000  Iraqi civil servants in project management, accounting, and risk analysis,  according to a USAID report.
section_title: USAID Monitors NCD Program Impacts but Had to Revise Overall Objectives
paragraphs: USAID uses a results framework with indicators that measure program  outputs and outcomes to monitor progress toward program objectives.  Through this framework, USAID reviews program activities, makes  corrections to identified problems, and responds to audit reports. During  the second year of the NCD program, USAID revised its indicators in  response to a November 2008 USAID Inspector General’s report stating  that the NCD program did not have indicators to measure the program’s  impact in improving key ministries’ delivery of core services. For  example, USAID measured many of its output goals such as training Iraqi  employees, establishing regional training centers, and awarding  scholarships. However, there were no outcome indicators to measure the  achievement of USAID’s goal to build the capacity of key Iraqi ministries  to deliver core services. As a result, USAID narrowed its overall program  indicators and stated it would begin to track the budget execution rates of  Iraqi ministries such as the percentage of ministries’ approved budget that  is spent. For example, USAID will now monitor the value of capital  projects approved, the number of capital projects approved by the  Ministry of Planning, and the rate of capital projects implemented.
In 2007, 3 out of the 20 NCD program accomplishment indicators were  output—or numeric—goals, such as number of civil servants trained or the  number of scholarships awarded. However, in 2008, the NCD program  emphasized the measurement of results and included additional outcome  indicators in its accomplishment reporting. For instance, 14 out of the 24  indicators measured outcomes, or actual improvements. Some of the  outcome indicators for 2008 included the extent to which trainees were  using their new skills at work and saw related improvements at their  office; whether the ministries were implementing improved fiscal  information technology systems, based on USAID contractor’s  recommendations; and the extent to which ministries and the Iraqi  government’s public administration training center, the National Center  for Consultation and Management Development, were initiating their own  training. Table 2 provides examples of these indicators and our reason for  considering these to be outcome indicators.
USAID has been compiling data on the 2008 overall results for   (1) strengthening public management skills, (2) establishing more effective  administrative systems, and (3) expanding the Iraqi government’s training  capacity. In October 2008, USAID reported that some target measures  were exceeded, some were not achieved, and several were on track. For  instance, the program did not achieve its target for significant  improvement reported by graduates within their ministry or unit. We  observed and participants told us during our site visits in October 2008  that many of the trainees were lower-level employees who lacked the  authority to implement their new skills within the units to which they  returned after training. USAID reported that ministries were either on  track to meet or had exceeded other results to establish more effective  administrative systems for 6 of 7 indicators. USAID stated it had achieved  or exceeded targeted results for 8 out of 10 indicators to expand the Iraqi  government’s capacity to train its own officials. However, the results were  not complete at the time of our review so we could not independently  assess them.
section_title: NCD Policies and Guidance Provide Direction for Implementing the Program
paragraphs: Polices and procedures for the NCD program are documented and  accessible. USAID programs are required to follow the mandatory  guidance in the automated directives system (ADS), which includes USAID  internal policy and required procedures as well as external regulations.  Agency employees must adhere to these policy directives and required  procedures. For example, ADS chapter 596 gives management  responsibility for internal controls and provides the policy and required  procedures to improve the accountability and effectiveness of USAID  programs by establishing, assessing, and reporting on internal controls. In  addition, ADS chapter 253 provides guidance for designing and  implementing training and capacity building programs. The chapter  includes guidance on assigning primary responsibility for the program;  host country responsibilities for the program; and requirements for data  collection, reporting, and monitoring of the program and participants.
The NCD contract and its contract modifications provide specific guidance  and expectations for implementing the program. For example, the first  task order implementing the contract called for six major tasks, a list of  responsibilities assigned to each major task and deadlines from within   30 days to 24 months for these assignments. The assignments included  assisting the Iraqi government in developing its own capacity-building  strategy, training government of Iraq employees at specific ministries,  introducing standard training modules for regional training centers, and  sending at least 50 Iraqis abroad to work on degrees or certificates related  to public administration. Subsequent modifications added tasks based on  the capacity-building needs of the ministries and Iraqi government. For  example, a September 2007 modification expanded ministerial capacity  development teams and placed project management units in key ministries  and institutions.
Communication of the results occurred regularly and the contractor was  required to provide weekly, monthly, quarterly, and annual reports on  program implementation. We reviewed annual, quarterly, and monthly  reports for 2006 through 2008 and some of the weekly reports. These  reports documented program statistics on training, consulting with  ministries, provision of equipment, and other activities. The reports also  reported on challenges to implementing the program. For example, in  2007, the security situation in Iraq, including the inability to visit ministries  and send Iraqis to training, was a major challenge to implementing the  program. Other challenges included high staff turnover and the difficulties  in acquiring skilled staff fluent in Arabic, which USAID has addressed by  hiring local Iraqis. Longer-term challenges included dealing with extensive  capacity needs at the ministries, while identifying ministries and  individuals willing to implement reforms.
section_title: Weaknesses Identified in NCD Financial Controls Over Contract Payment Process
paragraphs: Under USAID policy, an approving officer, usually the cognizant technical  officer, performs administrative approval, which provides written  evidence that USAID received the services or goods specified on the  contractor’s invoice prior to payment, and fills out a checklist to support  administrative approval. The checklist is on the USAID Administrative  Approval Form and Checklist and includes six different options for  supporting administrative approval. Between April 2007 and June 2008,  USAID received 18 invoices from the NCD contractor totaling about $79  million. We found that the cognizant technical officer did not check off the  option indicating receipt of contractor services on the form for  administrative approval for 6 of these 18 invoices, totaling about $17 of the  $79 million. Instead, the cognizant technical officer indicated that  acceptance of the contractor’s services was based on meeting(s) between  the officer and contractor personnel during which the contractor’s  performance was discussed. Thus, the cognizant technical officer  appeared to rely on the contractor’s statements that the billed services  were provided to authorize payment of the bill. Although the  Administrative Approval Form and Checklist provides an option for an  officer to confirm the receipt of goods or services by marking the  appropriate place, instructions do not require confirmation of receipt. For  example, the instructions direct the officer to mark as many reasons on  the form as possible to justify acceptance of the contractor’s services, and  that at least one reason on the checklist must be checked for  administrative approval of the contractor’s invoice. Not requiring the  confirmation of receipt invalidates this internal control and could  circumvent the regulatory and GAO internal control standards that require  confirmation of receipt prior to payment.
The instructions for the form do not require an explanation if confirmation  of receipt is not possible. According to USAID officials, there is a  reasonable likelihood that security risks may arise that make confirming  the receipt of services impossible due to prohibitive personal danger or  security protection costs. If these conditions are not documented, USAID  managers cannot readily monitor the extent to which invoices were paid  without confirmation of receipt or take other measures to ensure that the  government’s interest is protected.
USAID policy also requires verification of the pricing and computations on  a contractor’s invoice and assigns this responsibility to the financial  voucher examiner. We found that USAID did not have reasonable  assurance that the voucher examiner completed this function because  many of the contractor’s invoices showed no indication that the examiner  had performed any verifications, causing a lapse in the internal control to  detect any errors in contractor billings. Furthermore, USAID policy did not  specifically address the documentation that voucher examiners should use  to support their analysis of contractor invoices. However, the USAID  Deputy Controller in Iraq stated that, as of November 2008, voucher  examiners began using a form to document their analysis of contractor  invoices. It is too early to determine whether this form has been an  effective control to prevent improper payments to the contractor.
We observed that the complexity of these invoices and the process of  verifying pricing and computations against the terms of the contract are  unwieldy. This increases the risk that the voucher examiner’s review may  not prevent improper payments. For example, two of the contractor’s  invoices were more than 100 pages and listed numerous labor-hour costs  and other direct costs, including a variety of footnotes and adjustments.  Invoices listed the number of hours that specific individuals worked on the  NCD program and numerous labor hours for administration. In addition,  the cost of equipment purchases was not easily identifiable, if at all.  Furthermore, the Defense Contract Audit Agency identified problems with  certain NCD contractor costs billed to USAID.
section_title: Iraq Has Agreed to Sustain the Programs and Is Providing Some Support for NCD, but Budget Expenditures Are Unclear
paragraphs: Iraq committed to sustaining U.S.-funded projects and programs and  sharing in their costs in several official documents and the International  Compact for Iraq. For example, we found that Iraqi government officials  had signed letters agreeing to sustain many of the PRDC projects in our  sample. The documents, however, do not specify dollar amounts or other  resources to do this. For the NCD program, two Iraqi ministries signed  memorandums of understanding for support of the program and eight  other ministries developed capacity-building strategies that incorporated  NCD materials. Iraq also demonstrated its commitment to U.S. efforts by  expanding the NCD training program and starting its own training  programs in some ministries. Several ministries also made 2009 budget  commitments to continue the NCD training and provide equipment for  training centers, among other efforts. These amounts are due to be  expended during 2009. However, our past work has found that, although  Iraq budgets for investment and sustainment activities, it may not spend  the budgeted funds.
subsections: section_title: The Iraqi Government Has Committed to Operate and Maintain PRDC Projects and Is Supporting NCD Efforts
paragraphs: For the PRDC program, 16 of the 40 projects we reviewed had indications  that the Iraqi government agreed to sustain the projects; however, none of  the records we examined included specific funding or resource  commitments that would allow a check against actual Iraqi budgets and  expenditures. For fiscal year 2007 project funds, U.S. guidance required  that all PRDC project proposals include a letter of sustainment from the  appropriate Iraqi government office. However, in response to our request,  ITAO provided only 10 of the 12 letters of sustainment for fiscal year 2007  projects in our sample. For fiscal year 2006, 6 of the 28 projects in our  sample had evidence of Iraqi government commitment to sustain the  projects. Letters of sustainment indicate Iraqi government approval for  the design and construction of the project and an agreement to accept  staff, operate, and maintain the project. For example, on a 2007 PRDC  project to convert river water to drinking water, the Director General of  the Wasit Water Directorate signed a letter agreeing to staff, operate, and  maintain the water plant, once completed. For a 2007 PRDC project to  build four electrical feeders, the Director General of Electricity agreed to  prepare and submit an annual budget to the Ministry of Electricity to  operate and maintain the project.
The Iraqi government has agreed to support some NCD efforts. For  example, the Ministry of Electricity pledged to provide ongoing support  for NCD efforts; sustain projects funded in whole or part by NCD; and  provide staff to NCD, including finance and accounting specialists, power  generation engineers, maintenance engineers, and others. Commitments  from other ministries have been demonstrated by their actions to develop  capacity-building plans with NCD assistance. In October 2007, we reported  that not all U.S. capacity development efforts were clearly linked to the  needs and priorities identified by the Iraqis, which may reduce the  sustainability of U.S.-funded efforts. USAID has attempted to identify  Iraqi government needs and obtain official government commitments by  helping the ministries develop their own capacity-building plans. As of  January 2009, eight ministries, plus the Prime Minister’s Office and the  Council of Ministers’ Secretariat, had developed capacity development  plans with NCD assistance. Based on ministry self-assessments that  identify Iraqi needs and priorities, the plans emphasized the Iraqi  ministries partnering with the U.S. government on budget execution,  training in project management, strategic planning, human resources, and  fiscal management. For example, the Prime Minister’s Office, as result of  developing its capacity development plan in 2007, developed a new  organization structure, job descriptions, and a strategy for the office.
Iraqi ministries have also demonstrated commitment to NCD’s train-the- trainers program, and five ministries have started their own training  programs. USAID stated that the Iraqi government is increasingly taking  over USAID’s training. For example, according to USAID’s contractor, as  of May 2008, Iraqi government staff who had graduated from USAID’s  courses and received additional train-the-trainer courses taught more than  half of all monthly courses. Iraqi government staff trained by USAID  contractors taught 14,720 (over 54 percent) of 27,127 course participants  trained through September 2008. Moreover, as of September 2008, the Iraqi  government’s National Center for Consultancy and Management  Development delivers all train-the-trainer and core public administration  courses in project management, budgeting, procurement, and strategic  planning. The center has developed a tool to assess trainers and  established a monitoring and evaluation unit to assess the impact of its  training programs.
section_title: Iraqi Budget Expenditures for PRDC and NCD Programs Are Unclear
paragraphs: State’s PRDC 2006 guidance states that U.S. assistance will be matching in  nature to ensure commitment and investment from the provincial  government. PRDC program guidelines for fiscal year 2007 ESF funds  further state that the development of capacity building would be  demonstrated when projects are identified and programmed into Iraq’s  2008 provincial budgets. In its 2007 International Compact, Iraq stated that  any new development programs should be co-financed by Iraq to leverage  Iraq’s own resources and provide a framework for mutual accountability.
ITAO officials could not provide support that specific PRDC projects have  been co-financed or that the Iraqi government budgets contained operating  and maintenance funds for these projects. In August 2008, GRD officials  stated that Iraq had not provided any cost-share funds for implementing  fiscal year 2006 and fiscal year 2007 PRDC projects to date. Moreover,  according to a GRD official, the Iraqis have been unable to meet their  commitments to sustain PRDC projects because the central ministries  have not budgeted sufficient funds to sustain projects. For example,  according to this GRD official, the Director General for roads in the  Ministry of Construction and Housing budgeted only $100 million in fiscal  year 2008 for building and maintaining all roads in Iraq—an inadequate  amount for road construction and maintenance.
Iraq’s past inability to spend its investment budget also raises concerns  about whether Iraq is providing funds to sustain PRDC projects. In March  2009, we reported that Iraq’s inability to spend its resources, particularly  on investment activities, limits the government’s efforts to further  economic development and deliver essential services to the Iraqi people.  Although Iraq’s total expenditures grew from 2005 through 2007, Iraq was  unable to spend all of its budgeted funds, especially for investment  activities such as maintenance of roads, bridges, vehicles, buildings, water  and electricity installations, and weapons. In 2007, Iraq spent 28 percent of  its $12 billion total investment budget. In 2008, it spent 39 percent of its  $24 billion investment budget. In 2008, the Iraqi government spent $949  million, or about 2 percent of its total 2008 expenditures, for the  maintenance of Iraqi- and U.S.-funded investments. In 2008, the provinces  spent $2,054 million, or 22 percent of total investment expenditures of  $9,167 million. The 2008 investment budget for the provinces, including the  supplemental budget, was $6,470 million. The provinces spent 32 percent  of their investment budget. There were sufficient unspent budget funds for  the provinces to provide matching funds.
The spending limits imposed by the central ministries in Baghdad also  limit the ability of Iraq’s provincial governments to sustain projects.  According to a PRT official, the Director General for water in Basra has a  $2,500 per item requisition limit. For items higher than that amount, he  needs approval from the Ministry of Water in Baghdad. Most items cost  more than $2,500; a filter for the Garma water purification facility, for  example, costs $25,000. Obtaining approval from the central ministry in  Baghdad takes time, and often that ministry will approve some parts but  not others, which severely limits the Director General’s ability to live up to  his commitment to sustain U.S.-funded water projects in Basra.
For the NCD program, Iraq government ministries and executive offices  have pledged about $95 million in cost sharing for specific NCD-related  activities and procurements, according to USAID. Some of these  commitments are included in Iraqi government budgets, according to a  USAID report. For example, the Ministry of Agriculture budgeted $5.8  million to construct a strategic planning center for training and capacity  building and allocated $5.1 million in its operating budget to run the  center. The report also states that the Iraqi Ministry of Planning and  Development Cooperation allocated $6 million in its 2009 operational  budget to fund postgraduate studies. Moreover, the Council of Ministers  Secretariat allocated $1 million to create an executive training department  and dedicated office space to a full-time training center. USAID also  reported that various ministries and executive offices have agreed to  contribute about 41 percent (an estimated $2.2 million) of the total cost of  funding equipment, facilities, and training at four geographic information  system centers and 16 training centers.
section_title: Conclusion
paragraphs: A successful U.S. transition from Iraq depends on the Iraqi government’s  commitments to programs that build government capacity, such as the  PRDC and NCD programs. However, given the management weaknesses in  State’s PRDC program, including a lack of an overall program manager,  measures of effectiveness, and a lack of a focus on capacity building, it is  unclear if the program is achieving its objectives. Although the Iraqi  government has agreed to maintain PRDC projects, based on prior  experience, the Iraqi government’s commitment to spend resources on  U.S.-funded reconstruction projects may not be realized. Also, USACE  financial controls for the timekeeping process did not ensure adequate  documentation, although USACE introduced initiatives to correct this. The  management controls of USAID’s NCD program support the objective of  capacity building,and the program, including its outcome indicators and  guidance, is focused on this objective. However, the program has  weaknesses in the financial controls for confirming the receipt of goods  and services and review of contractor invoices. In addition, USAID will  need to ensure that the Iraqi government follows through on commitments  to sustain USAID NCD programs.
section_title: Recommendations for Executive Action
paragraphs: To help these programs achieve their objectives of building the capacity of  the provincial governments and central ministries,    We recommend that, for the PRDC program (1) the Secretary of State  ensure that management control weaknesses are addressed in the PRDC  program by designating an overall program manager; developing outcome  measures of effectiveness; and documenting actual Iraqi government  budget allocations and expenditures for fiscal year 2007 PRDC projects;  and (2) the Secretary of the Army ensure that USACE initiatives to  improve the financial controls for the timekeeping process correct the  deficiencies discussed in this report.
We recommend that, for the NCD program, the USAID Administrator   (1) revise USAID policy and procedures for confirming receipt of goods or  services applicable to the NCD program in Iraq to include (a) clarifying  that confirmation of receipt of goods/or services must be noted separately  from the administrative approval or (b) documenting reasons precluding  actual confirmation such as prohibitive personal danger or security  protection costs; (2) ensure that USAID/Iraq initiatives to improve the  documentation of the voucher examiner’s required review of contractor  invoices correct the deficiencies discussed in this report; and (3)  document actual Iraqi government budget allocations and expenditures to  ensure funds committed to support NCD activities are expended.
section_title: Agency Comments and Our Evaluation
paragraphs: State, USACE, and USAID provided written comments on a draft of this  report, which we have reprinted in appendixes II, III, and IV. The USACE  also provided technical comments, which we have incorporated where  appropriate.
State agreed with our recommendation to address management control  weaknesses in the PRDC program. State commented that it had clarified  and confirmed ITAO’s overall responsibility for the PRDC program and  that a program manager has now been designated. State also accepted our  recommendation to develop outcome measures of effectiveness for PRDC  and clarified that its reporting of projects approved and funds dispersed in  the 2207 report to Congress was not intended to be a measure of PRDC’s  success. State further agreed to report on Iraqi government contributions  to PRDC projects in its next cost matching report to Congress.
USACE agreed with our draft recommendation to strengthen its financial  controls for payroll and provided additional information about its  initiatives to improve its timekeeping process. We subsequently refined  our recommendation to state that the Secretary of the Army ensure that  USACE initiatives improve the timekeeping process correct the  deficiencies discussed in the report. USACE agreed to this  recommendation. In technical comments, USACE noted substantial  discrepancies—amounting to millions of dollars and over 100 projects— between its financial and project data and ITAO’s data that we included in  our draft report. In reconciling the conflicting data, ITAO agreed to revise  its April 3, 2009, Essential Indicators Report to reflect the corrected data.
USAID commented that it is taking under advisement our recommendation  to require confirmation of receipt of goods and services and that it has  already implemented our recommendation to document the voucher  examiner’s review of contract invoices. The agency agreed to implement  our recommendation to document the government of Iraq’s commitments  and expenditures associated with the NCD program.
We are sending copies of this report to interested congressional  committees and the Secretary of State, the Secretary of Defense, the  Secretary of the Army, and the Administrator for USAID. We will also  make copies available at no charge on the GAO Web site at  http://www.gao.gov. If you or your staff have any questions about this  report, please contact me at (202) 512-8979 or christoffj@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this report. Key contributors to this report are  listed in appendix V.
section_title: Appendix I: Scope and Methodology
paragraphs: To assess whether the management controls of the Provincial  Reconstruction Development Committee (PRDC) program and the  National Capacity Development (NCD) program support the achievement  of the programs’ objectives, we interviewed agency officials and analyzed  project contracts, program files, agency reports, guidelines, financial and  programmatic databases, and assessments for both the PRDC and NCD  programs. We examined key management controls, including (1) a clear  organizational structure with adequate managerial capacity and financial  systems that establish an effective control environment; (2) policies and  procedures that ensure management directives are carried out and  communication of those policies and procedures; and (3) monitoring  systems that track progress toward desired outcomes. We interviewed  officials at the Department of State (State), U.S. Agency for International  Development (USAID), and the U.S. Army Corps of Engineers (USACE) in  Washington, D.C., and Iraq. In Iraq, we also met with officials at State’s  Iraq Transition Assistance Office (ITAO), which oversees and coordinates  aspects of the PRDC program, the Office of Provincial Affairs, and Gulf  Regional Division (GRD) and its district offices. We reviewed a sample of  40 PRDC construction projects using Economic Support Funds (ESF)  from fiscal years 2006 and 2007and examined all activities in the NCD  program. We conducted field visits to several PRDC projects and to a  training center, where we observed Iraqi officials in NCD training  activities. We used information from the USACE’s Resident Management  System database to identify the status of projects and specific challenges.  We assessed the reliability of this system database by (1) interviewing  agency officials and contractors about data quality control procedures,  and (2) checking the data by visiting sites. We determined that the data  were sufficiently reliable for the purposes of this report.
To develop the sample of 45 PRDC projects, we used the population of 290  PRDC projects as of June 30, 2008, that were initiated with fiscal year 2006  and 2007 ESF. We selected a dollar unit sample to test financial controls  over PRDC project data in the USACE’s Financial Management System.  We used a 90-percent confidence level, an expected error of 0, and  tolerable error of 5 percent, for the sample plan. Given the parameters of  the sample test (e.g., sample size, expected errors) any control testing  error would indicate the control is not operating as designed.
To review the financial management controls over the PRDC and NCD  program, we reviewed documents supporting obligation and disbursement  transactions for 40 PRDC construction and 5 nonconstruction projects,  and all NCD obligation and disbursement transactions. We interviewed  USAID officials in Washington, D.C., and Iraq; and USACE officials in  Washington, D.C.; Millington, Tennessee; Winchester, Virginia; and Iraq.  Our review of PRDC and NCD transactions covered the period October 1,  2005, through June 30, 2008. To determine whether the financial data  provided to us were reliable, we interviewed agency officials and  performed testing regarding the accuracy and completeness of  information.
To evaluate U.S. efforts to ensure Iraqi government commitment to  sustaining U.S. program efforts, we examined U.S. guidance in obtaining  commitments from the Iraqi government and interviewed State and USAID  officials and their program implementers, GRD and Tatweer. We then  focused on two elements of commitment—letters or other evidence that  the Iraqi government committed to sustain or maintain the programs and  projects and evidence that the Iraqi government is sharing the cost of U.S.  efforts. PRDC program guidelines for 2006 state that the projects will be  matching in nature to ensure buy-in and investment from the government  and the 2007 guidelines require an Iraqi government letter of sustainment  for the projects. Moreover, Iraq has budget surpluses, and in the Annual  Review of the International Compact with Iraq, the Iraqi government  committed to co-finance any new development programs to leverage its  resources and provide a framework for mutual accountability.
We conducted this performance audit from March 2008 to June 2009 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Comments from the Department of State
subsections: section_title: GAO Comments
paragraphs: 1.  State implies that this GAO report calls for the elimination of steps or  partners in the process. Instead, we believe the program’s multistep  complexity illustrates the importance of implementing our  recommendation to designate a program manager. 2.  We added State’s additional information. However, in their technical  comments, Gulf Region Division officials stated that communication  and coordination remain problems as of May 2009. 3.  We have changed program “success” to program “accomplishment” in  the final report. However, the larger issue, as State acknowledges, is   that the Provincial Reconstruction Development Committee program  does not have outcome measures of effectiveness to assess how the  program has enhanced the capacity of local Iraqi councils to identify,  plan, and deliver essential services. 4.  Our past work indicates that although the Iraqi government budgets  for investment activities, its actual spending for these investments,  including maintenance of projects, is limited. For instance, in 2008, the  Iraqi government spent $949 million, or about 2 percent of its total  2008 expenditures, for the maintenance of Iraqi- and U.S.-funded  investments. In 2008, the provinces spent $2. 054 billion or 22 percent  of budgeted investment expenditures of $9.167 billion. The 2008  investment budget for the provinces, including the supplemental  budget, was $6.47 billion. The provinces spent 32 percent.
section_title: Appendix III: Comments from the U.S. Army Corps of Engineers
paragraphs: The following are GAO’s comments on the U.S. Army Corps of Engineers  letter dated May 22, 2009.
subsections: section_title: GAO Comment
paragraphs: 1.  We modified our recommendation in response to the additional  information USACE provided about its initiatives to strengthen the  timekeeping process. In follow up discussions, USACE agreed to our  recommendation that the Secretary of the Army ensure the initiatives  to improve the financial controls for the timekeeping process correct  the deficiencies discussed in the report.
section_title: Appendix IV: Comments from the U.S. Agency for International Development
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: Tetsuo Miyabara, Assistant Director; Mary Ellen Chervenic, Assistant  Director; Jessica Butchko; Richard Cambosos; Lynn Cothern; K. Eric  Essig; Dennis Fauber; Wilfred Holloway; Rhonda Horried; Grace Lui; Jason  Pogacnik; and Eddie Uyekawa made key contributions to this report.