As of September 2007, the Iraqi government included 34 ministries responsible for providing security and essential government services. U.S. capacity development programs target 12 key ministries: State and USAID focus on 10 civilian ministries while DOD is responsible for the Ministries of Defense and Interior. These 12 ministries employ 67 percent of the Iraqi government workforce and are responsible for 74 percent of the 2007 budget (see table 1). U.S. efforts to help build the capacity of the Iraqi national government are characterized by (1) multiple U.S. agencies leading individual efforts without overarching direction from a lead entity or a strategic approach that integrates their efforts with Iraqi government priorities and (2) shifting time frames and priorities in response to deteriorating conditions in Iraq. As of May 2007, six U.S. agencies were implementing about 53 projects at individual ministries and other national Iraqi agencies. State, USAID, and DOD lead the largest number of programs and provide about 384 U.S. military, government, and contractor personnel to work with the ministries. DOD provides over half (215) of the personnel to the Ministries of Defense and Interior to advise Iraqi staff in developing plans and policies, building ministry budgets, and managing personnel and logistics. State and USAID together provide an additional 169 advisors to the 10 key civilian ministries. Although State, USAID, and DOD have improved the coordination of their capacity-building efforts since early 2007, there is no lead agency or strategic plan to provide overarching guidance. Two factors explain the lack of a lead agency. First, from their inception in 2003, U.S. ministry capacity-building efforts evolved without an overall plan or the designation of a lead entity. U.S. agencies provided distinct assistance to four successive governments in response to Iraq’s immediate needs, according to U.S. officials. This approach first began under the Coalition Provisional Authority whereby U.S. advisors ran the ministries using U.S. and Iraqi funds and made personnel and budget decisions. Attempts to create an overall capacity development plan were dropped in late 2003 after the United States decided to transfer control of the ministries to an interim government. A second factor has been the delay in implementing recommendations from a 2005 State assessment that characterized U.S. capacity development programs as uncoordinated, fragmented, duplicative and disorganized. State recommended a unified effort among State, DOD, and USAID, with the latter providing overall coordination and leadership. The recommendations were not implemented. However, in July 2007, State named an ambassador to direct civilian capacity-building programs, including USAID efforts. Shifting priorities also have affected U.S. capacity development efforts, particularly in response to continued security problems. In early 2007, the U.S. mission refocused its capacity development program as part of the surge strategy associated with the administration’s New Way Forward. Rather than focusing on 12 civilian and security ministries, State and DOD targeted 6 key ministries (Interior, Defense, Planning, Finance, Oil, and Electricity) and focused on short-term improvements to address immediate problems with budget execution, procurement, and contracting. Accordingly, U.S. capacity development efforts shifted from long-term institution building to immediate efforts to help Iraqi ministries spend their capital budgets and deliver better services to the Iraqi people. Improvements were expected by September 2007. U.S. efforts to develop Iraqi ministerial capacity face four key challenges that pose a risk to their success and long-term sustainability. First, Iraqi government institutions have significant shortages of personnel with the skills to perform the vital tasks necessary to provide security and deliver essential services to the Iraqi people. When the Coalition Provisional Authority (CPA) removed Ba’athist party leaders and members from upper-level management in government, universities, and hospitals in 2003, most of Iraq’s technocratic class was forced out of government. A September 2006 U.S. embassy assessment noted that the government had significant human resource shortfalls in most key civilian ministries. The majority of staff at all but 1 of the 12 ministries surveyed was inadequately trained for their positions, and a quarter of them relied heavily on foreign support to compensate for their human and capital resource shortfalls. The lack of trained staff has particularly hindered the ability of ministries to develop and execute budgets. For example, in 2006, the Iraqi government spent only 22 percent of its capital budget. For January through July 2007, spending levels have improved with about 24 percent of capital budgets spent. However, as we reported in early September 2007, it is unlikely that Iraq will spend the $10 billion it allocated for 2007 for capital budgets by the end of this year. Second, Iraq’s government confronts significant challenges in staffing a nonpartisan civil service and addressing militia infiltration of key ministries. In June 2007, DOD reported that militias influenced every component of the Ministry of Interior. In particular, the Ministry has been infiltrated by members of the Supreme Islamic Council of Iraq and its Badr Organization, as well as Muqtada al-Sadr’s Mahdi Army. Furthermore, the Iraqi civil service remained hampered by staff whose political and sectarian loyalties jeopardized the civilian ministries’ abilities to provide basic services and build credibility among Iraqi citizens, according to U.S. government reports and international assessments. DOD further found that government ministries and budgets were sources of power for political parties, and staff ministry positions were rewarded to party cronies. The use of patronage hindered capacity development because it led to instability in the civil service as many staff were replaced whenever the government changed or a new minister was named, according to U.S. officials. Third, according to State, widespread corruption undermines efforts to develop the government’s capacity by robbing it of needed resources, some of which are used to fund the insurgency; by eroding popular faith in democratic institutions seen to be run by corrupt political elites; and by spurring capital flight and reducing economic growth. According to a State assessment, one-third of the 12 civilian ministries surveyed had problems with “ghost employees” (that is, nonexistent staff listed on the payroll). In addition, the procedures to counter corruption adopted at all but one of the civilian ministries surveyed were partly effective or ineffective. Similar problems existed in the security ministries, according to DOD. Finally, the security situation remains a major obstacle to developing capacity in areas vital to the government’s success. The high level of violence hinders U.S. advisors’ access to their counterparts in the ministries, increases absenteeism among ministry employees, and contributes to “brain drain” as ministry employees join the growing number of Iraqis leaving the country. According to a UN report, between March 2003 and June 2007, about 2.2 million Iraqis left the country and 2 million were internally displaced. According to U.S. and international officials, the flow of refugees exacerbates Iraqi ministry capacity shortfalls because those fleeing tend to be disproportionately from the educated and professional classes. A November 2006 UN report stated that an estimated 40 percent of Iraq’s professional class had left since 2003. In February 2007, State officials provided GAO with a three-page, high- level outline proposing a U.S. strategy for strengthening Iraqi ministerial capacity. This document was a summary with few details and no timeline. A senior USAID official indicated that it is uncertain whether the high-level summary will be developed into a strategy, although the administration received $140 million in funding for its capacity development efforts in fiscal year 2007 and requested $255 million for fiscal year 2008. GAO has previously identified the desirable elements of a strategy: a clear purpose, scope, and methodology; a delineation of U.S. roles, responsibilities, and coordination; desired goals, objectives, and activities tied to Iraqi priorities; performance measures; and a description of costs, resources needed, and risks. Table 2 summarizes the key elements of a strategy and provides examples of the status of the U.S. approach as of September 2007. As table 2 shows, U.S. agencies have developed some of these elements in their programs for capacity building at individual ministries, but not as part of an overall U.S. strategy. For example: We found little evidence that the U.S. government has clearly defined the purpose, scope, and methodology for developing an overall strategy. Agencies have provided some limited information on why an overall strategy is needed, what it will cover, and how it will be developed. A Joint Task Force on Capacity Development, established in October 2006, has helped U.S. agencies better delineate roles and responsibilities and coordinate their efforts. However, we found no plans on how the capacity development programs of State, USAID, and DOD will be unified and integrated. While U.S. agencies have clearly identified the overall goals of capacity development at the Iraqi ministries, most U.S. efforts lack clear ties to Iraqi priorities for all ministries. While DOD is developing measures to assess progress at the security ministries, such measures have not been developed for Iraqi civilian ministries. U.S. agencies have not identified the costs and resources needed to complete capacity development programs beyond the budget for fiscal year 2007 and the 2008 budget request. Agencies have not provided information on how future resources will be targeted to achieve the desired end-state or how the risks we identified will be addressed. In addition, efforts to improve cooperation with the UN and other international donor nations and organizations have encountered difficulties. For example, U.S. efforts are to be coordinated with the Iraqi government and the international donor community through the Capacity Development Working Group. However, the group did not meet for about a year after forming in late 2005 and did not meet from February through May 2007.