July 30, 2008 Quarterly Report and Semiannual Report to Congress
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SpecialSpecial InspectorInspector GeneralGeneral forfor IraqIraq ReconstructionReconstruction Quarterly Report and Semiannual Report to the United States Congress [July 30, 2008] MESSAGE FROM THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION Th is 18th Quarterly Report to the Congress provides a new look at the relief and reconstruction eff ort in Iraq, presenting a province-by-province review of progress on reconstruction and capacity-building in four key areas of concern—economics, essential services, governance, and security. Th is new review catalogues a series of informative snapshots on the achievements and challenges aff ecting each of Iraq’s 18 provinces. Th e United States has now appropriated more than $50 billion in taxpayer dollars for Iraq’s reconstruction. Th e picture of provincial progress in Section 2 further amplifi es how that money has been spent, updating the markedly mixed story that SIGIR has unfolded over the past four-and-a-half years through nearly 250 audits and inspections. Section 2 also breaks down the use of U.S. funds through the major accounts supporting Iraq reconstruction: the Iraq Relief and Reconstruction Fund ($20.86 billion), Iraq Security Forces Fund ($17.94 billion), Economic Support Fund ($3.74 billion), and Commander’s Emergency Response Program ($3.49 billion). SIGIR’s reporting jurisdiction covers each of these funding streams. Progress on the Year of Transfer continued this quarter, with the most notable developments being the end of the Surge and the continuing growth in Iraq’s oil revenues. Th e last of the fi ve U.S. Surge brigades has drawn down as Iraqi security forces have increased their capacity to take responsibility for providing protec- tion across Iraq. Another province, Qadissiya, transferred to Provincial Iraqi Control this quarter, leaving eight awaiting transfer. Th e Multi-National Security Transition Command-Iraq reports that Iraq’s Ministries of Defense and Interior continue to shoulder more of the fi nancial burden for supporting the operations, training, and equipping of Iraq’s security forces. Iraq’s burgeoning oil windfall, which has yielded more than $33 billion in revenues to date in 2008, has prompted the Government of Iraq to pursue a supplementary budget this summer, which means that potentially $7 billion in new funds could soon be budgeted to further support the country’s continuing reconstruction program. Section 3 of this Quarterly Report contains summaries of SIGIR’s seven new audits and seven new inspec- tions. On the audit front, SIGIR produced two more reviews of large Iraq Relief and Reconstruction Fund contracts, the latest in our focused fi nancial audit series. Our audit of FluorAMEC’s cost-plus contract for work in Iraq’s water sector found that much less was accomplished under the contract than expected because the funding for the water sector was greatly reduced and sector projects were signifi cantly more costly than anticipated. Our review of the security and justice contract issued to Parsons Delaware, Inc., found that only about one-third of the planned projects contemplated under this contract were completed and that millions of dollars in waste were likely associated with incomplete, terminated, and abandoned projects. Our audit team also reviewed the U.S. Embassy’s anticorruption program, fi nding that much remains to be done to support Iraq’s fi ght against corruption. And they reviewed the Iraq Reconstruction Management System, an important project-management database, fi nding that it requires signifi cant updating. SIGIR’s inspections this quarter include an assessment of the failed prison project at Kahn Bani Sa’ad. As that report reveals, more than $40 million was spent on this ill-fated project, but its abandonment leaves no apparent prospect of being completed. 400 Army Navy Drive • Arlington Virginia 22202 I am pleased to report that SIGIR’s hard work was meritoriously recognized this quarter by the President’s Council on Integrity and Effi ciency. Specifi cally, SIGIR’s audit team has been slated to receive a special award for outstanding performance, and our inspections team will receive a special award for its excellent report on the Mosul Dam project. I am gratifi ed that SIGIR’s eff orts have been so recognized and remain proud of the professionalism, productivity, and perseverance that the SIGIR team continues to demonstrate in carrying out our unprecedented mission in Iraq—oversight under fi re. Stuart W. Bowen, Jr. Special Inspector General for Iraq Reconstruction SIGIR Summary of Performance As of July 30, 2008 Audits Reports Issued 122 Recommendations Issued 329 Dollars Saved and Recovered $81,600,000 Dollars Put to Better Use $208,100,000 Challenged Payments $14,170,000 Inspections Project Assessments Issued 122 Limited On-site Assessments Issued 96 Aerial Assessments 548 Investigations Investigations Initiated 361 Investigations Closed or Referred 300 Open Investigations 61 Arrests 16 Indictments 17 Convictions 8 Court-ordered Restitution/Forfeiture $17,414,000 Hotline Contacts as of June 30, 2008 Fax 18 Telephone 74 Walk-in 110 E-mail 408 Referrals 26 Mail 28 Total Hotline Contacts 664 Non-Audit Products Congressional Testimony 26 Lessons Learned Reports Issued 3 TABLE OF CONTENTS SECTION 1 SECTION 3 SIGIR observations 1 sigir oversight 165 THE YEAR OF TRANSFER TO DATE 2 SIGIR AUDITS 167 NATIONWIDE RECONSTRUCTION 6 SIGIR INSPECTIONS 197 REBUILDING THE PROVINCES 9 SIGIR INVESTIGATIONS 219 SIGIR OVERSIGHT 9 SIGIR HOTLINE 225 THE HUMAN TOLL 11 SIGIR WEBSITE 227 LEGISLATIVE UPDATE 228 SECTION 2 Update on the SECTION 4 Year of Transfer 13 other agency oversight 231 OVERVIEW 14 Endnotes 2a U.S. Reconstruction Funding 21 U.S. RECONSTRUCTION FUNDING 23 Acronyms & Defi nitions 2b Reconstruction Across Iraq 45 OVERVIEW 46 List of Appendices* U.S. CAPACITY BUILDING WITHIN Appendix A: Statutory Requirements IRAQ’S GOVERNMENT 46 Appendix B: Cross-Reference ECONOMY 51 of Report to IG Act of 1978 ESSENTIAL SERVICES 60 Appendix C: Impact of SIGIR Operations GOVERNANCE 71 Appendix D: Cross-Reference of SIGIR Budget Terms SECURITY AND JUSTICE 81 Appendix E: SIGIR Sector Cross-Reference Appendix F: U.S. Appropriated Funds 2c Reconstruction in the Provinces 91 Appendix G: IRRF Apportionments by Agency OVERVIEW 92 Appendix H: Iraqi Funds PROVINCIAL IRAQI CONTROL 92 Appendix I: International Funding PROVINCIAL BUDGET EXECUTION 97 for Reconstruction Activities Appendix J: Completed SIGIR Audits PROVINCIAL RECONSTRUCTION TEAMS 100 Appendix K: Completed SIGIR Inspections PROVINCIAL SNAPSHOTS 103 Appendix L: Indictments and Convictions Appendix M: Debarments and Suspensions Appendix N: Detailed Summary of Other Agency Oversight Appendix O: Summary of U.S. Oversight in Iraq *Th e complete version of this SIGIR Quarterly and Semian- nual Report is available on the SIGIR website: www.sigir. mil. It is the offi cial version of the report, containing all appendices and corrections. TABLE OF CONTENTS Dahuk Erbil Ninewa Sulaymaniyah Tameem Salah al-Din Diyala Baghdad Anbar Babylon Wassit Kerbala Qadissiya Missan Najaf Thi-Qar Basrah Muthanna SIGIR OBSERVATIONS THE YEAR OF TRANSFER TO DATE TRANSFER OF RECONSTRUCTION FUNDING RESPONSIBILITY TRANSFER OF ASSETS TRANSFER OF SECURITY NATIONWIDE RECONSTRUCTION GOI PURCHASE OF U.S. PRODUCTS U.S. EFFORTS BUILD IRAQI BUSINESS CAPABILITIES OIL PRODUCTION RECORD ELECTRICITY CAPACITY GROWING GOVERNANCE REBUILDING THE PROVINCES SIGIR OVERSIGHT section 1 AUDITS AND INSPECTIONS INVESTIGATIONS THE HUMAN TOLL CASUALTIES REFUGEES 1 SIGIR OBSERVATIONS THE YEAR OF TRANSFER TO DATE SIGIR’s January Report designated 2008 as the be needed to rebuild Iraq.1 To date, $118 billion “Year of Transfer” in Iraq relief and reconstruc- in U.S., Iraqi, and international funds has been tion, defi ning three measures to assess per- committed to the program. Th e Government of formance: transfer of reconstruction funding Iraq’s (GOI) share of the investment for relief and responsibility, transfer of U.S.-funded assets, and reconstruction reached $50 billion this quarter, transfer of security responsibilities. Progress was equaling the cumulative U.S. investment. As achieved on each of these during this reporting Table 1.1 reveals, Iraq’s current investment in quarter. relief and reconstruction is more than three times Completing Iraq’s relief and reconstruction current U.S. investment. is now an Iraqi-led mission driven by Iraqi- developed and Iraqi-funded solutions. Th e IRAQ’S CONTINUING management responsibilities for moving forward INVESTMENT GROWTH on national recovery have shift ed into the hands In a recent review of progress, conducted pursu- of Iraq’s national and local authorities, with the ant to the requirements of the International United States and the international community Compact for Iraq (Compact), the GOI noted that providing targeted support. “Iraq is a rich country with skills and the wealth of its natural resources. Rather than aid, Iraq is TRANSFER OF RECONSTRUCTION looking for partnership and cooperation that will FUNDING RESPONSIBILITY help it unlock its own resources.”2 In January of 2004, the U.S. government esti- Deputy Prime Minster Barham Salih recently mated that between $50 and $100 billion would echoed the Compact’s conclusion, noting that U.S./GOI Funding for Iraq Reconstruction, by Calendar Year ($ billions) 2003/2004 2005 2006 2007 2008/2009 United States $23.07 $6.61 $7.28 $9.33 $4.17 GOI $16.00 $5.03 $6.18 $10.06 $13.06 Total $38.06 $11.61 $13.15 $18.60 $17.43 Sources: GOI, Republic of Iraq: Budget Revenues and Expenses 2003, July–December; Presidency of the Iraqi Interim Na- tional Assembly: The State General Budget for 2005; GOI 2006 Budget (as approved by TNA and written into law December 2005); U.S. Treasury, response to SIGIR data call (10/15/2007, 1/4/2008); GOI Budget 2008: Overview of Revenue and Expendi- ture, 2007–2008; Ministry of Finance, “Iraqi Federal Budget 2008,” provided by the U.S. Treasury (6/29/2008). Note: Numbers are affected by rounding.