Quarterly Report and Semiannual Report to the United States Congress [ January 30, 2011] (Public Laws 108-106 and 95-452, as amended) 223-818 SIGIR Cover.indd 1 1/24/2011 8:08:12 AM SIGIR Mission Statement Regarding U.S. relief and reconstruction plans, programs, and operations in Iraq, the Special Inspector General for Iraq Reconstruction provides independent and objective: · oversight and review through comprehensive audits, inspections, and investigations · advice and recommendations on policies to promote economy, efficiency, and effectiveness · prevention, detection, and deterrence of fraud, waste, and abuse · information and analysis to the Congress, the Secretary of State, the Secretary of Defense, and the American people _______________________________________________________________________________ The jurisdiction of the Office extends to amounts appropriated or otherwise made available for any fiscal year to the Iraq Relief and Reconstruction Fund, the Iraq Security Forces Fund, the Commander’s Emergency Response Program; or for assistance for the reconstruction of Iraq under the Economic Support Fund, the International Narcotics Control and Law Enforcement account, or any other provision of law. (Section 3001 of Public Law 108-106, as amended) Workers at the al-Rumaila Operations Organization (ROO)—a consortium of Iraq’s South Oil Company, British Petroleum, and the Chinese National Petroleum Corp.—reportedly drilled 41 new oil wells in Basrah’s al-Rumaila field in 2010. Iraq’s southern oil fields contain more than half of the country’s proved reserves, and international oil companies are also ramping up operations at West Qurna, Majnoon, and al-Zubair. (ROO photo) 223-818 SIGIR Cover.indd 2 1/24/2011 8:08:13 AM Special Inspector General for Iraq Reconstruction Quarterly Report and Semiannual Report to the United States Congress [January 30, 2011] (Public Laws 108-106 and 95-452, as amended) Jan11.indb 1 1/23/2011 9:25:08 PM Jan11.indb 2 1/23/2011 9:25:33 PM MESSAGE FROM THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION As I mark my seventh anniversary as Special Inspector General for Iraq Reconstruction, I am pleased to present this 28th Quarterly Report to the United States Congress and the Secretaries of State and Defense. The next eleven months will see a series of transitions in Iraq that will profoundly affect the nature ofthe continuing U.S. mission, culminating in the scheduled withdrawal of all U.S. troops by December 31, 2011. Notable transitions include: • the closure of the last Provincial Reconstruction Teams and the transition of their reconstruction missions to consulates in Erbil and Basrah and temporary offices in Mosul and Kirkuk • the transition of the police training mission from the military to the Department of State • the opening of a new Office of Security Cooperation-Iraq to manage most aspects of the continuing U.S. military assistance program The various changes occurring in Iraq in 2011 will unfold under the aegis of the new coalition government in Baghdad. Prime Minister Nuri al-Maliki finally secured a second four-year term this quarter, but did so only byallowingmyriadrivalstoobtainnumerouspositionsinthenewCouncilofMinisters. This quarter was good for Iraq economically. The Iraqi government’s aggressive efforts to attract foreign capital investment continued to bear fruit. Moreover, several international oil companies, working to develop south- ern Iraq’s lucrative oil fields, reported better-than-expected progress, including production increases at the super-giant al-Rumaila field. Much of Iraq’s oil and gas resources are located in Basrah province, Iraq’s eco- nomic engine and gateway to the world. Cognizant of Basrah’s importance to the future of Iraq, SIGIR officials traveled there in January to assess the state of the U.S. reconstruction effort. Our “Focus on Basrah” section de- tails SIGIR’s findings and describes conditions in what is probably Iraq’s most strategically important province. In another development, the United Nations Security Council passed three resolutions in December, lifting a series of anachronistic trade sanctions imposed when Iraq was governed by Saddam. One effect of this UN action is that the Government of Iraq (GOI) is free, if it so wishes, to pursue a peaceful nuclear energy program. It must alsobevigilantinprotectingitsassetsfromcreditors,nowthatprotectionsoftheUNwillbelifted. This quarter, SIGIR published five audits, including a review of the U.S. military’s $370 million effort topay former insurgents to provide security services through the Sons of Iraq (SOI) program. The military financed the costly SOI initiative using funds from the Commander’s Emergency Response Program (CERP). To date, almost $3.7 billion in CERP funds have been committed to projects in Iraq, with the SOI program being the single largest outlay. The Insert to this Quarterly Report contains a comprehensive look at how CERP funds have been expended in Iraq. SIGIR’s collective oversight reporting on the CERP is particularly informative, given the continued large-scale use of CERP funds in Afghanistan. 400ArmyNavyDrive•ArlingtonVirginia22202 0.0_TitleandLetter_Jan11.indd 3 1/24/2011 10:45:47 AM Other notable SIGIR accomplishments this quarter include: • completing investigative work that helped result in criminal and civil penalties of $69 million levied against the Louis Berger Group for inflating invoices relating to work it performed for USAID and the Department of Defense • issuing a finding that a $26 million U.S.-funded educational academy for Iraqi officials had not been formally supported by the GOI and that no provisions had been made for the academy’s operation and sustainment • determining that a discrepancy exists between the total CERP allocations that U.S. Forces-Iraq reports it received and the amount of CERP funds that the Army Budget Office reports it provided to them In early February, I will travel to Iraq for the 29th time, meeting with senior officials from the U.S. Embassy andtheGOItodiscusshowtheU.S.drawdownwillaffecttheongoingreconstructioneffort.Iwillalso confer with members of the new Iraqi government about its plans to maintain U.S.-funded projects and ameliorate the continuing pernicious influence of corruption. Although the last troops may withdraw from Iraq in December 2011, the Department of State will still maintain a significant reconstruction presence there for years to come, requiring sustained oversight and engagement to watch over what remains of the $58 billion U.S. reconstruction program. Stuart W.Bowen, Jr. Special Inspector General for Iraq Reconstruction 0.0_TitleandLetter_Jan11.indd 4 1/24/2011 7:58:30 AM SIGIR SUMMARYTABLE OF PERFORMANCE OF CONTENTS SIGIR Summary of Performance As of January 30, 2011 Audits Reports Issued 182 Recommendations Issued 444 Dollars Saved and Recovered ($ Millions) $610.61 Dollars Put to Better Use ($ Millions) $586.62 Challenged Payments ($ Millions) $112.63 Evaluations Reports Issued 1 Recommendations Issued 4 Studies Ongoing/Planned 3 Inspections Project Assessments Issued 170 Limited On-site Assessments Issued 96 Aerial Assessments 871 Investigations Investigations Initiated 524 Investigations Closed or Referred 420 Open Investigations 104 Arrests 31 Indictments 54 Convictions 44 Monetary Results ($ Millions) $140.9 Hotline Contacts, as of December 31, 2010 E-mail 398 Fax 18 Mail 29 Referrals 26 SIGIR Website 169 Telephone 79 Walk-in 112 Total Hotline Contacts 831 Other Products Congressional Testimony 31 LessonsLearnedReportsIssued 5 Quarterly Reports 28 Jan11.indb 5 1/23/2011 9:25:35 PM Jan11.indb 6 1/23/2011 9:25:35 PM TABLE OF CONTENTS Section 1 Section 5 SIGIR Observations 1 SIGIR Oversight 103 Iraq Reconstruction 2011: SIGIR Audits 104 Evolving toward Regular Order 2 Collaborative Forensic Audits/ Funding Update 3 Investigations Initiative 117 U.S. Reconstruction Management 4 SIGIR Investigations 118 Government Formation 6 SIGIR Evaluations 129 Security 10 SIGIR Hotline 130 Energy 13 SIGIR Website 131 Economy 14 Legislative Update 132 SIGIR Oversight 16 Human Toll 18 Section 6 Other Agency Oversight 135 Section 2 Introduction 136 Funding for Iraq Reconstruction 19 Other Agency Audits 137 Funding Overview 20 Other Agency Investigations 140 U.S. Funding 21 Iraqi Funding 34 Special Feature International Support 36 Focus on Basrah 45 Section 3 Endnotes 141 U.S. Presence and Sources and Notes for the Insert 152 Reconstruction Management 37 Acronyms and Definitions 153 TheU.S.Presencein2011 38 Contracting 44 Section 4 Developments in Iraq 55 Governance 56 Security 65 Rule of Law 75 Economy 81 Public Services 94 *The complete version of this SIGIR Quarterly Report is available on the SIGIR website: www.SIGIR.mil. It is the official version of the Report, containing all appendices and corrections. Jan11.indb 7 1/23/2011 9:25:35 PM TABLE OF CONTENTS Appendices The appendices for this Quarterly Report are not included in the print version of the publication. They are published on the SIGIR website at www.sigir.mil. Appendix A cross-references the pages of this Report with SIGIR’s statutory reporting requirements under Section 3001 of P.L. 108-106, as amended, and the Inspector General Act of 1978, as amended. Appendix B cross-references budget terms associated with the Iraq Relief and Reconstruction Fund (IRRF), Iraq Security Forces Fund (ISFF), Economic Support Fund (ESF), Commander’s Emergency Response Program (CERP), and international support for Iraq reconstruction. Appendix C reports on the international