Securing, Stabilizing, and Rebuilding Iraq: Key Issues for	 
Congressional Oversight (09-JAN-07, GAO-07-308SP).		 
                                                                 
As the United States reviews its plans to secure, stabilize, and 
rebuild Iraq, GAO has enclosed a series of issue papers for	 
Congressional consideration in developing its oversight agenda	 
for the 110th Congress and analyzing the President's revised	 
strategy for Iraq. These papers are based on the continuing work 
of the U.S. Government Accountability Office and the 67 	 
Iraq-related reports and testimonies we have provided to the	 
Congress since May 2003. Iraq has had three successful elections,
adopted a constitution, and installed its first elected 	 
government. At the same time, since the initial ground offensive 
ended in 2003, the costs to secure and stabilize Iraq have grown 
substantially, as has the level of violence that afflicts Iraqi  
society. Such violence stems from an insurgency that has grown	 
more complex and lethal over the past 3 and 1/2 years and the	 
Sunni-Shi'a conflict, which escalated dramatically in 2006. This 
instability complicates meaningful political reconciliation among
Iraq's religious and tribal groups, reduces the effectiveness of 
U.S. and Iraqi reconstruction and capacity-building efforts, and 
diminishes the hopes and expectations of an Iraqi people without 
adequate jobs, water, fuel, and electricity. Increasing Iraqi	 
security forces and transferring security responsibilities to	 
them have not resulted in reduced violence. Rather, attacks	 
increased throughout 2006. Although more Iraqi troops have been  
trained and equipped, high absenteeism and divided loyalties have
limited their overall effectiveness. At the same time, our	 
service members are working with great courage and diligence to  
perform the roles the President has asked of them.		 
Notwithstanding their noble efforts, the U.S. military has	 
sustained significant casualties. In addition, wear and tear on  
military equipment and growing replacement costs have risen	 
substantially. The resulting stress and strain on American forces
have reduced troop readiness levels and the availability of	 
reserve personnel. The U.S. rebuilding effort in Iraq has focused
on helping the Iraqi government establish a sound economy with	 
the capacity to deliver essential services. Although Iraq's	 
economy has grown and U.S. efforts have helped restore portions  
of Iraq's infrastructure, the poor security environment and	 
mismanagement have diminished the overall results of U.S.	 
investments. Iraq will need U.S. and international support,	 
including political and economic incentives, to strengthen its	 
fragile government institutions, which have thus far failed to	 
adequately deter corruption, stimulate employment, or deliver	 
essential services.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-308SP					        
    ACCNO:   A64724						        
  TITLE:     Securing, Stabilizing, and Rebuilding Iraq: Key Issues   
for Congressional Oversight					 
     DATE:   01/09/2007 
  SUBJECT:   Congressional oversight				 
	     Counterinsurgency					 
	     Defense capabilities				 
	     Defense cost control				 
	     Economic development				 
	     Economic stabilization				 
	     Federal aid to foreign countries			 
	     Financial management				 
	     Foreign governments				 
	     International relations				 
	     Military forces					 
	     Performance measures				 
	     Physical security					 
	     Security threats					 
	     Strategic planning 				 
	     Iraq						 

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GAO-07-308SP

   

     * [1]Enclosure I: More Comprehensive U.S. Strategy Needed to Achi
     * [2]Enclosure II: U.S. Commitments Involve Significant Resources
     * [3]Issue
     * [4]Summary
     * [5]NSVI Did Not Fully Address All Key Characteristics of an Eff
     * [6]Security, Political, and Economic Factors Hamper Efforts to
     * [7]Prior Recommendations
     * [8]Oversight Questions
     * [9]GAO Contact
     * [10]Issue
     * [11]Summary
     * [12]Reported Costs for Operations in Iraq Are Increasing
     * [13]Future Iraq Costs Are Likely to Be Considerable
     * [14]Prior Recommendations
     * [15]Oversight Questions
     * [16]GAO Contacts

          * [17]Enclosure III: Security Conditions Have Deteriorated as Iraq

               * [18]Enclosure IV: Assessing the Capabilities of the Iraqi
                 Securi

                    * [19]Enclosure V: DOD May Be Unable to Ensure That
                      U.S.-Funded Eq

     * [20]Issue
     * [21]Summary
     * [22]MNF-I Revised Security Transition Plan Because Iraq Could No
     * [23]Progress in Transferring Security Responsibilities to Iraq H
     * [24]Oversight Questions
     * [25]GAO Contact
     * [26]Issue
     * [27]Summary
     * [28]Reports on Iraqi Security Forces Provide Limited Assessments
     * [29]Transition Readiness Assessments Assess Iraqi Security Force
     * [30]Oversight Questions
     * [31]GAO Contact
     * [32]Issue
     * [33]Summary
     * [34]DOD Has Not Clarified What Accountability Requirements Apply
     * [35]Despite MNF-I Accountability Orders, DOD and MNF-I May Be Un
     * [36]Oversight Questions
     * [37]GAO Contact

          * [38]Enclosure VI: The Iraqi Government Needs to Staff an Effecti

               * [39]Enclosure VII: Ministry Capacity Development Efforts
                 Need an

                    * [40]Enclosure VIII: Several Factors Affect Iraqi
                      Ministry Effort
                    * [41]Enclosures IX: Iraq Owes Significant Foreign Debt
                      and Faces

     * [42]Issue
     * [43]Summary
     * [44]Iraqi Ministries Lack Trained, Nonpartisan Civil Service
     * [45]Corruption Is a Key Challenge
     * [46]Most Ministries Lack Technology and Face Challenges in Effec
     * [47]Oversight Questions
     * [48]GAO Contact
     * [49]Issue
     * [50]Summary
     * [51]Capacity Development Efforts Lack Integrated Plan
     * [52]Questions Remain about Iraqi Leadership and U.S. Agency Role
     * [53]U.S. Metrics to Assess Ministerial Effectiveness Are Still B
     * [54]Questions for Oversight
     * [55]GAO Contact
     * [56]Issue
     * [57]Summary
     * [58]Iraq Has Spent Little of Its Annual Capital Budget
     * [59]Lack of Clear Budget and Procurement Rules Affect Ministry E
     * [60]U.S. Government and Donors Have Made Efforts to Address Budg
     * [61]Oversight Questions
     * [62]GAO Contact
     * [63]Issue
     * [64]Summary
     * [65]Debt Reduction Has Been Promised, with Conditions
     * [66]Iraq Has Met Some IMF Targets, but Others Are More Challengi
     * [67]Oversight Questions
     * [68]GAO Contact

          * [69]Enclosure X: U.S. Efforts to Restore Iraq's Oil Sector Have

               * [70]Enclosure XI: U.S. Efforts to Improve Iraq's Electricity
                 Sec

     * [71]Issue
     * [72]Summary
     * [73]Iraq's Oil Production and Exports Have Not Met U.S. Program
     * [74]Security, Corruption, Sustainability, and Funding Challenges

          * [75]Addressing Infrastructure Security
          * [76]Combating Corruption and Smuggling
          * [77]Improving Infrastructure Management and Sustainability
          * [78]Developing Adequate Sources of Future Funding

     * [79]Oversight Questions
     * [80]GAO Contact
     * [81]Issue
     * [82]Summary
     * [83]Restoring Iraq's Electricity Sector Has Been Difficult
     * [84]Factors Hindering Efforts to Meet Electricity Needs

          * [85]Addressing Infrastructure Security
          * [86]Improving Infrastructure Management and Sustainability
          * [87]Developing Adequate Sources of Future Funding

     * [88]Oversight Questions
     * [89]GAO Contact

          * [90]Enclosure XII: Extended Operations Have Had Significant Cons

               * [91]Enclosure XIII: Securing Munitions Sites and Alleviating
                 Arm

                    * [92]Enclosure XIV: Deficiencies in Supply Support for
                      U.S. Groun

     * [93]Issue
     * [94]Summary
     * [95]Operations Have Challenged DOD's Ability to Provide Forces
     * [96]DOD Faces Enlisted Personnel Recruitment and Retention Chall
     * [97]DOD Policies and Guidance Have Limited the Availability of R
     * [98]Ongoing Operations Are Taking a Heavy Toll on Equipment
     * [99]Continuing Deployment of Ground Forces Has Affected Military
     * [100]Challenges Remain in Adjusting the Composition and Size of F
     * [101]Prior Recommendations
     * [102]Oversight Questions
     * [103]GAO Contact
     * [104]Issue
     * [105]Summary
     * [106]U.S. Did Not Prevent Looting of Munitions Sites
     * [107]Acquisition Delays and Distribution Problems Resulted in Bod
     * [108]Production and Installation Problems Resulted in Shortages o
     * [109]GAO Is Reviewing JIEDDO
     * [110]Prior Recommendations
     * [111]Oversight Questions
     * [112]GAO Contacts
     * [113]Issue
     * [114]Summary
     * [115]Inaccurate and Inadequately Funded Requirements
     * [116]Inaccurate Supply Forecasts
     * [117]Insufficient and Delayed Funding
     * [118]Delayed Acquisition
     * [119]Ineffective Distribution
     * [120]DOD Actions Taken to Improve Supply Support
     * [121]Prior Recommendations
     * [122]Oversight Questions
     * [123]GAO Contact

          * [124]Enclosure XV: DOD Needs to Improve Its Capacity to Manage Co

     * [125]Issue
     * [126]Summary
     * [127]Better Reconstruction Outcomes Require Improved Contract Man
     * [128]Action Needed to Address Long-standing Problems with Managem
     * [129]Prior Recommendations
     * [130]Oversight Questions
     * [131]GAO Contacts

          * [132]Enclosure XVI: Objectives, Scope, and Methodology

               * [133]Enclosure XVII: Staff Acknowledgments

     * [134]Strategy and Costs
     * [135]Security Conditions
     * [136]Governance Challenges
     * [137]Reconstruction Challenges
     * [138]U.S. Military Readiness
     * [139]Improving Acquisition Outcomes
     * [140]GAO's Mission
     * [141]Obtaining Copies of GAO Reports and Testimony

          * [142]Order by Mail or Phone

     * [143]To Report Fraud, Waste, and Abuse in Federal Programs
     * [144]Congressional Relations
     * [145]Public Affairs
     * [146]PDF6-Ordering Information.pdf

          * [147]Order by Mail or Phone

Contents

Letter 1

Strategy and Costs 6
Enclosure I: More Comprehensive U.S. Strategy Needed to Achieve Goals and
Address Challenges in Iraq 7
Enclosure II: U.S. Commitments Involve Significant Resources, but DOD Cost
Reports and Budgets Limit Transparency 13
Security Conditions 19
Enclosure III: Security Conditions Have Deteriorated as Iraq Has Assumed
Additional Security Responsibilities 20
Enclosure IV: Assessing the Capabilities of the Iraqi Security Forces Is
Critical 27
Enclosure V: DOD May Be Unable to Ensure That U.S.-Funded Equipment Has
Reached Iraqi Security Forces 33
Governance Challenges 40
Enclosure VI: The Iraqi Government Needs to Staff an Effective Civil
Service and Fight Corruption 41
Enclosure VII: Ministry Capacity Development Efforts Need Integrated Plan
47
Enclosure VIII: Several Factors Affect Iraqi Ministry Efforts to Spend
Capital Budgets 54
Enclosure IX: Iraq Owes Significant Foreign Debt and Faces Challenges in
Meeting IMF Conditions 59
Reconstruction Challenges 65
Enclosure X: U.S. Efforts to Restore Iraq's Oil Sector Have Been Slowed by
Major Challenges 66
Enclosure XI: U.S. Efforts to Improve Iraq's Electricity Sector Have Been
Constrained by Security, Management, and Funding Challenges 72
U.S. Military Readiness 79
Enclosure XII: Extended Operations Have Had Significant Consequences for
the U.S. Military 80
Enclosure XIII: Securing Munitions Sites and Alleviating Armor Shortages
Have Been Serious Problems 86
Enclosure XIV: Deficiencies in Supply Support for U.S. Ground Forces Have
Resulted in Shortages of Critical Items 92
Improving Acquisition Outcomes 97
Enclosure XV: DOD Needs to Improve Its Capacity to Manage Contractors 98
Objectives, Scope, and Methodology, and Staff Acknowledgments 105
Enclosure XVI: Objectives, Scope, and Methodology 106
Enclosure XVII: Staff Acknowledgments 114

Abbreviations

CDWG Capacity Development Working Group
CPA Coalition Provisional Authority
CSIS Center for Strategic and International Studies
DOD Department of Defense
EPSS Electric Power Security Service
GRD Gulf Region Division
GWOT global war on terrorism
HMMWV High-Mobility Multipurpose Wheeled Vehicle
IAMB International Advisory and Monitoring Board
IED improvised explosive device
IMF International Monetary Fund
IRMO Iraq Reconstruction Management Office
IRRF Iraqi Relief and Reconstruction Fund
ISF Iraqi security forces
ISFF Iraqi Security Forces Fund
JIEDDO Joint Improvised Explosive Device Defeat Organization
LOGCAP Logistics Civil Augmentation Program
MAT Ministry Assistance Team
mbpd million barrels per day
MNF-I Multinational Force-Iraq
MNSTC-I Multinational Security Transition Command-Iraq
mw megawatt
NCDP National Capacity Development Program
NSC National Security Council
NSVI National Strategy for Victory in Iraq
OIF Operation Iraqi Freedom
OMB Office of Management and Budget
SIB Strategic Infrastructure Battalions
SIGIR Special Inspector General for Iraqi Reconstruction
TRA Transition Readiness Assessment
USAID United States Agency for International Development

This is a work of the U.S. government and is not subject to copyright
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separately.

United States Government Accountability Office

Washington, DC 20548

January 9, 2007 January 9, 2007

Congressional Leadership and Committees

As the United States reviews its plans to secure, stabilize, and rebuild
Iraq, I have enclosed a series of issue papers for consideration in
developing your oversight agenda for the 110th Congress and analyzing the
President's revised strategy for Iraq. These papers are based on the
continuing work of the U.S. Government Accountability Office and the 67
Iraq-related reports and testimonies we have provided to the Congress
since May 2003. As the United States reviews its plans to secure,
stabilize, and rebuild Iraq, I have enclosed a series of issue papers for
consideration in developing your oversight agenda for the 110th Congress
and analyzing the President's revised strategy for Iraq. These papers are
based on the continuing work of the U.S. Government Accountability Office
and the 67 Iraq-related reports and testimonies we have provided to the
Congress since May 2003.

Iraq has had three successful elections, adopted a constitution, and
installed its first elected government. At the same time, since the
initial ground offensive ended in 2003, the costs to secure and stabilize
Iraq have grown substantially, as has the level of violence that afflicts
Iraqi society. Such violence stems from an insurgency that has grown more
complex and lethal over the past 3 1/2 years and the Sunni-Shi'a conflict,
which escalated dramatically in 2006. This instability complicates
meaningful political reconciliation among Iraq's religious and tribal
groups, reduces the effectiveness of U.S. and Iraqi reconstruction and
capacity-building efforts, and diminishes the hopes and expectations of an
Iraqi people without adequate jobs, water, fuel, and electricity. Iraq has
had three successful elections, adopted a constitution, and installed its
first elected government. At the same time, since the initial ground
offensive ended in 2003, the costs to secure and stabilize Iraq have grown
substantially, as has the level of violence that afflicts Iraqi society.
Such violence stems from an insurgency that has grown more complex and
lethal over the past 3 1/2 years and the Sunni-Shi'a conflict, which
escalated dramatically in 2006. This instability complicates meaningful
political reconciliation among Iraq's religious and tribal groups, reduces
the effectiveness of U.S. and Iraqi reconstruction and capacity-building
efforts, and diminishes the hopes and expectations of an Iraqi people
without adequate jobs, water, fuel, and electricity.

Increasing Iraqi security forces and transferring security
responsibilities to them have not resulted in reduced violence. Rather,
attacks increased throughout 2006. Although more Iraqi troops have been
trained and equipped, high absenteeism and divided loyalties have limited
their overall effectiveness. At the same time, our service members are
working with great courage and diligence to perform the roles the
President has asked of them. Notwithstanding their noble efforts, the U.S.
military has sustained significant casualties. In addition, wear and tear
on military equipment and growing replacement costs have risen
substantially. The resulting stress and strain on American forces have
reduced troop readiness levels and the availability of reserve personnel.
Increasing Iraqi security forces and transferring security
responsibilities to them have not resulted in reduced violence. Rather,
attacks increased throughout 2006. Although more Iraqi troops have been
trained and equipped, high absenteeism and divided loyalties have limited
their overall effectiveness. At the same time, our service members are
working with great courage and diligence to perform the roles the
President has asked of them. Notwithstanding their noble efforts, the U.S.
military has sustained significant casualties. In addition, wear and tear
on military equipment and growing replacement costs have risen
substantially. The resulting stress and strain on American forces have
reduced troop readiness levels and the availability of reserve personnel.

The U.S. rebuilding effort in Iraq has focused on helping the Iraqi
government establish a sound economy with the capacity to deliver
essential services. Although Iraq's economy has grown and U.S. efforts
have helped restore portions of Iraq's infrastructure, the poor security
environment and mismanagement have diminished the overall results of U.S.
investments. Iraq will need U.S. and international support, including The
U.S. rebuilding effort in Iraq has focused on helping the Iraqi government
establish a sound economy with the capacity to deliver essential services.
Although Iraq's economy has grown and U.S. efforts have helped restore
portions of Iraq's infrastructure, the poor security environment and
mismanagement have diminished the overall results of U.S. investments.
Iraq will need U.S. and international support, including political and
economic incentives, to strengthen its fragile government institutions,
which have thus far failed to adequately deter corruption, stimulate
employment, or deliver essential services.

The enclosures that follow discuss these issues and other critical
challenges that the United States and its allies face in the ongoing
struggle to help the Iraqis stabilize, secure, and rebuild Iraq.
Forthright answers to the oversight questions we pose herein are needed
from the U.S. agencies responsible for executing the President's strategy.
Congress and the American people need complete and transparent information
on the progress made toward achieving U.S. security, economic, and
diplomatic goals in Iraq to reasonably judge our past efforts and
determine future directions.

It is also important that the U.S. government account for the funds that
it expended on behalf of the Iraqi government through the Development Fund
for Iraq. After all, the Coalition Provisional Authority had a fiduciary
responsibility to properly safeguard, use, and account for these funds.

These enclosures focus on the U.S. strategy and costs of operations in
Iraq; security, governance, and reconstruction issues; the readiness of
U.S. military forces; and acquisition outcomes. They are based on our
completed and ongoing Iraq-related work, and incorporate information from
official documents and relevant officials from the various agencies
involved in stabilizing and rebuilding Iraq, including the Departments of
Defense, Energy, State, and the Treasury; the U.S. Agency for
International Development; the Army Corps of Engineers; the multinational
force; and the Defense Intelligence Agency. As part of this work, we made
multiple visits to Iraq during 2006. For the enclosures that include new
information, we provided copies to the relevant agencies for advanced
review and technical comments, which we incorporated as appropriate. We
conducted our review in accordance with generally accepted government
auditing standards. Enclosure XVI contains a detailed scope and
methodology.

We are sending copies of this report to Members of Congress. This report
will also be available at no charge on GAO's Web site at
http://www.gao.gov.

If you or your staff have any questions about this report, please contact
the individual listed at the end of each enclosure. Contact points for our
Offices of Congressional Relations and Public Affairs can be found on the
last page of this report. For press inquiries, please contact Paul
Anderson at (202) 512-3823. Key contributors to this report are included
in enclosure XVII.

Thank you for your time and consideration. As always, we at GAO stand
ready to assist Congress in discharging its constitutional
responsibilities for the benefit of the American people.

David M. Walker Comptroller General of the United States

Enclosures

List of Congressional Leadership and Committees

The Honorable Harry Reid
Majority Leader
The Honorable Mitch McConnell
Minority Leader
United States Senate

The Honorable Nancy Pelosi
The Speaker of the House of Representatives

The Honorable John A. Boehner

Minority Leader
House of Representatives

The Honorable Robert C. Byrd
The Honorable Thad Cochran
Committee on Appropriations
United States Senate

The Honorable Carl Levin
The Honorable John S. McCain
Committee on Armed Services
United States Senate

The Honorable Joseph R. Biden, Jr.
The Honorable Richard G. Lugar
Committee on Foreign Relations
United States Senate

The Honorable Joseph I. Lieberman
The Honorable Susan M. Collins
Committee on Homeland Security and Governmental Affairs
United States Senate

The Honorable David Obey
Chairman
The Honorable Jerry Lewis
Ranking Minority Member
Committee on Appropriations
House of Representatives

The Honorable Ike Skelton
Chairman
The Honorable Duncan L. Hunter
Committee on Armed Services
House of Representatives

The Honorable Tom Lantos
Chairman
The Honorable Ileana Ros-Lehtinen
Ranking Minority Member
Committee on Foreign Affairs
House of Representatives

The Honorable Henry A. Waxman
Chairman
The Honorable Tom Davis
Ranking Minority Member
Committee on Oversight and Government Reform
House of Representatives

The Honorable Christopher Shays
Ranking Minority Member
Subcommittee on National Security and International Relations
Committee on Oversight and Government Reform
House of Representatives

Strategy and Costs

    Enclosure I: More Comprehensive U.S. Strategy Needed to Achieve Goals and
    Address Challenges in Iraq

    Enclosure II: U.S. Commitments Involve Significant Resources, but DOD Cost
    Reports and Budgets Limit Transparency

Enclosure I: More Comprehensive U.S. Strategy Needed
to Achieve Goals and Address Challenges in Iraq

Issue

In November 2005, the National Security Council (NSC) issued the National
Strategy for Victory in Iraq (NSVI) to clarify the President's strategy^1
for achieving U.S. political, security, and economic goals in Iraq. The
U.S. goals included establishing a peaceful, stable, and secure Iraq.
Based on a GAO report issued in July 2006^2 and other GAO reviews, this
enclosure discusses (1) the extent to which the NSVI and its supporting
documents addressed the six characteristics of an effective national
strategy, and (2) how security, political, and economic factors have
affected the U.S. strategy for Iraq. Congressional review of the
President's 2007 plan for Iraq should consider whether it addresses the
key elements of a sound national strategy.

Summary

We reported in July 2006 that the NSVI was an improvement over previous
U.S. planning efforts for stabilizing and rebuilding Iraq. The strategy's
positive attributes included a clear purpose and scope and identification
of U.S. involvement in Iraq as a "vital national interest and the central
front in the war on terror." The strategy also provided a comprehensive
description of U.S. political, security, and economic objectives in Iraq.
However, the discussion of outcome-related performance measures to assess
progress in achieving these goals and objectives was limited. Moreover,
the strategy fell short in at least three other areas. First, it only
partially identified the agencies responsible for implementing key aspects
of the strategy. Second, it did not fully address how the U.S. will
integrate its goals with those of the Iraqis and the international
community, and it did not detail Iraq's anticipated contribution to its
future needs. Third, it only partially identified the current and future
costs of U.S. involvement in Iraq, including maintaining U.S. military
operations, building Iraqi government capacity, and rebuilding critical
infrastructure.

Security, political, and economic factors continue to hamper U.S. efforts
to stabilize Iraq and achieve key U.S. goals. First, the United States and
Iraq are trying to revitalize Iraq's economy and restore the oil,
electricity, and other key sectors. However, these efforts have been
impeded by security, corruption, and other challenges.

^1The NSVI and key supporting documents are collectively referred to as
the U.S. strategy for Iraq.

^2GAO, Rebuilding Iraq: More Comprehensive National Strategy Needed to
Help Achieve U.S. Goals, GAO-06-788 (Washington, D.C.: July 11, 2006).

NSVI Did Not Fully Address All Key Characteristics of an Effective
National Strategy

The NSVI aimed to improve U.S. strategic planning for Iraq; however, the
NSVI and supporting documents did not fully address all of the six
desirable characteristics of effective national strategies that GAO has
identified through its prior work.^3 We used these six characteristics to
evaluate the strategy--that is, the NSVI and supporting documents that
Department of Defense (DOD) and Department of State officials said
encompassed the U.S. strategy for rebuilding and stabilizing Iraq.^4

As figure 1 shows, the strategy generally addressed three of the six
characteristics but only partially addressed three others, limiting its
usefulness in guiding agency implementation efforts and achieving desired
results. Moreover, since the strategy was dispersed among several
documents instead of one, its effectiveness as a planning tool for
implementing agencies and informing Congress about the pace, costs, and
intended results of these efforts was limited.

^3See GAO, Combating Terrorism: Evaluation of Selected Characteristics in
National Strategies Related to Terrorism, GAO-04-408T (Washington, D.C.:
Feb. 3, 2004); and Defense Management: Comprehensive Strategy and Periodic
Reporting Are Needed to Gauge Progress and Costs of DOD's Global Posture
Restructuring, GAO-06-486C (Washington, D.C.: May 26, 2006).

^4We evaluated the NSVI along with seven related classified and
unclassified supporting documents. These documents were identified by
State's Office of the Coordinator for Iraq, State's Bureau of Near Eastern
Affairs, DOD's Defense Reconstruction Support Office, and DOD's Near
Eastern South Asian Affairs office as having key details about the
strategy. The documents included (1) the National Security Presidential
Directive 36 (May 2004), (2) the MNF-I Campaign Plan (August 2004), (3)
the MNF-I/ U.S. Embassy Baghdad Joint Mission Statement on Iraq (December
2005), (4) the Multinational Corps-Iraq Operation Order 05-03 (December
2005), (5) the National Strategy for Supporting Iraq (updated January
2006), (6) State's quarterly section 2207 reports to Congress (January and
April 2006); and (7) the April 2006 Joint Campaign Plan issued by the
Chief of Mission and the Commander of the MNF-I.

Figure 1: Extent That November 2005 U.S. Strategy for Iraq Addressed GAO's
Desirable Characteristics of an Effective National Strategy

As shown in figure 1, the NSVI and supporting documents only partially (1)
delineated the roles and responsibilities of key U.S. government agencies;
(2) described the means by which the strategy will be integrated among
U.S. entities, the Iraqi government, and international organizations, and
the mechanisms for coordination; and (3) identified the strategy's costs
and sources of financing.

           o Although the strategy partially addressed the roles and
           responsibilities of specific U.S. government agencies and offices
           and the process for coordination, it is not clear which agency was
           responsible for implementing the overlapping activities listed
           under the NSVI's eight strategic objectives. For instance, one
           activity was to promote transparency in the executive,
           legislative, and judicial branches of the Iraqi government;
           however, the NSVI and supporting documents did not indicate which
           agency was responsible for implementing this activity, or who was
           to be held accountable for results. Moreover, little guidance was
           provided to assist implementing agencies in resolving conflicts
           among themselves, as well as with other entities.
           o The NSVI and supporting documents partially addressed how the
           strategy related to other international donors and Iraqi
           government goals, objectives, and activities. For instance, the
           NSVI and supporting documents identified the need to integrate the
           efforts of the coalition, the Iraqi government, and other nations,
           but did not discuss how U.S. goals and objectives would be
           integrated. In addition, the strategy did not address what it
           expects the international community or the Iraqi government to pay
           to achieve future objectives.
           o The November 2005 National Strategy for Victory in Iraq and
           related supporting documents did not clearly identify the costs of
           U.S. military operations, including the costs to repair and
           replace equipment used during operations. The strategy did not
           identify other key related costs, including the costs of training,
           equipping, and supporting Iraq's security forces; the costs of
           rebuilding, maintaining, and protecting critical oil and
           electricity infrastructure; or the costs of building management
           capacity in Iraq's central ministries and 18 provincial
           governments. In addition to these costs, the new Iraqi government
           will need significant help in building the procurement, financial
           management, accountability, and other key systems needed to govern
           and provide basic services to its citizens.
			  
			  Security, Political, and Economic Factors Hamper Efforts to Achieve
			  Strategic Goals

           Our July 11, 2006, report and other GAO work show that security,
           political, and economic factors have hampered and will continue to
           influence U.S. efforts to stabilize Iraq and achieve key U.S.
           strategic goals. First, increases in attacks against the coalition
           and its Iraqi partners, growing sectarian violence, and the
           influence of militias have adversely affected U.S. and Iraqi
           efforts to secure Baghdad and other strategic cities. Second,
           sectarian control over ministries and the lack of skilled
           employees hinder efforts to improve Iraq's governance by building
           the capacity of ministries and reconciling differences among
           sectarian interests. Third, security, corruption, and fiscal
           problems limit U.S. and Iraqi plans to revitalize Iraq's economy
           and restore essential services in the oil and electricity sectors.

           o Overall security conditions in Iraq have continued to
           deteriorate and have grown more complex despite recent progress in
           transferring security responsibilities to Iraqi security forces
           and the Iraqi government. The number of trained and equipped Iraqi
           security forces has increased from about 174,000 in July 2005 to
           about 323,000 as of December 2006, at the same time as more Iraqi
           army units have taken the lead for counterinsurgency operations in
           specific geographic areas. Despite this progress, however, attacks
           on coalition forces, Iraqi security forces, and civilians have all
           increased, reaching record highs in October 2006. Because of these
           conditions, the United States could not draw down U.S. force
           levels in Iraq as planned in 2004 and 2006, and U.S. forces have
           continued to conduct combat operations in urban areas, especially
           Baghdad (see encl. III).
           o The U.S. government faces significant challenges in improving
           the capability of national and provincial governments to provide
           security and deliver services to the Iraqi people. According to
           State, the Iraqi capacity for self-governance was decimated after
           nearly 30 years of autocratic rule. In addition, Iraq lacked
           competent existing Iraqi governmental organizations. Since 2003,
           the United States has provided the Iraqis with a variety of
           training and technical assistance to improve their capacity to
           govern. As of December 2006, we identified more than 50 capacity
           development efforts led by at least 6 U.S. agencies (see encl.
           VII).
           o Iraq's oil production and exports have consistently fallen below
           U.S. program goals. U.S. and Iraqi efforts to restore Iraq's oil
           sector have been impeded by the lack of security, corruption,
           sustainability, and funding challenges. The unstable security
           environment continues to place workers and infrastructure at risk
           while protection efforts remain insufficient. Widespread
           corruption and smuggling affect the distribution of refined oil
           products such as gasoline. The U.S. reconstruction program has
           encountered difficulty with Iraq's ability to operate and maintain
           aging infrastructure. Furthermore, uncertainties exist regarding
           the sources of future funding. These challenges could make it
           difficult to achieve current production and export goals, which
           are central to Iraq's economic development (see encl. X).
			  
			  Prior Recommendations

           In our July 2006 report, we recommended that the NSC improve the
           current strategy by articulating clear roles and responsibilities,
           specifying future contributions, and identifying current costs and
           future resources. In addition, the United States, Iraq, and the
           international community should (1) enhance support capabilities of
           the Iraqi security forces, (2) improve the capabilities of the
           national and provincial governments, and (3) develop a
           comprehensive anti-corruption strategy. State commented that the
           NSVI's purpose is to provide a broad overview of the U.S. strategy
           in Iraq rather than a detailed account. GAO's analysis was not
           based exclusively on the NSVI but included all key supporting
           documents. Consequently, GAO retained the recommendation for a
           more complete and integrated strategy.
			  
			  Oversight Questions

           o What is the desired end-state of U.S. involvement in Iraq? How
           long, and at what cost, will it take to achieve a peaceful,
           stable, and secure Iraq?
           o What political and economic incentives are needed to increase
           security, improve government capacity, and reduce corruption in
           Iraq?
           o How will revised U.S. plans incorporate enhanced support for
           Iraqi security forces and national and provincial governments?
           o How will revised U.S. plans assist the Iraqi government in
           developing a comprehensive anti-corruption strategy?
           o If the President suggests a troop increase, what would be the
           mission of the additional troops?

                        o How long would they stay?
                        o How would the success of the mission be measured?
                        o What additional costs would the United States
                        incur?

           o To what extent does the administration's revised strategy
           integrate the input and resources of the Iraqi government?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
			  Enclosure II: U.S. Commitments Involve Significant Resources, 
			  but DOD Cost Reports and Budgets Limit Transparency
			  
			  Issue

           Since 2001, Congress has appropriated about $495 billion to U.S.
           agencies for military and diplomatic efforts in support of the
           global war on terrorism (GWOT); the majority of this amount has
           gone to stabilize and rebuild Iraq. Efforts in Iraq involve
           various activities such as combating insurgents, conducting civil
           affairs, building capacity, reconstructing infrastructure, and
           training Iraqi military forces. The Departments of Defense (DOD)
           and State and the U.S. Agency for International Development, among
           others, play primary roles. To date, the United States has
           reported substantial costs^1 for Iraq and can expect to incur
           significant costs in the foreseeable future, requiring decision
           makers to consider difficult trade-offs as the nation faces an
           increasing number of long-range fiscal challenges. Funding for
           these efforts has been provided through annual appropriations, as
           well as supplemental appropriations that are outside the annual
           budget process. Moving more funding into baseline budgets,
           particularly for DOD, would enable decision makers to better weigh
           priorities and assess trade-offs. This enclosure describes (1) the
           reported costs incurred by DOD and other U.S. agencies for
           military operations, reconstruction efforts, and stabilization
           activities in Iraq since 2003; and (2) the issues involved in
           estimating future financial commitments related to U.S
           involvement.
			  
			  Summary

           As of September 30, 2006, DOD had reported costs of about $257.5
           billion^2 for military operations in Iraq. In addition, as of
           October 2006, about $29 billion had been obligated for Iraqi
           reconstruction and stabilization efforts. However, problems with
           the processes for recording and reporting GWOT costs raise
           concerns that these data may not accurately reflect the true
           dollar value of war-related costs. U.S. commitments to Iraq will
           likely involve the continued investment of significant resources
           and will depend on several direct and indirect cost variables and,
           in some cases, decisions that have yet to be made. For DOD, these
           include the pace and duration of operations, redeployment and
           basing plans, and the amount of equipment to be repaired or
           replaced. Cost variables for other U.S. agencies include efforts
           to help form national and provincial governments, develop
           management capacity, build capable and loyal security forces, and
           undertake reconstruction activities to restore, sustain, and
           protect critical infrastructure. With activities likely to
           continue into the foreseeable future, decision makers will have to
           carefully weigh priorities and make difficult decisions when
           budgeting for future costs.
			  
^1For purposes of this enclosure, the term "costs" refers to the
obligations that have been incurred by U.S. agencies in Iraq. Obligations
are incurred through actions such as orders placed, contracts awarded,
services received, or similar transactions made during a given period that
will require payments during the same or a future period.

^2DOD's reported costs in Iraq do not include the costs of classified
activities.			  
			  
			  Reported Costs for Operations in Iraq Are Increasing

           Since 2003, when DOD began Operation Iraqi Freedom, DOD has
           reported cumulative costs of about $257.5 billion for military
           operations in Iraq. As shown in figure 1, DOD's reported costs
           show a steady increase from about $38.8 billion in fiscal year
           2003 to about $83.4 billion in fiscal year 2006. The largest
           increase has been in operation and maintenance expenses, including
           items such as support for housing, food, and services; the repair
           of equipment; and transportation to move people, supplies, and
           equipment. Between fiscal years 2003 and 2006, DOD reported
           increases in these expenses from about $29.9 billion to about $50
           billion. According to DOD officials, some of this increase is
           attributable to higher fuel costs and higher costs for contracts
           to provide housing, food, and services. Reported costs for
           military personnel have increased from about $8 billion in fiscal
           year 2003 to about $14.1 billion in fiscal year 2006, and include
           military pay and allowances for mobilized reservists, as well as
           special payments or allowances, such as imminent danger pay. DOD
           has also reported that costs for procurement of equipment and
           other items have increased from $0.7 billion in fiscal year 2003
           to about $13 billion in fiscal year 2006.

           Figure 1: DOD's Reported Costs for Operation Iraqi Freedom by
           Fiscal Year

           Note: DOD spent an additional $6.1 billion for operations in Iraq
           that was not included in DOD's reported costs.

           Other U.S. government agencies have reported obligating $29
           billion for Iraqi reconstruction and stabilization, as of October
           2006. Among other uses, these funds have been used for
           infrastructure repair of the electricity, oil, water, and health
           sectors; training and equipping of Iraqi security forces (military
           and police); and administrative expenses. The Department of State
           reports that the remaining funds will be used to sustain the
           infrastructure projects that are completed or under way and to
           build greater capacity at the national, provincial, and municipal
           levels.

           Our prior work^3 found numerous problems with DOD's processes for
           recording and reporting its war-related costs, including
           long-standing deficiencies in DOD's financial management systems
           and business processes, the use of estimates instead of actual
           cost data, and the lack of adequate supporting documentation. DOD
           has taken some steps to address these issues, but problems remain.
           Without transparent and accurate cost reporting, Congress and DOD
           will continue to not have reliable information on how much the war
           is costing, sufficient details on how appropriated funds are being
           spent, or the historical data needed to consider future funding
           needs.
			  
^3For example, see GAO, Global War on Terrorism: Fiscal Year 2006
Obligation Rates Are within Funding Levels and Significant Multiyear
Procurement Funds Will Likely Remain Available for Use in Fiscal Year
2007, GAO-07-76 (Washington, D.C.: Nov. 13, 2006); and Global War on
Terrorism: DOD Needs to Improve the Reliability of Cost Data and Provide
Additional Guidance to Control Costs, GAO-05-882 (Washington, D.C.: Sept.
21, 2005).		  
			  
			  Future Iraq Costs Are Likely to Be Considerable

           U.S. military and diplomatic commitments in Iraq will continue for
           the foreseeable future and are likely to be in the hundreds of
           billions of dollars. The magnitude of future costs will depend on
           several direct and indirect variables and, in some cases,
           decisions that have not been made. DOD's future costs will likely
           be affected by the pace and duration of operations, the types of
           facilities needed to support troops overseas, redeployment plans,
           and the amount of equipment to be repaired or replaced. Although
           reducing troops would appear to lower costs, we have seen from
           previous operations in the Balkans and Kosovo that costs could
           rise--if, for example, increased numbers of contractors replace
           military personnel. If the pace of operations remains high or
           troops are increased, costs for force protection, fuel, and other
           items could remain high. Lastly, sustained operations will
           continue to take a toll on the condition of equipment. The Army
           and Marine Corps will have the largest equipment reset (repaired,
           recapitalized, or replaced) costs. Although the military services
           are refining estimates of overall needs, their total requirements
           and costs are still unclear.

           Other future costs to the U.S. government in Iraq include efforts
           to help form national and provincial governments, develop
           management capacity, and build capable and loyal security forces.
           Also, more funds will be needed to restore, sustain, and protect
           infrastructure. The new Iraqi government will need significant
           help in building the procurement, financial management, and
           accountability systems needed to govern and provide basic services
           to its citizens. The 18 provincial governments will need
           assistance in building management capacity and delivering results
           that make a difference in Iraqis' daily lives. Sustaining Iraqi
           military and police forces of 323,000 personnel will require the
           Iraqi government to spend more money on personnel, maintenance,
           and equipment than originally anticipated. Also, the new Iraqi
           security forces will need additional help in addressing recurring
           training needs, replacing lost or stolen equipment, and developing
           improved logistical and sustainment capabilities. Although most of
           the early U.S. reconstruction monies for Iraq have been obligated,
           more funds will be needed for remaining reconstruction needs and
           to restore, sustain, and protect the infrastructure built to date.

           With U.S. commitments in Iraq continuing for the foreseeable
           future, requiring decision makers to make difficult decisions, we
           would encourage DOD to consider moving certain costs into the
           baseline budget, as it has done with Operation Noble Eagle.^4 This
           action is consistent with our prior recommendations and
           testimony^5 that, once an operation reaches a known level of
           effort and costs are more predictable, more funding should be
           built into the baseline budget. We note that Congress, in the John
           Warner National Defense Authorization Act for Fiscal Year 2007,
           requires, among other things, that the President's annual budget
           submitted after fiscal year 2007 include a request for the funds
           for ongoing military operations in Iraq and Afghanistan. Doing so
           would allow decision makers to weigh priorities and consider
           trade-offs in making financial decisions.
			  
			  Prior Recommendations

           Over the years, we have made a series of recommendations to the
           Secretary of Defense intended to improve the transparency and
           reliability of DOD's GWOT obligation data, including
           recommendations that DOD (1) revise the cost-reporting guidance so
           that large amounts of reported obligations are not shown in
           "miscellaneous" categories, and (2) take steps to ensure that
           reported GWOT obligations are reliable. We have also recommended
           that DOD build more funding into the baseline budget once an
           operation reaches a known level of effort and costs are more
           predictable. In response, the department has implemented many of
           our previous recommendations.
			  
			  Oversight Questions

           o What are the key factors causing steady growth in agencies'
           reported costs to address the situation in Iraq, and what steps
           are being taken to control costs?
           o To what extent have U.S. government agencies estimated the
           future costs and financial requirements of continued efforts in
           Iraq?
			  
^4This operation, which defends the U.S. homeland against terrorist
attacks, began in 2001.

^5GAO, Global War on Terrorism: Observations on Funding, Costs, and Future
Commitments, GAO-06-885T (Washington, D.C.: July 18, 2006); and Future
Years Defense Program: Actions Needed to Improve Transparency of DOD's
Projected Resource Needs, GAO-04-514 (Washington, D.C.: May 7, 2004).
			  
           o To what extent are improvements being made to existing
           accounting and management information systems so that they will be
           able to provide complete and reliable reporting on costs?
           o To what extent will the unstable security environment affect
           reconstruction efforts in Iraq, and what is the impact on future
           costs?
           o What steps are U.S. government agencies taking to move some of
           their more predictable costs into their baseline budgets?
           o Does DOD have a valid basis for determining funding needs for
           Iraq?
			  
			  GAO Contacts

           Sharon Pickup, Director, Defense Capabilities and Management,
           (202) 512-9619 or [email protected]; and Joseph A. Christoff,
           Director, International Affairs and Trade, (202) 512-8979 or
           [email protected].

Security Conditions			  

    Enclosure III: Security Conditions Have Deteriorated as Iraq Has Assumed
    Additional Security Responsibilities

    Enclosure IV: Assessing the Capabilities of the Iraqi Security Forces Is
    Critical

    Enclosure V: DOD May Be Unable to Ensure That U.S.-Funded Equipment Has
    Reached Iraqi Security Forces
	 
	 	     Enclosure III: Security Conditions Have Deteriorated as Iraq Has
			  Assumed Additional Security Responsibilities
			  
			  Issue

           Since the fall of 2003, the U.S.-led multinational force in Iraq
           has developed and refined a series of plans to transfer security
           responsibilities to the Iraqi government and security forces, with
           the intent of creating conditions that would allow a gradual
           drawdown of the 140,000 U.S. military personnel in Iraq. This
           security transition was to occur first in conjunction with the
           neutralization of Iraq's insurgency and second with the
           development of Iraqi forces and government institutions capable of
           securing their country. According to the November 2005 National
           Strategy for Victory in Iraq, security conditions in Iraq were
           expected to improve as the Iraqi government and security forces
           became more capable and took the lead for security. This enclosure
           provides information on (1) the evolution of the multinational
           force's plan to transfer security responsibilities to the Iraqi
           government and forces, and (2) whether progress in implementing
           the current security transition plan has led to improved security
           conditions in Iraq.
			  
			  Summary

           The Multinational Force-Iraq (MNF-I) has revised its security
           transition plan numerous times over the past 3 years, as Iraqi
           security forces and government have not effectively taken over
           security responsibilities within planned time frames.^1 MNF-I
           first revised its security transition plan in the summer of 2004
           following the collapse of Iraqi security forces during an
           insurgent uprising. This collapse ensued when MNF-I transferred
           security responsibilities to Iraqi forces before they were
           properly trained and equipped to battle insurgents. Under the
           current security transition plan, MNF-I has established
           partnerships with Iraqi security forces, is developing Iraqi army
           units so that they can lead counterinsurgency operations, and is
           assessing when to transfer security responsibilities to provincial
           Iraqi governments. After provincial transitions occur, the plan
           calls for MNF-I forces to move out of urban areas and assume a
           supporting role.

           Overall security conditions in Iraq have continued to deteriorate
           and have grown more complex despite recent progress in
           transferring security responsibilities to Iraqi security forces
           and the Iraqi government. The number of trained and equipped Iraqi
           security forces has increased from about 174,000 in July 2005 to
           about 323,000 in December 2006, at the same time as more Iraqi
           army units have taken the lead for counterinsurgency operations in
           specific geographic areas. Despite this progress, however, attacks
           on coalition forces, Iraqi security forces, and civilians have all
           increased, reaching record highs in October 2006. Because of these
           conditions, the United States could not draw down U.S. force
           levels in Iraq as planned in 2004 and 2006, and U.S. forces have
           continued to conduct combat operations in urban areas, especially
           Baghdad.
			  
^1The multinational force in Iraq was known as Combined Joint Task Force-7
until May 2004.			  
			  
			  MNF-I Revised Security Transition Plan Because Iraq Could Not
			  Effectively Take Over Security Responsibilities

           From the fall of 2003 through April 2006, MNF-I revised its
           security transition plan a number of times because the Iraqi
           government and security forces have proved incapable of assuming
           security responsibilities within the time frames envisioned by the
           plans. For example, in October 2003, the multinational force
           outlined a four-phased plan for transferring security missions to
           Iraqi security forces (see table 1). Citing the growing capability
           of Iraqi security forces, MNF-I attempted to quickly shift
           responsibilities to them in February 2004 but did not succeed in
           this effort. In Baghdad, for example, the coalition forces
           withdrew to bases outside of the city, giving Iraqi forces greater
           responsibility for security within the city. In April 2004,
           however, Iraqi police and military units performed poorly during
           an escalation of insurgent attacks against the coalition.^2 Many
           Iraqi security forces around the country collapsed during this
           uprising, with some units abandoning their posts and
           responsibilities and in some cases assisting the insurgency.
           Following the collapse of Iraqi security forces, MNF-I identified
           a number of problems that contributed to their poor performance,
           including problems in training and equipping Iraqi forces, and
           revised its security transition plan.^3

^2In March 2004, Iraqi security forces numbered about 203,000, including
about 76,000 police, 78,000 facilities protection officers, and about
38,000 in the civilian defense corps. The Departments of State and Defense
later stopped including facilities protection officers in their count of
Iraqi security forces.

^3MNF-I first revised the security transition plan in its August 2004
campaign plan and later in the April 2006 joint MNF-I/U.S. Embassy Baghdad
Campaign Plan. Detailed information on these plans is classified. See GAO,
DOD Reports Should Link Economic, Governance, and Security Indicators to
Conditions for Stabilizing Iraq, GAO-06-152C (Washington, D.C.: Oct. 18,
2005) for classified information on MNF-I's original campaign plan; and
Plans for Stabilizing Iraq, GAO-06-673C (Washington, D.C.: July 27, 2006)
for classified information on the Joint MNF-I/U.S. Embassy Baghdad
Campaign Plan.

Table 1: MNF-I's Initial and Current Plans for Transferring Security
Responsibilities to Iraq

             Initial security transition plan Current security transition     
Phase     (October 2003)                   plan (2005 and 2006)            
Phase I   Mutual support: The              Partnership: MNF-I and its      
             multinational force establishes  major subordinate commands      
             conditions for transferring      establish and maintain          
             security responsibilities to     partnerships in all Iraqi       
             Iraqi forces.                    security force units, from      
                                              battalion to ministerial level. 
Phase II  Transition to local control:     Iraqi army lead: Process during 
             Iraqi forces in a local area     which Iraqi army units progress 
             assume responsibility for        in capability from unit         
             security.                        formation to the ability to     
                                              conduct counterinsurgency       
                                              operations in specific          
                                              geographic areas.               
Phase III Transition to regional control:  Provincial Iraqi control: Iraqi 
             Iraqi forces are responsible for civil authorities satisfy the   
             larger regions.                  conditions required to assume   
                                              control and exercise            
                                              responsibility for the security 
                                              of their respective provinces.  
Phase IV  Transition to strategic over     Iraqi security self-reliance:   
             watch: Iraqi forces on a         The government of Iraq is       
             national level are capable of    capable of planning,            
             maintaining a secure environment conducting, and sustaining      
             against internal and external    security operations and forces  
             threats, with broad monitoring   through its security            
             from the multinational force.    ministries.                     

Source: GAO analysis of Combined Joint Task Force-7, DOD, and State
documents.

Note: The phases of the current security transition plan may occur at
different times throughout Iraq.

As shown in table 1, the current version of the security transition plan
includes four phases. During the first phase, which occurred from 2005
through 2006, MNF-I expanded the use of military, police, and other
transition teams to assist in the development of Iraqi security forces and
ministries, and its major subordinate commands established partnerships
with Iraqi military units. In the ongoing second phase, Iraqi army lead,
MNF-I is attempting to organize and develop Iraqi army units to the point
that they can assume the lead for counterinsurgency operations. Units in
the lead, however, still require MNF-I support because they need to
develop additional capabilities, particularly in the logistics and combat
support areas.^4 For the third phase, provincial Iraqi control, MNF-I and
the Iraqi government determine when Iraqi provinces can assume
responsibility for security based on the threat level in the province, the
capabilities of the Iraqi security forces and the provincial government,
and MNF-I's ability to respond to major threats, if needed. According to
an MNF-I official, as these conditions are met, MNF-I forces will then
move out of all urban areas and assume a supporting role.

^4We recently reviewed U.S. efforts to assist the Iraqi Ministries of
Defense and Interior in developing support capabilities, particularly in
the areas of logistics, command and control, and intelligence. We plan to
report separately on these matters due to the sensitive nature of the
information.

Progress in Transferring Security Responsibilities to Iraq Has Not Led to
Improved Security Conditions

The security situation has worsened despite progress in implementing the
current security transition plan (see fig. 1). For example, the State
Department has reported that the number of trained and equipped army and
police forces has increased from about 174,000 in July 2005 to about
323,000 in December 2006.^5 As we previously reported, the number of
trained and equipped security forces does not provide a complete picture
of their capabilities and may overstate the number of forces on duty.^6
Ministry of Interior data include police who are absent without leave, but
Ministry of Defense data exclude absent military personnel. Moreover,
according to DOD's November 2006 report to Congress, due to a lack of
standardized personnel strength reporting in the Ministry of Interior, it
is unclear how many of the coalition-trained police the ministry still
employs, or what percentage of the 180,000 police thought to be on the
ministry payroll are coalition trained and equipped.

DOD and State also have reported progress in transferring security
responsibilities to Iraqi army units and provincial governments. As shown
in figure 1, the number of Iraqi army battalions in the lead for
counterinsurgency operations has increased from 21 in March 2005 to 89 in
October 2006. In addition, 7 Iraqi army division headquarters and 30
brigade headquarters had assumed the lead by December 2006. Moreover, by
mid-December 2006, three provincial governments--Muthanna, Dhi Qar, and
Najaf--had taken over security responsibilities for their provinces. In
November 2006, DOD reported that security responsibility for up to five
more provinces could transition to Iraqi government authority by February
2007.

^5The United States had set a goal of training and equipping about 325,000
Iraqi security forces by December 2006. This figure consists of 137,000
military personnel under the Ministry of Defense and 188,000 Ministry of
Interior police and other forces. According to DOD and MNF-I reports, the
Prime Minister of Iraq has announced initiatives to man combat units at
110 percent of their authorization levels and to expand the size of the
army. If implemented, these moves would raise the end strength of Iraqi
security forces to about 362,000 and would extend the training and
equipping of Iraqi forces through January 2008.

^6GAO, Stabilizing Iraq: An Assessment of the Security Situation,
GAO-06-1094T (Washington, D.C.: Sept. 11, 2006); and Rebuilding Iraq:
Preliminary Observations on Challenges in Transferring Security
Responsibilities to Iraqi Military and Police, GAO-05-431T (Washington,
D.C.: Mar. 14, 2005).

Figure 1: Enemy-Initiated Attacks against the Coalition and Its Iraqi
Partners Compared with Progress in Developing Iraqi Security Forces

Notes: For the number of attacks in September 2006, an unclassified
breakout of categories is not available.

As shown in figure 1, the reported progress in transferring security
responsibilities to Iraq has not led to improved security conditions.
Since June 2003, overall security conditions in Iraq have deteriorated and
grown more complex, as evidenced by the increased numbers of attacks and
more recent Sunni-Shi'a sectarian strife after the February 2006 bombing
of the Golden Mosque in Samarra. Enemy-initiated attacks against the
coalition and its Iraqi partners have continued to increase through
October 2006. The average total attacks per day has increased, rising from
about 70 per day in January 2006 to about 180 per day in October 2006.
These attacks have increased around major religious and political events,
including Ramadan^7 and elections. Coalition forces are still the primary
target of attacks, but the number of attacks on Iraqi security forces and
civilians also has increased since 2003. In October 2006, the State
Department reported that the recent increase in violence has hindered
efforts to engage with Iraqi partners and shows the difficulty in making
political and economic progress in the absence of adequate security
conditions.

Although the Iraqi government and security forces have recently made some
progress in taking on security responsibilities, they and MNF-I have been
unable to reduce the levels of violence in Iraq. Because of these
conditions, the United States has not been able to draw down the number of
U.S. forces in Iraq as early as planned. For example, after the increase
in violence and collapse of Iraqi security forces during the spring of
2004, DOD decided to maintain a force level of about 138,000 troops until
at least the end of 2005, rather than reducing the number of troops to
105,000 by May 2004, as had been announced the prior fall. More recently,
DOD reversed a decision to significantly reduce the U.S. force level
during the spring of 2006 because Iraqi and coalition forces could not
contain the rapidly escalating violence that occurred the following
summer. After reducing the number of troops from about 160,000 in December
2005 to about 127,000 in June 2006, the United States increased its force
level to 144,000 troops in September and October 2006 and then reduced it
to 140,000 the following month.^8 Moreover, rather than moving out of
urban areas, U.S. forces have continued to conduct combat operations in
Baghdad and other cities in Iraq, often in conjunction with Iraqi security
forces.

^7Ramadan is the ninth month of the Islamic calendar. Over the past 4
years, Ramadan began about October 27, 2003; October 16, 2004; October 5,
2005; and September 24, 2006.

^8U.S. force levels for 2005 and 2006 came from Brookings Institution,
Iraq Index: Tracking Variables of Reconstruction & Security in Post-Saddam
Iraq (Washington, D.C: Dec. 21, 2006).

Oversight Questions

           o Why have security conditions continued to deteriorate in Iraq
           even as the number of trained and equipped Iraqi security forces
           has increased and the Iraqi forces and government have assumed
           increasing responsibility for security?
           o If existing U.S. political, economic, and security measures are
           not reducing violence in Iraq, what additional measures, if any,
           will the administration propose to stem the violence and
           facilitate the achievement of U.S. objectives, including an
           eventual drawdown of U.S. forces?
			  
GAO Contact			  

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
			  Enclosure IV: Assessing the Capabilities of the Iraqi Security
			  Forces Is Critical
			  
			  Issue

           Transferring security responsibilities to the Iraqi security
           forces and provincial governments is a critical part of the U.S.
           government's strategy in Iraq and key to allowing a drawdown of
           U.S. forces. Toward this end, the United States has provided about
           $15.4 billion to train, equip, and sustain the Iraqi army and
           police since 2003. However, it is unclear whether U.S.
           expenditures and efforts are having their intended effect in
           developing capable forces and whether additional resources are
           needed. A key measure of the capabilities of Iraqi forces is the
           Transition Readiness Assessment (TRA) reports prepared by
           coalition advisors embedded in Iraqi units. These reports serve as
           the basis for the Multinational Force-Iraq (MNF-I) determination
           of when a unit is capable of leading counterinsurgency operations
           and can assume security responsibilities for a specific area. This
           enclosure (1) assesses limitations in Department of Defense (DOD)
           and State Department reports on Iraqi security forces, and (2)
           discusses how unit-level TRA reports provide more comprehensive
           information on Iraqi security force capabilities.
			  
			  Summary

           Although DOD and State reports indicate progress in the
           development of Iraqi security forces, the aggregate nature of the
           reports does not provide comprehensive information on the
           capabilities and needs of individual units. As of December 2006,
           MNF-I had trained and equipped approximately 323,000 Iraqi
           security forces, had assigned specific areas of operations to 128
           Iraqi army units, and had transferred security responsibilities to
           three Iraqi provinces. However, aggregate numbers of trained and
           equipped forces that are leading operations do not provide
           information on the capabilities and needs of individual units.
           This information is found in unit-level TRA reports. These reports
           provide the coalition commander's professional judgment on an
           Iraqi unit's capabilities and are based on ratings in personnel,
           command and control, equipment, sustainment and logistics,
           training, and leadership. To conduct future work on this issue,
           GAO has made multiple requests for access to the unit-level TRA
           reports over the last year. However, DOD has not yet complied with
           our requests. This serves to limit congressional oversight over
           the progress achieved toward a critical U.S. objective.
			  
			  Reports on Iraqi Security Forces Provide Limited Assessments of
			  Capabilities

           DOD and State reports provide some information on the development
           of Iraqi security forces, but they do not provide detailed
           information on the specific capabilities that affect the readiness
           levels of individual units. For example, DOD and State provide
           Congress with weekly and quarterly reports on the progress made in
           developing capable Iraqi security forces and transferring security
           responsibilities to the Iraqi army and the Iraqi government. This
           information is provided in two key areas: (1) the number of
           trained and equipped forces, and (2) the number of Iraqi army
           units and provincial governments that have assumed responsibility
           for security of specific geographic areas.

           The State Department reports that the number of trained and
           equipped Iraqi security forces has increased from about 174,000 in
           July 2005 to about 323,000 in December 2006.^1 DOD reports that,
           as of December 5, 2006, 128 Iraqi army units--7 division
           headquarters, 30 brigade headquarters, and 91 battalions--have
           assumed the lead for counterinsurgency operations in their areas
           of responsibility. In addition, Muthanna, Dhi Qar, and Najaf
           provincial governments assumed security responsibility in July,
           September, and December 2006, respectively. However, these numbers
           do not provide a complete picture of Iraqi security forces'
           capabilities in part because they may overstate the number of
           forces on duty. For example, Ministry of Interior data include
           police who are absent without leave, but Ministry of Defense data
           exclude absent personnel. Moreover, the numbers do not give
           detailed information on the status of equipment, personnel,
           training, or leadership. Unit-level TRA reports provide that
           information. For additional information on the limitations of DOD-
           and State-reported information on the number of units trained and
           equipped as well as the transfer of security responsibilities, see
           enclosure III.
			  
			  Transition Readiness Assessments Assess Iraqi Security Force
			  Capabilities

           MNF-I uses the TRA system to determine when units of the Iraqi
           security forces can assume the lead for conducting security
           operations. The TRA is a joint assessment, prepared monthly by the
           unit's coalition commander and Iraqi commander. According to MNF-I
           guidance, the purpose of the TRA system is to provide commanders
           with a method to consistently evaluate units; it also helps to
           identify factors hindering unit progress, determine resource
           shortfalls, and make resource allocation decisions. The basic TRA
           reports^2 are used by commanders to determine when an Iraqi army
           unit is prepared to assume the lead in counterinsurgency
           operations.

           Iraqi army TRA reports contain capabilities ratings in the areas
           of personnel, command and control, equipment,
           sustainment/logistics, training, and leadership (see fig. 1).
           Commanders use the TRA results and their professional judgment to
           determine a unit's overall readiness level. Each Iraqi army unit
           is assigned a readiness level of 1 through 4, with 1 being the
           highest level a unit can achieve. Accordingly,

           o level 1 units are capable of planning, executing, and sustaining
           counterinsurgency operations,
           o level 2 units are capable of planning, executing, and sustaining
           counterinsurgency operations with Iraqi security forces or
           coalition support,
           o level 3 units are partially capable of conducting
           counterinsurgency operations in conjunction with coalition units,
           and
           o level 4 units are forming or are incapable of conducting
           counterinsurgency operations.

           The TRA reports also include the commanders' estimates of the
           number of months needed before a unit can assume the lead for
           counterinsurgency operations. DOD also reports readiness
           assessments for headquarters service companies, such as
           engineering and signal units that support combat units.^3

^1The 2006 number includes special operations forces and support forces.

^2The Iraqi army, national police, Department of Border Enforcement, and
strategic infrastructure battalions use the basic TRA format. MNF-I
assesses the capability of Iraqi police to perform law enforcement
operations using a different TRA report.

^3Headquarters service companies are rated levels 1 through 4 based on
their ability to provide combat support and combat service support to
units.

Figure 1: Transition Readiness Assessment (TRA) Report Form for the Iraqi
Army

Finally, the TRA reports include the coalition commander's narrative
assessment of the Iraqi unit's overall readiness level, known as the
Performance Capability Assessment, which is designed to clarify the
overall TRA. The narrative assesses the Iraqi unit's leadership
capabilities, combat experience, ability to execute intelligence-based
operations, and describes any life support issues affecting the Iraqi
unit's capabilities. Commanders must explain and address any regression in
the unit's overall TRA level and list the top three issues preventing the
unit from assuming the lead for counterinsurgency operations or advancing
to the next TRA level. Remarks are intended to provide information and
details that will help to resolve the problems that degrade the unit's
status.

DOD provided GAO with classified, aggregate information on overall
readiness levels for the Iraqi security forces--including an
executive-level brief--and information on units in the lead, but has not
provided unit-level reports on Iraqi forces' capabilities. According to
MNF-I's Deputy Chief of Staff for Strategic Effects, the best measure of
the capabilities of Iraqi units and improvements in the security situation
comes from commanders on the ground at the lowest level. We previously
reported that GAO was working with DOD to obtain the unit-level TRA
reports because they would be useful in more fully informing Congress on
the capabilities and needs of Iraq's security forces and in indicating how
accurately DOD reports reflect the forces' capabilities. As of January
2007, DOD still has not provided GAO with this unit-level TRA data.

Oversight Questions

           o Why has DOD not provided GAO and Congress with unit-level TRA
           reports?
           o How does DOD assess the reliability of TRA reports and ensure
           that they present an accurate picture of Iraqi security forces'
           capabilities and readiness?
           o At what TRA rating level would Iraqi army units not require any
           U.S. military support? What U.S. military support would Iraqi
           units still require at TRA levels 1 and 2?
           o How does DOD use unit-level TRA reports to assess shortfalls in
           Iraqi capabilities? What do DOD assessments show about the
           developmental needs of Iraqi security forces?

           o How have changes in the TRA system and form affected the
           standards by which units are assessed? Have changes been made in
           the degree to which the commanders' subjective judgment is used?
           If so, why?
           o What threat levels, if any, do commanders assess Iraqi units
           against when determining a unit's overall readiness rating? Is the
           threat level used consistently across all units?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
			  Enclosure V: DOD May Be Unable to Ensure That U.S.-Funded
			  Equipment Has Reached Iraqi Security Forces
			  
			  Issue

           In the fall of 2003, the Coalition Provisional Authority and
           Multinational Force-Iraq (MNF-I) shared responsibility for the
           U.S.-funded train-and-equip program for Iraqi security forces,
           which include military and police forces.^1 After the collapse of
           Iraqi forces in the spring of 2004, the United States restructured
           the multinational force and increased resources to train and equip
           Iraqi forces. Unlike traditional security assistance programs,^2
           the train-and-equip program in Iraq operates under the authority
           of the Department of Defense (DOD) and is implemented by MNF-I
           subordinate commands, including the Multinational Security
           Transition Command-Iraq (MNSTC-I). Since 2003, the United States
           has provided $15.4 billion for Iraqi security forces and law
           enforcement. According to MNSTC-I records, MNF-I has issued about
           480,000 weapons, 30,000 vehicles, and 1.65 million pieces of gear
           (uniforms, body armor, helmets, and footwear), among other items,
           to the Iraqi security forces as of October 2006. This enclosure
           provides information on (1) the laws and regulations governing
           property accountability that DOD may have applied to the U.S.
           train-and-equip program in Iraq^3 and (2) MNF-I's accountability
           for U.S.-funded equipment that it has issued to Iraqi security
           forces. We plan on issuing a final report on these and related
           intelligence matters by March 2007. Our work focuses on the
           accountability requirements for the transportation and
           distribution of U.S.-funded equipment and did not review any
           requirements relevant to the procurement of this equipment.
			  
			  Summary

           Congress funded the train-and-equip program for Iraq outside
           traditional security assistance programs, which, according to DOD
           officials, provided DOD with a large degree of flexibility in
           managing the program. Since the funding did not go through
           traditional security assistance programs, the accountability
           requirements normally applicable to these programs--including the
           registration of small arms transferred to foreign governments--did
           not necessarily apply. It is currently unclear what accountability
           measures, if any, DOD has chosen to apply to the train-and-equip
           program for Iraq, as DOD officials have expressed differing
           opinions on this matter. As part of our ongoing work, we have
           asked DOD to clarify what accountability measures it has chosen to
           apply to the program.

           While it is unclear which regulations DOD has chosen to apply,
           beginning in early 2004, MNF-I established requirements to control
           and account for equipment issued to the Iraqi security forces by
           issuing a series of orders that outlined procedures for its
           subordinate commands. These included obtaining signed records for
           equipment received by Iraqi units or individuals and recording
           weapons serial numbers. Although MNF-I took initial steps to
           establish property accountability procedures, limitations such as
           the initial lack of a fully operational equipment distribution
           network, staffing weaknesses, and the operational demands of
           equipping the Iraqi forces during war hindered its ability to
           fully execute critical tasks outlined in the property
           accountability orders. Since late 2005, MNSTC-I has taken
           additional steps to improve its property accountability
           procedures, including establishing property books^4 for equipment
           issued to Iraqi Ministry of Defense and Ministry of Interior
           forces. According to MNSTC-I officials, MNSTC-I also recovered
           existing documentation for equipment previously issued to Iraqi
           forces. However, according to our preliminary analysis, DOD and
           MNF-I may not be able to account for Iraqi security forces'
           receipt of about 90,000 rifles and about 80,000 pistols which were
           reported as issued before early October 2005. Thus, DOD and MNF-I
           may be unable to ensure that Iraqi military forces and police
           received all of the equipment that the coalition procured or
           obtained for them.
			  
			  DOD Has Not Clarified What Accountability Requirements Apply to
			  the Train-and-Equip Program for Iraq

           The train-and-equip program for Iraq received U.S. funding from
           sources other than traditional security assistance programs. These
           funding mechanisms, according to DOD officials, provided DOD with
           a large degree of flexibility in managing the program. Congress
           made funds available for developing Iraqi security forces
           initially through the Iraq Relief and Reconstruction Fund (IRRF)
           and later through the Iraq Security Forces Fund (ISFF).^5
           According to DOD officials, because the funding did not go through
           traditional security assistance programs, the equipment procured
           with these funds was not necessarily subject to the accountability
           requirements that normally apply to these programs. As specified
           in DOD regulations, these requirements include procedures for
           storing, protecting, transporting, and registering small arms and
           other sensitive items transferred to foreign governments. For
           example, the Security Assistance Management Manual, which provides
           guidance for traditional security assistance programs, states that
           the U.S. government's responsibility for equipment intended for
           transfer to a foreign government under the Foreign Military Sales
           program does not cease until the recipient government's official
           representative assumes final control.^6 Other regulations
           referenced by the Security Assistance Management Manual prescribe
           minimum standards and criteria for the physical security of
           sensitive conventional arms and require the registration of small
           arms transferred outside DOD control.^7

           It is unclear at this time what accountability measures DOD has
           chosen to apply to the train-and-equip program for Iraq. For
           example, DOD officials have expressed differing opinions on
           whether the DOD regulation on the Small Arms Serialization
           Program, which requires the entry of small arms serial numbers
           into a DOD-maintained registry, applies to U.S.-funded equipment
           procured for Iraqi security forces.^8 If the regulation does
           apply, then MNSTC-I would be required to provide the serial
           numbers of all small arms procured for Iraqi forces to the Small
           Arms Serialization Program. Although the regulation requirements
           are unclear, MNSTC-I has recently begun to provide weapons serial
           numbers to the Small Arms Serialization Program, according to
           MNSTC-I officials. As part of our ongoing work, we have asked DOD
           to clarify whether MNF-I and MNSTC-I must follow accountability
           measures specified in DOD regulations, or whether DOD has
           established other accountability measures.
			  
			  Despite MNF-I Accountability Orders, DOD and MNF-I May Be Unable
			  to Fully Account for Weapons Issued to Iraqi Security Forces

           While it is unclear which regulations DOD has chosen to apply,
           MNF-I issued orders to its subordinate commands directing steps to
           account for all equipment distributed to the Iraqi security
           forces.^9 These orders tasked relevant coalition forces to collect
           property accountability items, including signed hand receipts and
           weapons serial numbers. For example, MNF-I and one of its
           subordinate commands, Multinational Corps-Iraq (MNC-I), issued two
           orders in early 2004^10 that together directed U.S. military units
           responsible for issuing equipment to the Iraqi security forces to
           conduct the following procedures, among others:

           o record the serial numbers for all sensitive items such as
           weapons and radios;
           o enter relevant information onto a Department of the Army hand
           receipt form and obtain signatures from receiving Iraqi security
           forces; and
           o submit property accountability information to MNSTC-I.

           According to a former MNSTC-I official, hand receipts are critical
           to maintaining property accountability because they document the
           particular unit or individual that has control over a specific
           item.

           Although MNSTC-I took initial steps to establish property
           accountability procedures during 2004 and 2005, MNF-I subordinate
           commands did not fully execute critical tasks outlined in the
           property accountability orders due to the length of time necessary
           to fully develop an equipment distribution network, staffing
           weaknesses, and the operational demands of equipping the Iraqi
           forces during war:

           o The length of time necessary to fully develop the equipment
           distribution network hampered MNSTC-I's ability to collect and
           maintain appropriate equipment accountability records. According
           to former MNSTC-I officials, the equipment distribution network
           for Iraqi military forces and police, which included national
           warehouses and regional distribution centers, was initiated during
           2004. MNSTC-I took initial steps to put in place accountability
           procedures at the national level warehouses located at Taji and
           Abu Ghraib. For example, through the summer of 2004 and into early
           2005, MNSTC-I consolidated and recorded existing inventory and
           established a database to track equipment that the national
           warehouses received, stored, and shipped. In addition, regional
           equipment distribution centers, from which MNF-I staff and
           contractors issued equipment to Iraqi units and maintained records
           of issue, were established to receive equipment from the national
           warehouses. These and other efforts, however, did not result in a
           fully operational distribution network until mid-2005, over 1 year
           after MNF-I began distributing large quantities of equipment to
           the Iraqi security forces, according to former MNSTC-I officials.
           o According to former MNSTC-I and other officials, staffing
           weaknesses also hindered the development of property
           accountability procedures. According to the former MNSTC-I
           commander, several months passed after MNSTC-I's establishment
           before the command received the needed number of staff. As a
           consequence, MNSTC-I did not have the personnel necessary to open
           shipping containers and record information on individual items
           distributed to Iraqi forces, according to former MNSTC-I
           officials. Moreover, frequent personnel turnover contributed to
           communications problems and a loss of institutional memory. For
           example, some former MNSTC-I staff told us that they were not
           aware that MNF-I had published a property accountability order in
           early 2004 for equipment issued to Iraqi security forces.
           o The operational demands of equipping Iraqi forces during
           war--including the need to distribute weapons rapidly to Iraqi
           forces conducting combat operations--limited MNSTC-I's ability to
           fully comply with accountability procedures, according to former
           MNSTC-I officials. For example, during late 2004, according to the
           former MNSTC-I commander, Iraqi insurgents conducted a campaign of
           intimidation during which they attacked equipment convoys and
           killed contractors.

           Due to these early limitations, MNF-I subordinate commands did not
           consistently collect and maintain records of equipment issued to
           Iraqi security forces. As a result, DOD and MNF-I may be unable to
           ensure that all of the equipment obtained for the Iraqis reached
           the intended recipients.

           As MNSTC-I's organization matured, it took additional steps to
           improve accountability procedures for the equipment provided to
           Iraqi security forces. Since the fall of 2005, MNSTC-I has
           collected hand receipts for equipment issued to Iraqi security
           forces, according to former and current MNSTC-I officials. In
           addition, in the fall of 2005, MNSTC-I logistics staff established
           separate electronic property books for the equipment provided to
           Iraqi Ministry of Defense and Ministry of Interior forces,
           including records for equipment previously issued to those forces.
           To create the records for equipment already issued to the Iraqis,
           MNSTC-I staff relied on contract and shipping records stored at
           MNSTC-I, according to a former MNSTC-I official. In August 2006,
           according to MNSTC-I officials, MNSTC-I logistics staff began to
           build on earlier efforts to improve accountability by recovering
           records maintained at the Umm Qasr port, the national warehouses
           at Taji and Abu Ghraib, and the regional distribution centers. The
           information collected since August 2006 includes hand receipts for
           many shipments, according to MNSTC-I officials. In addition, since
           the spring of 2006, MNSTC-I has been consolidating weapons serial
           numbers into an electronic format. MNSTC-I officials stated that
           they have begun to submit these numbers to the DOD Small Arms
           Serialization Program, and are also establishing the basis for a
           weapons serial number registry for the government of Iraq. MNSTC-I
           officials stated that as a result of these efforts they can
           account for most of the weapons procured through coalition funding
           channels and issued to Iraqi security force units.

           Despite the steps MNF-I has taken to improve its accountability
           procedures, our preliminary analysis indicates that DOD and MNF-I
           may not be able to account for a number of weapons reported as
           issued to Iraqi forces. The MNSTC-I property books contain records
           for about 90,000 rifles and about 90,000 pistols issued to Iraqi
           forces as of September 22, 2005. These numbers incorporate records
           MNSTC-I recently recovered from earlier phases of the
           train-and-equip program for Iraq. However, the former MNSTC-I
           commander reported that about 180,000 rifles and about 170,000
           pistols were issued during the same time frame. According to
           former and current MNSTC-I officials, weapons obtained with
           non-U.S. funds may comprise a portion of the difference between
           these sets of numbers. In addition, MNSTC-I continues to recover
           records and may be able to account for some part of the
           difference. However, based on our preliminary analysis, because
           DOD and MNF-I maintained incomplete records for equipment issued
           to the Iraqi security forces before the fall of 2005, the numbers
           reported by the former MNSTC-I commander do not necessarily
           represent the weapons received by Iraqi security forces. Rather,
           these numbers indicate weapons tracked at the national warehouses
           and regional distribution centers, according to former MNSTC-I
           officials. In addition, former MNC-I property book officers told
           us they had maintained the required records for weapons their
           units had issued to Iraqi forces between 2004 and 2006. However,
           MNF-I officials were unaware of such records when we recently
           requested them. As a result, DOD and MNF-I may not be able to
           account for Iraqi security forces' receipt of about 90,000 rifles
           and about 80,000 pistols that were reported as issued but were not
           recorded during earlier phases of the train-and-equip program for
           Iraq. Thus, DOD and MNF-I may be unable to ensure that Iraqi
           military forces and police received all of the equipment that the
           United States has procured or obtained for them. In our ongoing
           review, we will continue to assess MNF-I records for equipment
           distributed to Iraqi forces.
			  
			  Oversight Questions

           o What are the steps being taken to ensure accountability of
           U.S.-funded equipment issued to the Iraqi security forces?
           o Should DOD formulate property accountability rules and
           regulations that distinguish between times of peace and war?
           o What is the potential for insurgents, militias, or other armed
           groups to obtain U.S.-funded equipment, including weapons?
           o What plans do DOD and the State Department have, if any, for
           transitioning MNSTC-I to a traditional security assistance
           organization?
			  
^1The Coalition Provisional Authority was the U.N.-recognized authority
led by the United States and the United Kingdom that was responsible for
the temporary governance of Iraq. Multinational Force-Iraq was known as
Combined Joint Task Force-7 until May 2004.

^2Traditional security assistance programs operate under State Department
authority and are managed in country by the Department of Defense through
security assistance organizations under the direction and supervision of
the Chief of the U.S. Diplomatic Mission.

^3DOD defines accountability as the obligation imposed by law, lawful
order, or regulation, accepted by an organization or person for keeping
accurate records, to ensure control of property, documents or funds, with
or without physical possession (DODI 5000.64, Accountability and
Management of DoD-Owned Equipment and Other Accountable Property, E2.2).

^4A property book is a formal set of property accounting records and
files.

^5See Emergency Supplemental Appropriations Act for Defense and for the
Reconstruction of Iraq and Afghanistan, 2004, P.L. 108-106; Emergency
Supplemental Appropriations Act for Defense, the Global War on Terror, and
Tsunami Relief, 2005, P.L. 109-13; Emergency Supplemental Appropriations
Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006,
P.L. 109-234; Department of Defense Appropriations Act, 2007, P.L.
109-289.

^6See DOD 5105.38-M, Security Assistance Management Manual, C7.5. The
Foreign Military Sales program is a traditional security assistance
program where eligible recipient governments purchase from the U.S.
government defense articles, services, or training, often using grants
provided under the Foreign Military Financing program.

^7DOD 5100.76-M, Physical Security of Sensitive Conventional Arms,
Ammunition, and Explosives, C1.1.1; DOD 4000.25-M, Defense Logistics
Management System, C18.7.4.3; and DOD 4000.25-2-M, Military Standard
Transaction Reporting and Accounting Procedures, C12.7.4.3.

^8DOD 4000.25-2-M, Military Standard Transaction Reporting and Accounting
Procedures, C12.7.4.3; DOD 4000.25-M, Defense Logistics Management System,
C18.7.4.3.

^9According to former and current MNSTC-I officials, MNF-I has issued
equipment from a variety of sources. The equipment includes items procured
with funds from the United States, Iraq, and other coalition countries, as
well as weapons captured since the start of Operation Iraqi Freedom and
then redistributed to Iraqi forces.

^10MNF-I Directive 04-015, OST Supply and Equipment Distribution Guidance
(May 2004); MNC-I FRAGO 155 [12 June 2004 DTU] to MNC-I OPORD 04-01, Iraqi
Security Force Property Accountability Requirements (June 2004).
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
Governance Challenges			  

    Enclosure VI: The Iraqi Government Needs to Staff an Effective Civil Service
    and Fight Corruption

    Enclosure VII: Ministry Capacity Development Efforts Need an Integrated Plan

    Enclosure VIII: Several Factors Affect Iraqi Ministry Efforts to Spend
    Capital Budgets

    Enclosures IX: Iraq Owes Significant Foreign Debt and Faces Challenges in
    Meeting IMF Conditions
	 
	        Enclosure VI: The Iraqi Government Needs to Staff an Effective Civil
			  Service and Fight Corruption
			  
			  Issue		

           Critical to stabilizing Iraq is ensuring that the nation's central
           government ministries can provide security to the country and
           deliver essential government services to all citizens. The Iraqi
           government has 34 central government ministries that employ an
           estimated 2 million government workers. The United States has
           multiple ongoing efforts to strengthen key Iraqi ministries,
           including programs at the Ministry of Interior and the Ministry of
           Defense that are implemented by the Department of Defense (DOD).
           Additional efforts at civilian ministries under the authority of
           the Department of State and United States Agency for International
           Development (USAID) are also under way. This enclosure is based on
           U.S. reports, an assessment by the World Bank, and interviews with
           U.S. officials.^1 This enclosure discusses U.S. and international
           assessments of the Iraqi ministries' capacity to (1) build and
           train a nonpartisan civil service, (2) fight corruption within the
           ministries, and (3) use technology and effectively manage
           resources. U.S. and international assessments note that these
           three critical areas must be strengthened to improve the Iraqi
           government's ability to provide basic services to its citizens. A
           classified version of this enclosure will be available in
           February.
			  
			  Summary

           Iraqi government institutions are undeveloped and confront
           significant challenges in staffing a competent, nonpartisan civil
           service; effectively fighting corruption; and using modern
           technology and managing resources effectively. Ministry personnel
           are frequently selected on the basis of political affiliation
           rather than competence or skills, and some ministries are under
           the authority of political parties hostile to the U.S. government.
           Also, U.S. reports cite widespread corruption in the Iraqi
           government and a lack of commitment to anti-corruption efforts
           within the ministries. Finally, reliance on manual processes and
           antiquated technology hampers efforts to build efficient, modern
           ministries. Figure 1 provides an organizational chart of the Iraqi
           executive branch and ministries.

^1See Department of Defense, Measuring Stability and Security in Iraq
(Washington, D.C.: August 2006 and November 2006); Department of State,
Survey of Anticorruption Programs Embassy Baghdad, Iraq (Washington, D.C.:
August 2006); The World Bank, Briefing Book for the Government of Iraq
Part 1: Key Policy Issues (Washington, D.C.: July 2006).

Figure 1: Iraqi Executive Branch and Ministries

Iraqi Ministries Lack Trained, Nonpartisan Civil Service

The Iraqi civil service remains hampered by inadequately trained staff
whose political and sectarian loyalties jeopardize the ministries' ability
to provide basic services and build credibility among Iraqi citizens,
according to U.S. government reports and international assessments.
According to U.S. officials a significant number of Iraqi ministry staff
lack adequate skills, including computer skills. A World Bank assessment
notes that political parties play a large role in hiring decisions within
the Iraqi government. Also, a U.S. report states that the government
ministries and the associated budgets are used as sources of power for
political parties with ministry positions staffed with party cronies as a
reward for political loyalty. According to U.S. officials, patronage leads
to instability in the civil service as many staff are replaced whenever
the government changes or a new minister is named.

Some Iraqi ministries are under the authority of political parties hostile
to U.S. goals and use their positions to pursue partisan agendas that
conflict with the goal of building a government that represents all ethnic
groups. For instance, DOD reports that the Ministry of Interior has been
infiltrated by members of the Supreme Council for Islamic Revolution in
Iraq or its Badr Organization and Muqtada al-Sadr's Mahdi Army. For
example, the Mahdi Army often operates under the authority or approval of
Iraqi police to detain, torture, and kill Sunni civilians. According to a
November DOD report, steps are being taken to address these issues. The
Ministries of Agriculture, Health, Transportation, and Tourism are led by
ministers whose allegiance is to al-Sadr. U.S. officials expressed
reservations about working in some of these ministries, noting that the
effectiveness of programs is hampered by presence of unresponsive or
anti-U.S. officials.

Corruption Is a Key Challenge

Corruption in Iraq is reportedly widespread and poses a major challenge to
building an effective Iraqi government and could jeopardize future flows
of needed international assistance. A World Bank report notes that
corruption undermines the government's ability to make effective use of
current reconstruction assistance. A 2006 survey by Transparency
International ranked Iraq's government as the second most corrupt
government in the world. Moreover, between January 2005 and August 2006,
56 officials in Iraq's ministries were either convicted of corruption
charges or subject to arrest warrants.

According to U.S. government and World Bank reports, the reasons for
corruption in the Iraqi ministries are several, including the following:

           o The absence of an effective Iraqi banking system leaves the
           government dependent on cash transactions.
           o The majority of key Iraqi ministries have inadequately
           transparent, obsolete, or ambiguous procurement systems.
           o Key accountability institutions, such as the inspectors general
           who were installed in each Iraqi ministry in 2004, lack the
           resources and independence to operate effectively and
           consistently.
           o The government has no strategy to implement training for its
           three anti-corruption institutions--the Commission on Public
           Integrity, the Board of Supreme Audit, and the inspectors general
           in each ministry.

           Furthermore, Embassy Baghdad's Anticorruption Working Group
           attributed poor performance by the anti-corruption institutions to
           the government's lack of visible and authoritative commitment and
           engagement.
			  
			  Most Ministries Lack Technology and Face Challenges in Effectively
			  Managing Resources

           The Iraqi ministries lack adequate technology and have difficulty
           managing their resources, according to U.S. officials and an
           international assessment. For example, U.S. officials said that
           the Ministry of Interior relies on manual processes, such as
           hand-written ledgers and a cash-based payroll system, which have
           resulted in Iraqi police leaving their posts to deliver paychecks
           to their families. U.S. officials also said that the Iraqi
           ministries lack the technology to effectively disseminate
           information among offices and ministries within the Iraqi
           government. Finally, a U.S. contractor with a training center in
           Baghdad noted that the lack of communication technology at the
           Iraqi ministries increases the risk faced by staff and Iraqi
           trainees by requiring them to undertake dangerous travel to the
           National Training Center in Baghdad. This could be obviated
           through remote or offsite training via video conferences or other
           computer-based training.

           U.S. officials said that the Iraqi ministries have limited
           capability to manage personnel, and that the Ministry of Interior
           has limited control of local and provincial police and that
           loyalty to officials in Baghdad is questionable. For example, the
           World Bank report states that the Iraqi government pays salaries
           to nonexistent, or "ghost employees," that are collected by other
           officials. According to U.S. officials 20 percent to 30 percent of
           the Ministry of Interior staff are "ghost employees." Also, many
           key ministries have been unable to expend budget resources on
           capital improvements and are running large surpluses due in part
           to an ineffective procurement process and the inability to carry
           out fair, competitive contracting, according to U.S. officials.
           Finally, U.S. officials said that the civilian ministries need
           assistance developing long-term and strategic plans, including the
           ability to plan for and execute capital expenditures.
			  
			  Oversight Questions

           o Given the level of corruption, partisanship, and sectarian
           loyalties in various ministries, what efforts are being made to
           ensure that U.S. resources, equipment, and training are
           appropriately used and are not used to support a single group's
           agenda?
           o How can the United States ensure that the Iraqi government
           initiates and sustains effective anti-corruption efforts within
           the ministries?
           o Given the limited capacity of the Iraqi ministries to
           effectively manage government resources, can the Iraqi government
           effectively absorb significant levels of future U.S. and
           international assistance?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
			  Enclosure VII: Ministry Capacity Development Efforts Need 
			  Integrated Plan
			  
			  Issue

           Developing the capacity of Iraq's national ministries to
           effectively provide security and deliver essential services is
           critical to U.S. efforts to help Iraq build a legitimate
           sustainable government. According to U.S and Coalition Provisional
           Authority (CPA) assessments and officials, years of neglect, a
           highly centralized decision-making system under the former regime,
           and the looting of ministries in 2003 have decimated Iraq's
           government ministries. Since then, the United States and other
           donor partners have attempted to strengthen the ministries.
           Current U.S. activities include efforts targeting 10 key civilian
           ministries with funding totaling about $126 million; transition
           efforts at the Ministries of Defense and Interior with funding of
           $43 million; and additional projects by several U.S. agencies.
           This enclosure (1) assesses the status of U.S. capacity
           development efforts, (2) examines overall leadership and
           coordination of these efforts, and (3) describes the metrics used
           to assess progress. We are continuing to review these issues and
           will report further on them in the spring of 2007.
			  
			  Summary

           The U.S. government lacks a plan that integrates current efforts
           to improve Iraq's capacity to provide security and deliver
           essential services. Although the National Strategy for Victory in
           Iraq and related policy documents guide all U.S. efforts in Iraq,
           the United States lacks a specific plan for its capacity
           development efforts that includes milestones and agreed-upon
           metrics, integrates all U.S. and coalition efforts, and
           incorporates Iraqi governmentwide capacity objectives. We
           identified more than 50 U.S. efforts led by at least six U.S.
           agencies; however, it is unclear how these efforts address core
           needs and Iraqi priorities in the absence of an integrated U.S.
           plan. U.S. officials note that the Iraqi government has taken an
           increasing leadership role in capacity development efforts in
           recent months and that coordination of U.S. efforts has improved.
           However, questions still remain about the extent of Iraqi
           leadership and ownership of these efforts. Moreover, it is
           uncertain how the U.S. will make the transition from the temporary
           U.S. entities leading these efforts to those having permanent
           post-conflict responsibilities. Finally, U.S. agencies are still
           developing the metrics to assess progress and effectiveness. After
           an initial U.S. Embassy effort was deemed inadequate, several
           efforts are ongoing.
			  
			  Capacity Development Efforts Lack Integrated Plan

           In its efforts to develop the capacity of Iraqi ministries, the
           United States lacks a plan that includes milestones and
           agreed-upon metrics, integrates all U.S. and coalition efforts,
           and incorporates Iraqi governmentwide capacity objectives. Overall
           U.S. activities in Iraq are guided by the April 2006 Joint
           Campaign Plan issued by Embassy Baghdad and the Multinational
           Force-Iraq (MNF-I), the Joint Campaign Action Plan, the National
           Strategy for Supporting Iraq (updated January 2006), and Iraq's
           National Development Strategy 2005-2007. However, there is no
           specific plan for capacity development that considers and
           integrates all U.S. efforts, according to U.S. officials. A
           mid-2005 U.S. Embassy assessment first identified the need for a
           broad, integrated approach. Multiple U.S. agencies had been
           conducting capacity development efforts since 2003 at individual
           ministries; however, most of these efforts focused on helping
           Iraqi officials assume responsibility for sustaining new and
           restored infrastructure. (Fig. 1 illustrates U.S. capacity
           development efforts in Iraq since 2003.) In June 2004, CPA
           reported that all Iraqi ministries had graduated and were capable
           of managing the Iraqi government.

Figure 1: Key U.S. Efforts to Improve Iraqi Ministerial Capacity

The mid-2005 assessment and subsequent reviews by the State Department
concluded, however, that a broader, Iraqi-led capacity development program
with an integrated approach was needed to strengthen the ministries. The
embassy conceived a National Capacity Development Program (NCDP) in late
2005. The program called for the U.S. Embassy to assess the current
capacity of the ministries in conjunction with the Iraqi government,
identify core needs, and work with the Iraqi government to develop a
governmentwide strategy. The Multinational Security Transition
Command-Iraq (MNSTC-I) assumed responsibility for capacity development at
the Ministries of Defense and Interior. Plans to integrate capacity
development efforts at the security and civilian ministries for core
common needs, such as budgeting, are ongoing.

As of December 2006, we identified more than 50 capacity development
efforts led by at least six U.S. agencies, including 18 programs launched
under the NCDP. However, it is unclear how these efforts are addressing
core needs and Iraqi priorities in the absence of an integrated U.S. plan.
The State Department's Iraq Reconstruction Management Office (IRMO)
coordinates the overall effort, which targets 10 key civilian ministries,
and is spending $61.5 million for short-term projects, such as providing
English-language training for Iraqi officials, developing a new media
center for the Prime Minister's office, and adding budget and procurement
components to Iraq's financial management information system, which the
U.S. Agency for International Development (USAID) is responsible for
implementing. USAID is also implementing a $65 million medium-term effort
initially focused on training the Iraqi civil service. A range of U.S.
Army Corps of Engineers projects also currently provide capacity
development and technical training at six ministries, including the
Ministries of Electricity and Oil. According to U.S. officials and
documents, IRMO has begun to identify all U.S. capacity development
efforts to develop a comprehensive plan.

The Iraqi government has not developed a governmentwide plan for capacity
development that includes core objectives and appropriate benchmarks to
measure progress. According to IRMO officials, the U.S. government worked
with Iraqis to incorporate Iraq's priorities into current capacity
development efforts and to validate these efforts. Nonetheless, a
governmentwide capacity development plan for Iraq does not exist. USAID is
responsible for helping the government of Iraq to create this plan as part
of its longer-term work to strengthen key public administration functions.
It is uncertain if the plan will be developed. The contractor responsible
for helping with the plan stated that the lack of a central coordinating
entity for the government of Iraq, combined with a lack of access at
certain ministries, could hamper U.S. efforts. Moreover, only a few
ministries, including the Ministries of Defense and Interior, have
developed action plans to address core needs and priorities.

Questions Remain about Iraqi Leadership and U.S. Agency Roles and
Responsibilities

Questions remain about the extent of Iraqi government leadership and
ownership in current capacity development efforts. To ensure Iraqi
ownership, a representative from the Iraq Ministry of Planning was to lead
the overall effort as chair of the multinational Capacity Development
Working Group formed in late 2005 to guide overall efforts. According to
IRMO officials, the Iraqi government has become increasingly involved
since the permanent government was finalized in May 2006. However, a
representative from the Ministry of Planning did not attend any working
group meetings until October 2006, according to U.S. officials.

In addition, Ministry Assistance Teams (MAT), comprised of representatives
from the Iraqi ministries, the U.S. government, and donor partners, were
to create capacity development action plans and to guide and monitor
efforts. However, one U.S. official stated that the MATs were largely a
planning concept. Other officials noted that Iraqi participation in the
MATs was uncertain, as in some cases U.S. advisers completed work that was
to be done by Iraqi counterparts. Another official told GAO that
membership on the MATs is informal and ad hoc, with relevant
representatives participating as needed to address specific issues.

All U.S. capacity development efforts are being coordinated by a joint
U.S. government task force. According to U.S. officials, early meetings of
the task force involved information sharing rather than coordination.
However, U.S. officials stated that the current objectives of the task
force include identifying issues, critical paths, and potential overlap in
U.S. capacity development efforts. Meetings held since the beginning of
November 2006 have helped clarify questions between USAID and IRMO on
project-specific issues. Although coordination mechanisms exist, the U.S.
agencies' roles and responsibilities for capacity development and for
transition to normal post-conflict operations are uncertain:

           o IRMO was established as a temporary organization by National
           Security Presidential Directive 36 in May 2004 and has
           responsibility for coordination, policy direction, and short-term
           capacity development efforts. U.S. officials questioned whether
           IRMO, as coordinator of all U.S. capacity development efforts,
           should also be implementing programs. In addition, one of IRMO's
           short-term projects includes providing training on principles of
           transparent procurement to Iraqi government officials. USAID has
           also delivered procurement training to Iraqi government officials
           through its efforts to train the Iraqi civil service, according to
           a high-level contractor. According to a senior State Department
           official, although IRMO was expected to cease operations in 2007,
           it is likely that its authority is going to be extended. However,
           it is unclear how IRMO will transition responsibility for capacity
           development to USAID when it eventually ceases operations.
           o MNSTC-I is a temporary organization with more than 130 personnel
           and contractors that is responsible for leading capacity
           development at the Ministries of Defense and Interior. However, it
           is unclear how it will transition these efforts to an embassy-run
           post-conflict security assistance effort and a civilian-led rule
           of law program. According to a senior State Department official,
           U.S. support for the Ministry of Interior is scheduled to
           transition to State in fiscal year 2007.			  
			  
			  U.S. Metrics to Assess Ministerial Effectiveness Are Still Being
			  Developed

           U.S. government agencies have developed multiple tools to assess
           capacity and measure progress at the Iraqi ministries. For
           example, IRMO developed an initial set of metrics in late 2005 to
           assess six core functions common to 10 key civilian ministries and
           2 security ministries. However, the government of Iraq did not
           participate in developing these metrics, according to an embassy
           document. U.S. officials also noted that these metrics were not
           based on internationally accepted approaches for measuring
           capacity. The metrics were dropped in early 2006 after they were
           deemed insufficient for their purpose at certain ministries,
           according to some U.S. government officials.

           Since then, at least three separate sets of metrics have been
           initiated or are under development. First, in mid-2006, MNF-I
           began monthly assessments of the capacity of the security
           ministries to perform nine key functions, such as planning,
           logistics, and budgeting. Second, IRMO completed a baseline
           assessment of the key civilian ministries in August 2006, using a
           new, more detailed ministry capacity assessment that gauges nine
           core functions, such as the ability to plan and to stem
           corruption. Third, USAID is developing a ministry self-assessment
           tool that will help determine Iraqi needs and how USAID will
           address these needs in its medium-term programs. The assessment
           also could inform an overall capacity development plan for the
           government of Iraq.'
			  
			  Questions for Oversight

           o What progress has been made in developing an overall integrated
           plan for capacity development in conjunction with the government
           of Iraq and the international community?
           o To what extent have U.S. efforts to improve Iraq's capacity to
           provide essential services incorporated lessons learned that have
           been cited by the World Bank and other international development
           organizations, such as the need to establish host-nation
           ownership?
           o How are IRMO, USAID, and DOD clarifying their roles and
           responsibilities in Iraqi capacity development efforts? What are
           they doing to ensure there are no gaps or duplicative efforts in
           the U.S. program?
           o How are U.S. agencies developing, coordinating, and reporting
           metrics for assessing the effectiveness of U.S. assistance to
           Iraq's ministries? How is the U.S. government validating the
           usefulness of its capacity development metrics?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
			  Enclosure VIII: Several Factors Affect Iraqi Ministry Efforts to
			  Spend Capital Budgets
			  
			  Issue

           When the Iraqi government assumed control over its finances in
           2004, it became responsible for determining how more than $25
           billion annually in government revenues would be collected and
           spent to rebuild the country and operate the government. However,
           the government faces difficulties in spending budgeted funds for
           capital goods and projects in the security, oil, and electricity
           sectors. In this enclosure, we discuss (1) the factors affecting
           the Iraqi ministries' efforts to spend approved budgets, and (2)
           U.S. government efforts to address Iraq's budget execution
           problems.
			  
			  Summary

           Sound government budgeting practices can help determine the
           priorities of the new government, provide transparency on
           government operations, and help decision makers weigh competing
           demands for limited resources. However, unclear budgeting and
           procurement rules have affected Iraq's efforts to spend capital
           budgets effectively and efficiently. The inability to spend the
           money raises serious questions for the government, which has to
           demonstrate to citizens who are skeptical that it can improve
           basic services and make a difference in their daily lives. The
           U.S. government has launched a series of initiatives in
           conjunction with other donors to address this issue and improve
           ministry budget execution.
			  
			  Iraq Has Spent Little of Its Annual Capital Budget

           As of August 2006, the government of Iraq had spent, on average, 8
           percent of its annual capital goods budget and 14 percent of its
           annual capital projects budget. Iraq's fiscal year begins on
           January 1 of each year. Some of the weakest spending occurs at the
           Ministry of Oil, which relies on damaged and outdated
           infrastructure to produce the oil that provides nearly all of the
           country's revenues (see table 1).
			  
			  
           Table 1: 2006 Annual Iraq Budget and Actual Expenditures through
           August 2006
			  
			  Dollars in millions
                                                 Expenditures through August
                   2006 Annual Budget                        2006
                Capital  Capital   Total Capital        Capital              
Ministry       goods projects  budget   goods       projects Total budget 
Finance          $10      $33 $16,506      $1            $74       $8,895 
Planning           4       27      55     0.4              3            9 
Interior         233       27   1,919      25            0.2          958 
Defense          864       33   3,443      12            0.0          831 
Oil                2    3,533   3,590     0.4              4           40 
Electricity        4      767     840     0.3            267          279 
Water            0.2      200     259     0.0             49           78 
Justice            3       10      74       2            0.2           34 
Others           272    1,552   7,290      77            480        3,501 
Total         $1,392   $6,181 $33,975    $117    $877(14.2%) $14,623(43%) 
                                          (8.4%)  

           Source: GAO analysis of Iraqi budget data.

           Since most of the $34.5 billion in reconstruction funds provided
           between fiscal year 2003 and 2006 have been obligated, unexpended
           Iraqi funds represent an important source of additional financing.
           The capital goods budgets of the Interior and Defense ministries
           were intended for the purchase of weapons, ammunition, and
           vehicles, among other items. However, as of August 2006, Interior
           and Defense had spent only about 11 percent and 1 percent,
           respectively, of these budgeted funds. The Ministry of Oil's $3.5
           billion 2006 capital project's budget targeted key enhancements to
           the country's oil production, distribution, and export facilities.
           As of August 2006, the ministry had spent less than 1 percent of
           these budgeted funds.
			  
			  Lack of Clear Budget and Procurement Rules Affect Ministry Efforts
			  to Spend Budgets

           According to U.S. officials, Iraq lacks the clearly defined and
           consistently applied budget and procurement rules that are needed
           for effective budget planning and implementation. The Iraqi
           ministries are guided by complex and conflicting sets of laws and
           regulations, including those implemented under Saddam Hussein, the
           Coalition Provisional Authority (CPA), and by the current
           government. According to State officials, the lack of agreed-upon
           procurement and budgeting rules causes confusion among ministry
           officials and creates opportunities for corruption and
           mismanagement.

           The World Bank and U.S. Treasury also identified the following
           budget and financial management problems:

           o Ministries do not submit budget execution reports on a timely or
           complete basis. The Kurdistan Regional Government receives block
           grants from the central government but does not provide budget
           execution reports to the central government.
           o Reconciliation of government accounts is impossible because the
           government lacks consolidated information on the balances in
           government bank accounts or on the exact number of these accounts.
           o Donor-financed expenditures take place directly with ministries
           and outside the budget process. As a result, the Ministry of
           Finance has limited information on the activities of Iraq's
           donors.
           o Provincial governments do not provide an accounting of the funds
           they receive ($2 billion in 2006 and slated to increase to $2.9
           billion in 2007).

           The World Bank also found that Iraq's procurement procedures and
           practices are not in line with generally accepted public
           procurement practices, such as effective bid protest mechanisms
           and transparency on final contract awards.^1
			  
			  U.S. Government and Donors Have Made Efforts to Address Budget
			  Execution Challenges

           The U.S. government, World Bank, and International Monetary Fund
           (IMF) have taken steps to address some of the existing
           deficiencies in ministry budget planning and execution. U.S.
           government officials stated that reform of budget and procurement
           processes is urgently needed but would be challenging due to the
           cultural resistance to change within the ministries.

           The U.S. Embassy has formed a "budget execution" task force
           charged with mapping out current ministry budgeting and
           procurement procedures to help ministry officials and external
           parties understand how their budgets are planned and implemented.
           This task force will identify the "rules of the road" for key
           agencies and help them streamline budget procedures. Treasury and
           the U.S. Agency for International Development (USAID) are also
           working with the Ministry of Finance to implement a
           state-of-the-art financial management information system to
           provide it with more complete and timely information on ministry
           budgets.
			  
^1World Bank, IRAQ: Operation Procurement Review (June 2005).			  

           The United States, World Bank, IMF, and other donors are also
           planning additional steps to strengthen Iraq's budget and
           procurement processes. First, the United States and other donors
           are training Ministry of Finance staff on budget preparation and
           execution. Second, according to U.S. officials, the IMF and World
           Bank helped implement a new budget classification system that is
           being used for the 2007 budget. This is an important step since it
           creates an accounting system for the entire government and
           provides a sound basis for budgeting and planning. (See enclosure
           X on Iraq's debt and progress in meeting international economic
           milestones). Third, the World Bank recommends bringing all donor
           projects into the budget by means of a unified reporting framework
           and reflecting this information in the Donor Assistance Database,
           a database of donor commitments and projects.

           Over the longer term, the World Bank recommends that Iraq's budget
           include all of the government's significant revenues and
           expenditures--including the full economic costs of the oil
           subsidies, which are currently excluded. The Bank also recommended
           that the international donor community help the Ministry of
           Finance, inspector general offices, and Board of Supreme Audit
           provide greater oversight of budgeted and expended funds.
			  
			  Oversight Questions

           o What are the key challenges that Iraq's government faces in
           planning and managing budgets and procurement in the near term and
           in the future?
           o What strategy guides U.S. efforts to build Iraqi ministry
           capacity to plan and execute budgets? Are the roles and
           responsibilities of the various U.S. agencies, international
           donors, and Iraqi ministries involved in these budget execution
           efforts clearly defined?
           o What types of assistance has the United States provided to
           improve ministry capacity to plan and implement budgets. What is
           the impact of this assistance?
           o Given the large unspent capital budgets, why should additional
           U.S. reconstruction assistance be provided to Iraq?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
			  Enclosure IX: Iraq Owes Significant Foreign Debt and Faces
			  Challenges in Meeting IMF Conditions
			  
			  Issue

           Iraq has significant foreign debt remaining from the Saddam
           Hussein regime, which presents financial challenges for Iraq's
           reconstruction and economic development. Although Iraq has
           negotiated some debt restructuring under an IMF reform program,
           implementing these reforms is challenging and, as of December
           2006, has not been wholly successful. Nonetheless, Iraq's progress
           in economic development is tied to the reforms and the debt
           reduction they secure. This enclosure describes (1) the nature and
           extent of Iraq's debt and (2) challenges that Iraq faces in
           implementing economic reforms to secure additional debt
           restructuring.
			  
			  Summary

           The United States has led efforts to forgive Iraq's bilateral debt
           and to secure greater debt relief and foreign assistance in
           exchange for political and economic reforms. At the end of 2004,
           Iraq owed about $120 billion to foreign creditors--an amount
           almost five times the size of its economy. The country owed about
           $36 billion to official creditors that were members of the Paris
           Club, a group of 19 creditor nations that includes the United
           States. In 2004, Paris Club members made a commitment to forgive
           80 percent of that debt. As part of this effort, the United States
           forgave all of Iraq's outstanding debt ($4.1 billion). However,
           the majority of Iraq's debt--about $69 billion--is owed to
           non-Paris Club countries, particularly those in the Persian Gulf
           region, such as Saudi Arabia. Negotiations with non-Paris Club
           countries are ongoing. Iraq's foreign debt at the end of 2006 is
           estimated at about $89 billion--almost twice the size of its
           economy.

           As a condition of Paris Club debt relief, Iraq agreed to follow a
           reform program developed by the International Monetary Fund (IMF).
           The IMF program stipulates a series of reforms that Iraq must
           undertake to qualify for debt relief and access to IMF funds. The
           reforms are intended to help Iraq restructure its economy, spark
           economic development, and attract investment. However, some of
           these reforms are challenging to implement due to the difficult
           security situation in Iraq and the government's relative
           inexperience. In addition, the Iraqi government has not been able
           to complete all of the reforms stipulated under the IMF agreement,
           such as completing a census of government employees. The IMF,
           however, allowed Iraq to reschedule implementation of the reforms.
			  
			  Debt Reduction Has Been Promised, with Conditions

           After Saddam Hussein's regime fell in 2003, Iraq's international
           creditors sought payment on the nearly $120 billion in outstanding
           debt owed them. This outstanding debt was nearly five times the
           size of Iraq's economy in 2004 and was believed to inhibit Iraq's
           ability to attract the investment needed to finance its economic
           reconstruction. Figure 1 shows that official Paris Club
           creditors--including the United States, United Kingdom, France,
           Japan, Russia, and 14 other countries--accounted for about $36
           billion (30 percent) of Iraq's total foreign debt in 2004.
           However, the largest amount (about $62 billion) was owed to
           non-Paris Club bilateral creditors, particularly Persian Gulf
           states such as Saudi Arabia and Kuwait.^1 The remaining debt was
           held by private creditors and multinational creditors.

Figure 1: Change in Iraq's Debt, 2004 to 2006

Note: Summations may differ from totals due to rounding. Non-Paris Club
official creditor debt is based on estimates since it has not been
reconciled. The estimate of this debt for 2004 was made by the IMF, while
the estimate for 2006 was provided by the U.S. Treasury Department.

^1Most of the debt to Persian Gulf states is for financial assistance
offered to the former Saddam Hussein regime during the 1980-1988 Iraq-Iran
war.

Iraq has engaged its creditors in negotiations to restructure and forgive
portions of its foreign debt.^2 Paris Club official creditors agreed to
reduce Iraq's outstanding debt by 80 percent over three phases, one of the
largest debt reductions ever agreed to by the Paris Club creditors. The
United States, a member of the Paris Club, forgave all of Iraq's
outstanding debt ($4.1 billion) in December 2004. Iraq received the first
30-percent tranche when it agreed to an IMF Emergency Post-Conflict
Assistance program in November 2004. The second 30-percent tranche took
effect in December 2005 when Iraq agreed to a stand-by arrangement with
the IMF. Iraq will receive the remaining 20-percent reduction following
satisfactory performance for 3 years under the IMF reform program. Iraq
cleared its arrears with the IMF and World Bank in 2004. By the end of
July 2006, Iraq had settled almost $20 billion in private creditor claims,
receiving overall (private) debt reduction of more than 80 percent. The
Iraq Minister of Finance stated that the pace and scale of the commercial
debt restructuring program was unprecedented.

However, even with Paris Club, private, and multilateral debt reductions,
at the end of 2006, Iraq will still owe foreign creditors about $89
billion--almost twice the size of its economy. In addition, Iraq owes an
additional $31 billion in compensation claims for damages and losses
resulting from Iraq's invasion and occupation of Kuwait in 1990. Iraq is
continuing to negotiate with other countries outside the Paris Club,
including its largest creditors from the Persian Gulf region and China. It
is unclear whether certain economic or political conditions may be
requested by creditors to forgive or restructure this outstanding debt.
U.S. government officials stated that political factors, not progress on
the IMF program, will ultimately determine the degree to which Iraq
succeeds in negotiating debt relief on the amounts owed to the Gulf
states. Given the large share of Iraq's outstanding debt, these
negotiations and their outcome represent an important factor that could
affect Iraq's reconstruction and economic development efforts. As part of
a larger effort to assist Iraq's economic development, the United States
is strongly supporting efforts by the U.N. and Iraq to create an
"International Compact for Iraq." The compact is aimed at providing
greater debt relief and foreign assistance in exchange for political and
economic reforms. However, this initiative, launched in the fall of 2006,
is still being negotiated.

^2In 1990, the United Nations (UN) imposed economic sanctions on Iraq
following the invasion of Kuwait. The Iraqi government subsequently
defaulted on its debts to the United States and other international
creditors. Following the end of major combat operations in May 2003, the
UN lifted sanctions and sheltered Iraq from certain debt claims. UN
Security Council Resolution 1483 decided that, until December 31, 2007,
Iraqi petroleum, natural gas, and petroleum products shall generally be
immune from legal proceedings against them.

Iraq Has Met Some IMF Targets, but Others Are More Challenging

To achieve debt restructuring, Iraq agreed to implement IMF conditions
that stipulate specific economic reforms and milestones that the
government needs to meet. The central objective of these reforms is to
maintain macroeconomic stability with sustainable growth over the medium
term. These conditions are contained in the IMF stand-by arrangement,
which was approved in December 2005 and in subsequent reviews of the
stand-by arrangement in July 2006. They include a wide range of reforms
such as reducing the subsidies on petroleum products (e.g., raising prices
of gasoline, kerosene, and similar products), limiting the budget deficit,
and developing financial systems and audits that adhere to international
standards.

The new Iraqi government affirmed its commitment to the IMF program that
had been agreed to by the transitional government. However, due to the
delay in forming a permanent government and the inherent challenges in
implementing economic reforms in the midst of an active insurgency, the
government did not meet all its commitments, according to the IMF. Table 1
provides a selective list of conditions for Iraq and their status.

Table 1: Status of Selected IMF Conditions for Iraq Debt Restructuring

IMF condition             Status                                           
Government budget deficit Iraq has maintained a budget surplus, due in     
maintained below specific part to the lack of spending by certain          
levels                    ministries of their capital budgets (see         
                             enclosure 8).                                    
Ceiling on government     Iraq has reached the agreed-upon ceiling for the 
imports of petroleum      cost of these imports ($2.8 billion in 2006) and 
products                  has requested a waiver from the IMF to import    
                             more. Since refinery capacity remains limited,   
                             this will likely be a problem in the future. The 
                             government committed to allow private imports of 
                             diesel, kerosene, and other fuel products to     
                             increase supplies and allow prices to rise to    
                             neighboring country levels (see enclosure 10).   
Reduced subsidies on      The government has increased prices on fuel      
petroleum products        products twice--once in 2005 and again in June   
(gasoline, LPG, kerosene, 2006--to keep them roughly in line with the IMF  
diesel)                   program. For example, the price of kerosene was  
                             increased from $0.01 to $0.19 per gallon and the 
                             price of gasoline from $0.05 to $0.40 per gallon 
                             in June 2006. Further price increases are        
                             necessary to reduce price differentials with     
                             neighboring countries, but domestic fuel prices  
                             may still remain below prices in neighboring     
                             countries, according to the World Bank.          
Adoption of a government  Scheduled for completion June 30, 2006, this     
budget classification and condition was rescheduled for December 31, 2006. 
chart of accounts in line According to U.S. officials, Iraq completed this 
with IMF standards        condition. It is critical because it creates an  
                             accounting basis for the entire government and   
                             facilitates budgeting and planning.              
Complete a census of all  Scheduled for completion June 30, 2006, this     
public service employees  condition was rescheduled for December 31, 2006. 
(including the military)  Because wages and pensions account for 28        
                             percent of the operational budget, the           
                             government needs an accurate employee count.     

Source: International Monetary Fund.

As the government seeks to implement the IMF reform program, it faces
several challenges. Oil production and exports have been below expected
levels, making overall economic expansion and job creation dependent on
growth in the non-oil sectors of the economy. Inflation of approximately
50 to 60 percent in 2006 and increases in the prices of basic necessities
such as food, fuel and electricity continue to be growing concerns.
Corruption and lost oil revenues account for more than a billion dollars
per year in lost government revenue, according to a 2006 report by the
Ministry of Oil Inspector General. Unemployment, estimated at 25 percent
to 40 percent in 2005 and even higher in 2006, contributes to the
country's instability. Over the medium term--even with debt
restructuring--Iraq will still have significant outstanding debt and
accumulating interest. Without growth in oil revenues, the IMF notes that
Iraq may need additional external financial assistance when the
restructured loans become due.

Oversight Questions

           o What is the status of efforts to restructure Iraq's remaining
           foreign debt? Does it present challenges for Iraq's reconstruction
           and economic development?
           o What types of conditions are Persian Gulf creditor nations
           seeking with Iraq to restructure or forgive outstanding debt?
           o How will the International Compact with Iraq help secure
           additional debt relief?
           o Are the pace and substance of IMF-required reforms realistic,
           given the security and political situation in Iraq?
           o In what areas can the U.S. government provide additional
           technical assistance to help Iraq meet its IMF reform goals?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
Reconstruction Challenges			  

    Enclosure X: U.S. Efforts to Restore Iraq's Oil Sector Have Been Slowed by
    Major Challenges

    Enclosure XI: U.S. Efforts to Improve Iraq's Electricity Sector Have Been
    Constrained by Security, Management, and Funding Challenges
	    
		     Enclosure X: U.S. Efforts to Restore Iraqï¿½s Oil Sector Have Been
			  Slowed by Major Challenges
			  
			  Issue

           Iraq's oil reserves, estimated at 115 billion barrels, are the
           third largest in the world. The oil sector currently accounts for
           about two-thirds of Iraq's gross domestic product and over 90
           percent of exports and revenues. However, Iraq's oil wells and
           associated infrastructure have deteriorated due to years of
           neglect, mismanagement, and international sanctions. Considerable
           looting after Operation Iraqi Freedom, the government of Iraq's
           reluctance or inability to approve equipment replacement or
           rehabilitation of oil field construction projects, and continued
           attacks on crude and refined-product pipelines also have
           contributed to Iraq's reduced oil production and export
           capacities. As of October 2006, the U.S. government allocated
           about $1.7 billion in Iraq Relief and Reconstruction Funds (IRRF)
           for the Iraqi oil sector, of which about $1.6 billion has been
           obligated and $1.1 billion disbursed.^1 In this enclosure, we
           discuss (1) the status of efforts to meet U.S. goals for Iraq's
           oil sector and (2) key challenges the United States faces in
           improving Iraq's oil sector.
			  
			  Summary

           Iraq's oil production and exports have consistently fallen below
           U.S. program goals. U.S. and Iraqi efforts to restore Iraq's oil
           sector have been impeded by the lack of security, corruption,
           sustainability, and funding challenges. The unstable security
           environment continues to place workers and infrastructure at risk
           while protection efforts remain insufficient. Widespread
           corruption and smuggling affect the distribution of refined oil
           products, such as gasoline. The U.S. reconstruction program has
           encountered difficulty with Iraq's ability to operate and maintain
           aging infrastructure. Further, uncertainties exist regarding the
           sources of future funding. These challenges could make it
           difficult to achieve current production and export goals, which
           are central to Iraq's government revenues and economic
           development.
			  
			  Iraqï¿½s Oil Production and Exports Have Not Met U.S. Program Goals

           U.S.-funded projects have focused on restoring Iraq's oil
           production infrastructure, improving refining and export capacity,
           and providing training for operations and maintenance. As of
           December 11, 2006, the Army Corps of Engineers Gulf Region
           Division reported completing 97 of 182 planned projects and is
           expected to complete the others by July 2007. These projects are
           intended to help improve Iraq's oil production infrastructure,
           refinery, and export capacity.

           Despite U.S. efforts, Iraq's oil production and exports have
           consistently fallen below their respective program goals. After
           initially rebounding in 2003, oil production and exports averaged,
           respectively, 2.1 million and 1.5 million barrels per day (mbpd)
           in 2006. U.S. program goals are to reach an average production
           capacity of 3 mbpd and export levels of 2.2 mbpd.^2 Despite not
           meeting U.S. production and export goals, export revenue has
           generally grown as world prices for crude oil have risen.

^1Department of State, Quarterly Update to Congress; 2207 Report
(Washington, D.C.: Oct. 2006).

Figure 1: Iraqi Oil Production, Export, and Revenue, June 2003 through
November 2006

^2According to State Department officials, the U.S. goals differ from the
government of Iraq's official production goal of 2.5 mbpd and the
International Monetary Fund (IMF) target of 2.3 mbpd (annual average).

Security, Corruption, Sustainability, and Funding Challenges Hinder
Efforts to Improve Iraq's Oil Infrastructure

The U.S. government and Iraq face several key challenges in improving
Iraq's oil sector.

Addressing Infrastructure Security

Security conditions have affected Iraq's oil production and have, in part,
led to project delays and increased costs. Insurgents have destroyed key
oil infrastructure, threatened workers, compromised the transport of
materials, and hindered project completion and repairs by preventing
access to work sites. U.S. officials reported that major oil pipelines in
the north continue to be sabotaged, shutting down oil exports and
resulting in lost revenues. Pipe line repair crews are overwhelmed by the
amount of work and unable to make rapid repairs.

The U.S. government has developed a number of initiatives to protect the
oil infrastructure and transfer this responsibility to the Iraqi
government.^3 Such efforts include improving the capabilities of
infrastructure protection forces such as the Oil Protection Force, a
protection force for static infrastructure sites. The U.S. military, with
the assistance of other coalition forces, is also working to improve the
capabilities of the Strategic Infrastructure Battalions (SIB). However,
according to U.S. officials, some units are of questionable capability and
loyalty. According to U.S. government officials and a recent Center for
Strategic and International Studies report,^4 such security forces are
underpaid, underequipped, poorly led, and of questionable quality.
Additional information on the effectiveness and quality of the SIBs is
classified.

^3The Special Inspector General for Iraq Reconstruction, Unclassified
Summary of SIGIR's Review of Efforts to Increase Iraq's Capability to
Protect Its Energy Infrastructure, SIGIR-06-038 (Arlington, Va.: Sept. 27,
2006).

^4Anthony Cordesman, Center for Strategic and International Studies, Iraqi
Force Development and the Challenge of Civil War: The Critical Problems
and Failures the U.S. Must Address if Iraqi Forces Are to Eventually Do
the Job, (Washington, D.C.: Nov. 30, 2006).

Combating Corruption and Smuggling

U.S. and international officials note that corruption in Iraq's oil sector
is pervasive. In 2006, the World Bank and Ministry of Oil's Inspector
General estimated that millions of dollars of government revenue is lost
each year to oil smuggling or diversion of refined products. According to
State Department officials and reports, about 10 percent to 30 percent of
refined fuels is diverted to the black market or is smuggled out of Iraq
and sold for a profit. According to U.S. Embassy documents, the insurgency
has been partly funded by corrupt activities within Iraq and from skimming
profits from black marketers.

In addition, Iraq lacks fully functioning meters to measure oil production
and exports. In 1996, the United Nations (UN) first cited the lack of oil
metering during the time Iraq was under UN sanctions. In addition, in
2004, the International Advisory and Monitoring Board for the Development
Fund for Iraq recommended that metering equipment be expeditiously
installed. According to the Ministry of Oil and the International Advisory
and Monitoring Board (IAMB), an absence of functioning meters precludes
control over the distribution and sale of crude and refined products. The
U.S. government is currently taking steps to replace old and broken meters
at the Al-Basra export terminal, Iraq's major oil export terminal. This
project is scheduled for completion in April 2007.

Improving Infrastructure Management and Sustainability

Problems in managing key oil projects have also led to delays. U.S. agency
and contractor officials have cited difficulties in initially defining the
scope, schedule, and cost of oil projects, as well as completing projects.
The Ministry of Oil has had difficulty operating and maintaining its aging
infrastructure, including some refineries originally constructed in the
1950s, 1960s, and 1970s. The ministry will have difficulty maintaining
future production levels unless it initiates an ambitious rehabilitation
program, according to State's Iraq Reconstruction Management Office
(IRMO). Iraq's refineries are inefficient in their yield; for every barrel
of crude oil sent to refineries only about half a barrel of refined fuel
products is produced, according to IRMO. U.S. officials report that the
sector's rebuilding efforts continue to be impeded by the lack of modern
technology; qualified staff and expertise at the field, plant, and
ministry level; an effective inventory control system for spare parts
within the oil sector's 14 operating companies; and difficulties in
spending budgets for equipment upgrades and replacements (see related
brief on budget execution). The U.S. government has provided additional
training and management assistance in response to these needs.

Developing Adequate Sources of Future Funding

According to U.S. and foreign officials, the ability and willingness of
the Iraqi government to fund improvements in its oil sector remain
uncertain for a number of reasons:

           o Iraq lacks effective procurement, budgeting, and financial
           management systems to execute budgets efficiently, ensure
           transparency of oil revenues, and ensure the accountability of
           Iraqi ministry and plant managers. As of August 2006, the Ministry
           of Oil had spent only 0.1 percent of its $3.5 billion capital
           budget, according to U.S. government reporting.
           o Current government subsidies have kept prices for refined oil
           products low and constrain opportunities for growth and
           investment. U.S. and international officials report that Iraq's
           low domestic fuel prices have stimulated black market activities
           and fuel smuggling out of the country; inadequate funding for
           maintenance and refinery upgrades; and domestic overconsumption.
           According to U.S. and international officials, the Iraqi budget is
           directly affected, since state-owned refineries cover less than
           half the domestic demand, and the Iraqi government has to import
           the rest at world market prices.
           o Iraq lacks a clear legal and fiscal framework to attract foreign
           investment. According to U.S. officials, until a new hydrocarbon
           law is passed, uncertainties exist surrounding the enforceability
           of contracts, how future oil revenues will be distributed, and
           what authority, if any, regional governments will have in signing
           oil exploration contracts with foreign firms. In addition,
           according to State officials, implementing regulations have yet to
           be issued for Iraq's Fuel Import Liberalization Law passed in
           early September 2006. These regulations could allow the private
           sector to import and distribute some refined products at market
           prices.
			  
			  Oversight Questions

           o What is the Ministry of Oil's current strategy for meeting
           Iraq's growing fuel needs, and what assistance is the U.S.
           government planning to provide to help implement this strategy?
           o To what extent will an adequate fuel supply for electricity
           generation be included in Ministry of Oil planning?
           o What is the status of actions to ensure adequate security and
           maintenance of facilities built or renovated with U.S. funding?

           o How effective have U.S. efforts been in transferring
           responsibility for operations and maintenance of U.S. oil projects
           to the Iraqi government? How are these efforts integrated among
           U.S. agencies and the international community?
           o What U.S. efforts will help ensure that Iraq develops an
           adequate legal and regulatory framework to provide transparency
           and accountability of current and future oil revenues?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
			  Enclosure XI: U.S. Efforts to Improve Iraqï¿½s Electricity Sector
			  Have Been Constrained by Security, Management, and Funding
			  Challenges
			  
			  Issue

           Iraq's electricity infrastructure has deteriorated due to years of
           neglect during the previous regime, international sanctions, and
           the destruction caused by conflict, looting, and vandalism. An
           inadequate and unreliable supply of electricity affects both
           public perceptions of the government's ability to deliver basic
           services and the productivity of Iraq's oil sector, which is
           crucial to rebuilding the economy. As of October 2006, the U.S.
           government allocated about $4.2 billion of the Iraq Relief and
           Reconstruction Fund (IRRF) to Iraq's electricity sector; almost
           $2.7 billion of this amount has been disbursed.^1 In this
           enclosure, we discuss (1) the status of efforts to meet U.S. goals
           for Iraq's electricity sector and (2) the key challenges the U.S.
           faces in improving Iraq's electricity sector.
			  
			  Summary

           In 2006, electricity reached 4,317 megawatt (mw) peak generation
           capacity per day but continued to fall short of the U.S. goal of
           6,000 mw. Production was also outpaced by increasing demand, which
           has averaged about 8,210 mw per day. The Ministry of Electricity's
           2006-2015 master plan aims to rehabilitate and expand the national
           grid and will require substantial funding of about $27 billion. If
           this plan is implemented, the ministry estimates that Iraq will be
           able to meet projected demand for electricity in 2009.

           U.S. and Iraqi efforts to restore Iraq's electricity sector have
           been impeded by security, infrastructure management and
           sustainability, and funding challenges. The unstable security
           environment continues to put electrical workers and infrastructure
           at risk and protection efforts have been insufficient. It is also
           unclear whether Iraq can or will adequately manage and sustain
           U.S. projects, given inadequacies in operations and maintenance
           and an uncertain fuel supply. Further, uncertainties exist
           regarding the sources of future funds for the Iraqi electricity
           sector. These challenges could make it difficult to achieve an
           effective and efficient Iraqi electrical grid.
			  
			  Restoring Iraqï¿½s Electricity Sector Has Been Difficult

           U.S. efforts focus on restoring or constructing generation,
           transmission, distribution, and automated monitoring and control
           system projects. As of December 2006, the Army Corps of Engineers
           Gulf Region Division (GRD) reported that 293 of its 523 planned
           projects had been completed and that it is expected to complete
           most of the others by the end of 2007. The U.S. Agency for
           International Development (USAID) reported completing all of its
           29 projects. According to the State Department, as IRRF projects
           are completed, efforts are increasingly shifting from building
           large, U.S.-funded infrastructure projects to better protecting,
           maintaining, and sustaining the current infrastructure.

           Despite these gains, Iraq's electrical supply has not met initial
           program goals, remains unreliable, and is not meeting growing
           demand. While completed U.S. projects have added an estimated
           2,093 mw^2 of new and rehabilitated generation capacity, U.S.
           efforts have not met the program goal of 6,000 mw established by
           the Coalition Provisional Authority (CPA) in 2004. Peak generation
           for 2006 averaged 4,317 mw per day, slightly above the prewar
           levels of 4,200 mw. Moreover, electricity supply across the nation
           continues to be unreliable. From July through September 2006, the
           nation averaged 11.1 hours, with Baghdad averaging 6.2 hours of
           power per day. Demand has also exceeded supply. In 2006, demand
           averaged 8,210 mw^3 per day and reached a peak of 9,622 mw^4
           during the week of August 21, 2006 (see fig. 1). According to the
           U.S. government, the growth in demand for electricity has been
           stimulated by government energy subsidies and a surge in consumer
           purchases of appliances and electronics.

^1U.S. Department of State, Quarterly Update to Congress; 2207 Report
(Washington, D.C., October 2006). Funds were appropriated to the Iraq
Relief and Reconstruction Fund in the Emergency Wartime Supplemental
Appropriations Act, 2003, P.L. 108-11, and the Emergency Supplemental
Appropriations Act for Defense and for the Reconstruction of Iraq and
Afghanistan, 2004, P.L. 108-106.

^2A megawatt is a measure of the rate at which electric energy can be
transferred and is used as a measure of electric generation capacity. One
megawatt equals 1 million watts.

^3This number is equal to 164,939 megawatt hours and is calculated by
multiplying 8,210 megawatts by 20.09 hours.

^4This number is equal to 193,306 megawatt hours and is calculated by
multiplying 9,622 megawatts by 20.09 hours.

Figure 1: Peak Electricity Produced and Demand in Iraq, May 2005-November
2006

In November 2006, the Ministry of Electricity presented an ambitious
master plan for 2006 to 2015 to rehabilitate and expand the national grid;
the plan will require substantial funding of about $27 billion. If this
plan is implemented, the ministry estimates that Iraq will be able to meet
its projected demand for electricity in 2009.

Factors Hindering Efforts to Meet Electricity Needs

The U.S. government and Iraq face key challenges in meeting Iraq's
electricity needs.

Addressing Infrastructure Security

The deteriorating security environment continues to pose a serious
challenge to Iraq's electricity system,^5 leading, in part, to project
delays and increased costs for security services. Electrical workers and
infrastructure are inadequately protected and are subject to targeted
attacks. The security situation also makes it difficult to get workers,
parts, and equipment to sites. Moreover, looting and vandalism have
continued since 2003, and major electrical transmission and fuel lines
have been repeatedly sabotaged, cutting power to other parts of the
country. According to Ministry of Electricity and U.S. officials, workers
are frequently intimidated by anti-Iraqi forces, and have difficulty
repairing downed lines.

In an effort to stop the sabotage, the ministry contracted with tribal
chiefs to protect the transmission lines running through their areas,
paying them about $60 to $100 per kilometer, according to State's Iraq
Reconstruction Management Office (IRMO). However, in October 2006, IRMO
officials reported that this scheme was flawed and did not result in
improved infrastructure protection.

The U.S. government has developed other initiatives to better protect
energy infrastructure.^6 The United States has trained and equipped the
Electrical Power Security Service (EPSS) and the Strategic Infrastructure
Battalions (SIB) and partnered these security services with coalition
forces. However, a U.S. official stated that the EPSS effort was
unsuccessful and that some of the SIB units have questionable capability
and loyalty. According to a U.S. government official and a recent Center
for Strategic and International Studies report,^7 these security forces
have been underpaid, underequipped, and poorly led, and are of
questionable quality. Additional information on the status of the SIBs is
classified.

^5MNF-I attack data on infrastructure are classified. The Iraq
Reconstruction and Management Office (IRMO) has worked with the Ministry
of Electricity to improve its infrastructure attack data, but it is not
always feasible to distinguish between attacks, weather events, and
equipment failures, according to IRMO officials.

^6The Special Inspector General for Iraq Reconstruction (SIGIR),
Unclassified Summary of SIGIR's Review of Efforts to Increase Iraq's
Capability to Protect Its Energy Infrastructure, SIGIR-06-038 (Washington,
D.C., Sept. 27, 2006).

^7Anthony Cordesman, Center for Strategic and International Studies, Iraqi
Force Development and the Challenge of Civil War: The Critical Problems
and Failures the U.S. Must Address if Iraqi Forces Are to Eventually Do
the Job (Washington, D.C., Nov. 30, 2006).

Improving Infrastructure Management and Sustainability

The U.S. reconstruction program has encountered difficulties with Iraq's
ability to sustain new and rehabilitated infrastructure and address fuel
requirements. Iraq's electricity sector suffers from deteriorated,
outdated, and inefficient infrastructure resulting from two decades of
underinvestment in operations and maintenance, replacement, and expansion.
This weakened infrastructure has led to unplanned outages.^8

The rebuilding of the electricity sector has been slowed by the lack of
training to enhance the skills of plant workers, inadequate spare parts,
and an ineffective asset management and parts inventory system. Moreover,
plants are sometimes operated beyond their recommended limits and use
poor-quality fuels that rapidly deteriorate parts, involve longer
maintenance downtimes, and increase pollution. According to U.S.
government officials, Iraq needs to develop cleaner and more reliable
sources of natural gas for its generators and to formulate an integrated
fuel strategy to address these needs. Currently, Iraq's fuel supply does
not meet demand and its quality is inconsistent.

For example, of the 35 natural gas turbines the U.S. government installed
in power generation plants, 16 are using diesel, crude, or heavy fuel oil
due to the lack of natural gas and lighter fuels. As a result, maintenance
cycles are reportedly three times as frequent and three times as costly.
Poor-quality fuels also decrease the power output of the turbines by up to
50 percent and can result in equipment failure and damage, according to
U.S. and Iraqi power plant officials. The U.S. government also estimates
that Iraq is flaring enough natural gas to generate at least 4,000 mw of
electrical power. Because of natural gas shortages, diesel has to be
imported at a cost of about $1.2 billion a year, thus straining economic
resources.

The U.S. government is providing assistance to address these shortfalls
through long-term operations and maintenance programs for thermal and gas
turbine power plants and through other initiatives to help the ministry
develop a sound operations and maintenance program.

^8Also, Iraq continues to lack an automated control system that would
decrease reliance on manual operators and help alert operators of
imbalances in power transmission. According to the State Department, the
United States is funding improvements that will help increase the current
system's reliability.

Developing Adequate Sources of Future Funding

Despite the Ministry of Electricity's recent development of a 10-year
master plan, Iraq's ability to fund improvements in its electricity sector
remains uncertain.

           o According to a World Bank assessment, Iraq lacks an adequate
           legal and regulatory framework and the procurement, budgeting, and
           financial management systems to execute budgets efficiently and
           ensure accountability at government ministries.
           o Iraq's electricity tariff, one of the lowest in the world, is
           below the cost of delivery and makes it difficult for Iraq to
           finance the improvements it needs to make. Moreover, Iraq's cost
           recovery is low due to inadequate metering, billing, and illegal
           taps into the system.
           o The ministry faces uncertainty regarding future donor
           commitments, although some future international support is
           expected to come through an International Compact launched in July
           2006. Under the compact, Iraq would undertake economic, political,
           and security reforms to receive increased support from the
           international community. Donors have yet to agree on this compact.
			  
			  Oversight Questions

           o What is the Ministry of Electricity's strategy for meeting
           Iraq's growing future electrical needs, and what assistance is the
           U.S. government providing to help implement this strategy?
           o What is the status of actions taken to ensure adequate security
           and maintenance for transmission lines and facilities built or
           renovated with U.S funding?
           o How effective have U.S. efforts been in transferring
           responsibility for operations and maintenance efforts for U.S.
           electricity projects to the Iraqi government? How are these
           efforts integrated among U.S. agencies and with international
           efforts? How is success measured?
           o What efforts are needed to ensure an adequate fuel supply for
           electricity generation in Iraq? How are the needs of the
           electricity sector integrated into Ministry of Oil planning?
           o Why did the United States purchase natural gas turbines to
           generate electricity when the necessary supply of natural gas was
           not assured in Iraq?
			  
			  GAO Contact

           Joseph A. Christoff, Director, International Affairs and Trade,
           (202) 512-8979 or [email protected].
			  
U.S. Military Readiness			

    Enclosure XII: Extended Operations Have Had Significant Consequences for the
    U.S. Military

    Enclosure XIII: Securing Munitions Sites and Alleviating Armor Shortages
    Have Been Serious Problems

    Enclosure XIV: Deficiencies in Supply Support for U.S. Ground Forces Have
    Resulted in Shortages of Critical Items
	 
	        Enclosure XII: Extended Operations Have Had Significant Consequences
			  for the U.S. Military
			  
			  Issue

           Since September 11, 2001, U.S. military forces have experienced a
           high pace of operations to support homeland security missions,
           Operation Enduring Freedom in Afghanistan, and various combat and
           counterinsurgency operations in Iraq. These operations have
           required many units and personnel to deploy for multiple tours of
           duty and, in some cases, to remain for extended tours. The
           Department of Defense (DOD) faces significant challenges in
           maintaining readiness for overseas and homeland missions and
           sustaining rotational deployments of duty, especially if the
           duration and intensity of current operations continue at the
           present pace. Pursuant to a congressional mandate, we are
           examining readiness issues, including DOD's ability to support
           ongoing operations as well as other commitments. This enclosure
           highlights some of the consequences that extended operations have
           had on the U.S. military regarding personnel, equipment, and
           training. It also discusses some of the challenges DOD faces as it
           adjusts the composition and size of its forces.
			  
			  Summary

           Although DOD has overcome difficult challenges in maintaining a
           high pace of operations over the past 5 years, extended operations
           in Iraq and elsewhere have had significant consequences for the
           U.S. military. Our work on personnel, equipment, and training
           issues has found problems with (1) DOD's ability to provide active
           and reserve forces, especially for some skills; (2) the
           recruitment and retention of personnel to fill shortages of
           critical positions, including those requiring the ability to speak
           foreign languages such as Arabic; (3) policies and guidance
           affecting the availability of reserve personnel; (4) heavy wear
           and tear on equipment, as well as equipment shortages in the
           reserve components; and (5) the effects of continued deployment of
           U.S. ground forces on military training. In addition, extended
           operations present challenges in determining the adjustments
           needed to the size and composition of the Army to meet both near-
           and long-term requirements.^1
			  
			  Operations Have Challenged DODï¿½s Ability to Provide Forces

           Ongoing operations in Iraq have challenged DOD's ability to supply
           active and reserve forces that are ready to deploy, particularly
           with regard to the Army and Marine Corps. Although the Army's goal
           is to deploy active personnel only 1 of every 3 years, many
           soldiers have deployed more frequently, and some personnel are
           preparing for their third rotations to Iraq. Active Marine Corps
           personnel are also deploying more frequently than the goals
           established by Marine Corps leaders. Moreover, ongoing operations
           have created a particularly high demand for certain combat support
           and combat service support skills, such as engineering, civil
           affairs, transportation, and military police. With limits placed
           on the availability of reserve component members with these skills
           (see discussion below), DOD is increasingly turning to the Navy
           and Air Force to help meet requirements for certain types of
           forces needed to support ground operations. The longer operations
           in Iraq continue, the greater the likelihood DOD will face
           increasing challenges in identifying sufficient numbers of such
           skilled personnel.
			  
			  DOD Faces Enlisted Personnel Recruitment and Retention Challenges

           Operations in Iraq have contributed to the U.S. military's
           significant challenge in recruiting and retaining hundreds of
           thousands of service members each year. While the services have
           generally met their aggregate recruiting and retention goals, DOD
           has had problems recruiting and retaining sufficient numbers of
           individuals with the right skills and knowledge. Over 40 percent
           of DOD's 1,484 occupational specialties were consistently
           underfilled for fiscal years 2000 through 2005, raising concerns
           about the military's ability to meet all of its missions. For
           example, during fiscal year 2003 when the Iraq war began, DOD was
           unable to fill almost 103,000 positions in consistently
           underfilled occupations; this number grew to 112,000 unfilled
           positions by 2005. Many of these consistently underfilled
           occupations are in critical areas, such as health care, human
           intelligence collection, and explosive ordnance disposal.
			  
			  DOD Policies and Guidance Have Limited the Availability of Reserve
			  Forces

           DOD has recognized that the department cannot execute major
           military operations without significant participation from its
           reserve components. However, its current mobilization and
           deployment policies and guidance restrict flexibility in staffing
           long-term operations such as the global war on terrorism. After
           September 11, 2001, DOD issued a series of policies and guidance
           to guide the use of reserves for the global war on terrorism in
           order to limit deployments and help sustain the all-volunteer
           force. Most significantly, it limited the services to one
           involuntary mobilization of their reserve component members for
           the global war on terrorism and limited reserve component
           mobilizations to Iraq and Afghanistan to 12 months "on the ground"
           in the U.S. Central Command area of operations, plus additional
           time for mobilization and demobilization activities. Thus, under
           the current policy, reserve component members who were
           involuntarily mobilized for operations related to the global war
           on terrorism cannot be involuntarily mobilized for the ongoing
           operation now referred to as "the long war." As additional
           personnel have been involuntarily mobilized, the services have
           come to rely more heavily on active forces, repeat volunteers, and
           new recruits to meet their sourcing requirements.
			  
			  Ongoing Operations Are Taking a Heavy Toll on Equipment

           Ongoing military operations in Iraq are inflicting heavy wear and
           tear on equipment. Some equipment items used by U.S. forces are
           more than 20 years old, and harsh combat and environmental
           conditions over time have further exacerbated equipment condition
           problems. The Army and the Marine Corps have initiated programs to
           reset (repair or replace) equipment and are likely to incur large
           expenditures in the future. We are currently assessing these
           programs, including the extent to which the services are tracking
           reset costs and the extent to which their reset plans maintain
           unit equipment readiness while meeting ongoing operational
           requirements.

           In addition, the Army National Guard and Army Reserve have
           transferred large quantities of equipment to deploying units, an
           approach that has contributed to growing equipment shortages in
           nondeployed units. Also, reserve units have left large quantities
           of equipment overseas, and DOD has not yet developed plans to
           replace the equipment. The Army National Guard reports that its
           nondeployed units have less than one-third of their required
           equipment, and the Army Reserve reports that its units have about
           half of the modern equipment they need to deploy. These shortages
           also could adversely affect reserve units' ability to perform
           homeland defense missions and provide support to civil authorities
           in the event of natural disasters or terrorist attacks.
			  
			  Continuing Deployment of Ground Forces Has Affected Military
			  Training

           The continuing deployment of ground forces to support ongoing
           operations has affected military training. The military services
           have been focused on preparing units to assume missions and to
           operate in conditions specific to Iraq and Afghanistan, with less
           time available to prepare for other wartime and homeland defense
           missions. In addition, personnel and units are being asked to
           perform missions or functions different from those they were
           designed for and are being retrained accordingly. For example,
           field artillery units have been used to perform some military
           police duties and therefore spend time training for these missions
           before deploying. To support deploying units, units that remain
           behind must give up personnel and equipment, thus limiting their
           ability to train as a unit or to train on certain equipment that
           they might be required to operate once deployed. Also, units are
           faced with replacing officer and senior enlisted personnel pulled
           to serve as trainers for Iraqi and Afghani security forces.
			  
			  Challenges Remain in Adjusting the Composition and Size of Forces

           Ongoing operations have raised questions about whether DOD has
           adequately reassessed and adjusted the size and composition of its
           forces, particularly with regard to the Army. Although the Army
           has begun to adjust its force structure, significant challenges
           remain. For example, in 2004, the Army began to implement a $52.5
           billion initiative throughout the active and reserve components to
           establish modular brigades that are intended to be more readily
           deployable to overseas operations such as Iraq than their
           predecessor units, which were designed for Cold War postures. The
           Army's goal of establishing fully capable modular units will be
           difficult given long-standing equipment and personnel shortfalls,
           particularly while the Army is also managing the training and
           deployment of forces to Iraq.

           Further, to help support operations in Iraq, the Army has made
           some adjustments in its active-reserve mix to establish additional
           units that are in high demand. The Marine Corps has made similar
           changes. However, the Office of the Secretary of Defense had not
           conducted a recent comprehensive data-driven analysis to assess
           the number of active personnel needed by the services to implement
           the defense strategy and to provide needed capabilities within
           acceptable levels of risk.
			  
			  Prior Recommendations

           In prior reports, we have made numerous recommendations addressing
           the military issues covered in this paper, including the
           following:

           o With regard to the recruitment and retention of enlisted
           personnel, we recommended that DOD develop a management action
           plan to help components identify and address the causes of their
           recruiting and retention challenges.^2 DOD partially concurred
           with this recommendation.
           o As the result of our work on the availability of reserve forces,
           we recommended that DOD develop a strategic framework that sets
           human capital goals concerning the availability of its reserve
           component forces to meet the longer-term requirements of the
           global war on terrorism under various mobilization authorities and
           identify personnel policies that should be linked within the
           context of the strategic framework.^3 DOD partially concurred with
           this recommendation.
           o In our work on Army National Guard equipment readiness, we
           recommended that the Army develop and submit to Congress a plan
           and funding strategy that addresses the equipment needs of the
           Army National Guard for the global war on terrorism and addresses
           how the Army will transition from short-term equipping measures to
           long-term equipping solutions.^4 DOD agreed with this
           recommendation.
           o In reporting on the Army's modularity program, we recommended
           that the Army develop and provide the Secretary of Defense and
           Congress with a comprehensive plan for assessing the Army's
           progress toward achieving the benefits of modularity. We
           recommended the plan include specific, quantifiable performance
           metrics to measure progress toward meeting the goals and
           objectives established in the Army Campaign Plan.^5 DOD agreed to
           develop expanded performance metrics.
			  
			  Oversight Questions

           o To what extent has DOD evaluated its ability to support any
           adjustments in troop levels in the administration's revised
           strategy, including the availability of personnel, equipment and
           training necessary if the strategy calls for increases?
           o What options are available to DOD for making more personnel,
           including both active duty and reserve personnel, available for
           future rotations while sustaining an all-volunteer force?
           o To what extent have DOD components developed a management action
           plan to identify and address the causes of their recruiting and
           retention challenges?
           o To what extent will equipment reset plans maintain unit
           equipment readiness while meeting ongoing operational
           requirements?
           o What is the state of readiness of our armed forces? To what
           extent has DOD evaluated whether units are ready and trained to
           respond to operations other than Iraq or Afghanistan?
           o Are the Army and Marine Corps appropriately sized, with the
           right composition and mix of units and personnel skills, to
           support ongoing operations, while remaining prepared for missions
           that could arise at home or abroad?

^1For further information on the issues discussed in this enclosure, see
GAO, Military Personnel: DOD Needs Action Plan to Address Personnel
Recruitment and Retention Challenges, GAO-06-134 (Washington, D.C.: Nov.
17, 2005); Military Personnel: Reserve Components Need Guidance to
Accurately and Consistently Account for Volunteers on Active Duty for
Operational Support, GAO-07-93 (Washington, D.C.: Oct. 31, 2006); Reserve
Forces: Army National Guard and Army Reserve Readiness for 21st Century
Challenges, GAO-06-1109T (Washington, D.C., Sept. 21, 2006); Force
Structure: DOD Needs to Integrate Data into Its Force Identification
Process and Examine Options to Meet Requirements for High-Demand Support
Forces, GAO-06-962 (Washington, D.C.: Sept. 5, 2006); Defense Logistics:
Preliminary Observations on Equipment Reset Challenges and Issues for the
Army and Marine Corps, GAO-06-604T (Washington, D.C.: Mar. 30, 2006);
Military Training: Funding Requests for Joint Urban Operations Training
and Facilities Should Be Based on Sound Strategy and Requirements,
GAO-06-193 (Washington, D.C.: Dec. 8, 2005); Military Personnel: DOD Needs
to Address Long-Term Reserve Force Availability and Related Mobilization
and Demobilization Issues, GAO-04-1031 (Washington, D.C.: Sept. 15, 2004);
Homeland Defense: DOD Needs to Assess the Structure of U.S. Forces for
Domestic Military Missions, GAO-03-670 (Washington, D.C.: July 11, 2003);
Force Structure: Army Needs to Provide DOD and Congress More Visibility
Regarding Modular Force Capabilities and Implementation Plans, GAO-06-745
(Washington, D.C.: Sept. 6, 2006); and Reserve Forces: Plans Needed to
Improve Army National Guard Equipment Readiness and Better Integrate Guard
into Army Force Transformation Initiatives, GAO-06-111 (Washington, D.C.:
Oct. 4, 2005.)

^2GAO-06-134.

^3GAO-04-1031.

^4GAO-06-111.

^5GAO-06-745.
			  
			  GAO Contact

           Henry L. Hinton, Jr., Managing Director, Defense Capabilities and
           Management, (202) 512-4300 or [email protected].
			  
			  Enclosure XIII: Securing Munitions Sites and Alleviating Armor
			  Shortages Have Been Serious Problems
			  
			  Issue

           U.S. ground forces in Iraq have come under frequent and deadly
           attacks from insurgents using weapons such as improvised explosive
           devices (IED), mortars, and rocket launchers. IEDs, in particular,
           have emerged as the number one threat against U.S. forces.
           Insurgents have made many IEDs from munitions looted from storage
           sites in Iraq. This enclosure discusses (1) the security provided
           by U.S. forces over conventional munitions storage sites in Iraq
           and (2) the challenges the Department of Defense (DOD) has faced
           in meeting increased requirements for body and truck armor to
           protect U.S. ground forces.
			  
			  Summary

           As a result of the overwhelming size and number of conventional
           munitions storage sites in Iraq, combined with prewar planning
           assumptions that proved to be invalid, U.S. forces did not
           adequately secure those sites and looting was widespread. Despite
           the potential risk posed by unsecured sites, DOD's actions in
           response to lessons learned during Operation Iraqi Freedom (OIF)
           have focused on countering IEDs and not on the strategic
           implications of munitions sites for future operations.^1

           Efforts to protect U.S. ground forces with increased body and
           truck armor have been characterized by shortages and delays, which
           have reduced operational capabilities and forced combat commanders
           to accept additional risk in completing their missions.^2 We are
           currently reviewing force protection measures, including body
           armor, for current operations, as well as the organization and
           management of the Joint IED Defeat Organization (JIEDDO), which
           was established in January 2006 with a mission of countering the
           IED threat.
			  
			  U.S. Did Not Prevent Looting of Munitions Sites

           A fundamental gap existed between OIF war plan assumptions and the
           experiences of U.S. and coalition forces in Iraq, contributing to
           an insufficient number of troops on the ground to prevent the
           widespread looting of conventional munitions storage sites. Looted
           munitions have emerged as a continuing asymmetric threat to U.S.
           and coalition forces. The human, strategic, and financial costs of
           the failure to provide sufficient troops on the ground have been
           high, since IEDs made from looted explosives have caused about
           half of all U.S. combat fatalities and casualties in Iraq and have
           killed hundreds of Iraqis. In addition, unsecured conventional
           munitions sites have helped sustain insurgent groups and
           threatened the achievement of the OIF strategic goal of creating a
           stable Iraqi nation.

           DOD's actions have primarily focused on countering IEDs and not on
           the security of conventional munitions storage sites as a
           strategic planning and priority-setting consideration for future
           operations. Although good first steps, these actions do not
           address what we believe is a critical OIF lesson learned: If not
           secured during initial combat operations, an adversary's
           conventional munitions storage sites can represent an asymmetric
           threat to U.S. forces that remain in country.
			  
			  Acquisition Delays and Distribution Problems Resulted in Body
			  Armor Shortages

           DOD faced challenges in supplying sufficient quantities of body
           armor to meet the requirements for U.S. military forces in Iraq.
           Temporary shortages of body armor occurred because of acquisition
           delays related to the lack of key materials and distribution
           problems in theater. Increasing military requirements for body
           armor exceeded the manufacturer's capacity to produce enough of
           the Army's new Interceptor body armor,^3 particularly after
           October 2003, when U.S. Central Command required body armor for
           all U.S. personnel in its area of responsibility. Before that, the
           Army required body armor for all soldiers in Iraq but not for all
           U.S. personnel. As a result of the shortages, many individuals
           purchased body armor that was available in the private sector with
           their own funds.

           According to the Defense Logistics Agency, the organization that
           manages body armor for the Army, the shortfall in vests and
           ceramic plates was due to the lack of Kevlar (a type of fiber) for
           manufacturing the vests and a lack of material for manufacturing
           the plates. Attempts to accelerate the fielding of the new armor
           had some success but also created additional logistics problems,
           including the inaccurate reporting of on-hand quantities.

           We are currently reviewing force protection measures, including
           body armor requirements, testing, and oversight, for current
           operations.
			  
			  Production and Installation Problems Resulted in Shortages of
			  Army and Marine Truck Armor

           DOD also faced the challenge of supplying sufficient amounts of
           armor for Army and Marine Corps trucks. U.S. military forces in
           Iraq have experienced shortages of truck armor due to problems
           with production and installation of armor kits. Although the Army
           first identified a requirement for 3,780 truck armor kits for five
           types of trucks^4 in November 2003, it did not produce all of the
           kits until February 2005 and did not install the kits to meet the
           initial requirement until May 2005--18 months after the
           requirement was identified. Requirements continued to increase
           after May 2005, but the time lag to meet them lessened. A number
           of factors contributed to the time needed to provide truck armor
           to deployed Army troops. As a result, troops were placed at
           greater risk as they conducted wartime operations in vehicles not
           equipped with the preferred level of protection. For example, the
           Army missed a valuable opportunity to have substantial numbers of
           truck armor kits available for OIF by not fully capitalizing on
           approved requirements for these kits established in 1996. In
           addition, production time lengthened because contracts were
           awarded for amounts less than total requirements due to increasing
           needs for truck armor and inadequate funding. Sufficient
           documentation was lacking to determine why funding was not
           available when needed, limiting effective oversight over funding
           decisions. Material shortages and limited kit installation rates
           also affected the availability of truck armor.

           The Marine Corps also experienced shortages of truck armor during
           OIF. The Marine Corps belatedly met requirements for the
           production and installation of add-on truck armor in September
           2004--8 months after the requirements were identified. Two factors
           affected the timely production and installation of Marine Corps
           truck armor. First, the lack of a synchronized approach between
           the Marine Corps and the Army resulted in the Marine Corps
           identifying its truck armor requirements and seeking armor
           solutions 2 months after the Army. This delay may have limited the
           Marine Corps' ability to field interim armor that met IED
           protection requirements and may have contributed to delays in
           providing add-on truck armor to deployed Marine Corps forces. The
           Marine Corps did not officially identify a requirement for truck
           armor and did not begin seeking out armor materials from industry
           until January 2004--2 months after the Army began its truck armor
           program in November 2003. According to Marine Corps officials, the
           armor-grade steel needed for sufficient IED protection was not
           available from suppliers in time to meet the Marine Corps'
           deployment timeline of March 2004. As a result, the Marine Corps
           fielded the interim armor with only limited IED protection.
           Second, mission needs restricted the rate at which the Marine
           Corps could replace its interim armor with add-on armor and
           install integrated armor.

           DOD has taken actions to improve the timely availability of truck
           armor. For example, the Army is developing a long-term armoring
           plan to improve the availability of truck armor for future
           operations. The Marine Corps increased the rate of installation
           for integrated armor by expanding its armor installation capacity.
           The Marine Corps is also taking longer-term actions, such as
           developing a plan to address the availability of truck armor for
           future operations.
			  
			  GAO Is Reviewing JIEDDO

           In response to Senate Report 109-292, we have initiated a review
           of JIEDDO. The objectives of our ongoing review are to determine
           (1) whether JIEDDO's overall management and organizational
           structure, including funding, personnel, and strategic planning
           processes, effectively support its mission; (2) the challenges, if
           any, that affect JIEDDO's ability to quickly and effectively
           identify, develop, test, and support technology and training
           solutions; and (3) the level of coordination that exists between
           JIEDDO and other DOD and non-DOD organizations to leverage
           existing capabilities and prevent duplication of efforts.
			  
			  Prior Recommendations

           In December 2006, we recommended that the Chairman of the Joint
           Staff conduct a theaterwide survey and risk assessment regarding
           unsecured conventional munitions in Iraq and incorporate
           conventional munitions storage site security as a strategic
           planning factor into all levels of planning policy and guidance,
           including joint doctrine, instructions, manuals, and other
           directives.^5 DOD partially concurred with our recommendations.

           In prior reports, we have recommended actions to ensure funding
           needs for urgent wartime requirements are identified quickly,
           requests for funding are well documented, and funding decisions
           are based on risk and an assessment of the highest priority
           requirements. For example, in March 2006, we recommended that the
           Army establish a process to document and communicate all urgent
           wartime funding requirements for supplies and equipment at the
           time they are identified and the disposition of funding
           decisions.^6 DOD concurred with the intent of the recommendation.
           More recently, we have recommended actions to ensure that the
           services make informed and coordinated decisions about what
           materiel solutions are developed and procured to address common
           urgent wartime requirements.^7 DOD generally agreed with these
           recommendations.
			  
			  Oversight Questions

           o Has DOD conducted a theaterwide survey and risk assessment
           regarding unsecured conventional munitions storage sites in Iraq?
           Has DOD developed a risk mitigation strategy for unsecured sites
           in Iraq?
           o Has DOD incorporated the security of conventional munitions
           storage sites as a strategic planning factor into all levels of
           planning policy and guidance?
           o Is the supply chain adequately supporting the troops' needs for
           body armor and truck armor during combat operations? Are the Army
           and Marine Corps coordinating the requirements, testing, and
           production of body armor and evaluating its effectiveness in the
           field?
           o Is JIEDDO structured to effectively accomplish its mission and
           account for its expenditures?
           o What steps has DOD taken to stay abreast of evolving force
           protection threats and to identify and employ appropriate
           mitigation measures?
			  
^1These issues are discussed in a classified GAO report, Operation Iraqi
Freedom: DOD Should Apply Lessons Learned Concerning the Need for Security
over Conventional Munitions Storage Sites to Future Operations Planning,
GAO-07-71C (Washington, D.C.: December 20, 2006). We plan to issue an
unclassified version of this report in January 2007.

^2For further information on these issues, see GAO, Defense Logistics:
Actions Needed to Improve the Availability of Critical Items during
Current and Future Operations, GAO-05-275 (Washington, D.C.: Apr. 8,
2005); Defense Logistics: Several Factors Limited the Production and
Installation of Army Truck Armor during Current Wartime Operations,
GAO-06-160 (Washington, D.C.: Mar. 22, 2006); and Defense Logistics: Lack
of a Synchronized Approach between the Marine Corps and Army Affected the
Timely Production and Installation of Marine Corps Truck Armor, GAO-06-274
(Washington, D.C.: June 22, 2006).

^3The Interceptor body armor is designed to provide protection against
rifle rounds through the combined use of ceramic tiles and polyethylene
fiber.

^4This requirement excludes tanker trucks. The completion of armor kit
installation for tankers was expected by January 2007.

^5GAO-07-71C.

^6GAO-06-160.

^7GAO-06-274.
			  
			  
			  GAO Contacts

           Davi M. D'Agostino, Director, Defense Capabilities and Management,
           (202) 512-5431 or [email protected]; and William M. Solis,
           Director, Defense Capabilities and Management, (202) 512-8365 or
           [email protected].
			  
			  Enclosure XIV: Deficiencies in Supply Support for U.S. Ground
			  Forces Have Resulted in Shortages of Critical Items
			  
			  Issue

           To support Operation Iraqi Freedom (OIF), the Department of
           Defense (DOD) undertook a massive logistics effort, moving
           millions of tons of cargo, including critical equipment, spare
           parts, and other supplies several thousand miles to the Persian
           Gulf. This effort began in late 2001, accelerated in the fall of
           2002 just before major combat operations were launched in March
           2003, and continues today as U.S. forces undertake stabilization
           efforts in Iraq. However, U.S. forces have still experienced
           shortages of critical supply items. This enclosure discusses (1)
           systemic deficiencies in DOD's supply support for U.S. ground
           forces during OIF and (2) actions DOD has taken to improve supply
           support.
			  
			  Summary

           OIF tested the DOD logistics system and the industry's capability
           to meet rapidly increasing demands, and in many instances the
           supply chain failed to respond quickly enough to meet the needs of
           modern warfare. In prior reports, we have reported on shortages of
           critical items^1 and the systemic deficiencies in supply support
           that led to these shortages. These deficiencies included (1)
           inaccurate and inadequately funded Army war reserve requirements,
           (2) inaccurate supply forecasts, (3) insufficient and delayed
           funding, (4) delayed acquisition, and (5) ineffective
           distribution.^2 DOD developed short-term solutions to manage item
           shortages during OIF, and DOD and the services have begun to
           undertake systemic, long-term changes to fix some of the supply
           problems identified.
			  
			  Inaccurate and Inadequately Funded Requirements

           The Army's out-of-date and inadequately funded war reserve
           requirements for spare parts negatively affected the availability
           of armored vehicle track shoes, lithium batteries, and tires. At
           the time of our April 2005 report, the Army had not conducted
           annual updates to its war reserve requirements since 1999. In
           addition, Army war reserve requirements had not been fully funded
           for many years, indicating that the Army had made a risk
           management decision not to fund war reserves. This decision forced
           war reserve managers to prioritize the use of available funding,
           which meant that some items had no war reserve to support initial
           operations. In our March 2006 report on Army truck armor, we
           similarly found that the Army made a decision not to fund prior
           requirements for truck armor identified in 1996; thus, the Army
           did not have a significant number of add-on armor kits available
           when the need for them arose in Iraq.
			  
			  Inaccurate Supply Forecasts

           DOD was unable to accurately forecast supply requirements for
           armored vehicle track shoes, lithium batteries,
           Meals-Ready-to-Eat, and tires. The Army's computer models for
           forecasting item demand did not have the capability to switch to a
           wartime forecasting mode as required. Further, the Defense
           Logistics Agency's model was not effective for all supply items.
           As a result, item managers had to manually develop forecasts for
           OIF, but they did not always have sufficient or timely information
           on estimated deployment sizes or the duration of operations. In
           some cases, they underestimated the actual demand, which resulted
           in supply shortages during operations.
			  
			  Insufficient and Delayed Funding

           In April 2005, we reported that delays in funding impeded the
           availability of armored vehicle track shoes, lithium batteries,
           and tires. Specifically, during OIF, the Army Materiel Command
           asked for additional funding to support forecasted OIF
           requirements but did not receive these funds in a timely manner.
           In March 2006, we similarly reported that funding was not always
           available to award truck armor contracts when requirements were
           identified. As a result, production time lengthened because
           contracts were awarded for amounts less than total requirements.
           In all of the cases we reported, sufficient documentation was
           lacking to determine why funding was not available when needed,
           thus limiting effective oversight over funding decisions.
			  
			  Delayed Acquisition

           Problems with delayed acquisition led to several shortages of
           critical supply and equipment items. For example, in April 2005,
           we reported that a lack of key materials and long production
           lead-times resulted in shortages of body armor and lithium
           batteries. Similarly, in March and June 2006, we reported that
           shortages of key materials, such as steel, negatively affected the
           availability of Army and Marine Corps truck armor kits. In
           addition to these shortages, in April 2005, we reported that DOD's
           decision not to maximize available production capacity adversely
           affected the availability of up-armored High-Mobility
           Multi-Purpose Wheeled Vehicles (HMMWV) and add-on armor kits. The
           acquisition challenges we reported impeded DOD's ability to
           quickly respond to rapidly increasing demands, resulting in
           equipment items not being available to warfighters when needed.
			  
			  Ineffective Distribution

           As a result of an ineffective joint distribution system during
           OIF, DOD was unable to distribute sufficient quantities of four
           items we reported on in April 2005--assault amphibian vehicle
           generators, body armor, Meals-Ready-to-Eat, and tires. Among the
           problems we identified with theater distribution were (1)
           conflicting doctrine, or military principles, defining the
           authority of the geographic combatant commander to synchronize the
           distribution of supplies from the United States to the theater;
           (2) improper packaging of air shipments from the United States,
           which forced personnel in theater to spend extra time opening and
           sorting shipments; (3) insufficient transportation equipment and
           supply personnel in theater; and (4) the inability of logistics
           information systems to support the requisition and shipment of
           supplies into and throughout Iraq. To address OIF distribution
           problems, DOD established a deployment and distribution operations
           center in Kuwait to coordinate the arrival of supplies in theater
           and consolidated air cargo pallets for shipment to a single supply
           support activity. According to DOD, these two initiatives improved
           the flow of supplies into and around the OIF theater.
			  
			  DOD Actions Taken to Improve Supply Support

           DOD, the services, and the defense agencies have taken actions to
           improve supply availability. Many short-term solutions to lessen
           the impact of supply shortages were instituted during combat
           operations. For example, as a result of the lithium battery
           shortage, the Joint Staff developed the "critical few list" to
           improve the availability of items that the services and combatant
           commands report as critical to their worldwide operations. DOD is
           also beginning to make systemic, long-term changes to correct some
           of its supply problems. One of the more notable is that the
           Secretary of Defense designated the U.S. Transportation Command as
           responsible for improving distribution. With the encouragement of
           the Office of Management and Budget, DOD has also developed a plan
           to improve supply chain management. The plan focuses on three
           areas--forecasting requirements, materiel distribution, and asset
           visibility. We have previously reported on DOD's efforts to
           improve supply distribution and supply chain management.^3
			  
			  Prior Recommendations

           We have made a number of prior recommendations aimed at improving
           the effectiveness of DOD's supply system in supporting deployed
           forces for contingency operations. For example, we have made
           recommendations to improve the accuracy of war reserve
           requirements, support prewar planning through supply forecasting,
           minimize future acquisition delays, and improve supply
           distribution. DOD agreed with the intent of the recommendations
           and cited actions it had taken or was taking to eliminate supply
           chain deficiencies. However, it did not clearly identify timelines
           for fully implementing most of these recommendations, and we
           subsequently modified our recommendations to require that DOD
           specify when actions will be completed.
			  
			  Oversight Questions

           o What actions has DOD taken to improve the accuracy of war
           reserve requirements and wartime supply requirements?
           o To what extent has DOD funded its war reserve and other
           equipment requirements, and what are the operational impacts of
           any unfunded requirements?
           o What actions has DOD taken to improve the timely availability of
           funding for wartime supply needs and emerging equipment
           requirements?
           o What actions has DOD taken to assess the industrial base's
           capacity to meet increasing wartime supply and equipment needs and
           to minimize acquisition delays?
           o What actions have DOD and the U.S. Transportation Command
           implemented to improve theater distribution during wartime?
			  
^1Items we reviewed included lithium batteries, tires, vehicle track
shoes, add-on body armor, Meals-Ready-to-Eat, up-armored High-Mobility
Multi-Purpose Wheeled Vehicles (HMMWV) and kits, and vehicle generators.
We have also reviewed delays in the production and installation of Army
and Marine Corps truck armor.

^2For further information on issues discussed in this enclosure, see GAO,
Defense Logistics: Actions Needed to Improve the Availability of Critical
Items during Current and Future Operations, GAO-05-275 (Washington, D.C.:
Apr. 8, 2005); Defense Logistics: Several Factors Limited the Production
and Installation of Army Truck Armor during Current Wartime Operations,
GAO-06-160 (Washington, D.C.: Mar. 22, 2006); and Defense Logistics: Lack
of a Synchronized Approach between the Marine Corps and Army Affected the
Timely Production and Installation of Marine Corps Truck Armor, GAO-06-274
(Washington, D.C.: June 22, 2006).

^3GAO, Defense Logistics: DOD Has Begun to Improve Supply Distribution
Operations, but Further Actions Are Needed to Sustain These Efforts,
GAO-05-775 (Washington, D.C.: Aug. 11, 2005); DOD's High-Risk Areas:
High-Level Commitment and Oversight Needed for DOD Supply Chain Plan to
Succeed, GAO-06-113T (Washington, D.C.: Oct. 6, 2005); and DOD's High-Risk
Areas: Challenges Remain to Achieving and Demonstrating Progress in Supply
Chain Management, GAO-06-983T (Washington, D.C.: July 25, 2006).
			  
			  GAO Contact

           William M. Solis, Director, Defense Capabilities and Management,
           (202) 512-8365 or [email protected].
			  
Improving Acquisition Outcomes			  

    Enclosure XV: DOD Needs to Improve Its Capacity to Manage Contractors
	 
	        Enclosure XV: DOD Needs to Improve Its Capacity to Manage
			  Contractors
			  
			  Issue

           The Department of Defense (DOD) has relied extensively on
           contractors to undertake major reconstruction projects and provide
           logistical support to its troops in Iraq. For example, DOD has
           responsibility for a significant portion of the more than $30
           billion in appropriated reconstruction funds and has awarded and
           managed many of the large reconstruction contracts, such as the
           contracts to rebuild Iraq's oil, water, and electrical
           infrastructure, and to train and equip Iraqi security forces.
           Further, U.S. military forces in Iraq have used contractors to a
           far greater extent than in prior operations to provide
           interpreters and intelligence analysts, as well as more
           traditional services such as weapons systems maintenance and base
           operations support. The Army alone estimates that almost 60,000
           contractor employees currently support ongoing military operations
           in Southwest Asia and has spent about $15.4 billion on its single
           largest support contract--the Logistics Civil Augmentation Program
           (LOGCAP)--between 2001 and 2004. These contracts are often
           cost-plus type contracts, which allow the contractor to be
           reimbursed for reasonable, allowable, and allocable costs to the
           extent prescribed in the contracts. This enclosure discusses
           actions needed to improve (1) DOD's reconstruction outcomes and
           (2) its use of logistics support contractors.
			  
			  Summary

           The United States has made significant investments through
           reconstruction and logistics support contracts, but this
           investment has not always resulted in the desired outcomes. Many
           reconstruction projects have fallen short of expectations, and DOD
           has yet to resolve long-standing challenges in its management and
           oversight of contractors in deployed locations. These challenges
           often reflect shortcomings in DOD's capacity to manage contractor
           efforts, including having sufficiently focused leadership,
           guidance, a match between requirements and resources, sound
           acquisition approaches, and an adequate number of trained
           contracting and oversight personnel. Further, because information
           on the number of contractor employees and the services they
           provide is not aggregated within DOD or its components, DOD cannot
           develop a complete picture of the extent to which it relies on
           contractors to support its operations. With about 29 percent of
           DOD's planned construction work remaining and the need for
           continued logistical support for deployed forces, it is essential
           to improve DOD's capacity to manage its contractors if the
           department is to increase its return on its investment.
			  
			  Better Reconstruction Outcomes Require Improved Contract
			  Management

           Amid some signs of progress, the United States and its coalition
           partners face numerous political, security, and economic
           challenges in rebuilding Iraq. Within this environment, many
           reconstruction projects have fallen short of expectations,
           resulting in increased costs, schedule delays, and reduced scopes
           of work. These outcomes have contributed to the inability of the
           United States to fully meet its goals with respect to oil,
           electricity, and water sectors. Poor acquisition outcomes are not
           unique to Iraq, and the contracting challenges are emblematic of
           systemic issues faced by DOD. In fact, GAO designated DOD's
           contract management activities as a high-risk area more than a
           decade ago. In our January 2005 report, we noted that DOD needed
           to use sound business practices when buying goods and services and
           have the right skills and capabilities in its acquisition
           workforce to properly manage these acquisitions.^1

           A prerequisite to having good outcomes is a match between
           well-defined requirements and available resources. Shifts in
           priorities and funding invariably have a cascading effect on
           individual contracts. To produce desired outcomes within available
           funding and required time frames, DOD and its contractors need to
           clearly understand reconstruction objectives and how they
           translate into the contract's terms and conditions: the goods or
           services needed, the level of performance or quality desired, the
           schedule, and the cost. When such requirements were not clear, DOD
           often entered into contract arrangements that posed additional
           risks. In June 2004, we reported that DOD often authorized
           contractors to begin work before key terms and conditions,
           including the work to be performed and its projected costs, were
           fully defined.^2 In September 2006, we reported that, under this
           approach, DOD contracting officials were less likely to remove the
           costs questioned by auditors if the contractor had incurred these
           costs before reaching agreement on the work's scope and price.^3
           In one case, the Defense Contract Audit Agency questioned $84
           million in an audit of a task order for an oil mission. In this
           case, the contractor did not submit a proposal until a year after
           the work was authorized, and DOD and the contractor did not
           negotiate the final terms of the contract until more than a year
           after the contractor had completed the work. The absence of
           well-defined requirements and clearly understood objectives
           complicates efforts to hold DOD and contractors accountable for
           poor acquisition outcomes.

           An unstable contracting environment--when wants, needs, and
           contract requirements are in flux--also requires greater attention
           to oversight, which relies on a capable government workforce.
           However, the Special Inspector General for Iraq Reconstruction
           found that one of the Coalition Provisional Authority's (CPA)
           critical shortcomings in personnel was the inadequate link between
           position requirements and necessary skills. Similarly, in January
           2004, an interagency assessment team found that the number of
           contracting personnel was insufficient to handle the increased
           workload expected with the influx of fiscal year 2004 funding. In
           part, the CPA's decision to award seven contracts in early 2004 to
           help better coordinate and manage the fiscal year 2004
           reconstruction efforts recognized this shortfall. As a result,
           however, DOD is relying on contractors to help manage and oversee
           other contractors.

           DOD's lack of capacity contributed to challenges in using
           interagency contracting vehicles.^4 In certain instances, rather
           than develop and award its own contracts, DOD used contracts
           already awarded by other agencies. While this practice may improve
           efficiency and timeliness, these contracts need to be effectively
           managed and their use requires a higher than usual degree of
           business acumen and flexibility on part of the workforce. During
           the initial stages of reconstruction, we and the DOD Inspector
           General found instances in which DOD improperly used interagency
           contracts. For example, we found that the lack of effective
           management controls, including insufficient oversight and a lack
           of adequate training, led to breakdowns in the issuance and
           administration of task orders for interrogation and other services
           by the Department of the Interior on behalf of DOD.^5 Similarly,
           the Inspector General found that a DOD component circumvented
           contracting rules when awarding contracts on behalf of the CPA by
           using the General Services Administration's federal supply
           schedule, in part due to DOD's failure to plan for the acquisition
           support the CPA needed to perform its mission.

           The need to award contracts and begin reconstruction efforts
           quickly also contributed to DOD using other than full and open
           competition during the initial stages of reconstruction. While
           full and open competition can be a tool to mitigate acquisition
           risks, DOD officials had only a relatively short time--often only
           weeks--to award the first major reconstruction contracts. We
           recently reported that available data indicate that between
           October 1, 2003, through March 31, 2006, the vast majority of
           DOD's contract obligations were on competed contracts.^6

           To improve its capacity to plan and award contracts and manage
           contractor performance, DOD has merged the Project and Contracting
           Office with the U.S. Army Corps of Engineers' Gulf Region
           Division. Additionally, DOD established the Joint Contracting
           Command-Iraq to consolidate and prioritize contracting activities
           and resolve contracting issues, among other things. In some
           sectors, DOD has attempted to directly contract with Iraqi firms,
           rather than rely on the large U.S. design-build contracts that it
           had awarded in early 2004. Although DOD expects this approach will
           reduce costs, it will likely increase the administrative and
           oversight burden on DOD's acquisition workforce. Overall, about 29
           percent of DOD's planned construction program was incomplete as of
           October 2006.
			  
			  Action Needed to Address Long-standing Problems with Management
			  and Oversight of Military Support Contractors

           DOD has long used contractors to provide supplies and services to
           deployed forces, but the scale of contractor support that DOD
           relies on in locations such as Iraq has increased considerably
           from prior operations. Since 1997, we have reported on DOD's
           management and training shortcomings related to contractors
           supporting deployed forces, including the lack of senior DOD
           leadership, the lack of visibility and knowledge of the number of
           contractors and the services they provide, and an inadequate
           number of trained personnel to ensure the efficient and effective
           use of contractor resources.

           We recently found these long-standing problems continue to hinder
           DOD's management and oversight of support contractors.^7 For
           example, despite DOD actions to improve its guidance on the use of
           contractors to support deployed forces, we found few measures had
           been taken by the relevant office within the Office of the
           Secretary of Defense to ensure that DOD components complied with
           this guidance. Similarly, despite facing many of the same
           difficulties in managing and overseeing contractors in Iraq as it
           faced in prior operations, no organization within DOD or its
           components is responsible for systematically collecting and
           sharing institutional knowledge regarding using support
           contractors. As a result, new units deploying to Iraq run the risk
           of repeating past mistakes. DOD has recently established an office
           to address contractor support issues, but the office's specific
           roles and responsibilities have not yet been clearly defined.

           Further, because information on the number of contractor employees
           or the services they provide is not aggregated by any organization
           within DOD or its components, senior leaders and military
           commanders cannot develop a complete picture of the extent to
           which they rely on contractors to support their operations. For
           example, when senior military leaders began to develop a base
           consolidation plan, officials were unable to determine how many
           contractors were deployed and therefore ran the risk of over- or
           under-building the capacity of the consolidated bases. Having
           limited visibility can also unnecessarily increase contracting
           costs to the government. For example, an Army official estimated
           that about $43 million is lost every year on free meals provided
           to contractor employees at deployed locations who also receive a
           per diem food allowance.

           Additionally, DOD does not have sufficient numbers of contractor
           oversight personnel at deployed locations, precluding its ability
           to obtain reasonable assurance that contractors are meeting
           contract requirements efficiently and effectively. An Army
           official acknowledged that the Army is struggling to find the
           capacity and expertise to provide the contracting support needed
           in Iraq. A LOGCAP program official noted that, if adequate
           staffing had been in place, the Army could have realized
           substantial savings on the LOGCAP contract through more effective
           reviews of new requirements. DOD is also at risk of being unable
           to monitor and assess contractor performance. A Defense Contract
           Management Agency official responsible for overseeing the LOGCAP
           contractor's performance at 27 locations noted that he was unable
           to visit all of those locations during his 6-month tour to
           determine the extent to which the contractor was meeting the
           contract's requirements.

           Military personnel continue to receive limited or no training on
           the use of contractor support as part of their predeployment
           training. The lack of training hinders commanders' ability to
           adequately plan for the use of contractor support and inhibits the
           ability of contract oversight personnel to manage and oversee
           contractors in deployed locations. Limited or no training also can
           lead to confusion regarding roles and responsibilities military
           commanders have in overseeing contractors at deployed locations.
           For example, in several instances, military commanders attempted
           to direct or ran the risk of directing a contractor to perform
           work outside the scope of the contract, even though commanders are
           not authorized to do so and such cases can result in increased
           costs to the government.
			  
			  Prior Recommendations

           We have made several recommendations to improve DOD acquisition
           outcomes, including those intended to assure that adequate
           acquisition staff and other resources are available to support
           future operations, to emphasize the need to define contract
           requirements in a timely manner, to improve the management of
           interagency contracting, and to resolve long-standing issues with
           regard to the management and use of support contractors. DOD has
           generally agreed with our recommendations and has actions under
           way to address them.
			  
			  Oversight Questions

           o What steps is DOD taking to ensure it has the capacity and
           knowledge to successfully execute remaining reconstruction
           efforts?
           o What actions has DOD taken to ensure that its business
           arrangements, including its use of contracts awarded by other
           agencies, result in the acquisition of goods and services in an
           appropriate, timely, and cost-effective manner?
           o To what extent is DOD improving its ability to identify the
           number of contractor employees and the types of services they
           provide as it considers how to support deployed forces in Iraq?
           o What steps is DOD taking to ensure that contractor support
           training is consistently provided to deployed forces?
           o What actions has DOD taken to ensure that it has a sufficient
           number of trained contracting and contract management personnel in
           place in Iraq?
           o What can be done to establish contracting arrangements in
           advance to support future contingency operations?
           o What limitations should be placed on the role that contractors
           play in conflict zones?
			  
^1GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January
2005).

^2GAO, Rebuilding Iraq: Fiscal Year 2003 Contract Award Procedures and
Management Challenges, GAO-04-605 (Washington, D.C.: June 1, 2004).

^3GAO, Rebuilding Iraq: Continued Progress Requires Overcoming Contract
Management Challenges, GAO-06-1130T (Washington, D.C.: Sept. 28, 2006);
and Iraq Contract Costs: DOD Consideration of Defense Contract Audit
Agency's Findings, GAO-06-1132 (Washington, D.C.: Sept. 25, 2006).

^4GAO identified management of interagency contracting a high-risk area in
January 2005. See GAO-05-207.

^5GAO, Interagency Contracting: Problems with DOD's and Interior's Orders

^6GAO, Rebuilding Iraq: Status of Competition for Iraq Reconstruction
Contracts, GAO-07-40 (Washington, D.C.: Oct. 6, 2006).

^7GAO, Military Operations: High-Level DOD Action Needed to Address
Long-standing Problems with Management and Oversight of Contractors
Supporting Deployed Forces, GAO-07-145 (Washington, D.C.: Dec. 18, 2006).
			  
			  GAO Contacts

           John P. Hutton, Acting Director, Acquisition and Sourcing
           Management, (202) 512-4841 or [email protected]; and William M.
           Solis, Director, Defense Capabilities and Management, (202)
           512-8365 or [email protected].
			  
Objectives, Scope, and Methodology, and Staff Acknowledgments			  

    Enclosure XVI: Objectives, Scope, and Methodology

    Enclosure XVII: Staff Acknowledgments
	 
	        Enclosure XVI: Objectives, Scope, and Methodology

           To monitor U.S. efforts in Iraq, we focused on (1) the U.S.
           strategy and costs of operations in Iraq, (2) security issues, (3)
           governance challenges, (4) reconstruction challenges, (5) U.S.
           military readiness, and (6) acquisition outcomes. Our analysis is
           based on completed and ongoing work. As part of this work, we made
           multiple visits to Iraq during 2006. For the enclosures that
           include new information, we provided copies to the relevant
           agencies for advanced review and technical comments, which we
           incorporated as appropriate. We conducted our review in accordance
           with generally accepted government auditing standards. The
           information on foreign law in this report does not reflect our
           independent legal analysis, but it is based on interviews and
           secondary sources.
			  
			  Strategy and Costs

           We examined (1) the U.S. strategy in Iraq, and (2) U.S. resource
           commitments in Iraq.

           To assess the U.S. strategy in Iraq, we obtained and analyzed
           records, reports, and data from U.S. government and military
           officials in Washington, D.C., and Baghdad, Iraq. We also examined
           the reports of other oversight entities that performed internal
           control and management reviews. We assessed the strategy using the
           six desirable characteristics of an effective national strategy
           developed in previous GAO work. National strategies with these
           characteristics offer policymakers and implementing agencies a
           management tool that can help ensure accountability and more
           effective results. The six characteristics are (1) a clear
           purpose, scope, methodology; (2) a detailed discussion of the
           problems, risks, and threats the strategy intends to address; (3)
           the desired goals and objectives, and outcome-related performance
           measures; (4) a description of the U.S. resources needed to
           implement the strategy; (5) a clear delineation of the U.S.
           government roles, responsibilities, and mechanisms for
           coordination; and (6) a description of how the strategy is
           integrated internally among U.S. agencies and externally with the
           Iraqi government and international organizations. We evaluated the
           National Strategy for Victory in Iraq (NSVI) alone and in
           conjunction with seven related classified and unclassified
           supporting documents that Department of State (State) and
           Department of Defense (DOD) officials said encompassed the U.S.
           strategy.

           To describe U.S. resource commitments in Iraq, we reviewed prior
           GAO products examining the reported obligations and funding for
           military operations in support of the global war on terrorism
           (GWOT). We also reviewed DOD's reported obligations as of
           September 2006. In our prior work, we compared supplemental and
           annual appropriations identified for GWOT to the military
           services' reported obligations and cost projections and examined
           the extent to which DOD has taken steps to improve its
           cost-reporting procedures and the reliability of its reported GWOT
           obligation data. To compare the military services' reported
           obligations against available funding appropriated for GWOT, we
           analyzed copies of DOD's monthly Supplemental and Cost of War
           Execution Report and reviewed applicable supplemental and annual
           appropriations and DOD reports on the transfer of funds between
           various appropriation accounts. We also interviewed key officials
           from the Office of the Under Secretary of Defense (Comptroller)
           and the Army, Navy, Marine Corps, and Air Force to determine if
           their projected GWOT obligations are within funding levels. As
           previously reported, we found the data in DOD's monthly
           Supplemental and Cost of War Execution Report to be of
           questionable reliability. Consequently, we are unable to ensure
           that DOD's reported obligations for GWOT are complete, reliable,
           and accurate, and they should therefore be considered
           approximations. In addition, DOD has acknowledged that systemic
           weaknesses with its financial management systems and business
           operations continue to impair its financial information. To
           examine the steps DOD has taken to improve the reliability of its
           reported GWOT obligations, we interviewed key officials from the
           DOD Comptroller and the Army, Navy, Marine Corps, and Air Force to
           determine the extent to which our previous recommendations have
           been implemented. We also reviewed any new guidance issued by DOD
           regarding the analysis and reporting of obligations for
           contingencies. In addition, we performed limited testing of the
           reported GWOT obligations for military personnel and discussed
           with DOD and military service financial managers their specific
           processes and procedures used to ensure that reported GWOT
           obligation data provided by the subordinate commands are accurate
           and reliable.
			  
			  Security Conditions

           To address security issues, we focused on (1) trends in security
           conditions in Iraq and in Multinational Force-Iraq's (MNF-I) plans
           for transferring security responsibilities to the Iraqi government
           and security forces, (2) how MNF-I measures the capabilities of
           the Iraqi security forces, and (3) accountability procedures for
           U.S.-funded equipment provided to the Iraqi security forces.
           Although we reviewed classified documents during our completed and
           ongoing Iraq security engagements, the information in this report
           is based on unclassified documents only.

           To provide information on areas (1) and (2), we relied extensively
           on a number of prior GAO reports.^1 Where appropriate, we updated
           data on security trends and progress in developing Iraqi security
           forces and transferring security responsibilities to them. To
           update data on trends in the security situation, we obtained and
           assessed MNF-I data on enemy-initiated attacks against the
           coalition and its Iraqi partners from the Defense Intelligence
           Agency. We determined that the data were sufficiently reliable for
           establishing general trends in the number of attacks. To assess
           and update data on progress in developing Iraqi security forces,
           we reviewed DOD and State reports, transcripts of MNF-I and U.S.
           Embassy press conferences, and MNF-I guidance on Iraqi readiness
           assessments.

           To address accountability for U.S.-funded equipment provided to
           the Iraq security forces, we reviewed (1) the laws and regulations
           governing property accountability for U.S.-funded equipment that
           DOD has applied to the U.S. train-and-equip program for Iraq, and
           (2) MNF-I's accountability for U.S.-funded equipment that it has
           issued to Iraqi security forces.

           To examine the laws and regulations that govern property
           accountability, we reviewed relevant legislation appropriating
           funds to train and equip the Iraqi security forces, pertinent DOD
           regulations, and relevant U.S. military orders. We interviewed
           officials from State and DOD, including the DOD Office of the
           Secretary of Defense, Deputy Undersecretary of Defense (Logistics
           and Material Readiness); Defense Security and Cooperation Agency;
           the Defense Logistics Agency; Tank-automotive and Armaments
           Command; and Defense Reconstruction and Support Office. We did not
           review individual contracts to determine whether they contained
           equipment accountability provisions.

           To review MNF-I's accountability for U.S.-funded equipment that it
           has issued to Iraqi security forces, we reviewed documentation and
           interviewed current and former officials of the U.S. Central
           Command (CENTCOM), MNF-I, and Multinational Security Transition
           Command-Iraq (MNSTC-I) in Baghdad, Iraq; Tampa, Florida;
           Washington, D.C.; and Fort Leavenworth, Kansas. To provide our
           preliminary observations on the amount of equipment reported by
           MNF-I as issued to the Iraqi security forces, we interviewed key
           officials to gain an understanding of the MNSTC-I property book
           data and information reported by the former MNSTC-I commander. We
           determined that the property books, as of October 2006, were
           sufficiently reliable for the purposes of our report. We did not
           assess the reliability of the commander's data. According to
           former MNSTC-I officials, the data represent equipment tracked at
           the national warehouses or the regional distribution centers.
           Based on interviews with current and former MNSTC-I officials, we
           noted the weaknesses in the data and determined that the data were
           sufficiently reliable for the purposes of our report.
			  
			  Governance Challenges

           To address governance issues, we examined (1) U.S. and
           international assessments of Iraq's ministries, (2) the status of
           ministry capacity development efforts, (3) the factors affecting
           Iraqi ministry efforts to spend capital budgets, and (4) Iraq's
           foreign debt and the challenges it faces in meeting International
           Monetary Fund (IMF) conditions.

           To describe U.S. and international assessments of Iraq's
           ministries, we reviewed official reports, such as Measuring
           Stability and Security in Iraq (Department of Defense), Survey of
           Anticorruption Programs (Department of State), and Briefing Book
           for the Government of Iraq (World Bank). We interviewed officials
           from the Departments of State and Defense, the U.S. Agency for
           International Development (USAID), and the World Bank about the
           status of Iraq's ministries and the challenges they face. We also
           discussed the status of Iraq's ministries with U.S. officials at
           the U.S. Embassy in Iraq.

           To address U.S. efforts to build Iraq ministry capacity, we
           reviewed U.S. documents, such as the Iraq Reconstruction
           Management Office (IRMO) Weekly Status Reports, contracts and
           statements of work for capacity development efforts, reports to
           Congress pursuant to Section 1227 (c) of the National Defense
           Authorization Act for fiscal year 2006, and multiple U.S.
           briefings and status reports about U.S. capacity development
           efforts and coordination. We interviewed U.S. officials from the
           Departments of State, Defense, Justice, and the Treasury and USAID
           who are responsible for implementing capacity development
           programs. We discussed with them (1) coordination among their
           agencies and (2) their roles. We interviewed officials of the
           World Bank and the United Nations about lessons learned from
           international capacity building and their current program efforts
           in Iraq. We identified and reviewed the various approaches to
           assessing ministry capacity used by USAID, State, and Defense.

           To address the factors affecting Iraqi ministry efforts to spend
           capital budgets, we reviewed budget expenditure reports of Iraqi
           Ministries prepared by the Department of the Treasury. We compiled
           these data to provide summary data. We also discussed these data
           with U.S. Treasury officials in the United States and Iraq. We
           also reviewed IMF and World Bank documents on developments in
           Iraq. We interviewed officials from the Departments of State,
           IRMO, USAID, and the World Bank about issues related to budget
           execution.

           To identify oversight questions related to Iraq's foreign debt and
           the challenges it faces in meeting IMF conditions, we examined
           documents from the IMF (including Iraq's stand-by arrangement),
           the Paris Club of international creditors, and relevant U.S.
           agencies and international organizations. To determine the amount
           of outstanding debt in 2004 (prior to debt restructuring) and
           2006, we used official IMF estimates of Iraq's external debt.
           Since the IMF estimates for 2006 included debt restructuring by
           non-Paris Club official creditors that had not been completed, we
           used the IMF estimate from 2004 for these countries.
			  
			  Reconstruction Challenges

           To address reconstruction challenges, we examined (1) U.S. efforts
           to restore Iraq's oil sector, and (2) U.S. efforts to improve
           Iraq's electricity sector.

           To determine the progress made in restoring oil and electricity,
           we reviewed weekly and daily status reports prepared by U.S.
           agencies, including the Army Corps of Engineers, State, and IRMO.
           We compiled these data and analyzed the results to provide summary
           data. To discuss progress in improving the electricity sector, we
           also met with U.S., Iraqi, and United Nations (UN) officials at a
           November 2006 electricity conference sponsored by the UN
           Development Program at the Dead Sea, Jordan. To determine the
           effect of Iraq's security environment on the U.S. rebuilding
           program, we interviewed Army Corps of Engineers, Defense, State,
           USAID, and Department of Energy officials in the United States and
           Iraq. We also obtained documents from State and Defense on
           security issues and funding. To help assess U.S. oversight of the
           program, we interviewed U.S. agency officials in the United States
           and Iraq and reviewed management reports used to help monitor
           progress, including the Corps' Sector Consolidated Results Updated
           Meeting reports for the oil and electricity sectors.
			  
			  U.S. Military Readiness

           To address the impact of U.S. operations on U.S. force readiness,
           we examined (1) the impact of extended operations in Iraq on the
           U.S. military, (2) munitions security and protection of U.S.
           ground forces, and (3) supply support for U.S. ground forces.

           To discuss the impact of extended operations on the U.S. military,
           we relied extensively on a number of prior GAO products addressing
           personnel, force structure, equipment, training, and other
           Iraq-related military issues. These products, which are cited in
           Encl. XII, provide detailed information on our scope and
           methodology.

           To assess the security provided by DOD over conventional munitions
           storage sites captured in Iraq, we reviewed DOD, Joint Staff, and
           service policies, guidance, procedures, and plans. We obtained
           documentation and interviewed officials from the U.S. Joint Forces
           Command; the U.S. Central Command, U.S. Army Forces Command; Third
           Army, which is also known as the U.S. Army Central and Coalition
           Forces Land Component Command; Joint Improvised Explosive Device
           (IED) Defeat Task Force; Defense Intelligence Agency; National
           Geospatial-Intelligence Agency; National Ground Intelligence
           Center; and Central Intelligence Agency. In addition, we
           interviewed previous command officers and active duty personnel
           who served as operational war planners prior to Operation Iraqi
           Freedom (OIF). Finally, we reviewed various iterations of
           operational plans and stability plans prepared by U.S. Central
           Command and the Coalition Forces Land Component Command. To assess
           DOD's actions to mitigate risks associated with an adversary's
           conventional munitions storage sites for future operations based
           on OIF lessons learned, we examined joint staff and
           service-specific lessons learned reports. We also reviewed joint
           doctrine and multiservice doctrines, tactics, techniques, and
           procedures, and the Joint IED Defeat handbook to determine how
           those documents address the security of conventional munitions
           storage sites.

           To address protection of U.S. ground forces in Iraq, we focused on
           the availability of body armor and truck armor to meet
           requirements. Our methodology for evaluating the supply of body
           armor--one of nine supply items we selected for detailed case
           studies--is discussed in the section below on supply support for
           U.S. ground forces. To examine the availability of truck armor, we
           focused on medium and heavy tactical trucks used by Army and
           Marine Corps forces in the U.S. Central Command area of
           responsibility, which included those in Iraq and Afghanistan. To
           identify the extent to which truck armor was produced and
           installed to meet identified requirements, we visited numerous
           DOD, Army, and Marine Corps organizations to obtain data on the
           requirements, funding, production, and installation of truck armor
           kits. We considered the armor requirement as met for each type of
           truck when the quantity of armor kits produced and installed onto
           vehicles equaled the requirement. Based on the information
           gathered, we identified factors that affected the time to provide
           truck armor kits to deployed forces. We also identified DOD's, the
           Army's, and the Marine Corps' short-term and long-term efforts to
           improve the availability of truck armor.

           To assess supply support for U.S. ground forces, we developed
           detailed case studies of nine supply items that were reported to
           be in short supply during OIF between October 2002 and September
           2004. To identify the extent and impact of supply shortages, we
           visited numerous DOD logistics organizations to obtain data on the
           production, availability, and distribution of supply items at the
           national level. We interviewed members of units that had returned
           from the theater to determine the extent and impact of item
           shortages on their operations. We identified deficiencies that
           affected the availability of two or more of the case study items.
           We worked with DOD logistics agencies, operational units, and
           service and geographic commands to evaluate the significance of
           these deficiencies. We also identified DOD's and the military
           services' short-term and long-term efforts to address these
           shortages. Our methodology for assessing supply support of truck
           armor is discussed in the section above on protection of U.S.
           forces. To assess DOD's progress in resolving supply distribution
           deficiencies, we reviewed DOD's organizational structure,
           transformation strategy, and major initiatives to improve the
           distribution system, including the U.S. Transportation Command's
           progress in implementing its responsibilities as DOD's
           "distribution process owner" and the extent to which DOD's
           logistics transformation strategy provides a framework for guiding
           and synchronizing distribution improvement efforts. We obtained
           information on five initiatives that DOD highlighted as major
           efforts to resolve distribution problems. We also reviewed DOD's
           plan to address long-term systemic weaknesses in supply chain
           management.
			  
			  Improving Acquisition Outcomes

           To examine efforts to improve acquisition outcomes, we relied
           primarily on our completed and ongoing reviews of efforts to
           rebuild Iraq that we have undertaken since 2003, as well as our
           work related to selected DOD contract management issues. We also
           reviewed audit reports and lessons learned reports issued by the
           Special Inspector General for Iraq Reconstruction and work
           completed by the Inspector General, Department of Defense. To
           determine the extent to which DOD has improved its management and
           oversight of contractors supporting deployed forces, we met with
           DOD and military department officials and reviewed changes to key
           policies and guidance. We visited selected DOD components and
           military commands in the United States and held discussions with
           military commanders, staff officers, and other officials that had
           deployed to Iraq or elsewhere in Southwest Asia during the
           2003-2006 time frame to discuss their experiences and the
           challenges they faced managing and overseeing contractors in a
           deployed location. We also traveled to Southwest Asia, including
           Iraq, to meet with combat units and to discuss the use of
           contractor support with military and installation commanders and
           other military personnel. We also met with 26 U.S. and foreign
           contractors who provide support to DOD in Southwest Asia to
           discuss contracting and contract management issues.
			  
^1GAO, Stabilizing Iraq: An Assessment of the Security Situation,
GAO-06-1094T (Washington, D.C.: Sept. 11, 2006); Rebuilding Iraq:
Preliminary Observations on Challenges in Transferring Security
Responsibilities to Iraqi Military and Police, GAO-05-431T (Washington,
D.C.: Mar. 14, 2005); and Rebuilding Iraq: Resource, Security, Governance,
Essential Services, and Oversight Issues, GAO-04-902R (Washington, D.C.:
June 28, 2004).
			  
			  Enclosure XVII: Staff Acknowledgments

           Key contributors to this report include Nanette Barton, Ann
           Borseth, David Bruno, Donna Byers, Dan Cain, Joseph A. Christoff,
           Carole Coffey, Lynn Cothern, Tracey Cross, Davi D'Agostino, Tim
           DiNapoli, Mike Ferren, Rich Geiger, Tom Gosling, Whitney Havens,
           Lisa Helmer, Patrick Hickey, Henry L. Hinton Jr., Rhonda Horried,
           John Hutton, Mike Kennedy, Bruce Kutnick, Steve Lord, Judy
           McCloskey, Tet Miyabara, Kate Monahan, Dave Moser, Mary Moutsos,
           Ken Patton, Sharon Pickup, Jason Pogacnik, Jim Reynolds, Donna
           Rogers, Cary Russell, Dave Schmitt, Amy Sheller, William Solis,
           Lorelei St. James, Janet St. Laurent, Derek Stewart, John Van
           Schaik, and Tim Wedding.

           Ben Atwater, Rob Ball, Leslie Bharadwaja, Michael Derr, Susan
           Ditto, George Duncan, Etana Finkler, Muriel Forster, Brent Helt,
           Wesley Johnson, Hynek Kalkus, Andy Marek, Jim Michels, Don
           Morrison, Marc Schwartz, Michael Simon, Jena Sinkfield, Cynthia
           Taylor, Gergana Trainor, Kristy Williams, Wilda Wong, and Tony
           Wysocki provided technical assistance.

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Report to Congressional Leadership and Committees

United States Government Accountability Office

GAO

January 2007

SECURING, STABILIZING, AND REBUILDING IRAQ

Key Issues for Congressional Oversight

GAO-07-308SP

This report was reissued on January 24, 2007, to reflect a change in the
total for capital project expenditures in table 1 on page 55 to read $877
million and not $87 million.

Securing, Stabilizing, and Rebuilding Iraq

*** End of document. ***