Stabilizing Iraq: Preliminary Observations on Budget and
Management Challenges of Iraq's Security Ministries (22-MAR-07,
GAO-07-637T).
In November 2005, the President issued the National Strategy for
Victory in Iraq. According to the strategy, victory will be
achieved when Iraq is peaceful, united, stable, secure, well
integrated into the international community, and a full partner
in the global war on terror. To help Iraq achieve this, the U.S.
is, among other efforts, helping strengthen the capabilities of
the Iraq Ministries of Defense and Interior (police forces) so
they can assume greater responsibility for the country's
security. The United States has provided about $15.4 billion to
develop Iraqi security forces and institutions. In this
testimony, GAO discusses preliminary observations on (1) U.S. and
Iraqi funding to develop and sustain the Iraqi security forces,
and (2) key challenges the United States and Iraq face in
improving the security ministries' operations and management.
This statement is based on prior GAO reports, recent fieldwork in
Iraq and Department of Defense, U.S. Treasury and Embassy budget
documents. GAO added information to this statement in response to
comments from Multinational Security Transition Command-Iraq. We
completed the work in accordance with generally accepted
government auditing standards.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-637T
ACCNO: A67130
TITLE: Stabilizing Iraq: Preliminary Observations on Budget and
Management Challenges of Iraq's Security Ministries
DATE: 03/22/2007
SUBJECT: Accountability
Budget outlays
Budgeting
Defense capabilities
Equipment inventories
Federal aid to foreign countries
Financial analysis
Financial management
Foreign governments
Foreign military sales agreements
Logistics
Military forces
DOD Operation Iraqi Freedom
Iraq
National Strategy for Victory in Iraq
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GAO-07-637T
* [1]Summary
* [2]Background
* [3]Although Iraq's Security Budget Has Grown, the United States
* [4]Reported Increase in Iraq's 2007 Security Budget Is Partiall
* [5]In 2006, Ministries of Defense and Interior Spent Budgets on
* [6]Iraq Faces Personnel and Logistical Challenges in Developing
* [7]MOD and MOI Have a Growing Workforce and Weak Personnel Mana
* [8]Ministries Face Significant Challenges in Logistics Manageme
* [9]Coalition Efforts to Address Problems at the Iraqi Security
* [10]Conclusion
* [11]Agency Comments
* [12]GAO Contact and Acknowledgments
* [13]GAO's Mission
* [14]Obtaining Copies of GAO Reports and Testimony
* [15]Order by Mail or Phone
* [16]To Report Fraud, Waste, and Abuse in Federal Programs
* [17]Congressional Relations
* [18]Public Affairs
Testimony
Before the Committee on Armed Services, Subcommittee on Oversight and
Investigations, House of Representatives
United States Government Accountability Office
GAO
For Release on Delivery Expected at 9:00 a.m. EDT
Thursday, March 22, 2007
STABILIZING IRAQ
Preliminary Observations on Budget and Management Challenges of Iraq's
Security Ministries
Statement of Joseph A. Christoff, Director
International Affairs and Trade
GAO-07-637T
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss our preliminary observations on
U.S. and Iraqi funding commitments and related challenges in strengthening
the Iraqi Ministry of Defense (MOD) and Ministry of Interior (MOI). We are
presently completing reviews of U.S. efforts to help the Iraqi government
execute its budget and build capacity in its ministries. The November 2005
National Strategy for Victory in Iraq articulated the desired end-state
for U.S. operations in Iraq: a peaceful, united, stable, and secure Iraq,
well integrated into the international community, and a full partner in
the global war on terrorism. To achieve this desired end state, the United
States is, among other things, helping MOD and MOI play a greater role in
managing and sustaining their security forces and assuming greater
responsibility for the country's security. The President's fiscal year
2008 funding request states that the Iraqi government will be largely
capable of sustaining its security forces by 2008. From 2003 through 2006,
the United States provided about $15.4 billion to develop Iraqi security
forces and institutions.
My testimony discusses our preliminary observations on (1) U.S. and Iraqi
funding to develop and sustain the Iraqi security forces, and (2) key
challenges the United States and Iraq face in improving the security
ministries' operations and management.
In developing this statement, we relied on prior GAO reports and, where
appropriate, we updated data. To identify the U.S. and Iraqi government
financial commitments for developing and sustaining the Iraqi security
forces, we reviewed Department of Defense (DOD), Multinational Force-Iraq
(MNF-I), and Multinational Security Transition Command-Iraq (MNSTC-I), and
Treasury budget documents and requests. We also analyzed data on Iraq's
2006 and 2007 budgets and 2006 budget execution through November 2006,
which were provided to us by the U.S. Treasury from Iraq's Ministry of
Finance.^1 To identify the challenges the government of Iraq faces in
developing the capacity of the Ministries of Defense and Interior, we
reviewed MNF-I assessments of the capabilities of these ministries. We
also conducted field work in Iraq and met with the MOD and MOI transition
teams to obtain further information on the ministries' capabilities and to
discuss U.S. and coalition efforts at the ministries. This work was
conducted in accordance with generally accepted government auditing
standards.
^1We corroborated our analysis and findings with information from other
U.S. agencies, the Iraqi government, and the International Monetary Fund.
While we did not independently verify the precision of the data on Iraq's
budget execution, we found that the data are sufficiently reliable to show
the relative differences in budget execution across Iraq's ministries and
budget categories (e.g., capital projects versus salaries).
Summary
In March 2007, DOD reported that Iraq will increase its 2007 security
budget from $5.4 billion to $7.3 billion (a 37-percent increase), which
DOD cites as evidence of the country's growing self-sufficiency and
commitment to security. However, our analysis shows that a portion of this
increase is attributable to the recent appreciation of the Iraqi dinar
against the dollar. Using a constant exchange rate, which reflects changes
in Iraq's budget in its own currency, Iraq's 2007 security budget will
grow by 15 percent. Moreover, the budget of the Ministry of Defense, which
plays the lead role in conducting counterinsurgency operations, will grow
by only 1 percent. To help assess whether Iraq's security ministries will
be able to spend the 2007 budgets, we analyzed their 2006 budgets and
spending. For example, between January and November 2006, the MOD had
spent only about 1 percent of its $864 million capital goods budget for
weapons, ammunition, and vehicles. Overall, Iraq's security ministries
spent a higher share of funds budgeted for salaries than funds budgeted
for capital goods. DOD has requested $5.8 billion for 2007 to 2008 to help
purchase these critical items for Iraq and provide additional assistance
to Iraq's security ministries.
The United States and Iraq confront personnel and logistical challenges in
developing security ministries that are capable of sustaining Iraq's
growing security forces. The security ministries have inadequate systems
to account for their personnel, as well as inexperienced staff with
limited budgeting and technology skills. However, in 2007, the ministries
plan to recruit 60,000 to 70,000 additional personnel and assume financial
responsibility for the 150,000 security guards currently protecting Iraq's
35 ministries and directorates. In addition, as we previously reported,
both ministries have difficulties planning for, acquiring, distributing,
and maintaining weapons, vehicles, and equipment.^2 In response to these
problems, the coalition has provided significant resources to support
Iraq's security ministries. In addition to financial assistance, the
U.S.-led coalition has 215 military, civilian, and contractor personnel
advising MOD and MOI staff on planning, budgeting, personnel, and
logistics issues. Furthermore, the United States signed a foreign military
sales agreement with Iraq in 2006, that according to U.S. officials, will
allow the security ministries to bypass their ineffective procurement
systems and purchase equipment and supplies directly from the United
States. Under this agreement, Iraq has deposited $1.9 billion into its
foreign military sales account and has requested to purchase helicopters,
small arms, trucks, and light armored vehicles, among other items.
However, in the long term, it is unclear whether Iraq's use of this
program will contribute to the ministries' capacity to improve their own
procurement and contracting systems.
^2GAO, Operation Iraqi Freedom: Preliminary Observations on Iraqi Security
Forces' Logistical Capabilities, [19]GAO-07-582T (Washington, D.C.: Mar.
9, 2007).
The Multinational Security Transition Command-Iraq commented on a draft of
this statement, stating that GAO did not give the government of Iraq and
the security ministries credit for negotiating the 2007 budget responsibly
and openly. The Command further stated that the government of Iraq clearly
recognized its inability to responsibly make procurements for the military
and police and thus entered into a foreign military sales agreement with
the United States. We added information in the statement to reflect
MNSTC-I's comments. Both DOD and GAO agree that it will take considerable
time and resources to address the challenges the United States and Iraq
face in developing security ministries and capable Iraqi forces.
Background
In August 2003, the Coalition Provisional Authority (CPA) dissolved the
military organizations of the former regime, including the Ministry of
Defense. In March 2004, the CPA established a new Ministry of Defense. The
MOD was ultimately to be responsible for the overall management,
direction, and control of the Iraqi armed forces, which now include the
Iraqi Army, Air Force, and Navy. Responsible for an estimated 200,000
civil servants and military personnel, the MOD is expected to conduct all
functions needed to sustain the armed forces, including developing plans,
programs, and budgets; and procuring needed goods.
The CPA did not dissolve the Ministry of Interior. MOI's role is to manage
more than 300,000 staff in the Iraqi police services, the National Police,
the Border Enforcement, and other services. Managerial functions include
setting qualifications and training for the forces, vetting all police and
other employees, and conducting the budgeting and financing for MOI
forces. The MOI directly controls the national police forces. However, the
MOI exercises only limited administrative control over regular Iraqi
police forces in the provinces, controlling issues such as recruiting
standards and yearly budget allocations. Operational control of provincial
police rests with the governor and his Council.
MNF-I leads U.S. and coalition military efforts in Iraq. Under the command
of MNF-I, MNSTC-I is responsible for leading coalition efforts to train
and equip Iraqi security forces and to build MOI and MOD capabilities.
MNSTC-I helps develop MOI and MOD capabilities through Ministry Transition
Teams and the Joint Staff Transition Team, which have a total of about 215
coalition advisors assigned to work with Iraqi officials at the
ministries.
The Iraqi government and the coalition transition teams confront a
challenging national environment to develop Iraq's security ministries.
Corruption is reportedly widespread and poses a major challenge to
building an effective government. A March 2007 DOD report states that the
Prime Minister has committed to reforming the government beginning with
his cabinet and the ministries. This commitment recognizes the
government's failure to counter corruption and reduce sectarianism, which
hampers the government's ability to perform.^3 In addition, capacity
building efforts are taking place amid ongoing violence and sectarian
tension, posing a threat to Iraqi government employees.
Although Iraq's Security Budget Has Grown, the United States Continues to Fund a
Significant Portion of Iraq's Security Needs
The 2007 increase in Iraq's security budget is attributable to increases
in planned expenditures and an appreciation of the Iraqi currency against
the U.S. dollar. MOD and MOI spent the largest percentage of budgeted
amounts on salaries but were less successful in spending funds on goods
and services (e.g., food, uniforms, and fuel) and capital goods (e.g.,
weapons, ammunition, and vehicles). Given Iraq's continued difficulties in
spending funds for these items, DOD has requested $5.8 billion in
additional funds to help purchase these critical items and provide other
assistance to Iraq's security ministries.
^3DOD, Measuring Stability and Security in Iraq: Report to Congress in
Accordance with the Department of Defense Appropriations Act 2007, Section
9010, Public Law 109-289 (Washington D.C.: Mar. 2, 2007).
Reported Increase in Iraq's 2007 Security Budget Is Partially Attributable to
Exchange Rate Appreciation
DOD's March 2007 report to Congress stated that the 37-percent increase in
Iraq's 2007 security budget is evidence of Iraq's growing self-sufficiency
and commitment to security. However, our analysis of Iraq's 2007 budget
shows that this reported increase is attributable to both increases in
planned expenditures and an appreciation of the Iraqi currency against the
U.S. dollar (Iraq's fiscal year begins on January 1 of each year). Iraq
implemented a 14-percent exchange rate appreciation between November 1,
2006, and February 1, 2007, to reduce the rate of core (non-fuel)
inflation. In 2006, inflation in Iraq averaged over 50 percent.^4
Iraq's official budget is presented and executed in Iraqi dinars, not U.S.
dollars. The percentage changes we calculated using a constant 2006
exchange rate are the same as those in the official budget based on Iraqi
dinars. For example, MOD's 2007 budget shows a decline in the number of
Iraqi dinars budgeted for goods and services compared with 2006. However,
when converted to U.S. dollars at the new appreciated exchange rate, the
budget shows an increase in planned expenditures. It is therefore
important to know the source of changes in the budget. For imported
products, the appreciated exchange rate (which means the Iraqi dinar
exchanges for relatively more U.S. dollars than before) allows Iraq to buy
relatively more imported products for the same number of dinars. However,
for expenditures made in Iraq, especially salaries, the appreciated
exchange rate may not best reflect changes in Iraq's budget expenditures.
Thus, we present both calculations.
Table 1 shows how the projected growth rate of Iraq's security budget
varies with the foreign exchange rate used to convert Iraqi dinars into
U.S. dollars. When using an appreciated exchange rate, Iraq's security
budget grows by 37 percent in 2007. The budget of MOD, which plays a key
role in conducting counterinsurgency operations, grows by 20 percent.
However, when using a constant exchange rate to facilitate a more direct
comparison of the planned increases in budgeted dinars, Iraq's security
budget grows by 15 percent in 2007 to $6.2 billion (constant exchange
rate), which represents 18 percent of Iraqis total 2007 budget of $34.5
billion. Thus, the increase in Iraq's budget in U.S. dollars is due to the
actual increases in planned expenditures and an appreciation of the
currency.
^4The 2006 and 2007 Iraqi budgets are prepared in nominal (not
inflation-adjusted) Iraqi dinars. We have not adjusted them for inflation
either because this would require predicting the level of inflation in
Iraq in 2007. However, a high inflation rate would reduce the purchasing
power of the budget.
Table 1: Budget Projections for Ministry of Defense and Interior,
2006-2007 (Millions of U.S. dollars)
2007 (appreciated)
2006 (constant) exchange rate exchange rate
Percentage Percentage
2006 2007 change from 2007 change from
Budget Category budget budget 2006 budget 2006
Ministry of Defense
Salaries 912 1,201 32% 1,429 57%
Goods and services 1,966 1,800 -8% 2,143 9%
(e.g., food, uniforms,
fuel, medicine,
maintenance)
Non-financial assets 530 438 -17% 521 -2%
(e.g, capital goods such
as weapons, ammo,
vehicles)
Capital projects 33 40 20% 48 43%
Other expenditures ... ... 0% 1 19%
Total $3,442 $3,479 1% $4,141 20%
Ministry of Interior
Salaries $1,465 $2,130 45% 2,536 73%
Goods and services 200 230 15% 274 37%
(e.g., food, uniforms,
fuel, medicine,
maintenance)
Non-financial assets 225 262 16% 312 38%
(e.g, capital goods such
as weapons, ammo,
vehicles)
Capital projects 27 33 25% 40 49%
Other expenditures 3 17 570% 21 698%
Total $1,919 $2,673 39% 3,182 66%
Total Security Budget (Both Ministries)
Total $5,362 $6,152 15% 7,323 37%
Note: The 2006 exchange rate used to convert Iraq dinars into dollars was
1500/$1. Using the same exchange rate to convert both the 2006 and 2007
budgets to U.S. dollars retains the same percentage change between the two
years as is found when comparing the change between the two years in
dinars. The U.S. Treasury uses an exchange rate of 1260/$1 for the 2007
Iraq budget (the appreciated exchange rate in the table), reflecting the
recent exchange rate appreciation of the Iraqi dinar relative to the U.S.
dollar. Totals may not add due to rounding. Budget classification scheme
is based on the 2007 budget. "..." refers to values that are less than one
half of one million dollars.
Source: GAO analysis of Iraq's 2006 and 2007 budgets, provided by the U.S.
Treasury.
Although MOD's overall budget will grow in 2007, its budget for several
critical items needed to wage counterinsurgency operations will decline in
2007. For example, the Ministry of Defense's 2007 budget for capital
goods--including weapons, ammunition, and vehicles--will decrease whether
using a constant exchange rate (17 percent) or appreciated exchange rate
(2 percent).
In contrast to MOD, MOI's 2007 budget shows positive growth rates in all
major categories. For example, the Ministry of Interior's 2007 budget for
capital goods--including weapons, ammunition, and vehicles--will increase
regardless of which exchange rate is used, by 16 percent using a constant
exchange rate or by 38 percent using the appreciated exchange rate. The
MOI is receiving increased budget support for its law enforcement
responsibilities. However, the additional budget support will be provided
to a ministry prone to militia infiltration. For example, in November
2006, the Director of the Defense Intelligence Agency stated that the
Ministry of Interior and the police were heavily infiltrated by militia
members of the Badr Organization and the Mahdi Army. In addition, the
MOI's national police--a paramilitary force of about 24,000 personnel--had
conducted counterinsurgency operations in the past, but the Iraqi
government decided in late 2006 to transform it into a civil society force
due to frequent allegations of abuse and other illegal activities.
The total number of staff reportedly employed by the Ministries of Defense
and Interior will grow from about 538,000 in 2006 to 608,000 employees in
2007 (see table 2). However, these numbers should be interpreted with some
caution. As we reported in January 2007,^5 ghost employees comprise about
20 to 30 percent of Ministry of Interior staff, according to U.S.
officials. Also, as of February 2007, the Iraqi government has yet to
complete a census of all government employees, as required by the
International Monetary Fund.
^5GAO, Securing, Stabilzing, and Rebuilding Iraq: Key Issues for
Congressional Oversight, [20]GAO-07-308SP (Washington, D.C.: Jan. 9,
2007).
Table 2: Estimated Number of Ministry of Defense and Interior Employees,
2006 and 2007
Percentage change from
2006 2007 2006
Ministry of Defense 160,000 200,000 25%
Ministry of Interior 378,000 408,000 8%
Total security forces and civilian
personnel 538,000 608,000 13%
Source: GAO analysis of Iraq 2006 and 2007 budgets provided by the U.S.
Treasury.
In 2006, Ministries of Defense and Interior Spent Budgets on Salaries but Not
Capital Items
To help assess whether Iraq's security ministries will be able to spend
the 2007 budgets, we analyzed the security ministries' 2006 budgets and
spending. Figure 1 shows the total amounts budgeted and expended by
funding category. In terms of their budgets, the MOD had both a larger
budget ($3.4 billion compared with $1.9 billion) and a larger portion of
its budget targeted at goods and services and capital goods, compared with
the MOI. For the MOI, salaries dominated the budget in 2006.
Figure 1 also shows that the ministries have had difficulty expending some
categories of their budgets. For example, MOD and MOI spent about 76 and
82 percent, respectively, of the $912 million and $1,471 million budgeted
for salaries as of November 2006.^6 In contrast, MOD and MOI spent 1 and
15 percent, respectively, of the $864 million and $233 million budgeted
for capital goods (e.g., weapons, ammunition, and vehicles). The inability
or unwillingness of Iraq's security ministries to spend budgeted funds on
critical items raises questions about the priorities and capabilities of
Iraq's government to fund its security requirements. As the U.S.
government transfers more of its security responsibilities to the Iraqi
government, it is important that the Iraqi government demonstrate that it
can execute its approved budgets more effectively.
^6The budget figures for these categories are based on Iraq's 2006 budget.
The budget figures presented in table 1 for both 2006 and 2007 are based
on Iraq's 2007 budget categories. Since the composition of some categories
changed, the values in the table do not necessarily correspond to the
values in figures 1 and 2.
Figure 1: Percentage of Budgeted Amounts Expended, by Funding Category,
Ministry of Defense and Ministry of Interior, January through November
2006
Note: Budget classification scheme is based on the 2006 budget and does
not directly correspond to the figures provided in table 1. The values in
this figure were provided to us by the U.S. Treasury from Iraq's Ministry
of Finance. The limited spending by various Iraqi ministries in certain
areas, such as capital projects, is a known issue and receiving attention
from U.S. advisors. However, we have not independently verified the
precision of these values and they are likely to change as Iraq's
expenditure data for the remainder of the year become available. We
provide this information for the purpose of demonstrating the relative
differences in Iraq's ability to expend its budget across ministries and
budget categories.
While Iraq's security ministries have encountered difficulties in spending
budgets for weapons, equipment, vehicles, food, fuel, and other items
needed to mount counterinsurgency campaigns, the U.S. government
anticipates providing additional support to these two ministries at least
through the end of fiscal year 2008. DOD has asked for an additional $5.8
billion to develop the Iraqi security forces in its fiscal year 2007
supplemental request and the fiscal year 2008 Global War on Terror budget
request (see table 3).
Table 3: Request for Additional Funds to Develop Iraqi Security Forces
(dollars in millions)
2008 Global War on Terror
2007 Supplemental Budget Request
Not
Category MOD MOI Specified Subtotal MOD MOI Subtotal Total
Infrastructure 264.8 205.0 0 469.8 0 0 0 469.8
Equipment and 1,584.3 373.6 0 1,957.9 1,043.0 245.0 1,288.0 3,245.9
Transportation
Training and 51.7 52.9 0 104.6 77.0 500.0 577.0 681.6
Operations
Sustainment 1,079.6 72.9 0 1,152.5 135.0 0 135.0 1,287.5
Related 0 0 157.5 157.5 0 0 0 157.5
Activities
Total 2,980.4 704.4 157.5 3,842.3 1,255.0 745.0 2,000.0 5,842.3
Source: Fiscal Year 2008 Security Forces Fund, Justification for Iraq
Security and Afghan Security Forces Fund, February 2007.
Of this amount, about $3.25 billion (about 56 percent) would purchase
equipment and transportation for the Iraqi security forces. DOD is also
requesting about $682 million for training and operations, including
efforts to develop senior management capabilities within the Ministries of
Defense and Interior, and to provide increased training for MOD
intelligence operations, communications operations, and resource
management.
Iraq Faces Personnel and Logistical Challenges in Developing its Security
Ministries' Management Capabilities
Iraq's security ministries face numerous challenges if they are to more
effectively direct and sustain Iraq's security forces. DOD reports and our
February 2007 fieldwork in Iraq found that the security ministries face
two key challenges: (1) managing a growing workforce while developing
effective personnel systems, and (2) improving the limited ability of MOD
and MOI to manage their logistics operations. Coalition advisors are
working with the security ministries to improve their planning, budgeting,
personnel, and logistical systems. In addition, a 2006 Foreign Military
Sales (FMS) agreement with Iraq will enable the security ministries to
bypass their ineffective procurement systems and purchase needed equipment
and supplies directly from the United States, according to U.S. officials.
MOD and MOI Have a Growing Workforce and Weak Personnel Management Systems
Planned changes in the size and composition of the security forces will
complicate MOD and MOI efforts to effectively manage their personnel. The
security ministries plan to add 60,000 to 70,000 staff to their rolls in
2007. In addition, in December 2006, the Iraqi Prime Minister directed the
MOI to assume responsibility for paying most of the Facilities Protection
Service (FPS), a 150,000-strong ministry guard force currently working for
27 ministries and 8 independent directorates.^7 According to DOD
reporting, the FPS lacks a coherent force structure and standardized
equipment, and its personnel are often untrained, unreliable, and
sometimes responsible for violent crimes. According to a senior coalition
advisor, FPS personnel will be paid by the MOI but remain under the
day-to-day supervision of the ministries, agencies, or provincial
governments to which they are assigned.
Although the ministries are significantly expanding their workforces, DOD
reports that MOD and MOI cannot accurately account for the personnel they
currently have on their payrolls. DOD notes that about 65 percent of
authorized personnel in fielded units are present for duty at any time,
but this figure is based on unreliable data.^8 Similarly, MOI also has no
reliable data to indicate how many personnel are still serving with the
ministry, so it is unknown how many of the more than 300,000 employees on
the MOI payroll are present for duty. MNSTC-I estimates that the number of
employees present for duty is less than 70 percent. DOD reports that
payments for pensions, medical care, and death benefits are currently
included in security ministry payrolls. Thus, the security ministries'
personnel figures may include retired, wounded, or deceased personnel. DOD
also found that corruption inflates both security ministries' personnel
figures, as corrupt leaders often collect pay and other compensation
designated for non-existent soldiers and policemen on the unit rolls.
In addition, a February 2007 MNF-I assessment stated that development of
MOD's personnel management system was hindered in 2006 by poor leadership,
low morale, and reliance on coalition counterparts. MNSTC-I commented that
higher level leadership within MOD did not allow knowledgeable managers to
implement personnel reforms and overruled their decisions. U.S. government
documents and coalition officials also cited problems at MOI with militia
infiltration that complicated reform efforts. Our recent work in Iraq also
found that the ministries' lack of skilled or experienced staff presents a
challenge. Some coalition officials noted that the lack of trained staff
hindered efforts to improve MOD budget formulation, noting that only two
or three members of the 30-person budget office were capable of producing
budget spreadsheets on a computer. Furthermore, these advisors stated that
most ministry staff lack basic computer and information technology skills,
are unwilling to make decisions, and often refer problems to higher
levels.
^7DOD reported that the directive transferring responsibility to MOI did
not include FPS forces at the Ministry of Oil, the Ministry of
Electricity, and the Higher Juridical Council.
^8According to MNSTC-I, the introduction of a human resources management
system at the end of March 2007 will enable MOD to know more precisely how
many serving and non-serving military and civilian staff it is paying.
Ministries Face Significant Challenges in Logistics Management
DOD's March report stated that the most significant shortcoming in MOD and
MOI forces capabilities is in planning and executing logistics and
sustainment requirements. The report noted that the factors underlying
this deficiency include inadequate levels of sustainment stocks, such as
vehicle fuel pumps and filters. Also identified as a challenge was the
limited capacity of MOD and MOI to plan for, acquire, distribute, and
maintain needed items. In addition, the security ministries have
difficulties in accounting for their equipment. For example, MOI's
immature equipment accountability system cannot track what police weapons
and vehicles remain in service or how much equipment authorized by the
provincial governors MOI has purchased for their staff, which had been.
Our fieldwork found that MOD and MOI units maintain equipment
accountability through the use of hand receipts and manual ledgers. As GAO
previously testified, both MOD and MOI have significant logistics
management issues to overcome before they are capable of independently
sustaining their security forces. ^9
Our recent fieldwork also found that developing the security ministries'
logistics capacity remains a major challenge, particularly at MOI. U.S.
officials noted that MOI cannot sustain the wide variety of equipment
donated by the coalition. For example, GAO previously testified that the
MOD had difficulty maintaining 21 different types of light trucks.
Similarly, MOI has been unable to maintain the 17 makes of vehicles it has
received for use by its personnel. According to coalition officials, the
cost and difficulty of obtaining spare parts for these diverse vehicle
fleets results in using some vehicles for spare parts and not repairing
others. Moreover, the MOI has not approved the draft logistics concept
proposed by the coalition, in part because it has yet to gain the
agreement of the provinces and is still negotiating with them on the
national warehouse system.
^9See GAO, Operation Iraqi Freedom: Preliminary Observations on Iraqi
Security Forces' Logistical Capabilities, GAO-07 -582T (Washington, D.C.:
Mar. 9, 2007).
Coalition Efforts to Address Problems at the Iraqi Security Ministries
The coalition devotes significant resources to develop capacity at Iraq's
security ministries. As of March 2007, the U.S.-led coalition had assigned
215 military, civilian, and contracting personnel to advise Iraqi staff at
the MOD and MOI on establishing plans and policies, budgeting, and
managing personnel and logistics. In comparison, the Ministries of Oil and
Electricity had 10 and 18 advisors, respectively.
The 111 coalition advisors at the MOD are embedded with staff from a
number of offices, including Plans and Policies and the Iraqi Joint Staff.
According to the advisors, they work with their Iraqi counterparts to
improve their planning processes and capabilities. For example, a senior
advisor to the joint staff helped MOD develop its counter insurgency
strategy. He provided them with a planning template, reviewed their work,
and suggested they add details such as the source of the threat, the risk
level, and the forces required to counter the threats. He was uncertain as
to whether his Iraqi counterparts had taken ownership of the process.
Our recent field work at the MOI found that 104 coalition advisors are
working with Iraqi officials. Among other efforts, they are helping MOI
develop processes for vetting Iraqi security forces, including collecting
and storing biometric data; establishing an identification card system;
and establishing a personnel management database that will house
inventory, payroll, human resource, financial, and budget data. However,
U.S. advisors stated that MOI staff has resisted efforts to computerize
their manual processes because of the increased transparency it would
provide.
Finally, MNSTC-I personnel are also assisting the MOD and the MOI in
purchasing needed equipment from the United States through the Foreign
Military Sales (FMS) program.^10 Under FMS, the U.S. government agrees to
sell defense articles or services (including training) to eligible foreign
countries or international organizations. The articles or services usually
come from DOD stocks or through purchase under DOD-managed contracts. In
December 2006, the government of Iraq transferred $1.9 billion into an
Iraqi account for FMS purchases. According to a November 2006 DOD report,
Iraq's use of the FMS program is intended to provide a way for both MOD
and MOI to spend their money on complete procurement packages without
risking the loss of funds to the corruption and mismanagement that hampers
Iraqi government contracting. In the latter part of 2006, DOD notified
Congress of a number of possible foreign military sales to Iraq,
including:
^10Under FMS, defense articles or services may be sold or leased to a
country or international organization only if the President, in accordance
with the Arms Export Control Act, as amended, determines that the country
or organization is eligible. The President determined that Iraq was
eligible to participate in the FMS program on July 21, 2004.
o Up to $900 million on intelligence, surveillance, and
reconnaissance aircraft, as well as related support equipment,
training, spare and repair parts, publications and technical data,
and other elements of logistics support;
o Up to $750 million for troop transport helicopters, small arms,
ammunition, vehicles, and associated logistics support; and
o Up to about $460 million for trucks, vehicles, including light
armored vehicles, and trailers, as well as associated equipment
and services.
According to a March 2007 DOD report,^11 MOD also plans to fund a $160
million maintenance contract through the FMS program from April 2007
through March 2008.
U.S. and coalition officials stated that the FMS agreement would allow
both MOD and MOI to bypass their ineffective procurement systems and
procure equipment and supplies more quickly and efficiently. However, in
the long term, it is unclear whether Iraq's use of the FMS program will
contribute to the ministries' capacity to improve their inefficient
procurement and contracting systems.
Conclusion
DOD expects that the Iraqi government will be capable of sustaining its
security forces by 2008. This expectation may not be met given the
security ministries' past problems in spending their capital budgets and
current personnel and logistical weaknesses.
In addition, as we previously reported, the United States and the Iraqi
security ministries are supporting Iraqi forces that have divided
loyalties, varying capabilities, high absenteeism, and questionable
dependability.^12
11DOD, Measuring Security and Stability in Iraq.
^12GAO, Stabilizing Iraq: Factors Impeding the Development of Capable
Iraqi Security Forces, [21]GAO-07-612T (Washington, D.C.: Mar. 13, 2007).
Mr. Chairman, this concludes my statement. I would be pleased to answer
any questions that you or other members may have at this time.
Agency Comments
The Multinational Security Transition Command-Iraq provided comments on a
draft of this statement. The head of the Command stated, "The GAO
testimony fails to give the government of Iraq and the two security
ministries any credit for recognizing their financial vulnerabilities and
for progressing far beyond the opaque and irresponsible business practices
of previous interim governments. The 2007 GOI budget was negotiated
responsibly and openly. Though the security budget may represent `only' a
15-percent increase from the previous year in purchasing power, it is
nearly a 20-percent share of the national budget. The government of Iraq
has clearly recognized its inability to responsibly make procurements on
behalf of its military and police forces and so has entered into a $1.7
billion Foreign Military Sales Agreement with 2006 funding. We anticipate
that another $1.55 billion investment into United States FMS this calendar
year."
We added information in this statement to reflect MNSTC-I's comments.
However, both DOD and GAO agree that it will take considerable time and
resources to address the challenges the U.S. and Iraqi governments face in
developing fully functioning security ministries and capable Iraqi forces.
GAO Contact and Acknowledgments
For questions regarding this testimony, please call Joseph A. Christoff at
(202) 512-8979 or [email protected] . Other key contributors to this
statement were Nanette Barton, Daniel C. Cain, Lynn Cothern, Mattias
Fenton, Elisabeth Helmer, B. Patrick Hickey, Bruce Kutnick, Stephen M.
Lord, Judy McCloskey, Tetsuo Miyabara, Mary Moutsos, and Timothy Wedding.
(320497)
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Highlights of [30]GAO-07-637T , a testimony before the Subcommittee on
Oversight and Investigations, Committee on Armed Services, House of
Representatives
March 22, 2007
STABILIZING IRAQ
Preliminary Observations on Budget and Management Challenges of Iraq's
Security Ministries
In November 2005, the President issued the National Strategy for Victory
in Iraq. According to the strategy, victory will be achieved when Iraq is
peaceful, united, stable, secure, well integrated into the international
community, and a full partner in the global war on terror.
To help Iraq achieve this, the U.S. is, among other efforts, helping
strengthen the capabilities of the Iraq Ministries of Defense and Interior
(police forces) so they can assume greater responsibility for the
country's security. The United States has provided about $15.4 billion to
develop Iraqi security forces and institutions.
In this testimony, GAO discusses preliminary observations on (1) U.S. and
Iraqi funding to develop and sustain the Iraqi security forces, and (2)
key challenges the United States and Iraq face in improving the security
ministries' operations and management.
This statement is based on prior GAO reports, recent fieldwork in Iraq and
Department of Defense, U.S. Treasury and Embassy budget documents. GAO
added information to this statement in response to comments from
Multinational Security Transition Command-Iraq. We completed the work in
accordance with generally accepted government auditing standards.
In March 2007, DOD reported that Iraq will increase its 2007 security
budget from $5.4 billion to $7.3 billion (a 37-percent increase). DOD
states this increase provides evidence of the country's growing
self-sufficiency and commitment to security. However, our analysis shows
that some of this increase is due to the appreciation of the Iraqi dinar
against the dollar. Using a constant exchange rate, Iraq's 2007 security
budget grows by 15 percent. Also, Iraq faced problems spending its 2006
security budget. As of November 2006, the Iraq Ministry of Defense had
spent only about 1 percent of its capital goods budget for weapons,
ammunition, and vehicles (see figure). DOD has requested $5.8 billion in
additional U.S. funds to help purchase these items for Iraq and provide
assistance to its security ministries.
The United States and Iraq face personnel and logistical challenges in
developing ministries that can sustain Iraq's growing security forces. For
example, the ministries have inadequate systems to account for personnel
and inexperienced staff with limited budgeting and technology skills.
Also, both security ministries have difficulties acquiring, distributing,
and maintaining weapons, vehicles, and equipment. The U.S.-led coalition
has provided significant resources to develop Iraq's security forces and
has 215 military and civilian advisors at the ministries. The United
States signed a foreign military sales agreement with Iraq that, according
to U.S. officials, allows Iraq to bypass its ineffective procurement
systems to purchase equipment directly from the United States. Iraq has
deposited $1.9 billion into its account for foreign military sales.
However, it is unclear whether this program will help improve the
ministries' procurement and contracting capacity.
Iraq Security Ministries' Budget Expenditures Jan.-Nov. 2006
References
Visible links
19. http://www.gao.gov/cgi-bin/getrpt?GAO-07-582T
20. http://www.gao.gov/cgi-bin/getrpt?GAO-07-308SP
21. http://www.gao.gov/cgi-bin/getrpt?GAO-07-612T
22. file:///home/webmaster/infomgt/d07637t.htm#mailto:[email protected]
23. http://www.gao.gov/
24. http://www.gao.gov/
25. http://www.gao.gov/fraudnet/fraudnet.htm
26. file:///home/webmaster/infomgt/d07637t.htm#mailto:[email protected]
30. http://www.gao.gov/cgi-bin/getrpt?GAO-07-637T
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