Sigir Highlights - January 2007

SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION-

SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

Congress created SIGIR to provide independent oversight of U.S. funds used for the reconstruction of Iraq by: • promoting economy, efficiency, and effectiveness in the administration of programs and operations • preventing and detecting waste, fraud, and abuse in such programs and operations • keeping the Secretary of State, Secretary of Defense, Congress, and American taxpayers informed about problems, deficiencies, and recommendations for corrective action relating to the administration of programs and operations

Ultimately, the sustained recovery of Iraq can be accomplished only by Iraqis—soldiers, police, ministry leadership, regional officials, and the people themselves—with the continuing help of the international community.

Stuart W. Bowen, Jr., was appointed Inspector General in January 2004. This past November, the IG returned from his fourteenth trip to Iraq to review progress on the reconstruction effort.

HOW the Iraq Relief and Reconstruction Fund WAS SPENT IN EACH SECTOR Security and Justice: The allocation for this sector was increased to $6.31 billion from $4.56 billion. The shift resulted in more funding for Iraqi police and Army training. Electricity: The original allocation in the electricity sector was $5.56 billion but was reduced to $4.24 billion. This was the largest original allocation to any sector. The sector’s goal was to improve Iraq’s capacity to generate power; however, generating capacity is still below pre-war levels. Water: The original allocation in this sector was $4.33 billion; however, funding shifts reduced the money available to this sector by approximately 50%, to $2.13 billion. Oil and Gas: The final allocation in this sector was $1.72 billion and was invested in oil infrastructure repairs and the purchase of petroleum products. Economic and Societal Development: After the transition to the Iraqi Interim Government in 2004, this sector received additional funding for democracy programs and private-sector development. Total funding reached $2.21 billion.

Transportation and Communication: Approximately $800 million was allocated to transportation and communication. Transportation was the first sector to move to direct contracting, engaging more Iraqi contractors. Health Care: Approximately $820 million was allocated to this sector to build or refurbish hospitals and primary healthcare centers (PHCs). Construction of the PHCs was hindered by inadequate management and weak oversight.

THE WAY AHEAD In moving forward, SIGIR has identified these areas upon which future economic support should focus: • building the capacity of the Government of Iraq, especially in budget execution • supporting the rule of law by strengthening programs in the security and justice sector • stimulating the development of Iraq’s private sector • supporting the continuing improvement of coordination of and cooperation among all of the agencies involved in Iraq reconstruction

NOTABLE SIGIR ACTIVITIES THIS QUARTER AUDITS: This quarter, SIGIR completed 8 audits that addressed a wide range of issues, including a review of a Department of State task order for Iraqi police training, an update on the PHC project, and a review of government property management controls by the U.S. Agency for International Development and its contractor, Bechtel National, Inc. All audit products are summarized in section 3 of this Report. INSPECTIONS: SIGIR inspectors completed 15 project assessments this quarter, bringing the total number of project assessments completed to 80. To date, SIGIR has completed 96 limited on-site inspections and 266 aerial assessments. Most IRRF projects that SIGIR visited this quarter met contractual specifications. However, SIGIR found some projects with deficiencies in construction, design, and sustainability. For summaries of the 15 project assessments completed this quarter, see section 3 of this Report. INVESTIGATIONS: Currently, SIGIR has 78 open investigations, including 23 cases awaiting action at DoJ. SIGIR continues to vigorously pursue fraud and abuse, contributing 9 cases to the International Contract Corruption Task Force this quarter. SIGIR also participates on several subcommittees of the U.S. Department of Justice (DoJ) National Procurement Fraud Task Force. SIGIR works closely with a range of agencies to suspend and debar contractors for fraud or corruption. To date, 14 individuals and companies have been suspended, and 8 have been debarred. TO OBTAIN A FULL REPORT visit the SIGIR Website www.sigir.mil • email [email protected] call (703) 428-1100

THE YEAR OF TRANSITION IN REVIEW

Last January, SIGIR identified 2006 as the year of transition, highlighting many challenges to effective turnover of projects and programs to Iraqi control. SIGIR observed limited progress on these issues during 2006: • supporting anticorruption efforts • enhancing infrastructure security • building ministerial capacity • ensuring the sustainability of reconstruction programs and projects • increasing support for reconstruction by the international community • improving coordination of all U.S. agencies involved in reconstruction In 2007, transition to Iraqi control will accelerate. Success, however, hinges on the effective resolution of each of these issues.

The End of THE IRRF By the end of October 2006, all of the Iraq Relief and Reconstruction Fund (IRRF) had been obligated. As of December 31, 2006, approximately 80% had been expended. Over the course of the U.S.-led reconstruction program, the allocation of IRRF dollars evolved substantially. THE CHANGING FOCUS OF IRRF In 2003, Congress appropriated more than $21 billion to the IRRF to support relief and reconstruction in Iraq.

Access to modern sewer facilities remains a problem for many Iraqi families.

The first $2.47 billion comprised IRRF 1 and was aimed at meeting the needs of an expected humanitarian crisis. Iraqi oil revenues were expected to fund Sector Shares of IRRF 2 Funds much of the infrastructure reconstruc% of $18.44 Billion tion. Later in 2003, with the advent of Source: IRMO Weekly Status Report (1/2/2007) 4% Transportation & the Coalition Provisional Authority Communications $.80 (CPA), an additional $18.44 billion was 4% Health Care 1% Reconstruction appropriated to bolster Iraq’s infra$.82 Management $.21 structure. From late-2003 to mid-2004, Oil & Gas $1.72 Security CPA began to execute a large-scale 9% & Justice 34% $6.31 infrastructure reconstruction program. Water 12% $2.13 However, between mid-June 2004 and 12% the present, funds were shifted into 23% Economic & security and democracy programs. Societal Development $2.21

Electricity $4.24

Note: Percentages do not add up to 100% due to rounding.

Jan

4/16

ORHA Mobilizes to Kuwait

3/21

6/15

8/2003

Apr 2 00 3

Jul

Coalition Land Forces Enter Iraq

Liberation Day

4/9

Oct

3/2004

Apr

Jul

2 00 4

1/25

5/11

2 00 4

Jul

Oct

Iraqi Interim Government Announced

6/1

IRMO & PCO Established under NSPD-36

DoS Section 2207 Report

Apr

Transfer of Sovereignty; CPA Dissolves (PCO replaces PMO)

6/28

Major Reprogramming of IRRF 2

Jan

J

F

M

A

M

Actual Production

J J 2006

A

2,000

4,000

6,000

8,000

10,000

J

F

Megawatts (MW) 12,000

A

M

J J 2006 Actual Peak Capacity (MW)

M

A

D

O

N

D Electrical Demand (MW)

S

Source: IRMO, Weekly Status Report (12/14/2005 - 12/26/2006)

Electrical Demand vs. Capacity

N

Target Production

O

In 2006, demand for electricity exceeded capacity.

500

1,000

1,500

2,000

2,500

Thousands of Barrels Per Day 3,000

Source: IRMO, Monthly Import, Production, and Export Report (December 2006)

S

In 2006, oil production continued to lag below targets.

Iraq Crude Oil Production

Oct

2

8 1

1

1 1

5 4 35

Apr

12/31 79% of IRRF 2 Expended

10/11

Unity Government Formed

2006

International Compact Final Text Released by PM Nouri al-Maliki

Iraq Study Group Report Released

Oct

Jan

1

2

1

3

1

Other Quarters

Number of Assessments This Quarter

1

2

Aerial Imagery Assessments

30 5 19 18 1 12 4 2

1

9 1

2

1

3

5

1 1

5

10

1 2 1 3 2 3 8

1

2 8 2 2 8 8 4

2 3 1 3 1 2 4

14

2

2

1

1

1 1 4

9 2 2 7

3

On-site Project Assessments

2

2

2

3

1

1

3

4

7

66

2

1

2

1 3

50,000

100,000

150,000

200,000

250,000

J

F

Number Trained 300,000

M

M

J J 2006 Ministry of Defense (MoD) Ministry of Interior (MoI)

A

A

S

N

MoD Goals for 2006 MoI Goals for 2006

O

Source: IRMO, Weekly Status Reports, 2006; 9010 Report (February 2006)

Security Forces Trained and Equipped

The security situation continues to deteriorate, and the effectiveness of the Iraqi Security Forces remains a significant concern.

Members of the ICCTF SIGIR U.S. ARMY CID, Major Procurement Fraud Unit DoS OIG, Criminal Investigations Directorate USAID OIG DCIS (DoD IG Defense Criminal Investigative Service) Federal Bureau of Investigation

The ICCTF has identified 36 cases. SIGIR has contributed 9 cases to the effort.

SIGIR is a member of the International Contract Corruption Task Force (ICCTF).

For Information on all SIGIR work, including the full text of all final audit and inspection products, see the SIGIR website: http://www.sigir.mil.

Infrastructure Protection Despite significant investment, Iraq has been unable to protect its infrastructure: electricity towers and oil pipelines are continually interdicted.

GOI Budget The capacity of Iraq’s ministries to execute their budgets remains weak. In August 2006, the GOI had executed only 43% of its total budget.

Operations and Maintenance The U.S. strategy to train and assist the GOI on O&M remains unclear, and the GOI lacks sufficient capacity to operate and maintain facilities.

Challenges to Infrastructure Transition

• Does the GOI have a plan to address infrastructure security?

• Has the GOI budgeted for operations and maintenance (O&M) of IRRF projects?

• Does the GOI have the capacity to operate and maintain IRRF projects?

Continuing Concerns

1

4

D

12/20 Najaf Officially Transferred to Iraqi Control

12/13

12/6

Federal Regions Law Passed

Fuel Import Liberalization Law Passed

PCO (Iraq) Terminated Diyala Provincial Reconstruction Team Inaugurated

Operation Together Forward (Baghdad Security Plan) National Reconciliation Plan and Dialogue Project

9/6

10/14 10/16

12/20 Iraq Reconstruction Accountability Act of 2006 Extends SIGIR Mission through FY 2008

9/30 100% of IRRF 2 Obligated 74% of IRRF 2 Expended

Nouri al-Maliki Selected as Iraq's First Permanent Prime Minister

Jul

JANUARY 2007 QUARTERLY REPORT

SIGIR is currently working on 78 cases. Investigations have resulted in 5 arrests and 4 convictions. Another 23 await prosecution. 1

Jan

4/22

5/20

6/14 6/25

10/4

Jan

2007

GRD-PCO Announces Final Remaining Projects Apportioned to DoD Have Started

Oct

SIGIR Investigations

2

12/15

Constitutionally Based Elections Constitutional Referendum

10/15

PCO Merged under GRD

12/4

Jul

2006

Approximately 70% of the projects that SIGIR inspected in 2006 were in compliance with contract specifications.

2005

Oct

Apr

80% of IRRF 2 Obligated 50% of IRRF 2 Expended

11/1

Jan

www.sigir.mil email: [email protected] (703) 428-1100

SIGIR Inspections

Iraq Reconstruction at a Glance: 2006

Focused on the end-state: the cost to complete U.S. projects, the sustainment and transition of U.S.-funded projects to the Government of Iraq (GOI), and building the capacity of Iraqi ministries and Iraqi Security Forces.

Promoted accountability, rule of law, and public trust in Iraq.

Issued 42 audit products to improve the transparency, efficiency, and effectiveness of the management of Iraq relief and reconstruction.

Insight, Foresight, Oversight

SIGIR Audits

SIGIR Activities in 2006

Apr

Jul

Iraqi Transitional Government Formed First Democratic Elections in Iraq

1/30

4/28

Major Reprogramming of IRRF 2

3/2005

JCC-I Established

1/29

Jul

2005

U.S. MISSION/IRMO

Apr

Major Reprogramming of IRRF 2

12/2004

Jan

MNSTC-I (Multi-National Security Transition Command–Iraq) Established

Transitional Administrative Law (TAL) Signed

3/8

USACE Gulf Region Div. Activated

1/5

Jan

Madrid Donor Conference

9/2004

Oct

2006: Year of Transition in Review

2002

Jan

4/16

Jan

Large-scale IRRF 2 Design-build Established under P.L. 108-106 $18.44B Contracts Awarded

11/6

C PA

PMO Created by CPA CPA Program Review Board Founded CPA Created by CENTCOM

ORHA Established under NSPD-24

3/16

Transition

1/20

Oct

10/23-24

DFI Created under UN Res. 1483

5/22

Jul

2 00 3

IRRF 1 Established under P.L. 108-11 $2.4B

ORHA

Apr

Organizational

Funding

PRE-WAR PLANNING

2002

Iraq Reconstruction Timeline

SIG IR SP ECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION