O OF FF FI IC CE E O OF F T TH HE E S SP PE EC CI IA AL L I IN NS SP PE EC CT TO OR R G GE EN NE ER RA AL L F FO OR R I IR RA AQ Q R RE EC CO ON NS ST TR RU UC CT TI IO ON N
C C CH H HA A AL R R L LL L LE E EN N NG G GE E O O OU U UT T T RE E EC C CO I I O ON ES S S F F FA A AC C CE E ED D D IR R RA A AQ Q Q R R RE E EL L LI N NS S ST T TR R RU U UC C CT T TI I IO I I IN N I IE E EF F F O ON N N A A AC C CT T TI I IV V VI I IT T TI I IE E ES S S
N C C CA A AR R RR R F F A A AN N ND D D
FU U UN N ND RY Y YI I IN N NG G G
D D
S S SI I IG G GI I IR R R-
- -0 0 05 5 5-
- -0 0 02 2 29 9 9
J J JA A AN N NU U UA A AR R RY Y Y 2 2 26 6 6, , , 2 2 20 0 00 0 06 6 6

SPECIAL INSPE CTOR GENE RAL FOR IRAQ RECONSTRUCTION
January 26, 2006
MEMORANDUM FOR U.S. AMBASSADOR FOR IRAQ
SUBJECT: Challenges Faced in Carrying Out Iraq Relief and Reconstruction Fund
Activities (SIGIR-05-029)
We are providing this report for your information and use. We performed the audit in
accordance with our statutory duties contained in Public Law 108-106, as amended,
which mandates the independent and objective conduct of audits relating to the programs
and operations funded with amounts appropriated or otherwise made available to the Iraq
Relief and Reconstruction Fund. Public Law 108-106, as amended, requires that we
provide for the independent and objective leadership and coordination of, and
recommendations on, policies designed to promote economy, efficiency, and
effectiveness in the administration of such programs and operations and to prevent and
detect waste, fraud, and abuse.
This report does not contain recommendations; therefore no written response to this
report is required. We appreciate the courtesies extended to the staff. For additional
information on this report, please contact Mr. Clifton Spruill by email at
clifton.spruill@iraq.centcom.mil or at (703) 343-8817, or Mr. Glenn Furbish by email at
glenn.furbish@iraq.centcom.mil or at (703) 343-8817. For the report distribution, see
Appendix M.
Stuart W. Bowen, Jr.
Inspector General
400 Army Navy Drive • Arlington, Virginia 22202

Special Inspector General for Iraq Reconstruction
SIGIR-05-029 January 26, 2006
Challenges Faced in Carrying Out Iraq Relief and Reconstruction Fund
Activities
Executive Summary
This report discusses the challenges faced by the Department of State in directing and
supervising Iraq Relief and Reconstruction Fund (IRRF) program activities.
Introduction. On November 6, 2003 Congress appropriated $18.4 billion for relief and
reconstruction activities in Iraq, and allocated the funds to specific sectors of Iraqi
infrastructure and governance. The allocations were based on project lists prepared by
the Coalition Provisional Authority in the summer of 2003. In June 2004, the CPA
transferred power to a sovereign Iraqi government and the Department of State, through
its U.S. Mission in Iraq, assumed the duties and responsibilities of the CPA. On October
18, 2005, the Special Inspector General for Iraq Reconstruction (SIGIR) Stuart W.
Bowen, Jr. testified before the House Government Reform Subcommittee on National
Security, Emerging Threats, and International Relations. In this testimony, the Inspector
General highlighted a growing area of concern—the reconstruction gap, or the difference
between the number of projects that the United States originally proposed to build in Iraq
and the number of projects that the Unites States will ultimately complete. This report
discusses the scope and effect of this reconstruction gap.
Objectives. The objectives of this audit were to determine (1) the effectiveness of U.S.
agencies in carrying out plans for Iraq reconstruction activities, and (2) to identify the
reasons, if any, for changes in the plans.
Results. Although significant progress has been made in developing Iraq’s
infrastructure, the United States will not complete all of the projects it originally planned
to construct through its Iraq Relief and Reconstruction program. For example, only 49 of
136 projects in the Water Resources and Sanitation sector will be completed, and only
about 300 of 425 planned projects in the Electric sector will be completed. The
completion of planned projects has been affected by a number of factors including:
• dramatically increased spending for security needs
• strategy changes as the Department of State has responded to the changing
environment in Iraq
• needed increases in spending for sustainment
• the need to fund IRRF administrative expenses not considered in initial planning
• plans made without a clear understanding of actual situational conditions
Data are available on the impact of some, but not all, of these factors. For example,
strategy changes have resulted in the reallocation of $5.6 billion dollars in IRRF monies
from their originally planned purposes; the unbudgeted administrative costs of the IRRF
i

implementing agencies has resulted in $400.6 million in project changes; and unbudgeted
sustainment costs have resulted in approximately $425 million in project changes, with
another $350 million currently budgeted for additional sustainment activities. However,
other factors, such as unforeseen security costs and unexpected conditions at many
planned job sites, affected the projects but are less measurable. Table 1 shows changes
between the CPA’s original November 2003 IRRF allocations, its allocations as of
October 2005, and some indication of how these factors have cumulatively impacted U.S.
plans.
Table 1: Iraq Relief and Reconstruction Funding Allocation Changes
November 2003 to October 2005 (Dollars in millions)
Sectors Congressional
Allocation
November 2003
Current
Allocation
October 2005
Change
in
Dollars
Percent
Change
Sectors with Increases
Private Sector
Development1
153.0 443.0 290.0 190%
--Iraq Debt Forgiveness No allocation 352.3 352.3
Justice, Public Safety
Infrastructure & Civil
Society
1,318.0 2,242.5 924.5 70.1%
Security & Law
Enforcement
3,243.0 5,017.6 1,774.6 54.7%
Education, Refugees &
Human Rights
280.0 363.0 83.0 29.6%
Transportation &
Telecommunication
500.0 508.5 8.5 1.7%
Administrative2 No allocation 213.0 213.0 0.0%
Sectors with Decreases
Water Resources &
Sanitation
4,332.0 2,146.6 (2,185.4) (50.4%)
Electric 5,560.0 4,309.8 (1,250.2) (22.5%)
Oil Infrastructure 1,890.0 1,723.0 (167.0) (8.8%)
Roads, Bridges &
Construction
370.0 333.7 (36.3) (9.8%)
Health Care 793.0 786.0 (7.0) (<1.0%)
Totals 18,439 18,439 (0.0) 0
Source: SIGIR analysis of Department of State and Office of Management and Budget data.
1In September 2004, Private Sector Development received $352.3 million for Iraq Debt Forgiveness.
Because debt forgiveness is not a program, it has been reported separately to provide a clearer picture on
how sector programs changed.
2An additional $601.3 million was used to cover FY2004 and 2005 operating expenses of the CPA and its
successor, and the implementation costs of the implementing agencies. These costs are not identified and
are spread across the sectors. Total FY2004-2005 administrative costs are actually $785.3 million.
ii

The Iraq reconstruction programs have shown tangible results; however, the large-scale
program changes mean that some of the original goals will not be fully achieved in some
sectors. As shown in Table 1, the Water Resources and Sanitation sector and the Electric
sector incurred the largest reduction of funds. How this funding reduction affects the
sectors’ original plans is not entirely certain, however, because the CPA established
broad sector goals and did not link individual projects to these goals. Moreover, there
was a lack of detailed and accurate data on the actual status of some sectors before the
start of reconstruction activity.
For example, a recent Government Accountability Office report on progress in the Water
sector reported that the original CPA program planners did not have good data on the
number of Iraqis with access to water before the war.1 Similarly, Electric sector officials
recently acknowledged that the CPA underestimated the decrepit state of Iraq’s electric
infrastructure before the war. In responding to the Government Accountability Office’s
report, the Department of State acknowledged its lack of metrics and responded that it
was in the process of refining performance metrics in the water sector and in all other
sectors. Because the Department of State was still working on this issue at the time of
our audit, we focused our review on information in the Office of Management and
Budget’s and Department of State’s Section 2207 Reports and interviews with sector
officials. For the two sectors with the largest change, Water and Electric, we identified
the following changes:
• Water Resources and Sanitation—about 60% of the originally planned water
resource and sanitation sector projects were not implemented. Potable water
projects and water pumping stations and generators retained the largest number of
projects, while the sewerage sub-sector; the irrigation and drainage sub-sector; the
major irrigation sub-sector; and the dams sub-sector had most of their projects
terminated. Nonetheless, the Department of State currently reports that Iraq’s
water treatment capacity will be increased by 2.25 million cubic meters per day.
• Electric—The CPA originally planned for about 425 projects in the Electric
sector, and will complete approximately 300. The largest change will occur in the
generation sub-sector, which will only add about 2,109 megawatts of additional
power rather than the originally planned 3,400 megawatts.
Additional analyses of how the original ten sectors and 67 sub-sectors have changed are
in Appendices B through K of this report.
This report contains no recommendations because the Department of State is developing
or refining metrics for all sectors in response to the Government Accountability Office’s
report on the Water Resources and Sanitation sector.
1 Rebuilding Iraq: U.S. Water and Sanitation Efforts Need Improved Measures for Assessing Impact and
Sustained Resources for Maintaining Facilities; GAO-05-872, (Sep. 7, 2005).
iii

Table of Contents
Executive Summary i
Introduction
Background 1
Objectives 2
Findings
Challenges in Implementing the IRRF Program 3
Measures for Determining Project Impact 10
Appendixes
A. Scope and Methodology 11
B. Security and Law Enforcement Sector 12
C. Justice, Public Safety Infrastructure and Civil Society Sector 15
D. Electric Sector 18
E. Oil Infrastructure Sector 20
F. Water Resources and Sanitation Sector 21
G. Transportation and Communications Sector 24
H. Roads, Bridges, and Construction Sector 26
I. Health Care Sector 27
J. Private Sector Development Sector 28
K. Education, Refugees, Human Rights, and Governance Sector 29
L. Acronyms 31
M. Report Distribution 32
N. Audit Team Members 34

Introduction
Background
On November 6, 2003, Congress enacted Public Law 108-106, the Emergency
Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq and
Afghanistan and appropriated a total of $18.649 billion. An appropriation of $18.439
billion was for security, relief, rehabilitation, and reconstruction in Iraq, and $210 million
was designated for assistance for Jordan, Liberia, and Sudan. The appropriation to Iraq,
known as the Iraq Relief and Reconstruction Fund (IRRF), was allocated among 10
sectors of Iraqi infrastructure and governance. According to a Congressional report,2 the
provision of basic services, such as electricity, clean water, sewage treatment and
disposal is urgently needed to give Iraqis hope for a better future.
From May 2003 to June 2004, the Coalition Provisional Authority (CPA), led by the
United States and the United Kingdom, was the UN-recognized coalition authority that
was responsible for the temporary governance of Iraq and for overseeing, directing, and
coordinating the reconstruction effort. On June 28, 2004, the CPA disbanded and
transferred power to a sovereign Iraqi government. When the CPA terminated,
responsibility for the direction, coordination and supervision of all assistance for Iraq
shifted to the U.S. Chief of Mission in Iraq, under the guidance of the Secretary of State.
Section 2207 of Public Law 108-106 requires the Director of the Office of Management
and Budget (OMB), in consultation with the Administrator of the CPA, to submit a
quarterly report to the Senate and House Committees on Appropriations, on the initial
obligation of IRRF funds on a project-by-project basis, the distribution of duties and
responsibilities regarding IRRF projects among the agencies of the U.S. government,
funds provided by foreign governments and international organizations, and revenues
from seized or frozen foreign assets. The Office of Management and Budget prepared
these reports from January 2004 through July 2004. The U.S. Mission in Iraq, through its
Iraq Reconstruction Management Office, has prepared the reports since October 2004.
Department of State (DoS) Program Responsibilities.
The U.S. Ambassador to Iraq is the DoS’s Chief of the U.S. Mission in Iraq and is
responsible for the continuous supervision and general direction of all assistance for Iraq
according to National Security Presidential Directive 36, United States Government
Operations in Iraq, May 11, 2004. This includes the direction, coordination, and
supervision of all United States government employees, policies, and activities in
country, except those under the command of an area military commander. The DoS’s
activities to rebuild Iraq are primarily funded through the Iraq Relief and Reconstruction
Fund as codified in Public Law 108-11 and Public Law 108-106.
2 House Committee on Appropriations Report 108-312, dated October 14, 2003.
1

Funding by Sector. Congress allocated the funds based in part on a request developed
by the CPA. The funds were allocated among 10 sectors. The sectors and their
allocations are shown below as a percent of the total IRRF allocation. Appendices B
through K identify the allocations to the sub-sectors.
Figure 1: November 2003 Funding Allocations by IRRF Sector
11%
18%
Security & Law
Enforcement
Justice & Public
Safety
Electric
7%
23%
Oil
10%
31%
Water &
Sanitation
Other
Source: Office of Management and Budget and Department of State Section 2207 Reports
Although Public Law 108-106 allocated specific amounts to the 10 designated sectors of
spending, it authorized the President to reallocate up to 10 percent of any of the
allocations subject to the proviso that the total for the sector receiving such funds could
not be increased by more than 20 percent. However, it also allowed one sector to be
increased by an additional 20 percent in the event of unforeseen or emergency situations.
Objectives
The objectives of this audit were to determine (1) the effectiveness of U.S. agencies in
carrying out plans for Iraq reconstruction activities, and (2) to identify the reasons, if any,
for changes in the plans.
2

Challenges in Implementing the IRRF Program
The United States faced significant challenges in planning and carrying out
reconstruction activities in Iraq as evidenced by the large amounts of money that were
reallocated between and within the various project sectors. The biggest change is
reallocation to support development of Iraq’s security forces. DoS officials have reported
that the original CPA planners envisioned a much more permissive security environment
than that experienced in 2004 and 2005. The Iraq insurgency has directly affected the
cost of reconstruction projects, increased the cost of materials, and created project delays.
Security problems alone, however, are not responsible for all of the challenges DoS is
facing in its reconstruction program. Other unforeseen problems, such as initial plans
that were hurriedly put together with little knowledge of actual conditions at proposed
project sites, needed increases in spending for sustainment, and the need to fund the
administrative expenses of the IRRF implementing agencies and the U.S. Mission in Iraq
have also utilized funds intended for projects. Both Congress and the Office of
Management and Budget were well aware that the original slate of projects was likely to
change. Congress gave the President the authority to reallocate money between sectors,
and in each of its Section 2207 Reports to the Congress, the Administration has
emphasized the need to maintain flexibility in its reconstruction plans.
Security Costs Have Been Higher Than Anticipated
The cost of providing security for IRRF projects has been a significant contributor to
program change, increasing costs by an estimated 9 percent over original budget
estimates, to approximately 16 to 22 percent. The U.S. Agency for International
Development and the Project and Contracting Office, two of the project implementing
agencies, report that intimidation of local workers has delayed projects, while the
insecure environment has driven away critically needed foreign technicians in the
essential services sectors. As a result, security costs for private security forces protecting
construction sites, workers, and convoys have increased dramatically, thereby
significantly adding to reconstruction overhead costs.
While some projects have no security costs, others have significant costs. According to
DoS, when the program was developed in 2003, the security environment in Iraq was
much more permissive than that experienced in 2004 and 2005. DoS officials report that
the CPA’s original planning was based on the 2003 environment and thus assumed a
much more permissive security environment; that is construction activities could be
undertaken largely without interference from insurgent attacks on the facilities or
intimidation of workers or authorities by insurgents.
While the cost of security depends upon the project type, location, and who is doing the
work, the original budgeted cost for security was set at a nominal 8 percent to 13 percent
of project estimates for large design-build projects. Because of the increase in insurgency
activities, contractors have had to include better site protection, hardened vehicles for
personnel transportation and trained security teams with special communications
capability. In a May report, DoS stated that of $9 billion allocated to the Project and
Contracting Office for construction activities, approximately $2 billion has been forecast
as attributable to costs associated with security, or 22 percent. Of this $2 billion, direct
costs were estimated at $1.46 billion (16 percent) and additional costs (the rework of
damaged facilities, replacement of damaged materials, and construction delays) added an
additional $.56 billion (6 percent).
3

Strategy Changes Have Had a Large Impact on Iraq Plans
The biggest change in IRRF plans has been the result of strategy changes as the CPA and
its DoS successor responded to the changing Iraq environment. Altogether, we estimate
that the CPA and DoS have reallocated $5.6 billion in IRRF funding (30 percent of total
IRRF dollars) between sectors in response to changing strategies and priorities as of
September 30, 2005. The largest of these changes, known as the IRRF Strategic
Spending Review, occurred in late summer of 2004 and reallocated $3.46 billion between
the sectors. Reallocations occurred both between sectors and within sectors, and
reallocations occurred frequently. For example, we identified 185 separate funding
reallocations between January 2004 and October 2005.
As we were preparing this report Ambassador Khalilzad, the current U.S. Ambassador to
Iraq, designated an additional $1 billion in IRRF funding to be held back to support DoS
priorities as well as projects of the new Iraqi government. This report does not analyze or
discuss this latest change in strategy.
IRRF Strategic Spending Review. As stated earlier, the CPA terminated on June 28,
2004, and IRRF program direction and supervision shifted to the U.S. Mission in Iraq
under Ambassador Negroponte. Almost immediately, the Ambassador initiated an
examination of the priorities and programs funded by the IRRF. According to DoS’s
October 2004 Section 2207 Report, the review was conducted in close consultation with
the Iraqi government, and all U.S. government implementing agencies. The objective
was to re-prioritize funding from projects that would not begin until mid to late 2005, and
use those funds to target key high-impact projects, which would in turn support longer-
term reconstruction efforts. The result was a plan to reallocate $3.46 billion between
sectors, focusing on improving security, increasing Iraqi employment, and supporting
democratic transition in Iraq. This plan was announced to Congress on September 14,
2004.
Table 2 shows the changes resulting from the strategic review. As shown, the Security
and Law Enforcement sector received the largest increase, with the Electric and the
Water Resources and Sanitation sectors providing all of the funds.
4

Table 2: Summary of Changes to Sector Allocations as a Result of the July 2004 IRRF Strategic
Spending Plan Review (Dollars in millions)
Sector July 2004
Increase Decrease October 2004
Allocation
Allocation
Security & Law Enforcement $3,235.0 $1,809.6 $5,044.6
Justice, Public Safety
Infrastructure, & Civil Society
1,484.0 460.5 1,944.5
Electric 5,464.5 (1,074.6) 4,390.0
Oil Infrastructure1 1,701.0 450.0 (450.0) 1,701.0
Water Resources & Sanitation 4,246.5 (1,935.6) 2,310.9
Transportation &
Telecommunications
499.5 499.5
Roads, Bridges & Construction 367.5 367.5
Health Care 786.0 786.0
Private Sector Development2 183.0 660.0 843.0
Education, Refugees, Human
Rights, Democracy &
Governance
259.0 80.0 339.0
Administrative 213.0 213.0
Total $18,439.0 $3,460.1 $(3,460.1) $18,439.0
Source: DoS Section 2207 Report, October 5, 2004.
1 The strategic review moved $450 million between two project lines within the oil sector. As a result there
is no net change in the amount of IRRF funds dedicated to the oil sector.
2 This includes $352.3 million for Iraq Debt Forgiveness.
Other Strategy Changes Reallocated $2.1 Billion. Since January 2004 Congress has
received eight quarterly reports on the planned use of funds made available for Iraq
Relief and Reconstruction activities. In total, these reports have identified $2.128 billion
in IRRF fund reallocations as a result of strategy changes that are in addition to the
$3.460 billion discussed above. These reallocations were made from the earliest days of
the IRRF reconstruction activity, with $857 million moving between sectors between the
time Congress enacted Public Law 108-106 on November 6, 2003, and the Office of
Management and Budget’s first Section 2207 Report in January 2004. Other changes
occurred regularly thereafter with the second largest reallocation, $504 million, occurring
in December 2004 when DoS reallocated IRRF funds to address near-term needs of the
Electric sector and to expedite delivery of essential services to four key post-battle cities.
Table 3 shows the amounts reallocated as reported in the Section 2207 quarterly reports.
As stated, these reallocations are in addition to the $3.46 billion reallocated by the IRRF
Strategic Spending Plan Review.
5

Table3: IRRF Fund Reallocations as a Result of Strategy Changes
Section 2207 Report Amounts Reallocated
as a Result of Strategy Changes
January 2004 $857 million
April 2004 $179 million
July 2004 $42 million
October 2004 $50 million
January 2005 $504 million
April 2005 $356.5 million
$76.5 million
$63 million
$2,128 million
July 2005 October 2005 Total Source: OMB and DoS Section 2207 Reports.
Reconstruction Priorities Changed Frequently. The reallocation of the $5.6 billion in
IRRF funding ($3.460 billion in the IRRF Strategic Spending Plan Review and $2.128
billion in additional changes) was accomplished through 185 separate sub-sector funding
changes, further illustrating the frequent changes under which the reconstruction
programs operated. In the October 2005 Section 2207 Report, we identified 67 sub-
sectors within the original 10 sectors, of which 11 were new sub-sectors that had been
added since January 2004. Of the remaining 56 sub-sector, 18 (32 percent) had
experienced cumulative funding changes (increases or decreases) greater than 50 percent
of their original allocation. Eight additional sub-sectors (14 percent) had cumulative
funding changes (increases or decreases) greater than 25 percent of their original
allocation.
As shown in Table 4 below, the Private Sector Development sector received the largest
percentage increase (190 percent) growing from $153 million to $443 million. The sector
also received $352.2 million to pay for the budget costs of forgiving approximately $4
billion in bilateral debt that Iraq owes the U.S. Because debt forgiveness is not a Private
Sector Development program, we have reported it separately to provide a clearer picture
of the changes in that sector’s programs. The Security and Law Enforcement sector
received the largest dollar increase, gaining $1.775 billion. The Justice, Public Safety,
and Civil Society sector received the second largest percentage increase (70.1 percent)
and the second largest increase in dollars of nearly $925 million.
Sectors that incurred the biggest decreases were the Water Resources and Sanitation
sector which was reduced from $4.3 billion to $2.1 billion (-50.4 percent), and the
Electric sector, which was reduced from $5.560 billion to $4.309 billion (-22.5 percent).
6

Table 4: Iraq Relief and Reconstruction Funding Allocation Changes
November 2003 to October 2005 (Dollars in millions)
Sectors Congressional
Allocation
November 2003
Current
Allocation
October 2005
Change
in
Dollars
Percent
Change
Sectors with increases
Private Sector Development1 153.0 443.0 290.0 190.0%
--Iraq Debt Forgiveness No allocation 352.3 352.3
Justice, Public Safety
Infrastructure, & Civil
Society
1,318.0 2,242.5 924.5 70.1%
Security & Law
Enforcement
3,243.0 5,017.6 1,774.6 54.7%
Education, Refugees &
Human Rights
280.0 363.0 83.0 29.6%
Transportation &
Telecommunication
500.0 508.5 8.5 1.7%
Administrative2 No allocation 213.0 213.0 0.0%
Sectors with decreases
Water Resources &
Sanitation
$4,332.0 $2,146.6 $(2,185.4) (50.4%)
Electric 5,560.0 4,309.8 (1,250.2) (22.5%)
Oil Infrastructure 1,890.0 1,723.0 (167.0) (8.8%)
Roads, Bridges &
Construction
370.0 333.7 (36.3) (9.8%)
Health Care 793.0 786.0 (7.0) (<1.0%)
Totals $18,439 $18,439 $(0.0) 0
Source: OMB and DoS Section 2207 Reports. 1In September 2004, Private Sector Development received $352.3 million for Iraq Debt Forgiveness.
Because debt forgiveness is not an actual program, we have reported it separately to provide a clearer
picture on how the sector changed.
2An additional $601.3 million was used to cover FY2004 and 2005 program implementation costs and the
FY2005 operating expenses of CPA’s successor organization. These costs are not identified and are spread
across the sectors. Total FY2004-2005 administrative costs are actually $785.7 million.
The Need for Large-Scale Sustainment Activities Was Not
Foreseen.
In the October 30, 2005, SIGIR Quarterly Report to Congress, we discussed sustainment,
or the ability of the Iraqi government to support IRRF-funded projects and facilities for
an extended period of time after U.S. financial, managerial, and technical assistance is
terminated. That report pointed out that the need to sustain projects after turnover to the
Government of Iraq was largely unforeseen and activities to develop the capacity of the
Iraqi government to support and budget for sustaining projects had not been included in
the CPA’s reconstruction plans. DoS had identified the problem, and two of its
implementing agencies, the Project and Contracting Office and the U.S. Agency for
International Development, had taken steps to prepare their projects for turnover to the
7

Iraqi government. At the time of our report, the two implementing agencies reported that
they reallocated a combined $425 million for sustainment and capacity building
activities. Additionally, DoS budget officials identified an additional $350 million in
IRRF funds that could be used to pay for sustainment activities. According to a DoS
budget official, as of January 9, 2006, the additional sustainment funds have been
committed and are awaiting contract action.
Some IRRF Administrative Expenses Were Not Considered in
Initial Plans
Altogether, $785.3 million in IRRF funding has been used to cover the administrative
costs of the agencies implementing the IRRF program, and the operating expenses of the
CPA and its successor organization. The use of these funds is authorized by the FY 2004
Supplement Appropriations Act. However, CPA planners did not factor $400.6 million
of these costs into their program and project plans. Consequently, the use of these funds
has reduced the level of funding that can be provided for specific relief and
reconstruction activities in Iraq, and altered U.S. plans.
The FY 2004 Supplemental Appropriations Act allowed agencies, other than the CPA,
who are managing or administering IRRF funds, to use “up to 10 percent” of those funds
to pay for administrative expenses, and allowed the CPA to take up to 1 percent of the
appropriation to cover its operating expenses. In April 2004, the Office of Management
and Budget (the agency writing the Section 2207 Report at the time) reported that it
would be using this authority, and in July 2004 reported that $290.4 million in IRRF
funds would be used to cover fiscal year 2004 expenses of the five agencies
implementing the IRRF. The Office of Management and Budget also reported that an
additional $184 million in IRRF funds would be used to cover the FY 2004 operating
expenses of the CPA. In October 2004, DoS reported on how it intended to fund FY
2005 expenses. According to the report, $94.3 million in IRRF funds would be used to
cover the administrative expenses of three of the implementing agencies, and $184
million in IRRF funds would be allocated to cover the operating expenses of the
successor to the CPA. Finally, in July 2005 AID revised its security costs and received
an additional $32.6 million in IRRF funds. Thus, in Fiscal Years 2004 and 2005, $785.3
million was allocated for IRRF administrative and operating expenses.
While the law permits IRRF funds to be used for administrative and operating expenses,
$400.6 million of these expenses, comprised of the $184 million in FT2004 operating
expenses, the $184 million in FY2005 operating expenses, and the $32.6 million
transferred to USAID in July 2005, were not considered in developing the original
September 2003 list of IRRF projects. According to the April 2004 Section 2207 Report,
taking this money will “reduce slightly the level of funding that CPA and its successor
can provide for specific relief and reconstruction projects in Iraq.” The specific sectors
and sub-sectors that lost funding in FY2004 are identified in the July 2004 Section 2207
Report. The sectors and sub-sectors that lost funding to cover the FY 2005
administrative and operating expenses, however, are not identified in the October 2004
report. Instead, a DoS official told us the implementing agencies were permitted to
allocate their share of the administrative expenses across their sectors and sub-sectors
without identifying which sub-sectors lost money.
8

Initial Plans Were Imprecise
The April 2005 Section 2207 Report states that the CPA had significantly underestimated
the damage done to the basic infrastructure from decades of neglect and warfare and, as a
result, more time and resources are required to stand-up and maintain systems than
originally thought. The state of Iraq’s infrastructure was further degraded by looting and
sabotage following the war. One DoS sector advisor told us that the original CPA
assessments had under-estimated the decrepit state of Iraq’s infrastructure and
overestimated the management capabilities of the Iraqi ministries. Obtaining more
accurate information, however, would have been difficult prior to the end of combat
operations. While we could not precisely determine costs associated with planning
difficulties, the Section 2207 Reports contain numerous citations about unforeseen
changes. Examples include:
• A port rehabilitation project in Umm Qasr had to spend money that was planned
for other work on critical structural and pier side repairs of berths as a precursor
to conducting dredging operations.
• The discovery of unexploded ordnance at Tallil Military Base prolonged the site
preparation and construction there.
• Facilities planned to serve as headquarters for the Council of Judges, the Court of
Cassation, and the Central Criminal Court of Iraq were deemed inappropriate due
to ownership problems.
• After completing initial inspection of nearly half of the schools in nine provinces,
the Ministry of Education revised its estimate of the number of schools needing
rehabilitation from 930 to 1,047.
9

Measures for Determining Project Impact
The United State’s reconstruction efforts have shown tangible results in improving the
Iraqi infrastructure. However, the significant funding change means that many of the
originally planned projects will not be completed. The biggest change will occur in two
sectors; Water Resources and Sanitation, and Electric, which had funding reductions of
50 and 22 percent respectively. A precise measure of how these funding reductions
affected the sectors’ original goals is unavailable, however, because the CPA established
broad goals for the sector, but did not link the individual projects to these goals.
Moreover, there is a lack of detailed and accurate baseline data on the actual status of
these sectors prior to the start of reconstruction activity. The lack of detailed and
accurate data was identified in a recent Government Accountability Office report on
progress in the Water sector that reported that program planners did not have good data
on the number of Iraqis with access to water before the war.3 Similarly, a recent Electric
sector report stated that the CPA underestimated the decrepit state of Iraq’s electric
infrastructure prior to the war. In responding to the Government Accountability Office’s
report, DoS acknowledged the lack of metrics and responded that it was in the process of
refining performance metrics in the Water Resources and Sanitation sector and in all
other sectors.
As a result, we will not be making a recommendation to establish or refine program
metrics. Since at the time of this audit DoS was still working on this issue, we focused
our review on information in OMB and DoS’s Section 2207 Reports and interviews with
key sector officials. For the two sectors with the largest change, Water Resources and
Sanitation and Electric, we identified the following changes:
• Water Resources and Sanitation—about sixty percent of the originally planned
water sector projects will not be completed. The potable water sub-sector and
water pumping stations and generators sub-sector retained the largest number of
projects, while the sewerage sub-sector, the irrigation and drainage sub-sector, the
major irrigation sub-sector, and the dams sub-sector had most of their projects
cancelled. Nonetheless, DoS reports that Iraq’s water treatment capacity will be
increased by 2.25 million cubic meters per day.
• Electric—DoS originally planned about 425 projects in the electric sector, and
will complete approximately 300. The largest change will occur in the generation
sub-sector, which will only add about 2,109 megawatts of additional power rather
than the originally planned 3,400 megawatts.
For additional analyses of how the original ten sectors and sub-sectors have changed, see
Appendices B through K.
3 Rebuilding Iraq: U.S. Water and Sanitation Efforts Need Improved Measures for Assessing Impact and
Sustained Resources for Maintaining Facilities; GAO-05-872, (Sep. 7, 2005).
10

Appendix A. Scope and Methodology__________
We initiated this audit in October 2005 (Project No. SIGIR-2005-23). To determine the
effectiveness of U.S. agencies in carrying out plans for Iraq reconstruction activities, we
reviewed reports submitted to meet the requirements of Section 2207 of Public Law 108-
106. These reports, which have been submitted every three months since January 2004,
identify ten sectors of Iraqi infrastructure and governance, and identify how Iraq Relief
and Reconstruction Funds (IRRF) have been allocated between those sectors. The
reports also identify any changes that have occurred in a sector’s allocation since the
previous quarter. We tracked these changes for a two year period to determine how funds
moved between the sectors, and to identify, where possible, the reasons for the changes.
We then identified the primary reasons for the changes, and aggregated the amount of
funding moved for each of the primary reasons we had identified.
To identify reasons for changes in U.S. plans, we also reviewed the Section 2207
Reports. In the body of the Section 2207 Reports, reasons were generally given as to why
funding changes were made. In our research to identify how and where funding moved
to satisfy objective one of this report, we identified the sub-sectors that incurred funding
changes greater than 25 percent. For each sub-sector with a change greater than 25
percent, we then looked up reasons for the change and summarized it for the report.
We conducted this audit between October 2005 and January 2006, in accordance with
generally accepted government auditing standards.
Use of Computer-Processed Data. We did not use computer-processed data to perform
this audit.
Prior Coverage.
SIGIR. SIGIR reported on October 24, 2005, in “Managing Sustainment for Iraq Relief
and Reconstruction Fund Programs” (SIGIR-05-022), that progress had been made in
identifying the challenges of sustaining the IRRF projects. However, there is a growing
recognition that the Iraqi government is not yet prepared to take over the near- or long-
term management and funding infrastructure developed through the IRRF projects. We
reported that we believe progress has been hampered by the absence of a centralized
sustainment office with the authority and responsibility to manage this effort across the
jurisdictional boundaries of the operating agency organizations. We identified the Iraq
Reconstruction Management Office as the primary DoS entity involved in managing
IRRF projects and deemed it responsible for coordinating sustainment. We made several
recommendations that direction be provided for a common sustainment vision and to plan
and manage sustainment activities.
Government Accountability Office. Rebuilding Iraq: U.S. Water and Sanitation
Efforts Need Improved Measures for Assessing Impact and Sustained Resources for
Maintaining Facilities; GAO-05-872, (Sep. 7, 2005).
11

Appendix B. Security and Law Enforcement
Sector
The Security and Law Enforcement Sector Increased by $1.775 Billion, or 54.7 Percent.
Table5: Security and Law Enforcement Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation as of
Change Percent change
Allocation
October 2005
November 2003
Security & Law
Enforcement
$3,243.0 $5,017.6 $1,774.6 54.7%
Police Training &
Technical Assistance
950.0 1,808.4 858.4 90.4%
Border Enforcement 150.0 436.8 286.8 191.2%
Facilities Protection 67.0 53.0 (14.0) (20.9%)
Iraqi Armed Forces
Facilities
745.0 730.8 (14.2) (1.9%)
Iraqi Armed Forces
Equipment
879.0 628.6 (250.4) (28.5%)
Iraqi Armed Forces
Operations & Training
375.0 429.3 54.3 14.5%
Iraqi National Guard
Operations and
Personnel
58.0 224.6 166.6 287.2%
Iraqi National Guard
Equipment
17.0 91.6 74.6 438.8%
Iraqi National Guard
Facilities
Not identified 358.5 358.5 0.0%
Iraqi Security Forces
Quick Response
Program
Not identified 170.0 170.0 0.0%
Commander’s
Humanitarian Relief &
Reconstruction Program
Not identified 86.0 86.0 0.0%
Source: OMB and DoS Section 2207 Reports.
The Security and Law Enforcement sector funds the establishment of trained Iraqi
security forces under firm civilian control and imbued with respect for political and
human rights. In terms of the funds available for sector activities, Security and Law
Enforcement originally ranked third behind the Electric and Water Resources and
Sanitation sectors. However, after two years the Security and Law Enforcement sector is
now the largest sector, increasing by approximately $1.8 billion over its original
allocation (an increase of about 54.7 percent). Moreover, Security and Law Enforcement
activities also received a $5.7 billion appropriation through Public Law 109-13 to fund
the provision of equipment, supplies, services, training, facility and infrastructure repair,
renovation, and construction for Iraqi security forces, further illustrating the growing
priority of U.S. projects and activities in this sector.4 The Department of Defense controls
this appropriation, known as the Iraq Security Forces Fund.
4 Public Law 109-13 Iraqi Security Forces Fund, (May 2005).
12

As shown in Table 5, there are eleven sub-sectors in this sector. Of these eleven sub-
sectors, five had funding changes greater than 25 percent of their original allocation. The
three sub-sectors that make up the Iraqi National Guard program registered the largest
percentage increases, growing by a combined 800 percent (from $75 million to $600
million), while two of the sub-sectors in the police training program registered the largest
dollar increases, increasing by about $1.145 billion. The Iraqi Armed Forces decreased
by $211 million, although only one sub-sector, Iraqi Armed Forces Equipment, decreased
by more than 25 percent. This decrease probably reflects the additional funding made
available through the Iraq Security Forces Fund rather than any lessening in priority.
Finally, two new sub-sectors were established, the Iraqi Security Forces Quick Response
Program sub-sector in July 2005, and the Commander’s Humanitarian Relief and
Reconstruction Program sub-sector in October 2005. Both sub-sectors were created to
provide a means to rapidly respond to emergent requirements.
DoS’s broad goal in this sector was to establish four security organizations: the Iraqi
Police Services, Border Police Services, the Facilities Protection Service, and the Iraqi
Civil Defense Corps, and to establish the new Iraqi Army to provide for the legitimate
territorial defense of Iraq. As of October 2005, DoS was reporting that both the Ministry
of Defense and the Ministry of Interior have made substantial progress in developing
their security forces, but continue to experience problems with their institutional
capability to support fielded forces.
Sub-sectors That Changed by More Than 25 Percent
Police Training Increased $858.4 Million, or 90.4 Percent. The Police Training sub-
sector increased by $858.4 million or 90.4 percent. Creating a safe and secure
environment is vital for the success of Iraq’s reconstruction, and rebuilding the Iraqi
police force is an important part of this goal. Some of the major changes in this sub-
sector were (1) a decision to provide training and equipment for an additional 45,000
police (bringing the total number of trained Iraqi Police Service personnel to 135,000);
(2) supporting construction and/or repair of over 650 police station facilities; (3) the
creation of a Civil Intervention Force, a specialized organization designed to provide a
national-level, high-end, rapid-response capability to counter large-scale civil
disobedience and insurgency activities and the construction of nine bases to support the
force; and (4) a decision to consolidate funding for construction of training academies
and training equipment for the Iraqi Police Service, the Department of Border
Enforcement, and the Facilities Protection Service in this line. A decision was also made
to provide specialized police training (counter-terrorism, criminal investigations,
intelligence, etc.) at a specialized training center in Baghdad.
Border Enforcement Increased by $286.8 Million, or 191.2 Percent. The Border
Enforcement sub-sector increased by $286.8 million, or 191.2 percent. Some of the
major changes in this sub-sector were (1) a decision to train and equip an additional
16,000 Border Enforcement personnel including border police, customs police, and
immigration officials; and (2) the construction of 99 border forts and corresponding
access roads as well as other border enforcement infrastructure such as regional training
bases and their operating costs; and (3) the purchase of basic technology for control and
screening at major ports of entry, including items such as x-rays, metal detectors, and
grid sensors.
Iraqi Armed Forces Equipment Decreased by $250.4 Million, or 28.5 Percent. The
Iraqi Armed Forces Equipment sub-sector incurred a funding decrease of $250.4 million,
13

or 28.5 percent of its original allocation. However, the Section 2207 reports do not
identify any changes in plan as a result of the reallocation. Again, we believe that no
effects are identified because of the availability of the $5.7 billion Iraq Security Forces
Fund.
Iraqi National Guard Operations and Personnel Increased by $166.6 Million, or
287.2 Percent. The Iraqi National Guard Operations and Personnel sub-sector had a
funding increase of $166.6 million, or a 287.2 percent increase over its original
allocation. The Iraqi National Guard, originally named the Iraqi Civil Defense Corps, is
a constabulary force to assist coalition forces in bringing stability to Iraq. In conjunction
with coalition forces, the Guard will conduct foot patrols, search for remnants of the
former regime, and perform other civic duties. The increase is primarily attributable to a
decision to increase the size of the force. The CPA’s original plan called for creating 18
National Guard battalions. However, the plan underwent two major changes. In January
2004 a decision was made to create 36 battalions, and in October 2004, following
Ambassador Negroponte’s Strategic Review of IRRF spending, a decision was made to
add an additional 20 battalions along with a National Guard Division and Brigade
headquarters.
Iraqi National Guard Equipment Increased by $74.6 Million, or 438.8 Percent.
The Iraqi National Guard Equipment sub-sector increased by $74.6 million, or 438.8
percent. The large scale increase in the size of the Iraqi National Guard created a
commensurate increase in equipment costs.
Iraqi National Guard Facilities Was Established as a New Sub-sector. DoS did not
identify Iraqi National Guard facilities as a separate sub-sector in its original plan.
Rather, funding for the support of Guard facilities was identified as part of the operations
and personnel program. As plans to increase the size of Guard force developed, a
decision was made in October 2004 to construct supporting facilities. National Guard
Facilities was established as a separate sub-sector, and $358.5 million was made available
for the sub-sector.
Iraqi Security Forces Quick Response Program Was Established as a New Sub-
sector. The Iraqi Security Forces Quick Response sub-sector was established in July
2004 to allow the Multi-National Security Transition Command-Iraq to respond to
emerging requirements, including force protection, facilities repair, communications
equipment, and other needs of the various Iraqi security forces. The July 2004 report
allocated $40 million for the sub-sector, and in October 2004 and January 2005 an
additional $130 million was added.
Commander’s Humanitarian Relief and Reconstruction Program Was Established
as a New Sub-sector. The Commander’s Humanitarian Relief and Reconstruction
Program sub-sector was established in October 2004, to provide urgent, essential water
and sewage services to Iraqi citizens with a primary focus on Baghdad. The sub-sector
was funded at $86 million and remains unchanged.
14

Appendix C. Justice, Public Safety
Infrastructure, and Civil ,Society Sector
The Justice, Public Safety Infrastructure, and Civil Society Sector Increased By $924.5
Million, or 70.1 Percent.
Table 6: Justice, Public Safety Infrastructure, and Civil Society Funding Allocation
Changes November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation
Current
Change Percent change
Allocation
November 2003
October 2005
Justice, Public Safety, &
Civil Society
$1,318.0 $2,242.5 $924.5 70.1%
Other Technical
Investigative Methods
10.0 5.0 (5.0) (50.0%)
Witness Protection
Program
75.0 37.0 (38.0) (50.7%)
Penal Facilities 100.0 87.0 (13.0) (13.0%)
Reconstruction and
Modernization of
Detention Facilities
109.0 165.0 56.0 51.4%
Facilities Protection,
Mine Removal, Fire
Service
400.0 274.0 (126.0) (31.5%)
Public Safety Training
and Facilities
199.0 219.5 20.5 10.3%
National Security
Communications
Network
90.0 106.5 16.5 18.3%
Rule of Law in Iraq Not identified 56.2 56.2 0.0%
Investigations of Crimes
against Humanity
75.0 128.0 53.0 70.7%
Judicial Security and
Facilities
150.0 159.0 9.0 6.0%
Democracy Building
Activities
100.0 995.3 895.3 895.3%
U.S. Institute for Peace 10.0 10.0 0 0.0%
Source: OMB and DoS Section 2207 Reports.
The Justice, Public Safety Infrastructure, and Civil Society sector funds programs such as
the protection of the judiciary, assistance for law enforcement personnel, and the
reconstruction of penal institutions to international standards. The sector was initially the
fourth largest in funding but has since moved ahead of Water Resources and Sanitation
into third position. Overall, Justice, Public Safety and Civil Society sub-sectors have
increased by $924.5 million or 70.1 percent over their original allocation. Almost all of
this increase occurred in one sub-sector, Democracy Building Activities, which funds
activities intended to establish the democratic foundations of a new Iraq. As shown in
15

Table 6, there are 12 sub-sectors in this activity, of which 6 had funding changes greater
than 25 percent of their original allocation. One new sub-sector, Rule of Law in Iraq,
was added.
Sub-sectors That Changed by More Than 25 Percent
Other Technical Investigative Methods Decreased by $5 Million, or 50 Percent.
Other Technical Investigative Methods was funded at $10 million, but the CPA reduced
sub-sector funding in January 2004 to $5 million. The sub-sector supports the use of
technical measures, such as recording devices, to develop prosecutable cases against
terrorists and organized crime members. The reduction in this sub-sector was reported in
OMB’s first Section 2207 Report largely before program activity began.
Witness Protection Program Sub-sector Decreased by $38 Million, or 50.7 Percent.
The Witness Protection Program sub-sector lost approximately half of its funding, going
from a $75 million sub-sector to a $37 million sub-sector. As with the Other Technical
Investigative Methods sub-sector, the decision to reduce this sub-sector was made by the
CPA in January 2004 before program activity began. The sub-sector supports the
establishment of a witness protection program to allow victims as well as criminals who
become government witnesses to testify without fear of being killed by the members of
the organization against whom they are testifying.
Reconstruction of Detention Facilities Increased by $56 Million, or 51.4 Percent.
The Reconstruction of Detention Facilities sub-sector increased by $56 million or 51.4
percent. Originally the plan was to reconstruct or modernize 25 adult facilities and one
juvenile rehabilitation facility. This goal was later revised to provide for one large
regional detention center instead of rehabilitating numerous facilities. Additionally, a
decision was made to hire approximately 100 civilian contractors to serve as trainers and
mentors for prison employees.
Facilities Repair, Fire Service, and De-mining Decreased by $125 Million, or 31.5
Percent. Congress provided $400 million for this sub-sector. Subsequently, $125
million was transferred to other projects--a 31.5 percent decrease in funding. As with
several other sub-sectors, the funds were reallocated by the CPA in January 2004, prior to
program activity beginning.
Rule of Law in Iraq Was Established as a New Sub-sector. The Rule of Law in Iraq
sub-sector is a new $30 million sub-sector designed to provide rule of law training to
judicial, prosecutorial, and attorney officials and staff, policy support for the Ministry of
Justice and High Juridical Council, and assistance to increase public access to justice and
legal assistance.
Investigations of Crimes against Humanity Office Increased by $53 Million, or 70.7
Percent. The Investigations of Crimes against Humanity sub-sector increased by $53
million, or 70.7 percent. Assistance for investigations of crimes against humanity
includes (1) bringing in and supporting international investigators; (2) evidence handling;
(3) local capacity-building; (4) prosecutorial and judicial support; (5) forensic support
through evidentiary exhumations of mass graves; and (6) infrastructure and security for
the Iraqi Special Tribunal. The $53 million increase was needed to meet fiscal year 2005
costs to complete exhumation of four mass gravesites that are linked to a certain set of
defendants whom the Iraqi Special Tribunal is expected to bring to trial.
16

Democracy Building Activities Increased by $895.3 Million, or 895 Percent. The
Democracy Building Activities sub-sector had the largest percentage growth of any Iraq
Relief and Reconstruction Fund sub-sector, growing by 895 percent, or $895.3 million.
The sub-sector funds basic institutions essential to democracy such as assisting Iraq’s
highly centralized ministries to make the transition to a more decentralized power-sharing
system; supporting civil society building and national civic education programs; and
establishing core procedures and processes for the Governing Council. Congress
provided $100 million for this sub-sector. The CPA identified a need for additional
funding almost immediately, adding $359 million in January 2004 alone. According to
the January 2004 Section 2207 Report, the CPA and the Iraqi Governing Council agreed
to accelerate the transition to full Iraqi sovereignty. This accelerated transition required
an increased emphasis on activities such as democracy-building. Some of the additional
money funded conflict mitigation activities which spur short-term employment activities;
support the development of local and provincial government; electoral technical
assistance to the Independent Election Commission of Iraq in preparation for Iraq’s
Transitional National Assembly elections in January 2005; elections monitoring; and
support for the Interim Government of Iraq.
17

Appendix D. Electric Sector
The Electric Sector Decreased by $1.250.2 Billion, or 22.5 Percent.
Table 7: Electric Sector Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation
Allocation as of
Change Percent change
October 2005
November 2003
Electric Sector $5,560.0 $4,309.8 $(1,250.2) (22.5%)
Generation 2,810.0 1,607.8 (1,202.2) (42.8%)
Transmission 1,550.0 1,241.6 (308.4) (19.9%)
Network Infrastructure 1,000.0 1,289.4 289.4 28.9%
Automated Monitoring
& Control System
150.0 127.0 (23.0) (15.3%)
Security 50.0 44.0 (6.0) (12.0%)
Source: OMB and DoS Section 2207 Reports.
The Electric Sector funds new generation capacity, the rehabilitation of some existing
generating units, and the reconstruction of most high-voltage transmission lines.
Immediately following the war, the electrical power infrastructure of Iraq was in perilous
condition. Early coalition efforts restored power generation to the same level as available
before the war. However, the system is inadequate to meet Iraq’s growing demand and
lacks any measure of reliability. Blackouts, unplanned outages and other failures
continue to occur on a frequent basis. The Electric sector was originally the largest sector
in terms of funding, but presently ranks second behind Security and Law Enforcement,
having lost $1.25 billion in funding. As shown in Table 7, there are 4 sub-sectors in this
sector: Generation, Transmission, Network Infrastructure, and Security. The majority of
change in this sector occurred in the Generation sub-sector, which lost $1.2 billion.
Sub-sectors That Changed by More Than 25 Percent
Generation Decreased by $1.2 Billion, or 42.8 Percent. The Generation sub-sector
experienced the second largest funding decrease of all Iraq Relief and Reconstruction
sub-sectors, losing $1.2 billion, or 42.8 percent of its original allocation. Initially, the
U.S. goal was to create a system that could generate 6,000 megawatts of power daily; an
increase of 3,400 megawatts. The plan entailed building 12 new generation plants that
would produce an additional 1,685 megawatts of power, and 12 rehabilitation and
maintenance projects that were expected to add an additional 1,144 megawatts. This was
later reduced to a goal of increasing power generation by 2,109 megawatts instead of
3,400 megawatts. This change, announced to Congress in September 2004, was part of
Ambassador Negroponte’s Strategic IRRF Review whose objective was to re-prioritize
funding from projects not beginning until mid to late 2005 and use these funds to target
key high-impact projects, which would, in turn, support longer-term reconstruction
efforts. The plan reallocated $1.046 billion from Generation. The cuts include four gas
powered stations in Anbar, Basra, Al-Methane and Dados; a diesel power plant in
Babylon; and Baja steam turbines 4 and 5 in Salah-Ad Din.
18

Network Infrastructure Increased by 289.4 Million, or 28.9 Percent. The distribution
network sub-sector was funded by Congress at $1.0 billion and received an additional
$289.4 million in funding, a 28.9 percent increase. Distribution networks deliver power
carried over the transmission networks to local areas. The distribution networks were
relatively unaffected by the recent war but were in a highly deteriorated condition
beforehand. Equipment is operating without adequate electrical protection and is
generally overloaded. The distribution network program includes the construction of
over 150 new or rehabilitated 33 kilovolt substations, and several hundred 11 kilovolt
substations countrywide. The additional funding was principally added to support
electrical distribution in Fallujah, Najaf, and Sadr City as part of a $246 million post-
battle reconstruction initiative.
19

Appendix E. Oil Infrastructure Sector
The Oil Infrastructure Sector Decreased by $167 Million, or 8.8 Percent.
Table 8: Oil Infrastructure Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation as of
Change Percent change
Allocation
October 2005
November 2003
Oil Infrastructure $1,890.0 $1,723.0 Infrastructure 1,200.0 1,697.0 690.0 26.0 $(167.0) 497.0 (664.0) (8.8%)
41.4%
Emergency Supplies of
Refined Petroleum
Products
(96.2%)
Source: OMB and DoS Section 2207 Reports.
The Iraqi oil infrastructure was damaged at the beginning of the war and extensively
looted soon afterwards. Oil is the most abundant natural resource in Iraq and the
mainstay of the Iraqi economy. There are two sub-sectors in the Oil Infrastructure sector:
Infrastructure and Emergency Supplies of Refined Oil Petroleum Products. As shown in
Table 8, the Infrastructure sub-sector increased by $497 million while the Emergency
Supplies of Refined Petroleum Products sub-sector was essentially eliminated.
Sub-Sectors That Changed by More Than 25 Percent
Infrastructure Increased by $497 Million, or 41.4 Percent. The Infrastructure sub-
sector funds (1) the repair of the oil infrastructure, (2) projects to counter the terrorist
threat to protect the current investments, and (3) projects to compensate for losses that are
a direct result of previous terrorist attacks. Once production is stabilized, funds will then
be used to continue to improve the Iraqi petroleum production systems with the ultimate
goal of restoring pre-war capacity levels of about 3 million barrels per day. The program
grew by $497 million, or 41.1 percent, over its original allocation. Approximately $450
million of the increase occurred as a part of Ambassador Negroponte’s IRRF Strategic
Spending Review in October 2004. The additional investment is targeted to increase
Iraqi oil production and will be used to cover cost overruns on previously started projects,
caused in part by the large number of pipelines sabotaged.
Emergency Supplies of Refined Petroleum Decreased by $664 Million, or 96.2
Percent. The Emergency Oil Supply sub-sector’s funding was essentially terminated,
incurring a $664 million reduction, or 96.2 percent of its original funding. Originally the
sub-sector was created because war damage, looting, poor maintenance, and sabotage had
created interruptions to the flow of crude to the refineries. Difficulties due to outdated
technology and poor maintenance at the refineries themselves and interruptions to the
flow of refined products to the cities further added to the need to import petroleum
products. Before the program began, however, the CPA decided to use Iraqi budget
resources for these needs. Consequently, the money was moved primarily to the oil
infrastructure sub-sector.
20

Appendix F. Water Resources and Sanitation
Sector
The Water Resources and Sanitation Sector Decreased by $2,185.4 Billion, or 50.4
Percent.
Table 9: Water Resources and Sanitation Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation as of
Change Percent change
Allocation
October 2005
November 2003
Water Resources &
Sanitation
$4,332.0 $2,146.6 $(2,185.4) (50.4%)
Potable Water 2,830.0 1,483.0 (1,347.0) (47.6%)
Water Conservation 30.0 31.0 1.0 3.3%
Sewerage 675.0 234.7 (440.3) (65.2%)
Other Solid Waste
Management
22.0 10.9 (11.1) (50.5%)
Pumping Stations &
Generators
150.0 123.0 (27.0) (18.0%)
Irrigation & Drainage
Systems
130.0 38.4 (91.6) (70.5%)
Major Irrigation Projects 130.0 53.4 (76.6) (58.9%)
Dam Repair,
Rehabilitation, &
Construction
125.0 61.5 (63.5) (50.8%)
Umm Qasr to Basra
Water Pipeline &
Treatment Plant
200.0 110.7 (89.3) (44.7%)
Basra Channel Flushing 40.0 0 (40.0) (100.0%)
Source: OMB and DoS Section 2207 Reports.
The Saddam regime’s misuse and mismanagement of Iraq’s water resources left large
sections of the country with polluted water, saline-saturated croplands and
malfunctioning or missing water supply and sewage control facilities. Clean water
resources were extremely limited and were a high priority to sustain stability in the
country and ensure long-term economic growth and preservation of life. The Water
Resources and Sanitation sector addresses these needs. The sector consists of ten sub-
sectors meant to increase public access to potable water and waste management systems;
manage Iraq’s water resources; and irrigate Iraq’s farmland. While the significance of
projects within this sector remains high, the sector has incurred the largest reduction in
funding of any sector, losing $2.185 billion, or 50.4 percent of its original allocation. In
terms of size, the sector has fallen from the second largest sector in November 2003,
behind only the Electric Sector, to the fourth largest sector, behind Security and Law
Enforcement; Electric; and the Justice, Public Safety Infrastructure, and Civil Society
sectors.
21

Sub-Sectors That Changed by More Than 25 Percent
Potable Water Decreased by $1.347 Billion, or 47.6 Percent. In January 2004, about
40 percent of the population of Iraq lacked access to safe, clean water. The goals of the
potable water sub-sector were to bring new potable water access to an additional 15
percent (about 4 million people) and to raise the quantity and quality of potable water
access to generally accepted minimum international standards for another 15 percent of
the Iraqi population. Therefore, projects were expected to benefit an additional 8 million
people. As shown in Table 9, the potable water program was funded at $2.830 billion,
but lost $1.343 billion, or 47.6 percent of its original allocation. According to a DoS
official, approximately 57 projects were cut or deferred. The effect these project cuts had
on the water sector’s goals, however, is difficult to measure.
According to a September 2005 Government Accountability Office report, the CPA’s
goals for providing essential services in Iraq were unrealistic because they were set
without having baseline data on the condition of Iraq’s water and sanitation
infrastructure.5 Additionally, there is a lack of sound performance data and measures for
gauging progress, such as measures of water quality and water metering systems that can
measure water availability. In the absence of such measures, program officials track the
number of projects started and completed. For example, DoS officials report that they
currently have 27 IRRF-funded potable water projects planned or completed. Altogether,
Water Sector officials project that an additional 2.75 million Iraqis will be served by U.S.
funded potable water projects.
Sewerage Decreased by $440.3 Million, or 65.2 Percent. Problems similar to those
discussed in the potable water sub-sector also existed in the sewerage sub-sector. As
shown in Table 9, the Sewerage sub-sector has lost $440.3 million of its funding, a 65.2
percent decrease. Before the war, there were only 9 sewage treatment plants in 8 of the
15 southern governorates. Even where sewer lines existed, broken lines and components
were a major health hazard throughout the country. There was standing sewage in
hundreds of municipalities, often in or next to schools, clinics, or public food markets.
There are about 250 cities in Iraq, with only 6 percent of the population covered by
treatment plants; the rest of the population depends on individual septic tanks and other
means of disposal, which are often highly unsanitary. The CPA’s initial goal was to
increase the sewerage service in cities by 5 percent to 11 percent of the population.
However, as with water there is a lack of measures of both pre-war access to sewerage
systems and how U.S. projects have improved the availability of sanitation services.
Only two of ten originally planned projects will be completed. Nonetheless, DoS
officials believe that approximately 4.5 million additional Iraqis are being served by U.S.
funded sewerage projects.
Other Solid Waste Management Decreased by $11 Million, or 50 Percent. The Other
Solid Waste Management sub-sector consisted of one project that was terminated because
geotechnical testing on the proposed site determined the water table was unacceptably
close to the surface; there was a lack of secure access to the site; and squatters were still
living on the property. Congress allocated $22 million for this project, and some
equipment was purchased before the project was terminated. The purchased equipment
will be turned over to the Kirkuk Governorate for use at their new landfill facility.
5 Rebuilding Iraq: U.S. Water and Sanitation Efforts Need Improved Measures for Assessing Impact and
Sustained Resources for Maintaining Facilities, GAO-05-872, (Sep. 7, 2005).
22

Irrigation and Drainage Systems Decreased by $92 Million, or 70.5 Percent. The
Irrigation and Drainage sub-sector envisioned three projects to rehabilitate old operating
irrigation and drainage systems to improve water use efficiency and water quality,
however, the program was largely terminated. The existing systems needed major
rehabilitation to improve the efficiency and reliability of water use, and the goal was to
allow the irrigation of 900,000 hectares.6 Approximately $92 million of the originally
allocated $130 million was reallocated to higher priority projects, and the one remaining
project was de-scoped to engineering and design studies only.
Major Irrigation Projects Decreased by $76.6 Million, or 58.9 Percent. The Major
Irrigation Projects program envisioned five projects to complete the construction of
major, ongoing irrigation and drainage projects. This was largely dropped, and only one
of the five projects will be undertaken, and this project has been de-scoped to an
engineering and design study only. Congress allocated $130 million for the five projects,
and the current budget forecast is $53.4 million will be spent; a reduction of $76.6
million.
Dam Repair, Rehabilitation, and New Construction Decreased by $63.5 Million, or
50.8 Percent. The original goal of the Dam Repair Rehabilitation, and New Construction
sub-sector was to construct six new dams in three governorates needed to provide water
for villages and livestock; and to repair six dams with critical safety issues. Ultimately,
only one repair project was completed. Engineering and design studies were completed
for three other projects. Congress funded this program at $125 million, but only $61.5
million is currently budgeted, a 50.8 percent reduction.
Umm Qasr/Basra Water Supply Project Decreased by $89.3 Million, or 44.7
Percent. Congress allocated $200 million for the Umm Qasr/Basra Water Supply
Project, but the CPA almost immediately adjusted its cost estimate for this project to
$114 million. The project entails maintenance to the canal that provides water to the city
of Basra. The project is ongoing.
Basra Channel Flushing Decreased by $40 Million, or 100 Percent. The Basra
Channel Flushing sub-sector was a $40 million program to flush canals extending
throughout the city of Basra of stagnant water and debris. The program was dropped
when the Interim Iraqi government decided to complete the work using its own resources.
6 A hectare is a metric unit of area equal to 2.471 acres.
23

Appendix G. Transportation and
Communications Sector
The Transportation and Communications Sector Increased by $8.5 Million, or 1.7
Percent.
Table 10: Transportation and Communications Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation
Allocation as of
Change Percent change
October 2005
November 20031
Transportation &
Communications
$500.0 $508.5 $8.5 1.7%
Civil Aviation 115.0 113.7 (1.3) (1.1%)
Umm Qasr Port Rehab 40.0 45.0 5.0 12.5%
Railroad Rehab &
Restoration
210.0 189.3 (20.7) (9.9%)
Iraq Telecom & Postal
Corporation
20.0 20.0 0 0.0%
Iraqi Communications
Systems
90.0 45.5 (44.5) (49.4%)
Consolidated Fiber
Network
Not identified 70.0 70.0 0.0%
Iraqi Communications
Operations
25.0 25.0 0 0.0%
Source: OMB and DoS Section 2207 Reports.
Note1: Congress reduced funding for transportation and communications sector programs by $280 million
but did not identify which sub-sectors should be reduced. Consequently, we used the CPA’s January 2004
allocation as our starting point.
The Transportation and Communications sector has changed very little from its original
allocation. Funding changes shown in the table largely represent the removal of the
Consolidated Fiber Network project from the Iraqi Communications Systems sub-sector,
in order to establish it as an independent sub-sector. Other sub-sectors are identified as
essential for Iraq to make a transition to a functioning market based economy, such as
increasing cargo handling volume and speed, increasing the effective capacity of the
railroad, and enabling passenger and cargo traffic at Iraq’s three main airports. The
sector was funded at $500 million and received a modest $8.5 million (1.7 percent)
increase in funding.
Sub-sectors That Changed by More Than 25 Percent
Iraq Communications Systems Decreased by $44.5 Million, or 49.4 Percent. The
Iraq Communications Systems sub-sector decreased by $44.5 million. However, the bulk
of this change was the result of transferring the consolidated fiber network project into its
own sub-sector line in order to consolidate and eliminate redundancies from three project
codes that had separate fiber optic networks planned. Other projects in this sector are new
switching and transport systems for wide-area voice and data traffic.
24

Consolidated Fiber Network Was Established as a New Sub-sector . The
Consolidated Fiber Network project was removed from the Iraqi Communications
Systems sub-sector and established as a new independent sub-sector. Funding was set at
$70 million; $44 million of which came from the Iraq Communications Systems
program. The sub-sector consolidates three separate fiber optic projects and eliminates
redundancies. When completed, the network will provide a communications network
that will support the electricity, railroad, and telecommunications sectors.
25

Appendix H. Roads Bridges and Construction
Sector
The Roads, Bridges, and Construction Sector Decreased by $36.3 Million, or 9.8 Percent.
Table 11: Roads, Bridges, and Construction Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation
Allocation as of
Change Percent change
October 2005
November 2003
Roads, Bridges, and
Construction
$370.0 $333.7 $(36.3) (9.8%)
Public Building
Construction & Repair
130.0 127.0 (3.0) (2.3%)
Roads & Bridges 240.0 206.7 (33.3) (13.9%)
Source: OMB and DoS Section 2207 Reports.
The Roads, Bridges, and Construction sector changed very little, decreasing by only
$36.3 million. Sector projects include the reconstruction and rehabilitation of public
buildings to include four ministry headquarters buildings and the rehabilitation of 60
school buildings. It will also fund a small portion of Iraq’s overall requirement for road
and bridge improvements. As shown in Table 11, there are two sub-sectors in this sector;
Public Building Construction and Repair, and Roads and Bridges. Congress allocated
$370 million for the sector and it has incurred only a 9.8 percent change.
No Roads, Bridges, and Construction sub-sectors had a funding change of more than 25
percent.
26

Appendix I. Health Care Sector
The Health Care Sector Decreased by $7 Million, or 1 Percent
Table 12: Health Care Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation as of
Change Percent change
Allocation
October 2005
November 2003
Health Care $793.0 $786.0 $(7.0) (<1.0%)
Nationwide Hospital &
Clinic Improvements
443.0 439.0 (4.0) (<1.0%)
Equipment Procurement
& Modernization
300.0 297.0 (3.0) (<1.0%)
Pediatric Facility in Basra 50.0 50.0 0 0.0%
Source: OMB and DoS Section 2207 Reports.
The Health Care sector incurred only minor changes in its funding. The sector funds
improvements to the Iraqi health system, which had deteriorated as a result of years of
neglect and mismanagement by Saddam’s regime. The Congress allocated $793 million
to purchase needed medical equipment, repair and modernize 15 hospitals and construct
new primary healthcare centers in every governorate, and train over 5,000 medical and
other primary care staff to support the restoration of Iraq’s health care system. As shown
in Table 12, there are three sub-sectors in the Health Care sector, each of which
maintained its funding. The $7 million in funding that was reallocated occurred in July
2004 when money was withdrawn to cover the operating expenses of the U.S. mission in
Iraq.
No health care sector sub-sectors had a funding change of more than 25 percent.
27

Appendix J. Private Sector Development Sector
The Private Sector Development Sector Increased by $290 Million, or 190 Percent
Table 13: Private Sector Development Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation as of
Change Percent change
allocation
October 2005
November 2003
Private Sector
Development1
153.0 443.0 290.0 + 190.0%
Expand Network of
Employment Centers
8.0 8.0 0 0.0%
Vocational Training2 63.0 75.1 12.1 19.2%
Business Skills
Training1
37.0 37.0 0 0.0%
Micro-Small-Medium
Enterprises
45.0 44.0 (1.0) (2.2%)
Institutional Reforms Not identified 80.0 80.0 0.0%
Agriculture Not identified 100.0 100.0 0.0%
Market-Based Reforms Not identified 98.9 98.9 0.0%
Iraq Debt Forgiveness1 Not identified 352.3 352.3 0.0%
Source: OMB and DoS Section 2207 Reports.
1Section 2207 Reports show the sector received $795.3 million. However, this includes $352.3 million for
Iraq Debt Forgiveness. Because Iraq Debt forgiveness is not an actual program, we excluded it from the
total to provide a clearer picture of program change within the sector.
2Congress allocated $100 million for training but did not identify how much was to go to vocational
training and business skills training. We used information in the body of the Section 2207 report to make
the allocation.
The Private Sector Development sector was originally intended to open employment
centers to match the needs of the public and private sector. However, in September 2004
Ambassador Negroponte conducted a strategic review of spending plans to free up funds
to target key high-impact projects and support longer-term reconstruction efforts. The
Private Sector Development sector was a key recipient of those funds, and three new sub-
sectors were created to encourage diversification in the Iraqi economy and to develop a
competitive sector; Institutional Reforms; Agriculture; and Market-Based Reforms.
These programs received $278.9 million. Additionally, Congress authorized the use of
IRRF funds to pay for the budget cost of forgiving approximately $4 billion in bilateral
debt that Iraq owes the U.S. This brings the total change within this sector as a result of
the strategic review to $639 million. In our earlier tables, we subtracted Iraq Debt
Forgiveness from the Private Sector Development totals, because Iraq Debt Forgiveness
is not an actual program and including it skews the actual program changes that occurred
within this sector.
Other than the three new sub-sectors added no Private Sector Development sub-sectors
had funding changes greater than 25 percent.
28

Appendix K. Education, Refugees, Human
Rights, and Governance Sector
The Education, Refugees, Human Rights, and Governance Sector Increased by $83
Million, or 29.6 Percent.
Table 14: Education, Refugees, Human Rights, and Governance Funding Allocation Changes
November 2003 to October 2005 (Millions of Dollars)
Congressional
Allocation as of
Change Percent change
Allocation
October 2005
November 2003
Education, Refugees,
Human Rights &
Governance
$280.0 $363.0 $83.0 29.6%
Migration & Refugee
Assistance
105.0 159.0 54.0 51.4%
Property Claims
Tribunal
30.0 10.0 (20.0) (66.7%)
Governance Not identified 40 40 0.0%
Banking System
Modernization
30.0 30.0 0 0.0%
Human Rights 15.0 15.0 0 0.0%
Education 90.0 99.0 9.0 10.0%
Civic Programs 10.0 10.0 0 0.0%
Source: OMB and DoS Section 2207 Reports.
Projects in this sector address a variety set of issues, including meeting the needs of
refugees, reforming Iraq’s banks, supporting the works of the Property Claims
Commission, improving human rights, and supporting the development of education. As
shown in Table 14, the sector consists of seven sub-sectors and experienced an overall
gain of $83 million, or a 29.6 percent increase. One new sub-sector, Governance, was
created.
Sub-Sectors That Changed by More Than 25 Percent
Migration and Refugee Assistance Increased by $54 Million, or 51.4 Percent. The
Migration and Refugee Assistance sub-sector received an additional $70 million as a
result of Ambassador Negroponte’s IRRF Strategic Review in October 2004 to provide
emergency relief assistance to over 100,000 Arabs and 50,000 Kurds, resettlement
assistance to 300,000 Kurds, and establish a contingency capability to respond quickly to
sudden population displacement due to violence or natural disasters. The sub-sector
subsequently lost $16 million, but no effect was identified in the Section 2207 Reports.
Property Claims Tribunal Decreased by $20 Million, or 66.7 Percent. The original
intent of this sub-sector was to create a process to resolve the many real property disputes
created by the Arabization campaign and other confiscatory practices of Saddam’s
29

regime. Iraq’s Governing Council planned to create a Property Claims Commission to
adjudicate the claims, and the U.S. planned to fund the establishment of offices, staffing,
and equipment for the Commission, and contribute $20 million for the compensation
fund. A compensation fund, however, was included in the revised 2004 Iraqi budget, and
the $20 million was reallocated.
Governance Was Established as a New Program . Governance is a new $40 million
sub-sector whose focus is on building the capacity of parties, and coalitions of parties, to
respond to the challenge of the first national elections of the post-Saddam era. DoS
engaged with the National Endowment on Democracy, the International Republican
Institute, and the National Democratic Institute for International Affairs to develop
programs to support democratic political parties and to support the democratic political
process leading up to the January 2005 elections and beyond.
30

Appendix L. Acronyms
CPA Coalition Provisional Authority
DoS Department of State
IRRF Iraq Relief and Reconstruction Fund
SIGIR Special Inspector General for Iraq Reconstruction
31

Appendix M. Report Distribution
Department of State
Secretary of State
Senior Advisor to the Secretary and Coordinator for Iraq
U.S. Ambassador to Iraq
Director, Iraq Reconstruction Management Office
Inspector General, Department of State
Department of Defense
Secretary of Defense
Deputy Secretary of Defense
Director, Defense Reconstruction Support Office
Under Secretary of Defense (Comptroller)/Chief Financial Officer
Deputy Chief Financial Officer
Deputy Comptroller (Program/Budget)
Inspector General, Department of Defense
Department of the Army
Assistant Secretary of the Army for Acquisition, Logistics, and Technology
Principal Deputy to the Assistant Secretary of the Army for Acquisition,
Logistics, and Technology
Deputy Assistant Secretary of the Army (Policy and Procurement)
Director, Project and Contracting Office
Commanding General, Joint Contracting Command – Iraq/Afghanistan
Assistant Secretary of the Army for Financial Management and Comptroller
Chief of Engineers and Commander, U.S. Army Corps of Engineers
Commanding General, Gulf Region Division
Auditor General of the Army
U.S. Central Command
Commanding General, Multi-National Force – Iraq
Commanding General, Multi-National Security Transition Command – Iraq
Commander, Joint Area Support Group – Central
Other Defense Organizations
Director, Defense Contract Audit Agency
32

Other Federal Government Organizations
Director, Office of Management and Budget
Comptroller General of the United States
Inspector General, Department of the Treasury
Inspector General, Department of Commerce
Inspector General, Department of Health and Human Services
Inspector General, U.S. Agency for International Development
Mission Director – Iraq, U.S. Agency for International Development
Congressional Committees and Subcommittees, Chairman and
Ranking Minority Member
U.S. Senate
Senate Committee on Appropriations
Subcommittee on Defense
Subcommittee on State, Foreign Operations and Related Programs
Senate Committee on Armed Services
Senate Committee on Foreign Relations
Subcommittee on International Operations and Terrorism
Subcommittee on Near Eastern and South Asian Affairs
Senate Committee on Homeland Security and Governmental Affairs
Subcommittee on Federal Financial Management, Government Information and
International Security
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia
U.S. House of Representatives
House Committee on Appropriations
Subcommittee on Defense
Subcommittee on Foreign Operations, Export Financing and Related Programs
Subcommittee on Science, State, Justice and Commerce and Related Agencies
House Committee on Armed Services
House Committee on Government Reform
Subcommittee on Management, Finance and Accountability
Subcommittee on National Security, Emerging Threats and International
Relations
House Committee on International Relations
Subcommittee on Middle East and Central Asia
33

Appendix N. Audit Team Members
This audit report was prepared and the audit work was conducted under the
direction of Joseph T. McDermott, the Assistant Inspector General for Auditing,
Office of the Special Inspector General for Iraq Reconstruction. The staff member
who contributed to the report:
Glenn D. Furbish
34