Order Code RL31833
Iraq: Reconstruction Assistance
Updated March 24, 2008
Curt Tarnoff
Specialist in Foreign Affairs
Foreign Affairs, Defense, and Trade Division

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Iraq: Reconstruction Assistance
Summary
A large-scale assistance program has been undertaken by the United States in
Iraq since mid-2003. To date, nearly $45 billion has been appropriated for Iraq
reconstruction. On December 26, 2007, H.R. 2764, the FY2008 Consolidated
Appropriations Act, was signed into law (P.L. 110-161). Although it specifically
rejects most regular or supplemental economic assistance to Iraq under the
State/Foreign Operations appropriations, it provides about $2.1 billion in
reconstruction assistance, mostly for the training of Iraqi security forces.
Contributions pledged by other donors at the October 2003 Madrid donor
conference and in subsequent meetings have amounted to roughly $17 billion in
grants and loans, of which at least $7 billion has been provided.
On June 28, 2004, the entity implementing assistance programs, the Coalition
Provisional Authority (CPA), dissolved, and sovereignty was returned to Iraq. U.N.
Security Council Resolution 1546 of June 8, 2004, returned control of assets held in
the Development Fund for Iraq to the government of Iraq. U.S. economic assistance
is now provided through the U.S. embassy, while security aid is chiefly managed by
the Pentagon.
A significant number of reconstruction activities on the ground are completed
or ongoing, but security concerns have slowed progress and added considerable
expense to these efforts. Reconstruction programs have included the training and
equipping of Iraqi security forces; construction of road, sanitation, electric power, oil
production, and other infrastructure; and a range of programs to offer expert advice
to the Iraqi government, establish business centers, provide school books and
vaccinations, finance village development projects, and promote civil society, etc.
Reconstruction priorities have changed over time. Allocations within the Iraq
Relief and Reconstruction Fund (IRRF), the main U.S. assistance account in the first
few years, mirrored shifting events on the ground. However, funds shifted to security
and democratization in the period from 2004 to 2006 meant fewer funds available for
electric power and water projects. At this time, most large-scale infrastructure
programs are no longer funded; however, many small-scale, targeted community-
level infrastructure efforts are funded under the Commander’s Emergency Response
Program (CERP). The key emphases of the aid program are the training of Iraqi
forces and programs assisting the development of Iraqi governing capacities and
supporting the work of the Provincial Reconstruction Teams (PRTs).
The report will be updated as events warrant. For discussion of the Iraq political
situation, see CRS Report RL31339, Iraq: Post-Saddam Governance and Security,
by Kenneth Katzman.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Funding for Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
FY2008 Regular and Emergency Appropriations and Congressional
Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
FY2009 Regular Appropriations Request . . . . . . . . . . . . . . . . . . . . . . . 6
Oil Revenue, Corruption, and the Iraqi Capital Budget . . . . . . . . . . . . . . . . . 6
Iraqi Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Iraqi Capital Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Iraqi Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Donors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Iraq Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
United Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
International Compact for Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
U.S. Assistance Policy and Program Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 13
U.S. Reconstruction Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Reconstruction Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Current Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Reconstruction Programs and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Infrastructure Sustainability and Asset Transfer . . . . . . . . . . . . . . . . . 19
Capacity Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Provincial Reconstruction Teams (PRTs) . . . . . . . . . . . . . . . . . . . . . . 21
The Role of Iraqis in Reconstruction and the DOD Plan to Re-start
State-Owned Enterprises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
CERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Accountability, Waste, and Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Assessments of Reconstruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Appendix. Criticisms of Iraq Reconstruction: 2003-2006 . . . . . . . . . . . . . . . . . . 36
List of Tables
Table 1. U.S. Assistance to Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 2. Iraq Relief and Reconstruction Fund (IRRF) . . . . . . . . . . . . . . . . . . . . 15

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Iraq: Reconstruction Assistance
Most Recent Developments
On February 4, 2008, the Administration submitted its regular FY2009 budget
request, providing $397 million for Iraq reconstruction under the foreign operations
account and, as is usually the case, making no request under the regular DOD
account. Of the requested amount, $300 million is for ESF, $75 million for INCLE
(rule of law), and $20 million for NADR (mostly demining).
On December 26, 2007, H.R. 2764, the FY2008 Consolidated Appropriations
Act, was signed into law (P.L. 110-161). Under section 699K of the State/Foreign
Operations portion (Division J), Congress specifically rejected most regular or
supplemental economic assistance to Iraq. Allocations of assistance under the
State/Foreign Operations appropriations amount to roughly $250 million, mostly to
assist refugees and displaced persons. Under the emergency Defense portion
(Division L), Congress provided $1.9 billion for the training of Iraqi security forces
and CERP military-allocated reconstruction funds. Further economic reconstruction
funding awaits consideration of a second tranche of the FY2008 emergency
appropriations, anticipated in spring 2008.
Introduction
Following years of authoritarian rule and economic sanctions, the United States
and the international community agreed in the spring of 2003 that efforts should be
made to rehabilitate economic infrastructure and introduce representative government
to post-war Iraq, among other objectives.1 To meet these ends, a large-scale
assistance program has been undertaken by the United States in Iraq. This program,
funded through a mix of appropriations accounts, is undergoing increased scrutiny
in the 110th Congress. This report describes recent developments in this assistance
effort and key issues of potential interest to Congress.2
1 U.N. Security Council Resolution 1483, May 22, 2003.
2 For detailed discussion of the Iraq political situation, see CRS Report RL31339, Iraq:
Post-Saddam Governance and Security, by Kenneth Katzman.

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Funding for Reconstruction
Several “spigots” have been available to fund Iraq reconstruction during the
period from 2003 to the present.3 U.S. foreign aid appropriations for Iraq have been
provided mostly in annual emergency supplemental bills beginning in FY2003.
International donors have also made aid contributions. Iraqi funds, largely derived
from oil export profits, have been employed to cover the “normal” operating costs
of the Iraqi government, and, when sufficient amounts are available, have been used
to address reconstruction needs. Additionally, the reduction or rescheduling of Iraqi
debt repayments has made further resources available. These sources of
reconstruction funding are discussed below.
U.S. Assistance
Over the years, U.S. assistance to Iraq has been provided through multiple
appropriations accounts (see Table 1 for funding levels). In the first several years
of the U.S. effort in Iraq, the bulk of U.S. assistance was provided through a specially
created Iraq Relief and Reconstruction Fund (IRRF), placed under the direct control
of the President, supporting aid efforts in a wide range of sectors, including water and
sanitation, electricity, oil production, training and equipping of Iraqi security forces,
education, democracy, and rule of law. The Fund, established in the April 2003
FY2003 Emergency Supplemental (P.L. 108-11, H.R. 1559/H.Rept. 108-76) and
replenished in the November 2003 FY2004 Emergency Supplemental (P.L.108-106,
H.R. 3289/H.Rept. 108-337), eventually totaled nearly $21 billion.
A new DOD account, the Iraq Security Forces Fund (ISFF), supporting the
training and equipping of Iraqi security forces, was set up under the May 2005
FY2005 emergency supplemental (P.L. 109-13, H.R. 1268/H.Rept.109-72).
Previously, most security training funds had been provided out of the IRRF. Policy
responsibility for the IRRF, originally delegated to the CPA (under DOD authority),
had, since the end of the occupation in June 2004, belonged to the State Department
as a result of a Presidential directive (NSPD 36, May 11, 2004), which, nonetheless,
continued to give DOD the main role in directing security aid. Putting funding for
security assistance entirely under DOD, however, was a sharp departure from historic
practice. Under most military assistance programs — Foreign Military Financing
(FMF) and the International Military Education and Training Program (IMET) —
State makes broad policy and DOD implements the programs. The conference report
on the supplemental adopted the President’s formula for the new account but required
3 The only formal estimate of the possible cost of Iraq reconstruction amounted to $55
billion over the four years from 2003 through 2007. This figure was the sum total of an
October 2003 World Bank and U.N. Development Group needs assessment of 14 sectors of
the Iraqi government and economy — $36 billion — combined with a $19.4 billion
Coalition Provisional Authority (CPA) projection for security, oil, and other sectors not
covered by the Bank/U.N. assessment. These amounts, calculated in mid-2003, did not take
into account the significant costs of instability and security needs that have emerged since
then. See [http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/
IRAQEXTN/0,,contentMDK:20206752~pagePK:141137~piPK:141127~theSitePK:3131
05,00.html].

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CRS-3
that the Iraq Security Forces Fund be made available “with the concurrence of the
Secretary of State.”
Another DOD account, the Commander’s Emergency Response Program
(CERP), has provided immediate reconstruction and humanitarian assistance at the
local level to support the work of U.S. military commanders. More recently, a
Business Task Force, attempting to rehabilitate state-owned enterprises to stimulate
the Iraqi economy and increase employment, has been funded out of the DOD Iraq
Freedom Fund account.
By FY2006, ESF had replaced the IRRF as the main spigot of U.S. economic
aid, provided in support of a wide variety of economic development and governance
efforts, but not funding the large-scale infrastructure programs or the security forces
training that characterized much of the IRRF. ESF, in particular, is a key component
of the so-called “surge” initiative, announced in January 2007. It largely funds the
programs implemented by the Provincial Reconstruction Teams (PRTs), such as
improvements to community infrastructure, job training, vocational education, and
micro-loans, and supports programs at the national level, including Ministerial
capacity development, agriculture and private sector reform, and strengthening of the
judicial process and democratization efforts. Under the FY2007 Supplemental, all
ESF, including previously unobligated funds, was withheld until the President
certified in reports to be submitted before July 15 and September 15, 2007, that the
government of Iraq had made progress in 18 benchmarks, including whether it
enacted the hydro-carbon law, taken specific steps toward provincial and local
elections, reformed de-Baathification laws, and begun expenditure of the promised
$10 billion Iraqi funds for reconstruction. The benchmark certification requirements
could be waived by the President. The reports were submitted as required, and the
President has released $1.7 billion in ESF through waivers issued on July 12 and
September 28, 2007.
In addition to ESF, the International Narcotics and Law Enforcement account
(INCLE) has supported “rule of law” efforts, the Democracy Fund supports a range
of democratization and civil society efforts, and the Treasury Department Technical
Assistance program offers experts on financial issues to the government of Iraq.
More recently, humanitarian refugee and displaced persons concerns have been
addressed by increased funding for the Migration and Refugee (MRA) and
International Disaster Assistance (IDA) accounts.
Most funding for Iraq reconstruction has been appropriated under emergency
supplemental appropriations legislation, because it is “off-budget” and does not
compete with other aid priorities in the regular aid bill. Efforts to “regularize” the
economic assistance program for Iraq by requesting funds in the traditional annual
foreign operations appropriations bill have met with limited success. The first such
effort, in 2005 for the FY2006 foreign operations bill (P.L. 109-102, H.R. 3057), saw
only $60.4 million (after rescission) provided of a $414 million request, because
some Members felt that sufficient funds remained unobligated in the IRRF — at the
time, $3-$5 billion — from which the Administration could draw to pay for
continuing reconstruction. Iraq programs received an allocation of only $176.3
million of an $734 million FY2007 regular foreign operations request as a
consequence of the continuing appropriations resolution (H.R. 5631/P.L. 109-289

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Division B, as amended by H.J.Res. 20, P.L. 110-5, on February 15, 2007), which
only set funding levels for major aid accounts. Congress rejected almost all of the
regular FY2008 request for Iraq (see below).
FY2008 Regular and Emergency Appropriations and Congressional
Action. On February 5, 2007, the Administration sent to Congress two budget
requests for Iraq reconstruction funding. First, it requested $391.8 million in regular
FY2008 State/Foreign Operations appropriations — mostly $298 million in ESF and
$75.8 million in INCLE. Second, the Administration issued a request for an FY2008
“Global War on Terror” emergency supplemental. The emergency request for Iraq
reconstruction, as later revised on October 22, 2007, totaled $4.9 billion, including
$797 million in ESF.
Of the ESF request, $25 million would support a new Iraq Enterprise Fund
based on the model in east Europe and the former Soviet Union. Enterprise funds are
U.S. government-funded private sector-run bodies that primarily provide loans or
equity investments to small and medium business. In the former communist
countries, they also took other steps to encourage growth of the private sector,
including support for mortgage lending markets and establishment of private equity
funds. The most successful example, the Polish Fund, made many profitable
investments, helping companies grow that otherwise were unable to obtain financial
support in the period just after the fall of communism. Some of the Funds, however,
have been much less successful, either by taking on poor investment risks, or unable
to locate promising businesses because of the poor business climate or competition
from other private sector funding sources. Some observers question the usefulness
of the funds because their ostensible development purpose seems often to conflict
with pressures for economic profit. The Administration proposed authorization
language for inclusion in the supplemental to allow the Administration to establish
the Fund.
The FY2008 emergency request also included $159 million under INCLE to
extend judicial reform and anticorruption efforts to the provinces and fund prison
construction, something that Congress has sometimes cut from previous requests.
Also requested was $195 million under the MRA account to address the continuing
refugee crisis in the region, and $80 million under the IDA account to provide
medical care, food, shelter, and other relief to refugees and displaced people.
The DOD portion of the request included $3 billion under the ISFF, $1.2 billion
in CERP funds, a request that includes Afghanistan, and $100 million under the Iraq
Freedom Fund for the Task Force to Improve Business and Stability Operations in
Iraq.
FY2008 emergency funds were also requested for operational costs (not
included in the totals above or in Table 1) for staffing and administering
reconstruction programs: $679 million for PRT and $45.8 million for USAID
operations.

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Table 1. U.S. Assistance to Iraq
(appropriations in $ millions)
Unenacted
2008
2008 Supp
2009
Fiscal Year
2003
2004
2005
2006
2007 Reg
2007 Supp Consolidated Enacted Total
(request)
(request)
Iraq Relief and Reconstruction Fund (IRRF)
2,475.0
18,439.0
—
10.0a
—
—
—
20,924.0
—
—
Economic Support Fund (ESF)
—
—
—
1,535.4
122.8
1,554.0
5.0
3,217.2
797.0
300.0
Democracy Fund
—
—
—
—
—
250.0
—
250.0
—
—
INCLE (Int’l Narcotics & Law Enforcement)
—
—
—
91.4
20.0
150.0
—
261.4
159.0
75.0
IFTA (Treasury Dept. Tech Asst.)
—
—
—
13.0
—
2.8
—
15.8
—
—
MRA (Migration & Refugee Asst.)
—
—
—
—
20.0
45.0
149.5
214.5
—
—
NADR (Nonprolif, Anti-Terror, De-mining)
—
—
3.6
—
13.2
7.0
16.0
39.8
—
20.0
IMET (Int’l Mil. Ed & Training Program )
—
1.2
—
—
1.1
—
—
2.3
—
2.0
IDA (Int’l Disaster Assistance)
—
—
—
7.9
5.0
45.0
80.0
137.9
—
—
Other USAID Funds
469.9
—
—
—
—
—
—
469.9
—
—
Total 150 Account
2,944.9
18,440.2
3.6
1,657.7
182.1
2,053.8
250.5
25,532.8
956.0
397.0
DOD - Iraq Security Forces Fund (ISFF)
—
—
5,391.0
3,007.0
1,700.0
3,842.3
1,500.0
15,440.3
1,500.0
—
DOD - Iraq Army
51.2
—
210.0b
—
—
—
—
261.2
—
—
DOD - CERP
—
140.0
718.0
708.0
375.0
350.4
370.0
2,661.4
359.7c
—
DOD - Oil Repair
802.0
—
—
—
—
—
—
802.0
—
—
DOD - Iraq Freedom Fund - Business Support
—
—
—
—
—
50.0
—
50.0
100.0
—
Total 050 Account
853.2
140.0
6,319.0
3,715.0
2,075.0
4,242.7
1,870.0
19,267.9
1,959.7
—
Total U.S. Reconstruction Assistance
3,798.1
18,580.2
6,322.6
5,372.7
2,257.1
6,296.5
2,120.5
44,800.7
2,915.7
397.0
Sources: State Department FY2009 Foreign Operations Congressional Budget Justification; SIGIR Report to Congress, January 30, 2008; and CRS calculations.
Note: The 150 account encompasses International Affairs spending and is mostly appropriated in the State/Foreign Operations bill. The 050 account is Defense appropriations.
This table does not contain agency operational costs, including CPA and State Department, except where these are embedded in the larger reconstruction accounts. The SIGIR estimates
these costs to date at an additional $3.0 billion.
a. Transfer from ESF.
b. Transfer from ISFF to reimburse Army for previous Iraqi training expenses.
c. The total unenacted FY2008 CERP request of $719.4 million is for both Iraq and Afghanistan. The amount included here assumes that at least half of the request is for Iraq.

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Both House (H.Rept. 110-197) and Senate-approved (S.Rept. 110-128) versions
of the regular FY2008 State/Foreign Operations appropriations (H.R. 2764) rejected
most economic (as opposed to security) aid to Iraq. These views were carried into
the final version of H.R. 2764, which became the vehicle for the omnibus
Consolidated Appropriations Act (P.L. 110-161, signed into law on December 26).
The Act included regular FY2008 funding as well as a first tranche of the emergency
supplemental appropriations. With a few discrete exceptions, Congress, in section
699K, specifically rejected almost all regular or supplemental economic assistance
to Iraq provided under the State/Foreign Operations part of the bill (Division J). It
approved efforts to fund humanitarian demining (drawing on regular NADR funds)
and assist refugees and internally displaced persons (drawing on supplemental MRA
and IDA funds), provided $5 million (before imposition of a .81% across-the-board
rescission) in ESF for the Marla Ruzicka War Victims Fund and $10 million (pre-
rescission) in ESF for the rescue of Iraqi scholars (the latter has not yet been
allocated).
Congress did provide a significant portion of the Administration emergency
supplemental request made for Defense appropriations. It appropriated half ($1.5
billion) of the request for the Iraq Security Forces Fund and nearly half of the total
CERP request (of which $370 million has been allocated to Iraq).
In the end, the Consolidated Appropriations Act provides about 40% of the total
$5.3 billion combined FY2008 regular and emergency request. Currently, the
Administration is seeking the remainder — about $2.0 billion — of the
unappropriated emergency Defense appropriations reconstruction request and $797
million in ESF and $159 million in INCLE of the unappropriated emergency foreign
operations request (as well as $679 million for PRT operational expenses) when a
second tranche of the FY2008 emergency supplemental is deliberated, as expected
in spring 2008. But, until then, U.S. funding for PRT operations and programs and
a wide range of other economic aid programs designed to support the surge and
enhance the capacity of the Iraqi government to address its own social needs will
have to rely on previously appropriated funds.
FY2009 Regular Appropriations Request. On February 4, 2008, the
Administration submitted its FY2009 regular appropriations request, providing $397
million for Iraq reconstruction under foreign operations and, as is usually the case,
making no request under the regular DOD appropriations. Of the requested amount,
$300 million is for ESF, $75 million for INCLE (rule of law), and $20 million for
NADR (mostly demining).
Oil Revenue, Corruption, and the Iraqi Capital Budget
Prior to the war, the Administration had expected that Iraq’s oil reserves would
help it “shoulder much of the burden for [its] own reconstruction.”4 Although they
have been insufficient in view of Iraq’s enormous needs, oil revenues have been an
important element in reconstruction funding. The May 22, 2003, U.N. Resolution
4 Press briefing by Ari Fleisher, White House, February 18, 2003; Sec. 1506 Report to
Congress, July 14, 2003, p. 4.

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1483 which ended sanctions permitted the occupying coalition to use oil reserves for
more long-term reconstruction purposes. The resolution shifted responsibility for oil
profits and their disbursal from the U.N. to the United States and its allies by
establishing a Development Fund for Iraq (DFI) held by the Central Bank of Iraq and
into which oil profits and other Iraqi assets would be deposited.5
During the occupation, DFI funds available to the CPA — $20.7 billion by June
28, 2004 — were used to support a wide range of reconstruction activities, including
the currency exchange program, oil and electricity infrastructure repair, purchase of
firefighting equipment, the Iraqi operating budget, and the Oil for Food Program’s
monthly food baskets, responsibility for which was transferred from the U.N. to the
CPA in November 2003. Under Security Council Resolution 1546, adopted on June
8, 2004, the transitional government of sovereign Iraq obtained control over use of
DFI funds, which continue to be replenished with oil revenue.
Oil production accounted for more than 94% of the Iraqi government revenue
in 2007. Recognizing the importance of oil revenue to Iraq reconstruction, more than
$2.5 billion of total U.S. reconstruction funding has been devoted to efforts to restore
and expand oil production infrastructure. Oil exporting resumed in mid-June 2003,
but oil production was slowed by sabotage and corruption. In September 2004, rates
of production reached a peak of 2.67 million barrels/day compared with an estimated
pre-war rate of 2.5 million barrels/day (MBD), but rates fell after that and for much
of the past few years has stood at around 2.0 MBD. Production has grown during
2007, and, as of mid-March 2008, stands at 2.4 MBD. The CPA target had been 2.8-
3.0 MBD by end of 2004. The Iraqi government had hoped to raise production to at
least 2.5 MBD in 2006, but goal for 2008 is 2.2 MBD.6
Payment for operating budget expenses and a variety of government social
programs has limited the amount of oil revenue left for reconstruction. Fuel and food
subsidies as well as support for state-owned enterprises have accounted for as much
as $11 billion annually. Because these practices divert funds from needed
reconstruction, Administration officials since 2003 have repeatedly pressured the
Iraqi government to face the need to address the subsidy issue. As part of its
agreement with the IMF pursuant to a debt reduction with the Paris Club, Iraq in mid-
December 2005 began to take steps to end its subsidy of gasoline, increasing the
price of fuel from 5 cents to roughly $1.06 a gallon.7 In response to rising
5 On March 20, 2003, President Bush issued an executive order confiscating non-diplomatic
Iraqi assets held in the United States, an estimated $1.74 billion worth available for
reconstruction purposes. Another $927 million in assets located by the United States in Iraq
were also used for these purposes. In addition, foreign governments were reported to hold
an estimated $3.7 billion in seized or frozen assets, of which $847 million had been
deposited in the DFI by June 28, 2004. Security Council Resolution 1511 urged member
states to deposit seized assets in the DFI.
6 Department of State, Iraq Weekly Status Report, March 19, 2008, p. 18.
7 Country Report Iraq Updater Fiscal Policy, Economist Intelligence Unit, May 15, 2007;
“Iraqi Economy Adds to Tensions with U.S.,” Financial Times, July 7, 2005; “Iraqis
Reluctant to End Love Affair with Fuel Subsidies,” Financial Times, June 13, 2005.

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commodity prices, the government of Iraq has announced that in 2008 the monthly
food rations will be halved and recipient numbers will be reduced.8
Iraqi Corruption. A further concern regarding the amount of oil income
available for reconstruction is the extent of corruption and mismanagement in the
Iraqi government. A 2006 audit of the DFI undertaken on behalf of the International
Advisory and Monitoring Board (IAMB) found that controls over export earnings
were ineffective and funds improperly accounted for by government staff. The
Comptroller General of the GAO has also suggested that there is “massive
corruption” in the Oil Ministry, and the head of Iraq’s Commission on Public
Integrity estimates that corruption has cost the government up to $18 billion. Iraq
ranks third from the bottom on Transparency International’s corruption index.9
A variety of U.S. assistance programs attempt to address the corruption issue.
Among these are provision of staff training and equipment to the Commission on
Public Integrity, the key national anti-corruption organization, similar assistance to
each Ministry Inspector General office, and most rule of law efforts that seek to
strengthen the judicial system. However, the SIGIR has found fault with
management of the Embassy anti-corruption effort — only 2 of 12 recommendations
made by the SIGIR in July 2006 had been fully implemented a year later. In a
January 2008 report, the SIGIR noted that the Embassy had taken steps to implement
all its concerns. On March 11, 2008, the U.S. Embassy announced the appointment
of Ambassador Lawrence Benedict as Coordinator for Anti-Corruption Initiatives.10
Iraqi Capital Budget. As the U.S. economic assistance program has
dwindled in size, the importance of Iraqi-owned funds available for large-scale
infrastructure has increased significantly. However, Iraqi ministries have had
difficulty spending their budget for capital projects such as roads, schools, and oil
production. According to U.S. officials, only about 23% of the 2006 capital budget
of about $6.2 billion was spent in that year, and only 3% of a $3.5 billion capital
budget available to the Oil Ministry was spent in 2006. Funds not spent in 2006 were
being utilized in 2007, delaying expenditure of 2007 capital funds. Among the
reasons offered for this situation has been a rapid turnover in personnel, security
concerns, lack of skills in contracting and managing projects, and a fear by
government employees of being accused of corrupt practices. The latter concern led
8 Department of State, Iraq Weekly Status Report, January 3, 2008, p. 10.
9 Transparency International, 2007 Global Corruption Perception Index, September 2007;
“Corruption Cited in Iraq’s Oil Industry,” Washington Post, July 17, 2006; “An Audit
Sharply Criticizes Iraq’s Bookkeeping,” New York Times, August 12, 2006; “Iraqi Judge
Says Maliki’s Government Shields Officials Accused of Corruption,” New York Times,
October 5, 2007; “Nonstop Theft and Bribery Stagger Iraq, New York Times, December 2,
2007; “Iraq Insurgency Runs on Stolen Oil Profits,” New York Times, March 16, 2008.
10 SIGIR, U.S. Anticorruption Efforts in Iraq: Sustained Management Commitment is a Key
to Success, 08-008, January 24, 2008.

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CRS-9
the Finance Minister in January 2008 to call for the abolition of the Commission on
Public Integrity, a key public watchdog group.11
Complementing the Administration’s new strategy for Iraq, the Iraqi
government approved a 2007 budget containing $10.1 billion for capital investment,
of which $2.1 billion was expected to go to provincial governments. The 2007 Iraq
budget also included $2.4 billion for investments in oil production and another $3
billion for the construction of new oil refineries to reduce oil product imports. The
Iraqi government has approved a $48.6 billion budget for 2008, $13.4 billion of
which is to be spent on capital projects.
Both U.S. Embassy and PRT assistance are partly aimed at helping ministries
and local government, respectively, to develop the capacity to efficiently utilize these
Iraqi-owned resources (See “Capacity Development” section below). According to
U.S. officials, the government of Iraq has taken significant steps in 2007 to execute
its capital budget, including formation of a senior-level task force, establishment of
new procedures such as revised procurement regulations, and additional training.
The allocation and expenditure of the Iraqi capital budget was one of the 18
benchmarks assessed under section 1314 of the FY2007 Supplemental. In September
2007, the Administration found progress on this factor to be satisfactory. It should
be noted, however, that the GAO has found the data on which the Administration
based its reports of 2007 improvements in budget execution to be subject to dispute,
and has indicated that actual expenditures may be significantly lower than reported.
The State Department disputes the GAO view. Nonetheless, there appears to be
confusion in the presentation and definition of data by various agencies.12 According
to a March 2008 DOD report to Congress, only 55% (page vi) of the total capital
budget had been “executed” as of November 2007, although this was “more than
double” the 2006 rate. The same report (page 9) notes that 45% was “spent” through
October 2007. The January 2008 SIGIR report quotes U.S. Treasury figures showing
that 15% had been “spent” by end of August 2007.
Focusing solely on Iraqi ministry spending, which presumably is easier to
capture than data from provincial governments, does not resolve the issue. The
March 2008 DOD report indicates that ministries had “executed” 47% of their capital
budgets through October 2007; the White House benchmark report issued in
September 2007 puts expenditures at 24% as of July 15, 2007. The GAO, however,
quotes Iraq’s official expenditure reports showing 4.4% as of August 2007. With
regard to provincial capital spending, the March 2008 DOD report notes that non-
Kurdish provinces had spent about 18% of their resources through September 2008.
Why the March DOD report has been unable to capture more recent expenditure data
11 “Oil Revenues are in the Billions, but Iraq is Failing to Spend Them,” New York Times;
and SIGIR, Report to Congress, July 30, 2007, p. 5; “Iraqi Finance Minister Warns of
Iranian-U.S. Escalation,” Al-Hayat in BBC Monitoring Int’l Reports, January 23, 2008.
12 None of the quoted documents fully explain: What is the difference between execution
vs. expenditure? What is the appropriate proportion of capital expenditures one should
expect from a government? Does expenditure in the Iraqi government case mean contract
obligation or cash disbursement (the latter of which would likely take longer)?

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CRS-10
is not explained. In any event, despite possible improvements from the previous
year, available information suggests that it is unlikely that Iraqi central ministries and
provincial governments had spent all of their 2007 budgets by the end of that year.13
Iraqi Debt
At the time of the invasion, Iraq’s debt, both public and private, was estimated
at $125 billion.14 Since then, the United States has argued that any new Iraqi
government should not be burdened with debts associated with the policies of its
previous ruler and has supported a near total forgiveness of debt. Some large holders
of Iraqi debt — France, Germany, and Russia for instance — were more inclined to
reschedule debt than to forgive it, arguing that, as an oil rich country, Iraq could
afford someday to pay its debts.15
Several steps led to a partial resolution of the debt issue. A series of meetings
in early 2004 between the President’s personal envoy for Iraq debt reduction, former
Secretary of State James Baker III, and the leaders of debt-holding countries led to
statements of support, but no firm commitment, for varying levels of relief. By
September 2004, Iraq had both assumed sovereignty and cleared its overdue financial
obligations to the IMF, making it easier for Iraq to negotiate an agreement with
private and government creditors. Further, Congress authorized $360 million (P.L.
108-309) to cover the costs of cancelling the roughly $4 billion Iraqi debt obligation
owed the United States. These factors culminated in an agreement by the 19 Paris
Club government creditors on November 20, 2004, to write off roughly $32 billion
in Iraqi debt, 80% of what it owed to this group. Recently, the Russian government
threatened to cancel its $13 billion cancellation commitment under the deal if Iraq
rescinds an oil contract with a Russian company made under the Hussein regime.16
In addition to Paris Club creditors, Iraq has borne about $69 billion in other
bilateral debt (mostly to Gulf States countries) and more than $21 billion in
commercial debt. Of the latter, most claims have been resolved. In May 2007, four
nations offered to forgive nearly $21 billion of Iraqi bilateral debt as part of their
participation in the International Compact with Iraq. However, negotiations with
13 GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq’s Budget Execution,
January 2008, GAO-08-153; Department of Defense, Measuring Stability and Security in
Iraq, December 2007 Report to Congress, p. 8, March 2008 Report to Congress, p. vi, 9;
White House, Benchmark Assessment Report, September 14, 2007, p. 27; “State Dept.
Official Disputes Iraq Report,” Washington Post, January 17, 2008.
14 Based on Paris Club data. Does not include $29 billion in unpaid Gulf War reparations.
International Monetary Fund, Iraq: Use of Fund Resources — Request for Emergency Post-
Conflict Assistance, September 24, 2004.
15 “G-7 Agrees That Iraq Needs Help with Debt,” Washington Post, April 13, 2003;
“Restructuring, Not Forgiveness,” Financial Times, April 15, 2003.
16 “Iraq, with U.S. Support, Voids a Russian Oil Contract,” New York Times, November 4,
2007.

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CRS-11
Saudi Arabia to forgive 80% of Iraq’s estimated $15 billion debt reportedly broke
down in September.17
Other Donors
To date, more than 40 non-U.S. donors have offered more than $17.0 billion in
economic reconstruction funds to Iraq.18 Of this reconstruction assistance, grant aid
promised by other donors totals about $7.2 billion. These include $1.6 billion by
Japan, $832 million by the United Kingdom, $214 million by Spain, $920 million by
the European Commission, $200 million by South Korea, and $350 million by Italy.
Much of the grant assistance has been provided as a contribution to the IRFFI (see
below). Of the nearly $10 billion offered in loans, about $3.2 billion have been
provided, including by Japan ($2.1 billion), the World Bank ($399 million), and the
IMF ($744 million).
Japan and Britain have been notably active in providing bilateral assistance.
Japan, the second largest donor after the United States, has already spent most of the
grant aid it pledged and has developed projects for use of $2.1 billion of a $3.5
billion concessional loan pledge. Among other things, it has provided significant
funding for electrical power station rehabilitation, water treatment units and tankers,
medical equipment, and firetrucks and police vehicles. The loan is funding port and
power plant rehabilitation and irrigation improvements. Britain has offered
considerable technical assistance and related support for improvements in the justice
system, governance, and economic policy.
Among multilateral contributions, the IMF provided an Emergency Post-conflict
Assistance package in 2004 and continues to offer a roughly $744 million Standby
Arrangement on which Iraq can draw, but has yet to do so. The World Bank has
allocated $399 million of a $500 million concessional loan program, including a
$100 million education project, $135 million road project, and $124 million electric
power project.19
Iraq Trust Fund. During much of the U.S. occupation, donors had been
reluctant to contribute to reconstruction because they had no say in where the funds
17 Department of Defense, Measuring Stability and Security in Iraq, December 2007, p. 9;
SIGIR, Report to Congress, July 30, 2007, p. 134. See CRS Report RL33376, Iraq’s Debt
Relief: Procedure and Potential Implications for International Debt Relief, by Martin A.
Weiss, for further details.
18 State Department calculation in 2207 Report, Appendix II, January 2008. Most of these
pledges were made at the Madrid Donor Conference held in October 2003. In addition,
immediately following the U.S. intervention in Iraq, U.N. appeals for postwar humanitarian
relief to Iraq met with $849 million in grant donations from non-U.S. donors. U.N. Office
for the Coordination of Humanitarian Affairs, Total Humanitarian Assistance for Iraq
Crisis 2003. April 5, 2004.
19 IMF, Iraq Financial Position in Fund as of September 30, 2007, [http://www.imf.org];
World Bank, World Bank Operations in Iraq, as of September 30, 2007.

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CRS-12
were to be allocated.20 To deal with this concern, a multi-donor trust fund, the
International Reconstruction Fund Facility for Iraq (IRFFI), was established on
December 11, 2003. The Facility has two windows, one run by the Bank (the World
Bank Iraq Trust Fund) and one by the United Nations (UNDG Iraq Trust Fund). As
of November 2007, donors had deposited about $1.8 billion in the Facility. Among
other activities, the World Bank Fund ($467 million committed) has financed
textbooks, school rehabilitation, and water and sanitation infrastructure, and has
provided hundreds of Iraqi civil servants with management training. The UNDG
Fund ($1.3 billion committed) is supporting a wide range of projects, most to be
implemented by the Iraqi government.21
United Nations. Despite the devastating bombing of its Baghdad compound
in 2003, the U.N. has played a major role in Iraq reconstruction. The U.N has been
largely responsible for providing assistance and guidance to promote the
democratization of Iraq, including support to the transitional government and the
Iraqi Electoral Commission. U.N. envoy Lakhdar Brahimi helped negotiate the
transition to sovereignty, and a U.N. team headed by Carina Perelli assisted the
implementation of elections for the National Assembly, successfully held on January
30, 2005. With U.N. assistance the electoral law was drafted, thousands of registrars
were trained, 540 registration centers were set up around the country, millions of
ballots were printed, 5,300 voting centers established, and thousands of poll watchers
trained. Subsequently, the U.N. helped with the constitution-writing process, the
constitutional referendum, and the December 2005 parliamentary election. The U.N.
is expected to assist in organizing provincial elections scheduled for autumn 2008.
With Trust Fund support, the development organizations within the United Nations
are actively working on dozens of projects. U.N. Security Council Resolution 1770,
approved August 10, 2007, extended the U.N. Mission for Iraq (UNAMI) another
year and called on the U.N. to expand its role in assisting Iraq. The number of U.N.
international staff in Iraq itself has grown significantly in the past year; in December
2007 there were 250-300, as well as about 500-600 local staff.22
International Compact for Iraq. In response to a continuing U.S. effort to
encourage greater levels of donor contributions, the U.N. and Iraq, on July 27, 2006,
launched an International Compact with Iraq. Under this initiative, participating
donor countries have pledged funds and, in return, Iraq has promised a five-year
program of specific reforms and actions leading to long-term economic and political
development. The Compact was finalized at a donor meeting held in Egypt on May
3, 2007, attended by more than 60 countries. Roughly $700 million in grant and
loans commitments (included in the above donor totals) and $21 billion in debt relief
are estimated to be associated with the Compact, not counting a $10.7 billion pledge
20 “U.S. Seeks Help With Iraq Costs, But Donors Want a Larger Say,” New York Times, July
14, 2003; “Bush’s Plea for Iraq Aid Falls on Deaf Ears,” Financial Times, September 25,
2003.
21 IRFFI website, [http://www.irffi.org].
22 “Security Council Approves a Broader U.N. Mandate in Iraq to Seek Reconciliation,” New
York Times, August 11, 2007; “New U.N. Envoy in Iraq Sets Out Strategy to Revive Hopes
Crushed in 2003 Attack,” New York Times, December 3, 2007; “U.N. to Help Organize Iraqi
Elections Set for October,” New York Times, February 15, 2008.

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CRS-13
from the United States that was requested in the FY2007 Supplemental, FY2008
regular, and FY2008 Emergency budget proposals made in February 2007.23
U.S. Assistance Policy and Program Structure
On June 28, 2004, the Coalition Provisional Authority (CPA), the agency
established to temporarily rule Iraq and implement reconstruction programs, was
dissolved as Iraq regained its sovereignty. At that time, broad responsibility for
assistance programs moved from the Secretary of Defense to the Secretary of State.24
At the Department of State, the Senior Advisor and Coordinator for Iraq is David
Satterfield. In Iraq, the United States provides assistance and, to the extent possible,
policy guidance to the Iraqi government through its U.S. embassy. Ryan Crocker is
the Ambassador. The embassy employs about 1,000 U.S. direct hire staff.
On May 15, 2007, President Bush chose Lieutenant General Douglas Lute to
serve as his so-called “war czar” in the capacity of Assistant to the President and
Deputy National Security Advisor. He is expected to coordinate and manage the
implementation of the new strategy in Iraq, including assistance program activities.
By executive order (13431), on May 15, 2007, an Iraq Transition Assistance
Office (ITAO) was established in the embassy, supplanting some of the functions of
the Iraq Reconstruction Management Office (IRMO) that had, itself, supplanted CPA
efforts in setting requirements and priorities for the aid program. The Embassy’s
Office of Provincial Affairs is in charge of the PRTs.
The Project and Contracting Office (PCO), formerly the CPA’s Program
Management Office (PMO), is run by the Army Corps of Engineers, Gulf Region
Division (GRD), headed by Brig. Gen. Jeffrey J. Dorko.25 The GRD-PCO has been
chiefly responsible for the more than $10 billion in FY2004-funded IRRF programs
dedicated to infrastructure construction, as well as follow-on sustainability efforts.
The GRD/PCO coordinates, manages and monitors contracting and expenditures in
six sectors — transport and communications; electricity; buildings/health;
security/justice; public works/water resources; and oil. Although in the Department
of the Army, it reports to the Department of State as well as to the Department of the
Defense.
Overall responsibility for management of U.S. military activity in Iraq belongs
to Gen. David H. Petraeus, commander of the multinational forces in Iraq. He also
serves as principal military adviser to the U.S. ambassador. Utilizing the roughly $5
23 Ambassador David Satterfield, Department of State briefing on April 30, 2007; SIGIR,
Report to Congress, July 30, 2007, p. 131.
24 According to National Security Presidential Directive (NSPD) of May 11, 2004. It made
the Secretary of State responsible for “continuous supervision and general direction of all
assistance for Iraq.”
25 The PCO and IRMO were established by the May 11, 2004 NSPD. See GRD-PCO website
at [http://www.rebuilding-iraq.net].

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CRS-14
billion in IRRF funds and nearly $16 billion of ISFF funds, with the policy guidance
of the Ambassador, Lt. General James Dubik is the officer immediately in charge of
overseeing the training and support of all Iraqi security forces. Although the State
Department had assumed control of technical assistance provided to the different Iraq
ministries, in October 2005 it ceded responsibility to DOD for the two ministries
most closely involved in security matters — Interior and Defense. Among reasons
given for this switch are that DOD has greater resources at its disposal and that State
has had difficulty filling advisor positions in these ministries, the latter point disputed
by some. In most other countries, State has responsibility for training police forces.26
A third major U.S. actor in the implementation of the aid program is the U.S.
Agency for International Development (USAID). Responsible for more than $5.2
billion of assistance to date, USAID manages a wide range of economic, social, and
political development programs. Its programs have included a multi-faceted, large-
scale construction project and most activities related to public health, agricultural
development, basic and higher education, civil society, local governance,
democratization, and policy reform.
The post of CPA Inspector General, created under the FY2004 Emergency
Supplemental legislation (P.L. 108-106), was redesignated the Special Inspector
General for Iraq Reconstruction (SIGIR) by the FY2005 DOD Authorization (P.L.
108-375). Special Inspector General Stuart Bowen, Jr., reports to both the Secretary
of Defense and State. The SIGIR office has about 60 employees examining a range
of issues, including the extent and use of competition in contracting; efficient and
effective contract management practices; and charges of criminal misconduct. The
SIGIR issued his first report to Congress regarding his audits and investigations on
March 30, 2004, and has reported quarterly since then.27
The SIGIR’s scope of authority originally encompassed only the IRRF, although
the SIGIR has responded to specific congressional and executive branch requests to
audit other account programs. The FY2007 Defense Authorization made all FY2006
reconstruction appropriations, regardless of account, subject to SIGIR jurisdiction as
though they were under the IRRF. Both House and Senate committee reports on the
FY2007 supplemental appropriations indicated they expected SIGIR authority to
include FY2007 reconstruction funding irrespective of funding account, but they did
not address the issue with legislation. The FY2008 Defense Authorization (H.R.
4986, P.L. 110-181), signed into law on January 28, 2008, broadens the authority of
the SIGIR to include all reconstruction programs from all accounts and all years.
U.S. Reconstruction Assistance
Among the key policy objectives laid out by the Bush Administration is the
economic and political reconstruction of Iraq. Discussion and debate have been
26 “Aid to Iraq Ministries to Shift to Pentagon,” Washington Post, September 26, 2005.
27 See [http://www.sigir.mil/] for reports and audits.

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CRS-15
ongoing regarding the strategy to reach these ends utilizing reconstruction aid funds
and the effectiveness of aid implementation.
Table 2. Iraq Relief and Reconstruction Fund (IRRF)
($ millions)
Current
Obligations as of
Sector
allocation
March 19, 2008
Expend.
FY2004 Supplemental (P.L. 108-106)
Security and Law Enforcement
4,978
4,955
4,866
Justice and Democracy
2,264
2,237
2,153
Electricity
4,196
4,048
3,781
Oil Infrastructure
1,723
1,597
1,569
Water and Sanitation
2,067
1,944
1,782
Transport and Telecommunications
462
449
407
Roads, Bridges, Construction
327
317
247
Health
812
776
725
Private Sector
821
821
811
Education, Refugees, Governance
436
423
395
Administrative Expenses
213
210
210
Total FY2004 Supplemental
18,299
17,776
16,946
FY2003 Supplemental (P.L. 108-11)
2,475
2,232
2,139
Total IRRF
20,774
20,012
19,085
Sources: Department of State, Iraq Weekly Status Report, March 19, 2008.
Reconstruction Priorities
Reconstruction priorities have changed over time. Allocations within the Iraq
Relief and Reconstruction Fund (IRRF), the main U.S. assistance account in the first
few years, mirrored shifting events on the ground. For example, in November 2003,
when the CPA decided to accelerate the hand-over of sovereignty, it immediately
revised the allocation of FY2004 IRRF appropriations that had been legislatively
mandated only weeks previously in order to increase substantially the
democratization effort — from $100 million to $458 million. After the State
Department took charge in June 2004, the new U.S. Embassy country team
reallocated FY2004 IRRF resources, emphasizing security needs, increased oil
production, greater employment, and democracy as the highest priorities, at the
expense of many large-scale economic infrastructure projects — in particular water
and sanitation and electricity — that were viewed as too slow and dependent on an
improved security situation to have an immediate impact. Although these and later
reallocations were pragmatic responses to new events on the ground, their cumulative
impact was to divert funds from previously planned programs. As a result, water and
sanitation projects were cut by half (from $4.3 billion to $2.1 billion), and electric
power programs lost a quarter of their original funding (from $5.6 to $4.2 billion).
Current Priorities. As of the end of September 2006, IRRF funds were no
longer available for obligation, and the large-scale infrastructure programs which

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CRS-16
chiefly characterized IRRF efforts are no longer funded by the United States
(although targeted neighborhood-oriented infrastructure projects and sustainment of
completed projects continue).28 The major elements of current assistance are as
follows:
! Military-Security Assistance. Almost two-thirds of total FY2007
military and security assistance regular and supplemental
reconstruction appropriations and 71% of FY2008 funds are applied
to the training and equipping of Iraqi security forces. This effort is
funded entirely from the ISFF.
Economic-social-democratization assistance is funded mostly with Economic
Support Fund (ESF) assistance, categorized under three “tracks”:
! Security Track. Under the security track are assistance programs
most closely associated with the Administration’s new strategy for
Iraq, largely programs supporting work of the Provincial
Reconstruction Teams (PRTs). There are 31 PRTs, including 13
embedded with combat battalions (ePRTs) in strategic locations.
These work with Iraqi local leaders to identify economic and
political development projects that can be implemented with U.S.
financing (see PRT section below for details).
! Economic Track. This track encompasses assistance to help Iraqis
operate, maintain, and sustain U.S.-funded infrastructure projects
(see sustainability section below for discussion).
! Political Track. Under the political track are a range of efforts to
support governance, democratization, and rule of law programs at all
levels of government in Iraq, including helping Iraqi ministries
improve their ability to operate and helping local governments
administer their provinces and municipalities.
Finally, there has been increasing attention paid to humanitarian needs.
! Humanitarian Aid. The Migration and Refugee Assistance (MRA)
and International Disaster Assistance (IDA) accounts address the
problems of a refugee and internally displaced persons population
amounting to more than 4.4 million.
Security, sustainability, PRTs, governance, and humanitarian needs constituted the
key features of the Administration budget reconstruction aid requests for FY2008.
28 According to the SIGIR, most of the “unobligated” FY2003 IRRF funds were used to
reimburse the Department of State for reconstruction costs incurred prior to the
appropriation. SIGIR, Report to Congress, October 31, 2007, p. 61. According to the
Department of State, $402 million of the remaining “un-obligated” FY2004 IRRF funds are
considered “expired” and can only be used for claims and adjustments related to existing
IRRF-funded contracts. 2207 Report to Congress, October 2007, p. 1.

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CRS-17
However, of these, Congress funded only the security and humanitarian aspects in
FY2008.
Reconstruction Programs and Issues
Status. Reconstruction programs have shown mixed results to date. There are
many positive outputs, such as schools rehabilitated, vaccinations provided, and so
on. However, in the critical sectors of electric power and oil production, outputs
have been less than originally envisioned. (In the past eight months, there have been
noteworthy improvements in both of these sectors.) Moreover, the impact of U.S.
projects on Iraq is hard to estimate, and the extent to which they and other-donor
contributions meet the total needs of Iraq has not been fully assessed. Although
mismanagement and corruption play a large role in diminishing returns from
reconstruction efforts, it has been the lack of stability and the effects of the
insurgency that have most affected the course of reconstruction to date.
A brief review of assistance sectors:29
! Security and Justice. More than 1,200 facilities — police stations,
border forts, fire stations, courts, etc. — have been completed.
About 444,502 police and military security forces have been trained
and equipped. Security responsibility for 9 of the 18 provinces has
now been transferred to Iraqi military control. However, sectarian
divisions, inadequate logistics capabilities, and insufficient numbers
of Iraqi officers and other problems keep the Iraqi Army and the
Ministries of Defense and Interior dependent on U.S. support. The
police are a particular concern; the September 2007 Independent
Commission report recommended that the National Police force be
eliminated and reconstituted. U.S. assistance is providing salaries
for the tribal Awakening movement’s so-called Sons of Iraq
(formerly Concerned Local Citizens) volunteer security force.30
! Healthcare. The focus of this sector, mostly funded from the IRRF,
has been to rehabilitate and equip facilities, train health care
providers, and provide medical services such as immunizations.
Nonetheless, according to a July 2007 Oxfam International report,
90 percent of Iraq’s 180 hospitals lack basic medical and surgical
supplies. Many construction projects experienced considerable
delays, and contracts won by U.S. firms had to be revoked and re-
awarded to Iraqis, including 12 of 20 refurbished hospitals. Only 91
of a planned 142 new clinics will be completed with U.S. funding.
Further, the Basrah Children’s Hospital has had significant cost
29 SIGIR, Report to Congress, January 30, 2008, pp. 14-132; Department of State, 2207
Report to Congress, January 2008; Department of State, Iraq Weekly Status Report, March
19, 2008.
30 General James Jones, et al., The Report of the Independent Commission on Security
Forces in Iraq, September 6, 2007, [http://www.csis.org/isf/], SIGIR; Report to Congress,
January 30, 2008, 25-33; DOD, Measuring Stability and Security in Iraq, March 2008, p. 17.

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CRS-18
overruns. A new Amara surgical hospital is being funded with ESF
funds. The ability to open new facilities has been hindered by the
lack of doctors; since 2003, the number of doctors has fallen from
24,000 to 14,000.31
! Transportation. Key results in this sector are the restoration of the
deepwater port at Umm Qasr, and repairs on 96 of 98 railway
stations, as well as two international and three regional airports.
Although the airports and seaport have shown considerable activity,
only a tiny percentage of Iraqi trains run because of security
concerns. The SIGIR notes that road repairs, mostly village roads,
are only targeting a very small percentage of total road and bridge
work required (for example, only 8 repaired bridges of 1,156 in poor
condition or destroyed) and have been delayed by security problems.
! Democracy. Local governance has been strengthened through
establishment of councils and community associations. More than
6,000 grassroots projects have been conducted through USAID
grants provided to more than 1,450 community action groups. Voter
education, training of election monitors, and related activities
contributed to three successful elections in 2005. Technical experts
provide advice to government agencies regarding adoption of
possible budgetary and management reforms. Halting progress has
been made on achieving national reconciliation, including amending
the Iraqi constitution, and holding long-promised local elections.
! Education, Agriculture and Private Sector Development. About
6,716 schools have been rehabilitated and 60,000 teachers trained.
Irrigation systems were rehabilitated, 68 veterinary clinics
reconstructed, and 83,500 date palm offshoots planted. Agricultural
extension agents are being trained and agribusiness supported. Bank
credit officers have been trained, and credit is provided to micro and
small business. Efforts to reinvigorate state-owned factories have
met with limited success to date (see discussion below).
! Refugees and IDPs. Of the 4.6 million Iraqis who have fled their
homes due to sectarian violence, roughly half are refugees in other
countries and half are internally displaced people (IDPs). Most U.S.
assistance in this sector is channeled through the U.N. High
Commission for Refugees (UNHCR), the International Red Cross,
and other agencies. More than $500 million has been allocated to
date.32
31 Oxfam International, Rising to the Humanitarian Challenge in Iraq, July 30, 2007, p. 11;
SIGIR, Report to Congress, October 30, 2007, pp. 127-128.
32 For details, see CRS Report RL33936, Iraqi Refugees and Internally Displaced Persons:
A Deepening Humanitarian Crisis? by Rhoda Margesson, Andorra Bruno, and Jeremy
Sharp.

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CRS-19
! Electricity. U.S.-funded projects have added 2,120 megawatts
(MW) to Iraq’s generating capacity. Before the war, electric power
was 4,500 MW and, until recently, capacity fell well below this level
despite an early goal of reaching 6,000 MW. However, by the third
quarter of 2007, it had increased to around 4,550 MW, a post-war
record. The most recent figures show a decline from that high to
4,121 MW. In Baghdad, Iraqis receive fewer hours of electricity
than before the war (averaging about 8 hours in late January);
elsewhere they receive more than previously (about 11 hours). In
addition to the impact of insurgent activity, other challenges to the
growth of electrical power are the rising demand for electricity, a
lack of centralized monitoring and control systems, poorly
maintained infrastructure, and a shortage of fuels to operate power
plants. The GAO estimates that an infrastructure investment of $27
billion is required to meet demand.33
! Oil and Gas. Although the original U.S. goal was 2.8-3.0 MBD by
end of 2004, oil and gas production remained stagnant and well
below the pre-war level of 2.5 million barrels/day for some years.
Production held steady during most of the past year at around 2.0
MBD. However, by late October 2007 the level had risen to 2.4
MBD, where, with occasional lapses, it remains. According to the
SIGIR, poor infrastructure, corruption, and difficulty maintaining
and operating U.S.-funded projects join the destruction caused by the
insurgency as major challenges. As the IRRF projects end, only
relatively small-scale CERP activities in this sector are active.
! Water and Sanitation. Water and sanitation sector assistance has
provided clean water to 6.7 million people and sanitation to 5.1
million. However, according to the aforementioned Oxfam report,
the number of Iraqis without access to clean water has risen since
2003 from 50 percent to 70 percent and 80 percent lack sanitation.
CERP funds now play the main role in U.S. water assistance.34
Infrastructure Sustainability and Asset Transfer. A s
l a r ge - s ca l e
construction projects — power plants, water and sanitation systems, oil facilities, etc.
— have been completed, there has been concern regarding the ability of Iraqis to
maintain and fund their operations once they are handed-over to Iraqi authorities.
This concern has grown following SIGIR “sustainment reviews” that suggested
projects transferred to Iraqi control are not being adequately maintained. For
instance, a July 2007 assessment found that two Baghdad region power station units
33 Glenn Zorpette, “Keeping Iraq in the Dark, New York Times, March 11, 2008; “”Iraq Far
From U.S. Goals for Energy,” Washington Post, September 2, 2007.
34 Ibid., Oxfam, p. 3.

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that had been rehabilitated with U.S. funds were not operational, largely because of
insufficiently maintained equipment.35
To insure long-term sustainability, the U.S. effort — the so-called “economic
track” now led by the Army Corps of Engineers — has focused on capacity
development — providing training to the appropriate personnel in the labor force
who will operate and maintain facilities and insuring sufficient funds are available
for repairs and equipment replacement following project completion. At the Ministry
level, the ITAO (formerly IRMO) is assisting development of policies and laws
conducive to efficient use and maintenance of infrastructure.
In addition, the United States is providing significant assistance to support the
physical protection of important infrastructure, in particular electricity and oil
facilities. Efforts to secure infrastructure include the use of biometrics, construction
of security perimeters, lighting and communications improvements, establishment
of exclusion zones for pipelines, and enhancements to the forward operating bases
used by the Iraqi army to protect infrastructure.36
The long-term responsibility for sustainability, however, lies with the Iraqi
government. The IRMO once estimated that it would cost about $1.2 billion annually
to operate and maintain U.S.-sponsored projects.37 Whether the Iraqi government can
shoulder the burden of additional costs will likely depend on the level of resources
it is able to draw on from oil profits and international donors.
Although a “principal objective” of the U.S. infrastructure construction program
has always been the “swift transition of the reconstruction effort to Iraqi management
and control,” the SIGIR found in July 2007 that the Iraqi government had not
accepted any U.S. project transfers since July 2006. As of May 31, 2007, 2,363
projects valued at $5.3 billion awaited transfer. According to the SIGIR, the U.S.
government in some cases has continued to fund maintenance of projects pending
acceptance by Iraq.38
Capacity Development. Much effort and assistance has gone into improving
the capabilities of government ministries, including equipping and training personnel
at all levels of service, and situating U.S. advisers in every ministry. Ministry
officials and staff, however, remain deficient in knowledge of modern administrative
systems and management practices. The current focus is on improving budget
execution and service delivery, considered by many to be essential elements of an
35 SIGIR, Report to Congress, April 30, 2007, p. 147; SIGIR, Report to Congress, July 30,
2007, p. 7; SIGIR, Project Assessment 07-103, Doura Power Station Units 5 and 6, July 18,
2007.
36 State Department, 2207 Report to Congress, January 2008, p. III6-9.
37 SIGIR, Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi
Government, Audit 06-017, July 2006.
38 Iraq Reconstruction Pre-Proposal Conference Briefing Slide Show, DOD, January 21,
2004; SIGIR, Transferring Iraq Relief and Reconstruction Fund Capital Projects to the
Government of Iraq, Audit 07-004, July 25, 2007.

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CRS-21
effective Iraqi government. As noted earlier, both the national Government of Iraq
and provincial governments have had difficulty implementing capital budgets. U.S.
programs, including institution of 18 Provincial Procurement Assistance Teams,
several Procurement Assistance Centers (two in Baghdad and one in Erbil), and a
range of training programs in public administration, appear to have led to
improvement over the previous year’s performance in this regard, although the extent
of that improvement has been subject to some dispute (see “Oil Revenue and Iraqi
Capital Budget” section).39
In the past two years, the SIGIR has highlighted problems with U.S.
implementation and coordination of capacity development programs, pointing out
that, as there is no single organization responsible for the reconstruction effort, the
capacity building program has gone without an integrated plan providing
coordination and priorities to the multiple organizations responsible for it, points
reiterated in an October 2007 GAO report on the effort. Perhaps responding to the
SIGIR’s concerns, in early 2007, the newly appointed Coordinator for Economic
Transition began leading an Embassy Budget Execution Initiative. This initiative
encompasses an interagency task force to coordinate U.S. activities, including those
of USAID and the U.S. senior consultants assigned to each ministry. The GAO
report suggests that this and parallel efforts have not yet resolved coordination issues
and that only now are U.S. officials beginning to develop a capacity development
strategy.40
Provincial Reconstruction Teams (PRTs). In an effort to expand
outreach to the provinces and strengthen local government, the U.S. Embassy, in
mid-2005, began establishing Provincial Reconstruction Teams (PRTs). There are
now three types of PRTs in Iraq, 31 in all. In each case, the military provides
protection to U.S. civilian officials and development specialists, allowing them
access to parts of Iraq that otherwise would not be possible. The PRTs are now a
major purveyor of U.S. reconstruction aid — responsible for over $1 billion in
FY2006 and FY2007 ESF funds — and a key element in the President’s new strategy
for Iraq.
The first PRTs were made up of Embassy, PCO, USAID, military, and other
U.S. agency staff, between 35 and 100 members in each, with the State Department
as leader. There are currently 11 of these PRTs. Prior to the new Iraq strategy
announced in January 2007, 10 of these PRTs had been established in Kirkuk,
Ninewa (Mosul), and Babil (Hillah), as well as in Baghdad, Anbar, Diyala, Salah-ad-
Din, Basrah, Nasiriyah, and Irbil (for all of Kurdistan). The latter three PRTs are
British, Italian, and South Korean-led, respectively.41 In addition to the PRTs, there
39 GAO, Better Data Needed to Assess Iraq’s Budget Execution, 08-153, January 2008, p.
15-19.
40 SIGIR, Status of Ministerial Capacity Development in Iraq, Audit 06-045, January 30,
2007; SIGIR, Report to Congress, July 30, 2007, pp. 61-66; SIGIR, Report to Congress,
October 31, 2007, pp. 101-105; GAO, U.S. Ministry Capacity Development Efforts Need an
Overall Integrated Strategy to Guide Efforts and Manage Risk, GAO-08-117, October 2007.
41 SIGIR, Review of the Effectiveness of the Provincial Reconstruction Team Program in
(continued...)

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CRS-22
have been seven Provincial Support Teams (PSTs), much smaller teams that reside
on a military forward operating base and provide advice to provincial officials as
needed.42
The third type of PRT — called ePRTs — are structured differently than their
predecessors. They are embedded in Brigade Combat Teams with the Brigade
Commander acting as leader. Most have 8 to 12 personnel. They were created as
part of the January 2007 surge strategy, which also saw an increase in U.S. forces.
In essence, the strategy envisions that, as U.S. and Iraqi military forces work to clear
and hold an area, ePRT staff will work with local Iraqis to further stabilize the area
by drawing on all available spigots of U.S. and Iraqi government funding to create
jobs and meet other basic needs. They play a major role in reconciling tribal,
municipal, district, and provincial government entities. Of the 13 ePRTs — nine are
in Baghdad, three in Anbar, one in northern Babylon, one in southern Diyala, and one
is in Wasit province.43
While the new ePRTs are more focused on establishing stability, the regular
PRTs emphasize improvement of local governance. They work together with local
community and Iraqi government representatives — forming Provincial
Reconstruction Development Councils (PRDCs) — to identify projects that can be
implemented and carried out with U.S. financing. It is anticipated that, as a result of
this collaboration, local governments may be strengthened while U.S. projects
achieve more lasting support. The PRTs also work closely with provincial
governments to strengthen their capacities and enable them to better interact with the
central government as well as to more effectively utilize the Iraqi government funds
that have been allocated to each province.44
At the disposal of all PRTs is a tool-box of projects that can be implemented at
the grass-roots level. PRDC-identified projects tend to be focused on infrastructure
— road and bridges, water and sanitation, schools, and health clinics — and usually
are finished in one year. Although the Embassy must approve them, PRDC projects
generally are implemented by the Army Corps of Engineers. In August 2007, a new
Quick Response Fund (QRF) that mimics the flexibility of the CERP in funding local
community projects was made available to the PRTs. They support local
government, NGOs, and small businesses. In addition to economic projects directly
handled by the PRTs, USAID runs several programs, often in conjunction with the
PRTs. The Community Action Program (CAP) funds projects identified by local
representative associations, stimulating democratic participation, while meeting local
needs and creating short-term employment. The Community Stabilization Program
41 (...continued)
Iraq, 07-015, October 18, 2007; Department of State, 2207 Report to Congress, October
2006, p. 5. “Military to Protect U.S. Aid Teams in Iraq,” Washington Post, April 14, 2006.
42 The PSTs are either being converted to PRTs or blended into existing PRTs.
43 SIGIR, Report to Congress, July 30, 2007, pp. 53-60; SIGIR, Status of the Provincial
Reconstruction Team Program Expansion in Iraq, Audit 07-014, July 25, 2007.
44 Robert Perito, Embedded Provincial Reconstruction Teams, U.S. Institute of Peace
Briefing.

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CRS-23
(CSP) addresses economic needs in specific strategic cities, providing youth
programs, micro and small enterprise support, and vocational training. The Local
Governance Program (LGP) helps build management and knowledge skills of
provincial government personnel. Complementing the work of the PRTs and
USAID, although apparently provided independently, funding from the
Commander’s Emergency Response Program (CERP) is also available to pacify the
local population where PRTs reside. A large proportion of CERP projects support
local, small-scale infrastructure construction, especially in the water and sanitation
and electrical power sectors.
There have been security and staffing constraints to the work of PRTs, however,
that might also pose problems for the expansion effort. One reason there had been
limited grassroots development work in the provinces up to the creation of the PRTs
is the lack of security. Although originally reluctant to divert the necessary
manpower from its other responsibilities, the Department of Defense agreed to
provide protection to the PRTs. A Memorandum of Understanding to this effect was
signed in November 2006. However, according to an October 2006 SIGIR report,
minimum “movement” by PRT personnel required three armored vehicles and eight
“shooters.” Normal business was, therefore, difficult. The SIGIR reported that many
PRT members could not regularly meet with local government officials to carry out
their capacity-building chores.45 Further, a former PRT diplomat who left in January
2007 suggested that local Iraqis were too intimidated to meet with U.S. staff and that
training sessions had been cancelled due to security concerns.46 In January 2007
congressional testimony, however, Secretary Rice indicated that civilian staff were
able to meet regularly with local government personnel, and Ambassador Satterfield
claimed in February 2007 that the SIGIR’s views on this issue did not reflect current
reality. But a March 2007 article based on PRT foreign service officer reports
indicated that the security problem had persisted.47 The October 2007 SIGIR report
continued to find that PRT performance was impeded by security concerns, and its
draft version even recommended that personnel be reassigned to better functioning
PRTs until security improved. According to the SIGIR, the Embassy and military
have promised new efforts to ensure that PRTs are not hindered by lack of
appropriate security.48
The March 2007 article mentioned above also raised the concern that security
obstacles facing PRTs might increase as U.S. troops protecting PRT staff hand
responsibility for security over to Iraqi forces. In September 2007 testimony to
Congress, a SIGIR official noted that there was little coordination between the PRTs
and U.S. military in those cases where security has been handed to the Iraqis. As a
45 SIGIR, Status of the Provincial Reconstruction Team Program in Iraq, 06-034, October
29, 2006.
46 “Ex-Envoy Says Iraq Rebuilding Plan Won’t Work,” Reuters, February 17, 2007.
47 “Rice’s Rebuilding Plan Hits Snags,” Washington Post, January 15, 2006; Testimony of
Secretary Rice to Senate Foreign Relations Committee, January 11, 2007; Teleconference
of Ambassador Satterfield, February 7, 2007; Shawn Dorman, “Iraq PRTs: Pins on a Map,”
Foreign Service Journal, March 2007.
48 SIGIR, Review of the Effectiveness..., October 18, 2007, p. x.

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CRS-24
result, the official suggested that U.S. civilians will be unable to move about freely
and, consequently, PRTs may be unable to function in those areas where the U.S.
military steps down.49 Whether the ePRTs are to be dissolved or redeployed
elsewhere following the draw-down on “surge” forces should become apparent by
summer 2008.
A second issue is the availability of qualified U.S. government civilian staff.
Early reports of its first year of operations suggested that State was having difficulty
enticing its personnel to volunteer for PRT posts. According to the SIGIR, DOD
stepped in to provide military civil affairs personnel in place of the State posts, but
required skills for such posts as local government, city management, business
development, and agricultural advisers were not being fully met. That situation
continued as the ePRTs were established. About 104 of the new ePRT posts were
temporarily occupied by military personnel or civilians until State was able to recruit
sufficient numbers of skilled individuals. Those recruited in specialized skills are
mostly contract personnel, because such skills are not typically available from either
the State or USAID foreign service. As many as 278 such personnel were expected
to eventually be needed. According to the October 2007 SIGIR report, many PRTs
were at half-capacity, there was a mismatch of skills to requirements, and there were
only 29 bilingual Arabic-speaking cultural advisers of 610 personnel. 50
The Role of Iraqis in Reconstruction and the DOD Plan to Re-start
State-Owned Enterprises. One facet of the U.S. reconstruction effort has been
an attempt to encourage economic growth and decrease unemployment by trying to
utilize Iraqis in the implementation of projects. In 2003-2004, this involved making
Iraqi businessmen aware of contract opportunities and encouraging U.S. contractors
to employ Iraqi firms. Although U.S. government requirements could be waived for
Iraqi contractors, most work for Iraqi business came in the form of subcontracts
under U.S. prime contractors.
When the State Department took over reconstruction in July 2004, however,
greater efforts were made to contract project work directly with Iraqis. By 2005, the
SIGIR estimated that about 70%-80% of new contracting was directly with Iraqis.51
A contributing factor in this effort was the deleterious impact of security on the
activities of the large-scale contractors. In January 2005, Contrack International,
holder of a $325 million roads and bridges construction contract, announced its
49 Shawn Dorman, “Iraq PRTs: Pins on a Map,” Foreign Service Journal, March 2007;
Testimony of Ginger Cruz, Deputy SIGIR, to House Armed Services Committee, Subcomm.
on Oversight, September 5, 2007.
50 SIGIR, Report to Congress, October 30, 2007, p. 87; “Pentagon Agrees to Help Fill State
Department’s Iraq Reconstruction Jobs on Temporary Basis,” New York Times, February
20, 2007; Teleconference of Ambassador David Satterfield, February 7, 2007; and Robert
Perito, Provincial Reconstruction Teams in Iraq, United States Institute of Peace, February
2007.
51 Stuart Bowen, Testimony to House Foreign Operations Appropriations Subcommittee,
September 7, 2005.

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CRS-25
withdrawal.52 Consequently, many bridge and road projects were then implemented
directly with the Ministry of Construction, with estimated savings of between 30%
and 40%.53 As some U.S. contractors were shown to perform inadequate work, they
were replaced by Iraqi contractors. The PCO claims that hundreds of Iraqi firms are
currently working on U.S.-funded reconstruction projects, although these numbers
are falling significantly as construction projects are completed. CERP and USAID
Community Action Program grants are often designed to directly employ large
numbers of Iraqis, many at the village level. About 111,976 Iraqis were reported to
be employed under all U.S.-funded projects in early January 2008.54
In the past year, U.S. defense officials, seeking to create employment
opportunities for Iraqi citizens, have begun rehabilitating some of the roughly 240
state-owned enterprises that composed a large portion of the Iraqi economy prior to
the U.S. occupation. Soon after the occupation began, the CPA attempted to
privatize them in an effort to open up a free market economy in Iraq, but officials
gave up on what promised to be a politically unpopular endeavor when the turnover
of sovereignty was accelerated. The Defense Department plan envisions the
production in Iraq of items required by the U.S. military, some of which are currently
produced by neighboring countries. Additionally, U.S. firms have been asked to
consider purchasing supplies from Iraqi enterprises.
To support this effort — entitled the Task Force to Improve Business and
Stability Operations — Congress approved $50 million in the FY2007 supplemental
and will consider the request of an additional $100 million under the DOD Iraq
Freedom Fund account when the second tranche of the FY2008 supplemental is
debated. Funds are being used to supply generators and other supplies. Between
November 2006 and December 2007, 17 factories had started-up: among them, one
producing Iraqi uniforms, another armored vehicles, and another household ceramic
bathware for domestic Iraqi consumption. Another 30 re-starts were anticipated by
the Task Force by March 2008. However, by December, only 5,000 jobs had been
created versus the DOD employment goal of 150,000 jobs in 140 restarted factories
by September 2008. A further Task Force effort directs U.S. military contracts to
Iraqi business — $200 million worth each month to over 5,000 private sector
businesses, according to the DOD. More recently, the Task Force has sought to
encourage the development of the private banking system, promoting formation of
a consortium of these banks and assisting the adoption of electronic funds transfers.55
52 BNA, Inc., Federal Contracts Report, January 11, 2005.
53 Ambassador Jeffrey, Testimony to House Foreign Operations Subcommittee, September
7, 2005. Department of State, 2207 Report to Congress, October 2005, p. 3.
54 Department of State, Iraq Weekly Status Report, January 9, 2008.
55 DOD, Measuring Stability and Security in Iraq, December 2007, p.10; DOD News
Briefing with Deputy Undersecretary Paul Brinkley, March 28, 2007; “To Stem Iraqi
Violence, U.S. Aims to Create Jobs,” Washington Post, December 12, 2006; “Bush to
Propose Restoring Iraqi Factories to Create Jobs,” New York Times, January 10, 2007;
“Aging and Shut, Iraq Factories May Reopen and Mitigate Ills,” New York Times, January
18, 2007; Paul Brinkley, “Restoring Hope,” Military Review, March-April 2008.

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CRS-26
Skepticism had been expressed regarding the DOD program. Some observers
questioned the extent to which violence would be reduced as a result of expanded
employment. Some were concerned that the SOEs might provide targets for
insurgents. Others have suggested that, unless well-managed, investments in SOEs
might provide opportunities for corruption and political manipulation.56 DOD
officials attribute program problems to a lack of enthusiasm by U.S. companies, the
Iraqi consumer’s preference for imported goods, the lack of electricity, and the
uncertain political and security environment.57
CERP. Drawn from DFI and Department of Defense funds rather than IRRF
or ESF appropriations, the Commander’s Emergency Response Program (CERP)
contributes to the reconstruction effort by providing U.S. military commanders on the
ground with “walking around money” intended to win hearts and minds throughout
Iraq. Up to now, a total of $3.2 billion — $548 million in Iraqi funds and nearly $2.7
billion in U.S. DOD appropriations — has been made available for this purpose.
The CERP supports a wide variety of reconstruction activities at the local level,
from provision of micro-grants to businesses to digging wells to painting schools,
provided in the form of small grants. CERP also funds infrastructure efforts, such
as repair or provision of electric generators and construction of water and sewer
systems, roads, and schools. Commanders identify local needs and dispense aid with
few bureaucratic encumbrances. Major subordinate commanders have authority to
approve grants up to $500,000. The grants have been credited with helping the
military better exercise their security missions, while at the same time meeting
immediate neighborhood development needs, often much more quickly than
equivalent efforts of the civilian reconstruction program. In addition to
reconstruction, CERP funds are used for compensation payments to the families of
killed or injured Iraqis.58 Recently, the CERP has been used to pay the salaries of the
so-called Sons of Iraq (formerly known as the Concerned Local Citizens).
As the IRRF program has declined, the CERP program has grown as a major
spigot of U.S. aid in Iraq. From its beginnings as a small-scale village program —
the average grant in FY2004 was $67,000 — it is now the major source of U.S.
infrastructure construction aid with an average grant in FY2006 of $140,000.
The SIGIR and others have raised some concerns regarding the CERP, most
derived from the essentially different security and reconstruction objectives of
military and civilian efforts, respectively. Among the SIGIR’s concerns is that there
is no mechanism to measure the outputs and outcomes of CERP projects. Secondly,
the high turnover of military personnel in Iraq means that there is little continuity in
management and oversight of the projects. Third, little weight has been given to the
56 United States Institute of Peace, State-Owned Enterprises: Post-Conflict Political
Economy Considerations, March 2007. “Defense Skirts State in Reviving Iraqi Industry,”
Washington Post, May 14, 2007.
57 “U.S. Falters in Bid to Boost Iraqi Business,” Washington Post, August 24, 2007; SIGIR,
Report to Congress, October 30, 2007, p. 95; “In Iraq, One Man’s Mission Impossible,”
CNNMoney.com, September 4, 2007.
58 SIGIR, Report to Congress, January 30, 2007, Appendix G.

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handing-over of projects to Iraqis and insuring their sustainability. Other observers
have noted that civil affairs officers and others allocating CERP grants are not
development specialists and have been provided little or no training on the selection
and management of reconstruction activities. The program’s early rationale — that
the military were the only ones able to conduct small-scale reconstruction in places
where civilian U.S. officials and NGO aid personnel were unable to go — appears
less strong now that civilian ePRT personnel are embedded in combat battalions.
Further, the October 2007 SIGIR report on the PRTs points to cases where the use
of CERP funds to meet local needs conflicted with PRT efforts to make local
government assume responsibility for provision of local services and work with the
provincial and national government, instead of the U.S. military, to address
problems.59
Security. The successful conduct of reconstruction work is contingent on an
environment of order and stability. Although recent reports suggest a lessening of
violence in parts of the country, the cumulative effect on the reconstruction effort of
years of continued instability has been manifold.
! The instability has hindered implementation of reconstruction
projects. Security threats have prevented PRT personnel from
communicating directly with local governments, construction
workers from appearing at their jobs, and project managers from
monitoring project work.60
! Completed reconstruction projects and pre-existing infrastructure
have been destroyed. For instance, in June 2007, eight of the twelve
400-kV transmission lines were out of service, greatly reducing the
electricity supply to Baghdad. Major pipelines continue to be
sabotaged, shutting down oil exports. Along with criminal activity
and poor equipment, insurgent attacks are estimated to be
responsible for the loss of $16 billion in oil revenue during a two
year period from 2005-2006.61
! Reconstruction costs rose substantially due to the need to provide for
security and insurance for personnel. Estimates of the portion of
project costs devoted to security have varied widely. A 2006 SIGIR
survey of major U.S. contractors found security costs to range from
59 SIGIR, Commander’s Emergency Response Program in Iraq Funds Many Large-Scale
Projects, 08-006, January 2008; SIGIR, Review of the Effectiveness of the Provincial
Reconstruction Team Program in Iraq, 07-015, October 18, 2007, pp. 23-24.
60 For example, the SIGIR reports that on March 24, 2006, a project manager received an e-
mail threatening all employees — as a result, no one came to work the next day. SIGIR,
Report to Congress, April 30, 2006, p. 12; SIGIR, Status of the Provincial Reconstruction
Team Program in Iraq, 06-034, October 29, 2006.
61 SIGIR, Report to Congress, August, 2007, pp. 69, 77; “Militias Seize Control of Grid,”
New York Times, August 23, 2007; “Iraq Insurgents Starve Capital of Electricity,” New York
Times, December 19, 2006; “Report Details Oil Industry Losses,” Washington Post,
September 29, 2006.

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a low of 7.6% to a high of 16.7%. Unanticipated security costs as
well as the related need to shift $1.8 billion from water and power
projects to the training and equipping of Iraqi forces has meant that
infrastructure programs could accomplish less than originally
anticipated.62
! Implementing organizations and personnel have fled. Fearing for
their safety, many aid implementors have been withdrawn from the
country. U.N. and bilateral aid donors have been reluctant to initiate
projects of their own; many are running programs from Jordan or
Kuwait utilizing Iraqi personnel to the extent possible.63
! The quality of aid has likely been negatively affected as
implementors cannot meet with local people and design and monitor
projects as they would in other countries. The pool of foreign
expertise available to advise the government and NGOs is restricted
to those few willing to endure the country’s hardships. U.S. agency
personnel stay only a short time and therefore institutional
knowledge is not maintained. Among the 2.4 million Iraqis who
have fled the country are professionals necessary to successful
reconstruction. More than 20,000 of 34,000 registered doctors have
reportedly left. In 2006, more than 300 teachers and Ministry of
Education staff were killed.64
! In a broader sense, prolonged insecurity has undermined the trust of
the Iraqi people in U.S. and now Iraqi government leadership to
bring about a democratic and economic transformation in Iraq,
opening the door to further political discontent and possible civil
war.65
There are two elements in the effort to provide the security that might allow
political and economic reconstruction to take hold — U.S. and coalition
peacekeeping forces and the training of Iraqi security forces to replace them. The
62 SIGIR, Fact Sheet in Major Contractors’ Security Costs, 06-044, January 30, 2007.
63 “Wolfowitz Says Iraq Violence Impedes Rebuilding Aid,” Wall Street Journal, June 1,
2005; “Driven from Iraq, Aid Groups Reflect on Work Half Begun,” New York Times,
November 15, 2004; “Security Conditions Continue to Hamper U.N. in Iraq,” Washington
File, August 11, 2004; “Charities Get Ready to Leave,” London Times, September 9, 2004.
64 International Committee of the Red Cross, Iraq: No Let-up in the Humanitarian Crisis,
March 2008; “Civilian Death Toll Reaches New High in Iraq, U.N. Says,” New York Times,
November 23, 2006; “As Death Stalks Iraq, Middle-Class Exodus Begins,” New York
Times, May 19, 2006; “Iraq’s Attorneys Practicing in a State of Fear,” Washington Post,
June 10, 2006; “Professionals Fleeing Iraq as Violence, Threats Persist,” Washington Post,
January 23, 2006.
65 “In Jaded, Perilous Capital, A Collision of Perceptions,” Washington Post, July 29, 2005;
“As Violence Deepens, So Does Pessimism,” Washington Post, May 18, 2004; “Fueling
Anger in Iraq,” Washington Post, December 9, 2003; “The Best, Brightest, and Wealthiest
Flee Iraq,” Chicago Tribune, November 21, 2004.

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number of U.S. troops is roughly 155,000. There are also about 13,481 troops from
25 other nations.66
About $20.7 billion in U.S. appropriations has been aimed at building Iraqi
security forces. According to the State Department, in early January 2008, there were
238,216 trained and equipped conventional Iraqi police and Ministry of Interior
forces and 202,577 army and other defense forces, although the actual number of
active duty soldiers has been said to be 65 percent of the total because of leave,
attrition, and desertion, and reports by officials and observers have suggested that
many fewer could be said to be capable of the most demanding jobs.67 In late 2007,
the Iraqi government authorized a significant expansion of its security forces to a
level of 555,789.68
During the past three years, poorly trained and equipped security forces, no-
shows and desertions, dismissals of police for criminal behavior, bribe-taking for
obtaining higher rank or for release of insurgent suspects, and infiltration of police
and other units by sectarian militia groups have threatened U.S. plans to increase
security using Iraqi personnel.69 The September 2007 Jones Commission report
called for the breakup and reconstitution of the police due to the high level of
corruption and sectarianism. U.S. commanders believe this step is unnecessary
because of progress made in weeding out inappropriate personnel.70
While the September 14, 2007, Benchmark Assessment Report argued that the
Iraqi forces were showing progress, it also noted that they were not making
satisfactory progress toward increasing the number of units capable of acting
independently of coalition partners. More recently, the DOD stated that 77% of all
formed Iraqi Army units are able to plan and execute operations with “minimal or no
assistance.” U.S. military officials point to “shortages of key personnel, equipment,
weaponry, and logistical capabilities” as significant obstacles.71
66 Iraq Index, Brookings Institution, [http://www.brookings.edu/iraqindex], March 8, 2008,
p. 27.
67 Department of State, Iraq Weekly Status Report, March 19, 2008; SIGIR, Report to
Congress, July 30, 2007, p. 47.
68 “Iraqis Authorize Big Jump in Forces,” Washington Post, December 31, 2007.
69 GAO, Stabilizing Iraq: Factors Impeding the Development of Capable Iraqi Security
Forces, GAO-07-612T, March 13, 2007; “U.S. Officers Detail Problems with Iraqi
Soldiers,” Washington Post, November 1, 2006; “In Baghdad, a Force Under the Militias’
Sway,” Washington Post, October 31, 2006; “Flaws Cited in Effort to Train Iraqi Forces,”
Washington Post, November 21, 2006.
70 White House, Benchmark Assessment Report, p. 24; General James L. Jones, Chairman,
The Report of the Independent Commission on the Security Forces of Iraq, September 6,
2007, p. 20; “U.S. Commanders Say Iraqi Police Can Be Reformed,” Washington Post,
December 11, 2007.
71 See CRS Report RL34387, Operation Iraqi Freedom: Strategies, Approaches, Results,
and Issues for Congress, by Catherine Dale; “Iraq May Need Military Help for Years,
Officials Say,” Washington Post, January 18, 2008; DOD, Measuring Stability and Security
(continued...)

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Accountability, Waste, and Fraud
A lack of transparency in early contracting and numerous reports in the media
suggesting that reconstruction funds were being squandered led to the establishment
in November 2003 of an Inspector General for the CPA, now called the Special
Inspector General for Iraq Reconstruction (SIGIR). To date, the SIGIR has issued
more than 108 audits and 108 project assessments, and it has conducted 96 limited
onsite inspections as well as dozens of investigations of possible criminal activity.72
It should be noted that many sectors and projects have not yet been subject to
program audits or project assessments, including water projects, roads, and almost
all traditional assistance programs, including those in democracy, governance,
education, agriculture, and economic growth sectors. Recent expansion of SIGIR
authority will likely facilitate increased oversight of the ESF and ISFF accounts that
now compose the majority of U.S. assistance to Iraq.
Some of the most egregious examples of misconduct found to date appear to
center on the CPA’s use of Iraqi funds during the year-long occupation. For
instance, a January 2005 SIGIR audit found that the CPA “provided less than
adequate controls” for $8.8 billion of DFI resources it moved through Iraqi
ministries. An April 2005 audit concluded that CPA managers of DFI funds
distributed in the South-Central region of Iraq could not account for more than $96.6
million in cash and receipts. An October 2005 audit found that South-Central
personnel could not account for more than $20.5 million in Rapid Regional Response
Program funds and made $2.6 million in excessive payments. In late 2005, several
U.S. citizens were criminally charged with respect to the handling of these funds —
and have since pled guilty. In February 2007, five more were indicted.73
While some investigations of reconstruction programs utilizing U.S.-
appropriated funds have raised the possibility of criminal activity, many more have
produced evidence of poor project implementation and questionable management and
oversight of projects, a large proportion of these the responsibility of the Army Corps
of Engineers which runs the Embassy’s Project and Contracting Office. SIGIR
auditors and project assessment teams with engineering, audit, and investigative
experience have traveled to major U.S.-funded IRRF project sites to see if work is
being performed properly. Although most conclude that projects were either carried
out as intended or point out correctable quality control and structural deficiencies, the
SIGIR has found some projects to be especially problematic, including the following:
71 (...continued)
in Iraq, March 2008 Report to Congress, p. 34.
72 See SIGIR website, [http://www.sigir.mil/], for audit reports to date. SIGIR, Report to
Congress, January 30, 2008, Section 3.
73 Management of Rapid Regional Response Program Grants in South-Central Iraq, Report
No. 05-015, October 25, 2005; Audit of Oversight of Funds Provided to Iraqi Ministries
through the National Budget Process, Report No. 05-004, January 30, 2005; Control of
Cash Provided to South-Central Iraq, Audit Report No. 05-006, April 30, 2005; “5 Indicted
in Probe of Iraq Deals,” Washington Post, February 8, 2007.

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! The Basrah Children’s Hospital, expected to cost $50 million, will
run to at least $98 million and nearly a year behind schedule.
Bechtel, the project contractor, was removed and the project will be
completed using local contractors. USAID, the agency responsible,
failed to report the cost and delays, in part because it had only one
contracting officer and one technical officer to oversee 20 projects
worth $1.4 billion.74
! In September 2006, the SIGIR reported that the Baghdad Police
College, a $75 million construction project implemented by Parsons,
was riddled with deficiencies, including improperly fabricated
wastewater plumbing which poses a health and structural hazard.
Press reports in November 2007 indicate that the problems have still
not been fixed by the contractor, despite promises made to
Congress.75 The Mosul police headquarters, constructed by an Iraqi
contractor at a cost of approximately $1 million, is similarly
troubled.76
! A $218 million first responders network was ineffective —
communication was not possible between the three established zones
of the system and Iraqi citizens could not call in to request
emergency assistance, among other problems.77
! After the expenditure of $186 million, only 6 of 150 planned
primary health care centers to be constructed by Parsons were
completed and only 14 more were expected to be finished. A
contract was awarded to Iraqi firms to complete 121 partially
constructed centers.78
! A project to run 16 oil pipelines under the Tigris River failed amidst
warnings from a geologist that the subsoil was not conducive to
drilling, demonstrating a lack of appropriate oversight by the Army
Corps of Engineers. Nearly $76 million in DFI funds were wasted.79
74 SIGIR, Audit 06-026, July 2006; “U.S. Neglect Found in Long-Delayed Iraq Hospital
Project,” Washington Post, July 29, 2006.
75 SIGIR, Project Assessment-06-078.1 and 06-079.1, September 27, 2006; “Heralded Iraq
Police Academy a ‘Disaster’,” Washington Post, September 28, 2006; “Baghdad’s Police
Academy Remains in Poor Condition, Despite a Repair Pledge,” New York Times,
November 6, 2007.
76 “U.S. Agency Cites Flaws in Another Iraqi Construction Project,” New York Times,
October 12, 2006.
77 SIGIR, Audit 06-020, July 2006.
78 SIGIR, Audit 06-011, April 2006; SIGIR, Report to Congress, October 30, 2006, p. 78;
“In a Dispute, Army Cancels Rebuilding Contract in Iraq,” New York Times, May 13, 2006.
79 SIGIR, Project Assessment SA-2005-001, in Report to Congress, January 30, 2006, pp.
73-75; “Rebuilding of Iraqi Oil Pipeline as Disaster Waiting to Happen,” New York Times,
(continued...)

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! An examination of Task Force Shield, a program to train and
manage an oil and electricity infrastructure protection force, found
it had been unsuccessful after the expenditure of $147 million. In
part, this outcome was due to the absence of a clear management
structure for the various U.S. agencies involved. Further, auditors,
reportedly, could not determine how many Iraqis were trained or
how many weapons were purchased.80
! An audit of “design-build” contracts that characterize many of the
infrastructure projects found very high administrative costs in some
cases. About 55% of KBR work on the RIO project and 43% of a
Parsons oil project were consumed by overhead costs. Security is
likely one factor in the high level of overhead found here, and
enforced idleness while awaiting government direction to begin
work is another. However, the audit also found inadequate
accounting and billing systems to capture administrative costs in
four of five contracts examined.81
! Roughly 370,000 weapons purchased with $133 million in IRRF
funds for the use of Iraqi security forces were not accompanied by
spare parts or technical repair manuals, and were not registered to
insure accountability. (Some of these weapons have reportedly
made their way to the black market.)82
! A DynCorp project to provide services to international police
trainers spent nearly $44 million on a residential camp that was not
used (including an Olympic-size swimming pool that was
unauthorized) and about $36 million for weapons that cannot be
accounted for. The audit found the State Department Bureau for
International Narcotics and Law Enforcement (INL) and State Office
of Acquisition Management provided poor contract administration.83
! A 2007 SIGIR financial review of the State Department’s DynCorp
contract for training Iraqi police could not be completed, because
documents were in disarray, invoices had not been validated, and
79 (...continued)
April 25, 2006.
80 SIGIR, Audit 06-009, April 2006; “In Shadows, Armed Groups Propel Iraq Toward
Chaos,” New York Times, May 24, 2006.
81 SIGIR, Audit 06-028, October 2006; “Idle Contractors Add Millions to Iraq Rebuilding,”
New York Times, October 25, 2006.
82 SIGIR, Audit 06-033, October 2006. “Black-Market Weapon Prices Surge in Iraq Chaos,”
New York Times, December 10, 2006.
83 SIGIR, Audit 06-029, January 2007.

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INL did not know what it received for the $1.2 billion in
expenditures.84
! A more than $38 million project to provide a new accounting system
for the Iraq Ministry of Finance has been of limited use and has been
suspended pending clarification of Iraqi government support for the
effort.85
! A 2007 DOD IG audit of $5.2 billion in the Iraq Security Forces
Fund found a lack of proper accountability for $1 billion in
equipment purchase contracts.86
Assessments of Reconstruction
Dozens of reports and articles published during the past five years have sought
to analyze, criticize, and recommend action regarding the progress of reconstruction
aid.87 Many focus on the history of the aid program with a view toward explaining
the current state of affairs. Others, like the Iraq Study Group report, seek to improve
future outcomes. See the Appendix for a collection of critical views.
Another category of assessments are reviews of specific projects, some findings
of which are noted in the previous section. Security concerns in Iraq have made it
difficult for interest groups and the news media to produce the kind of expert and
anecdotal reports they publish about other places. Most project assessments,
84 SIGIR, Audit 07-016, October 19, 2007.
85 SIGIR, Audit 08-001, October 23, 2007.
86 Department of Defense Inspector General, Management of the Iraq Security Forces Fund
in Southwest Asia — Phase III, November 30, 2007, Report No. D-2008-026.
87 Among the most notable are Anthony Cordesman, Cleaning Up the Mess, Center for
Strategic and International Studies, July 7, 2004; David Rieff, “Blueprint for a Mess,” New
York Times Magazine, November 2, 2003; George Packer, “War After War: Letter from
Baghdad,” The New Yorker, November 24, 2003; Kenneth M. Pollack, “After Saddam:
Assessing the Reconstruction of Iraq,” Foreign Affairs, January/February 2004; John Hamre
et al., Iraq’s Post-Conflict Reconstruction: A Field Review and Recommendations, Center
for Strategic and International Studies, July 17, 2003; James Fallows, “Blind into
Baghdad,” The Atlantic Monthly, January/February 2004; Center for Strategic and
International Studies, Post-Conflict Reconstruction Project, Frederick Barton and Bathsheba
Crocker, Co-Directors, Progress or Peril? Measuring Iraq’s Reconstruction, September
2004 and November 12, 2007, Update; Larry Diamond, Squandered Victory: The American
Occupation and the Bungled Effort to Bring Democracy to Iraq, Henry Holt, 2005; James
Fallows, “Why Iraq Has No Army,” The Atlantic Monthly, December 2005; Rajiv
Chandrasekaran, Imperial Life in the Emerald City: Inside Iraq’s Green Zone, Knopf, 2006;
and George Packer, The Assassins’ Gate: America in Iraq, Farrar, Straus and Giroux, 2005;
International Crisis Group, Reconstructing Iraq, September 2, 2004, available at
[http://www.crisisgroup.org/home/index.cfm?]; T. Christian Miller, Blood Money, Little,
Brown, and Company, 2006; SIGIR, Iraq Reconstruction: Lessons in Program and Project
Management, March 2007; and Glenn Zorpette, “Re-engineering Iraq,” IEEE Spectrum,
February 2006, available at [http://www.spectrum.ieee.org/feb06/2831].

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therefore, have come from various U.S. government auditors.88 Even these, however,
appear constrained by security in the number of site-visits they are able to undertake
to review project results. The SIGIR is conducting some of its assessments by aerial
imagery because of the risk to its personnel. Government Accountability Office
(GAO) investigators were not even able to visit Iraq while preparing a 2005 report
on water and sanitation programs.89
Some observers have suggested that one problem with assessing the progress
of economic reconstruction is that there is no “big picture” overview; by comparison,
more comprehensive end-result assessments of security assistance appear to be
regularly conducted by DOD.90 Responsible government agencies provide
information regarding how many infrastructure projects are being started and
completed — amounts of kilowatt hours produced and oil pumped — how many
small-scale grants are being provided, and how many people are being trained, but
there is little detail regarding to what degree the overall national need for drinking
water, schools, health care, electricity, employment, and other requirements is being
met by the expenditure of billions of dollars in U.S. resources — not to mention Iraqi
and other donor resources — targeted at these needs. When such data have been
gathered, they suggest that the needs are not being addressed to the extent required.
For example, the GAO has estimated that it will take $50 billion in infrastructure
investments to meet needs in the electricity and oil production sectors alone.91
The extent to which specific Iraqi needs are met is one way of assessing an
assistance program. The extent to which U.S. policy objectives have been met is
another. With the exception of a brief moment when what some would call an
idealistic Administration appears to have sought to transform Iraq into a modern
88 For a list of audits and inspections from all agencies, see SIGIR, Report to Congress,
January 30, 2007, Appendices I, J, K, L.
89 SIGIR, Report to Congress, July 30, 2005, pp. 60-66; GAO, Rebuilding Iraq: U.S. Water
and Sanitation Efforts Need Improved Measures for Assessing Impact and Sustained
Resources for Maintaining Facilities, GAO-05-872, September 2005.
90 Although observers may not agree on the meaning of what they find. In three
assessments of the effort to train and equip Iraqi security forces released in September 2007,
somewhat differing perspectives emerged. While the White House Benchmarks report
found much progress in the development and operation of the Iraqi security forces — from
growth in size to assumption of lead roles and independent planning — it also found the
increase in the number of Iraqi security forces being capable of operating independently of
U.S. troops to be unsatisfactory. The GAO, pointing out that the number of independent
units declined between March and July 2007, bluntly chose to describe the objective as not
being met. And the Iraqi Security Forces Independent Assessment Commission led by
General James Jones found that, while the Iraqi Army is capable of taking over an increasing
amount of day-to-day combat responsibilities, the Iraqi forces would be unable “to fulfill
their essential security responsibilities independently over the next 12-18 months.” White
House, Benchmarks Assessment Report, September 14, 2007; GAO, Iraqi Government Has
Not Met Most Legislative Security and Economic Benchmarks, GAO-07-1230T, September
7, 2007; General James L. Jones, Chairman, The Report of the Independent Commission on
the Security Forces of Iraq, September 6, 2007, p. 8.
91 “Iraq Far From U.S. Goals for Energy,” Washington Post, September 2, 2007.

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Western nation, the purpose of the U.S. assistance program has at the very least been
to create a minimal level of stability in which a minimally functioning Iraq could take
care of its own affairs. The strategies to accomplish this end have changed over
time. While the strategy governing security assistance shifted from classroom
military training to ever greater levels of cooperative U.S.-Iraqi troop operations, the
strategy for economic assistance has moved from the construction of large-scale
infrastructure, which chiefly characterized the period from 2004 through 2006, to
technical assistance provided to encourage ministerial and local government
capacities to manage and administer their own programs, small-scale employment
initiatives, and hundreds of community-based projects meant to supplement and
supplant the stabilization activities of the U.S. and Iraqi security forces.
The impact of these economic aid efforts, many underway on a smaller scale
since 2003, is much more difficult to weigh than the infrastructure programs. They
are individually too small and numerous perhaps to make an obvious dent on the
larger political and economic picture in Iraq. Measurements for success of these
economic aid programs are difficult to achieve. The seemingly most accessible
potential measurement of success for the effort to enhance ministerial and local
government capacities has been the rate of contracting and expenditure of capital
investment — budget execution. In September 2007, the Administration touted a
much improved level of budget execution over the previous year. However, a recent
GAO report suggests that figures employed to make that judgment were flawed and
that the level of spending cannot be established with current conflicting data.92
Ultimately, it may be the cumulative stabilizing impact of economic aid projects
when brought to bear on a specific Iraqi region in conjunction with the military
security assistance effort that will be the determinant of success. The merits of
individual project activities may be impossible to isolate.
92 GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq’s Budget Execution,
January 2008, GAO-08-153.

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Appendix. Criticisms of Iraq Reconstruction:
2003-2006
There has been no lack of criticism of the U.S. reconstruction program in Iraq.
However, it is important to recognize that criticisms aimed at earlier efforts may not
apply to current programs and strategies, especially if appropriate lessons have been
learned. Included among the many suggestions from a wide range of sources of what
went wrong in the Iraq reconstruction effort are the following:
! Inadequate security. As noted earlier in this report, lack of a
secure environment in which to undertake reconstruction meant
delays in project implementation and completion; destruction of
completed projects; greatly increased costs which, in turn, drained
funding from other projects; and a loss of foreign expertise and local
participation that would have made projects more effective. Among
widely circulated reasons were a failure to anticipate post-invasion
security needs and the early decision of the CPA administrator to
disband the Iraqi military. Initially, security forces received hurried
and insufficient training.
! No prior planning. Planning for post-Iraq reconstruction has been
generally characterized as inept. Military officials planned for a
humanitarian crisis that never happened. Moreover, accounts
suggest that efforts to plan for reconstruction were actively
discouraged by the Pentagon leadership lest it raise potential
obstacles to U.S. invasion. The State Department’s 2002 Future of
Iraq Project, which utilized dozens of Iraqi experts to anticipate
post-war concerns, including the possibility of widespread looting,
was said to be studiously ignored by DOD.
! Mismanaged transition to Iraqi governance. Many critics have
pointed to the slow pace of forming a publically approved Iraqi
authority which could have provided Iraqis with a sense of
ownership in the reconstruction and democratic process and
discouraged disorder. In the first six months, foreign aid workers
had no counterpart in the Iraqi ministries able to make decisions that
might advance reconstruction. CPA-imposed de-Baathification
disrupted the functioning of the Iraqi bureaucracy and meant the loss
of skilled Iraqis from management positions. Further, large-scale
reconstruction efforts were designed with little regard for Iraqi views
and were originally meant to be implemented by U.S. contractors
with Iraqis playing a secondary role.
! Discouraging a U.N. and International Role. The Administration
sought at first to keep control of post-war reconstruction in U.S.
hands, rather than internationalizing it as had been done in Kosovo
and Bosnia. Critics asserted that, had the U.N. been in a position of
greater responsibility, it would have deflected Iraqi criticism of the
United States, legitimized occupation policies, and encouraged

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CRS-37
financial and peacekeeping participation by bilateral donors. Donors
were said to be unresponsive to U.S. pleas for either military or
financial assistance, partly because they were not being offered a
“seat at the table” in determining the future of Iraq. The decision to
exclude some countries from competing for Iraq contracts, in the
view of many, further alienated potential international support.
! Inadequate U.S. civilian administration. Early on, a British
official was quoted as saying of the CPA, “this is the single most
chaotic organization I have ever worked for.”93 Critics asserted the
CPA was understaffed, lacking experience and knowledge of the
country, in many cases with no background in assistance programs,
and too isolated from the Iraqi people (with headquarters in a former
palace and requiring a military bodyguard when they ventured
outside). The level of aid expertise is seen as improving under State
Department management, but security concerns continued to limit
contact with Iraqis and insufficient staff numbers negatively affected
project oversight as well as PRT implementation.
! Excessive Reliance on the U.S. Military. Observers note that
although actual reconstruction is inherently a civilian effort, in Iraq
much of it was implemented by military personnel. In January
2003, the President placed sole authority for reconstruction in the
hands of DOD, rather than with development assistance or
democracy experts at USAID and State. In June 2004, after the State
Department was given the lead role, the Army continued to manage
about $10 billion in infrastructure projects, insuring a continued lack
of coordination between assistance entities. Utilizing the CERP
program, military commanders on the ground continue to influence
reconstruction at the grassroots level. Some assert that these are
roles for which the military had not been prepared — there is a long
learning curve and many mistakes were made — and which
emphasize to the Iraqi people the “occupation” character of the U.S.
presence. Instead, some critics suggested that a corps of civilian
reconstruction specialists should have been deployed around the
country. As early as July 2003, the Hamre Assessment Mission
report recommended that 18 provincial CPA offices be established
with 20-30 civilian staff in each.94 It was not until mid-2005, that
the PRT program was launched. Its spread was delayed by military
reluctance to provide security.
! Poor Accountability. As discussed earlier in this report, a number
of projects were poorly implemented. In some cases, funds may
have been misused. What unites many of these accounts, perhaps
93 “America’s Rebuilding of Iraq Is in Chaos, Say British,” London Daily Telegraph, June
17, 2003.
94 John Hamre et al,. Iraq’s Post-Conflict Reconstruction: A Field Review and
Recommendations, July 17, 2003, p. 5.

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most notably the CPA’s cavalier treatment of billions in Iraqi-owned
funds, is the argument that they could have been prevented by more
thorough oversight by government managers.
! Ineffective Assistance. Measurable objectives in critical sectors,
such as oil production and electric power generation, were not met.
But the full picture of the effectiveness of the reconstruction effort
in most sectors is clouded by the impact of instability and conflict.
! Inadequate Levels of Assistance. The high cost of conducting
reconstruction projects in Iraq: due to protective security spending
and large overhead costs — amounting in some cases to a quarter or
more of project totals — meant that amounts appropriated for
economic reconstruction did not produce the equivalent in goods and
services that one would expect in other aid recipient countries. In
short, less bang for the buck. Further, funds originally intended for
economic reconstruction, particularly water and electricity programs,
were diverted to training of Iraqi security forces.
! Too Broadly Dispersed Assistance. Critics maintain that the aid
effort attempted to do too much in too many sectors from health to
electricity to microenterprise to roads. As a result, too few resources
were scattered over too many projects to produce a significant
impact in any one of them. They argue that assistance should have
been concentrated more intensively in key areas such as oil
production and governance so that Iraqi funds could have been
generated and Iraqi managers could spend them.
! Poor Contracting and Procurement Processes. The SIGIR has
looked at contracting actions from before the war through the CPA
to the present. Among other problems, it points to the failure to
involve contracting and procurement personnel in the planning
stages of post-conflict reconstruction operations, the lack of
emphasis given contracting for smaller projects, the use of sole-
source and limited competition contracting, and the failure to give
a single unified contracting entity the authority to coordinate all
contracting activity.95
95 SIGIR, Iraq Reconstruction: Lessons in Contracting and Procurement, July 2006.

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