Rebuilding Iraq:

Improved Management Controls and Iraqi Commitment Needed for Key State and USAID Capacity-Building Programs

GAO-09-526: Published: Jun 3, 2009. Publicly Released: Jun 3, 2009.

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Since 2003, the United States has provided $49 billion to help rebuild Iraq. To build the capacity of Iraq's central and provincial governments to sustain this effort, the United States is implementing programs including Department of State's (State) Provincial Reconstruction Development Committee (PRDC) and the U.S. Agency for International Development's (USAID) National Capacity Development (NCD). The use of key management controls, such as appropriate organizational structure and program monitoring, helps ensure programs achieve their objectives. Through field visits in Iraq, interviews with program officials, analyses of official reports, and examination of a sample of projects, we assessed whether the PRDC and NCD's management controls support the programs' objectives of building the capacity of Iraq's government. We also assessed Iraq's commitment to sustaining these U.S. programs.

Through the PRDC program, State and USACE work with Iraqis in the provinces to develop proposals and undertake small-scale projects such as building schools, repairing roads, and developing water facilities. However, weaknesses in State's management controls hinder achieving the program objective to build provincial government capacity. First, the program involves multiple organizations and a complex process but had no clearly identified program manager until May 2009 when State designated one in response to GAO's findings. Second, State lacks a performance monitoring system that measures progress toward building provincial capacity to deliver essential services. Third, the program's guidelines and policies have changed frequently, but State did not adequately communicate or consult with the USACE, the program implementer, about these changes. Finally, USACE's financial controls for the timekeeping process did not ensure adequate documentation of time and attendance records for labor charges on projects. USAID's management controls generally supported the NCD program's objective of building ministry capacity by training Iraqi employees in administrative skills such as planning and budgeting and supporting Iraqi training centers. First, USAID's organizational structure is clear, including who is responsible for overall program management. Second, in response to an audit report, USAID narrowed the NCD program objective to improving ministries' administrative capabilities and clearly linked them to measures of outcome. Some of these measures include Iraqi ministries' execution of their capital budgets, including the number of capital projects approved and the rate of spending on capital projects. USAID reported it was on track to meet or exceed its 2008 targeted results. However, as of March 2009, final data on results were not available. Third, USAID's guidelines and program expectations for NCD are documented, clear, and communicated throughout the organization. However, with regard to financial controls, GAO found that USAID officials did not confirm receipt of goods and services for invoices totaling about $17 million of $79 million, prior to payment. The officials did not always document reasons such as security risks, when confirmation was not possible. Iraq has committed to sustaining U.S.-funded programs and sharing in their costs, but actual budget expenditures for such activities are unclear. For the PRDC program, 16 of the 40 projects in our sample had evidence that the Iraqi government agreed to sustain the project; however, the records did not specify actual financial or budget commitments. For the NCD program, the Iraqi government is supporting the program by providing trainers and allocating funds in their 2009 budgets for training center equipment and other NCD efforts. These funds are to be spent in 2009. We have previously reported that the Iraqi government includes funding in its budgets for investment activities such as operating and maintaining U.S.-funded reconstruction projects and training, but does not subsequently expend these funds.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In its written report to Congress on actions taken in response to this recommendation, USAID officials said USAID/Iraq's Financial Management Office implemented a reconciliation process to ensure that its implementers' payment records are in agreement with USAID's records. After Approving Officers approve vouchers, they are routed to voucher examiners. Voucher examiners are instructed to (1) perform reconciliation between the contractor's billings and those recorded in USAID's database and follow up on any differences, and (2) give the voucher to the Chief Accountant for review and clearance. GAO reviewed four NCD invoices and corresponding voucher examiner checklists dated from February 2011 to November 2011, which document this reconciliation process.

    Recommendation: To help these programs achieve their objectives of building the capacity of the provincial governments and central ministries, for the NCD program, the USAID Administrator should ensure that USAID/Iraq initiatives to improve the documentation of the voucher examiner's required review of contractor invoices correct the deficiencies discussed in this report.

    Agency Affected: United States Agency for International Development

  2. Status: Closed - Implemented

    Comments: In reporting to Congress on action taken in response to the report, USAID said that it had revised its procedures for its administrative approval form and checklist. The procedures revised in March 2011 require written acceptance of the goods or services by a U.S. government official. This acceptance is documented generally through a receiving report, or alternatively through USAID's administrative approval form and checklist. Instructions on the administrative approval form and checklist indicate that the Administrative Approving Official should (1) check a box on the form to indicate whether goods or services have been received or (2) attach an explanation if unable to visit the site and inspect the work. Instructions also indicate the Administrative Approving Official's signature on the administrative approval form and checklist formally documents the acceptance of the goods or services.

    Recommendation: To help these programs achieve their objectives of building the capacity of the provincial governments and central ministries, for the NCD program, the USAID Administrator should revise USAID policy and procedures for confirming receipt of goods or services applicable to the NCD program in Iraq to include (a) clarifying that confirmation of receipt of goods/or services must be noted separately from the administrative approval or (b) documenting reasons precluding actual confirmation such as prohibitive personal danger or security protection costs.

    Agency Affected: United States Agency for International Development

  3. Status: Closed - Implemented

    Comments: The USACE agreed with the findings in the GAO report and has implemented corrective actions to resolve the cited deficiencies. In response to GAO's recommendation, the USACE implemented a number of changes to improve the accuracy of the timesheets and labor hours recorded by the Gulf Region Division (GRD) from June 2009 to October 2010. For instance, the GRD Rear Cell that performed the function is now under the supervision of accountants who provide additional review and assistance to the timekeeping function. In addition, timesheets are being reviewed prior to certification, and all timesheets are being kept including the original and any revised or corrected timesheets. Additional follow-up is done when signed time and attendance reports are not received in a timely manner. In regards to labor costs, controls are in place at each district in Iraq to control labor costs charged to the Provincial Reconstruction Development Committee (PRDC). In addition, according to the Department of Defense Inspector General, the Program Management staff for the PRDC program review each request for additional labor costs. This evaluation process includes bimonthly updates of the cost analysis report. This report is used to gauge the actual cost for each active project and compares these costs with other projects with similar geographic location, project type, contract amount and other identifying characteristics. Expenses or rates that fall outside a reasonable range, as gauged by the Program Manager, are reviewed with the district prior to funding,. On October 22, 2010, the USACE issued Standard Operating Procedures on time and attendance for all GRD civilian personnel which implemented the recommendation.

    Recommendation: To help these programs achieve their objectives of building the capacity of the provincial governments and central ministries, for the PRDC program, the Secretary of the Army should ensure that U.S. Army Corps of Engineers (USACE) initiatives to improve the financial controls for the timekeeping process correct the deficiencies discussed in this report.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: The State Department (State) indicated in a letter to Congress that it had addressed GAO?s recommendation. In responding to GAO's recommendation to designate an overall program manager, State indicated that the Iraq Transition Assistance Office (ITAO) at U.S. Embassy in Baghdad maintained overall management of the PRDC program, and by August 2009 it had an officer clearly designated as the PRDC program manager. In responding to the sub-recommendation to develop outcome measures of effectiveness, State indicated it already had a provincial-focused measurement system in place, which it was in the process of making more robust. The Office of Provincial Affairs (OPA) Maturity Model, reassessed quarterly in each province, measured progress in provinces' capacity to operate and govern effectively. Specifically, in the Governance section of the OPA Maturity Model, progress made by Provincial governments in their ability to deliver essential services is rated. State indicated it was in the process of developing additional metrics to more fully quantify the impact of PRDC projects. In responding to the sub-recommendation to document actual Iraqi government budget allocations and expenditures for fiscal year 2007 PRDC projects, State indicated it submitted two reports to Congress detailing 2008 Iraqi government contributions to match some fiscal year 2008 Supplemental U.S. civilian foreign assistance programs and projects. As of August 2012, the program was no longer in operation.

    Recommendation: To help these programs achieve their objectives of building the capacity of the provincial governments and central ministries, for the PRDC program, the Secretary of State should ensure that management control weaknesses are addressed in the PRDC program by designating an overall program manager; developing outcome measures of effectiveness; and documenting actual Iraqi government budget allocations and expenditures for fiscal year 2007 PRDC projects.

    Agency Affected: Department of State

  5. Status: Closed - Implemented

    Comments: In responding to the GAO recommendation, USAID indicated in a letter to Congress that the Iraqi government did not allocate and expend funds in a manner that would allow USAID to track the government's actual budget allocations and expenditures for the NCD program. Therefore, USAID asked its implementing partner for the NCD program to estimate the Iraqi government's cost sharing contributions. Using multiple sources of data, each of which covered different time frames during the period 2006-2010, the contractor estimated Iraq's cost-sharing contributions for the program to be about $86 million. In 2012, USAID provided an updated estimate of the Iraqi government cost sharing contribution that totaled about $107 million. Both of these estimates were derived by extrapolating from the best available data in multiple sources, and while the data is not complete, USAID nonetheless undertook a good faith effort to estimate Iraq?s budget allocations and expenditures during the life of the program.

    Recommendation: To help these programs achieve their objectives of building the capacity of the provincial governments and central ministries, for the NCD program, the USAID Administrator should document actual Iraqi government budget allocations and expenditures to ensure funds committed to support NCD activities are expended.

    Agency Affected: United States Agency for International Development

 

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