Home > GAO-10-304 > Recommendations

Iraqi-U.S. Cost-Sharing:
Iraq Has a Cumulative Budget Surplus, Offering the Potential for Further Cost-Sharing

GAO-10-304, Published: Sep 13, 2010. Publicly Released: Sep 13, 2010.

Recommendations

Matters for Congressional Consideration

  1. Matter for Consideration: To ensure that Iraq continues to spend its own resources on security costs, Congress may wish to consider Iraq's available financial resources when reviewing (1) a fiscal year 2011 budget request and (2) potential future funding requests to support the Iraqi security forces.
  2. Agency Affected: Congress
  3. Status: Closed - Implemented
  4. Comments: Because of GAO's work on Iraqi-U.S. cost-sharing and Iraq's fiscal position, Congress provided $500 million less than requested by the Administration in its FY11 budget request to support the Iraqi security forces. Before the report was issued, GAO briefed staff members from the Senate Armed Services Committee, House Armed Services Committee, and Senate Appropriations Committee's Defense Subcommittee on preliminary findings from our cost-sharing audit in March 2010. In May 2010, the Chairman of the Senate Armed Services Committee, in a markup hearing, reduced the Administration's FY11 $2 billion request to $1 billion, in part because of GAO's analysis. After the report was issued in September 2010, GAO briefed staff of the Senate Armed Services Committee, and Senators Begich, Lieberman, Reed, and Udall, to help them prepare for an upcoming Senate floor debate on the FY11 defense authorization bill. On January 7, 2011, the President signed the National Defense Authorization Act for Fiscal Year 2011, which authorized $1.5 billion for the Iraq Security Forces Fund, $500 million less than the Administration requested. In March 2011, professional staff to the Senate and House Armed Services committees confirmed that GAO's report and briefings played a key role in the debate over the appropriate FY11 funding level for the Iraq Security Forces Fund.

Recommendations for Executive Action

  1. Recommendation: The Departments of State and the Treasury should work with the Iraqi government to further identify Iraqi resources available for future spending. This should include assisting Iraq in completing two reviews required under Iraq's arrangement with the IMF. State and Treasury should assist Iraq in completing a review of its outstanding advances to determine whether some of these advances may be recoverable and available for future spending.
  2. Agency Affected: Department of the Treasury
  3. Status: Closed - Implemented
  4. Comments: With assistance from the U.S. government and IMF, Iraq completed the review of central government accounts in 2010. Since February 2012, the U.S. government and the IMF have also worked with the government of Iraq to complete a report on its stock of outstanding advances, as GAO recommended. This review identified $30 billion in advances from 2003 to 2011. However, according to Treasury officials, the Iraqi government has determined that none of these funds are recoverable because they were used to open letters of credit for the purchase of military equipment or spent by government ministries. As Congress reviews future budget requests for funding to train and equip Iraqi security forces, the completed review of advances--along with continued assessments of Iraq's other financial resources--will provide important information on resources available to the Iraqi government for future spending.

  1. Recommendation: The Departments of State and the Treasury should work with the Iraqi government to further identify Iraqi resources available for future spending. This should include assisting Iraq in completing two reviews required under Iraq's arrangement with the IMF. State and Treasury should help Iraq complete a review of its central government accounts so that it can return any idle balances to the central Iraqi Treasury.
  2. Agency Affected: Department of the Treasury
  3. Status: Closed - Implemented
  4. Comments: State and Treasury concurred with the recommendation. According to State and Treasury, Embassy officials and senior officials from both departments met with Central Bank of Iraq and Ministry of Finance officials to press them on efforts to identify available resources in September and October 2010. Subsequently, Iraqi Ministry of Finance officials shared the initial results of their review with U.S. officials at the Embassy, including Treasury advisors from the Office of Technical Assistance (OTA). The advisors then assisted their Ministry of Finance counterparts to clarify some of the accounts and helped to group the individual accounts into broader categories. According to the IMF, almost 90 percent of the government of Iraq's accounts has been reviewed and the ownership clarified; Treasury officials explained that the remaining 10 percent represent a large number of small accounts in regional bank branches. The IMF also reported that Iraqi officials are working on identifying which accounts can be returned to the central treasury. As a result of this effort, the government of Iraq has more complete knowledge of the funds available to it, and the United States has a better understanding of Iraq's capacity to pay for its own government programs and security.

  1. Recommendation: The Departments of State and the Treasury should work with the Iraqi government to further identify Iraqi resources available for future spending. This should include assisting Iraq in completing two reviews required under Iraq's arrangement with the IMF. State and Treasury should assist Iraq in completing a review of its outstanding advances to determine whether some of these advances may be recoverable and available for future spending.
  2. Agency Affected: Department of State
  3. Status: Closed - Implemented
  4. Comments: With assistance from the U.S. government and IMF, Iraq completed the review of central government accounts in 2010. Since February 2012, the U.S. government and the IMF have also worked with the government of Iraq to complete a report on its stock of outstanding advances, as GAO recommended. This review identified $30 billion in advances from 2003 to 2011. However, according to Treasury officials, the Iraqi government has determined that none of these funds are recoverable because they were used to open letters of credit for the purchase of military equipment or spent by government ministries. As Congress reviews future budget requests for funding to train and equip Iraqi security forces, the completed review of advances--along with continued assessments of Iraq's other financial resources--will provide important information on resources available to the Iraqi government for future spending.

  1. Recommendation: The Departments of State and the Treasury should work with the Iraqi government to further identify Iraqi resources available for future spending. This should include assisting Iraq in completing two reviews required under Iraq's arrangement with the IMF. State and Treasury should help Iraq complete a review of its central government accounts so that it can return any idle balances to the central Iraqi Treasury.
  2. Agency Affected: Department of State
  3. Status: Closed - Implemented
  4. Comments: State and Treasury concurred with the recommendation. According to State and Treasury, Embassy officials and senior officials from both departments met with Central Bank of Iraq and Ministry of Finance officials to press them on efforts to identify available resources in September and October 2010. Subsequently, Iraqi Ministry of Finance officials shared the initial results of their review with U.S. officials at the Embassy, including Treasury advisors from the Office of Technical Assistance (OTA). The advisors then assisted their Ministry of Finance counterparts to clarify some of the accounts and helped to group the individual accounts into broader categories. According to the IMF, almost 90 percent of the government of Iraq's accounts has been reviewed and the ownership clarified; Treasury officials explained that the remaining 10 percent represent a large number of small accounts in regional bank branches. The IMF also reported that Iraqi officials are working on identifying which accounts can be returned to the central treasury. As a result of this effort, the government of Iraq has more complete knowledge of the funds available to it, and the United States has a better understanding of Iraq's capacity to pay for its own government programs and security.