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

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.

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.

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.

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.

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.