	Background

To help Iraq assume responsibility for sustaining U.S. reconstruction  efforts, U.S. agencies are implementing programs to build the capacity of  Iraq’s central and provincial governments, including State’s PRDC program  to strengthen the capacity of Iraqi provincial governments to deliver  essential services such as water and electricity and USAID’s NCD program  to assist the Iraqi government in improving the administrative capacity of  several ministries and executive offices through training. State Cannot Ensure That the PRDC Program Is Achieving Its Objective to Build Capacity

State’s PRDC program has management control weaknesses in  organization, monitoring, and communication that hinder the achievement  of its goal of building provincial government capacity. Second, State lacks a  performance monitoring system that measures progress toward building  the capacity of provincial governments. Third, State’s guidelines and  policies have changed frequently, as has the direction of the program, but  State did not fully communicate or consult with program implementers  about these changes. However, no single program manager was clearly responsible for overall  management of the program until May 2009, when State designated one in  response to GAO’s findings. However, this is a measure of  State’s ability to obtain and use U.S. funds. Our  review of time and attendance records for 152 USACE employees, totaling  about $2.5 million in net labor charges to 36 PRDC projects, disclosed that  about 26 percent of these charges did not have adequate supporting  documentation. The units responsible  for training Iraqi officials and working with the ministries are clearly  identified, and the chain of command is unambiguous. For example, USAID will now monitor the value of capital  projects approved, the number of capital projects approved by the  Ministry of Planning, and the rate of capital projects implemented. In October 2008, USAID reported that some target measures  were exceeded, some were not achieved, and several were on track. Iraq Has Agreed to Sustain the Programs and Is Providing Some Support for NCD, but Budget Expenditures Are Unclear

Iraq committed to sustaining U.S.-funded projects and programs and  sharing in their costs in several official documents and the International  Compact for Iraq. Several ministries also made 2009 budget  commitments to continue the NCD training and provide equipment for  training centers, among other efforts. The Iraqi Government Has Committed to Operate and Maintain PRDC Projects and Is Supporting NCD Efforts

For the PRDC program, 16 of the 40 projects we reviewed had indications  that the Iraqi government agreed to sustain the projects; however, none of  the records we examined included specific funding or resource  commitments that would allow a check against actual Iraqi budgets and  expenditures. The provinces spent 32 percent  of their investment budget. Also, USACE  financial controls for the timekeeping process did not ensure adequate  documentation, although USACE introduced initiatives to correct this. Recommendations for Executive Action

To help these programs achieve their objectives of building the capacity of  the provincial governments and central ministries,    We recommend that, for the PRDC program (1) the Secretary of State  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;  and (2) the Secretary of the Army ensure that USACE initiatives to  improve the financial controls for the timekeeping process correct the  deficiencies discussed in this report. We recommend that, for the NCD program, the USAID Administrator   (1) 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; (2) 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; and (3)  document actual Iraqi government budget allocations and expenditures to  ensure funds committed to support NCD activities are expended. Key contributors to this report are  listed in appendix V.

Appendix I: Scope and Methodology

To assess whether the management controls of the Provincial  Reconstruction Development Committee (PRDC) program and the  National Capacity Development (NCD) program support the achievement  of the programs’ objectives, we interviewed agency officials and analyzed  project contracts, program files, agency reports, guidelines, financial and  programmatic databases, and assessments for both the PRDC and NCD  programs.
Why GAO Did This Study

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.

What GAO Found

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.