In May 2004, the President issued a  National Security Presidential Directive, which stated that after the  transition of power to the Iraqi government, the Department of State  (State) through its ambassador to Iraq would be responsible for all U.S.  activities in Iraq, with the exception of U.S. efforts relating to security and  military operations, which would be the responsibility of the Department of  Defense (DOD). Multiple and Diverse Funding Sources Support Iraq Reconstruction and Government Operations

As of March 2005, U.S. appropriations, Iraqi revenues and assets, and  international donor pledges totaling about $60 billion had been made  available to support the relief and reconstruction and government  operations of Iraq. International donor funds have been primarily used  for public and essential service reconstruction activities; however, most of  about $13.6 billion pledged over a 4-year period is in the form of potential  loans that have not been accessed by the Iraqis. U.S. Appropriated Funding Focused on Infrastructure Repair and Training of Forces; Funding Has Been Reallocated as Priorities Changed

As of March 2005, of the $24 billion in appropriated U.S. funds made  available for relief and reconstruction in Iraq from fiscal years 2003 through  2005, about $18 billion had been obligated and about $9 billion had been  disbursed. A smaller portion of the $23  billion—approximately $7 billion—was allocated for relief and  reconstruction projects, primarily for the import of refined fuel products,  security, regional programs, and oil and power projects. Of this  amount, about $10 billion, or 70 percent, is in the form of loans, primarily  from the World Bank and International Monetary Fund (IMF). Donors have  pledged the remaining $3.6 billion as grants, to be provided multilaterally or  bilaterally. As of March 31, 2005, Iraq had  accessed $436 million of the available amount. Overall, the U.S. program in these sectors has accomplished  activities that focused on essential services restoration, such as  refurbishing and repairing oil facilities, increasing electrical generating  capacity, restoring water treatment plants, and expanding the availability of  basic health care. Implementation of the U.S.  reconstruction program in these sectors continues to face challenges, such  as security, sustainability, and the measurement of program results. Of the  $2.7 billion in appropriated funds for the oil sector, the United States had  obligated about $2 billion and disbursed $1.1 billion, as of March 31, 2005. Iraq’s overall power generation was lower through May 2005 than before  the 2003 conflict, although power generation exceeded this level for the  latter part of June 2005. Assessment

Although some progress has been made in rehabilitating many Iraqi electric  facilities as of May 2005, electricity production in Iraq was lower than  before the March 2003 conflict. Progress in the Water Sector Is Difficult to Measure and Some Completed Projects Are Not Functioning

U.S. reconstruction efforts in the water and sanitation sector focus on  improving Iraq’s potable water, sewage, and sanitation systems. The United  States has provided about $866 million in appropriated funds for health  activities to reestablish, restore, and expand the availability of health care  in Iraq. Further efforts to improve hospitals and clinics, procure equipment, and  provide training are under way. Conclusions

The United States, along with its coalition partners and various  international organizations and donors, has undertaken a challenging and  costly effort to stabilize and rebuild Iraq. In addressing the amount of U.S. funds that have been appropriated,  obligated, and disbursed for the Iraq reconstruction effort, we collected  funding information from the Department of Defense (DOD), including the  Project and Contracting Office (PCO), the U.S. Army Corps of Engineers  (USACE), and others; Department of State; the Department of the Treasury;  U.S. Agency for International Development (USAID); and the Coalition  Provisional Authority (CPA).
Why GAO Did This Study

Rebuilding Iraq is a U.S. national security and foreign policy priority and constitutes the largest U.S. assistance program since World War II. Billions of dollars in grants, loans, assets, and revenues from various sources have been made available or pledged to the reconstruction of Iraq. The United States, along with its coalition partners and various international organizations and donors, has embarked on a significant effort to rebuild Iraq following multiple wars and decades of neglect by the former regime. The U.S. effort to restore Iraq's basic infrastructure and essential services is important to attaining U.S. military and political objectives in Iraq and helping Iraq achieve democracy and freedom. This report provides information on (1) the funding applied to the reconstruction effort and (2) U.S. activities and progress made in the oil, power, water, and health sectors and key challenges that these sectors face.

What GAO Found

As of March 2005, the United States, Iraq, and international donors had pledged or made available more than $60 billion for security, governance, and reconstruction efforts in Iraq. The United States provided about $24 billion (for fiscal years 2003 through 2005) largely for security and reconstruction activities. Of this amount, about $18 billion had been obligated and about $9 billion disbursed. The State department has reported that since July 2004, about $4.7 billion of $18.4 billion in fiscal year 2004 funding has been realigned from large electricity and water projects to security, economic development, and smaller immediate impact projects. From May 2003 through June 2004, the Coalition Provisional Authority (CPA) controlled $23 billion in Iraqi revenues and assets, which was used primarily to fund the operations of the Iraqi government. The CPA allocated a smaller portion of these funds--about $7 billion--for relief and reconstruction projects. Finally, international donors pledged $13.6 billion over 4 years (2004 through 2007) for reconstruction activities, about $10 billion in the form of loans and $3.6 billion in the form of grants. Iraq had accessed $436 million of the available loans as of March 2005. As of the same date, donors had deposited more than $1 billion into funds for multilateral grant assistance, which disbursed about $167 million for the Iraqi elections and other activities, such as education and health projects. The U.S. reconstruction effort in Iraq has undertaken many activities in the oil, power, water, and health sectors and has made some progress, although multiple challenges confront each sector. The U.S. has completed projects in Iraq that have helped to restore basic services, such as rehabilitating oil wells and refineries, increasing electrical generation capacity, restoring water treatment plants, and reestablishing Iraqi basic health care services. However, as of May 2005, Iraq's crude oil production and overall power generation were lower than before the 2003 conflict, although power levels have increased recently; some completed water projects were not functioning as intended; and construction at hospital and clinics is under way. Reconstruction efforts continue to face challenges such as rebuilding in an insecure environment, ensuring the sustainability of completed projects, and measuring program results.