The CPA did not dissolve the Ministry of Interior. Although Iraq’s Security Budget Has Grown, the United States Continues to Fund a Significant Portion of Iraq’s Security Needs

The 2007 increase in Iraq’s security budget is attributable to increases in  planned expenditures and an appreciation of the Iraqi currency against the  U.S. dollar. Given Iraq’s continued difficulties in  spending funds for these items, DOD has requested $5.8 billion in  additional funds to help purchase these critical items and provide other  assistance to Iraq’s security ministries. Reported Increase in Iraq’s 2007 Security Budget Is Partially Attributable to Exchange Rate Appreciation

DOD’s March 2007 report to Congress stated that the 37-percent increase  in Iraq’s 2007 security budget is evidence of Iraq’s growing self-sufficiency  and commitment to security. For example, the Ministry of Defense’s 2007 budget for capital  goods—including weapons, ammunition, and vehicles—will decrease  whether using a constant exchange rate (17 percent) or appreciated  exchange rate (2 percent). DOD has asked for an additional $5.8  billion to develop the Iraqi security forces in its fiscal year 2007  supplemental request and the fiscal year 2008 Global War on Terror budget  request (see table 3). Iraq Faces Personnel and Logistical Challenges in Developing its Security Ministries’ Management Capabilities

Iraq’s security ministries face numerous challenges if they are to more  effectively direct and sustain Iraq’s security forces. In addition, a 2006 Foreign Military Sales  (FMS) agreement with Iraq will enable the security ministries to bypass  their ineffective procurement systems and purchase needed equipment  and supplies directly from the United States, according to U.S. officials. In addition, the security ministries have difficulties  in accounting for their equipment. As of March 2007, the U.S.-led coalition had assigned  215 military, civilian, and contracting personnel to advise Iraqi staff at the  MOD and MOI on establishing plans and policies, budgeting, and managing  personnel and logistics. In December 2006, the government of Iraq transferred $1.9  billion into an Iraqi account for FMS purchases. However, in  the long term, it is unclear whether Iraq’s use of the FMS program will  contribute to the ministries’ capacity to improve their inefficient  procurement and contracting systems. Conclusion

DOD expects that the Iraqi government will be capable of sustaining its  security forces by 2008. Agency Comments

The Multinational Security Transition Command-Iraq provided comments  on a draft of this statement. The government of Iraq  has clearly recognized its inability to responsibly make procurements on  behalf of its military and police forces and so has entered into a $1.7  billion Foreign Military Sales Agreement with 2006 funding. We anticipate  that another $1.55 billion investment into United States FMS this calendar  year.”
We added information in this statement to reflect MNSTC-I’s comments. However, both DOD and GAO agree that it will take considerable time and  resources to address the challenges the U.S. and Iraqi governments face in  developing fully functioning security ministries and capable Iraqi forces. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

In November 2005, the President issued the National Strategy for Victory in Iraq. According to the strategy, victory will be achieved when Iraq is peaceful, united, stable, secure, well integrated into the international community, and a full partner in the global war on terror. To help Iraq achieve this, the U.S. is, among other efforts, helping strengthen the capabilities of the Iraq Ministries of Defense and Interior (police forces) so they can assume greater responsibility for the country's security. The United States has provided about $15.4 billion to develop Iraqi security forces and institutions. In this testimony, GAO discusses preliminary observations on (1) U.S. and Iraqi funding to develop and sustain the Iraqi security forces, and (2) key challenges the United States and Iraq face in improving the security ministries' operations and management. This statement is based on prior GAO reports, recent fieldwork in Iraq and Department of Defense, U.S. Treasury and Embassy budget documents. GAO added information to this statement in response to comments from Multinational Security Transition Command-Iraq. We completed the work in accordance with generally accepted government auditing standards.

What GAO Found

In March 2007, DOD reported that Iraq will increase its 2007 security budget from $5.4 billion to $7.3 billion (a 37-percent increase). DOD states this increase provides evidence of the country's growing self-sufficiency and commitment to security. However, our analysis shows that some of this increase is due to the appreciation of the Iraqi dinar against the dollar. Using a constant exchange rate, Iraq's 2007 security budget grows by 15 percent. Also, Iraq faced problems spending its 2006 security budget. As of November 2006, the Iraq Ministry of Defense had spent only about 1 percent of its capital goods budget for weapons, ammunition, and vehicles. DOD has requested $5.8 billion in additional U.S. funds to help purchase these items for Iraq and provide assistance to its security ministries. The United States and Iraq face personnel and logistical challenges in developing ministries that can sustain Iraq's growing security forces. For example, the ministries have inadequate systems to account for personnel and inexperienced staff with limited budgeting and technology skills. Also, both security ministries have difficulties acquiring, distributing, and maintaining weapons, vehicles, and equipment. The U.S.-led coalition has provided significant resources to develop Iraq's security forces and has 215 military and civilian advisors at the ministries. The United States signed a foreign military sales agreement with Iraq that, according to U.S. officials, allows Iraq to bypass its ineffective procurement systems to purchase equipment directly from the United States. Iraq has deposited $1.9 billion into its account for foreign military sales. However, it is unclear whether this program will help improve the ministries' procurement and contracting capacity.