Another Report on Iraq, Another Round of Headaches for U.S.

By Walter Pincus
Monday, August 6, 2007

Buried deep within the 209 pages of the latest report by the Special Inspector General for Iraq Reconstruction (SIGIR), released last week, are a raft of problems illustrating how much remains to be done if the United States is to leave behind a functioning government in Iraq.

Consider the simple issue of how the government in Baghdad spends the money allocated in its budget. When it came to salaries of government employees, 99 percent of allocated funds in 2006 were paid out. But on capital spending for critical oil, electricity, water and education projects, only 22 percent of allocations were spent. The Ministry of Oil, for example, was budgeted $3.5 billion for capital expenses last year but spent only $90 million.

One basic problem is the Iraqi procurement process, in which a lack of rules "causes confusion among ministry officials and creates opportunities for corruption and mismanagement," according to a recent Government Accountability Office study, which SIGIR cites in its report. If a government ministry is awarding a contract exceeding $5 million, review by a High Contracts Committee is required. If the contract is approved, the ministry must apply for a letter of credit through the Finance Ministry to obtain the cash to pay for the contract. The Finance Ministry, in turn, must go through two other banks -- including some outside Iraq -- to get the needed cash.

Yes, Iraqi contracts are all paid out in cash. As Stuart W. Bowen Jr., the head of SIGIR, put it Tuesday in an appearance before the House Budget Committee, Iraq has a cash economy, and "helping them on budget execution [is] absolutely job one."

Major U.S. groups are helping to establish a new banking system: The Federal Reserve Bank of New York is working to strengthen Iraq's central bank; the U.S. Embassy is teaching key ministries to carry out planning, budgeting and training; and a special $20 million program to strengthen budget execution is underway.

Corruption remains so high that SIGIR considers it a "second insurgency," and it spawned three government anti-corruption bodies: the Board of Supreme Audit, the Commission on Public Integrity and Iraqi Inspectors General.

According to SIGIR, the Commission on Public Integrity is pursuing hundreds of public corruption cases involving "illegal payments, unauthorized transfer of vehicles and apartments, stolen government funds, massive fraud, corruption in Iraqi ports, misspending, and the diversion of government funds to militias."

But, the SIGIR report notes, "institutional and legal hurdles" continue to undercut such efforts. As reported previously in Fine Print, the commission's prosecution of present or former Iraqi ministers or their employees requires approval of the minister involved, under an old Saddam-era law reinstated by Prime Minister Nouri al-Maliki.

And the anti-corruption forces have their own troubles. SIGIR reports that a recent peer review of the Iraqi inspectors general resulted in two out of 15 being relieved of duty because of poor evaluations.

National security and intelligence reporter Walter Pincus pores over the speeches, reports, transcripts and other documents that flood Washington and every week uncovers the fine print that rarely makes headlines -- but should. If you have any items that fit the bill, please send them

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