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SIGIR conducts audits to determine whether programs and operations funded by the Iraq Relief and Reconstruction Fund (IRRF) are being managed efficiently, effectively, economically, and achieving the desired outcomes. SIGIR reports administratively to the Secretaries of State and Defense. In addition, SIGIR provides quarterly and semi-annual reports directly to the US Congress.

In early summer 2003, the Coalition Provisonal Authority and the International Monetary Fund separately conducted assessments that identified a need for improvements in the Government of Iraq's (GOI) budget and financial control system.

Vulnerable 

The assessment found that the GOI financial structure had limited ability to monitor Iraqi ministerial budgets and expenditures, leaving the ministries vulnerable to fraud, waste and misappropriation of funds. Further, a US Embassy official told SIGIR that the existing systems had limited planning functionality, which makes it difficult for the GOI to develop a budget.

The latest SIGIR report discusses a contract that was subsequently signed in July 2003 between the US Agency for International Development and Bearing Point, Inc. for a broad range of tasks related to economic and financial reforms for Iraq.

One of the task orders under that contract was to develop and implement a new Iraq Financial Management System (IFMIS). The new SIGIR report says although "some progress" has been reported on IFMIS, it was difficult to determine specifically what had been developed and implements and how much was spent in developing the system. Available information shows that the system development and implementation costs are over $38 million. 

SIGIR said that the Iraqi ministries had not taken ownership of the project, that there was a lack of "buy-in" and that the ministries continue to operate their Saddam-era financial system alongside the new system. Iraqi user requirements have not been identified and incorporated in the system’s development.

Not compatible 

The report says that there was a lack of understanding of the existing Iraqi financial and business processes before and during the installation of the proposed new system. The Iraqi government has a distinctive accounting system, a unique combination of cash and accrual accounts, that is not easily adapted into the IFMIS system.

"According to US Embassy officials, the Ministry of Finance continues to use its legacy system for overall budget and accounting, "nobody noticed" when IFMIS was down for a month, and no one relies on IFMIS to produce reports," SIGRIS reports. 

Other ministries, such as Interior and Defense, have developed their own financial management information systems, which are not compatible with IFMIS and cannot transfer financial data from one system to another.

"As a result, the agency personnel must manually input financial data via terminals in the various ministries," according to SIGRIS. 

In May 2007, the BearingPoint project leader and four of his security guards were kidnapped from the Ministry of Finance building and have not been recovered. The work on the budget and procurement modules has since been halted.

In July 2007, the US Embassy ordered the suspension of the IFMIS project pending clarification of Iraqi government support for the system. At present, the Embassy does not have a firm plan or strategy for addressing the next steps in the development of the system.   

On Monday, a report found that the State Department mismanaged a $1.2 billion contract for Iraqi police training to the point that it was unable to tell what it got for the money spent. 

• Special Inspector General for Iraq Reconstruction (SIGIR)