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Cablegate: Iraq Fy08 Report On Fiscal Transparency

VZCZCXRO0507
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #0717/01 0701548
ZNR UUUUU ZZH
R 101548Z MAR 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 6166
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 000717

SIPDIS

SENSITIVE
SIPDIS

EEB/IFD/OMA FOR ASNOW AND RFIGUEROA
NEA/RA FOR JPALLARES AND JSCOVITCH

E.O. 12958: N/A
TAGS: ECON EAID EFIN PREL PGOV IZ
SUBJECT: IRAQ FY08 REPORT ON FISCAL TRANSPARENCY

REF: STATE 16737

1. (U) As requested in reftel, Embassy Baghdad's submission
for the congressionally-mandated report on fiscal
transparency for countries receiving USG assistance follows:

2. (SBU) Begin text: The Government of Iraq (GoI) recently
reiterated its commitment to fiscal transparency in the
U.S.-Iraq Dialogue for Economic Cooperation's Joint
Communique issued February 28, 2008. The text of the 2008
federal budget law, which the Presidency Council endorsed on
February 27, is available in Arabic on the internet
(www.iraqpresidency.net). The GoI underscored its commitment
to financial transparency by signaling its intent to join the
Extractive Industries Transparency Initiative (EITI)
Secretariat in February 2008.

SIPDIS

3. (SBU) Regulations governing Iraq's public financial
management stem from the 2004 Financial Management Law, which
stipulates a number of measures aimed at fostering
transparency and ensuring accountability of public finances.
The GoI's adherence to these measures has been inconsistent,
due primarily to capacity constraints. Sectarian-based
political rivalries further exacerbate attempts within the
government to foster greater fiscal transparency.

4. (SBU) The primary responsibility for ensuring the
Development Fund for Iraq (DFI), into which all petroleum
revenues are deposited, is used in a transparent manner for
the benefit of the Iraqi people rests with the International
Advisory and Monitoring Board (IAMB) for Iraq, pursuant to
United Nations Security Council Resolutions 1483, 1546, 1637,
and 1790. Beginning in 2009, the IAMB's oversight authority
will be transferred to the Iraqi Committee of Financial
Experts (COFE), established by the Council of Ministers in
October 2006 to exercise oversight over petroleum revenues,
working alongside the IAMB. According to IAMB, COFE, chaired
by the President of the Board of Supreme Audit, is
independent, competent and professional.

5. (SBU) Several efforts are underway to strengthen public
financial management, helping Iraq meet the goals set in the
International Compact with Iraq. The World Bank has supported
the GoI to undertake a Public Expenditure and Institutional
Assessment (PEIA) to outline steps for strengthening the
accountability and transparency of public finance
institutions and policies. The Bank is now in the process of
working with the GoI to define a broad public finance
management reform program that will take into account the
efforts of various international partners, and will be
implemented over the next several years. Additionally, with
World Bank funding and technical assistance, the GoI's
Central Organization for Statistics and Information
Technology (COSIT) completed in 2007 a nationwide
socioeconomic household survey, the results of which are
anticipated to be released in mid to late 2008. The first
survey of this type to be conducted in Iraq since 1993, it
will examine income, expenditures, and living standards, and
provide the basis for a new consumer price index (CPI) with
updated statistical weights.

6. (SBU) USAID has been working on the development and
installation of the Iraqi Financial Management Information
System. To date, Iraq has depended on its pre-2003 legacy
paper ledger system. The absence of timely and reliable data
impedes Iraq's ability to effectively manage budget planning,
monitoring, and expenditure. Although work was suspended
after five USAID contractors were kidnapped from a Ministry
of Finance building in May 2007, efforts resumed in
mid-January 2008 with renewed commitment by Iraq's Minister
of Finance and an memorandum of understanding (MOU) outlining
U.S. and Iraqi responsibilities. USAID is also supporting a
census of public sector employees to promote greater payroll
transparency and identify and eliminate possible ghost
employees. The anticipated completion date for the census is
mid-2008, and the eventual goal is to computerize the payroll
and establish a bank transfer system for wage payments.

7. (U) USAID's Tatweer project is a USD 200 million,
three-year program that works to build the capacity of 11 key
Iraqi ministries and four executive offices within the GoI.
Tatweer focuses on three result areas: 1) improving the
skills of public administration managers; 2) improving
systems and processes in key ministries and the Prime
Minister's Office; and 3) expanding the GoI's public
administration training capacity. As a capacity building
project, Tatweer is promoting the establishment of systems
and procedures that increase transparency and accountability,
with Ministry Engagement Teams encouraging ministries to use

BAGHDAD 00000717 002 OF 002


policies that prevent corruption. To this end, an
transparency fostering component is built into all of
Tatweer's core training classes.

8. (U) Finally, Tatweer has a stand-alone corruption
combating component that focuses on providing assistance to
the inspectors general (IG's) inside the GoI's ministries.
Over the next 12 months, Tatweer will engage the offices of
the IG's to ensure that they have a clear understanding of
their roles and function; to strengthen communications
between IG offices and automate audit and inspection reports;
and finally to strengthen IG organizational development
skills and enhance the function of the IG Association to
ensure sustainability. End text.
CROCKER

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