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Cablegate: Diyala Budget Execution Delayed by Civil Strife

VZCZCXRO9848
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #2995/01 2610627
ZNR UUUUU ZZH
R 170627Z SEP 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 9455
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 002995

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN EAID PGOV IZ
SUBJECT: DIYALA BUDGET EXECUTION DELAYED BY CIVIL STRIFE

REF: BAGHDAD 2969

BAGHDAD 00002995 001.3 OF 002


This report is Sensitive But Unclassified and for official
use only. Not for transmission outside of USG channels.

1. (U) This is a PRT Diyala reporting cable

2. (SBU) Summary: Reports on budget execution show Diyala
last or near last among provinces in regard to disbursements
against its 2006 and 2007 development budgets. Improvements
in performance are needed and PRT Diyala is working on those
it has identified. However, the major factor causing poor
budget execution was the insurgency and armed conflict that
brought normal life to a halt in Diyala for much of 2006 and
2007. Not only was project execution largely halted during
that period, but work on projects that should have been
initiated during the 2006-2007 period is now straining
resources and slowing work on new projects approved in 2008.
It is in Diyala's long-term interest to work off this backlog
gradually rather than in crisis fashion, and in the process
develop know-how and momentum to sustain smooth budget
execution for the long-term. End summary.

3. (SBU) Through July 31, 2008, reports on budget execution
show Diyala last or near last among provinces in regard to
disbursements against its 2006 and 2007 development budgets.
Diyala has still disbursed less than half of its 2006 budget
and only about 20 percent of its 2007 budget. The primary
reason for this poor performance is that, for a substantial
period in 2006-2007, Diyala was overrun with armed conflict
and insurgent attacks. Civil activity, including execution
of development projects, was non-existent. Work resumed in
late 2007, but, to this day, some projects are still on hold
because certain areas of the province are not safe for work
by contractors (reftel).

4. (SBU) This disruption further exacerbates Diyala's budget
execution problems as is it now attempting to execute three
years of projects - 2006, 2007, and 2008 - at the same time.
As a result, the province's execution resources - ministry
Directors-General (DGs) and their project oversight staffs,
governorate oversight and accounting staff, even contractors
- are stretched.

5. (SBU) It should be noted that, while Diyala's execution
rates are lower than others, they are well above zero and
increasing. Commitments are at 91 percent for 2006, 83
percent for 2007, and almost 30 percent already for 2008.
This demonstrates that the Diyala contracting system is
operating reasonably well. Disbursements, while low, are
also advancing steadily. Disbursements under the 2006 budget
more than doubled between April and June 2008. However,
contractor invoices have been piling up unpaid in the
Governorate Accounting Office for more than two months. As
soon as these are paid, the disbursement rate will jump well
over 50 percent. 2007 disbursements have gone from near zero
in April, 2008 to 20 percent at the end of July. In sum,
there is every reason to expect Diyala's budget execution
numbers to continue to rise steadily from now on. Had Diyala
not lost much of 2006 and 2007 to conflict, there is also
every reason to think that its budget execution rates would
be comparable to those of
other provinces.

6. (SBU) Looking beyond security-related delays in project
execution, Diyala confronts a number of challenges in
attempting to improve its performance:

--The GoI requirements (not unique to Diyala) to submit
paperwork and obtain approvals from the Ministry of Planning
and Development Cooperation (MoPDC to receive subsequent
tranches of funding from the Ministry of Finance ) in order
to execute capital projects.

--Lack of computerization among budget management offices.

--Lack of transparency in project accounting.

--Attempts, with strong encouragement from Coalition Forces,
to de-centralize their budget management to the equivalent of
district and local (qada and nahia) government levels.
Despite strong desire by these officials, they lack adequate
project design and management resources and their performance
has been weak. --Over-loaded project execution resources
among the Ministerial DGs used to oversee contractors as they
try to implement three years' worth of projects (2006-2008)
at the same time.

--Excessive red tape (such as the requirement for up to 20
signatures) in processing contractor invoices.

7. (SBU) PRT Diyala is working systematically with the

BAGHDAD 00002995 002.2 OF 002


provincial government to address these challenges. PRT
advisors remind Diyala government officials daily of the
importance of rapid budget execution to improve the lives of
the people of Diyala. In addition, the PRT is:

--Buying computers for the Diyala government (just completed)
and funding computer training over the coming months. Also
scheduling USAID contractor RTI to present its new provincial
budget management software (GAPTIS) for review and possible
adoption by the Diyala government.

--Encouraging the use of computerized spreadsheets for
monitoring project execution and invoice payments, and
broadening of dissemination of those spreadsheets.

--Working to stimulate dialogue among all levels of local
governance, as well as among various elements of the PRT and
ePRT, to reach consensus on budget consultation and
coordination procedures that strike a good balance between
inclusiveness and effectiveness.

--Funding additional project execution oversight staff to
work in the qadas and nahias and encouraging ministerial DGs
to seek approval from Baghdad to expand their project
management staffs.

--Encouraging Diyala government officials to try to simplify
their invoice-processing machinery (but not at the price of
transparency and resistance to corruption).

8. (SBU) Comment: Budget execution is really a synonym for
governance. Improving it means strengthening virtually all
elements of multiple levels of government. This will take
time, and PRT Diyala is working to help the Diyala government
expand its capacity and with emphasis on strengthening
management practices that will serve the governorate well
over the long term. End comment.
CROCKER

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