IRAQ FY08 REPORT ON FISCAL TRANSPARENCY

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