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