Status of Department of State Economic Support Fund Interagency Agreements with the U.S. Army Corps of Engineers in Iraq

SIGIR has frequently been asked why expenditure rates for the Economic Support Funds (ESF) are relatively low as compared other appropriations being used in Iraq. SIGIR analyzed ESF obligations and expenditures for three interagency agreements to better understand why this occurs. The ESF is an appropriation account authorized by the Foreign Assistance Act of 1961. Specific ESF dollar amounts are requested within the President's Budget to Congress and approved by Congress under the Department of State's International Affairs - Foreign Operations, Export Financing and Related Program (Foreign Operations), Other Bilateral Economic Assistance, budgetary account. In 2006, DoS entered into three interagency agreements with the U.S. Army Corps of Engineers (USACE) to execute programs in Iraq. The objective of this report is to determine the status of the obligations and expenditure rates for the three interagency agreements and the practices used to obligate and expend the funds. SIGIR identified three significant and interrelated issues that affect the rate of obligation and expenditure for the ESF appropriations funding these agreements. First, although the ESF appropriation is a two year appropriation, under the authority of the Foreign Assistance Act of 1961 the funds remain available for deobligation and subsequent reobligation for a period of four years after the appropriation expires. Second, although the funds identified in the agreements are obligated at the time the agreements are signed, projects are not always associated with the agreements at that time. SIGIR's review shows that USACE has not awarded contracts for $126 million from the Fiscal Year 2006 ESF appropriation (15%), and $224 million from the Fiscal Year 2007 appropriation (58%). Third, the nature and purpose of the agreements--to develop the Iraqis' capabilities--also contributes to a slower expenditure rate than would typically occur.