A new report by the U.S. Government Accountability Office isn't sure. Its attempt to measure the Iraqi government's ability to put its capital budget into motion was frustrated by "widely disparate" numbers from the U.S. State and Treasury departments and the Iraq Ministry of Finance.

The State Department said Iraq's central government spent 24 percent of its capital budget through July 15, 2007. The Treasury Department pegs it at 4.4 percent through August.

"The disparity between the different sets of data calls into question their reliability and whether they can be used to draw firm conclusions about the extent to which the Iraqi government has increased its spending on capital projects in 2007, compared with 2006."

The Treasury Department told GAO delays due to violence and sectarianism and increases in the cost of executing the capital budget turns off prospective contractors. And there are fewer available workers because the war has created a massive refugee crisis; those who worked under the Saddam Hussein regime were blacklisted. And, the GAO is told by U.S. and foreign officials, Iraq's institutional capacity to execute the budget is weak.

Iraq's Oil Ministry spent less than 3 percent of its $3.5 billion capital budget in 2006; the entire government that year spent only 22 percent. This prompted President Bush to direct U.S. efforts at increasing such capacity as part of the famed "benchmarks."

Iraq has the third-largest proven oil reserves in the world and, according to the State Department's Iraq Weekly Status Report, oil exports brought in $41 billion in 2007 -- funding the entire year's budget.

Oil production has averaged 2 million barrels per day since the war began, and has recently been increasing, though far below what the reserves can handle. It needs tens of billions of dollars of investment to fix the harm done by Saddam, U.N. sanctions and three decades of war and move the sector forward.

The Oil Ministry received nearly $2.4 billion in for 2007 capital spending, the largest share.

"According to the unofficial data reported by the U.S. administration, as of July 15, 2007, the Ministry of Oil spent $500 million on capital projects, which is 21 percent of the ministry's $2.4 billion capital projects budget. This reported level of spending has already surpassed the ministry's total for 2006," the report said. The "official data," however, says the Oil Ministry only spent $270,000, or .01 percent, of its capital budget through August.

The Oil Ministry's expenditure data may also include funds in its capital budget it didn't spend, but rather redirected to subsidiaries in charge of spending it, according to the U.S. Special Inspector General for Iraq Reconstruction.

"What makes it even more elusive," Joseph Christoff, director of international affairs and trade at GAO, told United Press International, "is that in the most critical sector in Iraq we're not sure how much money is being reinvested into that sector by the government."

The Iraq Oil Ministry said it signed $558.3 million in contracts in 2007 to fix and enhance oil and gas fields and refineries and, between January and October, spent 18.5 percent of its capital budget, Dow Jones Newswires reports. It noted, however, that the Ministry wouldn't divulge any details on the contracts.

Christoff said a draft GAO report, using data through June 30, 2007, was given to the State and Treasury departments for review. State responded with the July 15 data -- used in the September "benchmarks" report -- showing much improved spending. Treasury's response, however, showed data through August that contradicted it.

"The unofficial data that the administration used in the report to Congress do not portray a full and accurate picture of the situation," the GAO report said. "We compared these data with official Ministry of Finance data to assess the extent to which the Iraqis had spent their capital projects budget. Since the spending gap between the administration's unofficial data and the Ministry of Finance's official data is strikingly large, we recommend that the Department of Treasury work with the Ministry of Finance to reconcile these differences."

Christoff said Treasury agrees with its recommendations.

"Official" data is the 2007 capital budget that the Ministry of Finance could verify was spent, Christoff said. The "unofficial" data, which is used by the Bush administration to further claim of progress, combines capital budget spending with money allocated in 2006 but spent in 2007 and money that is expected to be spent.

"I can understand why they went to this unofficial data �� it was not caveated at all," Christoff said. "It should not have been presented as expenditures spent."

"The assessment of Iraqi budget execution in the September benchmarks report was based on the most recent Finance Ministry data available. Our embassy in Baghdad is working closely with the Ministry to improve data on budget expenditures," a White House official told UPI. "Iraq has made steady progress in executing its capital budget, and we continue to support its efforts to spend more on economic reconstruction needs. It spent more in capital expenditures in the first nine months of 2007 than it did in all of 2006, and its draft budget for 2008 allots more than $13 billion for capital expenditures, 30 percent more than 2007."

Joanne Moore, a spokeswoman for the State Department, told UPI capital spending is "crucial for improving the provision of the central services to the Iraqi people, and we welcome GAO's attention to this critical issue."

"However, we believe GAO did not adequately report the significant progress Iraq has made on executing its budget over the previous year. We expect continued, sustained improvement in 2008."

The GAO report acknowledged the new programs instituted by the State and Treasury departments but said they haven't been active long enough to qualify success.

Both State and Treasury said the new International Monetary Fund-mandated accounting procedures led to capital spending being spread throughout the budget, which isn't reflected in the 4.4 percent. The GAO report said neither provided "evidence" to back that assertion.

A congressionally mandated Defense Department report released last month said the Iraq Oil Ministry spent $727 million of its capital budget through Nov. 1, 2007, and overall Iraq's central government spent 36 percent.

"We are predicting that when the final tallies are done in a month or two from 2007, we will have hit and may have exceeded 60 percent of the capital budget," a senior State Department official told The Washington Post.

"We just don't understand how State could be projecting 60 percent for 2007," Christoff said. "I don't know, I can't figure out where that 60 percent could come from."

(e-mail: [email protected])

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