1. Iraqi Budgeting ١٠١
• Iraq uses a one-size fits all template across the various Ministries.
• This generic format consists of nearly 200 separate line-items
capturing everything from satellite hook-ups to maintaining orchards.
• The underlying budgetary accounting mixes the Unified Accounting
System, Iraq’s Soviet-based accounting standards, with some
vestiges of the book-keeping found in the British Empire.
• There are five primary Chapters – or sections – that cluster
operating expenses, compensation and capital expenditures other
than building projects.
• The remaining chapters focus on inter-governmental transfers or
planning projects and lie outside of the annual budgeting exercise.
• Notwithstanding a laundry list of expense items, frequently costs
specific to the Ministry of Interior (the “Ministry” or the “MoI”) are
difficult to capture under this all purpose frame-work.
• Such hard-to-place items include sustainment costs like
warehousing expenses, life support or purchases of high technology
crime prevention equipment (i.e., back-scatter vans).

2. Chapter One: Pay me or Trade Me

3. Chapters Two & Three:
Food for Naught

4. Chapters Four and Five:
Where’s the Beef?

5. FAILURE of the 2005 BUDGET
Lack of Credibility
1. forecast of 128,000 employees; half the population of current personnel roster
2. Coalition’s de-centalization of national police force; splitting of the Finance and Administrative functions
3. omission of revised hazard duty pay levels granted in mid-2005 by order of the Prime Minister
Absence of Essential Communications to Operate De-centralized Institution
1. IRMO budget advice programmed toward centralized budgeting and accounting; lacked communication
with the field
2. failure to reconcile personnel rosters under Deputy Minister of Administration and payroll ledgers under
Deputy Minister of Finance
3. MNSTCI-sponsored paramilitary units and police training classes established outside of Ministry’s
ability to fund them immediately
Lack of Capacity to capture new and unfamiliar expense burdens
1. Key stake-holders at IRMO and within Ministry unfamiliar with the costs entailed to sustain deployments
mobile police and command units
2. Lack of institutional capacity to absorb generational leaps in policing technology
3. Poor advice from IRMO to implement stipends in lieu of more structured provision of life support
leading to up to $1 billion of costs shifting back onto MNSTCI
CONCLUSION: 2005 budget was caught “in between trains” and thus represented a hybrid of the
worst of centralized and de-centralized operations. The 2005 budget combined subsidized pricing from
a socialist régime and unreliable data from disconnected payroll accounting and personnel functions.

6. 2005 Budget History: Anatomy of a Bail-out
Annualized spending includes the following additions to salaries:
• IQD 150 billion ($103.5 million) supplemental recently passed by the Council of Ministers;
• IQD 290 billion ($200 million) of monthly subsidies from the Ministry of Finance for hazard pay;
• IQD 75 billion ($51.7 million) to be re-allocated from Chapter Five (CAPEX); as well as,
• IQD 620 billion ($427.6 million) being requested from Ministry of Finance to cover hazard duty pay.
In early 2005, MNSTCI rescued the Ministry by agreeing to:
1. Pay for supplies and CAPEX but not for salaries; and,
2. Pay for life support other sustainment costs but not for food.

7. LESSONS LEARNED FROM 2005 BUDGET PROBLEM
• De-centralize the budgeting process
• Build capacity within governorates for identifying and costing out needed
supplies, sustainment costs and support services
• Anticipate end-state police force levels for December 2006, not actual levels
at the time of budgeting
• Shift budgeting advisory to area with human and financial resources able to
infuse new budgeting practices and financial culture into the governorates
MEASURES TAKEN TO AVOID REPEAT OF BUDGET DEBACLE IN 2006
• Police Partnership Program established by CPATT (Spring 2006)
• Primary budgeting advice shifted from IRMO to CPATT (Spring 2006)
• Development of needs-based budgeting protocol by CPATT for use in the
field (Spring 2006)
• IRMO providing technical assistance in top-down evaluative financial
modeling to CPATT (Summer 2006)
• P-3 teams providing guidance and mentoring in identifying and quantifying
sustainment, capital and other needs through CPATT bottom’s-up budgeting
protocol (Summer 2006)

8. Review of New Budgeting Protocol
Ministry Ministry of Interior Contents of Budget Matrix
of Requirements Paper
Interior
2006
Chapter:
Article:
Type:
Budget
Requirements Requirement Line:
Cost:
Packet
Impact if not funded:
Pure Money:Col. Haleem Hassan / Accounting Director
Major Brian Lantz / CPATT
Major Henry Weber / CPATT
Expenditures until half-year:
Expected money spent for year:
1. 2005 Budget for expense item
2. Year-to-date expenditures
3. Build in expenses for responsibilities transitioned
by MNSTCI net of responsibilities assumed by
MNSTCI
4. Budget Balance left after expenditures adjusted
for net assumption of responsibilities
5. Projected amount to spend until end of 2005
accounting for costs not captured by 2005 budget
6. Difference of remaining Budget Balance AND
required amounts including previously uncaptured
expenses
7. Justification for additional funds to be appropriated
from government to cover shortfalls uncovered by
projecting full-cost requirements for balance of
2005
8. Annualize projected full-cost budget for 2006

9. MoI’s Credible Budget 2006

10. Revised Comparison
The revised figures in the IRMO model exclude the following obligations likely not to be
assumed by the Ministry:
1. academies in Jordan and Sulayminayah and expenses related to them;
2. voice-over inter-net protocol and other networks;
3. use of candidate screening tests and highly trained personal security details; and,
4. a national warehouse system for the Special Police.
NOTE: MoI and IRMO likely place sustainment costs in different chapters.
Talks with the MoI requires a 50% increase of hazard pay under the IRMO / CPATT model.

11. Conclusions
• The 2006 MoI budget reconciles with IRMO top-down model. The
variance in salaries has two underlying drivers: an anticipated
elevation in rank and pay integrated into the MoI budget and
inaccurate assumptions on hazard-duty pay by IRMO.
• Recent evidence suggests that the IRMO model understates
hazard pay by one-third.
• In chapters two and three, IRMO models for $255 million of life
support life support costs some of which the MoI Budget may
include in Chapter-1 as a stipend for lunch money.
• With these comments in mind, one can appreciate the extent to
which the 2006 Ministry’s budgeting abilities have progressed
under the guidance of CPATT to capture costs either excluded
from the 2005 budget or beyond the Ministry’s capacity in the 2004
planning cycle.
• The underlying explanation for the MoI’s much-improved
performance lies in training by the fielded P-3 teams and the
governorates’ willingness to apply requirements-based protocols
introduced by CPATT’s financial advisors.