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Pursuant to a congressional request, GAO discussed the impact of crime and corruption on the implementation of the Dayton Peace Agreement, focusing on: (1) how organized crime and public sector corruption have affected implementation of the agreement in Bosnia; (2) what the international community has done to improve Bosnia's law enforcement and judicial system and reduce corruption; and (3) how international assistance resources are being safeguarded and whether such assistance is being used by Bosnia in place of domestic revenues lost due to crime and corruption.

GAO noted that: (1) GAO found a near consensus opinion among officials GAO interviewed that endemic crime and corruption in Bosnia is threatening the successful implementation of the Dayton Peace Agreement and that until the situation is satisfactorily addressed the conditions for the complete withdrawal of the North Atlantic Treaty Organization (NATO)-led force will not be met; (2) although some of the U.S. and NATO conditions have been met, none of the progress in implementing the agreement is yet self-sustaining according to the High Representative and others; (3) Bosnian leaders from all three ethnic groups have not made a concerted effort to curb corruption and have often acted to obstruct the reform process in general; (4) Bosnia's law enforcement and judicial systems are inadequate and institutionally incapable of prosecuting cases of corruption or administering justice; (5) Bosnian, international, and U.S. efforts to correct weaknesses in these systems have achieved only limited success and have not measurably reduced political influence over the judiciary or the economy; (6) GAO found that international assistance, including U.S. assistance, is generally not being lost to fraud and corruption in Bosnia and that such assistance has been protected by a number of internal controls; (7) however, GAO did find incidents of corruption in the international assistance effort; (8) further, the assistance provided could supplant the hundreds of millions of dollars the Bosnian governments lose each year to customs fraud and tax evasion; (9) moreover, the Bosnians spend a large percentage of their revenues maintaining three competing militaries that are primarily designed to fight each other; (10) according to the High Representative, the size and structure of these forces are incompatible with the defense needs of Bosnia and are financially unsustainable; (11) the international community has provided about $407 million in budget support to cover Bosnia's budget deficits, and most of this support is not controlled or audited; and (12) consequently, the international community cannot be sure how the money it has provided is spent.