Audit: Halliburton lost track of government property in Iraq

WASHINGTON - A third or more of the government property Halliburton Co. was paid to manage for the U.S.-led Coalition Provisional Authority in Iraq could not be located by auditors, investigative reports to Congress show.

Halliburton's KBR subsidiary "did not effectively manage government property" and auditors could not locate hundreds of CPA items worth millions of dollars in Iraq and Kuwait this summer and fall, Inspector General Stuart W. Bowen reported to Congress in two reports.

Bowen's findings mark the latest bad news for Vice President Dick Cheney's former company, which is the focus of both a criminal investigation into alleged fuel price gouging and an FBI inquiry into possible favoritism from the Bush administration.

The Associated Press reported Wednesday that FBI agents have extensively interviewed an Army contracting officer who last month went public with allegations that the Bush administration was improperly awarding contracts to Halliburton without competitive bidding.

Halliburton and the Pentagon deny wrongdoing, and say they are cooperating in all investigations.

Company spokeswoman Cathy Gist said Friday that KBR recently conducted a "wall-to-wall" review of all property it is managing for the Pentagon in war zones including Iraq and Afghanistan and produced results far better than Bowen's findings.

"We are pleased to report that this total inventory review confirmed 99.4 percent accountability of all property," she said. "The facts show that KBR has adequately managed property for this mission by aggressively monitoring its property management functions - above and beyond what is required."

The U.S-backed CPA officially dissolved after a year in power in Baghdad when an interim Iraqi government took control of the country this summer. But Bowen's office continues to review how money was spent and it gave a tough assessment of KBR's performance.

KBR won a key logistics contract to manage everything from trucks and generators to computers.

Bowen reported that an audit earlier this summer found KBR had lost track of more than $18 million worth of equipment in Iraq. Investigators could not track down 52 of 164 randomly selected items in an inventory of more than 20,000 items overseen by KBR, including two electric generators worth nearly $1 million, 18 trucks or SUVs and six laptop computers.

Pentagon and Halliburton officials have been searching since the summer for the missing items and have tracked down many of them. Some were found in the hands of "unauthorized users" and 111 vehicles had not been returned for required check-in, they said.

Bowen's auditors found the problems extended beyond Iraq's borders. More recently, auditors sought to determine how well KBR managed the inventory and supplies of the CPA offices and warehouses in neighboring Kuwait, initially sampling 90 items from an inventory of more than 3,000.

The auditors found 30 of the 90 items could not be accounted for, and then reviewed additional documents and projected a total of 1,297 of the 3,302 property items, or 42.8 percent, could not be accounted for or were missing.

The inspector general said 108 additional items were on hand but not properly recorded in inventory. The audit projected more than 400 required hand receipts for property were not available or weren't filled out.

"This occurred because KBR did not effectively manage government property: specifically, KBR did not properly control CPA property items. Further, the KBR property records were not sufficiently accurate or available to properly account for CPA property items," Bowen reported to Congress.

"As a result, the CPA-IG projected that property valued at more than $1.1 million was not accurately accounted for or was missing," it added.

Bowen's report said the Pentagon agency that managed KBR in Iraq did not agree with all of the findings, and the agency declined to force KBR to change its inventory tracking system.

The Pentagon "stated that the contractor has put an accurate property control system in place that is effective, and an analysis of the system does not need to be performed at this time," Bowen's report said.

Bowen told lawmakers the Pentagon didn't provide any information to back its conclusions. However, he said the government did agree to "conduct a thorough review of CPA property and seek to recover the cost of missing equipment from the responsible party."

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On the Net:

Latest inspector general report: http://www.cpa-ig.com/pdf/cpaig-october-30-report.pdf.

Halliburton: http://www.halliburton.com/