The auditors who participated in the investigation were unable to reconcile financial statements for the DFI, in large part due to the CPA's decision to use cash basis accounting, which is more difficult to track than accrual accounting.
The investigators also found poor oversight of the fund managers who were responsible for transferring payments. While examining 15 disbursement locations, the auditors found that officials routinely failed to properly document advances to paying agents and receipts. For example, officials at 14 of the sites did not even maintain a register of cleared receipts. In examining 26 paid receipts, they found 25 had no supporting invoices, and all 26 were missing one or more of the required signatures.
They determined that of $400 million available for disbursement, as much as $50 million was handed out without proper receipts. "During the review, we found that there were no supporting receipts for some invoices; receipts were cleared with limited explanations of services or materiel received; and funds were disbursed for services that were contradictory to the allowable expenses," the Inspector General said in the report.
Until the summer of 2004, the CPA refused to release the names of companies that were awarded contracts paid for with Iraqi funds. Although information was available about US funded contracts, there was no public information available about companies paid with Iraqi money. In August 2004, information was finally made available for contracts valued at more than $5 million. But to this day, no details have been released about contracts worth less than $5 million.
An analysis of the data released in August 2004, showed that the CPA had awarded 85% of the contracts to US and UK firms. By contrast, Iraqi companies received a mere 2% of the contracts paid for with Iraqi funds.
A March 18, 2004 audit report by the Department of Defense Office of the Inspector General, titled, "Acquisition: Contracts Awarded by the Coalition Provisional Authority by the Defense Contracting Command-Washington," determined that the CPA and its predecessor, the Office for Reconstruction and Humanitarian Assistance (ORHA), had circumvented federal contracting procedures since the early days of the occupation.
The audit found that federal procurement rules were not followed in 22 of 24 contracts awarded by the Defense Contracting Command and that defense department personnel conducted "inadequate surveillance" on more than half of the contracts; did not "perform or support price reasonableness determinations;" and allowed activity that was "out-of-scope" of the original contracts.
The audit said that the DoD cannot be assured that it either "provided the best contracting solution or paid fair and reasonable prices for the goods and services purchased" during the reconstruction process.
However, not only did the CPA fail to follow DoD reporting rules, it failed to follow its own rules. CPA regulation Number 2 required the CPA to retain an independent certified public accounting firm to ensure that the Development Fund of Iraq was being used transparently and for the benefit of the Iraqi people.
But instead of hiring a certified public accounting firm, the CPA awarded a $1.4 million contract to North Star Consultants, a financial services firm, to review its internal controls for the DFI. In the end, neither North Star, nor any other firm, ever performed a review, because the Comptroller "verbally modified the contract and employed the contractor to primarily perform accounting tasks in the Comptroller's office," the report said.
In response to the report, the CPA claimed the reason that North Star did not perform a review was because the contract was not signed until shortly before the CPA was dissolved. Although it acknowledged that the contract "should have been modified to reflect the change," the CPA did not bother to explain why it would award a contract to review its control of the DFI if the organization was about to be dissolved.
The truth is, that the CPA' shabby accounting procedures left all doors open to fraud, waste, bribery, and the misappropriation of funds, and nobody will ever be able to figure out what exactly happened to the Iraqi money.
But the fact remains that Halliburton received 60% of all contracts paid for with Iraqi money, even after it was proven time and time again that its projects involved fraud on every front, from paying over $6 million in kickbacks to a Kuwaiti contractor; to charging for three times as many meals as the company actually served to soldiers; to spending millions on laundry and monogrammed towels; to running up costs by driving empty trucks back and forth across Iraq; to leasing overpriced vehicles from Kuwaiti purchasing offices.
In 2003, Halliburton was delivering gasoline, through the Kuwait subcontractor, Altanmia Commercial Marketing Company, for an average price of $2.65 per gallon. In the spring of 2004, the contract was canceled and the new Iraqi Interim government gave an identical contract to Lloyd Owens International, a British company that manages 700 trucks from 7 separate subcontractors, which left Halliburton resentful toward the new company because of losing the contract.
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