SUMMARY OF GOVERNMENT AUDITS AGAINST HALLIBURTON
21 March 2005
WASHINGTON, March 21 (HalliburtonWatch.org) -- The following information summarizes the audit reports released by various federal agencies regarding Halliburton's work in Iraq. Click the links for more information. For a full summary of other investigations against Halliburton, click here.
On August 2, 2002 -- seven months before the invasion of Iraq -- the Pentagon's Defense Contract Audit Agency (DCAA) reported that it had found "significant deficiencies" in Halliburton's billing methods. The audit said the deficiencies "have adversely affected the organization's ability to record, process, summarize and report billings" charged to U.S. military contracts. Information obtained in the audit was obtain by Hearst News Service, over the objections of officials at Halliburton, via the Freedom of Information Act.
In December 2003, a DCAA draft audit found that Halliburton overcharged the Defense Department by $61 million to import gasoline into Iraq from Kuwait through September 30, 2003. The minority staff of the House Government Reform Committee later determined that the total overpayment by Halliburton through April 1, 2004 was $167 million. Read the minority staff's press release here.
On December 31, 2003, a DCAA "Flash Report" audit found "significant" and "systemic" deficiencies in the way Halliburton estimates and validates costs. According to the DCAA audit, Halliburton repeatedly violated the Federal Acquisition Regulation and submitted a $2.7 billion proposal that "did not contain current, accurate, and complete data regarding subcontract costs." Source: Defense Contract Audit Agency, Audit Report No. 3311-2004K24020001 (Dec. 31, 2003). See Report from House Committee on Government Reform, Minority Staff.
On January 13, 2004, DCAA concluded that Halliburton's deficiencies "bring into question [Halliburton's] ability to consistently produce well-supported proposals that are acceptable as a basis for negotiation of fair and reasonable prices," and it urged the Army Corps of Engineers to "contact us to ascertain the status of [Halliburton's] estimating system prior to entering into future negotiations."
In a May 13, 2004, audit, DCAA reported "several deficiencies" in Halliburton's billing system that resulted in billings to the government that "are not prepared in accordance with applicable laws and regulations and contract terms." DCAA also found "system deficiencies resulting in material invoicing misstatements that are not prevented, detected and/ or corrected in a timely manner." The report emphasized Halliburton's inadequate controls over subcontract billings. The auditors "identified inadequate or nonexistent policies and procedures for notifying the government of potential significant subcontract problems that impact delivery, quality, and price" and determined that Halliburton "does not monitor the ongoing physical progress of subcontracts or the related costs and billings." Read Rep. Henry Waxman's statement on Halliburton's contracts. Read the testimony from William H. Reed, director of the DCAA.
On June 25, 2004, the U.S. Coalition Provisional Authority Inspector General (CPA IG) found that, as a result of poor oversight, Halliburton charged U.S. taxpayers for unauthorized and unnecessary expenses at the Kuwait Hilton Hotel. According to the IG, the overcharges would have amounted to $3.6 million per year.
A July 26, 2004, CPA IG audit report found that Halliburton "did not effectively manage government property" and that the company's property records "were not sufficiently accurate or available to properly account for CPA property items." The IG "projected that property valued at more than $18.6 million was not accurately accounted for or was missing." The Minority Staff of the House Committee on Government Reform issued a response to the IG's report.
In July 2004, the Government Accountability Office (GAO) found ineffective planning, inadequate cost control, and insufficient training of contract management officials under the troop logistics contract (known as LOGCAP) in Iraq. GAO reported that, when Halliburton acted as a middleman for the operation of dining halls, costs were over 40% higher. See Report from House Committee on Government Reform, Minority Staff.
In an August 16, 2004, memorandum, DCAA "identified significant unsupported costs" submitted by Halliburton's KBR subsidiary and found "numerous, systemic issues . . . with KBR's estimates." According to DCAA, "while contingency issues may have had an impact during the earlier stages of the procurements, clearly, the contractor should have adequate supporting data by now." When DCAA examined seven LOGCAP task orders with a combined proposed value of $4.33 billion, auditors identified unsupported costs totaling $1.82 billion. Read Rep. Henry Waxman's letter discussing the DCAA's August 16 memorandum.
On August 17, 2004, the Army announced it would withhold 15 percent of future payments to Halliburton because of suspicious bills. A few hours later, however, the Army announced it would not withhold those payments, but would instead give Halliburton "more time" to explain why it billed taxpayers for work that was apparently never undertaken or completed. The Army's decision was the third time it had extended the deadline for Halliburton to justify undocumented expenses, including $1.8 billion for work in Iraq and Kuwait.
On September 16, 2004, the Pentagon determined that $34.2 million (or 16 percent) of the costs associated with KBR's "Task Order 6" of the Iraqi oil infrastructure contract (RIO) were unreasonable, including $14.9 million in overcharges and $17.7 million in "unsupported" costs.
On November 10, 2004, Rep. Henry Waxman released new State Department documents that disclose efforts by senior Administration officials, including the Ambassador to Kuwait, to steer a lucrative Halliburton fuel subcontract to a favored Kuwaiti company. The documents also describe allegations of widespread bribes and kickbacks sought by Halliburton officials. One subcontractor said it's "common knowledge" that Halliburton officials are "on the take" and "solicit bribes openly" in exchange for awarding contracts.
On November 23, 2004, the Special Inspector General for Iraq Reconstruction (formerly the CPA IG) examined a $569 million LOGCAP task order and found that Halliburton "did not provide . . . sufficiently detailed cost data to evaluate overall project costs or to determine whether specific costs for services performed were reasonable." The IG concluded that the Army "did not receive sufficient or reliable cost information to effectively manage" the task order.
On February 8, 2005, the Pentagon ignored its own auditors and decided to pay $1.8 billion to Halliburton's KBR subsidiary for work that nobody can prove ever took place. The work was allegedly performed in Iraq and Kuwait under the Army's LOGCAP contract. The Army could have suspended or banned Halliburton from future contracts, but decided to take no action. In what the Washington Post called "a departure from normal policy," the Army decided to ignore its own auditors and pay KBR for all costs, plus the standard one to three percent fee, without any explanation that could justify the company's suspicious bills.
On March 14, 2005, a Pentagon audit revealed another $108 million in overcharges by KBR for delivering gasoline to Iraq. The Pentagon had previously released a redacted version of the audit to conceal the overcharge from the public, at KBR's request. Click here for the Pentagon's executive summary of the audit. Click here for the revised audit. See Rep. Henry Waxman's letter on the matter. Also see the report by HalliburtonWatch.org.
More Information:
Democratic Policy Committee Hearing
An Oversight Hearing on Iraq Contracting Abuses
Feb. 14, 2005 (Transcript (pdf))
Democratic Policy Committee Hearing
Whistleblowers: Iraq 'Wild West' Under CPA
Sept. 10, 2004 (Transcript (pdf))
House Committee on Government Reform
Three hearings in 2004: March 11, June 15 and July 22
Transcript (pdf)
(Note: This file is very large as it contains three
days of hearings)
Task orders under LOGCAP (pdf)
Task orders under Restore Iraqi Oil (RIO)
List of Halliburton's global U.S. military contract work in 2004 (pdf)
Audit Reports of the Special Inspector General for Iraq Reconstruction
The House Committee on Government Reform, Minority Office
Project on Government Oversight
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