US firm faulted on work in Iraq

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

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.

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

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 yesterday 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 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, which continues to review how money was spent, 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 this summer found that 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 sport utility vehicles, and six laptop computers.

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

Bowen's auditors found that 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 Kuwait, initially sampling 90 items from an inventory of more than 3,000. The auditors found that 30 of the 90 items could not be accounted for, and then reviewed additional documents and projected that 1,297 of the 3,032 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 that more than 400 required hand receipts for property were not available or were not filled out.

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