Global Policy Forum

By Irwin Arieff

Washington has agreed to commission a special audit of sole-source Pentagon contracts granted to Halliburton Co. and paid for with Iraqi oil money, an international watchdog agency said on Thursday. The U.S. government agreed to order the audit after complaints from the International Advisory and Monitoring Board about contracts the Pentagon awarded to Halliburton during the U.S.-led occupation of Iraq that were paid for with Iraqi funds and given out without competitive bidding. The Texas oil services firm was once headed by U.S. Vice President Dick Cheney.

The monitoring board, created by the U.N. Security Council to watch over U.S. stewardship of Iraq's natural resources during the occupation, also released an audit of Iraq's oil accounts during the final six months of the occupation. KPMG, which conducted the audit, expressed reservations about the occupation authorities' tracking of cash receipts and oil export sales.

"We expressed a qualified audit opinion on the completeness of cash receipts. We further expressed a qualified audit opinion on the completeness of export sales of petroleum and petroleum products," KPMG said in a letter to the board. The board has previously accused the Coalition Provisional Authority, which governed Iraq after the fall of Saddam Hussein up until last June, of sloppily managing billions of dollars of Iraqi oil money and moving at a glacial pace to guard against corruption.

NO-BID CONTRACTS

Halliburton has been accused of overcharging and obtaining Iraqi reconstruction contracts through political pull. Cheney's leadership of the firm between 1995 and 2000 has made it an issue in the U.S. presidential elections. The company has denied any wrongdoing and says the criticisms are motivated by politics. It said last month it was considering spinning off its KBR engineering and construction unit, at the heart of the Iraq controversy.

The Coalition Provisional Authority has never disclosed the amount of no-bid contracts awarded Halliburton from the Development Fund for Iraq, a special account set up at the Security Council's insistence to help track U.S. spending of Iraqi money during the occupation. But the firm is estimated to have won more than $1.5 billion through such contracts. In all, the occupation authority spent about $20 billion of Iraqi oil money.

The KPMG auditors, looking at the fund's operations between Jan. 1 and June 28, when the occupation ended, concluded internal control systems were insufficient to track the proceeds of oil exports as well as disbursements. It attributed the weaknesses primarily to high staff turnover, a difficult security situation and inadequate computer systems.

The audit also accused Iraqi ministries and provincial treasuries of mishandling some of the money turned over to them by the coalition authorities. In some instances, for example, contracts were awarded without any documentation or without competitive bidding. In others, records were "lost or burnt."

In a case involving $1.4 billion paid to the Kurdish regional government in northern Iraq on June 22, Kurdish authorities told the auditors none of the funds had been spent but refused to let them look at their books, KPMG said.