Audit 

Report 

Accountability and Control of 

Materiel Assets of the 

Coalition Provisional Authority in Kuwait 

Report Number 05-002 October 25, 2004 

Office of the Inspector General 

Coalition Provisional Authority 
COALITION PROVISIONAL AUTHORITY 

OFFICE OF THE INSPECTOR GENERAL

400 Army Navy Drive • Arlington, Virginia 22202

October 25, 2004 

MEMORANDUM FOR DIRECTOR, DEFENSE CONTRACT MANAGEMENT AGENCY 

SUBJECT: Accountability and Control of Materiel Assets of the Coalition Provisional 

Authority in Kuwait (Report No. 05-002) 

We are providing this audit report for your review and comment. We considered 

management comments on a draft of this report when preparing the final report. We performed 

the audit in accordance with our statutory duties contained in Public Law 108-106 which 

mandates the conduct of audits relating to the treatment, handling, and expenditure of funds by 

the Coalition Provisional Authority or its successor entities on Iraq reconstruction, and of the 

programs, operations, and contracts carried out in utilizing such funds. 

DoD Directive 7650.3 requires that all recommendations be resolved promptly. 

Comments from the Deputy Director, Defense Contract Management Agency were not 

responsive to Recommendations 1. and 2. Therefore, we request additional comments on 

Recommendations 1. and 2. within 10 days of the date of this report. 

We appreciate the courtesies extended to the audit staff. For additional information on 

this report, please contact Mr. Brian M. Flynn at (703) 343-9440 or Mr. Robert M. Murrell at 

(703) 428-0240. We will provide a formal briefing on the results of the audit, if desired. See 

Appendix E for the report distribution. 

 Stuart W. Bowen, Jr. 

 Inspector General 

 Coalition Provisional Authority 

 Office of the Inspector General 
i 

Office of the Inspector General 

Coalition Provisional Authority 

Report Number 05-002 October 25, 2004 

 (Project No. D2004-DCPAAL-0009.02) 

Accountability and Control of 

Materiel Assets of the 

Coalition Provisional Authority in Kuwait 

Executive Summary 

Introduction. This report is the second in a series resulting from our review of the 

management of the Logistics Civil Augmentation Program (LOGCAP) III contract and the 

associated Task Order 0044. This report discusses accountability and control of materiel 

assets in Kuwait used to support the Coalition Provisional Authority. 

The Department of the Army issued contract number DAAA09-02-D-0007, LOGCAP III1

 on 

December 14, 2001, to Brown and Root Services, a division of Kellogg Brown and Root, Inc.

(KBR). The LOGCAP III contract provides civilian augmentation for base operations and 

supports U.S. Army operations on a global basis. Task Order 0044 was issued by the 

Department of the Army to KBR on March 6, 2003, to provide logistics and life support 

services for the Coalition Provisional Authority Regional Offices located in the North, 

Central/Main, South Central, and the Southern areas of Iraq and for specified Coalition 

Provisional Authority satellite locations. As part of Task Order 0044, KBR property records 

show they managed 3,032 items valued at more than $3.7 million in Kuwait. 

Objective. The objective of the audit was to evaluate the effectiveness of policies, 

procedures, and property accountability measures used to account for and control materiel at 

Coalition Provisional Authority branch offices, headquarters, and warehouse locations. 

Results. We projected that KBR could not account for 1,297 (42.8 percent) property items 

from an inventory of 3,032 records valued more than $3.7 million. Further, we projected that 

108 (3.6 percent) property items were on-hand but were not recorded on hand receipts. In 

addition, we projected that 401 (13.2 percent) hand receipts were not on file or had not been 

prepared. As a result, we projected that property valued at more than $1.1 million was not 

accurately accounted for or was missing. 

Recommendations. We recommend the Commander, Defense Contract Management 

Agency, Iraq, reevaluate the KBR LOGCAP III property control system to determine that 

procedures exist to ensure the accuracy and effectiveness of the system and have been 

properly implemented by KBR, and, if not, identify corrective actions to be taken by KBR 

and suspend approval of the system until those corrective actions have been implemented; 

ensure that an accurate property control system analysis is performed after ongoing corrective 

actions are completed and conduct a thorough review of Coalition Provisional Authority 

property in Kuwait and Iraq to locate the unaccounted for or missing property; and upon 

completion of the review, seek to recover the cost of missing equipment from the responsible 

personnel. Further, we recommend the Commander, Defense Contract Management Agency, 

Iraq, initiate appropriate recovery actions from KBR, if it failed to fulfill its contractual 

obligations. 

 

1

 The first LOGCAP contract was awarded to KBR in 1992. The second LOGCAP contract was awarded to 

Dyncorp in 1997. Both LOGCAP I and II were awarded for a term of 5 years, whereas the LOGCAP III 

contract has a 10 year term. (Source: “Outsourcing War,” Business Week Online, September 9, 2003) 
ii 

Management Comments and Audit Response. The initial comments on a draft of this 

report were received from the office of the Director, Defense Contract Management Agency 

unsigned and undated. Subsequently, a signed but undated version of the management 

comments were received by facsimile. Finally, a signed and dated version of the 

management comments were received October 19, 2004, and those are included in the 

management comments section of this report as the response to the draft report. 

The Deputy Director, Defense Contract Management Agency did not concur with 

Recommendation 1. and stated that the inventoried sample of Coalition Provisional Authority 

owned items was not representative of the population and that the KBR property control 

system meets contract requirements and is in compliance. The response also stated that 27 of 

the 30 items reported as missing in the report were incorrect. We disagree. The simple 

random sample within each stratum we selected is representative of the population from 

which it was randomly selected. Further, the fact that KBR is only required to inventory the 

government property in its charge annually is not indicative of whether the procedures can 

ensure the accuracy and effectiveness of the system to support that annual inventory. Finally, 

because Defense Contract Management Agency did not provide any documentation related to 

the 27 items discussed above, we cannot clearly interpret the meaning of the events described 

in its examples. Nevertheless, at a minimum, the 27 examples cited in the response would 

appear to further confirm the inaccuracy of the KBR property book. 

The Deputy Director, Defense Contract Management Agency did not concur with 

Recommendation 2. and stated KBR 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. The 

response also stated that, if after September 30, 2004, the KBR property control system is 

found inadequate, Defense Contract Management Agency will initiate actions requiring KBR 

to submit a corrective action plan to remedy all discrepancies. We disagree. In the two 

audits we performed concerning materiel assets in Baghdad (see Appendix A) and Kuwait 

(this report), our combined results projected that property valued at more than $19.8 million 

(adjusted for rounding) was not accurately accounted for or was missing. Therefore, based 

on the results that significant amounts of property was identified as unaccounted for or 

missing and that the audit methodology was based on proper statistical sampling plans, we 

believe that Defense Contract Management Agency should have immediately initiated action 

to protect government property from potential fraud, waste, and abuse. 

The Deputy Director, Defense Contract Management Agency concurred with 

Recommendation 3. and stated it examined records-to-floor and floor-to-records in August 

2004 to verify the accuracy of information provided in the KBR property control system and 

that the review found satisfactory results for existence, location, and accuracy of recorded 

information that items had been inventoried within the last 12 months. We commend 

Defense Contract Management Agency for taking this action but because we were not 

provided a quantitative analysis plan, we are unable to determine the validity of the 

statements. Further, we cannot agree that the technique described in the management 

comments paragraph above could result in a conclusion that records were accurate for “items 

had been inventoried within the last 12 months.” 

Overall, we disagree with management’s conclusions and comments. Defense Contract 

Management Agency did not provide any information or documentation that would allow us to 

determine the validity of its position or cause us to change our recommendations. We continue 

to believe that the KBR property control system should be reevaluated and that an accurate 

property control system analysis should be performed. Therefore, we request Defense Contract 

Management Agency provide documentation associated with its statements so that we may 

determine the validity of its position. See the Finding section of the report for a discussion of 

the management comments and the Management Comments section of the report for the 

complete text of the comments. 
Table of Contents 

Executive Summary i 

Introduction 

Background 1 

Objective 2 

Finding 

Accountability and Control of Coalition Provisional Authority 

Property 3 

Appendixes 

A. Scope and Methodology 10 

B. Quantitative Analysis 11 

C. Unaccounted For or Missing Property Items in Kuwait 14 

D. Acronyms 15 

E. Report Distribution 16 

F. Audit Team Members 18 

Management Comments 

Defense Contract Management Agency 19 
1

Background 

This report is the second in a series resulting from our review of the management of the 

Logistics Civil Augmentation Program (LOGCAP) III contract and the associated Task 

Order 0044 (TO 0044). This report discusses the accountability and control of materiel 

assets in Kuwait used to support the Coalition Provisional Authority (CPA). The first 

report discussed the accountability and control of materiel assets in Baghdad, Iraq, used 

to support the CPA. 

Logistics Civil Augmentation Program. The Department of the Army (DA) issued 

contract number DAAA09-02-D-0007, LOGCAP III,1

 on December 14, 2001, to 

Brown and Root Services, a division of Kellogg Brown and Root, Inc. (KBR). This is 

an indefinite-delivery/indefinite-quantity cost-plus award-fee and an “on-call” provider 

service contract with actual costs dependent on specific requirements.2

 The LOGCAP 

contract provides civilian augmentation for base operations and supports U.S. Army 

operations on a global basis. 

When DA identifies a significant “event” or requirement for a specific service or 

commodity, it issues a Task Order under the LOGCAP contract to specifically address 

the performance requirements and contract terms for the particular event or 

requirement. The Task Order generally contains its own statement of work as well as a 

“Not to Exceed” dollar limitation. 

Task Order 0044. TO 0044 was issued by DA to KBR on March 6, 2003, to provide 

logistics and life support services for the CPA Regional Offices located in the North, 

Central/Main, South Central, and the Southern areas of Iraq and for the CPA satellite 

locations specified in the statement of work. As KBR performs the requirements cited 

in the specific TO 0044 it bills for the associated costs.

Property Control Procedures. In 2002, KBR published the LOGCAP III Property 

Control Procedures to document its property control system in support of the 

LOGCAP III contract. The property control procedures delineate the approved 

procedures for accounting, controlling, and ordering that are applicable to government 

furnished and contractor acquired property. The property control procedures require 

that KBR issue property items to users on DA Form 2062 (hand receipt) or DA Form 

3161 (temporary hand receipt) to maintain accurate property accountability. The 

property control procedures require KBR property managers to conduct periodic 

inspections of those hand receipts to ensure control of those hand receipts. An accurate 

and complete set of hand receipts is needed to ascertain the custody and location of the 

property so that KBR may perform a required 100 percent property inventory annually. 

Kuwait Location. Kuwait was the central location for receiving all items subsequently 

forwarded to locations in Iraq such as Al Hillah, Anaconda (Baghdad), Baghdad, Basra, 

and Erbil. As such, Kuwait had many temporary storage areas or “lay-down yards.” A 

lay-down yard is where items such as generators and very large containers were stored 

temporarily while those items awaited transshipment to Iraq. 

 

1

 The first LOGCAP contract was awarded to KBR in 1992. The second LOGCAP contract was awarded 

to Dyncorp in 1997. Both LOGCAP I and II were awarded for a term of 5 years, whereas the LOGCAP 

III contract has a 10 year term. (Source: “Outsourcing War,” Business Week Online, September 9, 2003) 

2

 Typical requirements associated with the LOGCAP contract include such items as providing Camp 

Operations (camp construction and maintenance, laundry, lodging, sanitation needs, subsistence, etc.), 

Force Protection (camp and personnel), and Transportation (personnel and cargo movement as well as 

vehicle motor pools).
2

Objective 

The objective of the audit was to evaluate the effectiveness of policies, procedures, and 

property accountability measures used to account for and control materiel at CPA 

branch offices, headquarters, and warehouse locations. The scope and methodology 

used to perform this audit and the prior coverage are discussed in Appendix A. The 

acronyms used in this report are shown in Appendix D and the audit team members are 

shown in Appendix F. 
3

Accountability and Control of Coalition 

Provisional Authority Property 

We projected that KBR could not account for 1,297 (42.8 percent) property items from 

an inventory of 3,032 records valued more than $3.7 million. Further, we projected that 

108 (3.6 percent) property items were on-hand but were not recorded on hand receipts. 

In addition, we projected that 401 (13.2 percent) hand receipts were not on file or had 

not been prepared. 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. As a result, we projected that property valued at more than 

$1.1 million was not accurately accounted for or was missing. 

Logistics Civil Augmentation Program Administrative 

Contracting Officer 

The U.S. Army Materiel Command designated the Defense Contract Management 

Agency (DCMA) as the LOGCAP administrative contracting officer. The duties of the 

LOGCAP administrative contracting officer include being the government property 

administrator. Federal Acquisition Regulation, Part 45, “Government Property,” 

requires the government property administrator to review and approve the overall 

accuracy, effectiveness, and implementation of the contractor’s property control 

system. 

Accordingly, DCMA reviewed and approved the LOGCAP property control system on 

January 15, 2003. In addition, DCMA was responsible for conducting a yearly 

property control system analysis. The property control system analysis review covered 

15 property management functions such as inventory records, physical inventories, and 

receiving and storage procedures. If, during the property control system analysis, the 

government property administrator finds any part of the contractor’s property control 

system to be inadequate, the contractor must take necessary corrective action before the 

system can be re-approved. 

Unaccounted For or Missing CPA Property 

We projected that KBR could not account for 1,297 (42.8 percent) property items from 

an inventory of 3,032 records valued more than $3.7 million. Further, we projected that 

108 (3.6 percent) property items were on-hand but were not recorded on hand receipts. 

In addition, we projected that 401 (13.2 percent) hand receipts were not on file or had 

not been prepared. 

Quantitative Analysis. To evaluate the effectiveness of property accountability, 

random statistical sampling was used to identify items for review and to estimate the 

differences between the KBR inventory records and the audited sample items. We 

selected our sample from an inventory population of 3,032 items valued at more than 

$3.7 million. The quantitative analysis plan and results are discussed in Appendix B. 

Property Record Accuracy. Our examination of 90 randomly selected property 

records disclosed that 30 property items could not be accounted for by KBR or were 

missing. Those property items are shown in Appendix C. The property items included 

3 generators valued at more than $172,000 and 7 vehicles valued at more than 

$219,000. We projected that KBR could not account for 1,297 (42.8 percent) property 

items from an inventory of 3,032 records valued at more than $3.7 million. 
4

Further, we confirmed that 37 of the 90 sampled property items were not on hand 

because those items had been shipped to Al Hillah, Anaconda (Baghdad), Baghdad, and 

Erbil. Although 9 of the 37 items had been shipped to Baghdad, KBR was unable to 

locate those items during the subsequent audit work we performed in Baghdad. We 

were unable to physically validate the items that had been shipped to Al Hillah, 

Anaconda (Baghdad), and Erbil due to security concerns. Items that have been shipped 

to other locations should be noted in the Kuwait property book for accountability 

purposes and recorded in the property books of the receiving locations as accountable 

property. 

Property Record Completeness. We also attempted to trace 28 on-hand property 

items from the floor to the property book. Our examination disclosed that 1 item was 

not recorded in the property book. We projected that 108 (3.6 percent) property items 

were on-hand but were not recorded on hand receipts. 

Our examination also disclosed that for 10 of 30 unaccounted for or missing items and 

11 of 90 sample items, KBR did not have hand receipts on file. KBR policies required 

that a hand receipt or temporary hand receipt be completed for all government property 

issued. The absence of a hand receipt makes it impossible or at least difficult to trace 

government property items back to the original receiver. We projected that 

401 (13.2 percent) hand receipts were not on file or had not been prepared. 

Oversight of Government Property 

Government property was not effectively managed by KBR. 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. 

Although DCMA reviewed and approved the KBR LOGCAP property control system on 

January 15, 2003, DCMA was unaware of the unaccounted for or missing property and 

the potential errors in the KBR property records. Team members from the DCMA 

Iraq/Kuwait office completed the fiscal year 2004 property control system analysis in 

February 2004. The team members concluded that KBR conducted physical inventories 

within a reasonable period of time and in accordance with the KBR property control 

procedures. The DCMA physical inventory review identified zero errors and concluded 

that KBR records and supporting documents were complete and accurate. 

Conclusion 

Our audit results do not agree with the results of the DCMA property control system 

analysis. Contrary to DCMA results, our review of the KBR property book based on 

statistical sampling techniques, as of April 2004, disclosed, in addition to the 

unaccounted for or missing property items, that 20 (67 percent) of those 30 unaccounted 

for or missing property items were last inventoried between 4 months and 11 months 

previous to our audit. Due to this discrepancy in inventory results in Kuwait, in addition 

to the discrepancy in inventory results identified in Office of the Inspector General, CPA, 

Report Number 04-011, “Audit of the Accountability and Control of Materiel Assets of 

the Coalition Provisional Authority in Baghdad,” July 26, 2004 (see Appendix A), we 

would question the validity of the DCMA approval of the KBR LOGCAP property 

control system on January 15, 2003, or, at least, the implementation of the approved 

system by KBR. 

In this audit we identified, among others, a spectrophotometer (Item no. 10 in 

Appendix C) was last “100% inventoried” or was last seen on May 30, 2003, and an 

800 kilowatt generator (Item no. 1 in Appendix C) was last inventoried or seen on July 1, 

2003. Additionally, a laptop computer and microwave oven (Items no. 12 and 27 in 

Appendix C, respectively) did not have dates recorded to identify when the last inventory 
5

was completed. Although the KBR property control procedures require only yearly 

inventories, KBR personnel stated it is KBR policy to inventory all property items once 

every three months. Consequently, we projected that property valued at more than 

$1.1 million was not accurately accounted for or was missing. 

Recommendations, Management Comments, and Audit 

Response

We recommend the Commander, Defense Contract Management Agency, Iraq: 

1. Reevaluate the Kellogg Brown & Root, Inc., Logistics Civil Augmentation 

Program III property control system to determine that procedures exist to ensure 

the accuracy and effectiveness of the system and have been properly implemented. 

If not, identify corrective actions to be taken by Kellogg Brown & Root, Inc., and 

suspend approval of the system until those corrective actions have been 

implemented. 

Management Comments. The Deputy Director, DCMA did not concur with the 

recommendation. The Deputy Director, DCMA stated that the nonconcurrence is based 

on several facts: 1) the inventoried sample of CPA-owned items is not representative of 

the population, and 2) KBR’s Property Control System meets contract requirements and 

is in compliance. According to the contract, KBR is required to inventory the 

government property on an annual basis. They have met this requirement since the 

contract’s inception and their policy to inventory items more frequently was an internal 

process they initiated and is not required contractually. 

Other factors that impacted the DCMA position were the CPA-IG sample-size selection 

and source data it used to complete the draft report. According to DCMA, CPA-IG 

used outdated information from a February 2004 property listing to define its sample 

population and to develop its audit objectives. However, the audit work for this review 

was not performed until May 2004. Further, the auditors did not pull another property 

listing query to ensure that information they used in their draft report was accurate and 

the most current information available. Therefore, they selected a sample size that was 

not representative of CPA-owned items and had inaccurate facts stated in the draft 

report. An example of the inaccuracies stated in this report is directly related to the 30 

items that the auditors reported as missing in the draft report. Specifically for that 

sample, 90% of the information reported about the items was incorrect. Below is the 

current status of the items identified as missing in the report: 8 items were not CPA 

property; 11 items had been added to the records; 2 items had Lost, Damage and/or 

Destruction of Government Property report issued; and 6 items had been transferred to 

the Iraq Property Book Office. 

Audit Response. The Deputy Director, DCMA comments are not responsive. The 

Deputy Director, DCMA provided neither documentation nor a quantitative analysis 

plan as a basis for its stated position; therefore, the accuracy of the DCMA statements 

can not be determined. We request DCMA provide documentation associated with its 

statements so that we may determine the validity of its position. 

The statement that “KBR’s Property Control System meets contract requirements and is 

in compliance” is not responsive to the recommendation. The recommendation was to 

reevaluate and ensure “procedures exist to ensure the accuracy and effectiveness of the 

system and have been properly implemented.” The fact that KBR is only required to 

inventory the government property in its charge annually is not indicative of whether 

the procedures can ensure the accuracy and effectiveness of the system to support that 

annual inventory. The response does not address this recommendation. 
6

In an audit, the sample selection and source data are not continually adjusted to 

complete the draft audit report. A statistical random sample is a one-time selection on 

an “as-of-date” from a universe or population of the items to be examined. The “as-ofdate” may be determined during the audit process or may be the most recent data 

available but it is the date for which the records are examined and conclusions are 

reached. Source data is examined to determine the accuracy of the records on that “asof-date” in which the sample items were to be recorded. The audit results represent the 

condition of the records and the items being sampled on the “as-of-date.” The audit 

results are not adjusted for events that occurred after the “as-of-date” that do not alter 

the identified condition on the “as-of-date.” For example, in an audit report, we can 

acknowledge that inventory items were found after the “as-of-date” but that fact does 

not change the condition identified in the audit results based on the “as-of-date.” 

In this particular audit, the automated listing from which the audit universe was 

established was a listing updated from the manual property book maintained by KBR. 

The audit team requested from KBR in early April the most recent property listing 

available. KBR provided a February 2004 listing that it indicated was the most recent 

property listing available. That fact alone indicates that KBR was not maintaining the 

property book in a timely manner. Therefore, if in the opinion of DCMA the property 

listing was outdated, then that occurrence was because the property book was not 

updated in a timely manner by KBR. This situation would also indicate to us that 

DCMA was unaware that the property book was not being updated in a timely manner 

by KBR. 

Further, the audit objective was developed first and the objective was to evaluate the 

effectiveness of policies, procedures, and property accountability measures used to 

account for and control materiel at CPA branch offices, headquarters, and warehouse 

locations. The date of the information did not impact the development of the audit 

objectives. 

The fact that the most recent property listing provided to the audit team was February 

2004 and the audit work was not performed until May 2004 is not relevant. For 

example, a valid audit technique may select property book data on a date many months 

previous to the date of the anticipated audit field work. That technique would be used 

to determine whether the property book entries over a period of time were reliable and 

to reconcile the sample items to a current property book listing. As for this particular 

audit, if the population represented the inventory at the end of February 2004, and the 

audit began in April 2003 (with the sample selection process), property items in the 

sample selected for audit should have supporting documentation prepared by KBR 

indicating their disposition. 

Nevertheless, in this particular audit, the simple random sample within each stratum we 

selected is representative of the population from which it was randomly selected. 

Suitable reconciliation of inventory between the population database and audit date 

should be supported by the KBR inventory accounting system. In fact, that 

reconciliation occurred on this audit as the audit team reconciled all the unaccounted 

for or missing items back to the most current KBR property book at the time of the 

audit field work in May 2004. 

Because DCMA does not provide dates of the events related to the items discussed 

above, the circumstances involving those transactions, or documentation to support that 

those events occurred, we cannot clearly interpret the meaning of the events described 

in the DCMA examples. Further, DCMA does not acknowledge that on numerous 

occasions the audit team tried to locate the property sample items with the help of KBR 

representatives in Kuwait and DCMA and KBR representatives in Iraq. Those KBR 

representatives had ample opportunities, during the course of the audit, to point out any 

data problems but did not do so. 
7

Nevertheless, at a minimum, the 27 examples cited above by DCMA would appear to 

further confirm the inaccuracy of the KBR property book. In addition, although we are 

unable to agree with the DCMA characterization of the 27 property items that DCMA 

states to be identified, DCMA still could not identify 3 items. If correct, this would 

also confirm inaccuracies in the KBR property book. We request DCMA provide 

documentation associated with its statements so that we may determine the validity of 

its position. The 27 items referred to by DCMA are discussed below. 

• “8 items were not CPA property.” We requested a current property book 

from KBR that contained CPA property items. KBR provided us with that 

property book without representing to us that the property book contained any 

property other than CPA property. If the property book contained property 

other than CPA property, we do not know whether KBR (and DCMA) was 

unaware of what type of property was contained in its property book or decided 

not to provide that information. Regardless, whether the eight items were CPA 

property or not, those items were unaccounted for or missing. We note that 

DCMA has identified an additional problem concerning the inaccuracies of the 

KBR property book. 

• “11 items had been added to the records.” DCMA does not indicate when 

the eleven items were added to the property records. Since we could not sample 

items that were not part of the records, those eleven items must have been added 

to the records at a later date. It would appear, then, that the eleven items should 

have been recorded on the property books in a timely manner as is required but 

that those items were not properly recorded. We note that DCMA has identified 

an additional problem concerning the inaccuracies of the KBR property book. 

• “2 items had Lost, Damage and/or Destruction of Government Property 

report issued.” DCMA did not provide the date the Lost, Damage and/or 

Destruction of Government Property report(s) for the two items were recorded 

in the property records. Since we could not examine source documentation that 

did not exist, the reports for the two items must have been added to the property 

records at a later date. It would appear, then, that the two items should have 

been recorded on the property books in a timely manner as is required as lost or 

damaged or destroyed but that those items were not properly recorded. We note 

that DCMA has identified an additional problem concerning the inaccuracies of 

the KBR property book. 

• “6 items had been transferred to the Iraq Property Book Office.” DCMA 

does not indicate the date(s) the six items were recorded in the property records. 

As we could not examine source documentation that did not exist, the transfer 

documentation or notation of those six items must have been added to the 

property records at a later date. It would appear, then, that the six items should 

have been recorded on the property books in a timely manner as is required as 

transferred to another location or organization but that those items were not 

properly recorded. We note that DCMA has identified an additional problem 

concerning the inaccuracies of the KBR property book. 

Given the examples provided by DCMA of items added to the property records, 

transferred from the property records, or lost, damaged, or destroyed, all of which 

apparently were not recorded on the property book at the time of the audit; we are 

unable to understand the DCMA position that the KBR property book was or is 

presently accurate. We would note, for example, that the KBR property manager was 

updating his property data files day-by-day as we identified items in the book but not 

on the floor. 

In an another example, four Toyota Land Cruiser sample items that were listed in the 

KBR February 2004 property book in Kuwait were still shown on the property book as 
8

Kuwait items as of May 2004. We were later told by the KBR property manager that 

those items had been shipped to Anaconda. We were given the shipping documents to 

prove the existence of the items but we did not physical verify those items due to 

security reasons. Nevertheless, we advised the KBR property manager to correct and 

update his property book to reflect that those items that were shown as Kuwait property 

but had apparently been shipped somewhere else. With exception of the 9 items that 

were shipped to Baghdad that KBR was unable to locate, we did not claim those items 

that were shipped to other places, but still recorded as Kuwait property, as unaccounted 

for or missing in the draft report. We did not do this because we did not physical verify 

those items due to security reasons. 

2. Ensure an accurate property control system analysis is performed after 

ongoing corrective actions are completed. 

Management Comments. The Deputy Director, DCMA did not concur with the 

recommendation. The Deputy Director, DCMA stated KBR 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. The contractors’ Property Control System was 

certified in January 2003 by DCMA personnel. Currently, KBR has until September 

30, 2004, to reconcile their inventory and submit Lost, Damage and/or Destruction of 

Government Property reports for missing items. If after September 30, 2004, the KBR 

Property Control System is found inadequate, DCMA will initiate actions requiring 

KBR to submit a corrective action plan to remedy all discrepancies. 

Audit Response. The Deputy Director, DCMA comments are not responsive. In the 

two audits we performed concerning materiel assets in Baghdad (see Appendix A) and 

Kuwait (this report), our combined results projected that KBR could not account for 

8,272 property items from an existing inventory of 23,563 records valued at $64.9 

million (adjusted for rounding). Further, we projected that 1,533 property items were 

on-hand but were not recorded on hand receipts. In addition, we projected that 6,321 

hand receipts were not on file or had not been prepared. As a result, we projected that 

property valued at more than $19.8 million (adjusted for rounding) was not accurately 

accounted for or was missing. 

As we stated in those two audit reports, this problem occurred because KBR did not 

effectively manage government property as it did not properly control CPA property 

items and its property records were not sufficiently accurate or available to properly 

account for CPA property items. 

Therefore, based on the results of two audits that significant amounts of property was 

identified as unaccounted for or missing and that the audit methodology was based on 

proper statistical sampling plans, DCMA should have immediately initiated action to 

protect government property from potential fraud, waste, and abuse. 

3. Conduct a thorough review of Coalition Provisional Authority property in 

Kuwait and Iraq to locate the unaccounted for or missing property. Upon 

completion of the review, the Defense Contract Management Agency should seek 

to recover the cost of missing equipment from the responsible personnel. Further, 

the Defense Contract Management Agency should initiate appropriate recovery 

actions from Kellogg Brown & Root, Inc., if it failed to fulfill its contractual 

obligations. 

Management Comments. The Deputy Director, DCMA concurred with the 

recommendation. The Deputy Director, DCMA stated it has completed this task. 

DCMA sent a team of experienced Property Specialists to Kuwait and Iraq in August 

2004. The specialists selected sample populations that exceeded the DoD standard 

(298 and 155 items, respectively) to examine Records to Floor and Floor to Records to 
9

verify the accuracy of information provided in the KBR Property Control System. All 

items were found during the review with the exception of a 200 kw generator at Camp 

Anaconda and within a week of the team’s return, the generator was located at Camp 

Anaconda. This review found satisfactory results for existence, location, and accuracy 

of recorded information that items had been inventoried within the last 12 months in 

accordance with proper Task Order procurement authority and ACO authorization. 

Audit Response. We commend DCMA for taking this action. However, because 

DCMA did not provide us with a quantitative analysis plan, we are unable to determine 

the validity of the DCMA statements. Further, given our discussion of the methods to 

use statistical sampling techniques in the performance of an audit, we cannot agree that 

the technique described in the management comments paragraph above could result in a 

conclusion that records were accurate for “items had been inventoried within the last 12 

months.” We request DCMA provide documentation associated with its statements so 

that we may determine the validity of its position. 

Overall, we disagree with management’s conclusions and comments. DCMA did not 

provide any information or documentation that would allow us to determine the validity 

of its position or cause us to change our recommendations. We continue to believe that 

the KBR property control system should be reevaluated and that an accurate property 

control system analysis should be performed. Therefore, we request DCMA provide 

documentation associated with its statements so that we may determine the validity of its 

position. We will work with DCMA management to reach a mutually satisfactory 

resolution. 
10

Appendix A. Scope and Methodology 

We obtained a copy of the Kellogg Brown and Root, Inc. (KBR) property book, as of 

April 2004. It contained 3,032 Coalition Provisional Authority (CPA) owned property 

items located in Kuwait. Those property items were valued at $3,739,209. We 

randomly selected for our sample (see Appendix B for the statistical plan and projected 

results), without replacement, 90 items of CPA owned property from the property book 

database and selected 28 reverse sample items from May 3 through May 27, 2004. Our 

sample contained 37 (41%) of 90 items that had been shipped to Al Hillah, Anaconda 

(Baghdad), Baghdad, and Erbil. Those shipments occurred because Kuwait was the 

central location for receiving all items subsequently forwarded to locations in Iraq. 

We also interviewed KBR managers and CPA equipment custodians to determine if all 

CPA assets were maintained on accountable records. Further, we reviewed KBR 

records to determine if an annual inventory had been completed and an individual had 

signed the hand receipt for accepting custodianship. Finally, we reviewed 

accountability procedures to record, inventory, and reconcile assets and transactions to 

test the internal controls. 

We performed this performance audit from May through July 2004 in accordance with 

generally accepted government auditing standards. 

Use of Computer-Processed Data. We relied on computer-processed data contained 

in the KBR property database file. We compared output data to physical inventories to 

validate data accuracy and reviewed output products for completeness, obvious errors, 

and reasonableness. Despite the fact the KBR property book was not complete; we 

believe the conclusions and recommendations in this report are valid when viewed with 

other available evidence. 

Prior Coverage. Office of the Inspector General, CPA (IG CPA) reports can be 

accessed over the Internet at http://www.cpa-ig.org. Specific reports related to our 

audit of the management of the Logistics Civil Augmentation Program III contract and 

the associated Task Order 0044 are listed below. 

IG CPA, Report Number 04-011, “Audit of the Accountability and Control of Materiel 

Assets of the Coalition Provisional Authority in Baghdad,” July 26, 2004. 
11

Appendix B. Quantitative Analysis

This appendix discusses two quantitative plans. The first plan discussed was to determine 

the accuracy of the inventory records and the second was to determine the accuracy of the 

inventory items on the floor versus inventory items on the property records. 

Quantitative Plan 

Objective: The audit objective is to determine the accuracy of the inventory records. 

Statistical sampling is used to identify items to review and to estimate the differences 

between audited and inventory records. 

Population: An Excel file, CPA.xls, was provided that constituted the inventory 

population of 3,032 items and representing $3,739,209 of inventory. 

Measures: The sampling plan measures for this project are the differences in the 

inventory records and the audited items that cannot be supported. 

Parameters: We agreed to use a 90 percent confidence level for each estimate. 

Sample Plan 

A single stage stratified sampling design was used. Items were stratified by inventory 

price as follows: 

Samples were randomly selected using a simple random sample without replacement 

methodology. Excel 2002 RAND() function was used to randomize the items. 90 items 

were randomly selected for the sample. 

Statistical Analysis and Interpretation 

Based on the audit results, we calculated the following accuracy on statistical projections 

for the 3,032 inventory items in the population: 

90 Percent Confidence Interval 

 Lower Bound Point Estimate Upper Bound 

Errors 

Error rate 

859 

28.3% 

1,297 

42.8% 

1,736 

57.3% 

We are 90 percent confident that the total amount of errors is between 859 and 1,736 and 

the error rate is between 28.3% and 57.3%. 

Population Sample 

Stratum $ N n $ 

> $25k 2,022,320 51 30 1,239,290 

> $2.5k <= $25k 467,972 68 30 166,205 

> $0 <= $2.5k 1,248,918 2,913 30 14,236 

Total $3,739,209 3,032 90 1,419,713 
12

90 Percent Confidence Interval 

 Lower Bound Point Estimate Upper Bound 

Error $620,942 $1,126,292 $1,631,641 

We are 90 percent confident that the total dollar error is between $620,942 and 

$1,631,641. 

Additionally, we statistically projected the total number of hand receipt errors for the 

3,032 inventory items in the population: 

 

90 Percent Confidence Interval 

 Lower Bound Point Estimate Upper Bound 

Errors 

Error rate 

20 

0.7% 

401 

13.2% 

782 

25.8% 

We are 90 percent confident that the total number of hand receipt errors is between 

20 and 782 and the error rate is between 0.7 % and 25.8%. 

Documentation, Presentation and Defense of Results 

We have provided documentation of the calculations for the working papers, and will 

assist in preparing the technical appendix information for the report. If needed, we will 

respond to questions or challenges concerning the quantitative plan, analysis, or results. 

Quantitative Plan 

Objective: The audit objective is to determine the accuracy of the inventory items on the 

floor versus inventory items on the property records. Statistical sampling is used to 

identify items to review and to estimate the differences between audited and inventory 

records. 

Population: An Excel file, CPA.xls, was provided that constituted the inventory 

population of 3,032 items. 

 

Measures: The sampling plan measures for this project are the differences in the 

inventory items audited and inventory items on the property records that cannot be 

supported. 

Parameters: We agreed to use a 90 percent confidence level for each estimate. 

Sample Plan 

A simple random sampling design was used. The population consisted of 3,032 items of 

inventory and the sample size consisted of 28 randomly selected inventory items. 

We randomly selected without replacement inventory items using a list of 100 random 

integer values between 1 and 360 representing degrees on a compass and an associated 
13

integer value between 1 and 100 representing linear distance from a center point. The 

random numbers were generated using SAS version 8. 

We randomly selected items from each audit location that was used in the book to floor 

sample. At each location, a position as reasonably close to the center point of most 

inventory items was determined. Using a hand held compass a north heading was 

determined. Positioned facing north, the next random number in sequence was chosen 

that represented the degree heading from which to choose the sample. The random 

number in the second column represented the minimum distance to walk before selecting 

an item to sample. If an inventory was not encountered at that distance the first inventory 

item encountered just beyond the distance value was selected for sampling. If the item 

was not within the scope of the audit for any reason such a client inventory being 

occupying the floor space but there was an item within the proximity, this item was 

chosen. If the compass heading and linear distance produced no items we returned to the 

central point and used the next random number in the sequence. All random selections 

began at the center point. In instances where the distance to the farthest item exceeded 

100 feet, we estimated the distance, divided the distance by 100 and used that factor to 

scale the random number distance for that location. 

Statistical Analysis and Interpretation 

Based on the audit results, we calculated the following completeness on statistical 

projections for the 3,032 inventory items in the population. We used the exact binominal 

calculation that may produce asymmetrical intervals. 

90 Percent Confidence Interval 

 Lower Bound Point Estimate Upper Bound 

Errors 

Error rate 

6 

0.2% 

108 

3.6% 

481 

15.9% 

We are 90 percent confident that the total amount of errors is between 6 and 481 and the 

error rate is between 0.2% and 15.9%. 

Documentation, Presentation and Defense of Results 

We have provided documentation of the calculations for the working papers, and will 

assist in preparing the technical appendix information for the report. If needed, we will 

respond to questions or challenges concerning the quantitative plan, analysis, or results. 
14

Appendix C. Unaccounted For or Missing 

Property Items in Kuwait 

# NOMENCLATURE 

COST 

PRICE GP_NUM INV_DATE 

HAND 

RECEIPT 

1 GENERATOR 800 KW 153,950 L053089 07/01/2003 (1) NO 

2 TRUCK UTILITY 4X4 38,775 L055269 08/25/2003 (1) YES 

3 TRUCK UTILITY 4X4 38,775 L055275 08/25/2003 (1) YES 

4 TRUCK UTILITY 4X4 38,775 L055272 08/25/2003 (1) YES 

5 TRUCK UTILITY 4X4 38,775 L055276 08/25/2003 (1) NO 

6 TRUCK UTILITY 4X2 (2) 28,330 L055029 08/21/2003 (1) YES 

7 TRUCK UTILITY 4X4 (2) 18,000 L137002 11/05/2003 (1) YES 

8 TRUCK UTILITY 4X4 (2) 18,000 L137009 11/05/2003 (1) YES 

9 GENERATOR 75 KW 14,619 L054994 08/11/2003 (1) NO 

10 METER SPECTROPHOTOMETER 6,435 L052378 05/30/2003 (1) NO 

11 GENERATOR 5 KW 3,614 L054706 07/20/2003 (1) NO 

12 COMPUTER LAPTOP 2,970 L050485 (3) NO 

13 PRINTER LASERJET (2) 2,932 L137556 12/16/2003 YES 

14 PRINTER LASERJET (2) 2,932 L137557 12/16/2003 YES 

15 PRINTER LASERJET (2) 2,932 L137555 12/16/2003 YES 

16 PRINTER LASERJET (2) 2,932 L137554 12/16/2003 YES 

17 AIR PACK 2,675 L019252 07/25/2003 (1) YES 

18 HEATER WATER 119 GAL (2) 679 L133321 02/29/2004 YES 

19 TOILET PORTABLE 438 L058110 06/23/2003 (1) NO 

20 VEST BALLISTIC SIZE 3XL 396 L110031 10/09/2003 (1) YES 

21 VEST BALLISTIC W/STEEL PLATE 3XL 396 L112661 11/08/2003 (1) YES 

22 VEST BALLISTIC W/STEEL PLATE XL 396 L111753 03/14/2004 YES 

23 SCANNER (2) 391 L133521 03/22/2004 YES 

24 VEST BALLISTIC 299 L094027 10/12/2003 (1) NO 

25 HELMET BALLISTIC SIZE L 260 L086836 09/27/2003 (1) YES 

26 HELMET BALLISTIC 165 L048378 02/10/2004 YES 

27 OVEN MICROWAVE 118 L029756 (3) NO 

28 CABINET FILE 4 DWR 116 D20382 10/15/2003 (1) NO 

29 CHAIR OFFICE ROTARY 111 D19525 10/31/2003 (1) YES 

30 TELEPHONE CELLULAR 105 L029554 07/23/2003 (1) YES 

 (1) 20 (67 percent) of the 30 unaccounted for or missing items with a 100 percent inventory date over 4 

months. 

(2) 9 items shipped to Baghdad. 

(3) 2 (7 percent) unaccounted for or missing items without a date to identify when the last 100 percent 

inventory was done. 
15

Appendix D. Acronyms 

CPA Coalition Provisional Authority 

DA Department of the Army 

DCMA Defense Contract Management Administration 

KBR Kellogg Brown and Root, Inc. 

LOGCAP Logistics Civil Augmentation Program 

TO Task Order 
16

Appendix E. Report Distribution 

Office of the Secretary of Defense 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

 Director, Program Analysis and Evaluation 

 Deputy Chief Financial Officer 

 Deputy Comptroller (Program/Budget) 

Principal Deputy Under Secretary of Defense for Acquisition, Technology and Logistics 

Inspector General, Department of Defense 

Director, Defense Procurement and Acquisition 

Director, Defense Support Office-Iraq 

Office of the Secretary of State 

U.S. Ambassador to Iraq 

Inspector General, Department of State 

Director, Iraq Reconstruction Management Office 

Department of the Army 

Assistant Secretary of the Army, Acquisition, Logistics & Technology 

 Deputy Assistant Secretary of the Army for Policy and Procurement 

Auditor General, Department of the Army 

Other Defense Organizations

Director, Defense Contract Audit Agency 

Director, Defense Contract Management Agency 

Director, Iraq Project and Contracting Office 

Other Federal Government Organizations 

Office of Management and Budget 

Government Accountability Office 

Inspector General, Department of Commerce 

Inspector General, Health and Human Services 

Inspector General, U.S. Agency for International Development 
17

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

Senate Committee on Appropriations 

Senate Subcommittee on Defense, Committee on Appropriations 

Senate Committee on Armed Services 

Senate Committee on Governmental Affairs 

Senate Committee on Foreign Relations 

House Committee on Appropriations 

House Subcommittee on Defense, Committee on Appropriations 

House Committee on Armed Services 

House Committee on Government Reform 

House Subcommittee on Government Efficiency and Financial Management, 

 Committee on Government Reform 

House Subcommittee on National Security, Emerging Threats, and International Relations, 

Committee on Government Reform 

House Subcommittee on Technology, Information Policy, Intergovernmental Relations, and 

the Census, Committee on Government Reform 
18

Appendix F. Audit Team Members 

The Logistics Management Division, Office of the Assistant Inspector General for Auditing, 

Coalition Provisional Authority, prepared this report. Personnel of the Office of the Assistant 

Inspector General for Auditing, Coalition Provisional Authority, who contributed to the 

report, are listed below. 

Brian Flynn 

Robert Murrell 

Kevin Ellenbeger 

Edward Terek 

Kayode Bamgbade 

David Griffin 

James Hartman 
19

Defense Contract Management Agency 
20
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