OFFICE OF THE SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

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For more information, contact SIGIR Public Affairs at 

(703) 428-1100 or PublicAffairs@sigir.mil Special Inspector General for Iraq Reconstruction 

SIGIR 

Special Inspector General for IRAQ Reconstruction 

Summary of Report: SIGIR 12-017 

Why SIGIR Did This Study 

Public Law 108-106, as amended, requires the 

Special Inspector General for Iraq 

Reconstruction (SIGIR) to perform forensic 

audits and issue a final report on all funding 

appropriated for the relief and reconstruction of 

Iraq. 

A forensic audit involves the systematic 

examination of a program’s internal controls 

over expenditures and financial data for 

indications of fraudulent, wasteful, or abusive 

activities. 

This report summarizes the results of SIGIR’s 

forensic audits and investigations of Iraq 

reconstruction funds and satisfies the 

requirement for a final forensic audit report. 

Congress has appropriated about $51.4 billion 

through Fiscal Year 2011 for Iraq 

reconstruction. The funds were appropriated or 

allocated to the Department of Defense (DoD), 

the Department of State (DoS), and the U.S. 

Agency for International Development 

(USAID). The funds were appropriated to the 

Iraq Relief and Reconstruction Fund, Iraq 

Security Forces Fund, Economic Support Fund, 

Commander’s Emergency Response Program, 

and the International Narcotics Control and Law 

Enforcement account. 

Recommendations 

This report contains no recommendations. 

Management Comments 

We did not receive comments on this report. 

July 13, 2012 

FINAL FORENSIC AUDIT REPORT OF IRAQ RECONSTRUCTION FUNDS

What SIGIR Found 

SIGIR audits, inspections, and investigations have found serious weaknesses 

in the government’s controls over Iraq reconstruction funds that put billions 

of American taxpayer dollars at risk of waste and misappropriation. The 

precise amount lost to fraud and waste can never be known, but SIGIR 

believes it is significant. As of June 30, 2012, SIGIR audit reports had 

questioned $635.8 million in costs, and SIGIR Investigations, working with 

other agencies, had resulted in $176.84 million in fines, forfeitures, and 

other monetary results. 

SIGIR audit reports identified internal control weaknesses such as 

inadequate reviews of contractors’ invoices, insufficient numbers of, or 

inadequately trained oversight staff, poor inventory controls, high staff 

turnover, poor recordkeeping, insufficient price competition by 

subcontractors, and weak oversight of cash disbursements. For example, 

SIGIR’s audit of a DoS contract for Iraqi police training program support 

found that more than $2.5 billion in U.S. funds was vulnerable to fraud and 

waste as a result of poor DoS oversight. Another SIGIR audit of a DoD 

contract for warehousing and distribution services found that the contractor’s 

business systems had not been adequately reviewed. Business system 

reviews are the government’s primary control to ensure that prices paid are 

reasonable and allowable. 

Weaknesses in internal controls open the door to opportunities for fraud and 

other illegal activities. As of June 30, 2012, SIGIR investigators, working 

with other agencies’ investigators, have developed information used to indict 

87 individuals and convict 71 individuals for fraudulent activities including 

bribery, kick-backs, theft of government funds and property, inflated 

invoices, delivery of insufficient or inferior goods, and bid rigging. For 

example, a U.S. Army Captain was convicted of stealing $690,000 intended 

for security contracts and relief and reconstruction programs. A regional 

vice president of a logistics company was convicted of a scheme to inflate 

invoices for military shipments to Baghdad through the firm’s contract. The 

estimated loss to the U.S. government was approximately $1 million. 

SIGIR found few problems in the agencies’ invoice payment processes. 

SIGIR tested 180,000 DoD, DoS and USAID payment transactions totaling 

about $40 billion. SIGIR looked for problem transactions such as duplicate 

payments, payments to fictitious vendors, or inappropriate separation of 

duties of individuals in the payment process. Overall, SIGIR’s tests found 

that once invoices were approved for payment, the payments were 

essentially processed correctly and to valid vendors. However, because of 

the internal control weaknesses discussed above, government agencies 

cannot be certain that the payments were for goods and services that 

(1) were actually received, (2) met contractual specifications, (3) were in 

accordance with the contract prices, or (4) were competitively priced. 
SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

2530 Crystal Drive • Arlington, Virginia 22202 

July 13, 2012 

MEMORANDUM FOR U.S. SECRETARY OF STATE 

U.S. SECRETARY OF DEFENSE 

COMMANDING GENERAL, U.S. ARMY CORPS OF ENGINEERS 

DIRECTOR, DEFENSE FINANCE AND ACCOUNTING SERVICE 

ADMINISTRATOR, U.S. AGENCY FOR INTERNATIONAL 

DEVELOPMENT 

SUBJECT: Final Forensic Audit Report of Iraq Reconstruction Funds (SIGIR-12-017) 

We are providing this audit report for your information and use. Public Law 108-106, as 

amended, requires the Special Inspector General for Iraq Reconstruction (SIGIR) to prepare a 

final forensic audit report on all funding appropriated for Iraq reconstruction. This report 

summarizes the results of SIGIR’s forensic audits and investigations of Iraq reconstruction funds 

to satisfy the requirement for a final forensic audit report. 

We performed our forensic audits in accordance with our statutory responsibilities contained in 

Public Law 108-106, as amended, which also incorporates the duties and responsibilities of 

inspectors general under the Inspector General Act of 1978. This law provides for independent 

and objective audits of programs and operations funded with amounts appropriated or otherwise 

made available for the reconstruction of Iraq, and for recommendations on related policies 

designed to promote economy, efficiency, and effectiveness and to prevent and detect fraud, 

waste, and abuse. 

- - - - 

We appreciate the courtesies extended to the SIGIR staff throughout its forensics work. For 

additional information on the report, please contact James Shafer, Assistant Inspector General for 

Audits (Washington, DC), 703-604-0894/ fred.j.shafer.civ@mail.mil or Tinh Nguyen, Principal 

Deputy Assistant Inspector General for Audits (Washington, D.C.), (703) 604-0545/ 

tinh.t.nguyen4.civ@mail.mil. 

Stuart W. Bowen, Jr. 

Inspector General 
Table of Contents 

Introduction 1

Background 1

Objectives 4

Weak Oversight of Major Reconstruction Contracts and Programs Increased 

Vulnerabilities to Fraud, Waste, and Abuse 5

Inadequate Reviews of Contractors’ Invoices 5

Insufficient Numbers of or Inadequately Trained Oversight Staff 6

Poor Inventory Controls 7

High Staff Turnover and Poor Recordkeeping 7

Insufficient Price Competition by Subcontractors 8

Weak Oversight of Cash Transactions 9

Investigations Uncover Fraudulent Activities 11

Theft of Funds and Property 11

Inflated Invoices 12

Insufficient or Inferior Goods 13

Bid Rigging 13

Kickbacks and Bribes for Contract Awards 14

Few Problems Found with Agencies’ Payment Processes 16

Few Duplicate Payments Uncovered 16

Few Instances Where Duties Did Not Appear To Be Appropriately Segregated 17

No Instances of Questionable Vendors, Fictitious Contractors, or Suspect Addresses 17

Few Instances of Debarred/Suspended Contractors 17

Notable Variances in Payment Activity Did Not Surface Any Issues 18

Poor or Delayed Accounting for Invoices Surfaced During Date Analysis 18

Application of Benford’s Law Did Not Surface Any Issues 18
Conclusions 19

Conclusions 19

Appendix A—Scope and Methodology 20

Appendix B—Acronyms 24

Appendix C—Audit Team Members 25

Appendix D—SIGIR Mission and Contact Information 26
1 

Final Forensic Audit Report of 

Iraq Reconstruction Funds 

SIGIR 12-017 July 13, 2012

Introduction 

Public Law 108-106, as amended, requires the Special Inspector General for Iraq Reconstruction 

(SIGIR) to prepare a final forensic audit report on all funds appropriated for Iraq relief and 

reconstruction, which through Fiscal Year 2011 totaled about $51.4 billion. The funds were 

appropriated or allocated to the Department of Defense (DoD), the Department of State (DoS), 

and the U.S. Agency for International Development (USAID). 

A forensic audit involves the systematic examination of a program’s internal controls over 

expenditures and financial data for indications of fraudulent, wasteful, or abusive activities. This 

report summarizes the results of SIGIR’s audit and investigative work in key areas of internal 

controls over U.S. government expenditures for Iraq reconstruction. 

Background 

Congress appropriated or allocated the $51.4 billion in five major reconstruction funds. The 

funds are: Iraq Relief and Reconstruction Fund (IRRF), Iraq Security Forces Fund (ISFF), 

Economic Support Fund (ESF), Commander’s Emergency Response Program (CERP), and 

International Narcotics Control and Law Enforcement (INCLE). Table 1 shows the totals by 

fund through Fiscal Year 2011. 

Table 1—Total Appropriations by Fund for Fiscal Years 2003–2011($ in billions) 

Iraq Relief and Reconstruction Program Funds Appropriated Amounts

IRRF l & IRRF II $20.9

ISFF 20.5

ESF 4.8

CERP 4.0

INCLE 1.2

Total $51.4

Source: SIGIR analysis of reconstruction funds.
2 

The appropriations have been used to pay for thousands of contracts under numerous programs 

implemented and managed by DoD, DoS, and USAID for the benefit of the Iraqi people.1

 

According to the Government Accountability Office’s Standards for Internal Control in the 

Federal Government2

, 

Internal control is a major part of managing an organization. It comprises the 

plans, methods, and procedures used to meet missions, goals, and objectives and, 

in doing so, supports performance-based management. Internal control also 

serves as the first line of defense in safeguarding assets and preventing and 

detecting errors and fraud. In short, internal control, which is synonymous with 

management control, helps government program managers achieve desired results 

through effective stewardship of public resources. 

SIGIR used a framework with multiple audit and investigative approaches in performing its 

forensic work. Specifically, SIGIR 

 examined major DoD, DoS, and USAID programs and contracts to determine if the 

organizations had good internal controls over the expenditure of U.S. reconstruction funds; 

 used internal and external sources to identify fraudulent activities; and 

 tested about 180,000 payment transactions totaling about $40 billion to identify irregular, 

or anomalous transactions that could indicate potential fraud.3

The 10 tests and their intended purposes are shown in Table 2. 

 

 

1

 Other federal agencies receiving funds for operations in Iraq include the Departments of Justice, Treasury, 

Homeland Security, Transportation, Commerce, and Agriculture; the Overseas Private Investment Corporation; and 

the Export-Import Bank. 

2

 GAO/AIMD-00.21.3.1. 

3

 A detailed description of our testing methodology can be found in a prior report, Forensic Audit Methodologies 

Used To Collect and Analyze Electronic Disbursements of Iraq Reconstruction Funds, SIGIR 11-006, 10/28/2010. 
3 

Table 2—Anomaly Tests and Intended Results 

Anomaly Test Intent of Test 

Duplicate payments Identify instances where it appears a contractor may have been paid two 

or more times for the same invoice, work performed, and/or product 

delivered. 

Separation of duties Identify breakdowns in separation of duties whereby the same 

government contracting official originates the request for payment, 

approves the request, and is the payor and/or payee. 

Questionable vendors Identify vendor names that are generic (e.g., cash, vendor) and vendor 

names that do not appear to align with the program goals. 

Fictitious contractors Identify payments to contractors with no associated D-U-N-Sa

/CAGEb

number. 

Fictitious addresses/high risk 

locations 

Identify payments to possibly fictitious addresses and/or high risk 

locations or known high-risk banking centers such as Cyprus and Beirut, 

Lebanon. 

Payments to debarred/ 

suspended contractors 

Identify payments to debarred/suspended contractors identified in the 

Excluded Parties List System. 

Notable variances in payment 

activity 

Identify payments outside of the “norm” for a vendor. 

Invoice date analysis Identify payments occurring prior to or on the date of invoice and 

sequentially-numbered contractor invoices. 

Payee Validation Identify payments to debarred/suspended contractors by contract 

personnel who are also disbursing agents. 

Application of Benford’s Lawc Identify nonrandom transaction amounts to identify instances a contractor 

submitted false invoices using false invoice totals. 

Notes:

a

 The Data Universal Numbering System or D-U-N-S® Number is Dunn and Bradstreet's copyrighted, proprietary means of 

identifying business entities on a location-specific basis. This unique nine-digit identification number has been assigned to more 

than 100 million businesses worldwide since 1994. The D-U-N-S Number® was incorporated into the Federal Acquisition 

Regulation in April 1998 as the Federal Government's contractor identification code for all procurement-related activities. b

 A Commercial and Government Entity (CAGE) Code is a five-character code that identifies companies doing or wishing to do 

business with the Federal Government. 

c

 Benford's law states that the leading digit in lists of numbers from many real-life sources of data is distributed in a non-uniform 

way. Accordingly, the first digit is 1 almost one third of the time, and subsequent digits occur as the first digit in descending 

frequency, where 9 is the leading digit less than one time in twenty.

Source: SIGIR analysis as of 09/30/2010. 

In addition to its audits of U.S.-funded programs and projects, SIGIR reviewed U.S. government 

oversight of the Government of Iraq’s Development Fund for Iraq. The results of SIGIR’s 

forensic efforts are described in more detail in this report. 

SIGIR continues to examine the expenditure of appropriated funds for Iraq reconstruction and 

will continue to do so until SIGIR ends operations, scheduled for Fiscal Year 2013. The results 

of those examinations will be reported as they are completed. 
4 

Objectives 

This report responds to requirements in Public Law 108-106, as amended, which requires a final 

forensic audit report. 

For a discussion of the audit scope and methodology and a summary of prior coverage, see 

Appendix A. For a list of acronyms used, see Appendix B. For the audit team members, see 

Appendix C. For the SIGIR mission and contact information, see Appendix D. 

 
5 

Weak Oversight of Major Reconstruction Contracts 

and Programs Increased Vulnerabilities to Fraud, 

Waste, and Abuse 

Since 2004, SIGIR’s audits have identified weak controls over the expenditure of reconstruction 

funds for many projects and program in Iraq. As of June 30, 2012, SIGIR’s audits questioned 

$635.8 million in costs. Inadequate reviews of contractors’ invoices, insufficient numbers of, or 

inadequately trained oversight staff, poor inventory controls, high staff turnover combined with 

poor recordkeeping, insufficient price competition by subcontractors, and weak oversight of cash 

disbursements are some of the more prevalent control weaknesses SIGIR found in its audits. 

These weaknesses increased the opportunity for fraud, waste, and abuse of U.S. government 

funds intended for Iraq reconstruction. 

Inadequate Reviews of Contractors’ Invoices

We found numerous instances where U.S. government employees or their designated 

representatives had not thoroughly reviewed contractors’ invoices before payment to ensure the 

bills were correct or appropriate. In some instances, invoices were reviewed months after they 

were paid. Poor and/or delayed invoice reviews add risk that the government may overpay, or 

pay unallowable and unreasonable costs. The following examples illustrate weak reviews of 

contractors’ invoices. 

Long-standing Weaknesses in Department of State’s Oversight of DynCorp Contract for 

Support of the Iraqi Police Training Program, SIGIR 10-008, 1/25/2010

We reported that DoS’s Bureau of International Narcotics and Law Enforcement Affairs (INL) 

had only one contracting officer representative (COR) in Iraq validating invoices for task orders 

with expenditures that exceeded $2.5 billion. As a result, invoices were not properly reviewed, 

and the $2.5 billion in U.S. funds were vulnerable to fraud and waste. We found this lack of 

control to be especially disturbing since earlier reviews of the DynCorp contract had found 

similar weaknesses. As a result of SIGIR’s audits, INL began reconciling all historical invoices 

and, as of July 2009, reported that it had recovered more than $60 million and had additional 

collections in process. 

Iraq Security Forces Fund: Weak Contract Oversight Allowed Potential Overcharges by 

AECOM To Go Undetected, SIGIR 10-005, 10/30/2009

Our audit of the U.S. Army’s Global Maintenance and Supply Services contract with AECOM to 

provide maintenance activities for the U.S. Army, Iraqi Army, and Afghan Army found that the 

U.S. Army Contracting Command performed inadequate invoice reviews. Our review of 

selected contract invoices showed AECOM potentially overbilled or could not support more than 

$4.2 million in costs, or 14% of the $30.6 million we examined. Given the billing issues 

identified during SIGIR’s limited review, the weaknesses in invoice review procedures, and the 

size of the contract, we concluded the U.S. government was highly vulnerable to having paid 

other questionable costs. 
6 

Poor Government Oversight of Anham and Its Subcontracting Procedures Allowed 

Questionable Costs To Go Undetected, SIGIR 11-022, 7/30/2011

Our audit of Anham, LLC’s (Anham) contract for warehouse and distribution services showed 

that U.S. government personnel either did not review, or only conducted limited reviews of 

Anham’s vouchers. At the time of our review, $113.4 million in expenses had been incurred 

under the contract. We found that the administrative contracting office reviewed only $32.7 

million in vouchers, and CORs reviewed another $32.2 million in vouchers for trucking services. 

However, the CORs did not compare vouchers to receiving documents, signed for delivery of 

goods without verifying that the goods were delivered, and allowed Anham employees to sign 

for receipt of $10 million in goods. Moreover, Anham did not submit $44.7 million in vouchers 

for warehousing and delivered items to the administrative contracting office, and thus these were 

not reviewed. 

In addition, the audit also found that the Defense Contract Audit Agency had not completed a 

review of Anham’s incurred costs and that, in general, it had a significant backlog in conducting 

these reviews. When completed, incurred costs reviews determine if costs claimed for 

reimbursement are reasonable, allowable, applicable to the contract, and in keeping with 

generally accepted accounting principles. Because of delays in conducting these reviews, 

Anham’s unreasonable charges for items purchased under the contract (such as an $80 PVC 

elbow that a competitor was selling for $1.41), could go undetected until such time when the 

government conducts these reviews. 

Insufficient Numbers of, or Inadequately Trained Oversight Staff 

CORs serve as the eyes and ears of the contracting officer to ensure the U.S. government 

receives the supplies and services it needs and is appropriately billed for the goods and services it 

receives. We found several instances where the number of CORs was insufficient for the 

workload or the CORs were inadequately trained to perform their oversight functions. The 

following examples illustrate these weaknesses. 

Review of DynCorp International, LLC, Contract Number S-LMAQM-04-C-0030, Task Order 

0338, for the Iraqi Police Training Program Support, SIGIR 06-029 and DoS-OIGAUD/IQO-07-20, 1/30/2007

The joint SIGIR/DoS Office of Inspector General review found that one COR in Iraq was 

responsible for a contract with a potential value of about $1.8 billion. His responsibilities 

included accepting contractor work, informing the contracting officer of performance failure, 

reviewing and approving invoices, and maintaining a COR file. For Task Order 0338 with a notto-exceed value of $188.7 million, we found weak and sometimes non-existent contract 

administration. Our previously mentioned subsequent review of the contract, SIGIR 10-008, 

found that DoS had increased the number of CORs to a maximum of four permanent personnel, 

but that number was still insufficient to adequately oversee the contract. Moreover, we found the 

CORs needed additional guidance on what they were to do because they did not perform 

functions for which they were responsible and performed other activities for which they were not 

responsible. 
7 

Control Weaknesses Remain in Oversight of Theater-wide Internal Security Services 

Contracts, SIGIR 11-018, 7/28/2011

We found issues that could adversely impact the CORs’ ability to perform their duties, leaving 

the U.S. government at risk of contractor fraud, waste, and abuse. Specifically, almost 40% of 

the CORs we surveyed said the training they received did not prepare them for their duties and 

25% said they lacked sufficient time to conduct effective oversight. We found similar issues in 

an audit of the contract in 2009.4

Poor Inventory Controls 

Poor inventory controls over U.S. purchased government property leave the property vulnerable 

to undetected loss or theft. The following examples illustrate weaknesses we found in inventory 

controls over U.S. government property. 

Outcome, Cost, and Oversight of Reconstruction of Taji Military Base and Baghdad 

Recruiting Center, SIGIR 08-004, 1/15/2008

Our review found that Parsons, the prime contractor, experienced problems in closing out 

inventory records. In August 2005, Parsons provided an inventory of property to another 

contractor performing reconstruction work at the Taji base. However, the Parsons’ report 

addressing the amount of government property was incomplete. At the time we completed our 

report, the task order for the reconstruction projects remained open because of questions about the 

accuracy of government property inventory records. 

Logistics Civil Augmentation Program Task Order 130: Requirements Validation, 

Government Oversight, and Contractor Performance, SIGIR 07-001, 6/22/2007

We found weaknesses in Kellogg Brown & Root Services, Inc.’s fuel receiving, distribution, and 

accountability processes of such magnitude that we were unable to determine an accurate 

measurement of the fuel services provided under the task order. These were material weaknesses 

that could result in the improper use of fuel. We also determined that government monitoring 

was not particularly strong during the period under review because the government lacked 

qualified oversight staff for this technical area. However during our discussions with the 

contractor, the contractor took corrective actions to improve controls. Also, the government 

improved its oversight by appointing a skilled Contracting Officer’s Technical Representative. 

High Staff Turnover and Poor Recordkeeping 

We found that U.S. government agencies participating in Iraq reconstruction activities did not 

anticipate the large and long-term staffing needs required to effectively manage reconstruction 

efforts. Program and project management offices were significantly understaffed even after 

major reconstruction projects were well under way. Exacerbating this problem was a lack of 

staff continuity and knowledge due to the high turnover of personnel and poor recordkeeping. 

These problems contributed to poor oversight, waste, and inefficiencies in government 

expenditures. The following examples illustrate these problems. 

 

4 Need To Enhance Oversight of Theater-wide Internal Security Services Contracts, SIGIR 09-017, 4/24/2009. 
8 

Commander’s Emergency Response Program: Projects at Baghdad Airport Provided Some 

Benefits, but Waste and Management Problems Occurred, SIGIR-10-013, 4/26/2010

DoD’s efforts to create a commercial economic zone at the Baghdad International Airport with 

CERP funds were hampered by the frequent rotation of civil affairs brigades charged with 

project management and inadequate expertise in engineering and airport development. The 

brigades had tours of duty ranging from six to nine months, with an average of eight months. In 

addition to the frequent staff turnover, we found poorly maintained project files and incomplete 

project tracking data. 

Begun in December 2006, the project aimed to establish the Baghdad airport as an international 

gateway that would generate revenue for Iraq and provide prosperity, stability, and social 

development. After four years and more than $35 million in expenditures for 46 projects, about 

half the projects and project funds were at risk of being wasted without further actions to 

complete the projects. 

Outcome, Cost, and Oversight of Electricity-Sector Reconstruction Contract with Perini 

Corporation, SIGIR 08-011, 4/29/2008

The U.S. government paid the Perini Corporation almost $123 million to build electrical 

transmission and distribution facilities in southern Iraq. We found high turnover of government 

contracting officials adversely impacted contract management because it undercut the 

effectiveness and efficiency of contract administration. We also found that between March 2004, 

when the contract was issued, and September 2006, 14 contracting officers were assigned for an 

average of 1 new contracting officer every 65 days. The high turnover was caused by the 

uncertain length of rotations, high work volume, intense operational tempo, limited incentives, 

high-risk environment, and shortfalls in qualified personnel. We reported that our assessment 

was constrained by incomplete documentation of the U.S. Army Corps of Engineers Gulf Region 

Division’s quality assurance program. 

Management of the Primary Healthcare Centers Construction Projects, SIGIR 06-011, 

4/29/2006

The U.S. Army Corps of Engineers Gulf Region Division was responsible for managing 400 

projects from a Parsons Delaware, Inc.’s contract to construct primary health care centers 

throughout Iraq. However, we found that the Gulf Region Division employed fewer than 40 

military and civilian field engineers and construction inspectors in the southern region of 

operations to do so, and according to government officials, 5% to 8% of these individuals were 

on rest and recuperation leave at any one time. As an indicator of the severe shortage of these 

inspectors, U.S. government officials told SIGIR at the time SIGIR was conducting the audit that 

it was trying to hire and train 115 Iraqi engineers to compensate for their personnel shortages. 

Insufficient Price Competition by Subcontractors 

Competition in contracting helps ensure that the U.S. government gets a fair price for the goods 

and services it procures. Our audits found weaknesses in that competitive environment which 

raise issues of excess pricing and possible fraud. Similarly, the Commission on Wartime 

Contracting found that the lack of subcontractor oversight significantly raises the risk of fraud. 
9 

The following examples illustrate the problems of achieving competition in high risk or 

dangerous environments. 

Outcome, Cost, and Oversight of Reconstruction of Taji Military Base and Baghdad 

Recruiting Center, SIGIR 08-004, 1/15/2008

SIGIR obtained information indicating that there were significant limitations to full and open 

competition in awarding contracts to Parsons’ subcontractors, which accounted for almost threequarters of the $37.4 million in reconstruction costs. These conditions created risks, especially 

to ensuring fair and reasonable subcontract prices. Parsons officials acknowledge that limited 

competition was prevalent and due to several factors: the lack of means, such as newspapers, 

radio, the Internet, or common mail service for distributing solicitations to a large supplier base; 

the inability for subcontractors to assume additional workload; and the inability of many 

potential subcontractors to prepare proposals. Also, as a result of the dangers of working in 

Baghdad and at Taji and the urgent need to begin construction quickly, Parsons said that using 

suppliers known to the company was essential to ensuring that it would be capable of performing 

the work. 

Poor Government Oversight of Anham and Its Subcontracting Procedures Allowed 

Questionable Costs To Go Undetected, SIGIR 11-022, 7/30/2011 

We found significant weaknesses in the government’s oversight of Anham’s business systems 

and other contract administration functions, which left the government at significant risk of 

paying unreasonable costs. Specifically, we found that the Defense Contract Audit Agency did 

not review Anham’s estimating system; the Defense Contract Audit Agency reviewed Anham’s 

billing system and found significant weaknesses; and the Defense Contract Management Agency 

reviewed and recommended approval of Anham’s purchasing system despite identifying 

significant gaps in documentation on the degree of price competition obtained. In a November 

2011 report, the Government Accountability Office found deficiencies in the oversight of 

contractor business systems and challenges facing both the Defense Contract Audit Agency and 

the Defense Contract Management Agency.5

 

Weak Oversight of Cash Transactions 

Because cash is especially vulnerable to theft and misappropriation, it must be appropriately 

safeguarded. Cash transactions were especially prevalent in Iraq due to the absence of a modern 

banking system. The following examples illustrate some of the control issues we found with 

U.S. government agencies’ cash controls. 

Sons of Iraq Program: Results Are Uncertain and Financial Controls Were Weak, 

SIGIR 11-010, 1/28/2011 

Overall, we found the U.S. Multi-National Corps–Iraq exercised weak financial controls over its 

cash payments to the Sons of Iraq. We found that payments were often made to a Sons of Iraq 

leader to distribute instead of directly to the individual Sons of Iraq member and without any 

means of verifying that each member received his salary. Moreover, considerable documentary 

 

5 Defense Contract Management Agency: Amid Ongoing Efforts to Rebuild Capacity, Several Factors Present 

Challenges in Meeting Its Missions, GAO-12-83, 11/03/2011. 
10 

evidence was missing that would have helped account for cash disbursements. Among the most 

significant missing documents were receipts and statements of agent officer’s accounts. These 

receipts and statements are important internal control documents that ensure funds are used 

appropriately. We reported that in December 2009, a U.S. Army Captain pled guilty to stealing 

approximately $690,000 in Sons of Iraq funds. 

Control of Cash Provided to South-Central Iraq, SIGIR 05-006, 4/30/2005

We found that the processes the Development Fund for Iraq account manager’s office used for 

completing, controlling, and maintaining accurate records for the issuance of cash to paying 

agents in the South-Central Region and for clearing those agents’ cash account balances for these 

Government of Iraq funds were flawed. Specifically, the Development Fund for Iraq account 

manager did not: 

 adhere to the clearing process for receipts of cash disbursements to ensure that cash 

accountability records were complete, accurate, and reconciled 

 have required cash accountability documentation to identify the total amount of money 

provided to paying agents 

 properly document transfers of cash between paying agents 

 review required documentation and clear the cash accounts of all division level agents 

every 30 days and instruct those agents to review required documentation and clear the 

cash accounts of field paying agents every 30 days 

 review required documentation in a timely manner 

 issue appointment letters to all individuals to whom cash was entrusted 

As a result, the Development Fund for Iraq account manager and paying agents in the SouthCentral Region did not fully comply with applicable guidance and did not properly control, 

account for, and turn-in cash assets. We further concluded that the South-Central Region paying 

agents and the Development Fund for Iraq account manager could not properly account for or 

support more than $96.6 million in cash and receipts. 

Coalition Provisional Authority Comptroller Cash Management Controls Over the 

Development Fund for Iraq, SIGIR 04-009, 7/28/2004

We found the Coalition Provisional Authority created policies and regulations which, although 

well-intended, did not establish effective funds control and accountability over $600 million in 

the Government of Iraq’s Development Funds for Iraq funds held as cash available for 

disbursement. This included $200 million with the Comptroller and more than $400 million with 

agents. Specifically, (1) proper cash accountability was not maintained, (2) physical security 

was inadequate, (3) fund agent records were not complete and (4) fund managers’ 

responsibilities and liabilities were not properly assigned. While we did not identify any actual 

losses of cash, these funds were susceptible to fraud, waste, and abuse. During the audit, we 

noted that management was taking corrective actions to strengthen controls. 
11 

Investigations Uncover Fraudulent Activities 

Weaknesses in internal controls open the door to opportunities for fraud and other illegal 

activities. As of June 30, 2012, the joint work of SIGIR investigators and other agencies’ 

investigators had resulted in 87 indictments, 71 convictions, and $176.84 million in fines, 

forfeitures, and other monetary results. Figure 1 shows the indictments, by type of criminal 

activity, that the investigators uncovered. 

Figure 1—Indictments, by Type of Criminal Activity, as of June 30, 2012 

Source: SIGIR investigations data.

The fraudulent activities uncovered by SIGIR and other agencies’ investigators include bribery, 

kick-backs, theft of government funds and property, inflated invoices, delivery of insufficient or 

inferior goods, and bid rigging. The following sections and examples illustrate the types of 

crimes that have been successfully investigated and prosecuted. 

Theft of Funds and Property 

U.S. Army Major Kevin Schrock was convicted of stealing CERP funds6 that were to be used for 

humanitarian relief or rebuilding purposes. Major Schrock was deployed with the 1st Brigade, 

25th Infantry Division, Mosul, Iraq, from September 2004 to September 2005. From September 

2004 to January 2005, he was appointed the paying agent for CERP funds and was responsible 

for requesting and obtaining the funds from the Army finance office and disbursing the funds. 

 

6

 The $4.0 billion CERP was a program that allowed commanders to respond to urgent humanitarian relief and 

reconstruction requirements in their areas of responsibilities. The CERP was intended for small-scale projects that 

can be quickly executed and sustained by the local population or government. Commanders were authorized to 

provide cash for micro grants to individual Iraqis to help revitalize economic markets in areas that had been heavily 

targeted by insurgent violence. 
12 

Major Schrock was the COR during the second half of this tour and was responsible for day-today contact with contractors in Iraq on behalf of the U.S. government. While in Iraq, Major 

Schrock stole more than $47,000 and deposited the funds to his bank accounts. He broke the 

deposits up in smaller amounts to try to avoid currency reporting requirements. Major Schrock 

pled guilty in February 2011 and was subsequently sentenced to three years’ probation and 

required to pay $47,241 in restitution. 

U.S. Army Captain Michael Dung Nguyen also stole CERP funds. Captain Nguyen pled guilty 

to stealing approximately $690,000 while he was deployed in Iraq. He gained access to the 

funds (which were intended as payments of security contracts with the Sons of Iraq and 

humanitarian relief and reconstruction programs) in his capacity as the project purchasing officer 

for the U.S. Army. Captain Nguyen was sentenced to 30 months in prison followed by three 

years of supervised release and was required to pay $200,000 in restitution, and forfeit his 

interest in all personal property bought with the stolen money. 

U.S. Army Sergeant Robert Nelson was convicted of stealing generators from a lot on a base that 

held used equipment. Once the generators were taken off the base, they were sold on the black 

market in Iraq. Sergeant Nelson admitted that he received half of the proceeds of the sales of 

stolen equipment, with approximately $35,000 of the money being wired to Nelson’s account. 

For this crime, Sergeant Nelson was given four years of probation with the first six months in 

home confinement and was required to pay $44,930 in restitution and special assessment. 

Mr. Robert Young, a contractor, pled guilty to participating in a scheme to steal more than 10 

million gallons of fuel from a U.S. Army fuel point in Iraq. Along with two other conspirators, 

Mr. Young created and obtained false documentation that allowed individuals to draw fuel, 

which was then resold on the black market. Mr. Young was sentenced to 97 months in prison 

followed by 3 years of supervised release, was required to forfeit $1.0 million, and pay $26.28 

million in restitution. 

U.S. Marine Corps Gunnery Sergeant Eric Hamilton pled guilty to a conspiracy to steal more 

than 70 electrical generators from two Marine Corps bases in Iraq in 2008. He was in charge of 

a military storage yard containing the generators and other equipment for use by U.S. Marine 

Corps units in Iraq. Sergeant Hamilton admitted that he identified the generators to be stolen, 

painted markings on them to designate them for theft by the Iraqi contractors, and facilitated 

access to the storage yard by the contractors’ trucks to load and remove the generators. He also 

admitted that he received more than $124,000 in payment from a Marine Corps officer and the 

Iraqi contractor in return for facilitating the theft. Sergeant Hamilton was sentenced to 18 

months in prison, three years of supervision release, and ordered to pay $124,944 in restitution to 

the United States. 

Inflated Invoices 

Mr. Christopher Cahill, a regional vice president of a logistics company, participated in a scheme 

to inflate invoices for military shipments to Baghdad through the firm’s contract. The invoices 

were adjusted by adding a bogus “war risk surcharge” of $.50 for each kilogram of freight 

transported to Baghdad. This matter involved contracts worth approximately $13 million and an 

estimated loss to the U.S. government of approximately $1 million. Mr. Cahill was sentenced to 
13 

30 months in prison followed by 2 years of supervised release and required to pay a $10,100 fine 

and assessment. 

Mr. Stephen Day, president and owner of a logistics company, colluded with another company to 

submit inflated invoices that were passed on to the U.S. government. The fictitious and 

fraudulent invoices totaled about $32,472. Mr. Day’s company arranged shipments of food to a 

Houston-based company that, in-turn, furnished food items to a Kuwaiti company working under 

a prime contract with the U.S. government to deliver food to troops in Iraq. In about 37 

transactions, Mr. Day provided 2 sets of invoices to the Houston-based company. The Houstonbased company paid Day’s company the lower-cost invoices but submitted for payment the 

higher-cost invoices to the prime contractor (the Kuwaiti company). These higher-cost invoices 

were subsequently passed on to the U.S. government for payment. For his financial misconduct, 

Mr. Day received three years’ probation and was required to pay $41,522 in restitution and a 

$2,000 fine. 

Insufficient or Inferior Goods 

U.S. Marine Corps Captain Eric Schmidt worked with his wife to steal about $1.69 million from 

U.S. government contracts. After using his position as a contracting officer to steer contracts to 

the Al-Methwad Company, an Iraqi firm, Captain Schmidt’s wife found U.S.-based vendors to 

provide the goods purportedly to be furnished by Al-Methwad under the terms of the contract. 

Ms. Janet Schmidt purchased the goods using Al-Methwad-provided funds, often purchasing far 

fewer or inferior products than the contract required. She then arranged for the delivery of the 

goods to Iraq. Once the shipment arrived in Iraq, Captain Schmidt falsely certified that AlMethwad provided both the number and type of goods the contract required. Using this false 

certification, Al-Methwad sought and received payment from the U.S. government. Captain 

Schmidt was sentenced to 72 months in prison followed by 3 years probation. Ms. Schmidt was 

sentenced to 1 year of home confinement and 3 years probation. Both were required to pay $2.1 

million in total restitution. 

Mr. Samir Itani owned and operated American Grocers Inc, which furnished food to Public 

Warehousing Company under a DoD subcontract to supply food to U.S. troops in Iraq. Mr. Itani 

conspired with Public Warehouse Company to overcharge the government for bogus trucking 

costs and for food shipments that never occurred. Mr. Itani was sentenced to two years 

imprisonment followed by three years supervised release and was required to pay a $100,000 

fine. 

Bid Rigging 

Mr. Jeff Mazon, a materials and property procurement manager for Kellogg Brown & Root 

Services, Inc., the prime contractor for the government under the Logistics Capabilities contract, 

inflated the bid from one subcontractor and then inflated the bid from a second subcontractor by 

a greater amount to make the first subcontractor appear to be the lower bidder. Kellogg Brown 

& Root Services subsequently awarded the contract to the lower cost first subcontractor. The 

scheme resulted in Kellogg Brown & Root Services paying an excess of $5.5 million to the 

subcontractor. Mr. Mazon was sentenced to 1 year probation and 6 months of home confinement 

and was required to pay a $5,000 fine. 
14 

U.S. Army National Guard Lieutenant Colonel Levonda Selph served as a member of a team to 

select the winning contractors in competitive procurements. In her official capacity, Lieutenant 

Colonel Selph solicited bribes, including cash and vacations in Thailand, in exchange for rigging 

the bidding process to ensure a Kuwaiti contractor received a renewal on his contract for the 

construction, maintenance, and operation of warehouses in Iraq. Lieutenant Colonel Selph was 

sentenced to 12 months in prison followed by 3 years of supervised release and was required to 

pay a $5,000 fine and $9,000 in restitution. 

Mr. Anthony Martin, a subcontracts administrator and subsequently a subcontracts manager with 

Kellogg Brown & Root, received kickbacks from the managing partner of a Kuwaiti company to 

award a subcontract related to U.S. military supply lines between Kuwait and Iraq. In 

conjunction with his duties to solicit bids from prospective subcontractors and negotiate and 

award Kellogg Brown & Root subcontracts, Mr. Martin selected the Kuwaiti company’s bid and 

then added $200,000 to the subcontract amount which he then received as his kickback. Mr. 

Martin was sentenced to one year and one day in prison followed by two years of supervised 

release and was required to pay $200,504 in restitution. 

Kickbacks and Bribes for Contract Awards 

Ms. Bonnie Murphy, a DoD civilian in Iraq, was tasked along with others to manage and dispose 

of surplus DoD property. Ms. Murphy was authorized to recommend qualified contractors to 

carry out those tasks. She accepted jewelry, worth approximately $9,000, from the owners and 

employees of an Iraqi company in exchange for justifying a non-competitive contract to the Iraqi 

company. Ms. Murphy was sentenced to one year of supervised release and was required to pay 

a $1,500 fine. 

U.S. Army Captain Faustino Gonzales received approximately $25,000 in kickbacks in exchange 

for awarding reconstruction contracts at inflated prices in Iraq. Captain Gonzales deposited bribe 

money in bank accounts in Killeen and San Antonio, Texas and also used some of the money to 

purchase a vehicle. Captain Gonzales was sentenced to 15 months in prison followed by 1 year 

supervised release and was required to pay a $10,000 fine and $25,100 in restitution and a 

special assessment. 

U.S. Army Major Roderick Sanchez was deployed overseas in Afghanistan, Iraq, and Kuwait as 

a contracting officer. Major Sanchez admitted to accepting bribes from foreign companies 

seeking to secure Army contracts. In return, Major Sanchez used his official position to steer 

Army contracts to these companies. During the course of this criminal scheme, Major Sanchez 

accepted Rolex watches, cash payments, and other items of value totaling more than $200,000. 

Major Sanchez was sentenced to five years in prison followed by three years of supervised 

release and a fine of $15,000. 

Retired Navy Lieutenant Commander Frankie Hand, and co-defendant Michelle Adams, a U.S. 

contractor, met in May 2007 at Camp Taji, Iraq. Lieutenant Commander Hand agreed to assist 

Ms. Adams and her business partner, Peter Dunn, in obtaining U.S. government contracts in 

exchange for Lieutenant Commander Hand becoming a “silent partner” in their companies. 

Thereafter, Hand, Adams, and Dunn agreed to pay Mark Carnes, a U.S. Air Force Master 

Sergeant at Camp Taji, for his “assistance” in getting contracts awarded to their companies. In 
15 

August and September 2007, Sergeant Carnes helped to steer two government contracts for work 

on Camp Taji to businesses run by Adams and Dunn, and their silent partner, Hand. After the 

United States paid $757,525 for the work on these two contracts, Ms. Adams, Mr. Dunn, and 

Lieutenant Commander Hand jointly paid Sergeant Carnes approximately $50,000 in bribes. 

Lieutenant Commander Hand received three years in prison and forfeiture of $757,525. Ms. 

Adams received 15 months in prison followed by supervised release. Mr. Dunn received 14 

months in prison followed by 2 years supervised release. Sergeant Carnes received 20 months in 

prison followed by 3 years supervised release and forfeiture of $57,030. 

 
16 

Few Problems Found with Agencies’ Payment 

Processes 

Our tests of 180,000 payment transactions processed by DoD, DoS, and USAID for Fiscal Years 

2003 through 2009, and totaling about $40 billion, found few problems such as duplicate 

payments, payments to fictitious vendors, or inappropriate separation of duties of individuals in 

the payment process. The few problems or questionable transactions we found were either 

resolved upon further examination or referred to others for resolution. Our tests of the 

transactions indicate that once the invoices were approved for payment, the payments were 

essentially processed correctly and to valid vendors. However, because of serious internal 

control weaknesses found in our reviews of projects and programs, government agencies cannot 

be certain that the payments were for goods and services that (1) were received, (2) met 

contractual specifications, (3) were in accordance with the contract prices, or (4) were 

competitively priced. 

The nearly 180,000 transactions we tested for Fiscal Years 2003 through 2009 represent 

approximately 84% of the appropriations or funds made available to DoD, DoS, and USAID 

from four major funds—ISFF, IRRF, CERP, and ESF—and about 75% of the total funds 

appropriated or made available for Iraq reconstruction. The payment transactions were from the 

following agencies’ financial databases: 

 DoD—Corps of Engineers Financial Management System, Computerized Accounts 

Payable Systems, and Deployable Disbursing Systems 

 DoS—Global Financial Management Systems 

 USAID—Phoenix database 

The following sections describe the results of our tests. 

Few Duplicate Payments Uncovered 

Our tests initially identified 1,131 transactions totaling $267 million where it appeared the 

vendors were paid two or more times for the same work or product. These transactions involved 

about 800 vendors associated with DoD, DoS, and USAID IRRF- and ISFF-funded programs. 

After further analysis, we verified that 50 payments totaling $52.14 million were duplicative. 

However, agencies have identified and corrected most of the duplicate payments as summarized 

below. 

 Twelve DoD payments valued at $142,000 were duplicative. At our request, DoD sought 

and received reimbursement for the overpayments. 

 Two DoS payments valued at approximately $4 million were duplicative. We later learned 

that DoS had also identified these duplicate payments and took actions to recover the 

overpayments. 
17 

 Thirty-six USAID payments valued at approximately $48 million were duplicative. We 

later learned that USAID had also identified these duplicate payments and took actions to 

recover the overpayments. 

Few Instances Where Duties Did Not Appear To Be Appropriately 

Segregated 

Segregation of duties is an important element of internal controls. For example, if one individual 

in an organization was responsible for approving the orders for goods, validating the receipt of 

the goods, and approving the payments for the goods, the organization would be vulnerable to 

fraud and abuse by the individual. 

Our tests initially identified108 transactions valued at $41 million where duties did not appear to 

be appropriately segregated. For example, we found that generic titles were used to represent 

individuals creating, certifying, modifying, and paying a voucher such as “Cashier C. Cashier” 

and “Input T. Input,” rather than an individual’s actual name as the signatory. However, upon 

close examination of vouchers and supporting documentation, we determined that except for a 

few instances, there appeared to be appropriate separation of duties. In the few instances where 

we noted one signatory was acting or signing on behalf of another, we referred the instances to 

investigative personnel for review and appropriate action. 

No Instances of Questionable Vendors, Fictitious Contractors, or 

Suspect Addresses 

Our tests identified 124 transactions that appeared to indicate: 

 payments to contractors with no associated DUNS number or government code identifier 

 payments to possibly fictitious addresses and/or high-risk locations or known high-risk 

banking centers such as Cyprus and Beirut, Lebanon 

 payments to vendors with generic names (e.g., cash, vendor), and vendors whose 

businesses did not appear to align with program goals 

However, upon further review of key documentation such as state business licenses, web sites, 

invoices, receiving documents, and payment records, we confirmed the legitimacy of these 

contractors. 

Few Instances of Debarred/Suspended Contractors 

Our tests found four vendors that received payments and that were also included in the Excluded 

Parties List System of debarred/suspended contractors.7 One vendor was the subject of an on-

 

7 The Excluded Parties List System is a web-based system maintained by the General Services Administration to 

provide a single comprehensive list of individuals and firms excluded by Federal government agencies from 

receiving federal contracts or federally approved subcontracts and from certain types of federal financial and 

nonfinancial assistance and benefits. 
18 

going investigation. We further examined the other three vendors and found that based upon a 

review of the transactions, most of the activity appeared to be related to existing contracts. The 

Federal Acquisition Regulation does not preclude payments during a suspension, proposed 

debarment, or debarment. Rather, it precludes new contract awards. 

Notable Variances in Payment Activity Did Not Surface Any Issues 

Our tests identified 3,435 payments to vendors that appeared outside the “norm” for those 

vendors. For example, a $50 million payment to a vendor would be outside the norm if the other 

payments to that vendor were for substantially lesser amounts. We reviewed 18 of the largest 

out-of-norm transactions, valued at almost $470 million but did not uncover issues that would 

indicate questionable activities. Rather, we found instances where larger invoices were 

processed at the same time. 

Poor or Delayed Accounting for Invoices Surfaced During Date 

Analysis 

Our tests identified 2,145 payments that were dated prior to, or on, the invoiced dates. We 

reviewed three payments where there was considerable time between the invoiced and payment 

dates. Specifically, the certifying officers signed the invoices up to 22 months after agencies 

records indicate agencies paid the vendor. Our review found that the anomalies resulted from 

poor or delayed accounting for the transactions rather than fraud. For example, we found that the 

agencies recorded the invoices in accounting systems months after they were paid, and the 

systems captured the dates the invoices were recorded as the invoiced dates. 

Application of Benford’s Law Did Not Surface Any Issues 

Our tests identified 10,746 nonrandom transaction amounts that met Benford’s Law. The law 

states that in listings or tables of statistics, the digit 1 tends to occur with probability much 

greater than the expected 11.1% (i.e., one digit out of 9). An assumption follows that when 

numbers are fabricated (for example, for use in false billings), they will be distributed uniformly. 

We reviewed 11 high-dollar-value transactions that appeared to meet Benford’s Law. Our 

review of the payment vouchers and other contract documentation found no evidence of 

questionable activities. 
19 

Conclusions 

Conclusions 

The U.S. government Iraq relief and reconstruction program had serious internal control 

weaknesses that put billions of American taxpayer dollars at risk of fraud, waste, and abuse. The 

precise amount lost to fraud and waste may never be known, but SIGIR’s audits and 

investigations have demonstrated that the amount could be substantial. The end result of the 

dollars lost to fraud and waste is that those funds were not available to assist the Iraqi people and 

help rebuild their country. 

Effective internal controls are the first line of defense in the protection of U.S. government 

property and funds, and ultimately, American taxpayer dollars. They make the possibility for 

fraud and waste that much more difficult, but they are not foolproof. And when they don’t exist 

or are weak, the opportunity for wasted resources or misappropriation of those resources 

increases. 

U.S. government audits of contractors’ business systems can also help prevent fraud, waste, and 

abuse by providing some assurance that the contractors’ accounting, billing, purchasing and 

estimating systems meet U.S. government standards. However, we and others found instances 

where these reviews were either not done or not done in a timely manner. 

Despite the deficiencies we found, our tests of almost 200,000 payment transactions determined 

that once the invoices were approved for payment, those payments were essentially processed 

correctly and to valid vendors. Although controls over the payment processes are important, 

they cannot substitute for effective controls over the entire procurement process because weak 

controls earlier in the process provide no assurance that the payments were for goods and 

services that (1) were received, (2) met contractual specifications, (3) were in accordance with 

the contract prices, or (4) were competitively priced. 

Overall, audits of programs and activities and investigations of individuals and companies can 

help uncover wasteful practices and the possibility for fraudulent activities, but they are far less 

effective than preventive measures. Further, proving and prosecuting fraud is difficult, costly, 

and time consuming. As such, proactive measures such as enhancing internal control procedures 

and carefully reviewing contractor and grantee business systems and practices are the key to 

establishing a climate where fraud, waste, and abuse is not the norm. 

 
20 

Appendix A—Scope and Methodology 

Scope and Methodology 

This report presents a compilation of audit and investigative forensic work in compliance with 

Public Law 108-106, as amended, which requires the Special Inspector General for Iraq 

Reconstruction (SIGIR) to prepare a final forensic audit report on all funds appropriated for Iraq 

relief and reconstruction. The audits were performed under the authority of Public Law 108-106, 

as amended, which also incorporates the duties and responsibilities of inspectors general under 

the Inspector General Act of 1978. 

In performing the final forensic report, we took a systematic examination of a program’s internal 

controls over expenditures and financial data for indications of fraudulent, wasteful, or abusive 

activities. Specifically, we reviewed over 200 audit reports focusing on the level of management 

oversight of major reconstruction contracts and programs. In doing so, we identified several 

internal control weaknesses that increased vulnerabilities to fraud, waste, and abuse. In addition, 

we reviewed criminal cases developed by both SIGIR investigators and other government 

agencies’ investigators to determine the connection between internal controls and fraudulent 

activities. Lastly, we tested anomalous expenditure transactions obtained from DoD, DoS, and 

USAID databases for fraudulent activities. We developed the list of anomalies for our tests 

through discussions with auditors, investigators, and agency officials as well as industryestablished test criteria; and we applied the criteria relevant to the anomalies to the financial 

transactions. When anomalies were identified, we further examined the details of the 

transactions to determine whether they were fraudulent or improper. 

This audit was conducted in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on our audit 

objectives. We believe that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives. 

Use of Computer-processed Data 

We used computer-processed data to identify anomalous expenditure transactions. The data 

came from the Defense Finance and Accounting Service, the U.S. Army Corps of Engineers’ 

Financial Management System, the USAID Phoenix System, and the DoS Global Financial 

Management System. We performed reconciliations of disbursement data received from the 

various accounting systems to determine that they were complete and reliable. The 

reconciliation process included a comparison of the detailed disbursement totals to other sources 

of information, including summary-level data. This reconciliation process yielded a variance of 

tolerable amounts. 
21 

Internal Controls 

As discussed in the body of the report, SIGIR has conducted audits of major reconstruction 

contracts that were intended, in part, to identify internal control weaknesses. We reported on 

those weaknesses in each report. 

Prior Coverage 

We reviewed the following reports by SIGIR; the Department of Defense, Office of the Inspector 

General; and Government Accountability Office. 

Special Inspector General for Iraq Reconstruction 

Poor Government Oversight of Anham and Its Subcontracting Procedures Allowed Questionable 

Costs To Go Undetected, SIGIR 11-022, 7/30/2011. 

Control Weaknesses Remain in Oversight of Theater-Wide Internal Security Services Contracts, 

SIGIR 11-018, 7/28/2011. 

Sons of Iraq Program: Results Are Uncertain and Financial Controls Were Weak, SIGIR 11-

010, 1/28/2011. 

Forensic Audit Methodologies Used To Collect and Analyze Electronic Disbursements of Iraq 

Reconstruction Funds, SIGIR 11-006, 10/28/2010. 

Iraq Reconstruction Funds: Forensic Audits Identifying Fraud, Waste, and Abuse—Interim 

Report #5, SIGIR 11-005, 10/28/2010. 

Iraq Reconstruction Funds: Forensic Audits Identifying Fraud, Waste, and Abuse—Interim 

Report #4, SIGIR 10-019, 7/26/2010. 

Iraq Reconstruction Funds: Forensic Audits Identifying Fraud, Waste, and Abuse—Interim 

Report #3, SIGIR 10-017, 4/28/2010. 

Commander’s Emergency Response Program: Projects at Baghdad Airport Provided Some 

Benefits, but Waste and Management Problems Occurred, SIGIR-10-013, 4/26/2010. 

Iraq Reconstruction Funds: Forensic Audits Identifying Fraud, Waste, and Abuse—Interim 

Report #2, SIGIR 10-011, 1/28/2010. 

Long-standing Weaknesses in Department of State’s Oversight of DynCorp Contract for Support 

of the Iraqi Police Training Program, SIGIR 10-008, 1/25/2010.

Iraq Security Forces Fund: Weak Contract Oversight Allowed Potential Overcharges by 

AECOM To Go Undetected, SIGIR 10-005, 10/30/2009. 

Iraq Reconstruction Funds: Forensic Audits Identifying Fraud, Waste, and Abuse—Interim 

Report #1, SIGIR 10-004, 10/28/2009. 
22 

Developing a Depot Maintenance Capability at Taji Hampered by Numerous Problems, 

SIGIR 9-027, 7/30/2009. 

Tikrit Location Command Project Achieving Contract Goals by Using Sound Management 

Practices, SIGIR 09-024, 7/30/2009. 

Commander’s Emergency Response Program: Muhalla 312 Electrical Distribution Project 

Largely Successful, SIGIR 09-025, 7/26/2009. 

Commander’s Emergency Response Program: Hotel Construction Completed, but Project 

Management Issues Remain, SIGIR 09-026, 7/26/2009. 

Joint Audit of Blackwater Contract and Task Orders for Worldwide Personal Protective Services 

in Iraq, AUD/IQO-09-16 and SIGIR 09-021, June 2009. 

Security Forces Logistics Contract Experienced Certain Cost, Outcome, and Oversight 

Problems, SIGIR 09-014, 4/26/2009. 

Need To Enhance Oversight of Theater-Wide Internal Security Services Contracts, SIGIR 09-

017, 4/24/2009. 

Oversight of Aegis’s Performance on Security Services Contracts in Iraq with the Department of 

Defense, SIGIR 09-010, 1/14/2009. 

Cost, Outcome, and Oversight of Iraq Oil Reconstruction Contract with Kellogg Brown & Root 

Services, Inc., SIGIR 09-008, 1/13/2009. 

Review of Cost, Outcome, and Oversight of Local Governance Program Contracts with Research 

Triangle Institute, SIGIR 09-003, 10/21/2008. 

Outcome, Cost, and Oversight of the Security and Justice Contract with Parsons Delaware, Inc., 

SIGIR 08-019, 7/28/2008. 

Review of Outcome, Cost, and Oversight of Water Sector Reconstruction Contract with 

FluorAMEC, LLC, SIGIR 08-018, 7/15/2008. 

Review of Outcome, Cost, and Oversight of Electricity-Sector Reconstruction Contract with 

Perini Corporation, SIGIR 08-011, 4/29/2008. 

Report on Review of Outcome, Cost, and Oversight of Iraq Reconstruction Contract W914NS04-D-0006, SIGIR 08-010, 1/28/2008. 

Outcome, Cost, and Oversight of Reconstruction of Taji Military Base and Baghdad Recruiting 

Center, SIGIR 08-004, 1/15/2008. 

Interim Review of DynCorp International, LLC, Spending Under Its Contract for the Iraqi Police 

Training Program, SIGIR 07-016, 10/23/2007. 
23 

Review of Bechtel’s Spending under Its Phase II Iraq Reconstruction Contract, SIGIR 07-009, 

7/25/2007. 

Logistics Civil Augmentation Program Task Order 130: Requirements Validation, Government 

Oversight, and Contractor Performance, SIGIR 07-001, 6/22/2007. 

Iraq Reconstruction: Lessons in Program and Project Management, March 2007. 

Review of DynCorp International, LLC, Contract Number S-LMAQM-04-C-0030, Task Order 

0338, for the Iraqi Police Training Program Support, SIGIR 06-029 and DoS-OIG-AUD/IQO07-20, 1/30/2007. 

Control of Cash Provided to South-Central Iraq, SIGIR 05-006, 4/30/2005. 

Coalition Provisional Authority Comptroller Cash Management Controls Over the Development 

Fund for Iraq, SIGIR 04-009, 7/28/2004. 

Department of Defense, Office of the Inspector General 

Controls Over Army Deployable Disbursing System Payments Need Improvement—(Report No. 

D-2011-101), 8/17/2011. 

Internal Controls Over United States Marine Corps Commercial and Miscellaneous Payments 

Processed Through the Deployable Disbursing System—(Report No. D-2010-037), 1/25/2010. 

Internal Controls Over Payments Made in Iraq, Kuwait and Egypt—(Report No. D-2008-098), 

5/22/2008. 

Government Accountability Office 

Defense Contract Management Agency: Amid Ongoing Efforts to Rebuild Capacity, Several 

Factors Present Challenges in Meeting Its Missions, GAO-12-83, 11/03/2011. 

Defense Contracting Integrity: Opportunities Exist to Improve DOD’s Oversight of Contractor 

Ethics Programs, GAO-09-591, 9/22/2009. 

Improper Payments: Significant Improvements Needed in DoD’s Efforts to Address Improper 

Payment and Recovery Auditing Requirements, GAO-09-442, 7/29/2009. 

Excluded Parties List System: Suspended and Debarred Businesses and Individuals Improperly 

Receive Federal Funds, GAO-09-174, 2/25/2009. 

 
24 

Appendix B—Acronyms 

Acronym Description 

CERP Commander’s Emergency Response Program 

COR Contracting Officer Representative 

DoD Department of Defense 

DoS Department of State 

DUNS Data Universal Numbering System 

ESF Economic Support Fund 

INCLE International Narcotics Control and Law Enforcement account 

INL Bureau of International Narcotics and Law Enforcement Affairs 

IRRF Iraq Relief and Reconstruction Fund 

ISFF Iraq Security Forces Fund 

SIGIR Special Inspector General for Iraq Reconstruction 

USAID U.S. Agency for International Development 

 
25 

Appendix C—Audit Team Members 

This report was prepared under the direction of James Shafer, Assistant Inspector General for 

Audits, Office of the Special Inspector General for Iraq Reconstruction. 

Staff members who contributed to the report include: 

Adam Hatton 

Joan Hlinka 

Richard Newbold 

Tinh Nguyen 

Robert Pelletier 

 
26 

Appendix D—SIGIR Mission and Contact Information 

SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, and 

operations in Iraq, the Special Inspector General for Iraq 

Reconstruction provides independent and objective: 

1. oversight and review through comprehensive audits, 

inspections, and investigations 

2. advice and recommendations on policies to promote 

economy, efficiency, and effectiveness 

3. deterrence of malfeasance through the prevention and 

detection of fraud, waste, and abuse 

4. information and analysis to the Secretary of State, the 

Secretary of Defense, the Congress, and the American 

people through Quarterly Reports 

Obtaining Copies of SIGIR 

Reports and Testimonies 

To obtain copies of SIGIR documents at no cost, go to 

SIGIR’s Web site (www.sigir.mil). 

To Report Fraud, Waste, and 

Abuse in Iraq Relief and 

Reconstruction Programs 

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline: 

1 Web: www.sigir.mil/submit_fraud.html 

2 Phone: 703-602-4063 

3 Toll Free: 866-301-2003 

Congressional Affairs Hillel Weinberg 

Assistant Inspector General for Congressional 

Affairs 

Mail: Office of the Special Inspector General 

for Iraq Reconstruction 

2530 Crystal Drive

 Arlington, VA 22202-3940 

Phone 703-428-1059 

Email hillel.weinberg@sigir.mil 

Public Affairs Christopher Griffith 

Director of Public Affairs 

Mail: Office of the Special Inspector General 

for Iraq Reconstruction 

2530 Crystal Drive

 Arlington, VA 22202-3940 

Phone: 703-604-0693 

Fax: 703-428-0818 

Email: PublicAffairs@sigir.mil