SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

2530 Crystal Drive • Arlington, Virginia 22202 

April 18, 2012 

LETTER FOR SECRETARY OF DEFENSE 

COMMANDING GENERAL, U.S. ARMY CORPS OF ENGINEERS 

SUBJECT: USACE Used or Deobligated Residual Funds on Terminated Contracts 

(SIGIR 12-014) 

This is the third report by the Special Inspector General for Iraq Reconstruction (SIGIR) on the 

outcomes of U.S. Department of Defense’s (DoD) Iraq reconstruction contract terminations. The 

two previous reports looked at DoD agencies’ controls over terminated contracts and whether 

U.S. funds were wasted as a result of the termination of the contracts.1 This report examines 

whether the U.S. Army Corps of Engineers (USACE) had unliquidated obligations on 55 

terminated contracts. 

SIGIR found no unliquidated obligations on the 55 terminated contracts. More broadly, it also 

found that as required by DoD regulations, USACE reviewed its unliquidated obligations for 

contracts in Iraq for the period ending January 31, 2012. 

Background 

Our January 2012 report focused on the 55 reconstruction contracts USACE terminated from 

June 2008 through April 2011. We had planned to report on the status of unliquidated 

obligations for the contracts, but that information was not available in time. USACE’s 

reconstruction contracts in Iraq were funded primarily by the Iraq Relief and Reconstruction 

Fund, the Commander’s Emergency Response Program, and the Iraq Security Forces Fund. 

Obligations are recorded when an authorized agent of the federal government enters into a 

legally binding agreement to purchase specific goods or services. As bills are received and 

payments made, the recorded obligation is reduced by the payment amounts, with the balance 

referred to as the unliquidated obligation. Funds no longer needed should be deobligated. 

DoD Financial Management Regulation volume 3, chapter 8, paragraph 080401, requires fund 

holders, with assistance from supporting accounting offices, to perform tri-annual reviews of 

dormant commitments, unliquidated obligations, accounts payable, and accounts receivable 

transactions for timeliness, accuracy, and completeness. The reviews are to be completed each 

year for the four-month periods ending on January 31, May 31, and September 30. 

 

1 U.S. Central Command Contracting Command Had Few Contract Terminations That Resulted in Wasted Funds in 

Iraq, SIGIR 12-005, 10/28/2011 and Few Contracts Terminated by the U.S. Army Corps of Engineers Resulted in 

Wasted Funds in Iraq, SIGIR 12-011, 1/29/2012. 
2 

USACE Had No Unliquidated Funds for Terminated Contracts

We found that USACE had no residual funds for the 55 terminated contracts. For 46 of the 55 

contracts, reports from USACE’s financial management system showed the obligated funds were 

either used to pay contractors or deobligated, thus leaving zero balances. For the remaining nine 

contracts, USACE officials stated that no financial transactions occurred after the funds were 

obligated and, therefore, USACE deobligated the funds. However, the financial management 

system cannot produce a status of obligations report that supports this information. 

Nevertheless, our review of the nine contract files confirmed that no financial transactions 

occurred after the funds were obligated, supporting the USACE officials’ statements. 

USACE Completed the Required Tri-annual Review 

We found that USACE had performed the required review of unliquidated obligations for 

contracts in Iraq for the period ending January 31, 2012. This was in compliance with the DoD 

Financial Management Regulation. The USACE Middle East District Budget Officer signed the 

tri-annual review confirmation statement on February 7, 2012. The review covered 3,441 

records with a total dollar value of more than $956 million. 

Concluding Observation 

As the Iraq reconstruction program winds down and contracts are completed or terminated, it is 

important that agencies properly account for remaining obligated funds. USACE executed this 

responsibility by deobligating residual funds from its recently terminated contracts. 

Management Comments 

Because this report does not contain recommendations, USACE was not required to, and did not, 

submit comments. 

- - - - 

We appreciate the courtesies extended to the SIGIR staff. 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, DC), (703) 604-0545/ tinh.t.nguyen4.civ@mail.mil. 

Stuart W. Bowen, Jr. 

Inspector General 
3 

Appendix A—Scope and Methodology 

Scope and Methodology

In April 2011, the Special Inspector General for Iraq Reconstruction (SIGIR) initiated Project 

1108 to examine U.S. Department of Defense terminated contracts in Iraq and identify potential 

waste. In October 2011, we issued a report on the U.S. Central Command Contracting 

Command’s terminated contracts.2

 In January 2012, we issued a report on the U.S. Army Corps 

of Engineers’ (USACE) terminated contracts.3 Our objectives for this report are to determine the 

extent of unliquidated obligations on USACE contracts terminated between June 2008 and April 

2011. This audit was performed by SIGIR 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. SIGIR conducted its work from January 2012 through March 

2012 in Baghdad, Iraq. It used information gathered in Winchester, Virginia, during previous 

reviews. 

To identify unliquidated obligations on terminated contracts, we obtained copies of the U.S. 

Army Corps of Engineers Financial Management System Obligation Status Reports for the 

contracts, when available. We also corresponded with knowledgeable officials to account for 

exceptions and gaps in the data. 

The 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 

To achieve the audit objectives, we relied on computer-processed data generated by the U.S. 

Army Corps of Engineers Financial Management System. We did not test the general or 

application controls of the system. However, we compared system data to source documents 

(contracts, contract modifications, memorandums for record) to determine data validity. Based 

on these tests, we conclude the data are sufficiently reliable to be used in meeting the audit’s 

objectives. 

Internal Controls 

In conducting the audit, we assessed certain management controls pertinent to the audit objective 

with respect to USACE’s contract management. Specifically, we identified and assessed 

 

2 U.S. Central Command Contracting Command Had Few Contract Terminations That Resulted in Wasted Funds in 

Iraq, SIGIR 12-005, 10/28/2011. 3 Few Contracts Terminated by the U.S. Army Corps of Engineers Resulted in Wasted Funds in Iraq, SIGIR 12-011, 

1/29/2012. 
4 

management controls for reviewing unliquidated obligations on contracts. The assessment is 

discussed in the body of our report. 

Prior Coverage 

We reviewed the following reports by SIGIR and the Government Accountability Office: 

Special Inspector General for Iraq Reconstruction 

Few Contracts Terminated by the U.S. Army Corps of Engineers Resulted in Wasted Funds in 

Iraq, SIGIR 12-011, 1/29/2012. 

U.S. Central Command Contracting Command Had Few Contract Terminations That Resulted in 

Wasted Funds in Iraq, SIGIR 12-005, 10/28/2011. 

Iraq Reconstruction Project Terminations Represent a Range of Actions, SIGIR 09-004, 

10/27/2008. 

Interim Report on Iraq Reconstruction Contract Terminations, SIGIR 08-013, 4/28/2008. 

Controls over Unliquidated Obligations in the Iraq Relief and Reconstruction Fund, SIGIR 07-

011, 10/23/2007. 

Government Accountability Office 

Contingency Contracting: Improved Planning and Management Oversight Needed to Address 

Challenges with Closing Contracts, GAO-11-891, 9/26/2011. 
5 

Appendix B—Acronyms 

Acronym Description 

DoD Department of Defense 

SIGIR Special Inspector General for Iraq Reconstruction 

USACE U.S. Army Corps of Engineers 

 
6 

Appendix C—Audit Team Members 

This report was prepared and the audit conducted under the direction of James Shafer, Assistant 

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

The staff members who conducted the audit and contributed to the report include: 

Angelina Johnston 

Robert Pelletier 

William Shimp 

 
7 

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: 

 oversight and review through comprehensive audits, 

inspections, and investigations 

 advice and recommendations on policies to promote 

economy, efficiency, and effectiveness 

 deterrence of malfeasance through the prevention and 

detection of fraud, waste, and abuse 

 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: 

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

 Phone: 703-602-4063 

 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.civ@mail.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