[Senate Hearing 110-673]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 110-673
 
  EXAMINING THE EFFECTIVENESS OF U.S. EFFORTS TO COMBAT WASTE, FRAUD, 
                     ABUSE, AND CORRUPTION IN IRAQ

=======================================================================

                                HEARINGS

                               before the

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                            SPECIAL HEARINGS

                     MARCH 11, 2008--WASHINGTON, DC
                     JULY 23, 2008--WASHINGTON, DC

                               __________

         Printed for the use of the Committee on Appropriations


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                      COMMITTEE ON APPROPRIATIONS

                ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            TED STEVENS, Alaska
TOM HARKIN, Iowa                     ARLEN SPECTER, Pennsylvania
BARBARA A. MIKULSKI, Maryland        PETE V. DOMENICI, New Mexico
HERB KOHL, Wisconsin                 CHRISTOPHER S. BOND, Missouri
PATTY MURRAY, Washington             MITCH McCONNELL, Kentucky
BYRON L. DORGAN, North Dakota        RICHARD C. SHELBY, Alabama
DIANNE FEINSTEIN, California         JUDD GREGG, New Hampshire
RICHARD J. DURBIN, Illinois          ROBERT F. BENNETT, Utah
TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              SAM BROWNBACK, Kansas
FRANK R. LAUTENBERG, New Jersey      WAYNE ALLARD, Colorado
BEN NELSON, Nebraska                 LAMAR ALEXANDER, Tennessee

                    Charles Kieffer, Staff Director
                  Bruce Evans, Minority Staff Director


                            C O N T E N T S

                              ----------                              

                        Tuesday, March 11, 2008

                                                                   Page

Opening Statement of Senator Patrick J. Leahy....................     1
Prepared Statement of Senator Robert C. Byrd.....................     1
Statement of Senator Thad Cochran................................     4
Statement of Hon. David M. Walker, Comptroller General, 
  Government Accountability Office...............................     5
    Prepared Statement of........................................     7
Background.......................................................     9
Poor Contracting Outcomes and Accountability Hinder U.S. Efforts 
  in Iraq........................................................    10
Long-standing Problems Hinder DOD's Management and Oversight of 
  Contractors Supporting Deployed Forces.........................    13
Lack of Adequate Strategic Planning Impedes U.S. Efforts to 
  Develop Capacity in Iraqi Ministries and Improve Outcomes in 
  Iraq's Energy Sector...........................................    16
Statement of Hon. Claude M. Kicklighter, Inspector General, 
  Department of Defense..........................................    19
    Prepared Statement of........................................    22
OIG Strategy.....................................................    22
In Theater Presence..............................................    22
Coordination.....................................................    22
Details on Munitions Accountability..............................    23
Details on Investigations........................................    24
Details on Audits................................................    26
Completed Audit Work.............................................    27
Ongoing Audit Work...............................................    28
Planned Audit Work...............................................    29
Details on Anticorruption Activities.............................    29
Panel on Contracting Integrity...................................    30
Significant Accomplishments......................................    30
Statement of Stuart W. Bowen, Jr., Special Inspector General for 
  Iraq Reconstruction............................................    31
U.S. Anticorruption Programs Insufficient........................    32
Fraud in Iraq Reconstruction.....................................    32
Waste in Iraq Reconstruction.....................................    32
Sustainment of Reconstruction Effort.............................    33
Prepared Statement of Stuart W. Bowen, Jr........................    34
SIGIR Background.................................................    35
Audits...........................................................    36
Inspections......................................................    36
Investigations...................................................    37
Reconstruction Program Vulnerable to Fraud, Waste, and Abuse.....    38
The Challenge in Quantifying Waste...............................    41
Government of Iraq (GOI) Acceptance and Sustainment of U.S.-
  funded Infrastructure Crucial to Ensuring U.S. Assistance is 
  Not Wasted.....................................................    41
U.S. Transfer Process Needs Improvement..........................    42
SIGIR Inspections and Audits Indicate Problems in GOI Sustainment 
  of U.S. Funded Projects........................................    42
Results of SIGIR Investigations..................................    44
Anticorruption: U.S. Programs and Iraqi Efforts..................    46
The Nature of Corruption.........................................    46
U.S. Embassy Progress in Sustaining High Level Leadership and 
  Comprehensive Approach.........................................    47
Government of Iraq Anticorruption Efforts: Challenges and 
  Progress.......................................................    47
Corruption Efforts Must be Sustained.............................    48
SIGIR Lessons Learned and Recommendations........................    48
Options for Congress to Consider.................................    49
Systemic Acquisition Challenges at the Department of Defense.....    60
Use of Overseas Companies by Kellogg, Brown and Root (KBR).......    62
The Betrayal of Judge Radhi......................................    69
Statement of Judge Radhi Hamza al-Radhi, Former Commissioner, 
  Commission on Public Integrity, Republic of Iraq...............    77
    Prepared Statement of........................................    78
Greetings........................................................    78
Reasons for an Iraqi Commission on Public Integrity..............    78
Appointment as Commissioner......................................    79
Operation of CPI.................................................    79
Results..........................................................    79
Guiding Principle................................................    80
Main Obstacles...................................................    80
The Future.......................................................    81
Additional Committee Questions...................................    99
Questions Submitted to David M. Walker...........................    99
Questions Submitted by Senator Robert C. Byrd....................    99
Questions Submitted by Senator Dianne Feinstein..................   100
Questions Submitted by Senator Judd Gregg........................   102
Questions Submitted to Claude M. Kicklighter.....................   103
Questions Submitted by Senator Robert C. Byrd....................   103
Questions Submitted by Senator Dianne Feinstein..................   106
Questions Submitted to Stuart W. Bowen, Jr.......................   107
Questions Submitted by Senator Robert C. Byrd....................   107
Questions Submitted by Senator Frank R. Lautenberg...............   111
Questions Submitted by Senator Judd Gregg........................   113
Questions Submitted by Senator Larry Craig.......................   115
Questions Submitted to Judge Radhi Hamza al-Radhi................   115
Questions Submitted by Senator Robert C. Byrd....................   115

                        Wednesday, July 23, 2008

Opening Statement of Senator Robert C. Byrd......................   121
Statement of Senator Thad Cochran................................   123
Statement of Hon. Gordon England, Deputy Secretary of Defense, 
  Department of Defense..........................................   125
Shay Assad, Director, Defense Procurement, Department of Defense.   125
Prepared Statement of Gordon England.............................   127
Oversight of DOD Contracts for OIF...............................   127
Department of Defense Inspector General's Report.................   128
Systemic Challenges by Functional Area...........................   128
Systemic Challenges Across Functional Areas......................   128
DOD Initiatives..................................................   128
DOD Audit Community Initiatives..................................   128
Defense Contract Audit Agency (DCAA).............................   128
Special Inspector General for Iraq Reconstruction (SIGIR)........   129
Actions Stemming From SIGIR Contracting Lessons Learned 
  Recommendations................................................   129
Gansler Commission Report........................................   129
Defense Contract Management Agency (DCMA)........................   130
Excellence in the Pursuit of Perfection..........................   130
Combating Corruption, Waste, Fraud, and Abuse in Iraq............   131
Statement of Hon. Gordon S. Heddell, Acting Inspector General, 
  Department of Defense..........................................   132
Mary Ugone, Department of Defense................................   132
IG Strategy......................................................   132
Section 842......................................................   133
Lessons Learned and Initiatives..................................   133
Prepared Statement of Gordon S. Heddell..........................   133
OIG Strategy.....................................................   134
New OIG Initiatives..............................................   135
Ongoing Oversight Work...........................................   136
Audit............................................................   139
Policy and Oversight.............................................   141
Special Plans and Operations.....................................   142
Intelligence.....................................................   143
Interagency Oversight............................................   144
Comprehensive Audit Plan for Southwest Asia......................   145
Statement of General Benjamin S. Griffin, Commanding General, 
  U.S. Army Materiel Command.....................................   205
Jeffrey Parsons, Executive Director, U.S. Army Materiel Command..   205
Lee Thompson, Program Director, Logistics Civil Augmentation 
  Program, U.S. Army Sustainment Command.........................   205
Prepared Statement of General Benjamin S. Griffin................   207
Weapons Misplaced in Iraq........................................   212
Loss of U.S. Coalition Provisional Authority Funds in Iraq.......   214
Army Contracting Command.........................................   215
Acquisition Workforce Training...................................   216
Lack of Oversight of U.S. Contracts in Iraq......................   217
Extending the Statute of Limitations.............................   219
Prepared Statement of Senator Patrick J. Leahy...................   220
Army Requests Additional General Officers........................   221
Construction Contracts in Afghanistan............................   222
Accountability from U.S. Contractors.............................   223
Agressive Prosecution of Wrongdoing..............................   224
Poorly Executed Contracts Endanger our Troops....................   226
AEY Ammunition Contracts.........................................   228
Fair Treatment of Whistleblowers?................................   229
Charles Smith Allegations........................................   230
KBR Water Allegations............................................   233
LOGCAP IV Acquisition Strategy...................................   233
RCI Audit Assistance.............................................   234
Additional Committee Questions...................................   236
Questions Submitted to Hon. Gordon England.......................   236
Questions Submitted by Senator Robert C. Byrd....................   236
Questions Submitted by Senator Byron L. Dorgan...................   244
Questions Submitted by Senator Frank R. Lautenberg...............   255
Questions Submitted by Senator Mitch McConnell...................   256
Question Submitted by Senator Wayne Allard.......................   257
Questions Submitted to General Benjamin S. Griffin...............   257
Questions Submitted by Senator Robert C. Byrd....................   257
Questions Submitted by Senator Byron L. Dorgan...................   259
Question Submitted by Senator Frank R. Lautenberg................   264
Questions Submitted to Gordon S. Heddell.........................   265
Questions Submitted by Senator Robert C. Byrd....................   265
Questions Submitted by Senator Byron L. Dorgan...................   271
Questions Submitted by Senator Frank R. Lautenberg...............   272
Questions Submitted by Senator Wayne Allard......................   273
Questions Submitted by Senator Larry Craig.......................   275


  EXAMINING THE EFFECTIVENESS OF U.S. EFFORTS TO COMBAT WASTE, FRAUD, 
                     ABUSE, AND CORRUPTION IN IRAQ

                              ----------                              


                        TUESDAY, MARCH 11, 2008

                                       U.S. Senate,
                               Committee on Appropriations,
                                                    Washington, DC.
    The committee met at 10:44 a.m., in room SD-106, Dirksen 
Senate Office Building, Hon. Patrick J. Leahy presiding.
    Present: Senators Leahy, Murray, Dorgan, Feinstein, 
Lautenberg, Nelson, Cochran, Craig, and Allard.


             OPENING STATEMENT OF SENATOR PATRICK J. LEAHY


    Senator Leahy. Good morning.
    First off, I apologize to all of our witnesses and those in 
the audience for being late. It was unavoidable.
    Chairman Byrd is not here today, but without objection I 
will include his full statement in the record.
    [The statement follows:]

              Prepared Statement of Senator Robert C. Byrd

    Ladies and Gentlemen, Members of the Committee, and our 
witnesses, I thank you for your attendance this morning. 
Today's hearing is the first in a series of hearings to be 
conducted by the Appropriations Committee to examine the costs 
and consequences of fraud, waste, abuse and corruption within 
Iraq and with U.S. government contracts involving Iraq. I hope 
that over the course of these hearings we will discover some 
solutions to these problems, some remedies to drain the 
festering abscess of waste, fraud, abuse and corruption.
    Media reports, think tank papers and Congressional efforts, 
especially those of Representative Waxman and Senator Dorgan, 
have documented many aspects of these problems. But, it is 
still difficult to determine the full extent of the fraud and 
corruption that have become epidemic throughout seemingly every 
aspect of U.S. involvement in Iraq.
    Since 2003, there has been a slow steady drumbeat of 
reports that throw light in some very dark corners of the Iraqi 
reconstruction effort, but over the last year, that drumbeat 
has intensified. It is becoming clear that fraud, waste, abuse 
and corruption are major contributors to the lack of progress 
on economic and governmental reconstruction in Iraq. This lack 
of success, in turn, undermines the legitimacy and authority of 
the Iraqi government and contributes to the perceived need for 
the United States and the international community to remain in 
Iraq.
    The United States alone has invested well over six hundred 
billion dollars, five long and difficult years, and almost 
4,000 lives to overthrow of Saddam Hussein's regime and to the 
subsequent stabilization and rebuilding of Iraq. Our own 
economy suffers while war deficits mount. We will hear 
testimony today about billions in U.S. dollars, wrapped in 
plastic and flown to Iraq, never to be seen again. We have 
learned about millions of dollars in cash, U.S. currency, 
carried out of U.S. offices in Iraq in boxes and put in car 
trunks, only to be seized by Iraqi officials before it could be 
spent on its intended purpose. That money has never been 
accounted for. Weapons, too, by the tens of thousands, have 
been distributed with little or no accountability, and their 
current whereabouts remain in question.
    Iraq is a nation of great natural resources, with vast oil 
wealth. It was asserted by the Administration that such 
resources could be tapped to fund reconstruction and investment 
in economic growth. So what has happened?
    We all know that the security situation in Iraq is still 
poor. Better, perhaps, than it was in 2006, but still 
insufficient to encourage local economic investment, let alone 
foreign investment. Despite more than $45 billion in U.S. 
reconstruction investment alone since 2003, Iraq's 
infrastructure remains in poor shape. Oil production has not 
surpassed pre-war levels, power production fails to deliver 
more than a few hours of electricity per day, clean water is 
often not available, schools and hospitals still struggle. As 
of April 2007, only 8 of 150 planned primary healthcare 
facilities to be built by 2006 with U.S. reconstruction aid 
were open to the public. Our billions in reconstruction have 
not translated into bricks and mortar or lights and water, at 
least for the average Iraqi.
    After five years of U.S. assistance, Iraq's economy is 
still struggling, and most of the country remains on a cash 
economy. Iraq soldiers disappear for weeks to hand carry their 
paychecks to their families because the banking system is 
inadequate. The government is unable to execute its budgets, it 
is rife with corruption and fraud, and it appears unable or 
unwilling to police itself. We have heard of instances in which 
$800 million of $1.3 billion allocated for Iraqi military 
procurement in a single year simply vanished, lost in the 
overseas bank accounts of former officials who live in luxury 
while their nation suffers.
    Iraq's vast oil wealth has, to far too large an extent, 
financed Iraqi insurgents and militias. Some of it has lined 
the pockets of Iraqi government officials who have legions of 
so-called ``ghost employees'' working for them. It pays for 
fuel subsidies to Iraqi citizens, some of whom profit by 
reselling oil purchased at the subsidized price to United 
States contractors at an inflated price. No wonder there is 
little incentive for them to achieve political reconciliation.
    Some U.S. officials ask why we should care how the Iraqis 
spend their own money. I'll tell you why. When Iraq misspends 
its own money and does not provide for its own security and its 
own reconstruction, guess who steps in to backfill that need? 
You do, and I do, and every American taxpayer does, to the tune 
of over $150 billion each year after year. That is why we must 
care, and care a lot, about corruption in the Iraqi government. 
Some Americans might not mind their tax dollars helping average 
Iraqis build a workable society, but I will bet that not one 
single American taxpayer likes the idea of their tax dollars 
fattening the wallet of a corrupt Iraqi official or going to an 
insurgent group that uses that money to build or buy explosive 
devices to be used against our troops.
    Some U.S. contractors appear to be getting fat off of this 
war as well. Congress has heard from some whistleblowers that 
have brought to light the excesses associated with the 
profligate use of ``cost-plus'' contracts, and the practice of 
double counting or double billing for services provided to U.S. 
service members, as well as egregious abuses involving shoddy 
materials, contaminated water, or spoiled food. Contractors 
have been paid in full and been given bonuses even when their 
work was not exemplary. No civilian contractor here in the 
United States would get away with this kind work; why is it 
allowed to occur in Iraq?
    What we are seeing in Iraq, I fear, is an endless cycle of 
corruption, an ever-turning water wheel of corrupt practices 
fed by the endless stream of dollars from U.S. reconstruction 
assistance, military operations support contracts, and 
misappropriated Iraqi oil revenues. As long as this wheel keeps 
turning and profiting contractors, officials, insurgents, and 
militias, there is no incentive for anyone to shut it down. Why 
would Iraqi officials want to build a functioning, transparent, 
accountable government and live only on their own salaries, 
when they can skim millions, take bribes and collect salaries 
for non-existent employees? Why would contractors want to make 
only a modest profit, when there is little accountability for 
fraudulent practices? And why would the insurgents and 
militants work for reconciliation or peace and stability in 
Iraq when their funding, prestige, and social aims are fostered 
in an environment of instability and corruption?
    Our witnesses today include, on our first panel, the 
Honorable Claude M. Kicklighter, the Inspector General for the 
Department of Defense; Stuart W. Bowen, Jr., the Special 
Inspector General for Iraq Reconstruction; and the Honorable 
David M. Walker, Comptroller General of the United States.
    On our second panel, I am pleased that Judge Radhi Hamza 
al-Radhi, the former Director of the Iraqi Commission on Public 
Integrity, will share his observations regarding the scope of 
government corruption and criminal activity in Iraq, as well as 
the adequacy of anticorruption efforts within the Iraqi 
government and the effectiveness of U.S. anticorruption 
support. Judge Radhi has faced death threats for his heroic 
efforts in Iraq, and members of his staff have been killed 
pursuing corrupt activities in Iraq.

    Senator Leahy. As you know, the chairman's been a strong 
voice for accountability of our assistance programs in Iraq. I 
talked with Senator Byrd yesterday. I know he still has that 
concern. We look forward to him being back here very soon.
    This committee has heard testimony on the President's 
budget request for billions of dollars for Iraq reconstruction 
over several years.
    The Appropriations Committee is actually the only regulator 
on the spigot this administration opened in 2003, to flood Iraq 
with billions of dollars of U.S. taxpayers' money. I think it's 
time, after all these years, for the Congress to have a strong 
hand on that spigot, especially as we're considering another 
$108 billion in supplemental emergency funds--money which the 
United States has to actually borrow, and pay interest on.
    Investigations of the Special Inspector General for Iraq 
Reconstruction (SIGIR), the Government Accountability Office 
(GAO), the media and others, have revealed waste and fraud on a 
scale unprecedented in our foreign assistance programs.
    The administration's attitude toward budgeting, spending 
and accounting for U.S. tax dollars in Iraq can actually be 
summed up in two words, ``Anything goes.'' Just put it on the 
American taxpayers' credit card.
    Meanwhile, the American people's priorities here at home 
have been relegated further and further to the back of the 
line. We've heard this year that there are even more needs in 
the United States that are going to have to be put on the back 
burner, as we send more money to Iraq. Incidentally, we've been 
there longer than the United States was in World War II.
    Beginning last year, the new Congress has begun oversight 
to try to correct these mistakes, and learn lessons so we can 
avoid them in the future. At today's hearing, we'll continue 
that process.
    For an administration that came into office insisting they 
could be trusted to spend taxpayer dollars wisely, and then 
ignored any advice they disagreed with--including from people 
with decades of experience--both Republicans and Democrats--the 
record's shameful.
    Even today, the administration continues to oppose remedies 
like the War Profiteering Prevention Act.
    It's not that nothing has been accomplished--none of us are 
suggesting that. There have been some very successful projects 
in Iraq. But if one compares the results with the exorbitant 
amounts spent, it's an embarrassment.
    As we struggle here, in the United States, to find the 
money to repair our decaying bridges or our roads or our 
schools, the administration has wasted hundreds of millions of 
dollars--some would say billions--in Iraq.
    Now, at first, of course, we were told by the 
administration and the American people were told that Iraqi oil 
would pay to rebuild the country. That assertion by the chief 
architects of the war turned out to be either naive or 
intentionally dishonest. I tend to think the latter.
    Instead, since 2003, they spent $45 billion for Iraqi 
relief and reconstruction, which of course does not include the 
half trillion dollars spent on the military operations. In 
fact, the long-term cost of this war is already expected to 
approach $3 trillion, if you count the cost of rebuilding our 
military and caring for the wounded.
    The administration spent huge amounts on no-bid contracts 
to companies like Halliburton and their subsidiaries, companies 
that have close connections with the White House. They charged 
exorbitant fees, they often did shoddy work, or never completed 
the work they were paid to do.
    I, and others, have urged the administration to focus on 
smaller projects and give more responsibility and involvement 
to the Iraqi people themselves, those who know the area the 
best. But stubbornness, arrogance and incompetence won out, and 
only recently has the approach begun to change.
    I want to commend Ambassador Ryan Crocker, and Ambassador 
Charles Ries, and their staffs, for the long overdue changes 
they're making.
    As chairman of the State and Foreign Operations 
Subcommittee, I've seen how foreign aid can be effective--it 
can help transform people's lives for the better, it can help 
transform whole countries. And it serves our national interests 
in many, many ways. But in Iraq the experts were ignored by 
political ideologues who wanted a quick fix. So, at a time when 
hardworking Americans are losing their homes, and losing their 
jobs, and spending their savings on the soaring costs of 
healthcare, trying to make ends meet, these same taxpayers have 
a right to know how the administration has squandered so much 
of their hard-earned money in Iraq.
    And they have a right to ask, today, with the price of oil 
at $108 a barrel, and the administration asking for billions of 
dollars more for Iraq reconstruction, why the American people 
should continue to foot the bill for what many say the Iraqis 
can afford themselves.
    I've been joined by one of the most distinguished and 
senior members of the United States Senate, Senator Thad 
Cochran, who has also chaired this committee in the past, and I 
yield to Senator Cochran.

                   STATEMENT OF SENATOR THAD COCHRAN

    Senator Cochran. Mr. Chairman, Thank you very much. You 
know, the seniority system is still alive and well in the U.S. 
Senate, and the more I'm here, the longer I'm here, the more I 
appreciate it.
    I also appreciate the fact that we have a panel of 
witnesses here who are very important. We appreciate your 
coming to talk with us about the reconstruction, the rebuilding 
in Iraq, and the challenges that we face there, Comptroller 
General, GAO, Inspector General of the Department of Defense, 
and Stuart Bowen, the Special Inspector General for Iraq 
Reconstruction. We appreciate all of the hard work you are 
undertaking in terms of trying to analyze and make 
recommendations for changes in policies, procedures, laws that 
we may consider, identifying the priorities for more funding, 
or funding that isn't necessary in this effort--we would 
appreciate your advice and counsel as we proceed with our 
hearing today.
    Thank you, Mr. Chairman.
    Senator Leahy. Thank you, Senator Cochran.
    And our witnesses will be, first, David Walker, who is the 
Comptroller General of the United States. He became the seventh 
Comptroller General and began his 15-year term November 9, 
1998, if I'm correct.
    As Comptroller General, he is the Nation's chief 
accountability officer, and he's the head of the U.S. 
Government Accountability Office, in the legislative branch, 
which was founded in 1921 to improve the performance and ensure 
the accountability of the Federal Government for the benefit of 
the American people.
    He will be followed by Claude M. Kicklighter, who is the 
Inspector General of the Department of Defense. He's the sixth 
Senate-confirmed DOD Inspector General, but he's served his 
country, not only since becoming inspector general on April 30 
of last year, for over 50 years. First, as an Army officer for 
35 years, retiring as a lieutenant general, followed by over 15 
years as a distinguished public servant.
    He is selected by the Secretaries of State and Defense to 
establish and direct the Iraq/Afghanistan Joint Transition 
Planning Group, and is a man of great knowledge and competence.
    He'll be followed by Stuart Bowen, who is the Special 
Inspector General for Iraq Reconstruction. He has served as 
Special Inspector General since October 2004. He was previously 
the Inspector General for the Coalition Provisional Authority, 
for which he was appointed in January 2004, and he has been 
asked to conduct effective oversight of $47 billion 
appropriated for the reconstruction of Iraq.
    We'll begin with the Comptroller General.
    Mr. Walker, go ahead.

STATEMENT OF HON. DAVID M. WALKER, COMPTROLLER GENERAL, 
            GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Walker. Thank you, Senator Leahy, Senator Cochran, 
members of the Senate Appropriations Committee. I'm pleased to 
be here today to discuss the challenges that the United States 
must address in order to improve performance and assure 
accountability over U.S. efforts to stabilize and reconstruct 
Iraq.
    Between fiscal years 2001 and 2008, Congress appropriated 
nearly $700 billion for the global war on terrorism (GWOT). The 
majority of this amount has been provided for DOD military 
operations in support of Operation Iraqi Freedom (OIF), 
including the cost of equipping, maintaining, and supporting 
our deployed forces.
    About $45 billion of this amount was provided for 
reconstruction efforts, including rebuilding Iraq's oil and 
electricity sectors, improving its security forces, and 
enhancing Iraq's capacity to govern.
    I'm pleased to appear here today with two of my colleagues 
from the accountability community, the DOD Inspector General, 
and the Special Inspector General for Iraq Reconstruction. As 
you know, GAO and the Inspectors General have different roles 
and responsibilities, and we try to work in a coordinated 
fashion to try to get our job done, while avoiding duplication 
of efforts.
    At GAO, our work tends to be more strategic, more long 
range, and cross-cutting across the different silos of 
Government, whereas the Inspectors General tend to focus on 
fighting fraud, waste, abuse, and mismanagement within their 
respective Departments and agencies, and they tend to drill 
down more than GAO does.
    I would like to note that--since one of the concerns of 
this committee is the issue of fraud, waste, and abuse--I would 
like to note that with regard to U.S. funds, fraud is not a 
major problem. It is a major problem with Iraqi funds. 
Corruption is a serious problem in Iraq.
    But waste is a huge problem, both for the United States as 
well as for Iraq, and in that regard I recently worked with 
several of my colleagues in the Inspector General community to 
develop a definition of waste, which I found had not been 
defined before.
    As we see it, waste occurs when taxpayers, in the 
aggregate, do not receive reasonable value for money in 
connection with any Government-funded activity, due to 
inappropriate acts or omissions by officials with control over, 
or access to, Government resources.
    Most waste does not involve a violation of law, but it does 
involve mismanagement resulting from poor leadership or 
guidance, inappropriate acts or omissions, including the use of 
poor business arrangements or inadequate oversight, often 
caused by having too few skilled people to manage and oversee 
the task.
    The United States is entering into its fifth year of 
efforts to rebuild and stabilize Iraq, but these efforts have 
neither consistently achieved their desired outcomes, nor have 
they done so, always, in an economic and efficient manner.
    While specific facts and circumstances differed, a lack of 
well-defined requirements, poor business arrangements, and 
inadequate oversight and accountability have affected 
reconstruction, stabilization, and support efforts, alike.
    Several longstanding and systemic problems continue to 
hinder the Department of Defense's management and oversight of 
contractors at deployed locations, including the failure to 
follow guidance, the failure to provide adequate numbers of 
contract oversight personnel, the failure to systematically 
collect and distribute lessons learned, and the failure to 
ensure pre-deployment training for military commanders and 
contract oversight personnel who have a role in connection with 
contractors.
    I might, however, note, in fairness--things are getting 
better, and that a number of the recommendations we've made 
have been implemented. There's been an intention to implement 
others, and so we're seeing improvement, but we've still got a 
long way to go.
    The United States has made available nearly $6 billion to 
rebuild Iraq's energy sector, as an example, and $300 million 
to develop its Government ministries, but neither one of these 
important efforts has a strategic and integrated plan.
    We have a number of players on the field in the Federal 
Government, working with their Iraqi partners. Each are trying 
to do the best they can with regard to their narrow span of 
control, but we need a strategic and integrated plan with 
responsibility and accountability, not only overall, but with 
regard to each major components in order to make sure that 
we're going to achieve positive results in an economic, 
efficient, and effective manner.
    The Iraqi Government is challenged. There is rampant 
corruption. There are problems with regard to capacity of their 
skills and knowledge, there are problems, also, with regard to 
factionalization that exists within a number of the ministries, 
especially the largest ministries.
    We've made certain recommendations to the State Department 
about putting together this strategic and integrated plan in 
connection with these two matters. As an example, they came 
back and said they felt that was the responsibility of the 
Iraqi Government. In our view it's a shared responsibility. 
U.S. taxpayer money is involved. And while it's a shared 
responsibility to be successful, we think that the State 
Department needs to work with the Iraqi Government to make 
these plans a reality.
    Thank you, Senators, and I will be more than happy to 
answer questions after my colleagues have their opportunity to 
speak.
    Senator Leahy. Thank you very much, Mr. Walker.
    [The statement follows:]

                 Prepared Statement of David M. Walker

    Mr. Chairman and Members of the Committee: I am pleased to be here 
today to discuss the challenges the United States must address to 
successfully improve performance and ensure accountability over U.S. 
efforts to stabilize and reconstruct Iraq. In my statement today, I 
will discuss (1) factors contributing to poor contracting outcomes and 
accountability, (2) long-standing issues in the Department of Defense's 
(DOD) management and oversight of contractors supporting deployed 
forces, and (3) efforts to improve the capacity of the Iraqi 
government.
    Between fiscal years 2001 to 2008, Congress appropriated nearly 
$700 billion for the global war on terrorism.\1\ The majority of this 
amount has been provided to DOD for military operations in support of 
Operation Iraqi Freedom, including the cost of equipping, maintaining, 
and supporting our deployed forces. About $45 billion was provided for 
reconstruction efforts, including rebuilding Iraq's oil and electricity 
sectors, improving its security forces, and enhancing Iraq's capacity 
to govern. Prudence with taxpayer funds and growing long-range fiscal 
challenges demand that the United States maximize its return on the 
billions of dollars invested in Iraq. Further, strengthening Iraq's 
fragile government institutions, which have thus far failed to 
adequately deter corruption, stimulate employment, or deliver essential 
services, is critical to establishing a peaceful, stable, and secure 
Iraq.
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    \1\ This figure includes military appropriations for Operation 
Noble Eagle, Operation Enduring Freedom, and Operation Iraqi Freedom, 
as well as stabilization and reconstruction appropriations for Iraq and 
Afghanistan.
---------------------------------------------------------------------------
    My statement today is based upon GAO's extensive work spanning 
several years. Since 2003, we have issued nearly 130 Iraq-related 
reports and testimonies.\2\ Our work in Iraq largely has been performed 
under my authority as Comptroller General to conduct evaluations on my 
own initiative since it is a matter of broad interest to the entire 
Congress. We performed this work in accordance with generally accepted 
government auditing standards.
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    \2\ To see GAO reports on Iraq, click on http://GAO.gov/docsearch/
featured/oif.html.
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    I am pleased to appear with the DOD Inspector General and the 
Special Inspector General for Iraq Reconstruction. As you know, GAO and 
the inspectors general have different, but complementary, roles and 
responsibilities. GAO's broad audit authority allows it to support 
Congress through strategic analyses of issues that cut across multiple 
federal agencies and sources of funding, while the inspectors general 
focus primarily on preventing and exposing fraud, waste, and abuse in 
individual federal agency programs. The abilities of the inspectors 
general to provide in-country oversight of specific projects and 
reconstruction challenges have enabled GAO to focus on national, 
sector, and interagency issues. We and the other accountability 
organizations coordinate our oversight efforts to avoid duplication and 
leverage our resources.
    I would like to note that several of my colleagues in the 
accountability community and I have developed a definition of waste. As 
we see it, waste occurs when taxpayers do not receive reasonable value 
for their money in connection with any government-funded activity due 
to inappropriate acts or omissions by officials with control over or 
access to government resources. Most waste does not involve a violation 
of law, but it does involve mismanagement resulting from poor 
leadership or guidance; inappropriate actions or omissions, including 
the use of poor business arrangements; or inadequate oversight, often 
caused by having too-few skilled people. Our reports and testimonies 
have provided specific examples where such issues resulted in higher 
costs, schedule delays, and unmet goals. I highlight some of these in 
my testimony. Nevertheless, estimating or quantifying the financial 
impact of fraudulent, wasteful, or abusive practices is not always 
feasible or practicable. However, the inability to do so should not 
detract from the need to improve management and accountability over our 
efforts in Iraq.

                                SUMMARY

    The United States is entering its fifth year of efforts to rebuild 
and stabilize Iraq, but these efforts have neither consistently 
achieved their desired outcomes nor done so in an economic and 
efficient manner. While the specific facts and circumstances differed, 
a lack of well-defined requirements, poor business arrangements, and 
inadequate oversight and accountability have affected reconstruction, 
stabilization, and support efforts alike. Two GAO reports issued in 
July 2007 illustrate some of these problems. In one report, we found 
that DOD completed negotiations for task orders on an oil contract more 
than 6 months after the work commenced. As a result, the contractor 
incurred almost all of its costs at the time of negotiations, which 
influenced DOD's decision to pay nearly all of the $221 million in 
costs questioned by the Defense Contract Audit Agency (DCAA). In a 
second report, we found that unclear DOD guidance, inadequate staff, 
and insufficient technology resulted in poor accountability over 
190,000 weapons provided to the Iraqi security forces. DOD concurred 
with our recommendation to identify accountability procedures for the 
program to train and equip the Iraqi security forces. However, as of 
March 2008, DOD had not developed the necessary procedures.
    Several long-standing and systemic problems continue to hinder 
DOD's management and oversight of contractors at deployed locations, 
including the failure to follow planning guidance, provide adequate 
numbers of contract oversight personnel, systematically collect and 
distribute lessons learned, and ensure predeployment training for 
military commanders and contract oversight personnel on the use and 
role of contractors. The scale of contractor support DOD relies on 
today in locations such as Iraq and elsewhere amounts to billions of 
dollars worth of goods and services each year, underscoring the need to 
effectively manage and oversee contractor efforts. The magnitude of 
this support demands that DOD ensure that military personnel have the 
guidance, resources, and training to effectively monitor contractor 
performance at deployed locations. However, our work has identified 
instances where poor oversight and management of contractors led to 
negative financial and operational impacts. We have made a number of 
recommendations aimed at strengthening DOD's management and oversight 
of contractor support at deployed locations, and the department has 
agreed to implement many of those recommendations. However, we have 
found that DOD has made limited progress implementing some key 
recommendations.
    The United States has made available nearly $6 billion to rebuild 
Iraq's energy sector and $300 million to develop its government 
ministries but lacks integrated strategic plans for both efforts. 
Building the capacity of the ministries is critical to ensure that Iraq 
can effectively assume responsibility for delivering government 
services and sustain the effort to rebuild and stabilize the country. 
Rebuilding Iraq's energy sector is necessary to ensure that Iraq can 
pay for these tasks and provide essential services to the Iraqi people. 
However, in the absence of a comprehensive and integrated strategic 
plan, U.S. efforts to build the capacity of the Iraqi government have 
been hindered by multiple U.S. agencies pursuing individual efforts 
without overarching direction. The creation of a comprehensive and 
integrated strategic plan for the energy sector is also essential for 
Iraq to identify the most pressing needs and address challenges 
affecting future development prospects. We recommended that the State 
Department work with Iraqi ministries to develop an integrated energy 
plan. State commented that the Iraqi government, not the U.S. 
government, should act on our recommendations. Given the billions of 
dollars provided to rebuild Iraq's energy sector and the limited 
capacity of Iraqi ministries, I believe that our recommendations to 
State are still valid.
    DOD and State have taken action to implement some, but not all, of 
our recommendations, increasing the risk that past mistakes or lapses 
in accountability will be repeated and undermining efforts to enable 
Iraq to assume greater responsibility for rebuilding its nation. In 
doing so, DOD and State miss opportunities to improve outcomes and 
enhance accountability.

                               BACKGROUND

    Several entities and U.S. agencies have played important roles in 
U.S. efforts to rebuild and stabilize Iraq. From May 2003 through June 
2004, the Coalition Provisional Authority (CPA) \3\ was responsible for 
overseeing, directing, and coordinating rebuilding efforts. After its 
dissolution, the Secretary of State assumed responsibilities for the 
supervision and general direction of reconstruction efforts in Iraq. 
DOD, including the U.S. Army Corps of Engineers, and United States 
Agency for International Development (USAID) have had responsibility 
for managing and overseeing specific reconstruction projects.
---------------------------------------------------------------------------
    \3\ Established in May 2003 and led by the United States and the 
United Kingdom, the CPA was the United Nations-recognized coalition 
authority responsible for the temporary governance of Iraq.
---------------------------------------------------------------------------
    Contractors have largely carried out reconstruction efforts in 
Iraq. For example, in early 2004, the CPA, through various military 
organizations, awarded seven contracts to help provide overall 
direction, coordination, and oversight of 12 large design-build 
contractors. In turn, these 12 design-build contractors were 
responsible for the design and execution of construction activities in 
various sectors such as electricity, oil, and public works and water.
    In addition, DOD has made extensive use of contractors to support 
its deployed forces. The scale of contractor support DOD relies on 
today in locations such Iraq and elsewhere amounts to billions of 
dollars worth of goods and services each year, underscoring the need to 
effectively manage and oversee contractor efforts. Contractors provide 
interpretation, intelligence analysis, and security services, as well 
as weapon systems maintenance and base operations support. The 
significance of such contracts is illustrated by the fact that the Army 
reported obligations of over $4.5 billion in fiscal year 2007 on its 
single-largest support contract, the Logistics Civil Augmentation 
Program (LOGCAP).
    The collective effort of military, civilian, and contractor 
personnel in Iraq has been complicated by the country's security 
environment. The CPA's original reconstruction plan was premised on the 
assumption that a permissive security environment would enable the 
United States to restore Iraq's essential services to prewar levels. 
The CPA also assumed that the Iraqi government and the international 
community would help finance Iraq's development and that Iraqi oil 
revenues could help pay for reconstruction costs. None of these 
assumptions has materialized.
    In February 2007, we reported that the security situation was 
continuing to deteriorate, impeding the management and execution of 
reconstruction efforts. As shown in figure 1, the security situation 
generally deteriorated through the summer of 2007, with the number of 
attacks increasing to about 180 per day in June 2007.




Figure 1.--Enemy-Initiated Attacks against the Coalition and Its Iraqi 
                                Partners

    However, since then, the number of enemy-initiated attacks has 
decreased by about two-thirds, to the levels of early 2005. 
Specifically, the average number of daily attacks decreased from about 
180 in June 2007 to about 60 in January 2008--a nearly 70 percent 
decrease--as the number of attacks against coalition forces in 
particular fell considerably. The number of attacks on Iraqi security 
forces and civilians also declined from June 2007 levels. While 
security has improved in Iraq, a permissive security environment has 
yet to be achieved.

  POOR CONTRACTING OUTCOMES AND ACCOUNTABILITY HINDER U.S. EFFORTS IN 
                                  IRAQ

    Our work over the past 5 years has shown that one or more of the 
elements essential for achieving good acquisition outcomes--well-
defined requirements matched with adequate resources, sound business 
arrangements, and the capacity to properly manage and oversee 
contractor performance--were often missing during specific 
reconstruction efforts, in contracts to support deployed forces, and in 
our efforts to equip Iraqi security forces. The absence of these 
elements often contributed to unmet expectations, schedule delays, or 
higher-than-necessary costs, underscoring both the need to hold 
agencies and contractors accountable for outcomes, and the challenges 
of doing so. Such issues are not unique to Iraq but reflect some of the 
long-standing and systemic issues confronting DOD. They are, however, 
magnified in a contingency situation such as Iraq or Katrina. Further, 
we found that unclear DOD guidance resulted in poor accountability over 
190,000 weapons provided to the Iraqi security forces.
Mismatch between Requirements and Resources
    A prerequisite to good outcomes is a match between well-defined 
requirements and available resources. Shifts in overall priorities and 
funding, even those made for good reasons, invariably have a cascading 
effect on individual contracts, making it more difficult to manage 
individual projects to successful outcomes and complicating efforts to 
hold agencies and contractors accountable. After the State Department 
assumed responsibility for U.S. reconstruction efforts in 2004, it re-
examined the priorities and programs initiated by the CPA, with the 
objective of reprioritizing funding to key, high-impact projects. State 
increased support for security, law enforcement efforts, and oil 
infrastructure enhancements. These reallocations, affecting billions of 
dollars of planned work, led to the cancellation of some projects in 
the electricity and water sector.
    At the contract level, the lack of well-defined requirements 
resulted in schedule delays and the United States potentially paying 
more than necessary. For example, in September 2005, we reported that 
difficulties in defining the cost, schedule, and work to be performed 
on projects in Iraq's water and sanitation sector contributed to 
project delays and reduced scopes of work.\4\ We found that agreement 
between the U.S. government and contractors on the final cost, 
schedule, and scope of 18 of the 24 task orders valued at $873 million 
had been delayed. These delays occurred, in part, because Iraqi 
authorities, U.S. agencies, and contractors could not agree on scopes 
of work and construction details.
---------------------------------------------------------------------------
    \4\ GAO, Rebuilding Iraq: U.S. Water and Sanitation Efforts Need 
Improved Measures for Assessing Impact and Sustained Resources for 
Maintaining Facilities, GAO-05-872 (Washington, D.C.: Sept. 7, 2005).
---------------------------------------------------------------------------
    Previously, in July 2004, we reported that a disagreement between 
the LOGCAP contractor and the DCAA on how to bill for services to feed 
soldiers in Iraq involved at least $88 million in questioned costs.\5\ 
The disagreement regarded whether the government should be billed on 
the camp populations specified in the statement of work or on the 
actual head count. A clearer statement of work, coupled with better DOD 
oversight of the contract, could have prevented the disagreement and 
mitigated the government's risk of paying for more services than 
needed.
---------------------------------------------------------------------------
    \5\ GAO, Military Operations: DOD's Extensive Use of Logistics 
Support Contracts Requires Strengthened Oversight, GAO-04-854 
(Washington, D.C.: July 19, 2004).
---------------------------------------------------------------------------
Business Arrangements that Increased Risk
    To award contracts and begin reconstruction efforts quickly, DOD 
used business arrangements that often increased DOD's risk of paying 
higher costs than it might have otherwise. Such arrangements often 
allowed contractors to begin work before key contract terms and 
conditions, such as the scope of the work and its price, were fully 
defined. For example, in a September 2006 report, we found that DOD 
contracting officials were less likely to remove the costs questioned 
by auditors if the contractor had already incurred these costs before 
the contract action was definitized.\6\ In contrast, in the few 
instances in which the government negotiated the terms before starting 
work, the portion of questioned costs removed from the proposal was 
substantial. For example, in three audits related to a logistics 
support contract, DCAA questioned $204 million. Since the government 
and the contractor negotiated the terms prior to the onset of the work, 
the contractor had not incurred any costs at the time of negotiations. 
DCAA calculated that $120 million of the $204 million in questioned 
costs were removed as a result of its findings.
---------------------------------------------------------------------------
    \6\ GAO, Iraq Contract Costs: DOD Consideration of Defense Contract 
Audit Agency's Findings, GAO-06-1132 (Washington, D.C.: Sept. 25, 
2006).
---------------------------------------------------------------------------
    We subsequently issued a report in July 2007 that focused on the 
U.S. Army Corps of Engineers' $2.5 billion contract to Kellogg Brown & 
Root to restore Iraq's oil infrastructure and ensure an adequate fuel 
supply within Iraq.\7\ DCAA reviewed the contract's 10 task orders and 
questioned $221 million in contractor costs. While DOD considered 
DCAA's audit findings and performed additional analysis, the lack of 
timely negotiations contributed significantly to DOD's decision on how 
to address the questioned costs. In this case, all 10 task orders were 
negotiated more than 180 days after the work commenced and the 
contractor had incurred almost all its costs at the time of 
negotiations. These circumstances influenced DOD's decision to pay 
nearly all of the $221 million in questioned costs.
---------------------------------------------------------------------------
    \7\ GAO, Defense Contract Management: DOD's Lack of Adherence to 
Key Contracting Principles on Iraq Oil Contract Put Government 
Interests at Risk, GAO-07-839 (Washington, D.C.: July 31, 2007).
---------------------------------------------------------------------------
Poor Management and Oversight of Contractor Performance
    Managing contractors in an unstable contracting environment means 
greater attention to oversight, which relies on having a capable 
government workforce. Having personnel who are trained to conduct 
oversight and who are held accountable for their responsibilities is 
essential for effective oversight of contractors. If oversight is not 
conducted, not sufficient, or not well documented, DOD is at risk of 
being unable to identify and correct poor contractor performance. On 
multiple occasions, we and others have reported on deficiencies in 
DOD's oversight; for example:
  --In December 2006, we reported that DOD did not have sufficient 
        numbers of contractor oversight personnel at deployed 
        locations, which limited its ability to obtain reasonable 
        assurance that contractors were meeting contract requirements 
        efficiently and effectively.\8\
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    \8\ GAO, Military Operations: High-Level DOD Action Needed to 
Address Long-standing Problems with Management and Oversight of 
Contractors Supporting Deployed Forces, GAO-07-145 (Washington, D.C.: 
Dec. 18, 2006).
---------------------------------------------------------------------------
  --In October 2007, the report of the Commission on Army Acquisition 
        and Program Management in Expeditionary Operations stated that 
        the Army lacked the leadership and military and civilian 
        personnel to provide sufficient contracting support to either 
        expeditionary or peacetime missions. According to the 
        Commission, Army contracting personnel experienced a 600-
        percent increase in their workload and were performing more 
        complex tasks, while the number of Army civilians and military 
        in the contracting workforce had remained stagnant or declined. 
        As a result, the Commission found that the vital task of 
        postaward contract management was rarely being done. It 
        recommended that the Army increase the number of civilian and 
        military personnel in its contracting workforce by 1,400 
        individuals.
  --Our recent analysis of five types of vehicles presented to the Army 
        as ready for acceptance from July 2006 through May 2007 found 
        that 18 to 31 percent of the vehicles failed government 
        inspection.\9\ Some equipment presented to the Army failed 
        inspection multiple times, sometimes for the same deficiency. 
        Rework on equipment that failed inspections since May 2005 
        wasted $4.2 million.
---------------------------------------------------------------------------
    \9\ GAO, Defense Logistics: The Army Needs to Implement an 
Effective Management and Oversight Plan for the Equipment Maintenance 
Contract in Kuwait, GAO-08-316R (Washington, D.C.: Jan. 22, 2008).
---------------------------------------------------------------------------
    Such issues are not unique to Iraq but often reflect the long-
standing and systemic issues DOD faces. Since 1992, we have identified 
DOD contract management to be high risk due to its vulnerabilities to 
fraud, waste, abuse, and mismanagement. In a report issued in July 
2006, we concluded that, because awards to contractors were large and 
growing, DOD would continue to be vulnerable to contracting fraud, 
waste or misuse of taxpayer dollars, and abuse.\10\
---------------------------------------------------------------------------
    \10\ GAO, Contract Management: DOD Vulnerabilities to Contracting 
Fraud, Waste, and Abuse, GAO-06-838R (Washington, D.C.: July 7, 2006).
---------------------------------------------------------------------------
Insufficient Accountability over U.S.-Funded Equipment Provided to 
        Iraqi Security Forces
    In July 2007, we reported that DOD could not fully account for 
Iraqi security forces' receipt of U.S.-provided equipment.\11\ Three 
factors contributed to this lapse in accountability. First, DOD had not 
specified which DOD equipment accountability \12\ procedures, if any, 
applied to the train-and-equip program for Iraq. Congress funded the 
train-and-equip program for Iraq outside traditional security 
assistance programs, which, according to DOD officials, allowed DOD a 
large degree of flexibility in managing the program. These officials 
stated that, since the funding did not go through traditional security 
assistance programs, the DOD accountability requirements normally 
applicable to these programs did not apply. For example, under 
traditional security assistance programs, DOD regulations specify 
accountability procedures for storing, protecting, transporting, and 
registering small arms and other sensitive items transferred to foreign 
governments.
---------------------------------------------------------------------------
    \11\ GAO, Stabilizing Iraq: DOD Cannot Ensure That U.S.-Funded 
Equipment Has Reached Iraqi Security Forces, GAO-07-711 (Washington, 
D.C.: July 31, 2007).
    \12\ DOD defines accountability as the obligation imposed by law, 
lawful order, or regulation accepted by an organization or person for 
keeping accurate records, to ensure control of property, documents, or 
funds, with or without physical possession.
---------------------------------------------------------------------------
    Second, DOD did not maintain a centralized record of all equipment 
distributed to the Iraqi security forces from June 2004 until December 
2005. At that time, DOD established a consolidated property book system 
to track the issuance of equipment to the Iraqi security forces and was 
attempting to recover past records. Our analysis found a discrepancy of 
at least 190,000 weapons between data reported by the former 
Multinational Security Transition Command- Iraq (MNSTC-I) commander and 
the property books (see figure 2). Former DOD officials stated that 
this lapse was due to an insufficient number of staff and the lack of a 
fully operational network to distribute equipment, among other reasons.



   Figure 2.--Discrepancies of MNSTC-I Reports of Selected Equipment 
   Issued to Iraqi Security Forces, June 2004 through September 2005

    Third, since the beginning of the program, DOD has not consistently 
collected supporting documents that confirm when the equipment was 
received, the quantities of equipment delivered, or the Iraqi units 
receiving the equipment. Since June 2006, the command has placed 
greater emphasis on collecting this documentation. However, our review 
of the 2007 property books found continuing problems with missing and 
incomplete records. Further, the property books consist of extensive 
electronic spreadsheets, which are an inefficient data management tool 
given the large amount of data and limited personnel available to 
maintain the system.
    In our July 2007 report, we recommended that the Secretary of 
Defense (1) determine which DOD accountability procedures apply or 
should apply to the program, and (2) after defining the required 
accountability procedures, ensure that sufficient staff, functioning 
distribution networks, standard operating procedures, and proper 
technology are available to meet the new requirements. DOD concurred 
with our recommendations but, as of March 3, 2008, had not determined 
which accountability procedures apply to the program.

    LONG-STANDING PROBLEMS HINDER DOD'S MANAGEMENT AND OVERSIGHT OF 
                 CONTRACTORS SUPPORTING DEPLOYED FORCES

    Several long-standing and systemic problems continue to hinder 
DOD's management and oversight of contractors at deployed locations, 
including the failure to follow planning guidance, an inadequate number 
of military and civilian contract oversight personnel, failure to 
systematically collect and distribute lessons learned, and the lack of 
comprehensive training for military commanders and contract oversight 
personnel. The recurring nature of these issues underscores the need 
for DOD leadership to ensure implementation of and compliance with 
existing guidance within the department. In prior reports, we made a 
number of recommendations aimed at strengthening DOD's management and 
oversight of contractor support at deployed locations, and the 
department has agreed to implement many of those recommendations. 
However, our prior work has found that DOD has made limited progress 
implementing some key recommendations. Our work on contracts to support 
deployed forces in Iraq has identified instances where poor oversight 
and management of contractors led to negative financial and operational 
impacts.

DOD Has Not Followed Long-standing Planning Guidance Regarding the Use 
        of Contractors to Support Deployed Forces
    Our work has shown that DOD has not followed long-standing planning 
guidance, particularly by not adequately factoring the use and role of 
contractors into its planning. For example, DOD guidance stresses the 
importance of fully integrating into logistics plans and orders the 
logistics functions performed by contractors along with those performed 
by military and government personnel. However, we noted in our 2003 
report that the operations plan for the war in Iraq contained limited 
information on contractor support.\13\ Similarly, DOD policy requires 
planning for contractor-provided services during crisis situations to 
provide a reasonable assurance of the continuation of services and to 
prepare a contingency plan for obtaining services from alternate 
sources if needed. Our review found that essential contractor services 
for deployed troops had not been identified and backup planning was not 
being done. Without firm plans, there is no assurance that the 
personnel needed to provide essential services will be available when 
needed.
---------------------------------------------------------------------------
    \13\ GAO, Military Operations: Contractors Provide Vital Services 
to Deployed Forces but Are Not Adequately Addressed in DOD Plans, GAO-
03-695 (Washington, D.C.: June 24, 2003).
---------------------------------------------------------------------------
    In addition, we reported in 2004 that the Army did not follow its 
planning guidance when deciding to use the Army's LOGCAP contract.\14\ 
Army guidance stresses the need for the clear identification of 
requirements and the development of a comprehensive statement of work 
early in the contingency planning process. Because this Army guidance 
was not followed, the plan to support the troops in Iraq was not 
comprehensive and was revised seven times in less than 1 year, 
generating a significant amount of rework that would have been avoided 
had the planning guidance been followed.
---------------------------------------------------------------------------
    \14\ GAO-04-854.
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    We have also found that DOD has not reviewed contractor support to 
identify the essential services provided and the department lacked 
visibility over the totality of contractor support to deployed forces. 
This information is essential in incorporating contractor support into 
planning efforts. For example, senior military commanders in Iraq 
stated that, when they began to develop a base consolidation plan for 
Iraq, they had no source to draw upon to determine how many contractors 
were on each installation.
    DOD has taken some actions to address this challenge. For example, 
DOD is developing a database of contractors who deploy with U.S. 
forces. According to senior DOD officials familiar with the database, 
as of February 2008, the database had about 80,000 records. DOD is 
working with State to include new DOD contractors, including private 
security contractors, in the database. This effort responds to 
recommendations we made in 2003 and 2006 to enhance the department's 
visibility over contractors in locations such as Iraq and 
Afghanistan.\15\ In addition, Joint Contracting Command Iraq/
Afghanistan has created the Theater Business Clearance process that 
reviews and approves all contracts for work in Iraq or Afghanistan. 
Joint Contracting Command Iraq/Afghanistan officials stated that this 
has helped military commanders know ahead of time when contractors are 
coming to work on their bases and to ensure sufficient facilities are 
available for them. According to senior DOD officials, DOD is also 
developing a cadre of contracting planners to ensure that contractor 
support is included in combatant commanders' planning.
---------------------------------------------------------------------------
    \15\ GAO-07-145.
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DOD Lacks Adequate Numbers of Trained Contract Oversight Personnel
    Having the right people with the right skills to oversee contractor 
performance is crucial to ensuring that DOD receives the best value for 
the billions of dollars spent each year on contractor-provided services 
to support deployed forces. However, several reviews by GAO and other 
organizations have consistently found deficiencies in DOD's oversight 
of contractors due to an inadequate number of trained military and 
civilian personnel to carry out these duties.
    Such concerns are not new, and we continue to find that poor 
oversight contributes to poor outcomes and wasted resources. For 
example, we reported in 2004 that DOD did not always have enough 
contract oversight personnel in place to manage and oversee its 
logistics support contracts such as LOGCAP and the Air Force Contract 
Augmentation Program (AFCAP). As a result, the Defense Contract 
Management Agency (DCMA) was unable to account for $2 million worth of 
tools that had been purchased using the AFCAP contract. In 2006, a 
LOGCAP Program Office official stated that the office did not prepare 
to hire additional contract oversight personnel in anticipation of an 
increased use of LOGCAP services due to Operation Iraqi Freedom. 
According to the official, if adequate staffing had been in place 
early, the Army could have realized substantial savings through more 
effective reviews of the increasing volume of LOGCAP requirements.
    In January 2008, we reported that the Army was inadequately staffed 
to conduct oversight of an equipment maintenance contract in Kuwait, a 
contract with cumulative obligations of more than $500 million.\16\ 
Vacant oversight personnel positions included a quality assurance 
specialist, a property administrator, and two quality assurance 
inspectors. According to Army officials, such shortfalls meant that 
surveillance was not being performed sufficiently, and the Army was 
less able to identify trends in contractor performance and begin 
corrective action. For example, a review of property accountability 
reports found that the contractor reported a total of $2.4 million in 
government-furnished property; however, two of the eight property 
listings alone totaled more than $2 million. Without adequate oversight 
of government property, the Army cannot be certain that duplicate 
supplies have not been ordered and that government property is not 
misplaced or misused.
---------------------------------------------------------------------------
    \16\ GAO-08-316R.
---------------------------------------------------------------------------
    DOD has taken some actions to address the challenge of a less-than-
adequate number of contract oversight personnel. For example, in 
February 2007, the Deputy Assistant Secretary of the Army (Policy and 
Procurement) issued guidance that required, among other actions, 
contracting officers to ensure that a quality assurance surveillance 
plan be prepared and implemented for service contracts exceeding 
$2,500. Joint Contracting Command Iraq/Afghanistan officials stated 
that they are in the process of adding about 39 personnel to provide 
additional contractor oversight. Similarly, DCMA has deployed 100 more 
personnel and plans to deploy another 150 to provide contract oversight 
and administration to both ongoing and future contracts in Iraq. DCMA 
is providing oversight for DOD's private security contracts and other 
theater-wide contracts. Additionally, senior DOD officials stated that 
the department has created a task force to address the recommendations 
of the October 2007 report by the Commission on Army Acquisition and 
Program Management in Expeditionary Operations.

DOD Does Not Systematically Collect and Distribute Lessons Learned
    DOD does not systematically ensure that lessons learned regarding 
the use of contractors to support deployed forces are shared with 
military personnel at deployed locations. Although DOD has a policy 
requiring the collection and distribution of lessons learned to the 
maximum extent possible, we found in our previous work that, with 
regard to contractor support to deployed forces, no procedures were in 
place to ensure lessons learned were being collected and distributed. 
For example, the Army regulation that establishes policies, 
responsibilities, and procedures for the implementation of the LOGCAP 
program makes customers that receive services under the LOGCAP contract 
responsible for collecting lessons learned. However, we have repeatedly 
found that DOD is not systematically collecting and sharing lessons 
learned on the use of contractors to support the deployed forces. We 
have made several recommendations in the past that DOD implement a 
department-wide lessons learned program for contractor support to 
deployed forces. However, we have previously reported that DOD has not 
established any procedures to systematically do this. We also found a 
failure to share best practices and lessons learned between units as 
one redeploys and the other deploys to replace it. As a result, new 
units essentially start at ground zero, having to resolve a number of 
difficulties until they understand contractor roles and 
responsibilities.

DOD Does Not Adequately Train Military Commanders and Contract 
        Oversight Personnel
    DOD does not routinely incorporate information about contractor 
support for deployed forces in its predeployment training of military 
personnel, despite the long-standing recognition of the need to provide 
such information. Our work has shown the need for better predeployment 
training of military commanders since the mid-1990s. DOD policy states 
that personnel should receive timely and effective training to ensure 
they have the knowledge and tools necessary to accomplish their 
missions.
    We have made several recommendations that DOD improve its 
contractor support-related training. In each instance, DOD concurred 
with our recommendation. However, our previous work has found limited 
evidence that improvements have been made in terms of how DOD trains 
military commanders and contract oversight personnel on the use of 
contractors to support forces prior to deployment. We have found that 
limited or no predeployment training on the use of contractor support 
has caused a variety of problems for military commanders in deployed 
locations.
    As we reported in 2006, several military commanders with limited or 
no predeployment training stated that they were not able to adequately 
plan for the use of those contractors.\17\ According to the commanders, 
their predeployment training provided them with insufficient 
information on how much support contractors would be providing in Iraq. 
The commanders were therefore surprised by the substantial number of 
personnel they had to use to perform missions such as on-base escorts 
for third-country and host-country nationals, convoy security, and 
other force protection support to contractors.
---------------------------------------------------------------------------
    \17\ GAO-07-145.
---------------------------------------------------------------------------
    We have found instances in which limited or no predeployment 
training for military commanders on the use of contractor support to 
deployed forces resulted in confusion about their roles and 
responsibilities in managing contractors. In some cases, concerns rose 
over the potential for military commanders to direct contractors to 
perform work outside the scope of the contract, which they lack the 
authority to do. As Army guidance makes clear, this can result in 
modifications to the contract that would involve additional costs and, 
in some cases, be in violation of competition requirements. For 
example, in 2006, a contractor stated that he was instructed by a 
military commander to release equipment the contractor was maintaining 
even though this action was not within the scope of the contract. The 
issue ultimately had to be resolved by the contracting officer.
    In a 2005 report on the use of private security contractors in 
Iraq,\18\ we found that commanders received no training or guidance on 
how to work with private security providers in Iraq. To highlight the 
lack of training and guidance, representatives from one unit stated 
they did not know private security providers were in their battle space 
until the providers called for assistance.\19\
---------------------------------------------------------------------------
    \18\ GAO, Rebuilding Iraq: Actions Needed To Improve Use of Private 
Security Providers, GAO-05-737 (Washington, D.C.: July 28, 2005).
    \19\ In response to an incident in September 2007 in which 17 
Iraqis died, the Department of State and DOD signed a memorandum of 
agreement in December 2007 outlining actions needed to improve 
oversight of private security contractors. GAO is currently reviewing 
U.S. agencies' use of private security contractors in Iraq.
---------------------------------------------------------------------------
    We also found that contract oversight personnel such as contracting 
officers' representatives continue to receive limited or no 
predeployment training regarding their roles and responsibilities in 
monitoring contractor performance. Contracting officers' 
representatives are typically drawn from units receiving contractor-
provided services and are not normally contracting specialists. 
However, DOD's acquisition regulations require that contracting 
officer's representatives be qualified through training and experience 
commensurate with their delegated responsibilities.
    We have found that limited or no predeployment training of contract 
oversight personnel has caused a variety of problems in deployed 
locations.
    The lack of training can affect the quality of service that 
contractors are providing at deployed locations. In a December 2006 
report, officials from a corps support group in Iraq stated that, until 
they were able to get a properly trained contracting officer's 
representative in place, they experienced numerous problems regarding 
the quality of food service LOGCAP provided.
    The lack of sufficient training also can lead to the inefficient 
use of military personnel. In the 2006 report, officials with a Stryker 
brigade stated that a lack of training hindered their ability to 
resolve staffing issues with a contractor conducting background 
screenings of third-country and host-country nationals. In this case, 
shortages of contractor-provided screeners forced the brigade to use 
its own intelligence personnel to conduct screenings. As a result, 
those personnel were not available for their primary intelligence-
gathering responsibilities.
    DOD and its components have made some improvements in providing 
training to military commanders and contract oversight personnel on the 
use of contractors to support deployed forces prior to their 
deployment. In DOD's response to our 2006 report, the Director of 
Defense Procurement and Acquisition Policy stated that the Army is 
making changes to its logistics training programs that would 
incorporate contracting officers' representatives training into its 
basic and advanced training for its ordnance, transportation, and 
quartermaster corps.\20\
---------------------------------------------------------------------------
    \20\ GAO-07-145.
---------------------------------------------------------------------------
    In addition, the Defense Acquisition University has updated its 
contingency contracting course to include a lesson on contractors 
accompanying the force. DCMA is adding personnel to assist in the 
training and managing of contracting officers' representatives. 
However, training of military commanders and contract oversight 
personnel remains a challenge. For example, the 2007 report of the 
Commission on Army Acquisition and Program Management in Expeditionary 
Operations found that combatant commands do not recognize the 
significance of contracts and contractors in expeditionary operations. 
The report concluded that the Army needs to educate and train 
commanders on the important operational role of contracting.

  LACK OF ADEQUATE STRATEGIC PLANNING IMPEDES U.S. EFFORTS TO DEVELOP 
  CAPACITY IN IRAQI MINISTRIES AND IMPROVE OUTCOMES IN IRAQ'S ENERGY 
                                 SECTOR

    U.S.efforts to increase the Iraqi government's capacity to invest 
in its own rebuilding are undermined by strategic planning shortfalls 
in two critical areas--developing the capacity of the Iraqi ministries 
to effectively execute their responsibilities and integrating oil and 
electricity development into a unified plan. In the energy sector, 
developing a comprehensive and integrated strategic plan is essential 
to meeting energy production and export goals, which in turn will help 
Iraq meet its future financial needs. In both cases, U.S. assistance in 
developing these plans will help ensure that future U.S. expenditures 
in rebuilding Iraq will result in long-term benefits.

Department of State Has Not Developed a Comprehensive and Integrated 
        Strategy to Develop Transparent and Accountable Iraqi 
        Ministries
    U.S. efforts to strengthen Iraqi ministries lack a strategic plan 
to integrate efforts, address challenges within the ministries, and set 
clear priorities.\21\ Over the past 4 years, U.S. efforts to help build 
the capacity of the Iraqi national government have been characterized 
by multiple U.S. agencies leading individual efforts, without 
overarching direction from a lead entity that integrates their efforts, 
and shifting time frames and priorities in response to deteriorating 
security and the reorganization of the U.S. mission in Iraq. 
Consequently, U.S. efforts to date have not resulted in key Iraqi 
ministries having the capacity to effectively govern and assume 
increasing responsibility for operating, maintaining, and further 
investing in reconstruction projects.
---------------------------------------------------------------------------
    \21\ To help Iraq develop the capability of its ministries, the 
United States has provided about $300 million between fiscal years 2005 
to 2007.
---------------------------------------------------------------------------
    The Iraqi ministries also face several challenges that pose a risk 
to their success and long-term sustainability.\22\ First, our October 
2007 report found that Iraqi ministries lack personnel with key skills, 
such as budgeting and procurement. Second, sectarian influence over 
ministry leadership and staff complicated efforts to build a 
professional and nonaligned civil service. Third, pervasive corruption 
in the Iraqi ministries impeded the effectiveness of U.S. efforts. 
Fourth, poor security limited U.S. advisors' access to their Iraqi 
counterparts, preventing ministry staff from attending planned training 
sessions and contributing to the exodus of skilled professionals to 
other countries.
---------------------------------------------------------------------------
    \22\ GAO, Stabilizing and Rebuilding Iraq: U.S. Ministry Capacity 
Development Efforts Need an Overall Integrated Strategy to Guide 
Efforts and Manage Risk, GAO-08-117 (Washington, D.C.: Oct. 1, 2007).
---------------------------------------------------------------------------
    While recognizing these challenges, U.S. efforts to help build the 
capacity of the Iraqi ministry suffered from the lack of coordination 
and shifting priorities. First, no single agency was in charge of 
leading U.S. ministry capacity development efforts. State, DOD, and 
USAID have led separate efforts at Iraqi ministries, investing about 
$169 million in funds in 2005 and 2006 for these efforts. As of mid-
2007, State and USAID were providing 169 capacity development advisors 
to 10 key civilian ministries; DOD was providing 215 to the Ministries 
of Defense and Interior. Although State took steps to improve 
coordination in early 2007, coordination between the agencies remains 
problematic. For example, although State, USAID, and DOD tried to 
develop a common set of metrics to measure ministry capacity in 2005, 
the agencies have now developed separate sets of metrics.
    Second, the focus of U.S. capacity development efforts had shifted 
from long-term institution-building projects, such as helping the Iraqi 
government develop its own capacity development strategy, to an 
immediate effort to help Iraqi ministries overcome their inability to 
spend their capital budgets and deliver essential services to the Iraqi 
people. However, as we reported in January 2008, it is unclear if Iraq 
is spending its $10.1 billion capital budget since U.S. and Iraqi 
reports show widely disparate rates for Iraqi government spending in 
2007.\23\ Citing unofficial Ministry of Finance data, the 
administration's September 2007 Benchmark Assessment Report stated that 
the Iraqi ministries had spent 24 percent of their capital projects 
budgets, as of July 15, 2007. The report concluded that, compared with 
2006, the government of Iraq was becoming more effective in spending 
its capital projects budget. However, the administration's report is 
not consistent with Iraq's official expenditure reports, which show 
that the central ministries had spent only 4.4 percent of their 
investment budget, as of August 2007. The lack of consistent and timely 
expenditure data limits transparency over Iraq's execution of $10.1 
billion 2007 budget for capital projects and reconstruction. The most 
recent expenditure data show a capital expenditure rate of 7 percent 
for the central ministries, as of November 2007.
---------------------------------------------------------------------------
    \23\ GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq's 
Budget Execution, GAO-08-153 (Washington, D.C.: Jan. 15, 2008).
---------------------------------------------------------------------------
    The U.S. government is beginning to develop a comprehensive and 
integrated strategy for U.S. capacity development efforts in Iraq, 
although agencies have been implementing separate programs since 2003. 
GAO's previous analyses of U.S. multiagency national strategies 
demonstrate that such a strategy should integrate the efforts of the 
involved agencies with the priorities of the Iraqi government, and 
include a clear purpose and scope; a delineation of U.S. roles, 
responsibilities, and coordination with other donors, including the 
United Nations; desired goals and objectives; performance measures; and 
a description of benefits and costs. U.S. efforts to develop Iraqi 
ministry capacity have included some but not all of these components. 
For example, agencies are working to clarify roles and 
responsibilities. However, U.S. efforts lack clear ties to Iraqi-
identified priorities at all ministries and information on how 
resources will be targeted to achieve the desired end-state.
    In October 2007, we recommended that State, in consultation with 
the Iraqi government, complete a comprehensive and integrated strategy 
for U.S. capacity development efforts. State recognized the value of an 
integrated strategy but stated that it may hinder efforts to tailor 
capacity development efforts to the priorities of each ministry. GAO's 
recommendation does not preclude tailoring capacity development efforts 
to meet each ministry's unique needs. A strategy ensures that a U.S.-
funded program has consistent overall goals, clear leadership and 
roles, and risks that are assessed.
    Similarly, in January 2008, we recommended that to help ensure more 
accurate reporting of the government of Iraq's spending of its capital 
projects budget, the Secretary of the Treasury work with the government 
of Iraq to ensure the reporting of accurate and reliable expenditure 
data. The Department of the Treasury agreed with our recommendation to 
ensure accurate and reliable reporting of Iraqi expenditure data and is 
working to implement it.

Lack of Adequate Strategic Planning Impedes U.S. and Iraqi Efforts to 
        Restore Iraq's Energy Sectors
    Despite the United States' investment of about $6 billion to 
rebuild Iraq's oil and electricity sectors, production in both sectors 
has consistently fallen below U.S. program goals of 3 million barrels 
per day and 6,000 megawatts of electrical peak generation capacity. As 
we reported in May 2007, it is difficult to identify the most pressing 
future funding needs, key rebuilding priorities, and existing 
vulnerabilities and risks within the sectors given the absence of an 
overarching strategic plan that comprehensively assesses the 
requirements of the energy sector as a whole.\24\ While the Iraqi 
government has crafted a multiyear strategic plan for Iraq's 
electricity sector, no such plan exists for the oil sector. Given the 
highly interdependent nature of the oil and electricity sectors, such a 
plan would help identify the most pressing needs for the entire energy 
sector and help overcome the daunting challenges affecting future 
development prospects.
---------------------------------------------------------------------------
    \24\ GAO, Rebuilding Iraq: Integrated Strategic Plan Needed to Help 
Restore Iraq's Oil and Electricity Sectors, GAO-07-677 (Washington, 
D.C.: May 15, 2007).
---------------------------------------------------------------------------
    As shown in figure 3, Iraq's oil production and exports, despite 
recent improvements, continue to fall below U.S. goals. As of December 
2007, Iraq produced about 2.5 million barrels of oil per day and 
exported nearly 2 million barrels per day, compared with the U.S. goals 
of 3 million barrels and 2.2 million barrels, respectively.\25\
---------------------------------------------------------------------------
    \25\ According to State, revenues generated from Iraqi oil exports 
increased from $31 billion in 2006 to $41 billion in 2007 (Iraq Weekly 
Status Report, Feb. 6, 2008).




   Figure 3.--Oil Production, Exports, and U.S. Goals, June 2003 to 
                             December 2007

    In addition, U.S. goals for electricity remain unmet. The problem 
is compounded by increasing demand that outstrips supply. As of 
February 2008, demand for electricity was twice as high as the supply. 
In addition, available power in Baghdad was 9 hours per day, compared 
with 17 hours per day in Basra. As we previously reported in May 2007, 
one of the challenges in developing the electricity sector was the U.S. 
government's decision to install natural gas turbine engines despite 
the absence of a natural gas distribution network. Of the 35 engines 
installed, 16 were using diesel or crude oil rather than natural gas. 
As a result, maintenance was three times as costly and electricity 
generated decreased by 50 percent.
    Billions of dollars are still needed to rebuild, maintain, and 
secure Iraq's oil and electricity infrastructure, underscoring the need 
for sound strategic planning. The Ministry of Electricity's 2006-2015 
Electricity Master Plan estimates that $27 billion will be needed to 
reach its goal of providing reliable electricity across Iraq by 2015. 
According to DOD, investment in Iraq's oil sector is ``woefully short'' 
of the absolute minimum required to sustain current production, and 
additional foreign and private investment is needed. Moreover, U.S. 
officials and industry experts estimate that Iraq would need $20 
billion to $30 billion over the next several years to reach and sustain 
a crude oil production capacity of 5 million barrels per day.
    We recommended that the Secretary of State, in conjunction with 
relevant U.S. agencies and international donors, work with Iraqi 
ministries to develop an integrated energy strategy. State commented, 
however, that the Iraqi government, not the U.S. government, is 
responsible for taking action on GAO's recommendations. We believe that 
the recommendations are still valid given the billions of dollars made 
available for Iraq's energy sector, the limited capacity of the Iraqi 
ministries, and the U.S. government's influence in overseeing Iraq's 
rebuilding efforts.

                               CONCLUSION

    U.S. efforts in Iraq are expansive: combating insurgents, training 
local security forces, shaping government institutions, reconstructing 
infrastructure, and enhancing public services. These efforts 
demonstrate a substantial commitment to most aspects of nation 
building. However, nation building is costly, particularly in the 
absence of a permissive security environment. Since 2001, Congress has 
appropriated about $700 billion for military and diplomatic activities 
in support of the global war on terrorism; the majority of this amount 
has supported U.S. actions in Iraq. This large expenditure of resources 
and the enormous task at hand heightens the levels of risk and offers 
the potential for fraud, waste, abuse, and corruption.
    But, as GAO's audits point out, these risks are further heightened 
when U.S. programs lack sound strategic planning, well-defined 
requirements, adequate oversight and accountability, and sufficient 
training for personnel. Future investments in Iraq will require 
decision makers not only to assess the outcomes achieved thus far but 
also the outcomes that could have been achieved with more efficient and 
effective use of appropriated dollars. It will also require decision 
makers to consider difficult trade-offs as the nation faces increasing 
fiscal challenges on the home front. Nonetheless, continuing oversight 
by Congress and the accountability organizations is needed to ensure 
that opportunities for waste, fraud, abuse, and corruption are 
minimized.
    In prior reports, GAO recommended that, to improve accountability 
and minimize opportunities for fraud, waste, and abuse of U.S. funds, 
(1) DOD adopt sound business processes in its acquisition strategies, 
such as definitizing contracts in a timely fashion and strengthening 
accountability procedures; (2) DOD leadership ensure implementation of 
and compliance with existing guidance to improve its management and 
oversight of contractors supporting deployed forces; and (3) U.S. 
agencies work with Iraq to develop strategic plans for key sectors.
    DOD and State have taken action to implement some, but not all, of 
our recommendations. Given the billions of dollars that the United 
States has spent in Iraq to help rebuild its infrastructure, improve 
security, support our forces, and improve the capacity of the 
ministries, I believe our recommendations, if fully implemented, would 
improve accountability and outcomes. Whether they are fully 
implemented, however, will depend on the leadership at each agency to 
set the appropriate tone, ensure that existing guidance is effectively 
implemented, take actions to prevent mistakes from being repeated, and 
seize opportunities to ensure that the efforts to help rebuild and 
stabilize Iraq achieve their intended results.
    Mr. Chairman, this concludes my statement. I would be pleased to 
answer questions that you or other Members have at this time.

    Senator Leahy. General Kicklighter.

STATEMENT OF HON. CLAUDE M. KICKLIGHTER, INSPECTOR 
            GENERAL, DEPARTMENT OF DEFENSE

    General Kicklighter. Senator Leahy, Senator Cochran, 
distinguished members of the Senate Appropriations Committee, 
thank you very much for the opportunity to appear before you 
this morning, and address corruption, fraud, waste, and abuse 
in Iraq. This testimony will cover the accomplishments of the 
Department of Defense Office of the Inspector General and other 
organizations in DOD, that have the mission to combat illegal 
and improper expenditures and improve accountability of DOD 
resources that support operations in Iraq.
    To date, $492 billion has been appropriated to Defense for 
Operation Iraqi Freedom. The U.S. military presence in Iraq is 
aimed at providing a secure environment which will enable the 
Iraqi people to establish a stable and strong Government that 
upholds the rule of law, good governance, and helps keep this 
Nation on a path to freedom. Corruption greatly undermines the 
effort of both the United States and Iraq, in establishing 
effective institutions of Government.
    As this committee knows, better than most, the DOD 
Inspector General has the primary responsibility within 
Defense, for providing oversight of Defense programs and funds 
appropriated to the Department, at home and around the world, 
and especially in southwest Asia.
    To accomplish our oversight mission, we have adopted a 
strategy that is based on maintaining an adequate presence in 
theater, but recognizing that much of the work can be done--and 
in some cases, should be done--outside of Iraq.
    A very important part of our effort is ensuring inter-
service and inter-agency coordination and collaboration, as Mr. 
Walker just talked about. We chair a quarterly Southwest Asia 
Joint Planning Group, which includes all the agencies that work 
together on this mission, and the DOD military organizations, 
to ensure coordination and collaboration and integration of our 
effort.
    In December 2005, our office received a hotline complaint 
that alleged that a single U.S. Army officer was receiving 
illegal gratuities from a DOD contractor. This evolved into an 
extensive and ongoing criminal investigation, involving 
millions of dollars in bribes, and a large number of U.S. 
military officers, non-commissioned officers, DOD civilians, 
and contractor personnel.
    In December 2006 and January 2007, we began to receive 
allegations from the Turkish National Police, and the Turkish 
Minister of Defense that weapons and explosives that were 
shipped to the Iraqi Security Forces were crossing their 
border, and finding their way into the hands of insurgents, 
terrorists, and criminals in Turkey.
    Around the same time, we were also beginning to find some 
of the weapons that the United States had supplied to the Iraqi 
Security Forces in the hands and control of insurgent groups, 
and U.S. security contractors in Iraq.
    With this information, we briefed the senior leadership in 
Defense, and those briefings resulted in the Secretary and the 
Chairman requesting that we send an assessment team to Iraq to 
review accountability, and also making sure that we kept the 
Secretary and the Chairman informed of our findings, but also 
making sure that we kept Congress fully informed, promptly, on 
this situation.
    We briefed the chairmen and the ranking members of our 
oversight committees. In this committee, we briefed Senator 
Inouye and Senator Stevens. The general request from Congress 
was that we get a team on the ground rapidly, and check to make 
sure that the barn door had no cracks in it, and if it did, 
make sure that it was nailed up promptly.
    We assembled an inter-agency, multidiscipline munitions 
assessment team, composed of subject matter experts, and 
deployed to Iraq and southwest Asia, in general.
    Our preliminary findings were that DOD and the Iraqi 
Security Forces currently had a system in place for controlling 
and accounting for weapons and ammunition being supplied to the 
military and police units. However, there still remained work 
to be done.
    Weapons were lost, early on, in large part due to battle 
losses on the battlefield, police stations being overrun, 
desertions, disintegration of untrained units--sometimes when 
they were committed to combat--some police and military 
personnel, and largely police, were selling their weapons, and 
poor recordkeeping. We also have an intensive investigation 
ongoing, looking into pilferage out of storage facilities.
    The assessment team will return to Iraq in April to review 
progress and assess the current status of munitions 
accountability. They will also be looking at foreign military 
sales operations, progress in helping the Iraqis build their 
own logistics sustainment base, so that they can take over and 
conduct more independent operations, and take over more battle 
space.
    As a result of our closed and ongoing investigations in 
southwest Asia, 18 Federal criminal indictments have been 
handed down, 26 Federal criminal informations have been issued, 
three hearings were conducted under Article 32, Uniformed Code 
of Military Justice, and in total, 25 people have been 
convicted of felony crimes, resulting in a total of 34 years of 
confinement, 35 years of probation, nine individuals and three 
companies were de-barred from contracting with the U.S. 
Government, 12 companies and 13 persons have been suspended 
from contracting with the United States Government. Two 
contractors have signed settlement agreements with the U.S. 
Government--a total of $11.1 million has been paid to the 
United States in restitution, recoveries--$365,000 was levied 
in fines and penalties, $1.76 million was forfeited back to the 
Government and $2.2 million was seized from the bank accounts 
of some of the companies involved.
    In addition, we currently have 102 Iraqi-related 
investigations still ongoing. In November 2007, we realigned 
the internal core mission assets to support southwest Asia 
audit operations, by establishing an expeditionary audit 
division, comprised of highly skilled, 30 audit personnel. 
Currently, we have 196 audit personnel, conducting audits 
related to Iraq and southwest Asia operations.
    In April 2008, approximately 25 auditors will be redeployed 
in support of OIF and Operation Enduring Freedom (OEF), with an 
additional 30 in reserve, to be called forward, if needed.
    We have 24 ongoing Iraqi-related audit projects, and as a 
result of the findings and recommendations, we in the 
Department have identified more than $840 million in funds that 
could be put to better use.
    We are dedicating more resources to this mission in Iraq on 
control and accountability, acquisition, contracting, 
corruption, waste, fraud, abuse, and expanding our footprint in 
all of southwest Asia, in some part, due to the support of this 
committee.
    We will continue to evaluate the lessons learned, and do 
our best to minimize the mistakes of the past. We will keep 
Congress and our leadership fully and promptly informed as we 
make--as we conduct these audits and investigations, and we 
will assist to build a stronger inner-agency and DOD oversight 
team, as we go forward.
    Sir, thank you for the opportunity of being here today, and 
I stand ready to try to answer your questions.
    [The statement follows:]

              Prepared Statement of Claude M. Kicklighter

    Mr. Chairman, Senator Cochran, and distinguished members of this 
committee, thank you for the opportunity to appear before you this 
morning and address corruption, fraud, waste, and abuse in Iraq. This 
testimony will cover the accomplishments of the Department of Defense 
Office of the Inspector General (DOD IG) and the other DOD 
organizations that have the mission to combat illegal and improper 
expenditures and to improve accountability of DOD resources that 
support operations in Iraq. To date, $655 billion has been appropriated 
to the Department of Defense in support of the men and women of our 
Armed Forces in Southwest Asia and the fight against terrorism, of 
which $492 billion has been appropriated to support Operation Iraqi 
Freedom \1\. The U.S. military presence in Iraq is aimed at providing a 
secure environment which will enable the Iraqi people to establish a 
stable government that upholds the rule of law and good governance. 
Corruption undermines the efforts of both the Iraqi people to establish 
effective institutions of government and undermines the United States 
ability to support this effort.
---------------------------------------------------------------------------
    \1\ Congressional Research Service report, ``The Cost of Iraq, 
Afghanistan, and Other Global War on Terror Operations Since 9/11,'' 
dated February 8, 2008. The numbers listed are DOD funds.
---------------------------------------------------------------------------
    As this committee knows, the DOD IG has the primary responsibility 
within the Department of Defense for providing oversight of the defense 
programs and the funds appropriated to the Department at home and 
around the world, to include Southwest Asia. In this role, the DOD IG 
office oversees, integrates, and attempts to ensure there are no gaps 
in the stewardship of DOD resources. We spearhead the DOD oversight 
community in auditing, investigating, and inspecting accountability 
processes and internal controls, in areas such as contracting, 
logistics, and financial management. Collectively, the community has 
dedicated over 470 auditors and over 190 investigators that have 
reviewed a wide range of issues pertaining to Southwest Asia. We also 
work in close partnership with other oversight organizations, such as 
the Government Accountability Office (GAO), the Special Inspector 
General for Iraq Reconstruction (SIGIR), the Department of State, and 
the U.S. Agency for International Development. In addition, we provided 
the core staff for the Coalition Provisional Authority IG, and later 
assisted the stand-up of the SIGIR. Since 2003 the OIG has provided 141 
full or part-time personnel in support of both organizations.
    Adequate management controls and oversight to verify that proper 
safeguards are in place and working as intended are essential in the 
fight against corruption, fraud, waste, and abuse. Conditions where 
internal controls are severely lacking or proper oversight is minimal 
create opportunities for corruption, fraud, waste, and abuse. 
Additionally, individuals must be held accountable for violating laws 
and regulations and mismanagement of DOD resources.

                              OIG STRATEGY

    To accomplish our oversight mission, we have adopted a strategy 
that is based on maintaining the right size presence in-theater but 
which also recognizes that much of our work can be done out of Iraq. An 
important part of our oversight effort is to improve inter-service and 
interagency coordination and collaboration to minimize duplication of 
effort and ensure that we have only the staff needed in-theater to 
accomplish the mission.

                          IN THEATER PRESENCE

    We have adopted an expeditionary workforce model to support efforts 
throughout all of Southwest Asia. We have core staff forward deployed 
at all times. The core contingent is comprised of individuals serving 
between 6 and 12 month deployments. Expeditionary team members will 
deploy for as long as needed to complete the task, but no longer. The 
actual number of auditors, investigators, and inspectors in Southwest 
Asia and Iraq fluctuates on a daily basis depending on requirements.
    We are increasing our presence in Southwest Asia and currently have 
279 personnel dedicated to Southwest Asia operations and are deployable 
as mission requirements dictate. Currently we have 22 people deployed 
to Southwest Asia. Utilizing both domestic and in theater assets we 
have 28 ongoing Iraq related audits and inspections and 102 ongoing 
Iraq related investigations.

                              COORDINATION

    We have jointly established and chair an interagency Southwest Asia 
Joint Planning Group (JPG) that meets quarterly and provides oversight 
of fraud, waste, abuse, and criminal activities in the Southwest Asia 
region. The JPG provides unity of effort of the organizations engaged 
in this effort, including the Military Inspectors General and Auditors 
General, the Government Accountability Office, the Department of State 
and the U.S. Agency for International Development Inspectors General, 
the SIGIR, and the Combatant Commands Inspectors General. The mission 
of the JPG is to better coordinate and integrate oversight activities 
in the region. The Southwest Asia JPG leads the coordination and 
oversight required to identify and recommend improved mission support 
to military units conducting operations.

                  DETAILS ON MUNITIONS ACCOUNTABILITY

    One example of the expeditionary model is the ongoing work 
regarding munitions control and accountability. In December 2005, our 
office received a Hotline complaint and other allegations that a senior 
U.S. Army officer received illegal gratuities from a DOD Contractor. 
This evolved into extensive and ongoing DOD criminal investigations, 
involving millions of dollars in bribes and a large number of U.S. 
military officers, non-commissioned officers, and civilian personnel.
    In December 2006, and January 2007, we began to receive allegations 
from the Turkish National Police and the Turkish Ministry of Defense 
that weapons and explosives that were shipped to the Iraqi Security 
Forces (ISF) were crossing the border and finding their way into the 
hands of insurgents, terrorists, and criminals in Turkey. In response, 
we sent two special agents to Turkey in January 2007, to follow-up on 
the allegations. Around this time, we were also beginning to find some 
weapons that the United States had supplied to the ISF, in the hands 
and control of insurgent groups and U.S. security contractors in Iraq.
    Additional concerns regarding the accountability and control of 
U.S. provided weapons and ammunition to ISF were also identified by 
SIGIR and GAO. In October of 2006, SIGIR identified materiel management 
control weaknesses regarding the accountability of weapons and the 
registration of weapons' serial numbers. In July 2007, GAO reported 
that DOD and Multi National Forces--Iraq could not fully account for 
weapons reported as previously issued to the Iraqi forces.
    With this information, we briefed the Secretary of Defense; the 
Chairman, Joint Chiefs of Staff; and the senior Defense team. Those 
briefings resulted in the Secretary and Chairman requesting that we 
send an assessment team into Iraq to review accountability and control 
of munitions being supplied by the United States to ISF. In addition, 
the Secretary of the Army was asked to do an assessment of contracting 
in Southwest Asia. The Secretary of Defense and the Chairman requested 
they be kept fully informed and also that we keep Congress fully 
informed. We briefed the Chairmen and Ranking Members of our primary 
oversight committees to include the Chairman and Ranking Member of the 
Senate Appropriations Subcommittee on Defense (Senators Inouye and 
Stevens). The general request from Congress was to get on-the-ground 
post-haste, see if the barn door had a crack, and if so, nail it shut.
    As a result, we assembled an interagency, multi-disciplinary 
Assessment Team on Munitions Accountability composed of twenty-two 
subject matter experts from the Office of Inspector General, U.S. 
Central Command, Army Audit Agency, Army Criminal Investigation Command 
(Army CID), Army Corps of Engineers, Air National Guard (who happened 
to be an Assistant U.S. Attorney General from Justice), Department of 
State, and the Department of Justice Bureau of Alcohol, Tobacco, 
Firearms and Explosives.
    The assessment team's objectives were to:
  --Determine whether DOD currently has adequate accountability and 
        control over U.S.-purchased munitions before formal turnover to 
        the ISF. Specifically, this included munitions from the time of 
        arrival at selected Iraq ports of entry until formal turnover 
        to ISF; and to
  --Determine whether the ISF currently have adequate accountability 
        and controls over U.S.-purchased munitions under their control. 
        Specifically, this included munitions from the time of formal 
        transfer to ISF through their subsequent issuance to selected 
        Iraq military and police units.
    Prior to our arrival in Iraq, we examined two additional related 
areas that are very important to the ability of the United States and 
ISF to account for and control munitions. One is establishing an 
effective Foreign Military Sales (FMS) program to support ISF, and the 
other is assisting the ISF to build their logistics sustainment base, 
for both military and police. The team did a lot of work in CONUS 
before they departed.
    To better understand the overall CENTCOM theater logistics 
operations, we spent several days in Kuwait evaluating accountability, 
control and onwards shipment of ammunition. We also looked at contract 
operations. The team also spent a week in Afghanistan looking at 
munitions accountability and control, contracting, and the Afghanistan 
National Security Forces logistics base.
    The assessment team then spent five weeks in Iraq examining the 
current U.S. and ISF supply chain operations, including transportation, 
delivery, storage and distribution. The assessment began at the port of 
entry, through all the supply nodes until the issuance of weapons and 
ammunition to Iraqi military and police units at the end of their pipe 
line.
    While in Iraq, the assessment team conferred with the U.S. 
Ambassador and staff, and the respective Commanders and staff of the 
Multi-National Force--Iraq (General Petraeus), the Multi-National 
Corps--Iraq (Lieutenant General Odierno), and the Multi-National 
Security Transition Command--Iraq (MNSTC-I) (Lieutenant General Dubik). 
The team also met with the U.S. Joint Contracting Command--Iraq/
Afghanistan, U.S. Army Corps of Engineers, Gulf Region Division (to 
include the Logistics Movement Coordination Center and U.S. Warehouse 
at Abu Ghraib), MNSTC-I's Security Assistance Office (which manages FMS 
in Iraq), and many other officials with the Coalition Forces and U.S. 
Embassy Baghdad.
    In addition, the team conferred with numerous Government of Iraq 
officials from the Ministry of Defense, the Ministry of Interior, the 
Inspectors General of the ministries, and various Iraqi Army units and 
police forces.
    Our preliminary finding is that DOD and ISF have a system currently 
in place for controlling and accounting for weapons and ammunition 
being supplied to the ISF; however, there still remains work to be 
done. Many weapons were lost early on due in large part to battle loss, 
police stations being overrun, desertion, disintegration of untrained 
units, some police and military personnel selling their weapons, and 
poor record keeping. We also have an ongoing investigation into 
pilferage of storage facilities.
    The U.S. supply of munitions to Iraq is shifting to FMS. The United 
States needs to put FMS on a war-time footing while also continuing to 
assist the ISF in building their logistics sustainment base. Both of 
these actions are underway and will greatly enhance the control and 
accountability of munitions. As reported by CENTCOM, a great deal of 
progress has already been made. Continued improvements in these two 
critical areas will also greatly enhance the ISF's ability to conduct 
independent operations and in taking over more battle space.
    Since the Assessment Team's return in late October 2007, we have 
briefed the Secretary of Defense; the Deputy Secretary of Defense; the 
Chairman, Joint Chiefs of Staff; and other senior leaders. Further, we 
briefed our primary oversight committees. We are drafting the report 
and upon completion will provide it to CENTCOM and other DOD 
organizations for review and official comment. The report is expected 
to be released in April 2008. This will complete Phase I.
    The Assessment Team is planning a follow-up trip (Phase II) to Iraq 
in April 2008, to review the status of actions taken on the report's 
recommendations and to assess the current status of munitions 
accountability and control, the FMS program, the development of their 
logistics sustainment base for the ISF, and contract operations in 
general. We will also spend time working with the Iraq Ministries of 
Defense and Interior Inspectors General.

                       DETAILS ON INVESTIGATIONS

    The Defense Criminal Investigative Service (DCIS), the criminal 
investigative arm of the DOD Inspector General, has been engaged in 
investigating waste, fraud, abuse, and corruption pertaining to the 
Iraqi theater since the start of the war. Pursuant to the Inspector 
General Act of 1978, DCIS has broad criminal investigative jurisdiction 
regarding DOD programs and operations. However, effectively countering 
fraud in Southwest Asia requires the cooperative efforts of other DOD 
investigative agencies and Federal law enforcement partners as well as 
the audit community. Investigative jurisdiction for fraud offenses 
involving DOD, to include offenses pertaining to Southwest Asia, are 
established in DOD Instruction 5505.2, ``Criminal Investigations of 
Fraud Offenses.'' The instruction establishes policies, 
responsibilities, and procedures for determining which of the DOD 
Criminal Investigative Organizations (DCIOs)--Defense Criminal 
Investigative Command (DCIS), the U.S. Army Criminal Investigation 
Command (Army CID), the Naval Criminal Investigative Service (NCIS), 
and the Air Force Office of Special Investigations (AFOSI)--are 
conducting investigations of fraud offenses under the United States 
Code and/or Uniform Code of Military Justice. DCIS has primary 
jurisdiction over matters involving most contract and procurement 
actions awarded by Defense Agencies, OSD components, and field 
activities. Additionally, DCIS has jurisdiction over, ``any allegations 
[involving DOD] that the IG DOD considers appropriate for investigation 
by DCIS.'' This broad authority affords DCIS the ability to easily 
partner with other agencies in an effort to protect the integrity of 
the entire DOD procurement and acquisition process--from countering 
fraud impacting initial research and development, to investigating 
fraud during contract execution, to ensuring appropriate disposal of 
products no longer needed by DOD components. The Service-specific 
Military Criminal Investigative Organizations (Army CID, NCIS, and 
AFOSI) typically focus upon allegations involving contract and 
procurements that their respective military department awards. 
Significant non-DOD partners in Iraq include the SIGIR, which 
investigates fraud involving Iraq reconstruction programs; and the FBI, 
which has overarching authority to investigate violations of various 
Federal statutes relating to fraud and corruption. Other organizations, 
such as the U.S. Department of State, Office of the Inspector General; 
and the U.S. Agency for International Development, Office of the 
Inspector General, partner with DCIS and other agencies when alleged 
fraudulent activity impacts their respective departments.
    From May 2003 through October 2004, DCIS deployed teams of two to 
three agents to Baghdad. From October 2004 to present, the DCIS 
European Post of Duty and multiple CONUS DCIS offices have conducted a 
wide variety of investigations related to Iraq. In September 2006, DCIS 
established a permanent presence in Iraq by deploying four special 
agents to the theater--two special agents are currently assigned to 
Iraq and two special agents are assigned to Kuwait. An additional 
special agent has been temporarily deployed to Iraq to support a 
special cell investigating issues relating to weapons accountability. 
Two additional special agents will soon deploy to Afghanistan. These 
in-theater agents are the forward-deployed elements of the 
approximately 64 DCIS special agents in CONUS and OCONUS participating 
in Southwest Asia investigations.
    DCIS protects America's warfighters by vigorously investigating 
alleged and suspected procurement fraud, corruption, and other breaches 
of public trust that impact critical DOD programs. Our investigations 
focus on matters such as bribery, theft, procurement fraud, illegal 
receipt of gratuities, bid-rigging, defective and substituted products, 
and conflicts of interest. DCIS' presence in the region has identified 
corrupt business practices, loss of U.S. funds through contract fraud, 
and theft of critical military equipment destined for the ISF.
    DCIS plays a significant and pivotal role in both the National 
Procurement Fraud Task Force (NPFTF) and the International Contract 
Corruption Task Force (ICCTF). Under the auspices of the Department of 
Justice, the NPFTF was created on October 10, 2006, to promote the 
prevention, early detection, and prosecution of procurement fraud 
nationwide and abroad. This multi-disciplinary and multi-agency (e.g., 
Federal Inspectors General, U.S. Attorneys, Federal law enforcement 
agencies such as the FBI) coalition has been extremely effective in 
fostering and better coordinating procurement fraud investigations. The 
ICCTF, an offshoot of the NPFTF, was formed in November 2006, to 
specifically target fraud and corruption involving Southwest Asia. The 
primary goal of the ICCTF is to combine the resources of multiple 
investigative agencies to effectively and efficiently investigate and 
prosecute cases of contract fraud and public corruption related to U.S. 
government spending in Iraq, Kuwait, and Afghanistan. The participating 
agencies in the ICCTF are DCIS; the U.S. Army Criminal Investigation 
Command's Major Procurement Fraud Unit; the Office of the Inspector 
General, U.S. Department of State; the Office of the Inspector General, 
U.S. Agency for International Development; the Federal Bureau of 
Investigation (FBI); and the SIGIR. The ICCTF created a Joint 
Operations Center (JOC) in furtherance of achieving maximum interagency 
cooperation. The JOC, which is located in Washington, D.C., serves as 
the nerve center for the collection and sharing of intelligence 
regarding corruption and fraud relating to funding for the Global War 
on Terror (GWOT). The JOC coordinates intelligence-gathering, de-
conflicts case work and deployments, disseminates intelligence, and 
provides analytic and logistical support \2\ for the ICCTF agencies to 
enhance criminal prosecutions and crime-prevention. The JOC is the 
vital link into the entire intelligence community and provides a 
repository from which to disseminate intelligence indicative of 
criminal activity. Case information and criminal intelligence are 
shared, and accomplishments are reported jointly. The agency heads meet 
regularly to collectively provide policy, direction, and oversight.
---------------------------------------------------------------------------
    \2\ Logistics support can include, but is not limited to, 
laboratory services, polygraphs, and specialized equipment (e.g., GPS 
phones).
---------------------------------------------------------------------------
    In addition to investigating allegations of fraud, waste, and 
abuse, DCIS launched a proactive project which will analyze over $10 
billion in payment vouchers related to U.S. Army purchases in Iraq. The 
vouchers are currently stored at the Defense Finance & Accounting 
Service (DFAS), Rome, NY. The project is being coordinated with DFAS, 
the DOD IG's Audit component, the Defense Contract Audit Agency, the 
U.S. Army Audit Agency, and the FBI. The project will attempt to 
identify fraudulent activity related to the war effort in Iraq and 
Afghanistan through utilization of data mining techniques. While the 
initiative is in its infancy, several questionable transactions have 
been identified and referred for further investigation. In addition to 
these analytical efforts to develop cases, the investigative team 
assigned to the project is also supporting ongoing investigations 
involving fraud and corruption in Iraq.
    To pursue investigative leads concerning weapons accountability in 
Iraq, DCIS is participating in a multi-agency Weapons Investigative 
Cell. Other participants include Army CID and the Bureau of Alcohol, 
Tobacco, Firearms and Explosives. The Weapons Investigative Cell is 
working with the International Zone Police Department and Government of 
Iraq officials to conduct weapons and munitions accountability 
investigations. In addition, the Weapons Investigative Cell is 
coordinating its activities with other affected U.S. and foreign 
agencies, and is attempting to determine if there is any evidence of 
weapons leaving Iraqi warehouses and being diverted or sold to 
unauthorized sources.
    As previously mentioned, investigations conducted in Southwest Asia 
are cooperative efforts. A total of sixty-four DCIS special agents 
(CONUS and OCONUS) are working the majority (97 percent) of these 
investigations in conjunction with one or more law enforcement partner 
agencies. DCIS' primary partner in countering DOD-related fraud in 
Southwest Asia is the Major Procurement Fraud Unit (MPFU), a component 
of Army CID. The MPFU conducts investigations into allegations of fraud 
associated with the Army's major acquisition programs. The MPFU is 
responsible for conducting Army-related investigations of allegations 
of fraud, defective pricing, corruption, kickbacks, antitrust 
violations and miscellaneous other incidents involving procurement 
fraud. Since June 2005, the MPFU has deployed 46 agents on rotational 
assignments to work in the region. The MPFU presently has 13 agents in 
offices in Iraq, Kuwait, and Afghanistan, and has initiated 146 
investigations, of which 92 investigations are ongoing.
    To date, DCIS has completed 25 investigations that are related to 
Southwest Asia. In addition, DCIS currently has 102 open investigations 
relating to the Iraqi theater. The majority of these investigations are 
being jointly investigated with one or more law enforcement partners. 
Of these 102 investigations, 16 are being conducted by agents deployed 
throughout Southwest Asia; the other 86 investigations are being 
conducted by special agents in the United States and Germany. DCIS 
attempts to transfer investigations developed in Southwest Asia to an 
appropriate CONUS venue as soon as practical so as to ensure we 
maximize the best use of our in-theater investigative resources and to 
begin and facilitate prosecution efforts.

                           DETAILS ON AUDITS

    Our OIG expeditionary model combined with our regional strategy in 
approaching our work in Iraq raises issues that often require solutions 
at the systemic level, as already illustrated by the munitions 
assessment team findings and recommendations. Further, we continue to 
evolve our comprehensive plan for audits of contracts, subcontracts, 
and task and delivery orders in support of coalition forces in Iraq and 
Afghanistan. Given that Army Audit Agency is focusing on the 
Commander's Emergency Response Program (CERP) and contracts for basic 
life support activities and that SIGIR focus is on reconstruction 
contracts, we have begun and will to continue to conduct a series of 
audits and report on financial and contracting systems in Iraq that 
support Coalition Forces and Iraq operations including contracts for 
maintenance service, transportation, and fuel.
    Additionally, we continue to focus on the training and equipping of 
the Iraqi military and police mission, acquisitions of key operational 
support assets such as body armor, fielding of mine resistant ambush 
protected vehicle, medical equipment, use of GWOT supplemental funds, 
controls over cash, monitoring of sensitive equipment, and out of 
country payments to name a few.
    In November 2007, we realigned internal core mission assets to 
support SWA audit operations by establishing an expeditionary audit 
division comprised of about 30 people. This audit division is 
complemented by other work conducted by U.S. based teams. In total, we 
have 196 personnel conducting audits related to Iraq and Southwest Asia 
operations. In April 2008, approximately 25 people will be deployed in 
support of OIF/OEF with an additional 30 in reserve. We will also have 
about 16 additional personnel deployed in support of the Munitions 
Assessment Team, FMS processes, and the progress being made to 
establish an effective Government of Iraq logistics process to support 
the ISF.
    We have 24 on-going Iraq-related audit projects reviewing mission-
critical support functions that directly impact the warfighter, such 
as: contract surveillance, contract payments, resetting of returning 
U.S. forces equipment, and acquisition of armored vehicles. Our audits 
also include oversight of cash and other monetary assets within Iraq as 
well as the execution of supplemental funds to train and equip the Iraq 
Security Forces. A complete list of completed reports, on-going 
projects, and planned projects is attached to this statement.
    We plan to issue a final audit report on controls over payments in 
support of Iraqi operations, which amounted to $10.7 billion for 
February 2003, to June 2006, and have already referred 28 vouchers 
totaling $35.1 million to DCIS for potential investigation.
    The following will be some key completed, ongoing, and planned 
audits.

                          COMPLETED AUDIT WORK

    In our report D-2007-107, ``Procurement Policy for Armored 
Vehicles,'' issued June 27, 2007, we addressed inquiries made by 
Congresswoman Louise M. Slaughter. We identified the following:
  --The Marine Corps Systems Command awarded sole-source contracts for 
        body armor and armored vehicles even though officials knew 
        other sources were available for competition.
  --Acquisition officials continued to award contracts for armored 
        vehicles even though the contractor repeatedly failed to meet 
        contractual delivery schedules for getting vehicles to the 
        theater, and
  --The government did not execute the liquidated damages clause of the 
        contract to collect appropriate fees from the contractor.
    In November 2006, we reported on the Army's small arms program 
including the availability, maintainability, and reliability of the 
small arms support for the warfighter. We found that the Army equipped 
its deployed forces in support of Operation Iraqi Freedom with the 
small arms necessary to meet Combatant Commanders requirements. 
However, to accomplish these requirements the deploying unit obtained 
some of the small arms from other sources, such as nondeployed units. 
As a result, the nondeployed units faced a potential shortage of small 
arms and may not have had the ability to adequately train and maintain 
equipment and personnel readiness at an acceptable level. We also 
determined that implementing and monitoring the Army Force Generation 
Program, as well as, developing an overarching Army training strategy 
will ensure that the unit's readiness is not degraded. We agreed with 
the Army that outlining requirements and developing a plan for small 
arms distribution will avert future small arms shortages.
    We also found that the Army generally had adequate controls for 
maintainability and reliability of small arms fielded to the 
warfighter. As a result of the Army's proactive approach to maintenance 
and reliability, the warfighter is provided with reliable small arms 
capabilities to sustain operations in varying environments but we also 
agreed with the Army that following up on findings and recommendations 
made by the Soldier Weapons Assessment Team will address small arms 
maintainability risks identified. We determined that ongoing 
initiatives and management actions were responsive to our initial 
concerns and we agreed with the actions the Army took.
    Another key report classified report, ``Equipment Status of 
Deployed Forces within the U.S. Central Command,'' issued January 25, 
2007. We reported that service members experienced shortages of force-
protection equipment, such as up-armored vehicles, electronic 
countermeasure devices, crew-served weapons, and communications 
equipment. As a result, Service members were not always equipped to 
effectively complete their missions. Also, the Request for Forces 
process did not always ensure that Service members performing 
nontraditional missions, such as Provincial Reconstruction Teams (PRTs) 
and detainee operations (i.e. In Lieu Of units \3\), received the 
equipment necessary to perform their wartime mission. As a result, 
Service members performed missions without the proper equipment or 
postponed missions while waiting to receive equipment. As a result of 
this review, the Under Secretary of Defense for Personnel and Readiness 
issued interim policy on training and equipping In Lieu Of units. A 
follow-on audit on equipping units in Iraq in accordance with mission 
requirements is currently being conducted in conjunction with the 
Multi-National Forces-Iraq Inspector General.
---------------------------------------------------------------------------
    \3\ Service members who perform wartime missions that are not 
traditionally organized, trained, and equipped to perform are called 
``In Lieu Of'' (ILO) forces.
---------------------------------------------------------------------------
    Last week on March 6, we issued a report on a review of the use of 
supplemental funds for medical support of GWOT. We performed this 
review in response to Office of the Assistant Secretary of Defense 
(Health Affairs) concerns over the reporting and use of GWOT 
supplemental funding by the Military Health System (MHS). The Military 
Department Surgeons General did not consistently report obligations of 
GWOT supplemental funds by mission as required by the TRICARE 
Management Activity. Without accurate and consistent reporting of GWOT 
supplemental fund obligations, DOD has no assurance that the Military 
Health System used funds for the missions for which they were 
requested. Additionally, DOD cannot ensure that the amounts reported in 
the fiscal year 2006 Defense Health Program Cost of War report are 
accurate and complete.

                           ONGOING AUDIT WORK

    One of highest priority ongoing reviews is an assessment of the 
procurement, distribution, and use of body armor in DOD. This audit is 
being performed at the request of Congresswoman Louise M. Slaughter. 
The objective of the audit was to evaluate the procurement history and 
practices for body armor and the effect that the Army's decision to ban 
the use of personally purchased body armor has on the safety of Service 
members. The audit team is reviewing 35 contracts and 5 Federal Supply 
Schedule orders, valued at more than $5.2 billion, awarded by the Army 
and Marine Corps between January 2004 and December 2006 for body armor 
components. The team will determine whether the contracts and orders 
for body armor components, such as the outer tactical vest, enhanced 
side ballistic inserts, small arms protective inserts, and deltoid and 
auxiliary protectors, were awarded in accordance with the Federal 
Acquisition Regulation.
    Another review relates to the protection of the Forces. We are 
assessing procurement and delivery of joint service armor protected 
vehicles. The objective is to determine whether the Mine Resistant 
Ambush Protected (MRAP) vehicle program office is effectively procuring 
armored vehicles in accordance with the Federal Acquisition Regulation 
and DOD requirements. Specifically, we will review MRAP program 
administration to determine whether the program office is taking 
appropriate actions to accelerate vehicle delivery to users. An 
additional objective is to review the Services' requirements for MRAP 
and High Mobility Multipurpose Wheeled Vehicles.
    We have two on-going audits related to Common Access Cards (CAC) 
issued to contractors. The first will determine whether controls over 
Common Access Cards (CACs) provided to contractors are in place and 
work as intended: specifically, whether DOD officials issue CACs to 
contractors, verify the continued need for contractors to possess CACs, 
and whether cards are being revoked or recovered from contractors in 
accordance with DOD policies and procedures. The importance of this 
series of reviews is to also ensure we are not providing contractors 
access to benefits that are not called for in specific contracts such 
as over compensating by providing a contractor daily expenses for basic 
life support items and by issuing an improper CAC providing these same 
life support items free. The team visited 67 sites, identified with the 
greatest number of contractor CACs, to test processes for the 
contractor CAC lifecycle. The audit team also obtained contractor CAC 
data from the Defense Manpower Data Center and tested a sample of the 
data to evaluate the reliability of controls over the issuance, 
periodic verification of continued need, revocation, and recovery of 
contractor CACs. The team anticipates issuing a draft report in April 
2008. The second project will address specifically the controls over 
the contractor CACs in Southwest Asia was announced on January 24, 
2008.
    We also are looking at the management and controls over selected 
funds to ensure proper use of and/or the support of payments in the 
following reviews:
  --Internal Controls Over Out-Of-Country Payments.--The objective is 
        to determine whether internal controls over out-of-country 
        payments supporting GWOT provide reasonable assurance that 
        payments are properly supported and recorded. DFAS Rome is the 
        field accounting office for contingency disbursing in Iraq, 
        Afghanistan, Kuwait, Saudi Arabia, and Egypt.
  --Funds appropriated for Afghanistan and Iraq processed through the 
        Foreign Military Sales Trust Fund.--The overall objective is to 
        determine whether the funds appropriated for the security, 
        reconstruction, and assistance of Afghanistan and Iraq and 
        processed through the Foreign Military Sales Trust Fund are 
        being properly managed. Specifically, we will determine whether 
        the transfer of appropriated funds from the Army's accounts 
        into the Foreign Military Sales Trust Fund was properly 
        authorized, accounted for, and used for the intended purpose. 
        In addition, we will verify whether the appropriated funds are 
        properly reported in DOD financial reports.
  --Operations and Maintenance Funds Used for GWOT Military 
        Construction Contracts.--The objective is to determine whether 
        DOD components followed requirements for using operations and 
        maintenance funds for GWOT military construction. Specifically, 
        we will determine whether DOD followed proper procedures for 
        administering, executing, and reporting the use of operations 
        and maintenance funds on GWOT military construction contracts.
  --Small arms ammunition fund management in support of GWOT.--
        Specifically, we will determine whether financial management 
        officials fully supported and properly incurred obligations and 
        expenditures. We will also determine whether funds for small 
        arms ammunition were accurately recorded in financial systems 
        for reporting to the Office of the Secretary of Defense.
  --Internal controls over the Army, General Fund, Cash and other 
        monetary assets held in Southwest Asia.--To accomplish this 
        review, we will verify the existence of cash reported by 
        disbursing officers to the U.S. Treasury; inspect physical 
        controls over cash; confirm collection and payment documents to 
        insure adequate internal controls over disbursing officer 
        accountability documents; and determine the source and use of 
        cash. We anticipate conducting site visits from April to June 
        of 2008 in Iraq, Afghanistan, Kuwait, Saudi Arabia, and Egypt.

                           PLANNED AUDIT WORK

    We have attached a list of our current planned audits for SWA 
including Iraq and Iraq-related. We have also modified our planning 
process to include the specifics required by the National Defense 
Authorization Act for Fiscal Year 2008, January 28, 2008. Section 842 
of the Act, ``Investigation of waste, fraud, and abuse in wartime 
contracts and contracting processes in Iraq and Afghanistan,'' requires 
the Inspector General of the Department of Defense to develop a 
comprehensive plan for a series of audits of contracts, subcontracts, 
and task and delivery orders for the support of coalition forces. The 
group developing this plan consists of the most experienced and senior 
executives in our audit organization.
    To develop the plan the group is: reviewing completed and ongoing 
audits and inspections; analyzing contract actions; researching the 
appropriations and expenditures; examining the contracting processes 
and systems; obtaining information from Iraq and Afghanistan; 
evaluating the related accounting and financial systems; and studying 
contracting problems that occurred in prior wars.
    The group is identifying areas or gaps in need of audit coverage. 
Examples of areas that may require audit work are: maintenance service 
contracts; security service contracts; air transportation contracts; 
DOD financial systems used in Iraq and Afghanistan; and staffing and 
training of contract oversight personnel.
    We want audits in the plan that will identify abuses and defects in 
contracts, systems and processes that can be promptly remedied. The 
plan will help us expand and refocus our audit efforts to support the 
war fighters. The plan will be coordinated through existing councils 
with the cognizant Inspectors General and Audit Chiefs.

                  DETAILS ON ANTICORRUPTION ACTIVITIES

    We continue to play a key role in developing and promoting the 
establishment of effective oversight and security organizations in 
Afghanistan and Iraq. As we stated earlier, until recently, we provided 
two full-time IG advisors to the Multi-National Security Transition 
Command--Iraq (MNSTC-I) Transition Teams in Baghdad to assist the 
Offices of the Inspectors General for the Ministry of Defense, Joint 
Headquarters (JHQ), and the Ministry of Interior. Prior to reassigning 
these advisors back to Washington D.C., we facilitated the 
establishment of a new MNSTC-I billet for an ``IG Integration 
Officer.'' The billet was approved and filled in July 2007 and is 
making a difference. The IG DOD will continue to provide assistance and 
advice as required.
    While in Iraq, with the munitions assessment team, we visited with 
the Inspector General for the Ministry of Defense and staff and the 
Deputy Inspector General, Ministry of Interior and were impressed with 
their progress. We also met with all Inspectors General from all 
ministries at a central meeting.
    In July 2007, we initiated a project to document the lessons 
learned during our 3-year experience in assisting in establishing and 
developing a viable, sustainable, effective IG system in Iraq. This 
project will capture the concepts, strategies, options, and practical 
applications establishing a Federal IG system may be appropriate in 
nation building missions and as an instrument to combat fraud, waste, 
abuse, and corruption in developing nations. The expected completion 
date for the lessons learned report is April 2008.
    The OIG works with DOD agencies to prevent corruption, fraud, 
waste, and abuse by keeping all informed, to include Defense agencies 
and military commanders, of vulnerabilities detected within their 
systems; providing mission briefings which address the impact of fraud, 
waste, and abuse on DOD programs and operations; and by documenting 
deficiencies in DOD internal management controls when discovered during 
the course of an investigation.
    Since the initiation of Operation Enduring Freedom and Operation 
Iraqi Freedom, we have acted in collaboration with the military 
services and the Defense Logistics Agency to pursue administrative 
remedies, such as suspensions and debarments from government 
contracting, against U.S. contractors and their personnel. We ensure 
investigations are coordinated with central points of contact, and we 
engage agency fraud counsels and suspension and debarment authorities 
to prevent repeat losses to DOD caused by unscrupulous contractor 
activities.
    We are also a member of the U.S. Department of Justice Asset 
Forfeiture Program. Our participation in this program results in 
seizure of fraud proceeds from criminals who have targeted DOD. The 
intent of the program is to deter criminal activity, punish offenders, 
and dismantle criminal organizations. Forfeitures related to fraud and 
corruption in Iraq are soon expected to exceed $5.1 million in funds 
and property. It is anticipated that considerable additional funds and 
property will be seized in the future as ongoing cases are resolved.

                     PANEL ON CONTRACTING INTEGRITY

    The John Warner National Defense Authorization Act of 2007 (Public 
Law 109-364) directed the DOD to convene a panel of senior leaders to 
conduct Department-wide reviews of progress to eliminate areas of 
vulnerability of the defense contracting system that allow fraud, 
waste, and abuse to occur. The panel was to review the report of the 
Comptroller General required by the National Defense Authorization Act 
of 2006 (Public Law 109-163) related to these areas of vulnerability, 
and to recommend changes in law, regulations, and policy deemed 
necessary.
    The DOD IG representative is a member of the overall Panel on 
Contracting Integrity, a member of the subcommittee on Adequate 
Pricing, and is Chairperson of the Procurement Fraud Indicators 
subcommittee. The Procurement Fraud Indicators subcommittee is 
identifying what these indicators are and how they should best be 
addressed and used for the contracting/acquisition workforce.
    As part of the Senior Steering Group for GWOT, DOD OIG 
representatives will meet monthly, beginning in March, to discuss ways 
to improved finance, accounting and procurement in Iraq. The group will 
determine needed tasks and timeframes; identify lead organizations and 
resource requirements to complete the tasks; determine whether an 
expeditionary finance and accounting capability is needed and if so, 
what would it look like, how it would be staffed, and how it would be 
funded; and discuss any changes needed in guidance to ensure the tasks 
can be completed efficiently and effectively. While it is imperative 
that solutions are implemented quickly, the group's focus is to propose 
and implement solutions that most benefit the warfighter and make the 
best use of the taxpayer's funds.

                      SIGNIFICANT ACCOMPLISHMENTS

    Of the 102 ongoing DCIS investigations, 41 investigations involve 
public corruption offenses (bribery, gratuities, and conflicts of 
interest); 47 investigations involve procurement fraud offenses (false 
claims and statements, undelivered products, defective products, cost/
labor mischarging); 13 investigations involve theft and technology 
protection offenses (theft of funds, property, equipment, supplies; and 
export violations involving U.S. technology and vehicles), and one 
terrorism-related case.
    To date, DCIS' ongoing Iraq related investigations have identified 
229 subjects consisting of 22 U.S. Government employees, 53 military 
personnel, 17 foreign nationals, 68 U.S. Government contractors, 23 
U.S. Government sub-contractors, 6 dependents of military personnel, 
and 40 others with no known affiliation to the government.
    As a result of closed and ongoing investigations in Southwest Asia, 
18 Federal criminal indictments and 26 Federal criminal informations 
\4\ have been issued, and 3 hearings have been conducted under Article 
32 of the Uniform Code of Military Justice. In total, 25 persons have 
been convicted of felony crimes, resulting in a total of approximately 
34 years of confinement and 35 years of probation; 9 individuals and 3 
companies were debarred from contracting with the U.S. Government; 12 
companies and 13 individuals were suspended from contracting; and 2 
contractors signed settlement agreements with the U.S. Government. A 
total of $11.1 million was paid to the United States in restitution; 
$365,725 was levied in fines and penalties; $1.76 million was 
forfeited; and $2.2 million was seized.
---------------------------------------------------------------------------
    \4\ ``Information'' is a criminal charge brought by a prosecutor 
without using a Grand Jury to get an indictment. The ``Information'' is 
filed in court and serves to notify the court and the accused of the 
charges. The ``Information'' must be in writing and must be supported 
by evidence submitted by the prosecutor, usually in the form of 
affidavits. The name is derived from the prosecutor providing 
information to the court to justify a prosecution.
---------------------------------------------------------------------------
    As a result of our audit work since fiscal year 2003, we made 64 
recommendations to improve financial management, logistics, contract 
administration, and accountability with DOD GWOT operations. Defense 
management took sufficient actions in implementing 48 of the 64 
recommendations. As a result, our records show 48 recommendations 
closed, 16 remain open. Additionally, as a result of our findings and 
recommendations, we and the Department have identified over $840 
million in funds that could be put to better use. We anticipate 
additional potential monetary benefits or improved financial management 
in the ongoing audits of controls over payments made in support of DOD 
Iraq operations, and internal controls over cash and other monetary 
assets. We also are working in partnership with the Defense Finance and 
Accounting Service on establishing minimum accountability requirements 
for payments made in support of DOD Iraq operations.

                                CLOSING

    Thanks to Congressional support, we are now dedicating more 
resources to provide oversight on munitions control and accountability, 
acquisition, corruption, waste, fraud, abuse, and expanding our 
footprint in all of Southwest Asia. We will continually evaluate the 
lessons learned and do our best to prevent the mistakes of the past. We 
will continue to keep Congress and our leadership fully and promptly 
informed.
    Thank you for the opportunity to appear before the committee today 
to address our ongoing oversight work regarding Iraq.

    Senator Leahy. And we will have questions--just one thought 
occurs to me, I just wanted to make sure I understand, of the 
number of auditors going in there, how many speak the language?
    General Kicklighter. Sir, I would say very few, if any.
    Senator Leahy. Thank you. I was afraid of that.
    Mr. Bowen.

STATEMENT OF STUART W. BOWEN, JR., SPECIAL INSPECTOR 
            GENERAL FOR IRAQ RECONSTRUCTION

    Mr. Bowen. Thank you, Senator Leahy. And just, on that 
point, I have three auditors and one investigator on my staff 
who speak Arabic. Their presence has enhanced our capacity to 
provide oversight and engage with the Iraqis.
    Senator Leahy. Thank you.
    General Kicklighter. We have one.
    Senator Leahy. Thank you.
    Mr. Bowen. Thank you, Senator Leahy, Ranking Member 
Cochran, and members of the committee for this opportunity to 
appear before you today to discuss important issues facing the 
United States' continuing support for relief and reconstruction 
in Iraq.
    The central matter before the committee today is the 
effectiveness of U.S. efforts to combat fraud, waste, abuse, 
and corruption in Iraq. This matter has two significant facets: 
fraud and waste within the U.S. program, and the problem of 
corruption within the Government of Iraq.
    Two days ago, I returned from my 19th trip to Iraq since my 
appointment 4 years ago as Special Inspector General. During my 
15-day stay, I had informative meetings on the many challenges 
confronting the program--the relief and reconstruction 
program--with former Prime Ministers Jaafri and Allawi, Deputy 
Prime Minister Barham Salih, and the current chair of the 
Baghdad Services Committee, Dr. Ahmed Chalabi.
    I also met with the leaders of the two primary anti-
corruption agencies in Iraq, Dr. Abdul Basit, who heads the 
board of supreme audit, and the new commissioner of what's now 
called the commission on integrity, formerly the commission on 
public integrity, Judge Rahim al-Ugaili.
    Dr. Basit recounted to me during our visit that his current 
audits reveal a continuing and serious problem of corruption 
within Iraqi ministries. Judge Rahim, the new commissioner on 
integrity, admitted and acknowledged the current weakness of 
his investigators' capacity to fight corruption in Iraq--a 
symptom of, frankly, a rule of law system that's in need of 
much repair.

               U.S. ANTICORRUPTION PROGRAMS INSUFFICIENT

    Over the past 5 years, U.S. programs to bolster anti-
corruption institutions in Iraq have been inconsistent, 
suffering from poor coordination, weak planning, and limited 
resources. SIGIR has completed several audits looking at these 
efforts and has found that the programs have yet to meet their 
goals.
    But the U.S. Embassy is making progress on the 
recommendations, as evidenced in our most recent audit, and 
we're following that up with another review that will be 
published this spring to give more detail on that progress.
    The Congress established SIGIR 4 years ago to provide 
oversight and relief of reconstruction funds in Iraq. Today, 
SIGIR has 36 auditors on the ground in Iraq--inspectors and 
investigators, as well--and we expect to expand our team to 46 
to meet our newly expanded mandate.

                      FRAUD IN IRAQ RECONSTRUCTION

    To date, SIGIR has issued 216 audits and inspections and 
addressed myriad problems within programs and projects of the 
U.S. reconstruction effort. Our investigative work has 
identified a number of instances of egregious fraud that have 
led to five convictions to date. In fact, this morning, jury 
selection has begun in the trial of three more persons arrested 
as a result of SIGIR investigations.
    We currently have----
    Senator Leahy. Juries here? In the United States?
    Mr. Bowen. Yes, in New Jersey, in the Federal District 
Court in New Jersey.
    Senator Leahy. Okay.
    Mr. Bowen. We currently have over 50 cases ongoing, 30 of 
them under management at the Department of Justice. The real 
challenge in the U.S. program--as Comptroller General Walker 
noted--is the problem of waste with respect to the oversight 
and management execution of almost $50 billion in relief and 
reconstruction funds. The fraud has been egregious; but as a 
relative matter to the total investment, it's a small 
percentage.

                      WASTE IN IRAQ RECONSTRUCTION

    Waste is another problem. It has diminished over time, as 
lessons learned have been applied, but it continues to be an 
issue, as our audits and inspections reveal.
    SIGIR has found pervasive weakness in program and contract 
management. Our inspections found a wide array of problems at 
construction sites.
    As requested by the committee, I've submitted, for the 
record, a number of examples from our auditors' inspections 
that identify vulnerabilities to fraud, waste, and abuse. Let 
me just highlight two in the interest of time.
    The Baghdad Police College, which we first reported on 18 
months ago, was a $72 million program. Really, this is a very 
critical single project, in my view, with respect to security, 
because it is where every Iraqi police officer is trained or is 
supposed to be trained.
    I visited there, again, last week, to see what progress had 
been made resolving the many problems uncovered in that initial 
inspection. Those problems included plumbing that didn't work 
at all, resulting in breakdowns and seepage, which rendered 
certain barracks unusable.
    Progress has been made. There are still problems with the 
plumbing, but I noted that the barracks are in better 
condition. Importantly, this program has expanded 
significantly, from that original $72 million program, and 
another $75 million will be spent--in phase II and phase III--
that will result in a significantly greater capacity to train 
12,000 Iraqi police officers.
    The audit I want to mention is our review this last quarter 
of the design-build contract that was awarded to Parsons, Inc. 
in March 2004. Of the 11 task orders issued under this 
particular contract--which involved buildings and health--only 
3 were completed. We've addressed some of the programs and 
projects before, most notably the primary health care clinic 
program. I think this is one of the single biggest failures of 
all of the programs in Iraq--one that would have provided 
clinics all across the country. It was a $186 million program, 
and when the contract was terminated, only six health clinics 
were complete.
    Now the Corps of Engineers has made significant progress, 
direct-contracting the completion of a number of the remaining 
clinics. About 75 are complete today, and about 50 are open.
    The Parsons design-build contract, frankly, is emblematic 
of a poor choice of a contracting vehicle to engage in the kind 
of work anticipated. We'll come out with the second review of 
Parson's this spring, looking at security and justice programs.

                  SUSTAINMENT OF RECONSTRUCTION EFFORT

    The other key issue with respect to fraud, waste, and 
corruption in Iraq is sustainment. As you noted, Mr. Chairman, 
about $47 billion has been invested in Iraq. The success of 
that investment, regardless of how much has been accomplished 
to date, is contingent upon an effective program, operated by 
the Iraqis, funded by the minister of finance, overseen by the 
ministries, to sustain what we've provided.
    Absent that, frankly, the biggest waste is yet to come, 
because those are enormously significant projects. Let me note 
one--the Nasiryah water treatment facility--which we're 
inspecting now. It is the most expensive project that the 
United States has undertaken, at a cost of $300 million. It is 
supposed to provide 600,000 persons in central Iraq with clean 
water, but it's operating at less than 50 percent capacity 
right now, because of poor operations and maintenance and lack 
of power. That inspection report will be out in the spring 
detailing the issues. To its credit, the Embassy is responding 
to this matter, and Ambassador Crocker will visit Nasiryah soon 
to help further those efforts along. But sustainment is key to 
this waste issue.
    Let me say that we continue to carry out our lessons 
learned program, with proposals for the Congress to consider 
that will improve how the U.S. manages contingency operations. 
I think if there's one overarching lesson learned, it's that 
reform is essential in this particular province in order to 
protect American interests abroad.
    So, let me close by thanking you for this opportunity to 
testify, Senator Leahy, and for the opportunity to address 
these important matters. I look forward to your questions.
    [The statement follows:]

               Prepared Statement of Stuart W. Bowen, Jr.

                              INTRODUCTION

    Chairman Byrd, Ranking Member Cochran, and members of the 
Committee, thank you for this opportunity to appear before you today to 
discuss important issues facing the United States' continuing support 
for the relief and reconstruction efforts in Iraq. The central issue 
that I will address is the effectiveness of U.S. efforts to combat 
fraud, waste, abuse, and corruption in Iraq. The efficacy of these 
efforts is essential to ensuring that the investment of billions in 
taxpayer dollars in relief and reconstruction activities in Iraq is 
protected and preserved.\1\
---------------------------------------------------------------------------
    \1\ See Appendix I for a definition of fraud, waste, and abuse 
developed by GAO, SIGIR, and the Inspectors General of the Departments 
of Defense and State.
---------------------------------------------------------------------------
    The Office of the Special Inspector General (SIGIR) began as the 
Coalition Provisional Authority Inspector General, starting work soon 
after my appointment in January 2004. SIGIR, which was formed in 
October 2004, reports to the Congress and jointly to the Secretaries of 
State and Defense. It is our mission to keep the Congress, the 
Administration, and the American people transparently informed about 
the results of our oversight, which have been both positive and 
negative, and to provide recommendations for improvement and lessons 
learned. During its short lifespan, SIGIR has issued 216 audit and 
inspection reports that address myriad programs and projects related to 
U.S. reconstruction efforts in Iraq. Our investigative work has 
identified a number of instances of egregious fraud that have led to 
five convictions to date, several trials that will begin this week, and 
pending indictments stemming from active cases.
    Our audit and inspection reports document a number of challenging 
situations that we have examined and investigated in Iraq. As a 
preliminary matter, it is important to note that the reconstruction 
program in Iraq is unlike any other in history in that it has been 
carried out virtually under fire. Thus, it is fundamentally different 
from reconstruction in a stable environment and our findings should be 
viewed in that light.
    The security challenges in Iraq, however, do not supersede the 
applicable rule governing the use of taxpayer dollars, and, in fact, 
the difficult environment increases the need for comprehensive on-the-
ground oversight. Thus, SIGIR has been and remains committed to 
maintaining a robust operational presence in Iraq to provide effective 
oversight and real-time review. Our collective reporting to date 
reveals a simple axiom: effective quality assurance programs carried 
out by the government and complemented by effective quality control 
programs performed by contractors will yield successful programs and 
projects. Where good quality assurance and quality control programs 
have been applied in Iraq, success has been achieved. SIGIR's 
inspection reports document that the majority of the projects we have 
visited have met contract expectations and are being used per their 
original intentions. However, of the 50 construction project 
assessments that were deemed a success, eight had inadequate design 
submissions, four had some form of inadequate construction, and two 
lacked sufficient attention to sustainability issues. Despite these 
findings, the overall rate of success is notable given the high 
security risks that have afflicted the program in Iraq.
    Since SIGIR's inception, an essential element of our approach to 
oversight has been to rapidly identify problem areas and work with 
management to develop improvement plans. I instruct my auditors to 
produce audits that provide solutions to any findings and to be 
transparent with management throughout the audit process. This approach 
has worked. Most of SIGIR's published audits have provided 
recommendations with which management concurred and agreed to 
implement. This approach has promoted positive change in the program 
through the application of lessons learned along the way.
    While the fraud we have found in Iraq has been egregious, it has 
also been limited in scope relative to the overall investment of 
taxpayer dollars in Iraq. However, SIGIR reporting has found that 
waste, while difficult to quantify in gross numbers, has been present 
in a wide variety of U.S.-funded Iraq reconstruction projects and 
programs. The problem of waste has diminished since the inception of 
the program as managers have applied lessons learned (e.g., moving from 
expensive design-build cost-plus contracts to direct, fixed-price 
contracts).
    Regarding the preservation of the U.S. investment in Iraq, SIGIR 
has found weaknesses in plans and processes governing the transfer of 
U.S.-funded projects and assets to the Government of Iraq (GOI). We 
raised a red flag on this issue (in an audit released last July), 
noting that much of the U.S. reconstruction investment is at risk 
unless these issues are effectively addressed by the GOI.
    Our investigative work and capacity are increasing, particularly 
with regard to using forensic capabilities to review allegations of 
contract fraud like double billing. We also are strengthening 
investigative coordination through expanded participation in various 
Iraq fraud task forces.
    As our previous audits have noted, the U.S. support for GOI for 
anticorruption programs has been relatively limited and less effective 
than necessary. The GOI continues to face a plethora of problems 
arising from corruption within its governmental institutions, a reality 
that the GOI has begun to face publicly as evidenced in its three-day 
anticorruption conference in early January 2008. Taking seriously the 
fight against corruption--a burden shared by the GOI and the U.S. 
Mission in Iraq--is an essential element to the ultimate success of the 
fledgling Iraqi democracy. Success on this front is key to preserving 
the U.S. investment in Iraq's relief and reconstruction.
    I returned two days ago from Iraq. It was my 19th trip over the 
past four years. During my 15-day stay, I had informative dialogues 
with a number of Iraqi officials about the past and present U.S. 
reconstruction programs. I met with former Prime Ministers Jaafri and 
Allawi, the current Deputy Prime Minister, Dr. Barham Salih, the Chair 
of the Baghdad Services Committee, Dr. Ahmed Chalabi, the President of 
the Board of Supreme Audit--Dr. Abdul Basit, and the new Commissioner 
of the Commission on Integrity. Judge Rahim al-Ugaili.
    My discussions with Dr. Basit and Judge Rahim focused on the 
current state of corruption in the GOI. Dr. Basit acknowledged that 
corruption within a number of ministries continues to restrict their 
progress. Judge Rahim, who has been in his new position for just under 
two months, concurred that Iraq and, specifically, his Commission must 
improve its collective anticorruption investigative capacity through 
training, better coordination with U.S. investigators, and expanded use 
of technical tools and expertise. Prime Minister Maliki has designated 
2008 as the Year of Reconstruction and Anticorruption. While this is a 
signal and welcome recognition within the Iraqi government of the 
importance of addressing this continuing problem, it is essential, as 
Dr. Basit related to me, that the GOI substantiate its welcome rhetoric 
with robust rule of laws actions.
    I also met with Ambassador Crocker, General Petraeus, and the 
leaders of the primary U.S. reconstruction management offices, 
collectively finding continued progress toward improving processes for 
managing the U.S. investment in Iraq.

                            SIGIR BACKGROUND

    My testimony is based on the audit reports that SIGIR has issued, 
in accord with Generally Accepted Audit Standards, and the SIGIR 
inspections and investigations, which have been completed in accord 
with standards established by the President's Council on Integrity and 
Efficiency (PCIE). Our continuing oversight work is summarized every 
three months in SIGIR's comprehensive Quarterly Reports--of note, we 
are the only IG required to produce quarterly reports to the Congress. 
We have also produced three lessons learned reports--on personnel, 
contracting, and program oversight--which have led to improvements 
through legislative and regulatory reforms. We are at work on a fourth 
cumulative lessons learned report scheduled for release this summer.
    By maintaining a significant oversight presence on the ground in 
Iraq, SIGIR is uniquely and robustly positioned to review U.S. 
reconstruction programs through its cross-jurisdictional mandate 
authority and capacity derived from four years of institutional 
experience. We conduct, supervise, and coordinate audits and 
investigations of the treatment, handling, and expenditure of amounts 
made available for the reconstruction of Iraq. We do so in order to 
ensure the independent and objective leadership of oversight; to 
promote economy, efficiency, and effectiveness; and to prevent and 
detect waste, fraud, and abuse in Iraq programs.
    The Congress has assigned SIGIR the responsibility for conducting 
audits and investigations relating to expenditures from a set of 
accounts specified in law, including the Iraq Relief and Reconstruction 
Fund, the Iraq Security Forces Fund, the Commander's Emergency Response 
Program, the Economic Support Fund, and a variety of smaller funds. In 
addition, Congress has assigned SIGIR the duty to provide reporting on 
amounts appropriated or otherwise made available ``for assistance for 
the reconstruction of Iraq . . . under any other provision of law.'' 
\2\
---------------------------------------------------------------------------
    \2\  Sec. 3001(m)(2)(B) of Public Law 108-106 as amended by Sec. 
1221, National Defense Authorization Act for Fiscal Year 2008 (Public 
Law 110-181).
---------------------------------------------------------------------------
    We regularly coordinate our work with other audit and investigative 
agencies with whom we share overlapping jurisdiction through a variety 
of mechanisms, including the Iraq Inspectors General Council, which I 
formed four years ago, and through joint audits with our sister 
agencies. Because of our unique mandate, SIGIR can take a multi-agency 
approach to the problems of Iraq reconstruction, comparing, for 
example, the Department of State's Provincial Reconstruction Teams and 
the Department of Defense's Commander's Emergency Response Program. 
These programs at times have similar goals but have also upon occasion 
used conflicting practices and procedures. SIGIR closely coordinates 
its work with the Government Accountability Office.
    The enactment of the fiscal year 2008 National Defense 
Authorization Act (NDAA) in late January 2008 provided SIGIR with new 
responsibilities. Specifically, the NDAA give SIGIR expanded oversight 
of funds in the Iraq Security Forces Fund, the Commander's Emergency 
Response Program, and the Economic Support Fund. Section 842 of the 
NDAA directs SIGIR to develop a comprehensive audit plan for a series 
of audits of Federal agency contracts, subcontracts, and task and 
delivery orders for the performance of security and reconstruction 
functions in Iraq. This will require a level of effort beyond SIGIR's 
already extensive focus on contract audits of reconstruction 
activities. The legislation requires SIGIR to play a significant 
leadership role in planning and coordinating these audits with other 
relevant inspector general organizations, including the DOD IG, the DoS 
IG, and USAID IG.
    Along with the work required under our new mandate, SIGIR continues 
its ongoing emphasis on detailed reconstruction contract review. 
Specifically, we continue work on our extant mandate to complete a 
final forensic audit report on all amounts appropriated or otherwise 
made available for the reconstruction of Iraq. To fulfill this 
requirement, SIGIR is executing a series of focused contract audits of 
large Iraq reconstruction contracts and will culminate this work with 
capping reports. Our focused financial audits have examined overall 
IRRF contract administration and oversight, contract outcomes, and have 
included assessments of vulnerabilities to fraud, waste, and abuse. 
Future contract audit coverage will be expanded to include contracts 
across additional reconstruction funding appropriations, years of 
funding, programs, and include construction as well as non-construction 
contracts.

                                 AUDITS

    Over its four-year existence, SIGIR's Audit Directorate has issued 
108 audit reports that provide 315 recommendations. These 
recommendations cover a wide range of issues that have contributed to 
improvements in agency operations in Iraq reconstruction. SIGIR audits 
have been directly responsible for $58 million in savings and $40 
million that has been put to better use. SIGIR has challenged $7.5 
million in payments. The vast majority of our recommendations have been 
agreed to by the agencies to whom they were addressed, with many 
corrective actions underway or completed.

                              INSPECTIONS

    As of January 2008, the SIGIR Inspections Directorate has issued 
108 project assessment reports that cover reconstruction project sites 
in Iraq valued at over $1.265 billion. To date, SIGIR has conducted 84 
construction assessments and 24 sustainment assessments. The 
assessments have yielded a variety of results, ranging from noting 
well-constructed projects to finding projects with serious 
deficiencies.
    The projects with deficiencies are largely the result of 
insufficient government oversight and inadequate contractor 
performance. Of the 84 construction assessments, 34 had significant 
deficiencies preventing the project from meeting its original 
objectives. These deficiencies resulted from inadequate design, 
construction, quality control, government quality assurance, and 
planning for sustainment.

                             INVESTIGATIONS

    SIGIR's investigative work has produced 14 indictments, 14 arrests, 
5 convictions, 9 individuals pending trial (several of whom go on trial 
this week), and over $17 million in fines, forfeitures, and 
restitution. We currently have 50 ongoing investigations into fraud, 
waste and abuse involving funds for the reconstruction of Iraq. From 
its inception, SIGIR has had a strong investigative presence in Iraq. 
Currently, we are expanding our capability throughout the continental 
United States, to areas where much of the information and many 
potential subjects are currently located.
    SIGIR Investigations continues to work with a wide range of U.S. 
agency partners in its pursuit of allegations of fraud, waste, and 
abuse in Iraq relief, reconstruction, and infrastructure building. 
SIGIR's investigative partners include: U.S. Army Criminal 
Investigation Command, Major Procurement Fraud Unit (CID-MPFU); Defense 
Criminal Investigative Service (DCIS); Federal Bureau of Investigation 
(FBI); U.S. Agency for International Development, Office of Inspector 
General (USAID OIG); and U.S. Department of State, Office of Inspector 
General (DoS OIG). Our partnerships with other Federal law enforcement 
agencies have enhanced interagency cooperation and maximized our 
investigative resources through investigative case coordination and 
deconfliction.
    SIGIR supports the ongoing national initiatives and task forces, 
such as the Defense Finance and Accounting Service invoice review 
project in Rome, New York. DCIS initiated the project to detect fraud 
involved with payments made by the U.S. Army to support the war effort 
in Iraq. Next week, two SIGIR agents will deploy to Rome, New York, to 
work with the task force in furtherance of this investigative effort.
    SIGIR continues to participate in the National Procurement Fraud 
Task Force (NPFTF) and the International Working Committee (IWC), a 
subcommittee of the NPFTF. In October 2006, the Department of Justice 
(DoJ) Criminal Division created the NPFTF to promote the early 
detection, prevention, and prosecution of procurement fraud associated 
with increased contracting activity for national security and other 
government programs. The IWC links DoJ and Federal law enforcement 
agencies and provides a venue to address prosecutorial issues resulting 
from fraud investigations conducted in an international war zone.
    While SIGIR agents in Iraq concentrate on American targets and work 
with our investigative partners and the DoJ, our special agents also 
continue to develop close relationships with Iraq's Commission on 
Integrity (CoI, formerly known as the Commission on Public Integrity) 
and the Board of Supreme Audit (BSA). My agents and I met with the head 
of the CoI during my recent visit to Iraq, and I am pleased to report 
that the close relationship that we previously had with the CoI will be 
continued under the CoI's new leadership. Thus, our agents in Iraq will 
be able to continue to assist Iraqi authorities in their investigations 
of Iraqi contractors who engaged in fraud potentially involving U.S. 
dollars.
    A key component of SIGIR's investigative program has been the 
strategic development of investigative task forces that enable 
synergistic collaboration among law enforcement agencies pursuing Iraq 
fraud cases. SIGIR formed the first Iraq fraud task force in spring 
2005. This initiative, the Special Investigative Task Force on Iraq 
Reconstruction (SPITFIRE), combined the efforts of SIGIR with 
investigative assets from the Internal Revenue Service, the Department 
of Homeland Security's Office of Immigration and Customs Enforcement, 
the Federal Bureau of Investigation, and the Department of State's 
Office of Inspector General. SPITFIRE succeeded in effectively pursuing 
the investigation of the Bloom-Stein conspiracy, the first major fraud 
prosecution in Iraq. SIGIR investigators developed allegations 
uncovered during a SIGIR audit, which revealed an egregious criminal 
conspiracy in Hilla, Iraq, involving tens of millions of dollars in 
fraudulent contracts, bribes, and kickbacks. Nine individuals 
(military, civilian, and contractors) were indicted, four convicted and 
five are pending trial; several others will go on trial start this 
week.
    SIGIR is not limiting its efforts just to addressing contractor 
misconduct through the criminal and civil justice system. We also refer 
cases to the U.S. Army Legal Services Agency, Procurement Fraud Branch, 
for adjudication under the administrative suspension and debarment 
process. Since December 2005, SIGIR and its partner agencies have 
worked closely with the Army's Procurement Fraud Branch to suspend and 
debar contractors for fraud or corruption within the Army, including 
those involving Iraq reconstruction or Army support contracts in Iraq.
    In June 2003, the Department of Defense designated the Department 
of the Army as the executive agent for contracting support to the 
Coalition Provisional Authority. As a result, the Army's suspension and 
debarment authority leads the effort to ensure the integrity of 
contractors performing these contracts. The goal of this program is to 
ensure that these contracts are awarded to, and performed by, 
contractors who are honest and ethical and who have the ability to 
successfully perform this important work. The Procurement Fraud Branch 
has also taken a leading role within the Army and at joint contracting 
organizations to train contracting officers to aid in the prevention 
and early detection of contractor fraud in Iraq reconstruction and 
support contracts. As reflected in SIGIR's last Quarterly Report to the 
United States Congress, the Army Procurement Fraud Branch reported that 
it had suspended 32 individuals or companies, proposed 30 for 
debarment, and debarred 20 based on allegations of fraud and misconduct 
connected to Iraq reconstruction and contractor fraud.

      RECONSTRUCTION PROGRAM VULNERABLE TO FRAUD, WASTE, AND ABUSE

    Systemic contracting and management problems, corruption, and the 
general lack of security in Iraq are major factors that have made 
reconstruction programs in Iraq vulnerable to fraud, waste and abuse. 
With the limited resources available, agencies often did not 
effectively administer or implement reconstruction contracts. This was 
particularly the case when it involved government oversight of the work 
performed and government review of invoices. Poor security exacerbated 
these problems by frequently making it too dangerous to provide 
oversight of reconstruction activities, to transport needed materials 
to construction sites, or to allow quality assurance personnel to visit 
sites. Our audits found pervasive weaknesses in program and contract 
management and our inspections uncovered many problems at construction 
sites. However, there have also been a number of successes in the 
program, and executive agencies have largely been responsive to our 
observations and recommendations, applying lesson learned along the 
way. As requested by the Committee, the following litany provides 
selected examples from our audits and inspections wherein we identified 
vulnerabilities to fraud, waste, and abuse.

Police Academy, Hilla, Iraq (SIGIR Inspection PA 05-032 issued January 
        31, 2006)
    At the direction of the Coalition Provisional Authority, the Joint 
Contracting Command--Iraq awarded a contract to SBIG Logistics and 
Technical Services, Inc. for the construction and support for an 
addition to the Al Hillah (Hilla) Police Academy. The total contract 
price was $23.6 million, of which $9.1 million was specifically for the 
additional building. The SIGIR inspection identified numerous 
deficiencies with the construction project. Overall, the U.S. 
government did not implement a quality assurance program and it did not 
ensure the design requirements were met. Even though the statement of 
work clearly required design submittals from the contractor for the 
major components of the police academy addition, the contractor did not 
provide them for review. In addition, SIGIR found significant cracks in 
the walls, inadequate backup power capability, poorly constructed 
sidewalks, a poorly designed wastewater system, evidence of roof leaks, 
and inadequate security systems. The contractor did not deliver or 
install the two back-up generators that were required by the contract. 
In addition, one other generator that was removed for overhaul was not 
returned. The two remaining generators that were on site were not 
capable of sustaining the academy in case of a power outage.

Border Posts (SIGIR Inspections PA 05-021 thru PA 05-024 issued January 
        31, 2006)
    USACE awarded a contract valued at $36.5 million in March of 2004 
to Parsons, Inc., to build border posts at Iraq's border crossings. The 
contractor did not prepare a properly designed facility and did not 
obtain written approval from USACE for the design before construction. 
Projects were not consistent with the original objective to complete 
and commission border denial posts. The border forts were not 
constructed with the perimeter security requirements. The jail 
facility, generator units, fuel tanks, and water system were not 
secured, and there were no physical restrictions preventing access to 
the walls of the border posts.
    During the design phase the contractor proposed replacing steel-
reinforced concrete columns and beams with structural steel I-beams. 
There was no record that USACE reviewed or approved the design changes. 
During construction, USACE personnel observed that the horizontal I-
beams supporting the roof were deflecting under the weight of the 
roofing material, and that some of the I-beams were improperly 
installed. A retrofit to reinforce the installed undersized I-beams was 
required.

U.S. Agency for International Development's (USAID) Management of the 
        Basrah Children's Hospital Project (SIGIR Audit 06-026 issued 
        July 31 2006)
    USAID was tasked with constructing a pediatric hospital with an 
estimated ceiling cost of $50 million. In August 2004, USAID awarded a 
contract to Bechtel National, Inc., to build the hospital. However, 
early decisions to increase the size of the facility, design flaws, 
contract delays, poor construction and site security ultimately 
increased the price to between $149.5 and $169.5 million. USAID was 
required by Public Law 108-106 to report on the progress of 
construction and its incurred costs to the Congress. However, USAID's 
accounting systems and management processes were inadequate and failed 
to identify either construction progress or accurate contract costs. To 
stay within the cost limits, USAID stopped reporting indirect costs 
that may have totaled $48 million that should have been assigned to the 
contract. Further, based on cost data obtained from USAID, SIGIR 
estimated the new completion price to be between $149.5 and $169.5 
million. Compounding these problems was a lack of effective program 
management and oversight by USAID and the Department of State. SIGIR 
observed that at the time of the audit, there was one contracting 
officer, one administrative contracting officer and one cognizant 
technical officer along with a few support staff who were responsible 
for management and oversight of $1.4 billion in construction activities 
including the Basrah Children's Hospital. Construction management was 
taken over by the U.S. Army Corps of Engineers (USACE). USACE says that 
completion of the hospital is now scheduled for mid-2008 with a planned 
opening of early 2009.

Baghdad Police College (SIGIR Inspections PA 06-078 and 06-079.2 issued 
        January 29, 2007)
    USACE awarded two task orders totaling $72.2 million to Parsons, 
Inc., to renovate portions and construct other portions of the Baghdad 
Police College. The contractor did not provide--and the government did 
not review--the required number of design drawings, USACE did not 
review the contractor's daily quality control reports and it also was 
unaware of significant construction deficiencies at the project site. 
SIGIR identified significant construction deficiencies, such as poor 
plumbing installation, expansion cracks, problems with the quality of 
the concrete, exposed rebar, and poor brickwork. Also, the construction 
and equipment installation were performed at a low level of workmanship 
by the contractor and did not comply with the international standards 
required in the contract. In addition, SIGIR found that the completed 
barracks buildings had significant plumbing failures and there were 
massive expansion cracks on the interior and exterior of the buildings 
that will leave the Iraqis with continual maintenance issues.
    Finally, in an effort to complete the project, which was 
experiencing significant cost overruns and schedule slippages, 24 items 
were removed from the scope of work under the contract. During this 
inspection, SIGIR inspectors found indications of potential fraud and 
referred these matters to SIGIR Investigations for appropriate action.
    On February 25, 2008, the SIGIR inspections staff initiated a 
follow-up assessment to determine the current status of the Baghdad 
Police College. During my recent trip to Iraq, I and my inspection team 
visited the Baghdad Police College as part of the new assessment. We 
found that, in addition to ongoing efforts to correct previous 
deficiencies (noted in our January 2007 report), the Multinational 
Security Transition Command--Iraq (MNSTC-I) is undertaking significant 
additional construction work. MNSTC-I estimates that current repair 
work will amount to $9 million and new construction contracts will 
amount to $42 million. Additional contracts to further expand training 
capabilities may add another $24 million to costs. The quality of the 
repair and construction work we observed on the initial return to the 
Baghdad Police College was decidedly better than the work that we 
previously reported on.

DynCorp International Task Order for the Iraqi Police Training Program 
        Support (SIGIR Audit 06-029 issued January 30, 2007)
    Under this task order issued in June 2004, the Department of 
State's Bureau for International Narcotics and Law (INL) contracted 
with DynCorp International for training services for international 
police liaison officers, training support equipment, and construction 
of a residential camp on the Adnan Palace grounds in Baghdad to house 
training personnel. The contract value was $188.7 million. Poor 
contract oversight resulted in millions of dollars being put at risk, 
and inadequate accounting of property acquired under the contract. 
Between July 2004 and June 2006, the Department of State paid about 
$43.8 million for manufacturing and temporary storage of a residential 
camp, including $4.2 million for unauthorized work associated with the 
camp. As of October 2007, INL has reached agreement for use of all the 
trailers for either the Embassy or a camp to be established at the 
Baghdad International Airport. In addition, the Department of State may 
have spent another $36.4 million for weapons and equipment, including 
armored vehicles, body armor, and communications equipment that cannot 
be accounted for.

Relief and Reconstruction Funded Work at the Mosul Dam (SIGIR 
        Inspection PA 07-105 issued October 29, 2007)
    The United States Army Corps of Engineers selected CH2Mhill/Parsons 
as the Sector Project and Contracting Office Contractor. It was 
responsible for engineering analysis and technical consulting, 
requirements management, quality assurance, contract administration, 
procurement, and logistics support. 21 contracts valued at $27 million 
were let to foreign companies. The SIGIR inspection found numerous 
problems at the site. There were no design drawings and specifications 
for large silos for holding concrete or for the construction of a 
grout-mixing plant. In addition, the foundation bolts of the stationary 
silos were so poorly installed that in 43 of 144 cases (30 percent), 
there were few, if any, bolt threads for the nuts to twist on. The 
government's quality assurance program did not adequately ensure 
correct delivery and construction of materials and equipment.
    Further, many contractor invoices lacked supporting details for 
materials and equipment claimed. For example, one contractor's invoice 
claimed the delivery of 4 contract-specified submersible pumps with 54-
m\3\/hour and 20-meter lift capability, but the pumps actually 
delivered had only 36-m\3\/hour and 17.5-meter lift capability. In 
addition, the contractor delivered two 30-m\3\/hour concrete mixing 
plants instead of the two 30-m\3\/hour grout mixing plants specifically 
required.
    Contract file documentation showed that the contracting officer 
attempted to modify the delivered concrete mixing plants into grout 
mixing plants at the expense of the U.S. government, instead of 
enforcing the Federal Acquisition Regulation clause in the contract 
that requires the contractor to replace or repair them at no increase 
in price.
    Approximately $19.4 million worth of equipment and materials 
delivered to the Mosul Dam for the implementation of the grouting 
operations did not provide benefit to the Ministry of Water Resources 
and may have been wasted. During this inspection, SIGIR found 
indications of potential fraud and referred these matters to SIGIR 
investigations.

Department of State, Bureau of International Narcotics and Law 
        Enforcement Affairs (INL), Management of DynCorp International, 
        LLC, Contract for the Iraqi Police Training Program (SIGIR 
        Audit 07-016 issued October 23, 2007)
    INL awarded a contract to DynCorp International in February 2004, 
to provide housing, food, security, facilities, training support 
systems, and a cadre of law enforcement personnel to support the Iraqi 
civilian police-training program. As of August 23, 2007, INL had 
obligated about $1.4 billion and paid about $1.2 billion. INL's prior 
lack of management and financial controls created an environment 
vulnerable to waste and fraud and a situation whereby INL does not know 
specifically what it received for most of the $1.2 billion in 
expenditures. Although training has been conducted and equipment 
provided under the contract, INL officials report that (1) invoices and 
supporting documents submitted by DynCorp were in disarray, but are 
being organized; (2) INL had not validated the accuracy of the invoices 
it received prior to October 2006; INL personnel in Iraq and in 
Washington, D.C. are in the process of validating past invoices; and 
(4) INL lacks confidence that Department of State accounting records 
accurately capture the purpose for most disbursement. INL had taken 
action and continues to take action to improve its contract management 
in general and its management of the DynCorp contract in particular. 
According to INL officials, it will take three to five years to 
complete a 100 percent review and reconciliation of the invoices and a 
validation of the property records. To date, SIGIR's reviews of DynCorp 
contracts with INL have resulted in about $4.1 million in potential 
savings to the U.S. government. SIGIR plans to follow up its work on 
this contract later this year.

Outcome, Cost, and Oversight of Iraq Reconstruction Contract W914NS-04-
        D-0006 (SIGIR Audit 08-010 issued January 28, 2008)
    In March 2004, USACE issued a contract to Parsons, Inc., with a 
ceiling price of $500 million to repair, renovate, or construct Iraqi 
ministry buildings and hospitals and to construct primary healthcare 
facilities. Of 11 task orders issued, only 3 were completed. The other 
8 task orders were terminated for the convenience of the government 
with the work at most of the sites only partially completed. The 
projects were between 78 and 98 percent complete at the time.
    USACE terminated these contracts because Parsons had poor control 
of its subcontractors, poorly managed and supervised the projects, and 
failed to control its costs. Parsons made infrequent trips to the 
project sites and as a result there was an overall lack of knowledge 
regarding conditions at the sites and in reporting construction 
progress. On the government side, SIGIR observed numerous management 
weaknesses, including high turnover of personnel, contracting office 
personnel with limited contact experience, a failure to enforce 
contract requirements for monthly cost reports, and a failure to review 
contractor invoices before payment to assure that the work was 
performed.

U.S. Agency for International Development's (USAID) Efforts to 
        Implement a Financial-Management Information System in Iraq 
        (SIGIR Audit 08-007 issued January 25, 2008)
    In 2003, USAID contracted with BearingPoint to develop and 
implement an Iraqi financial management information system. By October 
2007, the system, which had achieved limited functionality, was shut 
down due to security issues and a lack of support by the Government of 
Iraq. At that point about $26 million had been expended for the system 
under broad-based contracts that included numerous other tasks related 
to economic and financial reforms for Iraq. Although deteriorating 
security conditions and competing demands for funds under the contracts 
no doubt adversely impacted the system's development, there was also a 
lack of clear direction based on user requirements. Neither the 
contracts nor BearingPoint's work plans provided that direction. As a 
result, information was not available to clearly assess progress on the 
system in relation to available benchmarks, making it difficult for 
USAID to assess BearingPoint's performance. In mid-January 2008, the 
Iraqi Minister of Finance and Acting Mission Director at USAID signed a 
Memorandum of Understanding to restart the system.

                   THE CHALLENGE IN QUANTIFYING WASTE

    I am often asked: ``What is the total amount that has been wasted 
in the U.S. reconstruction effort in Iraq?'' To answer the total waste 
question, SIGIR would have to audit and inspect many more programs, 
projects, and contracts than we are able. I have 22 auditors in Iraq, 6 
inspectors, and 5 investigative staff. Thus, our oversight targets are 
necessarily judgmentally selective, developed through strategic 
planning that aims to provide the widest review possible. The foregoing 
litany of oversight reporting illustrates the scope of issues arising 
from our reviews of Iraq reconstruction contracts. This variety makes 
it impossible to calculate now what the precise total waste figure 
might be. But our collection of audits and inspections provide an 
episodic story of waste, as we have defined it with the GAO (see 
definition at Appendix I).
    One episode of waste is evidenced by our audit of the Iraq 
Financial Management System. The system is not being used and it does 
not appear that the GOI wants to use it. Thus, if the system ultimately 
falls into permanent disuse, then the entire U.S. investment, amounting 
to tens of millions of dollars, could be counted as waste. Other 
contracts we reviewed have uncovered decisions to reduce, descope, or 
terminate work because of cost overruns, changing needs, or security 
conditions. While some of these causes may be unavoidable others entail 
factors that point to waste. Despite these difficulties, I have 
directed my auditing team to continue to identify waste to the extent 
practical. We intend to do that principally through the forensic audit 
process. The bottom line is that our reporting demonstrates that 
waste--rather than fraud--has been the chief problem in the Iraq 
reconstruction program. But both the waste and the fraud issues could 
pale in comparison to the problem of ensuring that the GOI sustains the 
programs and projects funded by U.S. taxpayer dollars.

  GOVERNMENT OF IRAQ (GOI) ACCEPTANCE AND SUSTAINMENT OF U.S.-FUNDED 
    INFRASTRUCTURE CRUCIAL TO ENSURING U.S. ASSISTANCE IS NOT WASTED

    SIGIR audits have revealed that the U.S. investment is vulnerable 
to additional waste if construction projects are not properly 
maintained. To realize the maximum benefit of reconstruction 
investments, the assets must be effectively maintained and operated. 
However, the U.S. government and the GOI have yet to implement 
effective programs and plans to ensure proper asset transfer and 
maintenance. Planning for the effective management of these assets, 
from small health clinics to complex electrical generation plants, is 
critical for the economic and political recovery of Iraq and the 
security of U.S. interests in Iraq.
    SIGIR oversight has identified deficiencies related to the transfer 
of U.S. funded assets to the control of the GOI. Our audits and 
inspections identified that the U.S. and Iraqi governments need to 
improve the asset transfer process, and the GOI must address its 
shortfalls in sustaining U.S. funded projects to ensure that 
reconstruction funds are not wasted. Overall, SIGIR determined that the 
inability of U.S. agencies to agree on one common asset transfer 
process, compounded by reluctance from Iraqi government officials at 
the national level to formally accept projects, has hindered the 
effective turnover of U.S. funded reconstruction projects.

                U.S. TRANSFER PROCESS NEEDS IMPROVEMENT

    SIGIR has issued five reports \3\ on the transfer process, and we 
are currently working on a sixth. As explained in our July 2007 report, 
the asset transfer process is essential to both the United States and 
Iraq for two main reasons. First, it allows the GOI to recognize its 
ownership of the project. Asset recognition is the point at which the 
GOI officially agree that the project is complete, that all necessary 
project-specific documentation is in place, and that the U.S. 
government has provided the necessary training and orientation to the 
local Iraqi staff that will be responsible to manage, operate and 
maintain the new or refurbished facility. Second, it validates that the 
GOI is now responsible for project operation and maintenance and 
capital replacement. A formalized, unified asset transfer process 
allows the GOI to plan for and fund the operations and maintenance of 
U.S. funded construction projects.
---------------------------------------------------------------------------
    \3\ GRD-PCO Management of the Transfer of IRRF-funded Assets to the 
Iraqi Government, (SIGIR 05-028, January 24, 2006); Multi-National 
Security Transition Command--Iraq Management of the Transfer of Iraq 
Relief and Reconstruction Fund Projects to the Iraqi Government, (SIGIR 
06-006, April 29, 2006); U.S. Agency for International Development 
Management of the Transfer of Iraq Relief and Reconstruction Fund 
Projects to the Iraqi Government, (SIGIR 06-007, April 29, 2006); 
Transition of Iraq Relief and Reconstruction Fund Projects to the Iraqi 
Government, (SIGIR 06-017, July 28, 2006); Transfering Iraq Relief and 
Reconstruction Fund Capital Projects to the Government of Iraq, (SIGIR-
07-004, July 25, 2007).
---------------------------------------------------------------------------
    SIGIR's audits have made recommendations to USACE, MNSTC-I, and 
USAID to complete, in coordination with the asset transfer focal point 
organization in the Embassy, the development of a common policy 
facilitating the transfer of competed projects to the GOI. SIGIR follow 
up reviews recommended that the Embassy develop a single uniform 
process for asset recognition and transfer for all agencies. In July 
2007, SIGIR again assessed the progress and recommended that the U.S. 
Ambassador to Iraq provide senior level support to finalize a 
Memorandum of Understanding (MOU) between the United States and Iraq on 
asset transfer.
    SIGIR is currently in the process of updating our previous asset 
transfer reports and we are seeing some improvements. Since we began 
our reviews of asset transfer, SIGIR has been consistent in emphasizing 
the need to standardize the process for transferring assets to the GOI. 
Most recently, the Embassy, specifically the Asset Transfer and 
Recognition Working Group, has drafted an Interagency Agreement to 
formalize the asset transfer process among all U.S. partners. However, 
our preliminary evaluation indicates that the agreement still allows 
each agency to use its own procedures, and covers only projects funded 
by the Iraq Relief and Reconstruction Fund (IRRF). We will be following 
up with the Embassy on these issues for further clarification.
    SIGIR recommended last July that the Embassy execute an Asset 
Transfer MOU or Bilateral Agreement with the GOI. The working group 
drafted an MOU with the aim of achieving a consensus on each side's 
intentions with respect to the transfer of assets. Mission officials 
recently informed us that, although the MOU was delivered to the Deputy 
Prime Minister in November 2007, there has been no progress by the GOI 
regarding the pending MOU. Moreover, our current work suggests that the 
MOU, even if signed, may have only limited impact: it again relates 
only to IRRF, and the MOU stipulates that all agreements in the MOU are 
nonbinding. Embassy officials informed us that the most important 
aspect of the MOU is in the naming of an Iraqi point of contact to 
serve as a central point of contract within the Deputy Prime Minister's 
office on issues relating to asset transfer.

 SIGIR INSPECTIONS AND AUDITS INDICATE PROBLEMS IN GOI SUSTAINMENT OF 
                          U.S. FUNDED PROJECTS

    SIGIR audits and inspections have demonstrated that the GOI has had 
some successes but has experienced notable difficulties in sustaining 
transferred U.S. assets. To illustrate, SIGIR's Inspections staff 
conducted 24 sustainment assessments and found that 12 had significant 
deficiencies.\4\ SIGIR's inspections indicate that some projects now 
under Iraqi control are not being adequately maintained, posing threats 
to the condition and durability of the facilities and to the health and 
safety of those who work at them. Comprehensive Operations and 
Maintenance programs and effective training are key to improving 
prospects for sustainment.
---------------------------------------------------------------------------
    \4\ However, the number of poorly sustained sites may be larger 
because several sites could not be visited due to security concerns. As 
a result, the assessment team relied upon a review of the contract and 
photos taken at the time the projects were completed. Thus, actual 
sustainment is not known.
---------------------------------------------------------------------------
    Here are examples of what our inspections and audits found:
  --Erbil Maternity and Pediatric Hospital, Erbil, Iraq (SIGIR 
        Inspection PA-06-94, April 19, 2007).--In January 2007 SIGIR 
        inspectors assessed the condition of this $6.8 million project 
        that had been turned over to the GOI. At that time, SIGIR 
        determined that long-term sustainability and serviceability of 
        hospital equipment had been reduced because of the absence of 
        effective operations and maintenance and parts-management 
        programs. To illustrate, the hospital sewer system has 
        occasionally clogged, causing wastewater to back up through 
        floor drains into some sections of the hospital where patients 
        receive care. This may have occurred because of the improper 
        disposal of medical waste materials. SIGIR observed large 
        quantities of medical waste in the sewer system's traps, 
        manholes, and septic tank. Some mechanical equipment installed 
        during renovation was inoperable either because operations and 
        maintenance practices had been ineffective or because hospital 
        workers chose not to use the new equipment. For example, SIGIR 
        observed that a new incinerator installed during renovation was 
        not used because the people initially trained to operate the 
        incinerator were no longer employed at the hospital. Also a 
        sophisticated new oxygen generator and distribution system was 
        used only as a back-up system while hospital staff continued to 
        use oxygen tanks that were not properly protected and secured. 
        One of three new boilers was not operating, possibly because of 
        a fire, and it was being used for parts. Critical water 
        purification equipment did not function because weekly 
        maintenance checks to observe and drain moisture traps were not 
        performed.
      SIGIR recommended that U.S. reconstruction officials engage with 
        the appropriate Iraqi government officials to ensure 
        sustainment of this U.S. taxpayer investment. They responded 
        that our recommendations exceeded the contract requirements and 
        their purview to address.
  --Recruiting, Babel Volunteer Center, Hilla, Iraq (SIGIR Inspection 
        PA-06-089, April 17, 2007).--In January 2007, we inspected the 
        Al Hilla (Hilla) Recruitment and Training Center which cost 
        $1.8 million to repair. Our inspectors identified numerous 
        problems in its maintenance. For example, two bathroom floors 
        had buckled, which caused damage to concrete and tiles. Because 
        the tenants never evacuated the sewage holding tank, effluent 
        backed up in the drain lines and leaked into the ground beneath 
        the floors. The problem would have been mitigated if the sewage 
        holding tank had been properly evacuated; however, force 
        protection barriers and internal walls prevented pumping trucks 
        from accessing the tanks.
      Wiring appeared to have short-circuited and ignited an electrical 
        box, which has been replaced. The SIGIR inspection noted that 
        bathrooms were not clean, there were no beds for the Iraqi 
        soldiers stationed at the facility, and electrical wiring had 
        been improperly pieced-together to either repair burned-out 
        circuits or to add lighting. The wastewater holding tank was 
        full and channeling raw sewage onto the adjacent property, 
        which eventually drains into the Hilla River. At the time of 
        the inspection, SIGIR determined that if maintenance continued 
        at its current level, the useful life of the facility would be 
        significantly shortened and health hazards would persist. 
        Insufficient funding was identified as the cause of inadequate 
        maintenance.
  --West Baghdad International Airport Special Forces Barracks, 
        Baghdad, Iraq (SIGIR Inspection PA-07-100, April 24, 2007).--
        The Special Forces Barracks was a $5.2 million reconstruction 
        project which SIGIR inspected in March 2007. The four 150 
        kilovolt (kV) electrical generators installed under the 
        contract, valued at approximately $50,000 each, were not 
        operational. SIGIR could not determine when or why the 
        generators became inoperative, but observed that batteries were 
        missing and the levels of engine oil were inadequate. Some 
        bathroom floor drains in company barracks were plugged or 
        drained very slowly, which caused flooding in the bathrooms. 
        The roofs of at least three barracks leaked in several places 
        where water accumulated around drain basins.
      In this case, U.S. reconstruction managers were responsive to 
        SIGIR recommendations and indicated they would work with the 
        Iraqi government to develop the capacity necessary to sustain 
        projects constructed with U.S. funds.
  --Doura Power Station, Units 5 and 6, Baghdad, Iraq (SIGIR Inspection 
        PA-07-103, July 18, 2007).--In June 2007 SIGIR inspected the 
        Doura Power Station which cost $90.8 million to construct and 
        an additional $80 million to provide for operations and 
        maintenance and training for the Ministry of Electricity. SIGIR 
        determined that sustainable operations at full capacity after 
        start-up of Units 5 and 6 could not be reasonably assured 
        unless the Ministry of Electricity's operations and maintenance 
        practices improved. To illustrate, SIGIR observed that the 
        ministry improperly operated or insufficiently maintained 
        equipment in environments where equipment failure was likely. 
        For example, in April 2007, dust and oil film accumulated in 
        critical parts, which caused the complete failure of Unit 5. 
        Bypassing and intentionally overriding automatic controls 
        caused a system imbalance and catastrophic failure of power 
        plant equipment. Electricity was being illegally tapped 
        directly from the power plant using ad hoc cable taps 
        throughout the facility. SIGIR assessed, however, that a 
        planned contract for operations and maintenance and to 
        implement a local training program should result in the 
        prevention of future similar type deficiencies. We will be 
        assessing progress in the future.
  --Iraqi C-130 Base, Baghdad, Iraq (SIGIR Inspection PA-07-099, July 
        24, 2007).--This $30.8 million air base was inspected by SIGIR 
        in May 2007. During the inspection, SIGIR observed that 
        numerous generators were not functional. Moreover, SIGIR 
        observed flaws in the sewage system. For example, the nearby 
        storm-water collection pond and connected drainage ditch 
        contained sewage. The holding tank design allows sewage removal 
        only by pump. Therefore, it appeared that the waste-removal 
        truck pumped the sewage from the collection tanks into the 
        drainage ditch. SIGIR noted a number of documented malfunctions 
        of the reverse osmosis (RO) system. Regular filter changes had 
        not been performed, chlorine dosing did not meet requirements, 
        and the RO system pressures were not within the recommended 
        range. Additionally, filters, anti-scaling, testing kits, and 
        other various maintenance items were not available on site.
      SIGIR inspectors worked with MNSTC-I management during this 
        project and identified that a master plan was under development 
        that would address the problems identified.
    SIGIR's audits on Commander's Emergency Response Program (CERP) 
projects have identified further sustainment problems. SIGIR reviewed 
the CERP program in 2006, 2007, and 2008.\5\ Overall, SIGIR found that 
despite some improvements, continuing challenges in planning for the 
transition of completed projects to the Iraqi people and in fostering 
long term sustainment of completed projects. We also found instances of 
lack of coordination between the CERP program and programs managed by 
the Provincial Reconstruction Teams. While PRT programs tended to try 
to induce Iraqis to devise and solve their own problems, CERP programs 
tended to quickly ``fix'' problems identified by local commanders. 
Occasionally, the two programs were acting at cross-purposes. In 
addition, the CERP program has gotten involved in much larger projects 
over time, such as complex water projects, and its managers lack many 
of the necessary resources to carry such projects forward.
---------------------------------------------------------------------------
    \5\ Commander's Emergency Response Program in Iraq Funds Many Large 
Scale Projects, (SIGIR-08-006, January 25, 2008); Management of the 
Commander's Emergency Response Program in Iraq for Fiscal Year 2006 
(SIGIR-07-006, April 26, 2007); Management of the Commander's Emergency 
Response Program for Fiscal Year 2005 (SIGIR-05-025, January 23, 2006).
---------------------------------------------------------------------------
                    RESULTS OF SIGIR INVESTIGATIONS

    In our U.S. office, SIGIR investigators have historically worked 
from one central location in Arlington, Virginia; however, we recently 
expanded our investigative presence in the United States by opening 
offices in Florida, Texas, and Pennsylvania, with an additional office 
soon to be opened in Ohio. The agents assigned to these offices are 
conducting SIGIR's investigative work in their areas--where much of the 
records and witnesses are located, as well as providing SIGIR's 
investigative expertise to local task forces that are investigating 
allegations of fraud in U.S. funded programs and operations in Iraq.
    Pursuing allegations of criminal fraud in Iraq has been a high 
priority for me ever since my appointment as Inspector General four 
years ago, and I remain committed to ensuring SIGIR continues its 
rigorous investigation program. SIGIR's robust oversight efforts to 
date have helped deter fraud, yet much work remains to be done.
    SIGIR's investigative work to date has resulted in the following 
convictions and indictments--noting that criminal indictments are only 
charges and not evidence of guilt and a defendant is presumed innocent 
until and unless proven guilty:
  --On February 2, 2006, Robert Stein, the former CPA Comptroller and 
        Funding Officer in Hilla, Iraq, pleaded guilty to conspiracy, 
        bribery, money laundering, possession of machine guns, and 
        being a felon in possession of a firearm. Stein was the primary 
        co-conspirator with Philip Bloom funneling numerous fraudulent 
        contract payments to Bloom in exchange for kickbacks and 
        bribes. Stein also admitted to facilitating the purchase and 
        possession of at least 50 weapons, including machine guns, gun 
        barrel silencers and grenade launchers with misappropriated CPA 
        funds. On January 29, 2007, Stein was sentenced to nine years 
        in prison and three years of supervised release. Additionally, 
        he was ordered to pay $3.6 million in restitution and forfeit 
        $3.6 million in assets.
  --On March 9, 2006, Philip Bloom, a U.S. citizen, who resided in 
        Romania and Iraq, pleaded guilty to conspiracy, bribery, and 
        money laundering in connection with a scheme to defraud the 
        CPA. Bloom admitted that from December 2003 through December 
        2005, he, along with Robert Stein and numerous public 
        officials, including several high-ranking U.S. Army officers, 
        conspired to rig bids for federally-funded contracts awarded by 
        the CPA-South Central Region (CPA-SC) so that all of the 
        contracts were awarded to Bloom. The total value of the 
        contracts awarded to Bloom exceeded $8.6 million. Bloom 
        admitted paying Stein and other public officials over $2 
        million from proceeds of the fraudulently awarded contracts and 
        an additional at least $2 million in stolen money from the CPA. 
        On February 16, 2007, Bloom was sentenced to 46 months in 
        prison and two years of supervised release. Additionally, he 
        was ordered to pay $3.6 million in restitution and forfeit $3.6 
        million in assets.
  --On August 4, 2006, Faheem Mousa Salam, an employee of a government 
        contractor in Iraq, pleaded guilty to a violation of the 
        Foreign Corrupt Practices Act for offering a bribe to an Iraqi 
        police official. Salam is a naturalized U.S. citizen employed 
        by Titan Corporation and was living in Baghdad, Iraq. According 
        to court filings, Salam offered a senior Iraqi police officer 
        $60,000 for the official's assistance with facilitating the 
        purchase by a police training organization of approximately 
        1,000 armored vests and a sophisticated map printer for 
        approximately $1 million. On February 2, 2007, Salam was 
        sentenced to three years in prison, two years of supervised 
        release and 250 hours of community service.
  --On August 25, 2006, Bruce D. Hopfengardner, a Lieutenant Colonel in 
        the United States Army Reserve, pleaded guilty to conspiracy to 
        commit wire fraud and money laundering in connection with the 
        Bloom-Stein scheme. In his guilty plea, Hopfengardner admitted 
        that while serving as a special advisor to the CPA-SC, he used 
        his official position to steer contracts to Philip H. Bloom, a 
        U.S. citizen who owned and operated several companies in Iraq 
        and Romania. In return, Bloom provided Hopfengardner with 
        various items of value, including $144,500 in cash, over 
        $70,000 worth of vehicles, a $2,000 computer and a $6,000 
        watch. Hopfengardner and his coconspirators laundered over 
        $300,000 through various bank accounts in Iraq, Kuwait, 
        Switzerland and the United States. Finally, Hopfengardner 
        admitted that he stole $120,000 of funds designated for use in 
        the reconstruction of Iraq from the CPA-SC and that he smuggled 
        the stolen currency into the United States aboard commercial 
        and military aircraft. On June 25, 2007, Hopfengardner was 
        sentenced to 21 months in prison followed by 3 years supervised 
        release, and ordered to forfeit $144,500.
  --On February 7, 2007, U.S. Army Colonel Curtis G. Whiteford, U.S. 
        Army Lt. Colonels Debra M. Harrison and Michael B. Wheeler and 
        civilians Michael Morris and William Driver were indicted for 
        various crimes related to the Bloom-Stein scheme in Hilla, 
        Iraq. Whiteford, who was Stein's deputy in the comptroller's 
        office, was charged with one count of conspiracy, one count of 
        bribery and 11 counts of honest services wire fraud. Harrison, 
        at one time the acting Comptroller at CPA-SC who oversaw the 
        expenditure of CPA-SC funds for reconstruction projects, was 
        charged with one count of conspiracy, one count of bribery, 11 
        counts of honest services wire fraud, four counts of interstate 
        transport of stolen property, one count of bulk cash smuggling, 
        four counts of money laundering and one count of preparing a 
        false tax form. Wheeler, an advisor for CPA projects for the 
        reconstruction of Iraq, was charged with one count of 
        conspiracy, one count of bribery, 11 counts of honest services 
        wire fraud, one count of interstate transport of stolen 
        property and one count of bulk cash smuggling. Morris, who 
        worked for Bloom, was charged with one count of conspiracy and 
        11 counts of wire fraud. Driver, who is Harrison's husband, was 
        indicted on four counts of money laundering. The trial for 
        Whiteford, Morris and Wheeler starts on March 11, 2008. The 
        trial for Harrison and Driver has been postponed and a date has 
        not yet been scheduled.
  --On February 16, 2007, Steven Merkes, a former U.S. Air Force Master 
        Sergeant working for the Department of Defense in Germany, 
        pleaded guilty in U.S. District Court for accepting illegal 
        bribes from Phillip Bloom. Merkes accepted the bribes in 
        exchange for furnishing Bloom with sensitive contract 
        information prior to awarding contracts to Bloom. Merkes was 
        sentenced on February 16, 2007, to 12 months and one day in 
        prison and ordered to pay restitution of $24,000.
  --On July 23, 2007, U.S. Army Major John Cockerham, his wife Melissa 
        Cockerham, and his sister Carolyn Blake, were arrested on a 
        criminal complaint, and on August 22, 2007, they were charged 
        with conspiracy to defraud the United States and to commit 
        bribery, conspiracy to obstruct justice, and a money laundering 
        conspiracy. Major Cockerham was also charged with three counts 
        of bribery. According to the indictment, from late June 2004 
        through late December 2005, Major Cockerham was deployed to 
        Camp Arifjan, Kuwait, serving as a contracting officer 
        responsible for soliciting and reviewing bids for Department of 
        Defense (DOD) contracts in support of operations in the Middle 
        East, including Operation Iraqi Freedom. The contracts were for 
        various goods and services to DOD, including bottled water 
        destined for soldiers serving in Kuwait and Iraq. Major 
        Cockerham, Melissa Cockerham, Blake, an unidentified co-
        conspirator, and others allegedly accepted millions of dollars 
        in bribe payments on John Cockerhams' behalf, in return for his 
        awarding co-conspirator contractors and others DOD contracts, 
        including those for bottled water, through a rigged bidding 
        process. Cockerham allegedly guaranteed that a contractor would 
        receive a contract in return for the payment of money. Cash 
        bribes paid to the defendants and other co-conspirators 
        allegedly totaled $9.6 million. The indictment also alleges 
        that Melissa Cockerham and Carolyn Blake received millions of 
        dollars from these contractors, and that the conspirators 
        deposited the money in bank accounts and safe deposit boxes in 
        Kuwait and Dubai.
  --On November 15, 2007, Terry Hall was arrested on a criminal 
        complaint charging bribery. Subsequently, on November 20, 2007, 
        a federal grand jury indicted Hall for soliciting bribes. The 
        indictment alleged that Hall paid money and other things of 
        value to a U.S. military contracting officer to influence the 
        actions of the officer, including the award of more than $20 
        million in military contracts. Hall operated companies that had 
        contracts with the U.S. military in Kuwait, including Freedom 
        Consulting and Catering Co., U.S. Eagles Services Corp., and 
        Total Government Allegiance. According to the indictment, those 
        companies received more than $20 million worth of military 
        contracts for providing, among other things, bottled water to 
        the U.S. military in Kuwait.

            ANTICORRUPTION: U.S. PROGRAMS AND IRAQI EFFORTS

    In our January 2008 Quarterly Report to the Congress, we noted that 
the prevailing view among Iraqis about corruption in their country is 
not an optimistic one. Iraqis recognize the complex pattern woven from 
Iraq's long list of challenges--from its limited personnel and 
government capacity, to the fractious nature of politics, and all of 
those persisting in a still dangerous security environment. Corruption 
in Iraq, and for that matter in any country in transition, is not a 
problem that can be solved by simply creating a commission or by 
passing a law. It will take many long years of sustained effort, 
combined with political will, before the people of Iraq are assured 
that they are the beneficiaries of the oil riches and the full economic 
potential of their country.
    Today, corruption remains endemic in Iraq. Unless checked, it is 
doubtful that many U.S. funded reconstruction efforts will be able to 
achieve their intended purpose. Furthermore, as SIGIR pointed out in 
its most recent Quarterly Report to Congress, Iraq is facing a windfall 
in potential oil revenues in 2008--over $50 billion that is highly 
vulnerable to corruption.

                        THE NATURE OF CORRUPTION

    I testified in October 2007 \6\ that corruption in Iraq is a second 
insurgency because it directly harms the country's economic viability. 
In very real terms, corruption stymies the construction and maintenance 
of Iraq's infrastructure, deprives people of goods and services, 
reduces confidence in public institutions, and potentially aids 
insurgent groups reportedly funded by graft derived from oil smuggling 
or embezzlement. Corruption discourages hope, devalues America's 
contributions to Iraq, and strengthens the appeal of our opponents.
---------------------------------------------------------------------------
    \6\ Testimony of Stuart W. Bowen, Jr., Special Inspector General 
for Iraq Reconstruction, ``Assessing the State of Iraqi Corruption'', 
House Committee on Oversight and Government Reform.
---------------------------------------------------------------------------
    Surveys of Iraq's citizens continue to reveal a common belief that 
corruption is pervasive within their national government. Transparency 
International conducts annual surveys within countries on individuals' 
perceptions of the degree of public sector corruption. Their scores 
range from 10 for highly clean to 0 for highly corrupt. Out of 180 
countries, Transparency International ranks Iraq at 178 with a score of 
1.5. This data, while not conclusive, provides a grim independent 
assessment of corruption in Iraq.
    Effective anticorruption programs must include a broad range of 
approaches to address the issue. Activities to address corruption may 
include establishing specific government entities which attack existing 
corruption. In Iraq, this includes the Commission on Integrity, which 
is the primary agency charged with investigating accusations of 
official corruption and bringing alleged offenders to court. It is 
analogous to the FBI. The Board of Supreme Audit is Iraq's analogue to 
the U.S. Government Accountability Office, and Iraq's system of 
Inspectors General parallels U.S. agency IGs. Additionally, U.S. 
efforts address the broad spectrum of conditions facilitating 
corruption by identifying deficiencies in investigative techniques and 
improving local governance capacity.

     U.S. EMBASSY PROGRESS IN SUSTAINING HIGH LEVEL LEADERSHIP AND 
                         COMPREHENSIVE APPROACH

    In January of this year, SIGIR issued its fourth review on U.S. 
support to Iraq's anticorruption efforts. SIGIR found that the U.S. 
Embassy in Iraq has taken action or has planned steps to address 
SIGIR's previous concerns. If effectively implemented, these actions 
would address all recommendations contained in earlier SIGIR 
reports.\7\ Most notably, the Ambassador has identified actions to 
improve the oversight and coordination of the U.S. anticorruption 
effort and in December 2007 proposed to the Secretary of State a 
reorganization of personnel and assets to elevate the importance of 
anticorruption programs.
---------------------------------------------------------------------------
    \7\ U.S. Anticorruption Efforts in Iraq: Sustained Management 
Commitment is a Key to Success, (SIGIR-08-008, January 24, 2008).
---------------------------------------------------------------------------
    The Embassy has recognized the need to design and implement a 
comprehensive, integrated anticorruption strategy to assist the GOI and 
the Iraqi people in combating the corruption permeating government 
agencies, private business, and other institutions of Iraqi society. 
SIGIR supports these actions but notes that past efforts to revitalize 
and coordinate U.S. anticorruption efforts have been largely 
ineffective and suffered from a lack of management follow through. The 
success of these new efforts will, therefore, depend in large part on 
sustained management commitment, particularly in terms of day-to-day 
leadership and senior-management oversight.
    At this time, preliminary observations from our ongoing work 
indicate that the Embassy is moving forward on its December plan, 
albeit slowly. To illustrate, the new Anticorruption Coordinator's 
Office has been established and initially staffed with six positions. 
An Acting Anticorruption Coordinator has been temporarily assigned 
until the position can be filled by a senior level U.S. government 
official. The State Department informed us that a preliminary selection 
has been made for this is position with a formal announcement imminent.
    The Anticorruption Working Group has convened several times and 
seven sub-groups have been established in order to better manage/
achieve specific goals and objectives. The sub-groups have been 
assigned specific areas to coordinate such as: (1) implementing and 
monitoring anticorruption reforms, (2) establishing standards to 
evaluate U.S. government anticorruption assistance, and (3) maintaining 
and accurate inventory of U.S. anticorruption assistance programs to 
prevent duplication of efforts among U.S. civilian and military 
entities. Several sub-groups have met and actions are underway in 
several areas, many of which stem from recommendations in prior SIGIR 
reports.

   GOVERNMENT OF IRAQ ANTICORRUPTION EFFORTS: CHALLENGES AND PROGRESS

    I would like to address some of the challenges that I raised in my 
October 4, 2007 testimony on corruption in Iraq \8\ and the steps the 
GOI is taking to fight this corruption.
---------------------------------------------------------------------------
    \8\ SIGIR 07-015T October 4, 2007 ``Assessing the State of Iraqi 
Corruption'' Testimony presented to the House Oversight and Government 
Reform Committee.
---------------------------------------------------------------------------
Security
    Security concerns throughout Iraq severely limit the transparency 
of government although as SIGIR as reported in our January 2008 
quarterly report, violence has decreased and there is continuing 
progress in the capacity and size of the Iraqi Security Forces. 
Nevertheless, violence, or threats of violence as well as political 
influence over many of Iraq's public institutions remain. To 
demonstrate the impact of such conditions, I previously testified that 
Commission on Integrity investigators have been forced to reveal the 
details of their cases to the ministries and officials they were 
investigating, placing witnesses and anticorruption officials in 
danger. At least 39 employees of the Commission have been murdered. 
Judges and judicial investigators have also been intimidated or killed.

Political Leadership and the Rule of Law
    The absence of ability within the Iraqi judicial system to 
prosecute corruption cases effectively and fairly is a major obstacle 
to tackling the pervasive corruption in the country. These weaknesses 
stem from many factors: from the shortage of reliable judges, 
courtrooms and detention facilities, to political interference and the 
resulting culture of impunity. Article 136(b) of Iraq's Criminal Code 
is a notorious structural obstacle impeding Iraq's anticorruption 
efforts. This provision allows any Iraqi minister to grant, by fiat, 
complete immunity from prosecution to any ministry employee accused of 
wrongdoing.
    In addition, an order issued by the Prime Minister in the spring of 
2007 requires Iraqi law enforcement authorities to obtain permission 
from the Prime Minister's office before investigating current or former 
ministers. Although an Embassy official informed us that the head of 
the Commission on Integrity stated that the 2007 order had not impeded 
his recent activities, we continue to believe that these actions are 
incompatible with a well-functioning anti-corruption program.

Capacity
    Iraq's anticorruption agencies, as well as government ministries 
charged with managing Iraq's financial resources and providing 
necessary services to its people, face significant capacity and 
resource shortfalls. Enormous shortfalls exist in the areas of 
investigations, audit and management. Moreover, our review of efforts 
to implement a financial management information system discussed 
earlier in this testimony demonstrated the vulnerabilities of current 
conditions. In 2003, the Coalition Provisional Authority and the 
International Monetary Fund conducted assessments that found that the 
GOI financial structure provided limited ability to monitor Iraqi 
ministerial budgets and expenditures, leaving the ministries vulnerable 
to fraud, waste and abuse.

Government of Iraq Efforts
    SIGIR continues to monitor GOI anticorruption efforts. The first 
Anticorruption Conference was held in Baghdad on January 3, 2008. 
Organized by Deputy Prime Minister Baram Saleh, the conference 
announced that 18 initiatives, recommended by the Prime Minister, would 
begin as part of a National Campaign for Fighting Administrative 
Corruption. These initiatives are broad and address a wide range of 
issues. To illustrate, the plan calls for the adoption of data systems 
to provide transparency over public fund management and the execution 
of projects and plans. Moreover, addressing laws and regulations is an 
integral component of the plan; drafting a law on administrative 
corruption and review existing laws and regulations affecting money 
laundering are included as steps that must be taken. The Conference 
announcement also provided completion dates for each of the 18 
initiatives. No later than April 1, 2008, for example, the Ministry of 
Foreign Affairs must implement the United Nation's agreement in 
fighting administrative corruption which Iraq agreed to join. Moreover, 
to support its anticorruption efforts, the GOI has created two groups: 
the Joint Anticorruption Council and the Council of Representation 
Committee on Integrity.

                  CORRUPTION EFFORTS MUST BE SUSTAINED

    Just as it is critical that the Government of Iraq (GOI) develop 
effective sustainment measures for the ``hard'' construction projects, 
so must it develop effective sustainment plans for ``soft'' programs--
corruption being foremost among them. Efforts to improve government 
processes, increase transparency, strengthen the civil service system, 
bolster training, and hold individuals accountable--are even more 
important. In the area of corruption fighting--ensuring that entities 
such as the Board of Supreme Audit remain independent, resourced and 
politically supported, are also critical. We recognize that this will 
not be an easy task. In Iraq, as in many countries in transition, 
corruption presents a very complex challenge.

               SIGIR LESSONS LEARNED AND RECOMMENDATIONS

    In concluding, SIGIR has identified the following lessons learned 
that relate to the issues we have discussed today.

Strategy and Planning
    Include contracting and procurement personnel in all planning 
stages for post conflict reconstruction operations.
    Clearly define, properly allocate, and effectively communicate 
essential contracting and procurement roles and responsibilities to all 
participating agencies.
    Emphasize contracting methods that support smaller projects in the 
early phases of a contingency reconstruction effort.
    Generally avoid using sole-source and limited competition 
contracting actions. These exceptional contracting actions can be used 
in exceptional cases, but the emphasis must always be on full 
transparency in contracting and procurement.

Policy and Process
    Establish a single set of simple contracting regulations and 
procedures that provide uniform direction to all contracting personnel 
in a contingency environment.
    Develop deployable contracting and procurement systems before 
mobilizing for post-conflict efforts and test them to ensure that they 
can be effectively implemented in contingency situations.
    Definitize contracts as early in the process as possible. SIGIR 
Audit 06-019 found that there was a lack of clarity regarding 
regulatory requirements for definitization of task orders issued under 
contracts classified as Indefinite-Delivery/Indefinite Quantity (ID/
IQ).
    Designate a single unified contracting entity to coordinate all 
contracting activity in theater. JCC-I/A has recently been designated 
the coordinating agency.
    Ensure sufficient data collection and integration before developing 
contract or task order requirements.
    Avoid using expensive design-build contracts that have unclear 
requirements and are awarded on a cost-plus basis, especially for 
simpler projects when standard structures are needed in large numbers 
over a wide geographical area such as for schools and clinics.
    Use operational assessment teams and audit teams to evaluate and 
provide suggested improvements to post-conflict reconstruction 
contracting processes and systems.
    SIGIR, made the following recommendations in our Contracting 
Lessons Learned Report to improve contingency contracting:
  --Explore the creation of an enhanced Contingency Federal Acquisition 
        Regulation (CFAR). We observed that agencies have developed 
        agency specific regulations implementing the government-wide 
        Federal Acquisition Regulation (FAR). For example, the Army 
        notes that the Department of State, which has unique 
        capabilities important to expeditionary situations, has 
        developed FAR implementing procedures that differ from DOD's.
  --Pursue the institutionalization of special contracting programs 
        such as the CERP which we noted before have unique roles in 
        post-conflict reconstruction.
  --Include contracting and program management staff at all phases of 
        planning for contingency operations.
  --Create a deployable reserve corps of contracting personnel who are 
        trained to execute rapid relief and reconstruction contracting 
        during contingency operations.
  --Develop and implement information systems for managing contracting 
        and procurement in contingency operations.
  --Pre-compete and pre-qualify a diverse pool of contractors with 
        expertise in specialized reconstruction areas.

                    OPTIONS FOR CONGRESS TO CONSIDER

    The Senate, in S. 680, has taken a number of steps to improve post-
conflict contracting.\9\ Moreover, the Army has initiated its own 
review, with the Commission on Army Acquisition issuing an excellent 
report on the subject. We generally support the Commission report's 
recommendations and note that many of these recommendations are tied 
directly to areas of concern that SIGIR identified. We look forward to 
seeing their implementation.
---------------------------------------------------------------------------
    \9\ Statement of Stuart W. Bowen, Jr. before the United States 
Senate Committee on Homeland Security Subcommittees, ``Improving 
Contracting and Government Oversight of Contractors Performing Work in 
Contingency Operations'', January 24, 2008.
---------------------------------------------------------------------------
    We suggest that the Congress consider requiring any civilian 
agencies contracting in a contingency environment, most notably DoS and 
USAID, conduct their own comprehensive studies of their contracting 
operations to identify deficiencies and corrective actions. 
Specifically, we suggest these studies address their contracting and 
program and project management requirements, the status of their 
efforts to hire, train and ensure the speedy deployment of contingency 
contracting staff, and polices and procedures to manage and oversee 
contracts and contractors.
    Given the critical need for coordination and collaboration, we 
further suggest these studies also address how the agencies will work 
with their civilian, as well as military, counterparts in contingency 
operations. In this regard, I would also suggest that specific 
timeframes be established for identifying contracting and contract 
management problem areas and reporting to Congress their proposed 
solutions, including implementation plans with identified priorities of 
specific tasks and completion dates.
    Lastly, I would suggest to the Committee and to other committees 
that have oversight of U.S. reconstruction funding in Iraq that they 
press the various agencies which come before them during the budget 
cycle about the agency's own plans to deal with the problems we have 
discovered in specific and systemic terms, and in both the medium and 
short terms.

                                CLOSING

    Let me close by thanking you for the opportunity to testify before 
you today on these important matters. On behalf of all of my 
colleagues, who carry out the important mandate you have assigned 
SIGIR, I extend thanks for your support of our work by providing us the 
resources we need to get the job done. This completes my statement for 
the record, and I look forward to responding to your questions.

             APPENDIX I.--WHAT ARE FRAUD, WASTE AND ABUSE?

    Definitions.--Fraud, waste, and abuse generally relates to the U.S. 
taxpayers not receiving the full value of government funded activities. 
Fraud is an illegal action by a government or contractor officials for 
personal gain. Waste represents a transgression that is less than fraud 
and abuse and most waste does not involve a violation of law. Rather, 
waste relates primarily to conditions that could result in waste such 
as mismanagement, inappropriate actions or inadequate oversight. Waste 
involves the taxpayers as a whole not receiving reasonable value for 
money in connection with any government funded activities due to an 
inappropriate act or omission by players with control over or access to 
government resources (e.g., executive, judicial or legislative branch 
employees, contractors, grantees or other recipients.) Examples of 
waste in the acquisitions and contracting area include the following:
  --Unreasonable, unrealistic, inadequate or frequently changing 
        requirements.
  --Proceeding with development or production of systems without 
        achieving an adequate maturity of related technologies in 
        situations where there is no compelling national security 
        interest to do so.
  --Failure to use competitive bidding in appropriate circumstances.
  --Over-reliance on cost-plus contracting arrangements where 
        reasonable alternatives are available.
  --Payment of incentive and award fees in circumstances where the 
        contractor's performance, in terms of cost, schedule and 
        quality outcomes, does not justify such fees.
  --Failure to engage in selected pre-contracting activities for 
        contingent events (e.g., hurricanes, military conflicts).
  --Congressional directions (e.g. earmarks), and agency spending 
        actions where the action would not otherwise be taken based on 
        an objective value and risk assessment and considering 
        available resources.
    Abuse of authority or position involves decisions made for personal 
financial gains or for immediate or close family member or business 
associate. Abuse does not necessarily involve fraud or violation of 
law.\10\
---------------------------------------------------------------------------
    \10\ GAO Letter to Congressman Ike Skelton on behalf of GAO, and 
the Inspectors General of SIGIR, DOD-IG and DOS-IG. February 7, 2007.

    Senator Leahy. Thank you very much.
    I have one question for all of you. But before I start, 
just to go back, General Kicklighter in your testimony you 
mentioned the diversion of U.S. weapons to Iraqi insurgents and 
your efforts to stop it. Are you confident today that U.S. 
weapons are not being diverted and used to kill and wound 
Americans?
    General Kicklighter. Senator, I am confident that both the 
United States--the coalition forces and the Iraqi Security 
Forces have put in place procedures to prevent that--accounting 
for weapons down to the company level, by serial number. And we 
went and looked at a lot of the nodes and down at police 
stations, and companies, and here's what the estimate is--is 
that all of the weapons coming through the system today, there 
is a major attempt to capture those weapons, and control them 
by serial number, and by weapons card down in the police 
station and down to the units.
    Senator Leahy. I'm thinking of the very large number of 
handguns that went unaccounted for, some even showed up in 
Turkey.
    General Kicklighter. Yes, sir.
    Senator Leahy. Are you confident that none of the American 
weapons today are being diverted and used against us?
    General Kicklighter. Yes, sir.
    I can't say 100 percent that, you know, that any system is 
100 percent, but I believe there is a good system in place that 
is getting better day by day, and there is not a major leakage 
of weapons going into the hands of the insurgents, or to the 
black market.
    Senator Leahy. Not a major leakage?
    General Kicklighter. No, sir. And, but there is a----
    Senator Leahy. That's not awfully comforting. And I'm not 
trying to quibble words here, but obviously the first weapons 
went out with no adequate way of checking them. We had the 
problem after the invasion that large ammunition dumps weren't 
even secured.
    If you're a family member of one of our brave men and women 
who are over there fighting, you'd be concerned if, among the 
weapons they're facing, are weapons that came from the United 
States. I think you'd agree, from your own military background, 
that's something we should all be concerned about.
    General Kicklighter. We should be extremely concerned about 
tight controls of weapons, and ammunition. Making sure they 
don't fall into the wrong hands.
    Senator Leahy. Let me ask this question and I'll begin with 
Mr. Walker. Five years after we invaded Iraq, after spending 
$44 billion to rebuild the country, do you believe that there 
are effective controls in place today to prevent the theft and 
loss of U.S. taxpayer funds, and Iraqi Government funds?
    Mr. Walker. Senator Leahy, I think things are much better 
today than they were, but they're clearly not good enough. And 
I think there is a bigger picture question--the Iraqis have a 
budget surplus. We have a huge budget deficit.
    Senator Leahy. I'm going to be going into that, but go 
ahead.
    Mr. Walker. All right. One of the questions is, who should 
be paying?
    Senator Leahy. Well, they have $4 billion a month in oil 
revenues, that's about $50 billion a year. The President's 
asking for billions more in an emergency supplemental for the 
Iraqi reconstruction funds--any reason why we can't use some of 
that $50 billion a year of their oil revenues?
    Mr. Walker. Part of the problem, Senator Leahy, is that my 
information I have from my very capable staff is that for the 
calendar year that ended on 2007, from January through 
November, the Iraqis had spent less than 10 percent of their 
budget for several of the major ministries.
    At the same point in time, we're all painfully aware of 
what is happening with crude oil prices. So, irrespective of 
what they budget, it's not being spent for various reasons, 
and, needless to say, revenues are going up.
    Senator Leahy. Which bothers me, because we're told in this 
country we can't spend money to fix our infrastructure, as bad 
as it is, we can't spend money to have our airports run well, 
we can't spend money to do research on cancer and Alzheimer's 
and diabetes and everything else, because of the war in Iraq. 
It seems if we ask for billions of dollars more for them, at 
some point, they ought to be able to pay for some of this 
themselves.
    General Kicklighter, could they be doing more? And covering 
more of their own reconstruction costs than they do?
    General Kicklighter. Sir, I think that they are beginning 
to do more, and I know that they're doing more in the area of 
paying for their own military equipment. They are investing in 
foreign military sales now, and bringing weapons systems into 
the country that they are paying for. And I think that's 
certainly the trend that we should be following. As time goes 
on, they should pick up more and more of the expenses of their 
defense.
    Senator Leahy. Including reconstruction?
    General Kicklighter. Yes, sir.
    Senator Leahy. Mr. Bowen--first, do you believe that there 
are effective controls to prevent the theft and loss of U.S. 
taxpayer funds, and Iraqi Government funds?
    And second, should the Iraqi Government be paying more of 
these reconstruction costs?
    Mr. Bowen. As to the first question, I agree with what 
Comptroller General Walker said: ``The controls have gotten 
better.'' It's something that we've focused on since 2004, 
reporting on the challenges during CPA of the lack of controls 
and the need to improve.
    My biggest concern on the control front is the issues 
related to direct contracting with Iraqi firms. It's an 
emphasis that the United States Joint Contracting Command--Iraq 
has pushed--I think, properly--forward, in order to employ more 
Iraqis and build capacity and promote capital growth.
    However, those are Iraqi firms executing projects involving 
U.S. funds, and I continue to raise questions about that.
    Senator Leahy. During these past 5 years, has there been 
anyone from the Iraqi Government held accountable for the theft 
or loss of U.S. taxpayer funds?
    Mr. Bowen. That issue has not come to the fore. My concern 
on prosecution of Iraqis is there haven't been any, to speak 
of. The largest one----
    Senator Leahy. There hasn't been any corruption, or there 
hasn't been any prosecution?
    Mr. Bowen. Prosecution.
    Senator Leahy. I wanted to make sure.
    Mr. Bowen. Prosecution.
    Senator Leahy. As a former prosecutor, I know the 
difference.
    Mr. Bowen. Yes. The most notable case came to court 1 week 
ago in Baghdad, involving the deputy minister of health. There 
was significant evidence related to the sale of prescription 
drugs on the black market that had been ongoing within that 
ministry. The case was dismissed, because witnesses had been 
intimidated and did not show. That's the sign of a rule of law 
system that is not strong. Frankly, the corruption issue is a 
symptom of that weak rule of law system.
    Senator Leahy. Well, it's also costing American taxpayers a 
great deal of money, because they won't police their own 
corruption. It creates a real problem here.
    Mr. Bowen. Well, that's right. With respect to the oil 
revenue, that was the leading issue pointed out in our latest 
quarterly report that this windfall, as a result of this last 
quarter's maximum production level since the invasion, the 
maximum export level since the invasion, and the highest oil 
prices in history, all of these coalesced into an enormous 
revenue windfall for the Iraqi Government. They estimated 
revenues of $35 billion last November, and it's estimated to be 
closer to $60 billion. And that certainly gives them resources 
to carry forward with an extensive reconstruction plan.
    Also, it makes it all the more important that Prime 
Minister Maliki carry forward since he's declared the year 2008 
to be the year of reconstruction and anti-corruption on both of 
those fronts.
    Senator Leahy. I want more than decoration, I'd like to see 
them actually do it. Because we have to spend more for our aid 
because of the oil prices, they ought to be able to use some of 
their oil revenues to pay these costs, and not keep sending the 
bill to the United States.
    Senator Cochran.
    Senator Cochran. Mr. Chairman, thank you. I gather from the 
testimony of David Walker, that U.S. operations are not nearly 
as troublesome in terms of breaking down the system, 
procurement, safeguarding property, and all the rest.
    I wondered if you have heard about the fact that the Army 
is moving to upgrade its oversight capabilities, and whether or 
not you had an opportunity to look into what they're doing.
    Mr. Walker. Well, first, Senator Cochran, let me clarify. I 
believe what I said was, was that with regard to fraud and 
corruption, that is a major problem with regard to the Iraqi 
Government and Iraqi funds. There is some with regard to U.S. 
personnel and U.S. funds, but not significant. The real problem 
is waste.
    With regard to the issue that you raise, yes. In response 
to GAO recommendations, in response to the Gansler report, 
which undoubtedly, you're familiar with, the Army and the 
Department of Defense had started to send more contracting 
personnel and to try to add training and additional oversight 
capability. They've still got a ways to go, but they are taking 
steps.
    Senator Cochran. And, Mr. Kicklighter, the Secretary of the 
Army specifically responded to the need to improve contracting 
work and established a commission to review these efforts. And 
I'm told the work of the Army's contracting forces activities 
were put under very close scrutiny.
    And they announced last week that they were establishing a 
new contracting command, headed by a two-star general. What's 
your impression of the effort that's being made by the Army? Do 
you think these efforts will achieve the results that are 
intended?
    General Kicklighter. The short answer, sir, is that they 
will. The Army has had both the Gansler Commission, and they've 
also had a task force headed up by Lieutenant General Ross 
Thompson, and Kathy Condon, a deputy commander at Army Material 
Command.
    These two independent bodies looked at how well we were 
organized to oversee and support contract operations around the 
world, but particularly in southwest Asia.
    And those two bodies, which we kind of over-watched, came 
up with very similar recommendations. The Army has moved out, 
smartly. But a lot of the problems will not be able to be 
corrected overnight.
    For example, they were woefully understaffed in personnel. 
That report calls for, I think, an additional thousand career 
civilians to be put against this problem, and 400 military, to 
bring military in the process much earlier in their career. 
Better training for both military and civilians--they have 
really moved out, but it will take some time to do the kinds of 
thing that are necessary, in my opinion.
    Senator Cochran. Mr. Bowen, your office has prepared a 
series of ``lessons learned'' reports, in the areas of human 
capital management, contracting and procurement, and program 
and project management. Is there evidence that they have led to 
reducing incidents of fraud and waste?
    Mr. Bowen. Yes, there is evidence, in this regard. Our 
early audits revealed the contracting process during CPA was in 
disarray. Our audits, I think, helped lead to the formation of 
the Joint Contracting Command--Iraq, which gave a centralized 
point for the oversight of $13 billion in hard construction 
contracts, and several billion dollars more in nonconstruction 
spending which was part of the Iraq Relief and Reconstruction 
Fund.
    We also recommended that the CERP doctrine be 
institutionalized, and be formalized, and be provided more 
oversight. That has begun to happen. CERP has expanded along 
the way, as well, and I think more attention in that regard 
would be helpful.
    Our chief recommendation on contracting was the 
implementation of an enhanced contingency Federal acquisition 
regulation, and the Office of Federal Procurement Policy 
acknowledged that it would be useful. It also adopted a number 
of our recommendations on Federal contracting across the board, 
and I think those have been salutary events.
    Senator Cochran. Your most recent quarterly report 
describes 2008 as ``the Year of Transfer'' of Iraq, as the 
Government of Iraq assumes greater responsibility for the 
financing and management of reconstruction efforts, are you 
working with them to help ensure that they benefit, also, from 
the lessons learned that your agency has documented?
    Mr. Bowen. The U.S. mission in Iraq is doing that and is 
seeking to build capacity. I think capacity-building is the 
point of the support spear, if you will, in Iraq, with respect 
to how the ministries operate. And it's all the more compelling 
an issue now, in light of this windfall in oil revenues.
    I think the Year of Transfer involves transferring 
responsibility for planning, executing, and funding 
reconstruction and relief operations, and transferring 
responsibility for the remaining nine provinces, to Iraqi 
security control--nine have already transferred--and 
transferring responsibility. I've said this before, today the 
sustainment of what we build is to ensure that, collectively, 
the fledging Iraqi democracy can continue to grow.
    Senator Cochran. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Leahy. Thank you, Senator Cochran.
    Senator Murray, you were next, but I----
    Senator Murray. Well, Mr. Chairman, Senator Dorgan has done 
an incredible amount of work on this, and I know the Byrd rule 
on seniority, but I would prefer to let Senator Dorgan ask his 
questions first, now.
    Senator Leahy. Certainly, Senator Dorgan has spent a lot of 
time working on this. He's been an extremely strong voice for 
accountability of Iraq Reconstruction funds.
    Senator Dorgan, we'll yield to you, and then after the next 
Republican, we'll go to Senator Murray.
    Senator Dorgan. Mr. Chairman, I thank the Senator for the 
courtesy. I'm not going to ask questions so much of this panel. 
I'm going to ask a lot of questions of the next witness. I want 
to thank all three who have come today. This is a lot of good 
work. I've met with Mr. Bowen in my office, and talked about 
SIGIR and the work you're doing. I had an opportunity to spend 
some time with Mr. Kicklighter. In fact, he just released an IG 
report yesterday that I think is very important. And of course, 
Mr. Walker has done, just terrific work in these areas.
    So, I want to thank all of you. You are so important to us 
at this point.
    I want to make a couple of comments, if I might. I really 
appreciate this hearing being held. I think for 5 years, 
frankly, Congress has done a miserable job of oversight, just a 
miserable job. And we've just shoveled money out the door, and 
it is the greatest waste, fraud, and abuse in the history of 
this country, I'm convinced. I'm convinced the American 
taxpayers have been stolen blind.
    Let me give you just a couple of examples. I hold up a 
chart that shows a comment by Mr. Will Granger. He was in 
charge of all water quality for Iraq. We paid him for that. He 
worked for KBR, the Halliburton Corporation, they had a 
contract to provide water to military bases.
    This is from an internal memorandum of the Halliburton 
Corporation that I was able to get a hold of. In it, he talks 
about the problems--they weren't testing water.
    And Mr. Granger--this is an employee of Halliburton--says, 
``This event should be considered a near miss, as the 
consequences of these actions could have been very severe, 
resulting in mass sickness or death.''
    This is a 21-page internal report by the company that was 
paid to test water, and didn't do it.
    The company denies this happened, and the Pentagon didn't 
care much about it, regrettably.
    Mr. Kicklighter, thank you for the inspector general report 
that finally tells us, this is a set of facts that's very 
important.
    Let me just also hold up Ms. Greenhouse's testimony. She 
talks about when the LOG/CAP and the RIO projects were 
originally given. This is the highest civilian contracting 
officer in the U.S. Army Corps of Engineers. She came to the 
Congress and she said, ``I can unequivocally state that the 
abuse related to the contracts awarded to KBR represents the 
most blatant and improper contract abuse I've witnessed during 
the course of my career.'' This is the highest civilian 
official at the Corps of Engineers. You know what she got for 
that honesty? Demoted. And, of course, now for 4 years, 3 
years, that's been kicking around in the Pentagon.
    Frank Willis, let me show you Frank Willis. He came 
forward. He was in a building in Iraq, and he showed us how 
money was saran-wrapped into football-sized packets. He said 
they used to throw them around. This money went to Custer 
Battles Corporation. They were told to ``bring a bag, because 
we pay cash.'' This happens to be $2 million in $100 bills. And 
Frank Willis told us the way money was distributed, and he said 
it was the most unbelievable waste that he'd ever seen.
    Now, let me show you a tiny little example. Mr. Henry 
Bunting showed up. I held 12 hearings in the Senate Democratic 
Policy Committee, because other committees weren't holding 
them. Henry Bunting showed up with this towel. This towel, as 
you see, is a white towel. Henry Bunting worked for KBR, he was 
supposed to order towels for the military, because now we 
contract everything out, even the buying of towels. So, he made 
an order for a towel, ordered a white towel.
    The supervisor said, ``No, you can't do that, you need to 
order a towel with KBR embroidered on it.'' He said, ``The 
problem is, that will triple or quadruple the price.'' His 
supervisor says, ``It doesn't matter, this is a cost-plus 
contract, taxpayers pay for that.''
    So, this is the towel the troops got, with ``KBR'' 
embroidered on it.
    Now this is a tiny little issue. The fact is, this wouldn't 
be part of any investigation that's going on. But it's just a 
profound waste of taxpayers money.
    And let me also say, that today we will hear from a 
witness, of the next panel, in which we will hear that U.S. tax 
dollars--stolen through corruption in Iraq--are funding the 
forces that have killed American soldiers. We'll hear that 
directly from someone who was in Iraq, and involved in this 
issue.
    We'll hear from a witness who said that he showed up and 
was given $11 million in cash--$11 million in cash--and all he 
had to do was to give them a name, a photo ID, and an address. 
That's less documentation than you need to give to cash a $25 
check in this country. $11 million which was, by the way, later 
stolen.
    So, you know, we see these things--there was a question, I 
think, about are the Iraqis paying now, beginning to pay for 
their own defense equipment? We'll have testimony today, as 
well, that says, ``Well, yeah, they are. In fact, they're 
ordering new tanks and planes and so on, some of which are 
never delivered, some of which are delivered as old equipment. 
And the former minister of defense cannot account for--and he's 
now gone, of course, with substantial property holdings in 
London--cannot account for $4 billion--$4 billion--that went 
through his hands. But I know where some of it is.
    If I sound upset by this--I think what's happening here is 
unbelievable.
    Mr. Kicklighter, the inspector general's report you 
released yesterday describes, I think, an undermining of our 
solders, even as the American taxpayers are being fleeced. And 
we don't have nearly the resources that we need.
    Inspector General Bowen, this is your third quarter report 
from last year, I've kept it on my desk, now, for 4 months. We 
have 967 water projects, right now that we're funding in Iraq. 
We have 478 electricity projects--you've done some awfully good 
work, delineating exactly what projects are ongoing, that are 
being funded with American tax dollars. And I appreciate your 
coming today to talk about them. We are a country that's up to 
its neck in debt, shoveling billions of dollars out the door, 
sending $100 bills over by C-130s on pallets. We are finally, 
at long, long, last, maybe going to give the taxpayer some 
feeling that there's some accountability and oversight? I 
wonder. I'm not certain of that, but I wonder.
    This hearing is a very important hearing, it's the tip of 
the iceberg, and the three of you have done really excellent 
work.
    I'm sorry to use my time just to talk, because you've got a 
lot to say, and I know that and I've read your reports and have 
kept pretty close track of this, having done 12 hearings. But, 
the next witness, I'm going to ask a lot of questions of the 
next witness. And I think this ought to be the first of a dozen 
or two dozen hearings, at which we put the--all the spotlights 
on the same spot, and demand on behalf of the America taxpayers 
and demand on behalf of soldiers, who strapped on body armor 
this morning, and went out and risked their lives--demand 
accountability. Because I think we have been cheated. And 
Congress needs to do and can do much, much better.
    One final point. The Truman Committee that was established 
at the start of the Second World War--they held 60 hearings a 
year. They started with $15,000, they saved $15 billion for 
this country. They held 60 hearings a year, demanding 
accountability, and this Congress for 5 years, has been asleep.
    So, Mr. Chairman, thank you for recognizing me.
    Senator Leahy. I would tell the Senator from North Dakota 
that the reports that he's brought out have been invaluable to 
this Senator.
    I should also note, for those who think there may be any 
question of partisanship--the Truman Committee, which you 
talked about, was conducted by then-Senator Truman of Missouri, 
during a Democratically controlled Congress, with a Democratic 
President, in a war that had far more support in the United 
States than the current war does.
    They still raised the questions, because--whether you 
support the war or are opposed to the war--Americans would like 
to think that money is spent wisely, and spent well. For those 
who have had family members serving there, or who have served 
there themselves, they want to make sure that it's done well.
    I felt that way when my son was in the Marine Corps and got 
called up for Desert Storm. I feel that same way today, even 
though I have no family member there.
    Senator Craig, you're next.
    Senator Craig. Well, Mr. Chairman, thank you very much. I 
totally agree that these kinds of oversight hearings are 
critical, there should be more of them, as detailed as we can 
possibly become by the information available to us, I think is 
important.
    General Kicklighter, you mentioned the need for employees 
to do the work at hand, and you mentioned numbers of 1,000-plus 
accountants or auditors or that type--is it possible to find 
them, and do they want to go to Iraq? Or will they go to Iraq?
    General Kicklighter. I think the problem is recruiting, 
training and preparing, and I think once that's been done, that 
there is a willingness to go serve. And 1,000 of these will be 
Department of Defense career civilians.
    I've been to Iraq, I think, 11 or 12 times since the 
beginning, and every time that I've been there, I've been so 
impressed by the quality and the dedication and the commitment 
of both the military and the civilians that are there, and the 
civilians, in large part, are there because they want to be 
there, and they volunteer, but that's not always the case.
    But, I think, Senator, once we've recruited, trained, and 
prepared these people, they will go, and they will provide the 
oversight we need, and the acquisition in the contracting 
world.
    Senator Craig. I keep hearing there is a concern about 
civilians who are there. Can they do the kind of work necessary 
from inside the green zone? I would have to think they would 
have to be out on the ground?
    General Kicklighter. Sir, they do have to be out on the 
ground, and they're all over the country.
    Senator Craig. Okay.
    General Kicklighter. They're in provincial reconstruction 
teams, they're in maintenance teams, they're in teaching teams, 
they're in engineer groups. And they do share risk, similar to 
what our troops do, our career civilians do.
    But, to the extent possible, the same security that we can 
provide our military and our civilians, we're attempting to do 
that. But there are risks involved.
    Senator Craig. Yes.
    Both the chairman and the ranking member have expressed 
concern about oil revenues, and effective use of those oil 
revenues. I think many of us felt, as we funded the war, that 
the money that we fund goes to the troops. And in the very 
beginning, we talked about the potential and the capability of 
the Iraqi people, of funding--in large part--their own 
reconstruction.
    Mr. Walker, first of all, thank you for your service, I 
understand you're leaving us, soon, and going into private 
life. Manana?
    Mr. Walker. Tomorrow's my last day.
    Senator Craig. Tomorrow is your last day.
    Mr. Walker. As Comptroller General, correct.
    Senator Craig. Well, first and foremost, thank you for your 
service, it has been greatly appreciated.
    In those concerns about the potential billions of dollars 
that are now coming into Iraq, and the unwillingness or the 
inability to expend them and, of course, the possible waste 
that could occur there, based on the fraud and abuse that we're 
now beginning to hear about, you mentioned the need for a 
strategic plan of implementation, I believe in the energy 
sector.
    So the Iraqis want one? Are they willing to accept it? Do 
they know what we're talking about in that respect? And do they 
comprehend the need for a path forward that is both strategic, 
realistic, implementable, and therefore accountable?
    Mr. Walker. Well, Senator Craig, the Iraqis have a much 
more serious capacity problem than we do. There was a flight of 
talent from Iraq that occurred a number of years ago. Some 
individuals have come back, but not in adequate quantities to 
be able to address the skills and knowledge gap.
    I think the simple fact is, that if they want our money--
which presumably they do--and if we want to make sure that the 
taxpayers are getting a good return on investment, then we need 
to insist on it. And, you know, one of those things that has 
been mentioned before is, where is the accountability?
    Senator Craig. Well, we need to insist on it. Are we 
insisting on it, to that degree?
    Mr. Walker. Well, our recommendation to the State 
Department was that they needed to develop a strategic and 
integrated plan with respect to the energy sector, as well as 
capacity building for the Iraqi ministries. Their comeback to 
us, was, ``Well, the Iraqis ought to do that,'' and our 
comeback is, ``No, it should be a shared responsibility, 
because it involved both U.S. taxpayer funds, and Iraqi funds, 
and we stand by that.''
    Senator Craig. And that's where it stands at the moment?
    Mr. Walker. That's where it stands right now.
    Senator Craig. There's a disagreement, so it's not going 
forward?
    Mr. Walker. Well, we'll see. Right now, there's a 
disagreement, and as you know, under our Constitution, we can't 
force people to adopt our recommendations. We rely upon you and 
other members to encourage the executive branch to do the right 
thing.
    Senator Craig. Mr. Walker, General Kicklighter, Mr. Bowen--
lessons learned. It's my understanding that we're supposed to 
see a compilation of those soon.
    What are some of the lessons learned that are bringing 
about the implementation that lessens the opportunity for 
fraud, waste, and abuse? All three of you, a couple of those 
that you have clearly learned and you have now effectively 
implemented?
    Mr. Bowen. On the contracting front?
    Senator Craig. Yes.
    Mr. Bowen. First, ensuring that there is a single database 
for contracts in theater. That has been an extremely difficult 
endeavor, something we've focused on through our reviews over 
the last 3 years. It's still not possible to go to a single 
source and find out all of the projects and all of the 
contracts--that, to me, is a basic building block of 
accountability.
    Second, ensuring that there is an understood and agreed-
upon set of rules for contracting in theater. There are a whole 
variety of agencies contracting, and they have a whole variety 
of rules, which is a challenge for contractors operating in-
country.
    Third, on the personnel front, ensuring that the right 
people are selected for the right jobs, for an extended period. 
During the CPA tenure, there was constant turnover, and that 
turnover problem has gotten better, but it's still an issue.
    We have documented situations where a certain contract has 
had--the Parsons contract, for example, has had 16 different 
contracting officers, in just over 3 years. And that is simply 
a weakness in oversight that leads to waste.
    Mr. Walker. Senator Craig.
    Senator Craig. Yes.
    Mr. Walker. With regard to Iraq, one of the critical needs 
is to have more on the ground oversight capability that's 
forward deployed, on the ground.
    But second, I'd like to provide for the record, with the 
permission of the chairman, a listing of the 15 longstanding, 
systemic, acquisition and contracting problems that exists 
within the Department of Defense. They've been there for years, 
they result in billions of waste every year, and that waste is 
accentuated, and increased, when you're dealing with 
contingency operations. And Iraq is a contingency operation, 
just as Katrina was one, for domestic natural disaster, in the 
Department of Homeland Security.
    Senator Craig. I'm sure the chairman will accept those for 
the record, it will be important for us to see.
    [The information follows:]

      Systemic Acquisition Challenges at the Department of Defense

    Service budgets are allocated largely according to top line 
historical percentages rather than Defense-wide strategic 
assessments and current and likely resource limitations.
    Capabilities and requirements are based primarily on 
individual service wants versus collective Defense needs (i.e., 
based on current and expected future threats) that are both 
affordable and sustainable over time.
    Defense consistently overpromises and underdelivers in 
connection with major weapons, information, and other systems 
(i.e., capabilities, costs, quantities, and schedule).
    Defense often employs a ``plug and pray approach'' when 
costs escalate (i.e., divide total funding dollars by cost per 
copy, plug in the number that can be purchased, then pray that 
Congress will provide more funding to buy more quantities).
    Congress sometimes forces the department to buy items 
(e.g., weapon systems) and provide services (e.g., additional 
health care for non-active beneficiaries, such as active duty 
members' dependents and military retirees and their dependents) 
that the department does not want and we cannot afford.
    DOD tries to develop high-risk technologies after programs 
start instead of setting up funding, organizations, and 
processes to conduct high-risk technology development 
activities in low-cost environments, (i.e., technology 
development is not separated from product development). Program 
decisions to move into design and production are made without 
adequate standards or knowledge.
    Program requirements are often set at unrealistic levels, 
then changed frequently as recognition sets in that they cannot 
be achieved. As a result, too much time passes, threats may 
change, or members of the user and acquisition communities may 
simply change their mind. The resulting program instability 
causes cost escalation, schedule delays, smaller quantities and 
reduced contractor accountability.
    Contracts, especially service contracts, often do not have 
definitive or realistic requirements at the outset in order to 
control costs and facilitate accountability.
    Contracts typically do not accurately reflect the 
complexity of projects or appropriately allocate risk between 
the contractors and the taxpayers (e.g., cost plus, 
cancellation charges).
    Key program staff rotate too frequently, thus promoting 
myopia and reducing accountability (i.e., tours based on time 
versus key milestones). Additionally, the revolving door 
between industry and the department presents potential 
conflicts of interest.
    The acquisition workforce faces serious challenges (e.g., 
size, skills, knowledge, and succession planning).
    Incentive and award fees are often paid based on contractor 
attitudes and efforts versus positive results (i.e., cost, 
quality, and schedule).
    Inadequate oversight is being conducted by both the 
department and Congress, which results in little to no 
accountability for recurring and systemic problems.
    Some individual program and funding decisions made within 
the department and by Congress serve to undercut sound 
policies.
    Lack of a professional, term-based Chief Management Officer 
at the department serves to slow progress on defense 
transformation and reduce the chance of success in the 
acquisitions/contracting and other key business areas.

    Senator Craig. Are you saying that these problems that 
you're proposing to us as examples, or as realities, still 
exist today?
    Mr. Walker. They still exist today, to differing degrees. 
And, in fact, this afternoon, I'm testifying before the full 
Senate Armed Services Committee, and that will be one of the 
issues that I will talk about this afternoon.
    Senator Craig. Thank you.
    General Kicklighter, last one, he's following up on a 
question, general?
    General Kicklighter. Thank you, sir. That's an excellent 
question, and let me just tell you, one of those things that 
we're doing to capture the lessons learned--we're going through 
all of the investigations, the audits, the inspections that 
have been done since the beginning.
    And I think that by next month, we will have done an 
evaluation of what are the themes and the lessons that we've 
learned from this war, and we'll make sure, Senator, that you 
get a copy of that, and this committee gets a copy of that when 
we finish that report.
    But, it's going to be extremely valuable, and it will 
answer the kind of question that you answered.
    Let me just add two points to that, and I think it 
reinforces what my colleagues have said.
    One is that I think the problems that we had in contracting 
is that where we had poor oversight, where we had poor 
leadership, where we had the lack of the proper level of 
leadership, and the fact that we didn't have administrative 
support is what caused a lot of the problems for corruption and 
waste in the contracting world. And I think we've learned that 
lesson, and that reinforces what my two colleagues have said.
    The other thing I'd like to reinforce, what Mr. Walker 
said, and that is the value of a strategic plan that integrates 
all of the effort out there. This is not only a kinetic war, 
but it's--the non-kinetic part is extremely important, in 
finishing this up.
    And so the lesson, I think, is that a strategic plan that 
integrates all of our effort, and Senator Leahy talked about 
this in the beginning, about all of the ministries and so 
forth, an integrated plan that's updated frequently, that gives 
us a path for the future, I think, is a lesson that we've 
learned, as well.
    Senator Craig. Thank you, Mr. Chairman.
    Gentlemen, thank you for your service.
    Senator Leahy. Senator Feinstein.
    Senator Feinstein. Mr. Chairman, I just want to begin by 
thanking Senator Dorgan for the work he has done. You know, he 
spoke with an alarm in his voice, and I really hope you three 
gentlemen take note of this.
    I think that we feel that this is the greatest instance of 
fraud, waste, and abuse that any of us have ever, ever seen. 
And it really deserves some kind of extra governmental effort.
    Let me just take one of his instances, and I guess it was 
the AP that reported that dozens of U.S. troops have become ill 
from unmonitored and potentially unsafe water supplied by KBR.
    Another report suggests that the company has avoided paying 
hundreds of millions of dollars in Federal Medicare and Social 
Security taxes by hiring workers through offshore entities 
based in the Cayman Islands.
    Is that true or false? Whoever wants to answer it?
    General Kicklighter. Let me answer the water question.
    Senator Feinstein. General, thank you.
    General Kicklighter. That question is absolutely correct, 
and that problem was brought to this office by Senator Dorgan. 
He brought it to our attention.
    Senator Feinstein. Right, respectfully, I know it was 
correct.
    General Kicklighter. And it was absolutely correct. I do 
not know the answer to the other part of your question, but I 
will be happy to look into that, and report back to you.
    Senator Feinstein. All right, do either of the two of you 
know the answer to that question? True or false is the answer, 
Mr. Bowen?
    Mr. Bowen. I don't know the answer. I am aware from my many 
visits to Iraq of KBR's use of third country nationals to carry 
out a significant amount of their work.
    Senator Feinstein. To avoid taxes.
    Well, it seemed to me that would be something that you 
ought to look at. I mean, they get top dollar times 100 for 
what they're doing, and it seems to me the very least they can 
do is pay taxes.
    Well, let me ask you another one. It is believed that the 
Pentagon has known that KBR has exploited this loophole since 
at least 2004, even as the company has amassed an estimated $16 
billion in contracts in Iraq. Is this true or false?
    General Kicklighter. I do not know the answer to that, 
Senator, but I will look into it and get back to you.
    [The information follows:]

       Use of Overseas Companies by Kellogg, Brown and Root (KBR)

    The Department of Defense Office of the Inspector General 
has not reviewed this issue. Under current law the practice is 
not illegal; however, the Defense Contract Audit Agency (DCAA) 
has conducted audits to ensure that contractors have not billed 
government contracts for taxes that were not incurred.
    Recently both the House and Senate have introduced 
legislation, which if enacted would prevent this type of 
situation from reoccurring. H.R. 5602 and S. 2775, ``Fair Share 
Act of 2008,'' have been introduced to amend the Internal 
Revenue Code of 1986 and the Social Security Act to treat 
certain domestically controlled foreign persons performing 
services under contract with the United States Government as 
American employers for purposes of certain employment taxes and 
benefits.

    Senator Feinstein. Okay. It has been reported that $8.9 
billion of Iraqi oil has been essentially corrupted--in other 
words, put in somebody's pocket. Is that true?
    Mr. Bowen. I don't know the answer to that number. The fact 
is that corruption has afflicted the Iraqi oil sector, 
particularly up at the Baiji Refinery with respect to the 
smuggling of refined fuels, and that was a symptom of the 
subsidy program that created an incentive for smuggling. And I 
know that continues to be a problem today based on my recent 
visits with Iraqi authorities.
    Mr. Walker. Senator Feinstein, corruption has been a 
problem, in particular with regard to the energy sector. That's 
where the money is, that's their most valuable asset.
    I might note one thing that I think is important. There are 
two pots of money--there is U.S. taxpayer money, and there's 
Iraqi money. And there was widely reported roughly $9 billion 
worth of money that disappeared, that was improperly accounted 
for. That was Iraqi money. And, in fact, the picture that you 
have there--even though it was U.S. currency, it was probably 
Iraqi deposits.
    Here's the important point. Those funds were the 
responsibility of U.S. citizens. And so, even though they were 
Iraqi funds, we still have responsibility and should have 
accountability. And I've worked with my counterpart, Dr. Abdul 
Basit, who is chairman of the board of supreme audit in Iraq, 
to try to make sure he has access to the records, to be able to 
do audit work to hold people accountable.
    So, even though it's Iraqi money, we should be concerned 
about it because we were responsible.
    Senator Feinstein. Absolutely, thank you.
    Some American officials have estimated that as much as one-
third of what they spend on Iraqi contracts and grants, end up 
unaccounted for or stolen, with a portion going to Shia or 
Sunni militias, true or false?
    Mr. Walker. I can't attest to the percentage--it is 
significant.
    Senator Feinstein. Anybody else like to add to that?
    Mr. Bowen. I can't attest to that percentage, either, but 
it is a significant problem.
    This is the issue I alluded to earlier, with respect to the 
move toward direct contracting with Iraqi firms. That presents 
a challenge because of the U.S. dollars, and they are paying a 
company that we have limited insight into and oversight of.
    Senator Feinstein. Mr. Bowen, in your 2006 assessment of 
the Basrah Children's Hospital Project, you noted that USAID 
had only one contracting officer, and one technical officer to 
oversee 20 projects, worth $1.4 billion. Do any United States 
agencies today have sufficient numbers of monitoring personnel 
on the ground? I've heard what's been said. But, my question 
is, is it sufficient today?
    Mr. Bowen. A couple of things. First, as a result of those 
audits, the agencies responded by significantly expanding their 
presence and their oversight. For instance, the DynCorp 
contract is a parallel to the Bechtel contract, also a $1 
billion contract, one that we reported had a significant 
shortfall in persons overseeing it. They had two persons. That 
simply doesn't pass the faintest muster.
    But, they now have--I met the director of INL last week--14 
persons here, in Washington, working on that contract, and 8 in 
Iraq. So, it's a several orders of magnitude increase.
    Then to your real question, is this sufficient? I think 
more oversight's always better, and when you're talking about 
extraordinarily large sums of money being spent in a war zone 
that's very difficult to move around in----
    Senator Feinstein. Well, my question is, is it sufficient 
today?
    Mr. Bowen. Right.
    Senator Feinstein. And you're sort of skirting around the 
question.
    Mr. Bowen. Well, we have an ongoing audit that will update 
those previous reviews, that will specifically address that 
matter.
    Senator Feinstein. So, is the answer you don't know? Is it 
no? What is the answer?
    Mr. Bowen. The answer is that we don't know whether the 
improvements that they've made are adequate to oversee the 
current contracts, but our reviews, which will be out this 
spring, will provide details on it.
    Senator Feinstein. Thank you very much. My time is up.
    Thank you very much, Mr. Chairman.
    Senator Leahy. Thank you.
    And, Senator Lautenberg.
    Senator Lautenberg. Yeah, Mr. Chairman, the litany that we 
hear here is of such a nature that you wonder--what kind of 
behavior dictated the theft and dishonesty with which this 
country of ours was dealt during this Iraq war? And Senator 
Dorgan has done substantial work, to his credit, it brought us 
face-to-face with some of the problems that exist.
    And I served on the Department of Homeland Security 
Subcommittee, and tried to get oversight hearings. And Mr. 
Chairman, I want to congratulate you for holding this hearing. 
I tried to get oversight hearings in the Department of Homeland 
Security Subcommittee, and sent nine letters begging for 
oversight hearings, and was told that it wouldn't be necessary, 
because it would only be duplicative.
    And when you see the list of things that have happened, and 
I point out--what a coincidence it is that Vice President 
Cheney has un-exercised options that he had--got when he was 
the CEO of Halliburton.
    Now, I come out of the corporate world, and I understand 
fully what options are, and what they mean, and even though 
they're supposedly going to be given to a university, to accept 
them, I think is a little less than appropriate.
    And when we look at Halliburton's behavior, and the things 
that they neglected to do--water tested positive for e. coli, 
coliform bacteria, they allowed our troops in Iraq to shower, 
bathe, sometimes brush their teeth with that water--charged--
Halliburton charged taxpayers for services it never provided, 
and tens of thousands of meals it never served--outward theft.
    You know, I served in a different war. And everybody's 
conscience drove them to be as frugal, as careful, as they 
could be. And if you deviated from full and honest support for 
your country, it was considered traitorous, that you were a 
traitor to the cause. And when we see that there have been sham 
corporations opened in the Caribbean and the Cayman Islands, 
and then shifted to Dubai--and by the way, we heard in the last 
year or so, that Halliburton was thinking of moving its 
headquarters to Dubai--and helping, from that office, helping 
Iran derive revenues from its oil, which they, in turn, spent 
to send people to kill our troops. It's something really rotten 
here, to develop a theme from another time in a play.
    I want to ask Mr. Walker--the United States Senate 
Governmental Affairs Committee from 2003 to 2006, held only one 
oversight hearing on Iraq contracting, with only one witness. 
Was that a sufficient amount of oversight of this multibillion 
dollar program?
    Mr. Walker. Well, it's not enough oversight, Senator 
Lautenberg, the question is, which committee of jurisdiction or 
committees of jurisdiction should be holding it? I would 
respectfully suggest that with respect to Senate Homeland 
Security and Governmental Affairs, clearly they had 
responsibility for Katrina, which was a domestic contingency. 
Yes, they have authority to look at Government contracting, 
Government-wide. The question is, was anybody else doing it?
    Senator Lautenberg. Well, if we get to this point, and we 
find out that there's still questions being asked, there's 
still unanswered questions, then at what point does it get 
duplicative? At what point do we say, ``Well, some other 
committee is doing it?'' That's an old dodge, to hide behind 
another committee's jurisdiction, to say, ``Well, I thought 
they were doing it.'' In good conscience, each one of us ought 
to be interested in what was taking place. And what's happened 
to the millions and billions of dollars that was wasted.
    Mr. Walker. Senator Lautenberg, if I can, real quickly. 
There wasn't enough oversight, in general, during that period 
of time.
    Senator Lautenberg. Thank you very much.
    Mr. Bowen, the Washington Post raised concern about a trip 
that you took in January to Maine. They said it was interpreted 
as political. It quoted a State Department official who 
reviewed your activity as saying, ``This is the kind of thing 
we're taught not to do.''
    Did you check with the Office of Special Counsel to 
determine if this trip was an appropriate use of taxpayer 
funds?
    Mr. Bowen. No, I didn't. But I am invited to speak on Iraq 
reconstruction issues, and I was invited by Husson College up 
there, and I traveled up to speak to them.
    Senator Lautenberg. Who were--who invited you?
    Mr. Bowen. Husson College, in Bangor, Maine.
    Senator Lautenberg. Husson. Did you hold press conferences 
there? Did you do editorial board meetings?
    Mr. Bowen. I was invited to discuss our work by the 
editorial board.
    Senator Lautenberg. By the editorial board?
    Mr. Bowen. Yes.
    Senator Lautenberg. Were you accompanied to the editorial 
board meetings?
    Mr. Bowen. Yes, I was.
    Senator Lautenberg. By whom?
    Mr. Bowen. By Senator Collins.
    Senator Lautenberg. By Senator Collins? I see. And they 
review the kinds of questions that we're discussing here today?
    Mr. Bowen. It was just a review of our continuing work, 
oversight work, in Iraq.
    Senator Lautenberg. Mr. Kicklighter--the troops who became 
sick from using unsafe water, do they have any recourse against 
Halliburton for its negligence?
    General Kicklighter. Senator, I don't know the answer to 
that, but we certainly are looking into what our recourse will 
be against Halliburton for not performing the contract as so 
specified.
    Senator Lautenberg. I have a question here that I wanted to 
review with either Mr. Walker or Mr. Kicklighter.
    On January 28 of this year, I sent a letter to the GAO 
asking for an investigation into a suspicious e-mail exchange 
indicating that the Army Audit Agency was told by the Army to 
not answer questions about whether the cost of closing Fort 
Monmouth was higher than the Army indicated. The GAO passed the 
investigation to the Department of Justice, who passed it on to 
you, Mr. Kicklighter, and my question for you is, will you do 
this investigation, Mr. Kicklighter?
    General Kicklighter. Sir, we will. We had a meeting the 
other night, and we are in the process of looking into it, as 
we speak.
    Senator Lautenberg. Thank you.
    And one last thing, the Pentagon auditors have classified 
as ``questionable'' over $1 billion from Halliburton cost-plus 
log cap contract. Now, given this, should the Defense 
Department be permitted to continue to enter into cost-plus 
contracts which provide little incentive for a contractor to 
keep costs down?
    Mr. Walker. Senator Lautenberg, I think we need to reduce 
the number of cost-plus contracts. And I think that to the 
extent that we enter into a cost-plus contract, it is 
absolutely essential that the Government do its part to be very 
specific with regard to what type of products and services do 
we expect, in what quantities, in what timeframe, in what 
locations.
    In the absence of doing that--which occurs all too 
frequently--you are essentially writing a blank check to the 
contractor. And that is wholly inappropriate.
    Senator Lautenberg. Do you agree, Mr. Kicklighter?
    General Kicklighter. I totally agree. And to the extent 
possible, contracting should be free and open competition.
    Senator Lautenberg. And I just quote from Senator 
Feinstein's comment about--this is the greatest instance, 
perhaps, in the history of this country--of fraud, waste, and 
abuse, at a time when people are so concerned about our mission 
there, and the wisdom in the first place, and the carrying on 
of this war that has demoralized this country, is 
incomprehensible.
    Thank you, Mr. Chairman. And I appreciate the--your 
patience in letting me go beyond that time.
    Senator Leahy. Of course, Senator Lautenberg.
    I think we can probably wrap up this panel fairly quickly. 
Mr. Bowen, let me ask you--according to Judge al-Radhi, who 
will testify shortly, there are more than 3,000 pending 
corruption investigations in Iraq, involving more than $18 
billion that may have been lost to fraud. Only 300, one-tenth, 
of these cases have been resolved. The Iraqi Government has 
passed laws and taken steps to immunize a number of officials.
    In 2006, you made 12 recommendations to improve the State 
Department's anticorruption efforts in Iraq. A year later, you 
found little progress had been made. The State Department only 
implemented two of your recommendations as of last July. In 
January of this year, a couple of months ago, 10 
recommendations remained unaddressed. Am I correct in assuming 
we have a serious problem of corruption in Iraq?
    Mr. Bowen. Yes, Senator Leahy, you are. We have a two-fold 
problem--the problem of corruption in Iraq, and the problem of 
supporting Iraq's anticorruption institutions effectively.
    Senator Leahy. You've opened hundreds of investigations in 
cases of fraud, waste, and abuse and there are currently more 
than 55 open, active investigations, many of which have been 
referred to the Department of Justice.
    According to your records, the Justice Department has only 
brought charges against about 14 individuals, and recovered 
only $17 million in fraud. Do you believe the Justice 
Department has moved aggressively enough? Should we turn this 
over to some good local sheriff's departments that might be 
more aggressive?
    Mr. Bowen. Well, we're working with----
    Senator Leahy. Sorry, that last may have been uncalled for, 
but I'm wearing my other hat as chairman of the Judiciary 
Committee.
    Mr. Bowen. Yes.
    Senator Leahy. I'm just wondering--it doesn't seem like 
we're getting an awful lot out of them?
    Mr. Bowen. We have some significant cases that are pending, 
that I can't address, of course. I would say that the effort by 
the Justice Department has improved over time, which is a 
continuing theme in the course of this hearing. I think that 
we'll see the fruit of those prosecutions this summer.
    Senator Leahy. Do DOD and Department of State still enter 
into cost-plus contracts in Iraq?
    Mr. Bowen. Yes, they do. And I think S. 680 is a good 
reform measure to help circumscribe the overuse of cost-plus 
contracts. It's clear--as our audits documented--that, for 
example, overhead was an extraordinarily high percentage of 
these cost-plus contracts. We have a report coming out this 
quarter that will show that overhead on one cost-plus contract 
was about 50 percent of the total cost of the contract. That's 
unacceptable.
    Senator Leahy. You've testified before in the Judiciary 
Committee in favor of the War Profiteering Prevention Act. Do 
you still support that?
    Mr. Bowen. Yes, sir, I do. I think strengthening oversight 
and prosecutions of contractors and Government officials who 
engage in corrupt practices is a good thing.
    Senator Leahy. Sometimes the idea that you might go to jail 
and not just get a fine might focus one's mind?
    Mr. Bowen. Focuses the mind, yes, sir.
    Senator Leahy. I found that when I was in law enforcement.
    Senator Cochran, do you have any further?
    Senator Cochran. Mr. Chairman, I think your convening this 
hearing has been very important, and also ensures that everyone 
will know that we're anxious to see that the funds that are 
appropriated by this Congress are spent for the purposes that 
we approved them, and without any culpability for fraud, abuse, 
or waste. And I think the gentlemen who have appeared before 
our committee today have convinced me that the best efforts in 
their offices are being made to achieve that goal. To ferret 
out waste, fraud, and abuse where it exists, and see that those 
who are guilty of it are brought to justice. And we appreciate 
your service in those ways. Thank you.
    Senator Leahy. I noted in my introduction of the 
Comptroller General, Mr. Walker, that he has a 15-year term. 
He's about two-thirds of the way through that, at almost 10 
years, but he's going to be leaving tomorrow, if I'm correct, 
after 10 years of service. Service that I've been privileged to 
see. I've seen his candor, his commitment to the Congress, and 
the American people, and the ability of both Republicans and 
Democrats alike to rely on what he's said.
    I wish you well in your new career, but I might say, Mr. 
Walker, your service has been in the best of what one would 
expect of somebody serving our great country, and I commend you 
for that, and I suspect you'd find that virtually everybody 
else would agree.
    Mr. Walker. Thank you so much, Senator Leahy. It's been an 
honor and a privilege to serve.
    Senator Dorgan. Mr. Chairman?
    Senator Leahy. Yes, Senator Dorgan?
    Senator Dorgan. Two things, just in 30 seconds.
    Let me also say, I think Mr. Walker has been an 
extraordinary public servant. He's provided just great service 
to this country. I regret he's leaving, but I understand the 
circumstances and wish him well. But, I thank him for his 
service.
    Inspector General Bowen, our next witness is going to be 
Judge Radhi. We don't know Judge Radhi, but I understand you 
do. You have said this about him, and I want you at least for 
the committee's purposes, to respond.
    You have said, ``Judge Radhi is an honorable man and an 
effective crime fighter in Iraq,'' saying, ``it's a loss he's 
no longer there.'' This is the man who was the head of the 
Commission on Public Integrity in Iraq. Twice his opponents 
have tried to kill him. He comes to this committee at some 
risk, to speak openly, but is that still your view of Judge 
Radhi?
    Mr. Bowen. Yes, Senator Dorgan, it is. I met with him 
during every trip that I took to Iraq and was sad to see him 
go.
    Senator Dorgan. Well, it's a very courageous man who shows 
up here to be our next witness, and I just wanted the committee 
to understand that he doesn't come to us out of the blue--he 
comes to us as a very courageous man in Iraq who has risked his 
life to do good. Regrettably, he lost the battle, in many ways, 
there. But he's going to describe some things today that are 
very unusual, and very disturbing.
    Inspector General Bowen, and Inspector General Kicklighter, 
thanks again for your service, as well.
    Senator Leahy. I thank you all.
    Thank you, Mr. Walker, General Kicklighter, Mr. Bowen. We 
will recess for 5 minutes while we reset the table, thank you.
    We're back in order.
    Our next witness--may I have order, please.
    Our next witness is Judge Radhi Hamza al-Radhi.
    He served as Iraq's highest ranking anticorruption officer, 
Commissioner of the Iraqi Commission on Public Integrity, CPI, 
from 2004 to 2007. Under his tenure, CPI successfully 
investigated 3,000 corruption cases in courts for adjudication, 
241 of the cases have been prosecuted and resulted in guilty 
verdicts.
    Judge al-Radhi graduated from the Judicial Institute in 
Iraq in 1979, he has worked in legal affairs since. During the 
Iran-Iraq war, he was Director of Funds for Iraqi orphans.
    The Judge resigned as Commissioner of CPI in September 
2007, citing death threats against him, and political pressure 
from the Iraqi Government. CPI is one of those institutions in 
Iraq created to provide governmental oversight. Unfortunately, 
the Prime Minister, Nouri al-Maliki, has refused to recognize 
the independence of CPI.
    I should also note that we have a translator from the State 
Department, Nina Behrans, thank you.
    Then Judge, it's great to have you here, welcome to the 
United States, not that you're a stranger here. Please go 
ahead, sir.
    Senator Dorgan. Mr. Chairman?
    Senator Leahy. Yes.
    Senator Dorgan. Before the Judge responds, I'd like to just 
make about two comments, and ask that we put, at this point, in 
the record, an article in Portfolio Magazine dated April 2008, 
that's this current month's magazine. It's titled, ``The 
Betrayal of Judge Radhi: He fled missile attacks in Baghdad and 
came to the United States, and now he's on the run--how America 
turned its back on the top fraud cop in Iraq.''
    The reason I wanted to mention this is because this man has 
twice been the victim of attacks on his life, he's in this 
country, the State Department has been none too pleased with 
what he has said, because he hasn't painted the most wonderful 
picture of what's happening in Iraq. And if you don't paint a 
wonderful picture, those that want that mosaic painted don't 
want to listen to you much, so they're pretty upset with Judge 
al-Radhi, but I really appreciate his willingness and his 
courage to come forward, and I'm anxious to ask him a series of 
questions.
    [The information follows:]

                [From Conde Nast Portfolio, April 2008]

                      The Betrayal of Judge Radhi
    He fled missile attacks in Baghdad and came to the United States. 
Now he's on the run.
        how america turned its back on its top fraud cop in iraq

                      (By Christopher S. Stewart)

    On an ordinary evening in early January, Judge Radhi Hamza al-Radhi 
shuffles through the tile-and-glass canyons of the Springfield Mall in 
Northern Virginia. No one notices him. He doesn't exactly look like a 
wanted man. He is a bespectacled 63-year-old Iraqi with receding white 
hair, a clipped mustache, a burn scar from childhood on his crooked 
nose, and distinctive black eyebrows. Smelling faintly of Aramis 
cologne, he shambles along, searching for something to do. In his tweed 
coat and brown shoes, he looks more like a college chemistry professor 
than the hardened crime fighter he was before everything went wrong and 
he had to run.
    The judge comes here daily, sometimes twice a day--it's a three-
minute walk from his new suburban hideout. He spends the time walking, 
gazing into the storefronts, observing faces, but mostly he's lost in 
thought. Occasionally, his eyes flicker up to the mall's second floor, 
as if he's looking for his enemies. But they are not there.
    We stop at a western-wear shop, where he likes a tall, black 
Stetson hat, and stroll through Target, his favorite store because it 
has what he needs for his new life and, as he says, ``there are so much 
sales.'' We stand near a blinking carousel and watch it turn.
    After an hour or so, he enters a Brookstone store and falls into a 
massage chair. As the mechanical nubs knead his back, he recalls the 
way his life was in Iraq, 6,300 miles away, where he mingled with world 
leaders and fought the most important battle of his life. ``It seems so 
long ago,'' he says. ``I never thought it would end this way.''
    Before he fled Iraq, Radhi was the head of Iraq's Commission on 
Public Integrity, where he policed the country's government and 
investigated its biggest cases of bribery and financial chicanery. Set 
up and paid for, in part, by the United States, the agency was Iraq's 
F.B.I., and Radhi was compared to Eliot Ness, who took down the Chicago 
Mob in the 1930s. Stuart Bowen, the U.S. special inspector general for 
Iraq reconstruction, described Radhi as his ``most reliable partner . . 
. in Iraq,'' and Chuck Grinnell, a senior C.P.I. adviser, remembers, 
``He was one of the good guys, one of the few in Iraq.''
    The judge was appointed to the post by Ambassador Paul Bremer in 
the summer of 2004, almost a year after the U.S.-led invasion. At the 
time, Iraq was a free-for-all, with competing gangs and criminals 
gunning for a seemingly endless flow of reconstruction cash. The 
prevailing view held that the C.P.I. was vital to the advancement of 
the near-broke country, a sentiment reflected by President Bush in a 
2005 speech to the Council on Foreign Relations. ``Listen,'' he told a 
crowded ballroom at the Omni Shoreham Hotel in Washington, ``the Iraqi 
people expect money to be spent openly and honestly, and so do the 
American people.'' He would tout the C.P.I. again a month later, in a 
speech to the Veterans of Foreign Wars.
    The judge's job was, simply put, to figure out where the money was 
going. Billions of dollars were being wasted or stolen outright in 
Iraq, including $8.8 billion that went unaccounted for in 2003 and 
2004. Many of Iraq's leaders were either directly participating in the 
thievery or quietly supporting it through hired guns, who later waged 
sectarian wars in the streets. Radhi was supposed to track down the 
criminals, stanch the hemorrhaging of money, and put an end to the 
corruption that was dubbed the ``second insurgency'' by Bowen and 
considered a principal source of funding for the terrorist groups that 
the U.S. military was trying to crush.
    The Ministry of Interior, for instance, resembled a Mafia 
organization. Instead of working to guarantee the country's security, 
many of its officials, the judge discovered, were engaged in bribery, 
contract killing, and kidnapping. Hundreds of ghost workers collected 
wages that totaled more than $1 million a month. Meanwhile, the Mahdi 
Army, a Shiite militia devoted to cleric Moktada al-Sadr, had fully 
commandeered the ministries of health, trade, and transportation. Its 
soldiers, with the tacit approval of ministry employees, stole food and 
medical supplies, among other things, and resold them to fund the 
insurgency against the Americans and the Sunnis, the minority that 
still held power after Saddam Hussein's ouster. Over time, ambulances 
ferried weapons and mercenaries, while hospitals became integral to the 
militia's sectarian killing machine. Shiite soldiers executed Sunni 
patients and then killed family members listed in their medical files.
    The Oil Ministry had many of the same problems. After the invasion, 
President Bush claimed that oil revenues would pay for most of Iraq's 
reconstruction. But even with the United States investing huge sums in 
oil projects, revenues weren't and still aren't covering costs, though 
$3 billion has been spent to date. Aging infrastructure and insurgents' 
attacks on pipelines were part of the trouble. But the biggest 
challenge was that criminal groups were stealing from depots and 
hijacking transport trucks, sometimes in collusion with ministry 
officials. Monthly, the state oil industry lost up to $90 million, and 
the judge claims that more than half of the smuggling profits went 
straight into local terrorism.
    Although Radhi was officially in charge of investigating how the 
Iraqi government spent its budget, his work also uncovered how millions 
of American tax dollars were being diverted and used to bolster militia 
groups. The most visible way those American tax dollars ended up in the 
hands of the bad guys in Iraq was through U.S. capacity-building 
programs meant to help train ministry officials in everything from 
budgeting to delivering basic government services.
    A recent Government Accountability Office report shows that the 
United States invested $169 million in these programs at about half a 
dozen of the most critical ministries in 2005 and 2006. Because the 
militias infiltrated most, if not all, of these ministries, the 
capacity-building money is, by extension, helping build the militias. 
In other words, by funding ministries, we are working against 
ourselves.
    The amount of American tax money that has gone to the Iraqi 
militias is impossible to nail down, though Radhi says it could be 
tens, if not hundreds, of millions. So far, the United States has spent 
about $48 billion on Iraq reconstruction, with a notable chunk of that 
money passing through the agencies Radhi was investigating. Chris King, 
a former adviser to the judge at the State Department, says, ``The 
worst elements in Iraq smile at us and take our money, but we're 
getting played. I went to the Justice Department guys and said, `You 
are funding and training death squads. You can't say no one told you. I 
told you. You are funding death squads.' I have no doubt that U.S. 
reconstruction cash is funding militias.''
    Those death squads eventually targeted the judge. As his team built 
cases against some of the country's most powerful people--businessmen, 
clerics, politicians, warlords--threats came back. Grim voices muttered 
over cell phones, ``Stop your investigations now'' and ``Do you know 
who you are messing with?'' Soon his investigators and their families 
were dying: one body full of bullets, another hung on a meat hook, 
another disfigured with a power drill. There were sniper attacks and 
suicide bombers. Government officials blocked his investigations. 
Sometimes he spent the night at safe houses with friends, who 
increasingly worried that he would be killed.
    The United States, strangely enough, did not step in. Some said the 
United States was afraid to take sides, wary of alienating its allies 
in the Shiite-dominated government. Others suggested that Radhi's 
probes were becoming an embarrassment to the Bush administration, 
highlighting yet more trouble for a U.S. war effort that was already 
under siege. ``There was a lack of due attention, political will, and 
support in the senior levels of the U.S. government,'' King says.
    Still, the judge didn't waver. He worked through the interim and 
transitional Iraqi governments and through the rise of a newly 
sovereign Iraq. By the summer of 2007, even as his close advisers 
``focused solely on his survival,'' as one says, Radhi had launched 
almost 3,000 corruption cases. The accused included shady American 
companies and entrepreneurs, Iraqi ministers, and at least one member 
of Prime Minister Nuri al-Maliki's family. The total haul: $18 
billion--a number as mind-boggling and damning to Iraqi politicians as 
it was to the Bush administration.
    It was around this time that the missile came for Radhi.
    It came hurtling out of the still-dim morning sky as the judge 
stood in a bath towel on the first floor of his walled compound at the 
edge of Baghdad's Green Zone. Around 6 a.m., the scorching late-July 
sun was just creeping over the mortar-scarred city's horizon. His 
family and bodyguards were still asleep in the two-story house. 
Everything was silent, except for some birds singing in the garden's 
olive trees.
    When it hit, the missile made a huge thump that obliterated the 
morning quiet and convulsed the house like an earthquake. The memory of 
it still consumes the judge. He closes his eyes and tells me, ``I 
thought I was dead.'' The missile, launched from a truck and believed 
to be about nine feet long, was meant to kill him and end his 
investigations. Most everyone agreed on this point. Yet somehow he 
survived. As the noise of the blast diminished, he stood in the hall, 
unshaven and barefoot, shards of glass and debris on the floor. The 
missile had hit an empty house across the street, now a smoldering pile 
of rubble. There were prayers of thanks to a gracious God, but the 
near-hit made the judge wonder if he had pressed things too far. The 
missile strike wasn't the last; a few weeks later, another arrived, 
destroying the empty house behind his, signaling to him that it was 
only a matter of time before the next rocket would hit its mark.
    He decided he couldn't go back. He had a family--a wife and a 
daughter, who was eight months pregnant. The idea of being driven away 
by his enemies ate at him, but he felt he had no choice. ``Radhi didn't 
leave for himself,'' Grinnell, the C.P.I. adviser, says. ``He would 
have died in Iraq. But it became too much, and he left so that his 
family could survive.''
    After a trip to Washington last summer, Radhi resigned his C.P.I. 
job and asked the U.S. government for asylum. He had a couple of bags, 
a small amount of cash, and no idea where he would go.
    In October, the judge began his move from a world he knew into much 
more uncertain terrain. Appearing before the House Committee on 
Oversight and Government Reform on Capitol Hill, he testified about his 
findings of corruption that reached all the way to the prime minister's 
office.
    It was a huge story. Many people called the judge a hero, but 
others--particularly officials in the State Department, which had 
helped create him--distanced themselves. Documents detailing Iraqi 
corruption were retroactively classified, and staff members were 
instructed not to talk about the judge's allegations against the Maliki 
government. According to people involved in his case, the 
administration didn't know what to do with a man who was painting a 
negative picture of its efforts in Iraq, where it wanted people to 
believe that the situation was improving.
    Things only got worse for Radhi. Soon after his arrival in the 
United States, the Iraqi government called for his arrest and 
prosecution, citing smuggled documents, corruption, and libel, and his 
pension was cut off. He shacked up in a budget hotel in a Virginia 
suburb but ran out of money after two weeks. An acquaintance kindly 
lent him an unfurnished townhouse. After his family and that of his 
security chief--11 people in all--were evacuated from Iraq, they joined 
him in Virginia. They shared three queen-size mattresses on the floor 
and coexisted amid a sad shipwreck scene of plastic lawn furniture, TV 
tables, pillows that served as couches, secondhand clothes, and donated 
food, most of which was shipped in by local Quakers, who had taken an 
interest in the refugees.
    His asylum proceedings stalled as the State Department instructed 
employees not to support the judge in his flight from Iraq. ``Team, I 
have ordered our current C.P.I. staff not to write any letters in 
support of Judge Radhi,'' one email read. When I called the State 
Department, no one wanted to comment on the judge. Once a key U.S. 
partner in rebuilding Iraq, Radhi had implausibly become both a wanted 
man and a castaway.
    At night, he lay awake next to his wife on a mattress on the floor 
wondering what had gone wrong. He had suddenly become a man without a 
country. I first meet the judge a couple of weeks after his 
congressional hearing. He sits upright in a white plastic lawn chair 
with a cardboard box of old personal documents next to him. Except for 
the two bags of clothes, the box was nearly all he'd carried with him 
from Baghdad. It contains just about the only items that testify to his 
existence--family photo albums, resumes, diplomas, and report cards 
from as far back as grade school. As Radhi pages through the files, he 
speaks through a translator, sometimes pausing to put a finger to his 
forehead as if in search of a distant memory. He wears a desert-brown 
suit with a yellow tie, and dark rings sag around his hard brown eyes. 
Though he looks as if he hasn't slept in weeks, he is surprisingly 
upbeat. ``Things will get better,'' he tells me. ``I'm hopeful.''
    This says a lot.
    The judge, a secular Shiite, was born in 1945, the second-youngest 
of 10. Hamza Radhi al-Ketany, his father, was a successful seed 
merchant; his mother, a homemaker. The family lived in a cramped house 
in downtown Kut, a river city of about a half-million in eastern Iraq. 
After high school, he traveled to Beirut, Lebanon, for college, then 
returned to Iraq for law school at Baghdad University.
    It was there, in the summer of 1968, that he caught his first 
glimpse of Saddam Hussein, a rising force in the Baath Party, which had 
recently seized power in a bloodless coup. Standing in front of about 
1,000 law students in an auditorium, Hussein pulled out a pistol and 
began firing. Windows shattered and students ran.
    Although some at the time hailed the Baath Party--baath is Arabic 
for renaissance--as the future of Arab unity and socialism, people who 
didn't join began to disappear, and fear infected the country. 
Intelligence agents were everywhere, and one night in 1970, at around 
midnight, they arrived at the 25-year-old Radhi's house in Kut, where 
he had a private law firm.
    Radhi says that he was forced into a black Volkswagen sedan, 
blindfolded, and transported to the Palace of the End prison in 
Baghdad. There, he was asked why he had not joined the party. Radhi 
replied that he was not political. He was tied up, beaten with bats, 
hung upside down from a steel ceiling fan, given electric shocks, and 
thrown into a cell the size of a coffin. All night, he heard screams 
and moans emanating from prisoners in the hundreds or thousands of 
other cells around him.
    After 100 days, he was released. His keepers told him not to speak 
of the place, though he would always have jagged white scars on his 
arms and back, as well as a soft spot about the size of a quarter on 
his skull, where the bats had done their work. He attempted to return 
to his life. Marriage helped to some extent. He wedded his cousin, a 
pretty brown-haired woman with whom he had grown up in Kut, and they 
had three children.
    Later, Radhi joined the Ministry of Labor, where he inspected 
working conditions at regional factories and gained a reputation as a 
diligent and honest investigator. Seven years later, in 1977, he 
enrolled in the prestigious Judicial Institute, a two-year training 
program for the country's top judges and attorneys general.
    Most of the students there were aligned with the Baath Party. Radhi 
still wasn't, which was why police returned when he was a year into the 
program, arrested him again, and interrogated him for another 10 days.
    Hussein officially came to power in the summer of 1979. The next 
year, the country went to war with Iran. Radhi was appointed to a 
social post, where he spent the next eight years finding housing and 
schooling for children whose parents were battlefield casualties. In 
1984, two of the judge's cousins disappeared after they were deemed to 
be communists; a third cousin, who refused to serve in the army, was 
executed by firing squad.
    Despite being on the political and social fringe, the judge was 
eventually hired by the Ministry of Justice as an attorney for a job 
handling mainly civil cases. As most of his colleagues were Baath Party 
members, Radhi says the position began to wear on him. He heard about 
disappearances and deaths of ``traitors.'' After three years, he quit, 
and for the next decade, he disappeared from the public sector.
    During the next few years, Radhi kept a small law practice and 
lived as if politics didn't exist. He traveled to Yemen and Jordan 
searching for work, spending months at a time away. Nothing panned out, 
and his family struggled to get by. But then American soldiers arrived 
in March 2003, and after almost two decades, his hope returned. ``I 
believed things were about to change,'' he says. ``The bombing 
happened, and Saddam was gone. And I thought that I could help rebuild. 
I dreamed of a different place.''
    In November 2003, Bremer and his team devised the C.P.I. and began 
searching for the right person to fill its top post. Grinnell, the 
C.P.I. adviser, interviewed more than a dozen Iraqi candidates. With so 
much money at stake, the Americans knew it would probably be the most 
dangerous job in Iraq, pitting an unelected official earning $5,000 a 
month against the country's strongest political players--some of whom 
commanded death squads.
    Many candidates dropped out, but Radhi was undeterred. ``When we 
told him about the danger, he said to me--and I remember this vividly--
`God will not take me one second before he is ready to see me,' '' 
Grinnell says. Even though what Radhi said was a common phrase in 
Arabic, Grinnell says, ``that shocked me about Radhi, because when you 
look at him, he doesn't look physically strong. But he has a presence 
that is felt.''
    The C.P.I. was charged with tracking Iraq's $30 billion to $40 
billion annual budget through the murky channels of government and 
determining how much of it went into reconstruction and how much was 
wasted or stolen. To get the agency off the ground, the United States 
invested between $7 million and $12 million in it. As with most of 
Iraq's burgeoning institutions, a handful of adventurous Americans 
served as advisers. In this case, they came from the Coalition 
Provisional Authority and later the State Department. At first, the 
C.P.I. had only a few investigators, but its team in Baghdad even 
tually expanded to include 180 employees, with about 700 supplemental 
work ers and several offices sprinkled around the country.
    And so it began. After a three-week training session, which took 
Radhi to the United States for the first time, he and his family moved 
into a protected house in Baghdad's Green Zone, and an office was 
assembled in a crumbling concrete building. Almost immediately, people 
began referring to the office as the Zoo, because it and five other 
C.P.I. properties occupied the city's former zoo grounds, now devoid of 
animals and overgrown with weeds. On the border with the Red Zone, as 
the rest of the city is ominously known, the Zoo was so far removed 
from the other buildings in the Green Zone that one American adviser, 
former New Hampshire Superior Court judge Arthur Brennan, described it 
as a ``lonely outpost'' suffused with a ``Doctor Zhivago sense of 
bleakness and tragedy and inexplicable hope.''
    The days were long, starting at 6 a.m. and sometimes stretching 
well past midnight. Radhi would head home just as the Army snipers up 
in a nearby roost began burning their nightly fire to stay warm in the 
desert chill. The judge says he drank a lot of tea to stay alert, and 
the TV in his office, always tuned to CNN, supplied a constant 
soundtrack. The work was immensely complicated and was focused on 
Iraq's ministries, staffed for the most part by people who had never 
run a government agency.
    It's difficult to investigate financial corruption under the best 
circumstances. But in Iraq, where some ministries were armed to the 
teeth and potential witnesses were either complicit, beholden to 
someone, or too terrified to speak, the investigations took on another 
layer of difficulty. Expectations of basic investigative work didn't 
take into account the ugly reality on the ground: armed bandits 
prowling the streets, sectarian militias battling for territory, 
insurgent warfare coming alive, droves of people disappearing daily, 
and most forms of trust nonexistent.
    Almost immediately, the responsibilities of the detective job 
sucked up most of Radhi's time. He moved slowly, telling his men, 
``Shway, shway'' (Step by step). Through interviews, audits, and 
official documents, the judge and his staff uncovered an anarchic and 
opaque world. Contracts were vague; nepotism and bribery abounded; 
budgets were filed the old-fashioned way, on paper; and cash by the 
truckload was vanishing abroad into private bank accounts or being 
funneled to militias. If you had a brain and some political 
connections, you could walk away from Iraq a millionaire. ``Corruption 
was everywhere,'' the judge says. ``Everywhere.''
    It took about a year for Radhi to collect enough evidence to begin 
passing his cases to the investigative court. And then rulings and a 
slew of arrest warrants put criminals on notice. Among the most 
stunning of the cases was a billion-dollar heist from the Ministry of 
Defense, where the Americans had handpicked the leaders, Defense 
Minister Hazem Shaalan and his deputy, Ziad Tariq Cattan. Before the 
U.S.-led invasion, the two men had been exiles from Hussein's Iraq: 
Shaalan was a real estate agent in London; Cattan lived in Poland and 
sold used cars. Following Hussein's ouster, the men returned to their 
homeland and became high-ranking officials, commanding large budgets 
and charged with equipping the new Iraqi army.
    Months into their appointments, according to official documents, 
the men asked the Iraqi interim government, led by Prime Minister Ayad 
Allawi, a Shiite, for $1.2 billion. They claimed it was for new 
military equipment. But the equipment that eventually arrived, the 
judge says, was cheap, old, and mostly unusable: run-down helicopters, 
knockoff machine guns, defective bulletproof vests, and ammunition that 
was on the verge of self-detonating. The judge found nebulous contracts 
with fake companies, with money flowing from the ministry into secret 
bank accounts abroad. More than $360 million worth of Polish-made Sokol 
helicopters, contracted through a ``storefront company,'' were not 
delivered at all.
    In September 2005, arrest warrants were issued for Shaalan and 
Cattan, but the men had already vanished with an alleged $850 million. 
Although both were later convicted of corruption and sentenced to 
dozens of years in prison (21 others were eventually charged in the 
case), they remain abroad, beyond the reach of Iraqi courts. Both 
Shaalan and Cattan have denied any wrongdoing. Cattan has even put up a 
website in hopes of clearing his name. But no money has yet been 
recovered.
    The judge kept digging. By December 2005, months after a 
transitional Iraqi government led by Prime Minister Ibrahim al-Jaafari 
took over for Allawi, Radhi and his investigators had opened 800 cases, 
with more than 30 senior government officers appearing in criminal 
court and 91 cases scheduled to be brought before a judge.
    Around this time, the backlash against the C.P.I. began. There were 
threats against Radhi and his crusaders, and in March, a suicide bomber 
strolled into the C.P.I.'s Mosul office and set off his device, killing 
himself and one of the agency's lead investigators, who had been 
looking into oil theft. Not long after, a C.P.I. security chief was 
executed on a Baghdad street along with his wife, who was seven months 
pregnant.
    Iraqi ministries, meanwhile, started to shut their doors to Radhi's 
probes. It didn't help that the Jaafari government, following Allawi's 
lead, had restored a Hussein-era law that empowered the prime minister 
to exempt his cabinet from prosecution and gave ministers the authority 
to exempt their employees as well. Although Bremer had suspended the 
law when he created the C.P.I., the interim Iraqi government now 
claimed that the judge's cases were becoming politically motivated and 
had to be stopped.
    When I ask Radhi about it, he laughs. ``No one wanted us to 
investigate. If I investigated Kurds, the Kurds would say, `You are 
biased. You are Arab.' If it was a Shia case, they would say, `It's 
political.' If Sunni, they would say, `You are Shia. You don't like 
us.' The people we were chasing wanted to stop us.''
    Amid this mayhem, investigators occasionally ran into Americans who 
sought to make dirty deals with Iraqi opportunists. The judge's lead 
investigator, Salam Jaddoa Adhoob, describes them as cowboys. ``These 
guys operated with no rules. They came to Iraq to make fast money, and 
then they left with their pockets full,'' Adhoob tells me one night at 
his own safe house in a remote Virginia town, where he's lived since 
fleeing death threats more than six months ago.
    According to Adhoob, one American business, the Hummer manufacturer 
AM General, signed a $59 million contract with the Iraqi Defense 
Ministry to provide the army with 500 armor-plated trucks. (General 
Motors bought the Hummer name in 1999, though AM General continues to 
manufacture the vehicle.) However, only 167 trucks arrived. Later, the 
AM General case and others involving Americans were, in accordance with 
a new policy, handed over to the inspector general's office. A 
government official concedes that a number of investigations are under 
way but wouldn't comment about AM General specifically except to say 
that ``they are on everyone's radar.'' When I ask AM General about the 
allegations, Craig MacNab, a company spokesman, claims that he hasn't 
heard anything about them but cites a complex production process, made 
more difficult by turnover within the Iraqi Ministry of Defense. The 
remaining trucks are due to begin arriving in the spring of 2008--more 
than three years after the initial contract was signed.
    In May 2006, following the country's parliamentary elections, 
Maliki became prime minister of the newly sovereign and Shiite-
dominated Iraq. After two transitional governments and a lot of 
violence and lost money, Maliki promised transformation, though Radhi 
would come to see the ensuing months as particularly troublesome.
    While Maliki spoke publicly about eradicating corruption, privately 
he began lobbying to bring Radhi's agency under his command. Maliki 
reenacted the controversial get-out-of-jail-free law. As a result, 
between September 2006 and February 2007, various ministers blocked at 
least 48 corruption cases involving a total of $35 million--not that 
the judge had the firepower to enter the ministries anyway. For those 
two years, Transparency International, the Berlin-based anticorruption 
watchdog, listed Iraq as the most corrupt country in the Middle East. 
Meanwhile, more suspected criminals fled, including 15 ministers, while 
more than 20 corruption-case judges were assassinated.
    The tipping point for Radhi came when the imam who led the Iraqi 
Parliament's Shiite coalition demanded a meeting a few days after 
Saddam Hussein was executed, at the end of 2006. His name is Jala 
Alsaghir, but some call him the Lion. ``He was the Lion because of his 
jaw that juts out,'' Radhi says, ``and he is a very dangerous man.''
    In a dimly lit room, the Lion, surrounded by a dozen or so 
bodyguards, told Radhi, ``Your cases are touching high-level Shia 
people. It is time for you to stop your job,'' Radhi recalls. The judge 
took Alsaghir's words as a threat on his life. A week or so later, 
Alsaghir stood in front of Parliament and accused Radhi of corruption. 
Though nothing was officially done about the allegations, Radhi says 
that Alsaghir's words opened the floodgates of violence. ``The people I 
was investigating realized that I was determined to keep investigating 
them and pursuing the rule of law,'' he explains.
    By the end of 2006, 18 of Radhi's men were dead, and by the middle 
of 2007, another 10 were gone. The Maliki government, which had shored 
up power over the minority Sunnis, moved to further diminish Radhi's 
independence. First, the prime minister summoned the judge to his 
office to talk about his investigations of the oil and defense 
ministers and demanded that he fire Adhoob. After Radhi refused to 
comply with Maliki's demand, an order was issued directing the judge to 
``stop the pursuit of previous and current ministers, unless done 
through the prime minister's office.'' Another official letter 
dismissed a corruption case against Maliki's cousin, Salam al-Maliki, 
the transportation minister.
    It appeared that Maliki, whose party now dominated the country's 
most moneyed and powerful ministries, was squeezing out the judge. 
Vance Jochim, an American adviser to the C.P.I., urged the United 
States to intervene. ``I kept bringing this up to the embassy,'' Jochim 
says. ``Tell the Iraqis we won't give them something. Take away the 
free gasoline in the Green Zone. But the embassy would never do that.''
    That's because the State Department itself appeared to be backing 
away from the judge. ``Judge Radhi went where angels feared to tread 
and thought he would be protected, but he wasn't,'' explains Ali 
Allawi, the Iraqi finance minister at the time. ``The United States 
decided to abandon him once his gangbusting began to affect a large 
number of people who were U.S. allies--all the ministers and top-level 
Iraqi players. He was a very courageous man, but he went after too many 
friends of the United States, and that got him in trouble.''
    Allawi said that if Radhi was intent on cracking down on the 
kingpins, ``he should have built some political support around him. But 
he did not do that. He went after everyone at once, and that got him 
bombed.''
    Late in the spring of 2007, charges ranging from petty corruption 
to complicity in murder were leveled against Radhi in criminal court. 
Although the cases were ultimately dismissed, a radical Shiite cleric 
named Sheik Sabah al-Saadi, who had political ties to Prime Minister 
Maliki and oil-smuggling rings, pushed for a vote in Parliament to 
impeach Radhi.
    In July, the U.S. embassy circulated a sensitive but unclassified 
report detailing the judge's alarming accounts of Iraqi corruption and 
greed, giving credence to his tale of the country's meltdown. By late 
summer, talk of his impeachment grew louder, and then the missile came 
gunning for him.
    At the end of August, Radhi headed to Washington for training at 
the Justice Department. When he left for the airport, he kissed his 
wife and told her that things would be okay, though he feared that they 
would only get worse. As summer heat pummeled Baghdad, a missile struck 
the house behind his, nearly killing his family.
    On October 4, Radhi testified in front of the House Committee on 
Oversight and Government Reform. Sitting at a long table, behind 
microphones and bottles of water, he recounted the story of the crimes 
his team had uncovered to members of the investigative committee. He 
told them about the rampant corruption among U.S. allies, including the 
Maliki government, and the theft of billions of dollars. He explained 
that reconstruction had almost stopped, that the lost money was 
propping up a terrorist movement that was ripping his country apart, 
and that the current government could not be trusted. ``I have led my 
life governed by these few words: `Law is above all. No one is above 
the law,' '' he declared.
    Comptroller General David Walker, Bowen, and Larry Butler, a deputy 
assistant secretary of state, also testified. Although Butler refused 
to discuss much of anything related to the judge's findings, Walker and 
Bowen spoke openly about Iraq's corruption problem. During his 
testimony, Bowen explained to the packed chamber that the loss of the 
judge was ``a real blow to anticorruption efforts in Iraq. He was the 
most prominent corruption enforcer.'' Christopher Griffith, a C.P.I. 
adviser at the Zoo, echoed this during a prehearing interview, calling 
the judge ``the most honest government-of-Iraq official that I have met 
in my 21 months in the country.''
    There was some antagonism in the room when Republican 
representative Dan Burton, of Indiana, questioned Radhi's authenticity. 
Referring to the ``Saddam Hussein regime,'' under which the judge 
worked as a state lawyer, Burton wondered, ``How did you get those 
jobs?'' The judge, who spoke calmly through several hours of testimony, 
replied that he had been given the job based on his ``hard work'' but 
that he'd refused to follow orders and then quit. He reminded Burton 
that the Baath regime put him in prison and, as he put it, ``broke my 
head.''
    The testimony was a blow to General David Petraeus, the commander 
of the multinational forces in Iraq, and Ryan Crocker, the U.S. 
ambassador to Iraq, who had testified three weeks earlier about signs 
of progress in the current military surge, which began in January 2007 
with an infusion of 30,000 troops. Following Radhi's testimony, there 
was a lot of talk in Washington about what the death of 3,800 U.S. 
soldiers and the spending of $450 billion had actually accomplished in 
Iraq. Alluding to the judge's testimony in a Los Angeles Times 
editorial, Representative Henry Waxman, of California, the Democratic 
chairman of the House Oversight Committee, wondered, ``Is Maliki's 
corruption worth American lives?''
    And even when the violence in Iraq began to ebb--which the judge 
warns is only a strategic pause--the biggest question remained: 
Considering Radhi's evidence, can we really trust the people in power 
in Iraq?
    When Secretary of State Condoleezza Rice was pressed in a 
subsequent oversight hearing about Iraq, she evaded numerous questions 
about the judge's testimony. For instance, she declined to comment on 
the specific allegation that the prime minister had obstructed a probe 
into a cousin's business dealings and claimed that she didn't know 
about Maliki's secret immunity order, which had been circulated in 
Rice's office weeks before her testimony, though she admitted that such 
an order would be ``deeply concerning.''
    Asylum for Radhi could come through in six weeks or six months. It 
is hard to know, especially considering the order prohibiting State 
Department employees from supporting the judge's efforts. In a further 
twist, Bowen's Office of the Special Inspector General for Iraq 
Reconstruction, one of the judge's most prominent supporters, is now 
under investigation for overspending and mismanagement.
    In the meantime, the judge and his family can't work or apply for 
benefits and must rely on others for almost everything--money, food, 
and transportation.
    Shortly after the judge's testimony, the Iraqi government gave his 
old job to a Maliki crony, a man alleged to be an oil mobster, who 
immediately began an investigation into Radhi's work. Since then, many 
say that the C.P.I. has fallen into disarray, with no clear mandate.
    The judge, for now, remains a wanted man in Iraq.
    I visit Radhi for the last time in early January, just after his 
relocation to a new two-bedroom condominium. His daughter and son-in-
law also have their own place, right down the hall, as does his 
security chief's family.
    Today, his life has slowed down, almost to a glacial pace. He 
spends stretches of the day watching a flat-screen TV, seeking news 
from Iraq. He also reads from a dictionary to improve his English and 
emails friends back home.
    His new existence is hard on him. He doesn't enjoy depending on the 
$2,000 a month donated to him and his family by friends. His life has 
always been one of independence and dignity. As the months pass, a 
creeping feeling of isolation swells in his mind, though he doesn't 
complain. Sitting in his living room, which is outfitted with 
secondhand furniture and items from Target, he mostly talks about how 
grateful he is that his family got out of Iraq alive. Asked if he is 
angry about anything that happened, he shakes his head. ``I believe I 
did the right thing,'' he tells me.
    Next to asylum, his biggest concern for the future is finding work. 
When I speak to Ali Allawi, Iraq's former finance minister, he says 
that this is exactly why the judge's case is tragic. A great and 
courageous man in his home country, Radhi is now a foreigner whose 
inability to speak English fluently renders his skills virtually 
useless. ``It's sad,'' Allawi says. ``He could end up sweeping floors 
on the late shift at a place like Wal-Mart.''
    During one of my conversations with the judge, I can't resist 
asking a dumb question: ``Did you ever think about stealing just a 
little bit of money for yourself?''
    He looks at me funny, like I've made a bad joke. There was so much 
money floating around over there, I say. Wasn't he at all tempted to 
reach into the pot and take a little for himself?
    At first, he's not sure if he heard me correctly. So I ask him 
again, and he sort of smiles before he becomes serious and says, ``The 
temptation was there. Lots of money was offered to forget cases. But I 
am not that man.''
    This is the point. If he were that man, he would be somewhere else. 
Baathists wouldn't have tortured him, and he wouldn't have been forced 
out of his country. That man wouldn't be sitting on a donated brown 
couch.
    So what about the $18 billion? I wonder if any of it will be 
recovered. The judge says no. It is lost. He says militias are still 
active in many Iraqi ministries, which continue to receive millions of 
dollars in U.S. taxpayer money.
    As he sits here, he knows he still has many enemies. But he is safe 
now, he believes. ``I don't think there will be rockets coming for 
me.''
    Later, we go to the mall. It's my last night with him. He takes me 
on a tour of his daily haunts. When we exit, it is late and dark. As we 
walk toward his apartment, through a nearly empty and silent parking 
lot, a low-flying helicopter suddenly and violently disrupts the 
suburban quiet.
    For a moment, the judge's head angles skyward, his eyes opening 
wider than I've seen them. ``That is the sound of Iraq,'' he says over 
the noise. He nods happily.
    I ask him, ``Do you ever miss it, Iraq?''
    ``Sometimes,'' he responds, as he watches the helicopter pass 
overhead before it disappears, leaving silence again. ``I miss my 
country. I miss my work of helping my country. But this is home now.''

    Senator Leahy. Judge, we are delighted that you're here. 
Please, go ahead with your statement.

STATEMENT OF JUDGE RADHI HAMZA aL-RADHI, FORMER 
            COMMISSIONER, COMMISSION ON PUBLIC 
            INTEGRITY, REPUBLIC OF IRAQ

    Judge al-Radhi. I am Judge Radhi Hamza al-Radhi, former 
commissioner of the Commission on Public Integrity, CPI, 
Republic of Iraq.
    It is an honor to be here and to thank the American people 
who have sacrificed their lives and money in order to achieve 
noble goal in Iraq of ending the suffering, and supporting 
democracy, thank you thousands of times.
    In my written testimony, I highlighted the reasons for the 
Commission on Public Integrity, my appointment as a 
Commissioner and my background and I summarized much of our 
historic work.
    Corruption in Iraq today is rampant across the Government, 
costing tens of billions of dollars, and has infected virtually 
every agency and ministry, including some of the most powerful 
officials.
    Corruption has been part of the failure of the Government 
of Iraq to control the militia that control parts of 
government. Unfortunately, today in Iraq, corruption has 
infected our biggest source of money, oil. Corruption has 
infected those who have the guns to restore law and order. And 
corruption has infected the very government officials who 
promise a new, better Iraq. Corruption keeps millions of Iraqis 
in inhumane living conditions, and it funds the killing of 
United States and Iraqi forces.
    I have lived my life governed by these few words: ``Law is 
above all, no one is above the law.'' This guiding principle 
should apply to all government departments and ministries, 
neutrally, fully, and without regard to sect, ethnicity, party 
affiliation, tribe or religion.
    Unfortunately, we have been met with major problems. Since 
the establishment of the CPI, more than 31 employees have been 
assassinated, as well as at least an additional 12 family 
members.
    In a number of cases, my staff and their relatives have 
been kidnapped or detained and tortured prior to being killed. 
Many of these people were gunned down at close range. This 
includes my staff member Mohanned Abd Salif, who was gunned 
down with his 7-month pregnant wife.
    One of my staff members was protected by my security staff, 
but his father was kidnapped because his son worked at CPI. 
This staff member's father was 80 years old. When his dead body 
was found, a power drill had been used to drill his body with 
holes.
    My head of our Mosul branch was killed by a suicide bomber 
in his office. Two weeks ago, one of my attorneys was shot and 
he is now fighting for his life. Just Friday, the body of one 
of my investigators was found in a Baghdad trash dump.
    These are just a few examples--there are many more. And, 
personally, my family's home has been attacked by missiles, and 
I by both missiles and snipers.
    Justice loses, and corruption wins. Further, the prime 
minister and his government have refused to recognize the 
independence of the commission to appoint qualified people in 
the ministries, and foster honesty. Worse, the government has 
formally blocked actions against the presidency, the council of 
ministers and former and current ministers, used the law to 
empower ministries and the prime minister to stop specific 
corruption cases, and promoted sectarian agendas. Importantly, 
it has been impossible for CPI to safely and effectively 
investigate oil corruption where Sunni and Shia militias have 
control of the metering, transport, and distribution of Iraqi 
oil. This has resulted in the ministry of oil effectively 
financing terrorism through these militias.
    I am afraid that the commission itself will now be used as 
a tool of corruption. I fear that the bravest and honest 
members of my CPI staff in Iraq are now facing a purge and 
being pressured into silence. My heart, my prayers are with 
them.
    Let me share with you my situation. My case for asylum is 
currently pending. Just as my family's safety was at risk in 
Iraq, because of my work, now my words, including my words to 
you today, may add to my risk. Following my testimony before 
the U.S. House, the Iraqi prime minister himself threatened me 
with prosecution.
    I come before you with faith and confidence that any 
service to my country and to all like you who stand against 
corruption will not cause any punishment in the United States.
    For here in America, without protection or plan, I am but a 
feather in the wind.
    But as a Judge and crime fighter, I know that even a 
feather can be stronger than greed and violence.
    Thank you so much.
    [The statement follows:]

            Prepared Statement of Judge Radhi Hamza al-Radhi

    To Our Distinguished Chairman and Respected Members of the United 
States Senate, Ladies and Gentlemen:

                               GREETINGS

    I am Judge Radhi Hamza al-Radhi, former Commissioner of the 
Commission on Public Integrity (``CPI''), Republic of Iraq. It is an 
honor to be here among you today to discuss with you the most important 
problems facing Iraq after the recent change. The change which led the 
United States and its allies in Iraq to eliminate the highest 
dictatorship in the world, that of Saddam Hussein. The dictatorship he 
built on the corpses, money and the suffering of Iraqis. I want to 
thank the American people who have sacrificed their life and money in 
order to achieve noble goals that are worthy of respect. The goal for 
Iraqi's rights, for the ending of their suffering and for the spread of 
democracy throughout Iraq, which is the key to progress and growth. 
Thank you thousands of times to everyone who participated and 
sacrificed for these noble goals.

          REASONS FOR AN IRAQI COMMISSION ON PUBLIC INTEGRITY

    Iraq is a rich country; however its infrastructure is essentially 
nonexistent and much work needs to be done.
    Building democracy requires transparency from the Government in 
order for that government to manage socio-economic matters.
    The Iraqi people are smart and hard working and are looking for 
progress. For that they deserve a fair and honest government.
    Transparency and the presence of an effective Commission on Public 
Integrity as well as The Board of Supreme Audit and the Inspectors 
General will encourage foreign investment in Iraq.
    The existence of these bodies dedicated to public oversight, 
especially CPI, would protect funds, and these funds would be devoted 
to public services for Iraqi people, leading to welfare and prosperity 
for them. This in turn would bring internal stability and would have 
positive impacts on regional and international stability.
    The legal authorities for these anticorruption organizations are 
derived from the Coalition of Provisional Authorities orders including 
Order No. (55) establishing the Commission on Public Integrity, Order 
No. (57) establishing the office of Inspector General in each ministry 
and Order No. (77) Continuing the Board of Supreme Audit which was 
established in 1927.

                      APPOINTMENT AS COMMISSIONER

    For these important reasons Iraq established the Commission on 
Public Integrity. I was honored to be named the Commissioner of CPI. 
The Iraqi Judicial Council selected three candidates for this position. 
Ambassador Bremer chose me to lead CPI because I graduated from the 
Judicial Institute in 1979 and I have 39 years of experience in legal 
affairs. Additionally, I was director of funds for Iraqi orphans during 
the Iraq-Iran war. While I consider myself an honest technocrat and 
judge, some have speculated that other credentials included the fact 
that I am Shia and that I was jailed and tortured by Saddam Hussein for 
refusing to join the Baath Party. According to the law, future 
commissioners will be selected from three candidates chosen from the 
Higher Juridical Council. The Prime Minister must pick one of these 
candidates and the Parliament must confirm this candidate. A 
Commissioner can only be fired for cause by a two-thirds vote of the 
Parliament. Therefore the responsibility of this power and the need for 
integrity in this office is great.

                            OPERATION OF CPI

    This Commission on Public Integrity started in June 2004. American 
experts have had a great impact in providing advice and guidance to 
this magnificent Commission. The American experts helped us by 
establishing training courses from day one until now. They have spent a 
great amount time and of money to hold this Commission accountable to 
disseminate and promote the ethics of integrity for my country.
    The functioning of CPI had been outstanding even under very 
difficult circumstances. It was able to build several important 
departments or directorates within 3 years, such as:
  --The Directorate General of Prevention and Transparency, which 
        prepared a Code of Conduct for all Iraqi government employees 
        and has also prepared a Financial Disclosure program to 
        disclose the financial interests of senior employees such as 
        the general director and superior officers.
  --The Directorate General for Non-Governmental Organization 
        relations, which contacted most NGOs in Iraq in order to 
        motivate them to achieve their objectives and solve their 
        problems honestly. Some of these organizations have played a 
        significant role in my country to develop morals and contribute 
        to the reconstruction of Iraq and also to put pressure on the 
        Government to provide better services to the Iraqi people.
  --The Directorate General for Education, which worked to educate 
        government employees on their duties and responsibilities, 
        including promoting the Code of Conduct, educating Iraqi public 
        on their rights and responsibilities as well as promoting the 
        Hotline. In conjunction with the Ministry of Education, it 
        worked to develop a curriculum for Iraqi school children to 
        promote public service and ethics. It had a public affairs 
        department to work with international and domestic news media 
        organizations.
    In addition, the Directorate General for Investigations 
investigated corruption in government departments and ministries.

                                RESULTS

    During these three years, there have been many results produced for 
an organization so young and new to my country. I will briefly expand 
on many of the areas above such as our work with educating the 
government ministries in the Code of Conduct, work on Financial 
Disclosure, the establishment of an INTERPOL liaison office, printing 
and distribution of educational materials for children, a Civil Service 
Reform conference and NGO conference, Investigation Department has 
expanded with the establishment of a Forensics Division, an 
Investigative Research Division, a Witness Protection Program and 
facilities, the establishment of a Statistics Division in the 
Administration Department which promulgates annual reports to the Iraqi 
government and the Iraqi people on the activities of CPI, the initial 
establishment of a Public Integrity and Ethics Institute to 
professionalize the civil service and provide training for CPI, the 
Board of Supreme Audit and the Inspectors General, the establishment of 
an anticorruption Hotline to receive calls from Iraqi citizens for the 
first time in Iraq's history, the printing and distribution Hotline 
promotional materials and other CPI materials.
    For the first time, perhaps in Middle East history, a government 
minister was arrested, in accordance with the Rule of Law in a non-
political, non-sectarian manner, on corruption charges. This case came 
early in our investigation process, before the full force of opposition 
to CPI was organized. Unfortunately, of the 3,000 corruption cases we 
successfully investigated and forwarded to the courts for adjudication, 
according to my records, only 241 cases to date were adjudicated with 
guilty sentences ranging between six months and one hundred and twenty 
years. However, the cost of corruption that my Commission has uncovered 
so far across all ministries in Iraq has been estimated to be as high 
as $18 billion.
    Broken down by Iraqi government ministry, that $18 billion was 
distributed in this way:

------------------------------------------------------------------------
                       Ministry                           Total Money
------------------------------------------------------------------------
Defense..............................................     $5,000,000,000
Trade................................................      3,000,000,000
Electricity..........................................      3,000,000,000
Transportation.......................................      2,000,000,000
Health...............................................      2,000,000,000
Interior.............................................      1,000,000,000
Communications.......................................      1,000,000,000
Housing..............................................      1,000,000,000
Finance..............................................        500,000,000
Oil..................................................        500,000,000
------------------------------------------------------------------------

    This data represents my estimate based only on cases before the 
courts as of late 2007. It does not break the numbers down by U.S. tax 
dollars or Iraqi dinar. While U.S. tax dollars may be of greater 
interest to this Committee, such a break down is very hard for me to 
determine. It also does not distinguish between degree of crime such as 
funds stolen and funds poorly spent due to mismanagement. It does not 
represent the cases that never made it to the courts or cases dismissed 
at the court, some of which were dismissed after judges were threatened 
or assassinated. In particular, it does not reflect the full extent of 
oil corruption, including metering fraud, theft, and smuggling. My 
small group of heroic investigators did not have the capacity to 
investigate all of the oil smuggling. In addition to theft by militias 
and government employees, I had received evidence of widespread 
smuggling including the reestablishment of the smuggling routes that 
Saddam Hussein's regime used to circumvent United Nations resolutions 
including the Oil for Food Program.
    In addition, based on the end of year 2005 data available to me, I 
have attached for the Committee six graphs detailing how corruption was 
reported, our CPI caseload by ministry, the percentage of corruption 
cases by ministry, the disposition of cases, the corruption cases by 
kind and the demographics of the top 35 senior indicted officials.

                           GUIDING PRINCIPLE

    I have led my life governed by these few words, ``Law is above all, 
no one is above the law.'' This guiding principle applies to all 
government departments and ministries neutrally, fully and without 
regard to sect, ethnicity, party affiliation, tribe or religion.

                             MAIN OBSTACLES

    The main obstacles to our work are:
  --Violence, intimidation and personal attacks. Since the 
        establishment of the Commission of Public Integrity, more than 
        31 employees have been assassinated as well as at least an 
        additional 12 family members. In a number of cases, my staff 
        and their relatives have been kidnapped or detained and 
        tortured prior to being killed. Many of these people were 
        gunned down at close range. This includes my staff member 
        Mohanned Abd Salif who was gunned down on the street with his 
        seven month pregnant wife. My Security Chief on my staff was 
        repeatedly threatened with death, and his father was recently 
        kidnapped and killed because of his son's work at CPI. His body 
        was found hung from a meat hook. One of my staff members who 
        performed clerical duties was protected by my security staff, 
        but his father was kidnapped because his son worked at CPI. 
        This staff member's father was 80 years old. When his dead body 
        was found, a power drill had been used to drill his body with 
        holes. My head of our Mosul branch was killed by a suicide 
        bomber in his office. Two weeks ago one of my attorneys was 
        shot in the neck and in the chest, and is now fighting for his 
        life. Just Friday the body of one of my investigators was found 
        in a Baghdad trash dump. These are just a few examples, there 
        are many more which were directed to my staff, me and our 
        families. Personally, for example, my family's home has been 
        repeatedly attacked by missiles, virtually destroying all 
        around me. I have had a sniper bullet striking near me as I was 
        outside my office. We know the corrupt will stop at nothing. 
        They are so corrupt that they will attack their accusers and 
        their families with both guns and meat hooks as well as counter 
        charges of corruption. So that the accusers become the accused 
        in a deadly game that all of us have witnessed.
  --The Prime Minister and his government have refused to recognize the 
        independence of the Commission on Public Integrity, even though 
        the Iraqi Constitution sets forth the independence of CPI in 
        point No. 102, 103.
  --The interference of the Iraqi Government in Commission matters; 
        officials and agencies in the Iraqi Government sent us formal 
        letters forbidding us to take any action against the 
        presidency, council of ministries and former and current 
        ministers.
  --The use of Article 136, Section B of the Criminal Procedures Law 
        No. 23 of 1971, which prevented us from transmitting many 
        corrupt employees' cases to court until we received permission 
        from the minister of the agency we were investigating. This 
        presented obvious problems. The same thing applied to corrupt 
        ministers: We could not take any action until we could get the 
        permission of the Prime Minister. Based on that, many 
        corruption cases have been closed by the ministers and the 
        Prime Minister, at an estimated worth of one hundred billion 
        Iraqi dinar. In addition to the obstacles of Article 136, there 
        was pressure put on the judiciary not to prosecute cases on 
        behalf of individuals. Many of Iraq's judges live in fear of 
        torture and assassination of themselves and their family 
        members if they adjudicate cases of senior government 
        officials.
  --The Executive, Legislative and Judicial branches of the Iraqi 
        Government did not work as required to promote the Rule of Law 
        and fight corruption in Iraq. The executive branch often 
        protected corrupt employees and actively attempted to eradicate 
        or control the Commission. The legislative branch did not 
        revise the anticorruption laws. The judiciary branch often 
        succumbed to pressure and did not adjudicate corruption cases.
  --The government did not appoint leaders, particularly ministers and 
        Inspectors General that would fight corruption within 
        ministries.
  --In order to promote sectarian agendas, professional technocrats who 
        were qualified to perform vital government services and 
        administration were not appointed.
  --Importantly, it has been impossible for the Commission on Public 
        Integrity to safely and adequately investigate oil corruption 
        where Sunni and Shia militias have control of the metering, 
        transport and distribution of Iraqi oil. This has resulted in 
        the Ministry of Oil effectively financing terrorism through 
        these militias.
  --Additionally, my small group of investigators investigated the 
        largest number of cases in the Ministry of Defense and Ministry 
        of Interior. As you might imagine, investigating the security 
        forces of Iraq is very difficult, but necessary for an Iraqi 
        future of transparency and the Rule of Law.

                               THE FUTURE

    As the committee can appreciate, this is not an easy situation to 
resolve and it will not be resolved quickly or completely. Obviously 
the Government of Iraq, with the help of the U.S. government, needs to 
resolve the specific obstacles that I have listed above.
    Further, the people who were dedicated and honest under my tenure 
at the Commission on Public Integrity need to be protected and 
supported and those who infiltrated the Commission for sectarian 
political reasons must be re-staffed with people who are truly 
committed to its mission and its guiding principle that ``No one is 
above the law.'' If this does not happen, I am afraid that the 
Commission itself can be used as a tool of oppression as well as a tool 
of the corrupt to further corruption, sectarianism and an illegal 
consolidation of power through targeted purges of political enemies.
    Finally, the people of Iraq must see advances by the Iraqi 
Government on the political level, on economic reconstruction, on basic 
services, amenities and infrastructure, and on the rule of law. The 
Government of Iraq will fail and the Iraqi and American people will 
continue to suffer if the militias and militia controlled parts of the 
Iraqi government, including the security forces, are not brought under 
control. Sectarian corruption has eroded the work of the American and 
Iraqi people to build a better future for Iraq and the region.

                               CONCLUSION

    Let me share with you my situation--at the least to the extent I am 
able right now. I and a staff delegation from the Commission on Public 
Integrity of the Republic of Iraq came to the United States on August 
24, 2007, for forensics and evidence training with the U.S. Department 
of Justice. During our visit, threats against me and my family in Iraq 
escalated to a point where, together with the immense pressure of the 
last two years from the highest levels of the Iraqi Government, 
regretfully and painfully caused me to seek appropriate U.S. Government 
protection for my family. My family's safety became paramount.
    My case for asylum was filed October 3, 2007, and is currently 
pending. Just as my family's safety was at risk in Iraq because of my 
work, now my words, including my words to you today, may add to my 
risk. Following my testimony before the United States House on October 
4, 2007, the Iraqi Prime Minister himself threatened me with 
prosecution. Further, I am told that my former agency now has been 
directed to simply pursue charges against me and my staff and ignore 
the corruption in the Iraqi Government.
    My staff and their families, I and my family, know too well that 
honesty, democracy and justice are not purchased without a price. While 
those ideals are praised loudly, the people who fight for them daily--
the law enforcers, the anti-corruption fighters, the whistleblowers and 
their advocates--are too often met with violence, persecution, false 
allegations, and indifference. I have the greatest respect for the 
work, courage and sacrifice that the American people have made on 
behalf of Iraq. I come before you with faith and confidence that my 
service to my country and to all like you who stand against corruption 
will not cause any retaliation in the United States. This is not the 
case in Iraq today, where I and my Commission have been politically, 
legally, financially and physically attacked.
    Now, here in America, without protection or plan, I am but a 
feather in the wind. I am a judge and a crime fighter. I don't know 
politics. I worked my life for my country. I love and I very much miss 
my country, but if I return, I will be killed. I look forward to the 
day when my status is secure and my family and I can begin to rebuild 
our life.
    I see my work in uncovering billions of dollars of corruption as 
promoting democracy, public integrity and the rule of law in Iraq and 
look forward to working with all who will aid in this effort.
    Thank you for your attention and patience, and please feel free to 
ask any questions.

    Senator Leahy. Judge, thank you very much. That was some of 
the most moving testimony that we've had in this room, and I 
appreciate that a great deal.
    You've reported about the 3,000 pending corruption 
investigations in Iraq, and again, I applaud your courage in 
being willing to go forward with those investigations and all 
of us regret so very, very much the loss of lives of those who 
worked with you, and their family members.
    You said those cases involved more than $18 billion lost to 
fraud. How much of that $18 billion, approximately, would you 
estimate came from the United States Government?
    Judge al-Radhi. Thank you, Mr. Chairman. I repeat in 
Arabic, because there is so much information, you know.
    Senator Leahy. Go ahead.
    Judge al-Radhi [spoken in Arabic]. With respect to monies 
that enter Iraq, whether from revenues from oil, or from United 
States sources or other foreign monies, we consider these 
monies to be Iraqi monies, and we do control--provide control, 
oversight on these monies.
    If the one who is playing with these monies is an Iraqi 
citizen, we do prosecute that Iraqi citizen and we send him for 
trial in whatever courts he is due.
    And if it's a foreign person, we refer him then to Mr. 
Bowen's committee, because the law under Ambassador Bremer 
prevented us from prosecuting a non-Iraqi citizen.
    And our investigations since the outset, until the day I 
arrived in the United States has been related to 3,000 cases, 
accounting for $18 billion, distributed among the various 
ministries. These cases are not being actively pursued in front 
of the relevant tribunals or courts. And this, from the first, 
undermines the oversight entities in Iraq.
    Senator Leahy. Do you know if any of the money that came 
from the United States that was stolen has now been recovered 
and returned to the United States?
    Judge al-Radhi [spoken in Arabic]. It entered into the 
pockets of the corrupt.
    Senator Leahy. Okay, that's what I thought. It's obvious to 
me, Judge, that you cannot continue your--or that nobody could 
continue the work you're doing, unless they were given complete 
and total security. Am I correct in that?
    Judge al-Radhi [spoken in Arabic]. Yes, sir, you are 
correct in that. I am surprised by what was put forth by the 
representative of DOD minutes ago, that he had requested the 
increase of the number of U.S. investigators. In Iraq we have 
three main oversight entities.
    The first one, the first entity is the commission on public 
integrity, that has the power to refer to courts.
    And the second one, the board of supreme audit, that 
oversees the financial issues of the ministries.
    And the third body being the inspector general offices in 
each of the ministries in Iraq.
    Why were these three entities weakened? Why were these 
three entities weakened when they were undertaking good 
performance?
    Senator Leahy. Thank you.
    Senator Cochran.
    Senator Cochran. Thank you very much for appearing before 
our hearing, we appreciate your courage.
    Senator Leahy. If you could just hold for just one moment, 
Senator Cochran. I'm going to go to another meeting.
    Senator Dorgan who began all of this will fill in for me. 
But, I must say--I'm going to set the clock again for Senator 
Cochran--but I must say, Judge, I admire your courage, and I 
admire the courage of those who work with you. I think they 
want to see a better Iraq, and someday let us hope there will 
be. Thank you.
    Senator Cochran.
    Judge al-Radhi. Thank you, Mr. Senator.
    Senator Cochran. Judge, you heard the testimony of the 
witnesses, I assume, who preceded you at this hearing today 
talk about the effort that's being made through agencies of our 
Government, to be sure that funds that are appropriated and 
spent for Iraqi freedom and reconstruction are handled in ways 
that are legal, and for which purposes have been approved by 
the countries that are donating, and making available these 
resources.
    My question--one question that comes to my mind is that, do 
you know of any countries other than the United States who are 
trying to be helpful to Iraq, who are making any efforts to 
ensure that your anticorruption efforts, the Iraqi Government's 
efforts to deal with corruption are being supported and 
strengthened. Is anybody helping you, other than the United 
States?
    Judge al-Radhi [spoken in Arabic]. Thank you for your 
praise for my work. And I came here to thank the Americans for 
their great assistance to the Iraqis. However, Your Excellency, 
you have heard about the great mistakes that have been 
committed, and about the large amounts of money that have been 
wasted.
    Sir, the infrastructure in Iraq is equal to zero. You heard 
in previous testimony about the increase in usable water. I 
wonder, is there no regular, usable water in Iraq for us to 
speak about?
    Half of Baghdad, and I'm talking here about the region of 
Rasalfi, and it is a populous--a large area accounting for 
about 4 to 5 million people living in it--lives in the summer 
with no water. If there's no water, how can we speak about 
increases in usable water? This doesn't even account for the 
rural areas or remote areas that are located away from Baghdad, 
and their lack of water.
    If you visited Baghdad, you would see for yourself that 
there is no water, no electricity, no sewage systems, no 
streets--everything is destroyed. If this is the case in 
Baghdad, then, what would be the case of other provinces?
    The problem is that this government has failed in 
performing, in doing its duties for many reasons. One of these 
reasons is that this government has relied on blocs of 
sectarian cultures, if you will. It has distributed the 
ministries according to the various sects and groupings. 
Instead of employing the help of technocrats, they named to the 
various critical posts, politicians from these various blocs, 
political blocs. And you may be surprised if I tell you that 
many of these appointees have false degrees, fake college 
degrees, or bought degrees. And those who are governing Iraq 
today are doing it only to benefit their blocs, their various 
blocs.
    Senator Cochran. Thank you very much.
    I wonder, in your experience, observing the U.S. efforts to 
help reconstruct and rebuild and recover, do you notice the 
same kind of corruption among contractors who are actually 
given money directly from the United States to U.S.-owned 
firms, and U.S.-operated firms--do you see any evidence of 
corrupt practices among those companies, or are you talking 
about strictly those that are being supported by the Iraqi 
regime.
    Judge al-Radhi [spoken in Arabic]. Corruption is 
corruption. And the various entities have failed in undertaking 
the reconstruction process. And the fraudulent contracts into 
which they entered are all contracts which violate the laws.
    The contract is usually written by a crook who manipulates 
the contract requirements. For example, the former defense 
minister, who was originally an instructor or a teacher, went 
to Pakistan and Poland and entered into contracts, and doesn't 
know anything about the technical aspects and requirements of 
contracts, but monies were paid for a contract amounting to 
$113 million and another contract for the same amount, $113 
million, and a third contract amounting to $167 million--all to 
purchase airplanes for Iraq. The monies were paid to the 
foreign companies, and the aircrafts were not delivered to 
Iraq.
    When we brought that case in front of the courts, senior 
officials from the Defense Ministry of Iraq were witnesses. The 
crooks also entered in contracts to acquire ambulances, but 
these ambulances were not delivered either.
    Nothwithstanding these problems, still in 2007, the 
Ministry of Defense in Iraq sent us a letter that the ministry 
of defense does not have a technical committee to inspect the 
weapons that are supposed to be received. So, no one takes a 
look at how many or quality of equipment comes to Iraq, and 
what does come is not inspected. And this is only a simple 
example.
    Senator Cochran. Thank you. Thank you very much.
    Senator, my time is expired.
    Senator Dorgan [presiding]. Mr. al-Radhi, Judge al-Radhi, 
you indicated that you uncovered $18 billion worth of misspent 
funds in Iraq. Is it true that the majority of those funds came 
from the United States Government?
    Judge al-Radhi [spoken in Arabic]. Yes. That is correct, 
because most of these monies came from the DOD, so it is 
correct.
    Senator Dorgan. Judge al-Radhi, you indicated that some of 
the same money that this committee, this Appropriations 
Committee, has appropriated to help rebuild Iraq, had been 
funneled to the insurgents and the militias that have killed 
American soldiers. How does that funneling of money happen, so 
that you believe money appropriated by this committee ends up 
in the hands of insurgents with which to kill American 
soldiers?
    Judge al-Radhi [spoken in Arabic]. When the ministry of 
defense buys not usable weapons, but bad weapons, how can the 
Iraqi army defend itself with such weapons?
    Ms. Behrans. And sir, the interpreter, for the record, 
would like to tell you that the mention, the previous mention 
about the ministry of defense, relates to ministry of defense 
and not DOD. The interpreter got an explanation.
    Senator Dorgan. I understand.
    Ms. Behrans. Thank you, sir.
    Judge al-Radhi [spoken in Arabic]. This is on one hand. The 
other aspect is that the oil is being smuggled in Beiji from 
the Sunni militias and in Basrah, through the Shiite militias. 
And, of course, they will use this to purchase weapons. And, of 
course, these monies will target the killing of Iraqis and 
Americans.
    Senator Dorgan. Judge al-Radhi, when you uncovered 
information about waste and fraud and abuse, did you share it 
with U.S. officials in Iraq, and if so, what was their 
response?
    Judge al-Radhi [spoken in Arabic]. Yes, we did share a lot 
with the U.S. officials about such discussions, because we--
there is a U.S. representative or technical expert in each of 
the ministries. And I have wished for those experts to tell us 
if these ministers were corrupt, or to try to give us advice to 
end the corruption as we uncovered it.
    However, the opposite happened. One of those experts came 
to me and did the opposite, he tried to defend the corrupt 
Iraqi minister. Likewise, in the ministry of reconstruction and 
population, this expert came and defended those corrupt within 
the ministry. However, I must not generalize here, because some 
of the experts were very good people. However, this is what 
happened in some instances.
    Senator Dorgan. But you are saying in your testimony that 
your personal knowledge is that some U.S. officials or advisors 
were given evidence of corruption by you, and they did not take 
action, or they actually defended the corruption, is that your 
testimony?
    Judge al-Radhi [spoken in Arabic]. Yes, correct.
    Senator Dorgan. And is that because they didn't want to 
offend any of the ministries in the Iraqi Government, as they 
were trying to put ministries together?
    Judge al-Radhi [spoken in Arabic]. Many reasons. I cannot 
really define exactly, and precisely, the motive. However, some 
of them are corrupt, some of them wanted to steal money and to 
benefit from the reconstruction, and some of them had 
procedures that did not go along with Iraqi laws.
    Senator Dorgan. Judge al-Radhi, my understanding is that 
you were given $11 million cash to start the commission on 
public integrity? You were told that the resources to start 
this commission on public integrity would be made available, 
you showed up, and they were made available in cash? You signed 
for the cash. Apparently you had a couple of people helping you 
load it into a car, took it home, had $11 million in cash in 
your home overnight, and then deposited it in a bank the next 
morning. My understanding is that $11 million disappeared while 
in a bank account. Can you describe that circumstance to us? 
And this, incidentally, was $11 million of U.S. taxpayers' 
money.
    Judge al-Radhi [spoken in Arabic]. $11 million, and this 
happened toward the end of the time when Ambassador Bremer was 
there.
    Advisors and experts told the Ambassador to provide this 
money to the commission on public integrity to create an 
academy that would enable the creation of studying the ethics 
and integrity. And indeed, I went to this financial entity, a 
U.S. financial entity when they were in Iraq and I received a 
check for over $11 million. And I signed it with my name, 
because I was the head of the CPI in Iraq.
    And in the same building of that entity, I went to the 
cashier's office, and I signed for the check and he paid the 
money to me. And I had four to five bodyguards, we transferred 
the amount, the monies, in a Suburban car, and this happened in 
the afternoon of that day.
    So, I placed it at the directorate, at my office, and I 
slept in front of the door, that same night, along with the 
protection that was provided to me.
    The next morning, early in the morning, we took the monies 
to the bank, and it was recorded under the name of our 
directorate in the Rafidain Bank.
    After a lapse of time, the council of ministers issued an 
order and they retrieved all the monies in hard currency--
foreign currency--from all the directorates, and one of these 
directorates was ours.
    We told them, if you don't approve of the hard currency, 
give us instead of this foreign money, Iraqi currency for the 
academy project. We were answered with the following answer: 
that the minister of finance did not approve or give consent to 
give us the money. And I have a letter here, showing that they 
received the money--away from the CPI, and receipts that the 
money was received by the Central Bank, and by the ministry of 
finance.
    [The information follows:]
          In the Name of God the most Gracious, Most Merciful
Republic of Iraq
Ministry of Finance
Office: Accounting
Section: Cashing
No: 17/53
AH date:3286
CE date: 19/2/2006

To: Commission of Public Integrity /Financial Office
Subject: A Client Account

    With reference to your book No: 193 of 6/2/2006 we confirm that the 
amount of $11,988.871/-eleven million, nine hundred and eighty eight 
thousand, and eight hundred and seventy one dollars has been in our 
account since 30/1/2005 according to the Central Bank notice No: 34548 
enclosed.
            With Appreciation
                              Muhib Abdul Razak Abdul Aziz,
                         General Director of the Accounting Office.
                                                          19/2/2006
CC to:
  --Accounting Office/none Central System Office
  --Accounting Office/cashing.
  --Out put Section



                certification of translation competence
    I, Tona Rashad, hereby certify that I am fluent in both written and 
oral English and the Arabic languages, and that I have translated the 
foregoing documents from Arabic to English to the best of my skill and 
ability and that the translation is a true, accurate translation of the 
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008
                                 ______
                                 
          In the Name of God the most Gracious, Most Merciful
Republic of Iraq
Ministry of Finance
Office: Accounting
Section: Vouchering
No: 902/21/1
AH date:13074
CE date: 21/9/2005

To: Al Rafedein Bank/Accounting Section
Subject: Closing Foreign Currency Accounts

    According to your book No. 2108 of 2/7/2005 where you request the 
approval to exclude the Commission of Public Integrity from the 
procedures to close foreign currency accounts.
    We would like to inform you that we did not get the Minister's 
approval for that exclusion and we should depend working on item No. 
3920 of 5/4/2005 to close all open accounts in dollars for all (Al 
Rafedein) Bank Offices.
            With appreciation...
                                             Fuad Abdullah,
                                         Ministry of Finance Agent.
                                                          19/9/2005
CC to:
  --Commission of Public Integrity . . . to be informed . . . with 
        appreciation
  --Office of Accounting/cashing



                certification of translation competence
    I, Tona Rashad, hereby certify that I am fluent in both written and 
oral English and the Arabic languages, and that I have translated the 
foregoing documents from Arabic to English to the best of my skill and 
ability and that the translation is a true, accurate translation of the 
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008
                                 ______
                                 
REPUBLIC OF IRAQ
PRIME MINISTER'S OFFICE
Ref.: m.r.n/s/7/914
Date: 04/01/2007
                (Personal, Confidential and very Urgent)
                 To/The General Commission of Integrity
8569
743
                            Subject/Referral
    Peace, mercy and blessings of Allah be upon you!
    It has been decided not to refer any of the following parties to 
the court until approval of His Excellency, the Prime Minister, is 
obtained:
    1. Presidential office
    2. Council of Ministers
    3. Current and previous ministers
            With appreciation
                        Signed by Dr. Tariq Najim Abdullah,
                                   Prime Minister's Office Manager.
                                                         04/01/2007
A copy to/
  --Presidential office-Diwan/Please be informed . . . With 
        appreciation
  --Both Prime Minister Deputies/Please be informed . . . With 
        appreciation
  --Ministers' Cabinet Secretary General's Office/Please be informed . 
        . . With appreciation
  --Organizing unit
  --Follow up
  --Issued correspondence file



                certification of translation competence
    I, Tona Rashad, hereby certify that I am fluent in both written and 
oral English and the Arabic languages, and that I have translated the 
foregoing documents from Arabic to English to the best of my skill and 
ability and that the translation is a true, accurate translation of the 
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008
                                 ______
                                 
REPUBLIC OF IRAQ
PRIME MINISTER'S OFFICE
Ref.: m.r.n/s/7/923
Date: 04/02/2007
                (Personal, Confidential and very Urgent)
                 To/The General Commission of Integrity
[Stamp of the General Commission of Integrity]
8568
743
                           Subject/Directive
[Stamp of the Investigations office]
Ref.: 6348
Date: 04/12/2007

    Peace, mercy and blessings of Allah be upon you!
    Your letter ref. no. s/78 dated 03/01/2007.
    His Excellency, the Prime Minister, directed to emphasize our 
attached letter with ref. no. m.r.n./s/7/914 dated 04/01/2007, which 
directs to stop the pursuit of previous and current ministers, unless 
done through the Prime Minister's office, and our attached letter no. 
m.r.n./s/7/282 dated 02/04/2007, which refers to the authorization from 
the Prime Minister's office for ownership.
            With appreciation
Attachments:
  --The two above mentioned letters from the Prime Minister's Office

     Signed by Prime Minister Nori Kamil Al-Maliki's office
                                  Dr. Tariq Najim Abdullah,
                                   Prime Minister's Office Manager,
                                                         04/02/2007
A copy to/
  --Organizing unit
  --Follow up



                                 ______
                                 
Republic of Iraq
Office of the Prime Minister

Number: M. R. N / S / 7 / 282
Date: 4/2/2007
[Stamp: Office of the Deputy Chairman of the Commission; Incoming; 
        Number 686; Date 7/2/2007]
[Stamp: Commission of Public Integrity; (illegible) Iraq; (illegible) 
        226; (illegible) 7 2 7]
                       (Private and Confidential)
To: Commission of Public Integrity
Re: Transfer of Ownership

    May the Peace, Mercy and Blessings of God be upon you.
    His Excellency, the Prime Minister, has given the order that the 
Office of the Prime Minister has no objection to the procedures in 
place for the transfer of ownership of the residential housing owned by 
the Iraqi Ports Company, among which is the house registered in the 
name of Mr. Salam Audah Faleh, the former Minister of Transportation, 
on the basis of the acceptance of the General Secretariat of the 
Council of Ministers, as stated in its letter numbered Qaf/2/1/25/13796 
of 20/9/2005 and pursuant to which transfer of ownership operations 
were properly conducted.
            Regards.
Enclosures:
  --Aforementioned Letter of General Secretariat of the Council of 
        Ministers
  --Record of Sale (Transfer of Ownership) of house number 190 Ajnadin 
        Street

                           Office of Nouri Kamel Al-Maliki,
                                                    Prime Minister.
                                   Dr. Tarek Nijm Abdallah,
                      Director of the Office of the Prime Minister.
                                                           4/2/2007
Our Office/Urgent
    To be referred to the Basra Branch (private and confidential).
    A copy thereof is to be kept with us along with the enclosures.
                  (signature)
CC to:
  --Ministry of Transportation--Office of the Minister For your 
        information. Regards.
  --General Secretariat of the Council of Ministers--Office of the 
        Secretary/Your above letter. Regards.
  --Honorable Mr. Salam Audah Faleh/Former Minister of Transportation/
        For your information. Regards.
  --Outgoing letters file.
                                            To: Office of the Judge
                                 ______
                                 
NO: Q/2/1/39/14708
Date: 3/9/2007

                       Ministries/Minster Office
        Offices not related to Ministry/Office of Chief of Unite
                 Subject/Commission of Public Integrity

    The Commission on Public Integrity's area of expertise is limited 
according to Order 55 of 2004 including the following:
    1. Investigation of corruption cases and it has to be exposed to 
the Investigate Judge.
    2. Refer all information related to possible violations of the code 
of conduct where either the violating employee or the one they suspect 
in him to the Minster, the Chief of Office not related to the Ministry 
to the Inspector General.
    3. Publish structured lists to have officials reveal their 
financial assess.
    4. Propose legislation related to anti corruption.
    5. As a result, the Commission cannot request information, files or 
any other thing, yet they can investigate the Management and Corruption 
after it happens and when evidences presented against the accused. It 
could also refer all the received information about the information 
related to possible violations of the code of conduct to the Minister, 
the Chief of Office not related to the Ministry or the Inspector 
General where either the violating employee or the one they suspect for 
purposes of making an Investigation. And it doesn't have the right to 
stop or prevent it from happening if it related to the Ministry under 
investigation or the Office of the Inspector General.
            We hope observance . . . with appreciation

                             Dr. Farhad Nema Allah Hussein,
                     Secretarial General of the Ministries Council.
                                                          30/8/2007
CC:
  --Prim Minister Office/to be informed . . . with appreciation.
  --Office of Secretarial General of the Ministries Council/to be 
        informed . . . with appreciation.
  --The Commotion of Public Integrity/Chief of Office/according to your 
        book numbered T/detective/548//2007/4888 in 14/8/2007 for 
        mentioned purpose . . . with appreciation.

        
        
                CERTIFICATION OF TRANSLATION COMPETENCE

    I, Tona Rashad, hereby certify that I am fluent in both written and 
oral English and the Arabic languages, and that I have translated the 
foregoing documents from Arabic to English to the best of my skill and 
ability and that the translation is a true, accurate translation of the 
Arabic original.
Tona Rashad,
Tel 202-828-1872
Email [email protected]
2099 Pennsylvania Avenue, N.W.
Suite 100
Washington, D.C. 20006-6801
Today's Date: March 10, 2008

    Senator Dorgan. Judge al-Radhi, that was $11 million of 
American taxpayer's money--do you have any notion of how it was 
spent?
    Judge al-Radhi [spoken in Arabic]. The council of ministers 
took that money, and it was spent in a waste--in a public money 
waste fashion.
    Senator Dorgan. My understanding, Judge al-Radhi, is that 
the American money that was given in large quantities to all of 
the ministries, was something called capacity building money. 
And you have indicated that, because virtually all of the 
ministries have been infiltrated by some of the militia, that 
so-called ``capacity building'' funding from the United States 
is the funding that has ended up, and been diverted into the 
militia's hands, is that correct?
    Judge al-Radhi [spoken in Arabic]. That is correct because 
the ministries were distributed according to the various 
political parties.
    For instance, the ministry of health portfolio was given to 
one of the Shiite parties, so if there was an ill person from a 
different sect, ill and residing in a hospital, staying in a 
hospital, that ill person would be kidnapped from that 
hospital.
    And this led to the loss of monies through such practices. 
The officer himself would sell his gun. And just as you have 
heard from the previous panel that testified minutes ago, such 
weapon have reached the frontier of Turkey.
    And this is one of the reasons that undermined and weakened 
our institution, because we did track down the corrupt and we 
did give a diagnosis for corruption in the country, and for the 
first time, our institution, the CPI, for the first time in the 
Middle East, it would refer ministers to the courts for 
prosecution for nonpolitical reasons, but for the reasons of 
corruption.
    Senator Dorgan. Judge al-Radhi, I want to hold up a chart 
that has the copy of a letter that I believe you received, it 
is in Arabic, and then translated to English. My understanding 
is it's a letter that came from the prime minister's office, 
and it says to you, ``Peace, mercy and blessings of Allah be 
upon you, it has been decided not to refer any of the following 
parties to the court, until approval of his excellency, the 
prime minister, is obtained, presidential office, council of 
ministers, current and previous ministers, with the previous 
appreciation.''
    What, apparently, this means--you might confirm it--what, 
apparently, this means is as you began digging in to crime and 
corruption, and as I want to refer again to the description by 
the special inspector general who said you are an honorable man 
and an effective crime fighter in Iraq. As you began to dig 
into corruption and understand that some of the ministries were 
corrupt and misusing money, the prime minister's office said to 
your office, you are not able to refer any parties dealing with 
corruption to a court, unless the prime minister would give 
approval, is that correct?
    Judge al-Radhi [spoken in Arabic]. That is correct, and 
that directive violates the constitution, because we are 
considered an independent entity, based on article 102 of the 
Iraqi constitution.
    Senator Dorgan. And do you believe this happened because 
you started talking about, well, for example, Mr.--I believe it 
was Mr. Hussan, the minister of defense where $4 billion was 
unaccounted for, I mean, they couldn't account for $4 billion 
of spending. Do you believe that because you were digging into 
that, the prime minister's office then came up with a letter of 
this type, to stop what you were doing?
    Judge al-Radhi [spoken in Arabic]. Yes, because of our 
investigations that included investigating practices from the 
ministry of oil, and the ministry of defense. Accordingly, we 
received this letter.
    Senator Dorgan. Judge al-Radhi, let me conclude today by 
thanking you for being here. I must say to you, I'm embarrassed 
at the attendance of this committee, this committee room is 
full when we appropriate money. There seems to be less 
enthusiasm for oversight to determine how that money is spent. 
I appreciate the Senators who did attend, and my colleague, 
Senator Cochran, has been here for the whole period, and former 
chair and others, so I appreciate those who came.
    But, frankly, this is a very significant issue. It should 
command a great deal of attention by this Congress, and I 
regret it has not.
    I know they have tried to kill you, personally, you do this 
at great risk. And I also want to say one other thing. I'm very 
unhappy with the U.S. State Department, and the way that you 
have been treated, personally, since you came to this country. 
The State Department, I believe, has sort of set you loose over 
here with no help and guidance, and apparently no action on 
your asylum request, and your message is not in accordance with 
the message that some tell us about.
    I think there are good things going on in Iraq and 
improvements going on in Iraq, and I think there's a lot of 
corruption and fraud and abuse--I think both represent an 
accurate story. The story you tell is not--is not welcomed by 
some. They don't want to hear those facts, and that 
interpretation and that information, so I believe you have not 
been treated well by the U.S. State Department, and I think 
that's a shame. I hope that one of these days the State 
Department will do what it should do for a man of your courage 
and your integrity.
    Taking on the job as head of the commission on public 
integrity in a country in Iraq where so many have been 
assassinated and murdered, and their families have been 
threatened. And I read the account, by the way, of you standing 
in your house when a missile hit in that neighborhood and your 
house collapses around you and you were fortunately unhurt. But 
you're a man of great personal courage I believe, and there 
came a time when you couldn't continue to do your job in Iraq. 
And you come to this country and tell us what you see and what 
you know, that I think is very helpful to our United States 
Congress. And as one Member of the United States Senate, I want 
to tell you how much I appreciate your courage, your work, and 
your willingness to come today.
    Thank you very much.
    Judge al-Radhi. Thank you so much.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Dorgan. Any members wishing to submit questions to 
the witnesses may do so and they will all be printed in the 
record.
    [The following questions were not asked at the hearing, but 
were submitted to the witnesses for response subsequent to the 
hearing:]

                 Questions Submitted to David M. Walker
             Questions Submitted by Senator Robert C. Byrd

    Question. Mr. Walker, a recent State Department report stated that 
in early 2006, the Iraqi oil ministry estimated that ten percent of the 
$4-5 billion in fuel imported for public consumption in Iraq at 
subsidized rates in 2005 was smuggled internally and out of the country 
for resale at market rates. Further, approximately ten percent of all 
oil smuggling profits were estimated to go to insurgents. 
Conservatively, those facts suggest that insurgents in Iraq have 
approximately $100 million per year available to them from that single 
source. Should we be concerned about this and can you estimate for us 
the total revenues available to the insurgents?
    Answer. Yes. Congress should be concerned. GAO has previously 
reported that corruption is widespread and a problem for the Iraqi 
government. We do not have an estimate of the amount available to 
insurgents from petroleum-related corruption, but our report 
``Stabilizing Iraq: Armed Groups in Iraq Rely on Resources Generated in 
Iraq to Sustain High Levels of Violence'' (GAO-07-782C) provides 
further information. The report title is unclassified but the body of 
the report is classified. A copy of this report is available to the 
Committee.
    Question. Mr. Walker, since March 2004, experts have been urging 
Iraq to install control systems to measure and account for the amount 
of oil pumped out of Iraqi oil fields and processed at Iraqi 
refineries, as the best way to prevent corruption and the diversion of 
oil and oil revenues to insurgents and other unauthorized individuals. 
As recently as February 2008, such control measures were still being 
recommended. Why have control systems not been installed?
    Answer. The lack oil metering in Iraq has been a problem since 1996 
when the United Nations first cited the issue during the Oil for Food 
Program. In 2004, the Coalition Provisional Authority took steps to 
install a metering system, but lack of security stopped completion of 
this work. In 2006, the Iraqi government took steps to establish, 
within the next 2 years, a measuring system for Iraq's oil, gas, and 
related products within Iraq and export and import operations. However, 
we reported in 2007 that security continued to pose a challenge to 
Iraq's oil and electricity sectors and has led to project delays and 
increased costs. As of February 2008, the International Advisory and 
Monitoring Board (IAMB) reported that some metering at oil terminals 
had been installed, but there is an absence of a comprehensive system 
of metering, including no metering in the oil fields.\1\
---------------------------------------------------------------------------
    \1\ The IAMB is an independent audit oversight body for the 
Development Fund for Iraq (DFI) established pursuant to U.N. Security 
Council Resolution 1483 to help ensure that the DFI is used in a 
transparent manner for the benefit of the people of Iraq and export 
sales of petroleum products are made consistent with international best 
practices. The IAMB's terms of reference, approved in October 2003, 
allow it to oversee the completeness of deposits into the DFI, the 
management of the funds in the DFI and the use of DFI resources in the 
spending ministries, together with the power to complete special 
audits.
---------------------------------------------------------------------------
    Question. Mr. Walker, do you feel that there are sufficient 
controls over the accountability of the weapons the United States 
provides to Iraqi security forces? Please explain.
    Answer. No. As of March 2008, the Department of Defense (DOD) had 
not implemented GAO's recommendations to improve accountability over 
the U.S. program to train and equip Iraqi security forces.\2\ We 
recommended that the Secretary of Defense determine which DOD 
accountability procedures apply or should apply to the program. We also 
recommended that after defining the required accountability procedures, 
DOD ensure that sufficient staff, functioning distribution networks, 
standard operating procedures, and proper technology are available to 
meet the requirements.
---------------------------------------------------------------------------
    \2\ GAO, Stabilizing Iraq: DOD Cannot Ensure that U.S.-Funded 
Equipment Has Reached Iraqi Security Forces, GAO-07-711 (Washington, 
D.C.: July 31, 2007).
---------------------------------------------------------------------------
    Question. Mr. Walker, do we have confidence that the use of 
Development Fund for Iraq deposit accounts can be reconciled with 
income and spending?
    Answer. GAO cannot determine the extent to which the Iraqi 
government is spending its $10.1 billion capital projects budget for 
2007 because of wide discrepancies between Iraq and U.S. reports on 
Iraqi expenditures. The discrepancies highlight the uncertainty about 
Iraqi expenditures.\3\ In addition, U.S. agencies, the World Bank, and 
independent auditors report serious internal control weaknesses in 
Iraqi government accounting procedures. For example, the World Bank 
reported that reconciliation of government of Iraq accounts is 
impossible. GAO plans to review issues related to Iraqi income and 
spending under the authority of the Comptroller General, based on a 
request from the Senate Armed Services Committee.
---------------------------------------------------------------------------
    \3\ GAO, Iraq Reconstruction: Better Data Needed to Assess Iraq's 
Budget Execution, GAO-08-153 (Washington, D.C.: Jan. 15, 2008).
---------------------------------------------------------------------------
    Question. Mr. Walker, is Iraq in possession of financial assets not 
accounted for in the Development Fund for Iraq accounts, and if so, 
where are these resources and do discrepancies exist in these accounts?
    Answer. GAO has not examined whether the Iraq government has 
financial assets not accounted for in the Development Fund for Iraq 
(DFI). However, IAMB is responsible for overseeing the completeness of 
deposits into the Development Fund for Iraq. IAMB reported that 
auditors will finalize the 2007 audit of the DFI and report to IAMB 
during 2008.
    Question. Mr. Walker, have there been any discrepancies noted 
between the Development Fund for Iraq balance reports and actual bank 
holdings, and if so, where?
    Answer. GAO has not examined any potential discrepancies between 
the DFI balance reports and actual bank holdings. However, the 
International Monetary Fund reported in January 2008 that audits of the 
DFI noted large un-reconciled differences regarding oil extraction, 
production, and export sales. Also, the World Bank has reported that 
the government of Iraq lacks consolidated information on the exact 
number of government bank accounts it has and the balances in them. As 
part of a future GAO review referred to under question 8, GAO is 
planning to address some of these issues.
    Question. Mr. Walker, is Iraq holding gold or other monetary assets 
that might not be accounted for in their deposit accounts?
    Answer. GAO has not examined whether the government of Iraq is 
holding gold or other monetary assets not accounted for in DFI deposit 
accounts.
    Question. Mr. Walker, I am concerned about what happens from year-
to-year regarding unobligated funds due to Iraq's reported budget 
execution problems. If unobligated funds are rolled over from year to 
year, what is the confidence level that such funds are actually 
available for obligation and execution?
    Answer. GAO cannot determine how much the Iraqi government has 
actually spent because U.S. and Iraqi reports show widely disparate 
spending data. Moreover, the IAMB, International Monetary Fund, and 
World Bank have concerns about whether Iraq government accounts can be 
reconciled. As a result, it is uncertain whether unused funds approved 
by Iraq's budget laws are actually available for obligation and 
execution the following year.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein

    Question. On March 6, 2008, the Boston Globe ran a story entitled 
``Top Iraq Contractor Skirts U.S. Taxes Offshore.'' In the story, the 
authors noted that ``more than 21,000 people working for KBR in Iraq--
including about 10,500 Americans--are listed as employees'' of two 
shell companies for KBR registered in the Caribbean. The story also 
states: ``the Defense Department has known since at least 2004 that KBR 
was avoiding taxes by declaring its American workers as employees of 
Cayman Islands shell companies, and officials said the move allowed KBR 
to perform the work more cheaply, saving Defense dollars.'' However, 
the article estimates a roughly $500 million shortfall in lost Social 
Security and Medicare revenue as a result of the practice.
    Many employees did not know that they were employed by the shell 
companies, not KBR, and those employees have lost eligibility for 
Social Security, unemployment, and other government services as a 
result of these practices. KBR has amassed an estimated $16 billion in 
contracts in Iraq. On March 13th, Senator John Kerry (D-MA) introduced 
legislation to treat foreign subsidiaries of U.S. companies performing 
services under contract with the United States government as American 
employers for the purpose of Social Security and Medicare payroll 
taxes.
    Can you comment on whether or not the Government Accountability 
Office has reviewed this issue and any findings that have come as a 
result of the review? If not, does the GAO plan to review the issue?
    Answer. We have not reviewed KBR's hiring of personnel through 
companies registered in the Caribbean and have no ongoing work 
specifically related to this issue. We have, however, previously 
reported on issues associated with federal contractors with offshore 
subsidiaries. For example, we reported in February 2004 that 59 of the 
100 largest publicly traded federal contractors in fiscal year 2001, 
including Halliburton (then the parent company of KBR), reported having 
a subsidiary in a tax haven country.\4\ We subsequently reported in 
June 2004 that large tax haven contractors were more likely to have a 
tax cost advantage in federal contracting than large domestic 
contractors.\5\
---------------------------------------------------------------------------
    \4\ GAO, International Taxation: Information on Federal Contractors 
With Offshore Subsidiaries, GAO-04-293, (Washington, D.C.: Feb. 2, 
2004).
    \5\ GAO, International Taxation: Tax Haven Companies Were More 
Likely to Have a Tax Cost Advantage in Federal Contracting, GAO-04-856, 
(Washington, D.C.: June 30, 2004).
---------------------------------------------------------------------------
    Question. With the multitude of reports raising questions about 
KBR's performance as a contractor in Iraq, why is the U.S. military 
still doing business with the company?
    Answer. DOD may be in a better position to address its use of 
specific contractors or how it used past performance information when 
awarding specific contracts. We would like to note, however, that 
contracting is important to how many agencies accomplish their 
missions, and therefore it is critical that agencies focus on buying 
the right things the right way. This includes ensuring that contracts 
are awarded only to responsible contractors, and that contractors are 
held accountable for their performance. As we noted in July 2007, the 
use of contractor performance information is a key factor in doing 
so.\6\
---------------------------------------------------------------------------
    \6\ GAO, Federal Contracting: Use of Contractor Performance 
Information, GAO-07-1111T, (Washington, D.C.: July 18, 2007).
---------------------------------------------------------------------------
    Question. What actions has the GAO taken to address past problems 
with KBR and can you name the instances where the DOD has cancelled a 
large contact in Iraq due to mismanagement?
    Answer. GAO has made multiple recommendations in previous reports 
aimed at improving DOD's oversight and management of contractors 
supporting deployed forces, including KBR. For example, GAO issued a 
report in July 2004 addressing the need for DOD to strengthen oversight 
of logistics support contracts such as the Army Logistics Civil 
Augmentation Program (LOGCAP).\7\ In March 2005, GAO issued a report 
calling for high-level DOD coordination to improve the management of 
the LOGCAP contract.\8\ And in December 2006, GAO issued a 
comprehensive report on contractor support to deployed forces that 
called for high-level DOD action to address long-standing problems with 
DOD's management and oversight of contractors supporting deployed 
forces.\9\
---------------------------------------------------------------------------
    \7\ GAO, Military Operations: DOD's Extensive Use of Logistics 
Support Contracts Requires Strengthened Oversight, GAO-04-854 
(Washington, D.C.: July 19, 2004).
    \8\ GAO, Defense Logistics: High-Level DOD Coordination Is Needed 
to Further Improve the Management of the Army's LOGCAP Contract, GAO-
05-328 (Washington, D.C.: March 21, 2005).
    \9\ GAO, Military Operations: High-Level DOD Action Needed to 
Address Long-standing Problems with Management and Oversight of 
Contractors Supporting Deployed Forces, GAO-07-145 (Washington, D.C.: 
Dec. 18, 2006).
---------------------------------------------------------------------------
    We do not have complete information on the extent to which DOD may 
have cancelled a large contract in Iraq due to mismanagement. We are 
aware of several instances in which DOD cancelled or terminated, at 
least in part, contracts or task orders for work in Iraq due to poor 
management and higher than expected costs For example, in May 2006, the 
U.S. Army Corps of Engineers announced that the contract with Parsons 
Global Services to build primary health care centers was partially 
terminated due to insufficient progress and escalating costs.
    In a January report to Congress, the Congressional Research Service 
(CRS) recommended that Congress consider requiring that ``the Defense 
Department use more fixed-price contracting in Iraq, task and delivery 
orders [be matched to] certain dollar constraints, and larger contracts 
be divided into smaller contracts, with better-defined discrete 
tasks.''
    Question. In your opinion, does the size of the contracts used in 
Iraq inhibit proper oversight of those contracts?
    Answer. The size of a contract can be a factor in determining the 
extent and nature of oversight required, but in and of itself does not 
inhibit proper oversight. Rather, we and others have reported that DOD 
simply does not have a sufficient number of acquisition and contracting 
personnel to provide effective oversight over the range of contracts 
and contractors it employs in Iraq, thereby limiting its ability to 
obtain reasonable assurance that contractors were meeting contract 
requirements efficiently and effectively.
    Question. Would a system similar to the one outlined by CRS help 
increase oversight of Iraq contracts?
    Answer. While we have not specifically assessed the options 
proposed by CRS in its January 2008 report, our work provides insights 
into some of the underlying issues that these proposals attempt to 
address. For example, we have reported that reconstruction and support 
contracts are often cost-reimbursement type contracts, which allow the 
contractor to be reimbursed for reasonable, allowable, and allocable 
costs to the extent prescribed in the contracts. Such contracts are 
generally used when uncertainties involved in contract performance, 
such as when the government's requirements or needs are not well-
defined, do not allow the work to be priced on a fixed-price basis. In 
some cases, we found that the lack of well-defined requirements 
resulted in DOD using business arrangements that increased the 
government's risk, such as by allowing contractors to begin work before 
key contract terms and conditions, such as the scope of the work and 
its price, were fully defined.\10\ Consequently, the extent that DOD is 
able to better define its requirements should enable it to increase its 
use of fixed-price contracts and enable it to definitize its contracts 
on a more timely basis.
---------------------------------------------------------------------------
    \10\ See, for example, GAO, Defense Contract Management: DOD's Lack 
of Adherence to Key Contracting Principles on Iraq Oil Contract Put 
Government Interests at Risk, GAO-07-839 (Washington, D.C.: July 31, 
2007) and Iraq Contract Costs: DOD Consideration of Defense Contract 
Audit Agency's Findings, GAO-06-1132 (Washington, D.C.: Sept. 25, 
2006).
---------------------------------------------------------------------------
    The increased use of fixed-price contracts and the more timely 
definitization of contracts, however, does not obviate the need for 
effective management and oversight. In other words, if contracts are 
not effectively managed and given sufficient oversight, the 
government's risk is likely to increase. In that regard, DOD still 
needs to improve its capacity to manage and oversee contractor 
performance, including assuring that it has sufficient contract 
oversight personnel to provide effective oversight. We have made a 
number of recommendations aimed at strengthening DOD's management and 
oversight of contractor support at deployed locations, and the 
department has agreed to implement many of those recommendations. 
However, we have found that DOD has made limited progress implementing 
some key recommendations.
    Question. What other barriers prevent the GAO or Inspectors General 
from improving oversight of these contracts?
    Answer. Despite improvement since last year, the security situation 
in Iraq continues to hamper contract oversight. Operating within this 
environment, we and the other accountability organizations will 
continue to coordinate our oversight efforts to avoid duplication and 
leverage our resources.
                                 ______
                                 
               Questions Submitted by Senator Judd Gregg

    Question. Has the Prime Minister or any other senior Iraqi 
government official taken any action to interfere with GOI 
investigations into cases of corruption? If so, please describe in 
detail the circumstances.
    Answer. GAO has not examined allegations of senior Iraqi government 
officials interfering with government of Iraq investigations of 
corruption.
    Question. What factors limit the ability of the CPI, the Board of 
Supreme Audit, and respective Ministry IGs from investigating and 
prosecuting cases of corruption?
    Answer. Violence, intimidation, and attacks against staff are a 
major obstacle to investigations according to the former head of the 
Commission on Public Integrity (CPI). Aggravating this situation, we 
have reported that corruption within the ministries is widespread and 
the Iraqi civil service remains hampered by staff with political and 
sectarian loyalties. Also, Iraqi law is an obstacle. Article 136(b) of 
Iraq's Criminal Code allows any Iraqi minister to grant complete 
immunity of prosecution to any ministry employee accused of wrongdoing. 
These factors create a difficult environment to investigate charges of 
corruption.
    Question. Have any documents in the possession of the U.S. Mission 
been altered by U.S. Government officials by removing the names of 
Iraqi leaders because the documents implicate those leaders in cases of 
corruption?
    Answer. GAO has not investigated this issue.
    Question. Has the U.S. Mission ever retroactively classified 
anticorruption or rule of law reports after Congress has requested such 
reports?
    Answer. The U.S. Mission retroactively classified rule of law 
reports and documents GAO used as a source in our report ``Stabilizing 
and Rebuilding Iraq: U.S. Ministry Capacity Development Efforts U.S. 
Ministry Capacity Development Efforts Need an Overall Integrated 
Strategy to Guide Efforts and Manage Risk'' (GAO-08-117). We 
subsequently had to remove text and information from our unclassified 
report and reissue the report so it would remain unclassified.
                                 ______
                                 
              Questions Submitted to Claude M. Kicklighter
             Questions Submitted by Senator Robert C. Byrd

    Question. General Kicklighter, the Department of Defense, through 
the Commander's Emergency Response Program, administers the Concerned 
Local Citizen program in Iraq. Reportedly, within that program there 
are about 80,000-90,000 individuals being paid about $350 per month; 
that amounts to about $30 million in total per month. Can you tell me 
how that money is distributed and what audit controls are in place to 
ensure that each individual actually exists and receives the amount 
intended to go to them?
    Answer. The DODIG has not specifically reviewed the CERP program in 
Iraq. However, on February 28. 2007, we issued DOD IG report D-2007-
0064, ``Implementation of the Commanders' Emergency Response Program in 
Afghanistan.'' The overall objectives of the audit were to evaluate 
management's administration of the Commanders' Emergency Response 
Program (CERP), and determine whether the internal controls set up for 
the CERP in the Afghanistan area of responsibility protect DOD assets. 
We found that the Commander, Combined Forces Command Afghanistan 
established controls over the CERP; however, they were not effective in 
all cases. As a result:
  --Of the 16 pay agents, 15 did not have appropriate physical security 
        for storing cash, the sixteenth pay agent did not hold cash 
        because she is collocated with a finance office. Of the 16 pay 
        agents, 2 inappropriately disbursed cash.
  --Some of the projects we reviewed did not fully achieve the intent 
        of the CERP.
  --Weaknesses in administrative processes led to inconsistent program 
        implementation, unnecessary requirements, and insufficient 
        documentation.
    Question. General Kicklighter, do you believe that effective risk 
mitigation measures are in place to prevent the flow of funds from 
corrupt practices from reaching insurgents and militias and if not, 
what recommendations can you make to correct the problem?
    Answer. We are conducting numerous audits that review the controls 
of funds. However, those reviews examine the control of funds from the 
time the funds are appropriated until the time those funds are 
obligated and expended. When funds are provided to the Iraq Security 
Forces (ISF), we do not review controls after the transfer of the funds 
to the ISF and therefore cannot comment on risk mitigation standards 
from that point onwards. Within DOD, we have found numerous instances 
of a lack of controls over funding, especially when funds used are 
cash. There is always a high risk of corruption when dealing with cash. 
Because there is not a sophisticated financial infrastructure in Iraq, 
many transactions are conducted with cash. I do not believe we will be 
able to effectively mitigate the risks of funds from corrupt practices 
reaching insurgents and militias until there is a sophisticated funding 
infrastructure in Iraq. In the meantime, we will review cash controls 
to ensure the most effective mitigation measures possible at this time 
are in use.
    We will continue our investigative mission to identify and 
investigate corrupt practices with an anticipated result of prevent the 
``flow of funds'' to anywhere other than their intended contractual 
purposes.
    Question. General Kicklighter, how many actual Department of 
Defense audit and investigative employees, not counting contractors, 
but from the office of the Inspector General, are actually stationed in 
Iraq?
    Answer. As of March 11, 2008, the Department of Defense Office of 
the Inspector General had 5 core staff auditors and 2 agents forward 
deployed in Iraq. Three auditors are located in the International Zone 
and two are located in Camp Victory. In addition, we had 2 agents in 
Kuwait and will soon have 2 agents in Afghanistan.
    To accomplish our oversight mission, we have adopted a strategy 
that is based on maintaining the right size presence in-theater but 
which also recognizes that much of our work can be done out of Iraq. We 
have adopted an expeditionary workforce model to support efforts 
throughout all of Southwest Asia. We have 20 core staff forward 
deployed at all times. The core contingent is comprised of individuals 
serving between 6 and 12 month deployments. Expeditionary team members 
will deploy for as long as needed to complete the task, but no longer. 
The actual number of auditors, investigators, and inspectors in 
Southwest Asia and Iraq fluctuates on a daily basis depending on 
requirements.
    We are increasing our presence in Southwest Asia and currently have 
279 personnel dedicated to Southwest Asia operations and are deployable 
as mission requirements dictate. Currently we have 22 people deployed 
to Southwest Asia. Utilizing both domestic and in theater assets we 
have 28 ongoing Iraq related audits and inspections and 102 ongoing 
Iraq related investigations.
    Question. General Kicklighter, there have been reports of ``ghost 
employees'' within the Ministry of the Interior that may total up to 
20-30 percent of the force. Since that ministry, ironically, executes 
the law enforcement functions in Iraq, what is the extent of the 
problem and what steps are underway within Iraq to reconcile salary 
payments with physical employees?
    Answer. The oversight responsibilities of the Office of the 
Inspector General extend to DOD appropriated funds in support of 
Defense operations to include Operation Iraqi Freedom. Our office has 
not done work regarding the employment records of the Iraq Ministry of 
Interior because our oversight authority does not include oversight of 
the Iraqi government.
    Question. General Kicklighter, has a weapons accountability system 
been established to track weapons and other military equipment 
transferred from the United States to Iraq and if so, have weapons 
provided for prior to 2005 been located or otherwise accounted for?
    Answer. The objectives of the DODIG Assessment Team on Munitions 
Accountability are to:
  --Determine whether the DOD currently has adequate accountability and 
        control over U.S.-purchased munitions before formal turnover to 
        the ISF.
  --Determine whether the ISF currently has adequate accountability and 
        controls over U.S.-purchased munitions under their control.
    The team is chartered to review the current situation on the ground 
not what occurred in the past. The team concluded the DOD and the ISF 
currently have a system in place for controlling and accounting for 
weapons and ammunition being supplied to the ISF; however, there still 
remains work to be done. As the U.S. supply of munitions to Iraq shifts 
to Foreign Military Sales (FMS), the United States needs to put the FMS 
program on a war-time footing while also assisting the ISF in building 
their logistics sustainment base.
  --FMS systems and processes provide increased levels of 
        accountability and control over munitions.
  --U.S. military transition teams are working with their Iraqi 
        military and police counterparts to strengthen ISF logistics, 
        and related munitions accountability and control.
  --Both these actions are underway and will greatly enhance the 
        control and accountability of munitions.
    The assessment report is currently being staffed for management 
comments. In addition, the assessment team deployed back to Iraq to 
review the status of corrective actions taken on the report's 
recommendations, and assess the current status of munitions control and 
accountability, FMS, and the Iraqi Logistics Sustainment base. They 
will return to Washington, DC in the late May/early June timeframe.
    Question. General Kicklighter, does the Iraqi Ministry of Defense 
have a physical inventory system in place to track physical assets 
purchased with or provided by the United States or Development Fund for 
Iraq funds and have there been problems with inventory loss?
    Answer. We have not and do not look at the methodology of tracking 
assets after those assets have been transferred to a foreign 
government. Report No. D-2008-026, ``Management of the Iraq Security 
Forces Fund in Southwest Asia--Phase III,'' November 30, 2007 found 
that the Multi-National Security Transition Command--Iraq had problems 
accounting for physical inventory purchased with ISF funds before the 
transfer of those assets to ISF. Those problems are currently being 
addressed and we plan to conduct a follow-up audit early next year.
    Question. General Kicklighter, in hearings last month, we learned 
that as of December 31, 2007, there were 163,540 private contractors in 
Iraq, and that 17 percent of those were Americans, with the rest being 
local nationals or Third Country Nationals. At the same hearing, 
Ambassador Kennedy testified that security contractors in Iraq receive 
an average of $1,222 per day, for an average yearly salary of $445,000. 
Recognizing that not all contractors are security personnel; can you 
provide the Committee with the total amount spent on contractors last 
year and the average daily and annual compensation rates for different 
categories of contract jobs?
    Answer. We have not conducted an audit that would validate the 
number of private security contractors, the nationality breakdown of 
security contractors in Iraq, or average salary of security contractors 
in Iraq. We plan to begin an audit of private security contractors used 
in support of OIF. The overall objective will be to determine whether 
private security services contracts have clearly defined requirements 
and whether those requirements are being fully met by contractors. 
Specifically, we will determine whether contract statements of work 
were clear, definite, and certain, and whether the contract terms and 
conditions for private security services were clearly defined in the 
contracts. Within the scope of that audit, we can address the average 
salaries of security contractors working on the judgmental sample of 
contracts that will be reviewed but will not be able to project those 
amounts to all Iraqi contracts. We simply do not have the resources to 
review all security contracts in Iraq or a statistical sample of Iraqi 
security contracts.
    The Federal Procurement Data System shows that in excess of $315 
billion was spent on DOD contracting in fiscal year 2007. We are not 
aware of a reliable source for average daily and annual compensation 
rates for different categories of contract jobs.
    Question. General Kicklighter, some previous testimony from former 
private contractors and other sources suggests that Third Country 
Nationals hired as private contractors in Iraq by U.S. companies are 
not always paid or provided benefits on par with those provided to 
American contract personnel. Do you have any evidence to prove or 
disprove these reports and if true, is that payment differential 
reflected in the payments to the contracting company?
    Answer. We have heard allegations on this issue but have not 
conducted audits or planned to conduct audits that would address the 
issue. This is not an area that contains clear criteria on the 
responsibilities of contractors. Many legal issues regarding 
international law and labor rates would have to be addressed before a 
substantive audit could be conducted. In addition, because many Third 
Country Nationals are hired as subcontractors, the legal issue of 
contract privity between DOD and the subcontractors would be a major 
issue.
    Question. General Kicklighter, do you believe that effective risk 
mitigation measures are in place to prevent corruption in the use of 
U.S. and Iraqi funds, and if not, what recommendations can you make?
    Answer. Effective risk mitigation requires a combination of efforts 
to include the oversight provided by the DOD IG, GAO, State IG, USAID 
IG, and SIGIR. In addition to the oversight community, the honesty and 
integrity of the federal and contractor workforces also play a large 
role in effective risk mitigation. However, no matter how many controls 
are put in place corruption will still exist. It is our mission to work 
with the resources provided by the Congress to assess risk and place 
our resources in areas that help to minimize that risk.
    Section 842, ``Investigation of Waste, Fraud, and Abuse in Wartime 
Contracts and Contracting Processes in Iraq and Afghanistan,'' of the 
Act (Public Law 110-181) requires the DOD IG to conduct, ``thorough 
audits . . . to identify potential waste, fraud, and abuse in the 
performance of--Department of Defense contracts, subcontracts, and task 
and delivery orders for the logistical support of coalition forces in 
Iraq and Afghanistan.'' As a result of these concerns and due to the 
complex operational environment in Southwest Asia, we have established 
an Office for Strategic Plans and Operations for the Global War on 
Terror (GWOT). The new component is focused on GWOT and other high 
value, high visibility assessment missions. The establishment of this 
new office will supplement the efforts currently being undertaken by 
DOD IG components. This initiative is part of an ongoing Organizational 
Development Project that was initiated in January 2008 to assess 
corporate-level strategies, organizational alignments, geographical 
locations, personnel development, business practices, culture, and 
performance to best position the DOD IG to execute current, emerging 
and future missions.
    Another initiative was the realignment of internal core mission 
assets within the Office of the Deputy Inspector General for Auditing 
to form the Joint and Overseas Operations Directorate to support 
Southwest Asia audit operations. This expeditionary audit directorate 
was formed in November 2007 to address corruption, fraud, waste, and 
abuse in Southwest Asia; combat illegal and improper expenditures; and 
improve accountability of DOD resources that support operations in 
Southwest Asia. To accomplish this mission, we expanded our presence in 
Qatar, Afghanistan, and Iraq; established a field office in Korea; and 
are establishing field offices in Germany and Hawaii.
    Senate Report 110-77, to accompany the National Defense 
Authorization Act (NDAA) for Fiscal Year 2008, addresses funding for 
the Office of the Inspector General, Department of Defense (DOD IG) 
stating that, ``The committee is concerned that funding levels for this 
important independent audit and investigative function is not keeping 
pace with the demands for Inspectors' General services in the global 
war on terror.'' The report also directs the IG to, ``provide to the 
defense committees, by March 31, 2008, an analysis of the current and 
future personnel, organization, technology, and funding requirements of 
the OIG'' to include, ``a comprehensive and detailed master plan, with 
annual objectives and funding requirements, that provides the fastest 
possible increase in audit and investigative capabilities.'' This 
report was provided to the congressional Defense oversight committees 
on April 14, 2008.
    Based on our analysis, the funding requirement for the DOD IG for 
fiscal year 2009 is $25.24 million above the level provided in the 
President's budget for fiscal year 2009. That $25.24 million is 
directly linked to requests by Congress to increase both audit and 
investigative efforts regarding Southwest Asia and the Global War on 
Terror. In fiscal year 2009, we estimate that the President's budget 
will allow for an increase to 1,474 FTEs. This would account for 37 of 
the 481 FTEs outlined in our DOD IG growth plan through fiscal year 
2015, closing the gap for the desired end state to 444 FTEs, but 
falling 134 short of the 1,608 FTEs that we require for fiscal year 
2009 in order to provide the fastest possible increase in our audit and 
investigative capabilities. Additional fiscal year 2009 funding will 
allow us to continue to increase our oversight efforts related to GWOT, 
contract management and acquisitions; and would support DOD IG audits 
conducted in response to Sec. 842 of the fiscal year 2008 NDAA, as 
mentioned above.
    This growth, if supported by Congress, will enable us to perform 
our statutory duties and to provide additional coverage of the high 
risk and high impact areas of DOD contracting, major weapons system 
acquisitions, information technology, information security, human 
capital, charge cards, personnel and medical readiness, financial 
management, and homeland security. It will also allow for enhanced 
investigative support to Joint Terrorism Task Forces (JTTFs) located 
throughout the United States; establishment of new offices in 
geographic locations that have been previously neglected due to limited 
staffing; enhanced investigative support to the GWOT; and increased 
emphasis on investigating crimes in areas that have dropped in priority 
and have been largely neglected because of the new demands of today's 
environment.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein

    Question. On March 6, 2008, the Boston Globe ran a story entitled 
``Top Iraq Contractor Skirts U.S. Taxes Offshore.'' In the story, the 
authors noted that ``than 21,000 people working for KBR in Iraq--
including about 10,500 Americans--are listed as employees'' of two 
shell companies for KBR registered in the Caribbean. The story also 
states: ``the Defense Department has known since at least 2004 that KBR 
was avoiding taxes by declaring its American workers as employees of 
Cayman Islands shell companies, and officials said the move allowed KBR 
to perform the work more cheaply, saving Defense dollars.'' However, 
the article estimates a roughly $500 million shortfall in lost Social 
Security and Medicare revenue as a result of the practice.
    Many employees did not know that they were employed by the shell 
companies, not KBR, and those employees have lost eligibility for 
Social Security, unemployment, and other government services as a 
result of these practices. KBR has amassed an estimated $16 billion in 
contracts in Iraq. On March 13th, Senator John Kerry (D-MA) introduced 
legislation to treat foreign subsidiaries of U.S. companies performing 
services under contract with the United States government as American 
employers for the purpose of Social Security and Medicare payroll 
taxes.
    Can you comment on whether or not the DOD Inspector General's 
office has reviewed this issue and any findings that have come as a 
result of the review? If not, does the office plan to review the issue?
    Answer. The Department of Defense Office of the Inspector General 
has not reviewed this issue. Under current law the practice is not 
illegal; however, the Defense Contract Audit Agency (DCAA) has 
conducted audits to ensure that contractors have not billed government 
contracts for taxes that were not incurred.
    As you know, recently both the House and Senate have introduced 
legislation, which if enacted would prevent this type of situation from 
reoccurring. H.R. 5602 and S. 2775, sponsored by Senator Kerry, ``Fair 
Share Act of 2008,'' have been introduced to amend the Internal Revenue 
Code of 1986 and the Social Security Act to treat certain domestically 
controlled foreign persons performing services under contract with the 
United States Government as American employers for purposes of certain 
employment taxes and benefits.
    Question. With the multitude of reports raising questions about 
KBR's performance as a contractor in Iraq, why is the U.S. military 
still doing business with the company?
    Answer. The decision to contract with a specific company is made by 
the Department and the DOD IG has no input into that decision.
    The Federal Acquisition Regulations state that the prior 
performance of a company must be considered when awarding a new 
contract. However, there are no specifics on how to judge the prior 
performance of a large defense contractor. KBR has not been debarred 
from Federal contracts and absent such action, there is no reason for a 
contracting officer not to consider KBR proposals for contract awards.
    Question. What actions has the Pentagon taken to address past 
problems with KBR and can you name the instances where the DOD has 
cancelled a large contact in Iraq due to mismanagement?
    Answer. The DODIG has no information on this topic and no knowledge 
of any instances of DOD cancelling a large contact in Iraq due to 
mismanagement because we have not conducted audits involving either of 
these situations.
                                 ______
                                 
              Questions Submitted to Stuart W. Bowen, Jr.
             Questions Submitted by Senator Robert C. Byrd

    Question. Mr. Bowen, we have heard accounts which suggest that 
during the Coalition Provisional Authority period, projects were paid 
in full, up front, in cash, before work was begun on projects. Is this 
true, and was it commonplace?
    Answer. From August to December 2004, the Inspector General of the 
Coalition Provisional Authority (CPA) audited the Control of Cash 
Provided to South-Central Iraq (Report Number 05-006). The auditors 
encountered instances in which one contractor was paid in full up 
front, in cash, before work was begun on projects. In that case at 
least 8 contracts worth $1,978,810 were paid in full up front. In 
addition, at least 23 grants, including 2 worth $950,000 each, were 
paid up front to the grant recipient prior to services being rendered 
or expenses incurred.
    These instances involved the use of cash from the Development Fund 
for Iraq (for the most part this money was a combination of Seized and 
Vested assets and proceeds from the sale of Iraqi oil), and not from 
U.S. appropriated funds. The instances mentioned above involved 
contracts awarded to Mr. Phillip Bloom (contractor) and paid by Mr. 
Robert Stein (CPA employee). Our investigation of this anomaly resulted 
in Mr. Bloom and Mr. Stein pleading guilty to conspiracy, bribery, and 
money laundering in connection with a scheme to defraud the CPA. Both 
are currently in prison.
    In our work to date, SIGIR has not encountered any instances 
involving U.S. appropriated funds in which contractors were paid in 
full, up front, in cash, before work was begun on projects
    During the previously-mentioned audit of the Control of Cash 
Provided to South-Central Iraq, we also encountered instances in which 
local contractors were paid half of contract amounts up front before 
work was begin on projects. This practice was commonplace in the South-
Central Region at the time. We believe that it was a factor in the 
overall poor value received for contracts awarded by the South-Central 
Region at that time.
    In our work to date, we have encountered no instances involving 
U.S. appropriated funds in which contractors were paid half of contract 
amounts up front before work was to begin on projects.
    Question. Mr. Bowen, have investigations or audits been performed 
to establish that the recipients of these U.S. funds are legitimate 
contracting entities such as builders, contractors, engineers, and so 
forth, and are such investigations standard procedure?
    Answer. SIGIR has not performed audits with the issue discussed in 
the question as a particular objective. However, in each contract audit 
we focus on potential fraud, waste and abuse. In so doing, we have not 
to date identified the conditions you describe in any of our audits.
    Question. Mr. Bowen, since the end of the tenure of the Coalition 
Provisional Authority in 2004, have investigations or audits been 
performed by U.S. or Iraqi entities to establish that the recipients of 
U.S. funds are legitimate contracting entities such as builders, 
contractors, engineers, and so forth, and if not, why?
    Answer. SIGIR established an Inspections Directorate in the summer 
of 2005 to address these and other concerns.
    As of our January 2008 Quarterly Report to Congress, the 
Inspections Directorate had visited and reported on 108 reconstruction 
sites throughout Iraq. Since then, the Inspections Directorate has 
visited an additional 10 sites and will be reporting on those sites in 
the future.
    The Inspections Directorate has assessed contracted work of U.S. 
and non-U.S. contractors, large and small contractors, contractors in 
all reconstruction sectors, as well as on-going and completed 
construction work.
    While the Inspections Directorate has found numerous instances of 
poorly designed and performed contracted work, no instances have been 
detected in which builders, contractors, engineers, and so forth were 
not legitimate entities or did not exist.
    The Inspections Directorate notes that prime contractors frequently 
subcontract a portion of project work. For example, electrical or 
plumbing subcontractors have been encountered on sites. But in such 
instances, the subcontractors have existed and been on site performing 
work. It should also be noted that contractors have been encouraged to 
use subcontractors as a means of employing larger numbers of Iraqis.
    In addition, in each contract audit we focus on potential fraud, 
waste and abuse. We have not identified the conditions described in the 
question in any of our audits.
    Question. Mr. Bowen, do you believe that effective risk mitigation 
measures are in place to control corruption in the use of U.S. and 
Iraqi funds and if not, what measures would you suggest?
    Answer. Regarding the effectiveness of risk mitigation measures, we 
need to differentiate clearly funds that are under U.S. control and 
funds that are under Iraqi control. SIGIR has testified that we have 
found little fraud when the United States has been managing its funds. 
In our audits, waste has been the much bigger problem but has 
diminished as managers have applied lessons learned (e.g., moving from 
expensive design-build cost-plus contracts to direct, fixed-price 
contracts). Nonetheless, SIGIR has identified serious lapses in U.S. 
government oversight that create a significant risk of fraud in those 
contracts.
    To mitigate the risk from corruption within the Iraqi government, 
the United States provides only small amounts of U.S. funding directly 
to Iraqis and primarily through small grants or micro-loans. 
Furthermore, when U.S. awards contracts to Iraqi entities, U.S. 
government entities maintain oversight responsibility for the 
applicable funds.
    Question. Mr. Bowen, oil production metering has been recommended 
consistently since at least March 2004. What are the obstacles to fully 
implementing a comprehensive metering system? What are the estimates of 
revenue loss due to the lack of a comprehensive metering system?
    Answer. SIGIR's Inspections Directorate has reviewed this issue in 
Baghdad and reports that the Government of Iraq (GoI) has a plan to 
implement a comprehensive metering system and is in the process of 
implementing the plan. The GoI plan calls for the acquisition of meters 
in 2007 and 2008 and installation of the meters in 2009. The Ministry 
of Finance, recognizing the significance that meters play in 
controlling the significant GoI revenue involved, has created a 
Department of Metering to administer and regulate meters.
    Obstacles to the GoI's plan include:
  --The difficulties that the GoI has in making acquisitions. In 
        reaction to allegations of corruption, the GoI has instituted 
        an extremely bureaucratic acquisition process requiring an 
        exhaustive number of approvals. This bureaucratic approval 
        process is exacerbated by the number and complexity of meters 
        required to implement a comprehensive metering system.
  --A comprehensive metering system requires accurate meters throughout 
        the entire production and distribution system. The GoI has 
        effective meters at the Al Basrah Oil Terminal (ABOT) where oil 
        produced in the south is sold. It also has effective meters at 
        the Ceyhan Facility in Turkey where oil produced in the north 
        is sold. However, it does not have effective meters to 
        determine how much oil is produced or whether oil is being lost 
        or stolen as it is transmitted through dozens and dozens of 
        processing points and hundreds of miles of pipelines to 
        refineries or to the ABOT and Ceyhan sales facilities. To 
        effectively control its oil, the GoI needs accurate meters at 
        each of its Gas Oil Separation Plants, pumping stations, 
        pressure monitoring stations, pipe connections, refineries etc.
  --The meters that are currently in use by the GoI are manual, not 
        electronic meters. The manual meters require that GoI personnel 
        visit remote locations to obtain meter readings. In Iraq this 
        is an inherently dangerous practice. Equally, if not more 
        importantly, the manual readings do not provide the real time 
        information that electronic meters would provide and that is 
        needed throughout the system to detect leaks, thefts of oil, 
        and malfunctioning equipment that result in loss of oil as it 
        flows through the system. The GoI needs to implement its plan 
        to acquire new electronic meters and tie them into central 
        control facilities.
  --The GoI has to acquire, keep calibrated, and protect hundreds of 
        expensive meters. As previously noted the meters are at remote 
        locations subject to tampering, theft and destruction.
    Without an effective metering system, it is not possible to 
estimate the loss of revenue to the GoI. The GoI only knows how much 
oil it is selling, it does not have accurate information on the amount 
of oil it produces, uses internally, or loses due to leaks, inefficient 
processing, and malfunctioning equipment.
    Question. Mr. Bowen, is there reason to believe that smuggled and 
or stolen oil resources might have been diverted to militias or other 
insurgent forces?
    Answer. I testified before the Committee that ``. . . corruption 
has afflicted the Iraqi oil sector, particularly up at the Baiji 
refinery, with respect to the smuggling of refined fuels. . . . I know 
that that continues to be a problem today, based on my recent visits 
with Iraqi authorities.'' The smuggling and corruption problems often 
involve the use or threat of violence and, although we do not have 
specific findings, it is possible that such resources might have been 
diverted to militias or insurgents not part of Iraq's security forces. 
Oil is a commodity that has been relatively easy for criminals to 
acquire illicitly and dispose of.
    Question. Mr. Bowen, Prime Minster Maliki last year ordered Iraqi 
security forces, backed up by U.S. forces, to replace the security 
force at the Baiji refinery with a new civilian force. Reportedly, 
corruption is ``down significantly.'' Can you further characterize this 
situation, in terms of production increases or significant reductions 
in the volume of fuel being diverted to insurgents, or if not, why not?
    Answer. Assessing the security situation or diversion of assets to 
insurgents is beyond the scope of SIGIR's legislative authority. I do 
not have any additional information beyond what I provided in response 
to question 6.
    Question. Has a system that electronically tracks funds and 
projects been established and fully implemented in Iraq or to what 
degree is it in place?
    Answer. DOD agencies in Iraq track funds and monitor the status of 
their projects in the Iraq Reconstruction Management System (IRMS); the 
Department of State and U.S. Agency for International Development 
monitor contract status in their own internal systems. The need to 
track such information was recognized in 2004 when the then-existing 
Project and Contracting Office (PCO) initiated an information 
technology management reporting system. By mid 2005, however, the 
system was only partially operational and not being utilized by all of 
the agencies receiving amounts from the Iraq Relief and Reconstruction 
Fund account. In response, in September 2005 the U.S. Army Corps of 
Engineers, Gulf Region Division (GRD) and PCO officials recommended 
consolidating information from multiple sources into a single database, 
namely the IRMS. This system is in place today. Nevertheless, SIGIR 
reported in April 2006 that agencies inputting the data lacked internal 
controls to ensure the accuracy of the data they were providing, and 
civilian agencies maintain their own data systems. An audit that will 
be released this quarter looking at Terminations for Convenience and 
Terminations for Default will also address ongoing shortfalls in the 
electronic tracking of projects and U.S. funds for Iraq Reconstruction.
    Question. Mr. Bowen, do you know what the unreconciled difference 
is between the $13 billion in Coalition Provisional Authority project 
money, money from U.S. taxpayers, provided to the Iraqi government and 
evidence of project completion?
    Answer. In January 2005 SIGIR reported that the Coalition 
Provisional Authority (CPA) internal controls over approximately $8.8 
billion in Development Fund for Iraq (DFI) monies disbursed to Iraqi 
ministries through the CPA's national budget process failed to provide 
sufficient accountability for the use of those funds. These monies were 
not U.S. taxpayer funds--they were Iraqi funds in the hands of CPA 
officials.
    Question. Mr. Bowen, is there evidence that any Coalition 
Provisional Authority funds or resources purchased with these U.S. 
funds were diverted to private or insurgent use? Can you provide 
details or estimates?
    Answer. SIGIR's investigative work involving CPA funds was 
initiated as a result of the Audit work performed under the ``Audit of 
Cash Controls Over Disbursing Officers in Southern Iraq,'' Audit Number 
D2004-DCPAAF-0034. These funds were Development Fund for Iraq (DFI) 
funds, that is, they were Iraqi funds in the hands of CPA officials. 
(We are not aware that any of those funds have been diverted to 
insurgents.)
    SIGIR's investigative work involving these CPA funds resulted in 
the following indictments and convictions:
  --On February 2, 2006, Robert Stein, the former CPA Comptroller and 
        Funding Officer in Hilla, Iraq, pleaded guilty to conspiracy, 
        bribery, money laundering, possession of machine guns, and 
        being a felon in possession of a firearm. Stein was the primary 
        co-conspirator with Philip Bloom, funneling numerous fraudulent 
        contract payments to Bloom in exchange for kickbacks and 
        bribes. Stein also admitted to facilitating the purchase and 
        possession of at least 50 weapons, including machine guns, gun 
        barrel silencers and grenade launchers with misappropriated CPA 
        funds. On January 29, 2007, Stein was sentenced to nine years 
        in prison and three years of supervised release. Additionally, 
        he was ordered to pay $3.6 million in restitution and forfeit 
        $3.6 million in assets.
  --On March 9, 2006, Philip Bloom, a U.S. citizen, who resided in 
        Romania and Iraq, pleaded guilty to conspiracy, bribery, and 
        money laundering in connection with a scheme to defraud the 
        CPA. Bloom admitted that from December 2003 through December 
        2005, he, along with Robert Stein and numerous public 
        officials, including several high-ranking U.S. Army officers, 
        conspired to rig bids for federally-funded contracts awarded by 
        the CPA-South Central Region (CPA-SC) so that all of the 
        contracts were awarded to Bloom. The total value of the 
        contracts awarded to Bloom exceeded $8.6 million. Bloom 
        admitted paying Stein and other public officials over $2 
        million from proceeds of the fraudulently awarded contracts and 
        an additional at least $2 million in stolen money from the CPA. 
        On February 16, 2007, Bloom was sentenced to 46 months in 
        prison and two years of supervised release. Additionally, he 
        was ordered to pay $3.6 million in restitution and forfeit $3.6 
        million in assets.
  --On August 4, 2006, Faheem Mousa Salam, an employee of a government 
        contractor in Iraq, pleaded guilty to a violation of the 
        Foreign Corrupt Practices Act for offering a bribe to an Iraqi 
        police official. Salam is a naturalized U.S. citizen employed 
        by Titan Corporation and was living in Baghdad, Iraq. According 
        to court filings, Salam offered a senior Iraqi police officer 
        $60,000 for the official's assistance with facilitating the 
        purchase by a police training organization of approximately 
        1,000 armored vests and a sophisticated map printer for 
        approximately $1 million. On February 2, 2007, Salam was 
        sentenced to three years in prison, two years of supervised 
        release and 250 hours of community service.
  --On August 25, 2006, Bruce D. Hopfengardner, a Lieutenant Colonel in 
        the United States Army Reserve, pleaded guilty to conspiracy to 
        commit wire fraud and money laundering in connection with the 
        Bloom-Stein scheme. In his guilty plea, Hopfengardner admitted 
        that while serving as a special advisor to the CPA-SC, he used 
        his official position to steer contracts to Philip H. Bloom, a 
        U.S. citizen who owned and operated several companies in Iraq 
        and Romania. In return, Bloom provided Hopfengardner with 
        various items of value, including $144,500 in cash, over 
        $70,000 worth of vehicles, a $2,000 computer and a $6,000 
        watch. Hopfengardner and his coconspirators laundered over 
        $300,000 through various bank accounts in Iraq, Kuwait, 
        Switzerland and the United States. Finally, Hopfengardner 
        admitted that he stole $120,000 of funds designated for use in 
        the reconstruction of Iraq from the CPA-SC and that he smuggled 
        the stolen currency into the United States aboard commercial 
        and military aircraft. On June 25, 2007, Hopfengardner was 
        sentenced to 21 months in prison followed by 3 years supervised 
        release, and ordered to forfeit $144,500.
  --On February 7, 2007, U.S. Army Colonel Curtis G. Whiteford, U.S. 
        Army Lt. Colonels Debra M. Harrison and Michael B. Wheeler and 
        civilians Michael Morris and William Driver were indicted for 
        various crimes related to the Bloom-Stein scheme in Hilla, 
        Iraq. Whiteford, who was Stein's deputy in the comptroller's 
        office, was charged with one count of conspiracy, one count of 
        bribery and 11 counts of honest services wire fraud. Harrison, 
        at one time the acting Comptroller at CPA-SC who oversaw the 
        expenditure of CPA-SC funds for reconstruction projects, was 
        charged with one count of conspiracy, one count of bribery, 11 
        counts of honest services wire fraud, four counts of interstate 
        transport of stolen property, one count of bulk cash smuggling, 
        four counts of money laundering and one count of preparing a 
        false tax form. Wheeler, an advisor for CPA projects for the 
        reconstruction of Iraq, was charged with one count of 
        conspiracy, one count of bribery, 11 counts of honest services 
        wire fraud, one count of interstate transport of stolen 
        property and one count of bulk cash smuggling. Morris, who was 
        alleged to have worked for Bloom as a middle-man in the 
        criminal scheme, was charged with one count of conspiracy and 
        11 counts of wire fraud. Driver, who is Harrison's husband, was 
        indicted on four counts of money laundering. The trial for 
        Whiteford, Morris and Wheeler was scheduled to start on March 
        11, 2008; however, it has been rescheduled to begin in 
        September 2008. It is anticipated that Harrison and Driver will 
        be added to the list of defendants in this trial. In this 
        connection we note that an indictment is merely an allegation. 
        Defendants are presumed to be innocent until proven guilty.
  --On February 16, 2007, Steven Merkes, a former U.S. Air Force Master 
        Sergeant working for the Department of Defense in Germany, 
        pleaded guilty in U.S. District Court for accepting illegal 
        bribes from Phillip Bloom. Merkes accepted the bribes in 
        exchange for furnishing Bloom with sensitive contract 
        information prior to awarding contracts to Bloom. Merkes was 
        sentenced on February 16, 2007, to 12 months and one day in 
        prison and ordered to pay restitution of $24,000.
    Question. Mr. Bowen, since the end of the tenure of the Coalition 
Provisional Authority in 2004, what is the unreconciled difference 
between the project money provided to Iraq and the evidence of project 
completion?
    Answer. Very little in the way of U.S. appropriated funds have been 
provided directly to Iraq. Rather, appropriated funds have for the most 
part been allocated on specific contracts for specific projects and 
managed by one or more U.S. agency. In these cases, SIGIR has reported 
instances where monies were spent and projects were incomplete, such as 
for Primary Healthcare Centers. Recently, the United States has put in 
place a new strategy to provide modest sums of money for discrete 
purposes to local governmental entities and private individuals 
through, for example, the Commander's Emergency Response Program (CERP) 
and microloan programs. Through the end of fiscal year 2007, Congress 
had appropriated about $2.3 billion for CERP activities. The microloan 
program was funded at about $40 million as of January 2008.
    Question. Mr. Bowen, since the end of the tenure of the Coalition 
Provisional Authority in 2004, is there evidence that any U.S. funds or 
resources purchased with these funds were diverted to private or 
insurgent use?
    Answer. The United States has not turned substantial U.S. funds 
over to the Iraqi government (for example, in the form of cash 
assistance for balance of payments support, as is done for some 
countries). In almost all cases the United States purchases goods or 
services and makes them available for the purpose of developing Iraq. 
Once those goods and services are made available to the Iraqi 
government, the United States sees them as property of Iraq and as 
Iraq's responsibility to safeguard.
    SIGIR has helped the U.S. Department of Justice bring charges 
against individuals for diversion of U.S. resources to private use 
prior to those resources having been transferred to Iraq's government. 
In additional cases, we believe corruption has occurred but 
insufficient evidence was available to make a case in U.S. courts. 
Other investigations are ongoing.
    SIGIR has not determined via any of its audits that U.S. funds or 
resources purchased with these funds were diverted to insurgent use. We 
respectfully suggest this question can be best addressed by the Multi-
National Forces-Iraq and U.S. intelligence agencies. Nevertheless, a 
SIGIR 2006 audit on weapons provided the GoI with U.S. funds found that 
not all weapons were properly accounted for by either DOD or the GoI, 
which raised security concerns.\1\
---------------------------------------------------------------------------
    \1\ Iraqi Security Forces: Weapons Provided by the U.S. Department 
of Defense Using the Iraq Relief and Reconstruction Fund (SIGIR-06-033, 
October 28, 2006).
---------------------------------------------------------------------------
    Question. Mr. Bowen, has there been any effort, to your knowledge, 
from the United States to hold anyone from the Iraqi government 
accountable for the diversion or loss of U.S. taxpayers' funds since 
the beginning of the post-war period?
    Answer. We have no knowledge of any actions holding anyone from the 
Iraqi Government accountable for the diversion or loss of U.S. 
taxpayers' funds. SIGIR's investigations have primarily focused on 
contracting irregularities in connection with the expenditure of U.S. 
funds.
    Question. Mr. Bowen, do you believe that effective risk mitigation 
measures are in place to prevent funds derived from corrupt practices 
from reaching insurgents and militias, and if not, what recommendations 
can you make?
    Answer. I have repeatedly stated that corruption is tantamount to a 
second insurgency in Iraq. Moreover, the Government of Iraq is not 
poised to address the problem sufficiently as it lacks the training, 
staff, and in some cases the political will to do so. SIGIR has 
consistently addressed the need for the U.S. assistance program to 
pursue more aggressively its anticorruption program and made a series 
of recommendations to improve coordination and elevate the importance 
of its efforts. In January 2008 SIGIR reported that the Embassy had 
taken some specific steps to reinvigorate and improve the coordination 
of its diverse anticorruption activities which range from training 
judges to institutionalizing anticorruption entities such as the Board 
of Supreme Audit and Commission on Integrity.\2\
---------------------------------------------------------------------------
    \2\ U.S. Anticorruption Efforts in Iraq: Sustained Management 
Commitment is a Key to Success, (SIGIR-08-008, January 24, 2008).
---------------------------------------------------------------------------
                                 ______
                                 
           Questions Submitted by Senator Frank R. Lautenberg

    Question. What was the schedule and complete itinerary for your 
trip to Maine in January 2008?
    Answer. My schedule/itinerary for the Maine trip was as follows:

----------------------------------------------------------------------------------------------------------------
              Schedule                                                 Itinerary
----------------------------------------------------------------------------------------------------------------
     Wednesday, January 2, 2008

10:10-11:45 AM......................  USAir flight #3902 from Washington National to Portland, ME (coach class)
12:55-2:00 PM.......................  Lunch with Sen. Collins, Mac's Grill, Auburn, ME
2:15 PM-3:15 PM.....................  Maine Watch taping, MPBN Studio, Lewiston
6:30 PM-8:00 PM.....................  Dinner with Bill Beardsley, President of Husson College, Mrs. Beardsley,
                                       and Sen. Collins at Perri House Restaurant, Bangor
RON.................................  Sheraton Four Points Bangor, Bangor (government rate)

      Thursday, January 3, 2008

7:05 AM.............................  Call to WVOM Radio
7:30-9:00 AM........................  Husson Business Breakfast, Husson College, Bangor
9:30-10:00 AM.......................  Bangor Daily News Editorial Board Meeting, Bangor
12:10-1:30 PM.......................  Lunch with Senator Collins and David Offer (retired Editorial Director/
                                       contributing columnist, Kennebec Journal), Vignola's, Portland
1:45-2:15 PM........................  Portland Press Herald Editorial Board Meeting, Portland Press Herald,
                                       Portland
5:06-6:52 PM........................  Depart Portland on USAir flight #3477 from Portland to Washington National
                                       (coach class)
----------------------------------------------------------------------------------------------------------------

    Question. Please individually specify with what funds the following 
costs were paid with on the trip: Lodging, travel, and food.
    Answer. Travel and Lodging were paid with SIGIR funds.
    Food was paid for as follows:
  --(1) On January 2, 2008, I purchased my lunch.
  --(2) On January 2, 2008, the President of Husson College paid for my 
        dinner.
  --(3) On January 3, 2008, breakfast was provided at Husson College, 
        as the presentation was part of a breakfast meeting sponsored 
        by the College.
  --(4) On January 3, 2008, Senator Collins paid for my lunch.
    The meals mentioned above are the only meals I had during my trip.
    In accordance with government travel rules, I claimed a pro-rata 
share of my per diem reimbursement for the lunch I purchased on January 
2, 2008. I did not claim reimbursement from the government for any of 
the other meals.
    The other meals fall within exceptions to the gift rule 
restrictions, i.e., employees may accept meals that are provided on the 
day they are speaking in their official capacity (5 CFR 2635.204(g)(1)) 
(meal 3) and gifts of less than $20 (5 CFR 2635.204(a)) (meal 2).
    Moreover, the lunch purchased by Senator Collins (meal 4) does not 
fall under the gift statute, as she is not a prohibited source. (5 CFR 
2635.203(d)).
    Question. Did the SIGIR General Counsel clear your trip to make 
sure that it complied with the Hatch Act, 5 U.S.C.  7321-7326?
    Answer. The Designated Agency Ethics Officer reviewed the 
invitation from Husson College and the draft itinerary; he approved the 
trip. Office of General Counsel staff advised me before my trip that I 
should not participate in any political activity during my visit to 
Maine, pursuant to Hatch Act requirements. My activities were analyzed 
by Office of General Counsel staff after my return, and I was advised 
that there were no Hatch Act violations.
    Question. Have you debriefed the SIGIR General Counsel on your 
activities during the trip to verify that you complied at all times 
with the Hatch Act and other applicable laws? If not, will you?
    Answer. Upon my return from Maine, I reported on my activities to 
SIGIR's Office of General Counsel and, specifically, that I did not 
engage in any political activity during the trip. I provided specific 
information about the trip to the Designated Agency Ethics Officer to 
ensure compliance with ethical restrictions regarding gifts. SIGIR's 
Office of General Counsel advised that there were no violations of the 
Hatch Act.
    Question. Who informed you of the opportunity to speak at Husson 
College?
    Answer. Senator Collins.
    Question. Who invited you to speak at Husson College?
    Answer. I received a written invitation from William H. Beardsley, 
President of Husson College.
    Question. What newspaper editorial boards did you speak with on the 
trip?
    Answer. Bangor Daily News and The Portland Press Herald.
    Question. Who invited you to speak before those editorial board(s)?
    Answer. The boards' invitations were conveyed from Senator 
Collins's staff to my staff.
    Question. Were you asked to speak to other members of the media? If 
so, by whom?
    Answer. Yes. Senator Collins' staff conveyed invitations to my 
staff for me to be interviewed on ``Maine Watch'', on WVOM radio, and 
by a columnist for the Kennebec Journal.
    Question. Please identify similar domestic trips that you have 
taken during your time as SIGIR.
    Answer. I have spoken at the following colleges or universities: 
The George Washington University Law School, Washington, DC; The 
University of Texas at Austin, Lyndon B. Johnson School of Public 
Affairs, Austin, TX; St. Vincent College, Latrobe, PA; The University 
of the South, Sewanee, TN; and St. Mary's University School of Law, San 
Antonio, TX.
    In addition, I have given presentations to numerous industry and 
public interest groups.
    Question. How many speeches have you given across the country 
similar to your event at Husson College? Please provide specifics.
    Answer. See above.
                                 ______
                                 
               Questions Submitted by Senator Judd Gregg

    Question. To date, what concrete accomplishments have been achieved 
by the U.S. Mission's Anti-Corruption Working Group in combating 
corruption in Iraq?
    Answer. The Mission's Anticorruption Working Group (ACWG) is a 
coordinating entity whose function is to provide direction and strategy 
to the numerous anticorruption-related programs managed by U.S. 
agencies in Iraq. Since 2006, SIGIR has reported in several reviews 
that the ACWG has lacked sustained management commitment and oversight, 
that efforts to revitalize and coordinate U.S. anticorruption efforts 
have been largely ineffective and suffered from a lack of management 
follow-through, and that the Embassy has lacked a comprehensive, 
integrated strategy that ties anticorruption support to the overall 
strategy of the U.S. Embassy in Iraq, with metrics to measure progress. 
As of January 2008, only two of SIGIR's 12 previous recommendations to 
improve management of the anticorruption program have been implemented. 
For example, the ACWG does not maintain an adequate inventory of 
ongoing anticorruption programs nor does it have established metrics to 
evaluate results.
    In our January 2008 audit report reviewing United States Embassy's 
anti-corruption programs, SIGIR concluded that a December 2007 Mission 
plan to reinvigorate the ACWG and other anticorruption efforts appeared 
on a positive track but we cautioned that, as with previous efforts, 
the new approach needs sustained management commitment to leadership, 
additional resources, and program oversight to succeed.
    Question. Given reported infiltration of certain Iraqi Ministries 
by elements hostile to U.S. interests, is there any evidence that the 
current leadership or offices of the Commission on Public Integrity 
(CPI), the Board of Supreme Audit or respective GOI Offices of 
Inspector General have been compromised by such elements?
    Answer. SIGIR regularly meets with the leadership of the Board of 
Supreme Audit and the Commission on Integrity (COI, as the CPI is now 
known), and we have played an intermittent role in providing advice and 
direction to the several Iraqi Inspectors General. Neither the 
President of the BSA nor the Commissioner of the COI has ever evinced 
concerns about infiltration of their respective offices by elements 
hostile to the United States. Both of these entities are particularly 
receptive to U.S. support and SIGIR's relations with both have been 
exceptionally good. Unfortunately, elements hostile to the United 
States helped force out Judge Rahdi al Rahdi, the previous CPI/COI 
Commissioner. Over 30 CPI/COI employees have been killed over the past 
four years by hostile elements. The Iraqi IGs are a mixed bag, and 
SIGIR believes that there could be a potential problem with 
infiltration in the IG offices at ``Sadrist ministries'' (e.g., 
Ministry of Health).
    The U.S. Embassy in Iraq has responsibilities concerning each of 
these entities and thus a question to the Embassy staff on this issue 
could be beneficial.
    Question. How many CPI employees, including family members, have 
been murdered as a result of efforts to combat corruption in Iraq, and 
what steps are the GoI and the U.S. Mission taking to provide physical 
security for CPI employees and their family members?
    Answer. In our meetings with the CPI/COI, SIGIR has learned that 
over 30 CPI personnel and family members have been killed over the past 
five years. The U.S. Embassy in Iraq has responsibilities concerning 
each of these entities and thus a question to the Embassy staff on this 
issue could be beneficial.
    Question. What is the current role of the U.S. Mission's Office of 
Transparency and Accountability (OTA) in combating corruption in Iraq?
    Answer. The Office of Accountability and Transparency (OAT) was 
subsumed into the Anticorruption Coordination Office in January 2008 as 
part of the Ambassador's new anticorruption strategy.\1\ SIGIR reported 
that the OAT had been established to strengthen the Iraqi 
anticorruption institutions--the Board of Supreme Audit (BSA), the 
Office of the Inspector General (IG) at each ministry, and the then-
Commission on Public Integrity (CPI)--and had accomplished a number of 
noteworthy achievements. These accomplishments included: providing a 
full-time advisor for the Iraqi IGs, providing a full-time advisor for 
the Board of Supreme Audit, and assisting in the development of a 
charter for the Joint Anticorruption Council. The new Anticorruption 
Coordination Office is now responsible for all for all anticorruption 
activities.
---------------------------------------------------------------------------
    \1\ U.S. Anticorruption Efforts in Iraq: Sustained Management 
Commitment is a Key to Success (SIGIR-08-008, January 24, 2008).
---------------------------------------------------------------------------
    Question. What is the anticipated future role of OTA in combating 
corruption in Iraq?
    Answer. OAT's role is covered in our response to the question 
above.
    Question. Has the Prime Minister or any other senior Iraqi 
government official taken any action to interfere with GOI 
investigations into cases of corruption? If so, please describe in 
detail the circumstances.
    Answer. SIGIR has received reports that investigations into 
corruption allegations within the GOI have been subject to political 
influence, but we do not have definitive proof of such influence having 
been asserted. In March 2007, the Prime Minister's Office issued an 
order requiring that any proposed investigation of any GOI minister or 
former minister must first obtain the permission from the Prime 
Minister's Office before proceeding. This directive apparently is still 
in effect today. This problematic directive augments the problematic 
statute in Iraqi Law, Article 136b, which provides that any minister 
can, by fiat, exempt any ministry employee from investigation for 
corruption. The CPI/COI discussed with SIGIR the widespread use and 
abuse of this provision to protect potentially guilty ministry 
employees.
    Question. What factors limit the ability of the CPI, the Board of 
Supreme Audit, and respective Ministry IGs from investigating and 
prosecuting cases of corruption?
    Answer. There remains much to be done on the legislative front to 
ensure a harmonized set of laws under which the Iraqi government can 
effectively prosecute cases of corruption. Amending Article 136b and 
revoking the Prime Minister's March 2007 directive are two needed 
reforms. In addition to these legal challenges, there are also 
implementation and capacity challenges, e.g., ensuring that the CPI/COI 
investigators have weapons permits; ensuring that the Iraqi IGs receive 
sufficient training and resources to do their jobs; and providing the 
BSA with access to the information it needs to provide adequate 
oversight. The U.S. Embassy and international organizations, such as 
the World Bank, are working to provide technical assistance to the GOI 
to improve its investigative and prosecutorial capabilities, but more 
needs to be done. The new CPI/COI Commissioner told me during my 
February visit with him that his investigators need more training 
before they are ready to really assume responsibly for full-blown 
investigations.
    Question. Have any documents in the possession of the U.S. Mission 
been altered by U.S. Government officials by removing the names of 
Iraqi leaders because the documents implicate those leaders in cases of 
corruption?
    Answer. It has been widely reported that certain draft documents 
internal to the U.S. Embassy addressing the issue of corruption, which 
included the names of Iraqi officials, have been revised due to 
diplomatic concerns. It should also be noted that the accuracy of any 
statements contained in such documents developed by U.S. advisors is 
potentially unverifiable. SIGIR has not performed a detailed study of 
this issue, however, and is unable to speak authoritatively on all 
documents. To the extent that we review specific documents related to 
corruption in our audits, our findings are contained within our audits. 
A new audit on anti-corruption efforts will be released at the end of 
April and copies will be provided to this committee as well as to the 
other committees to which we report.
    Question. Has the U.S. Mission ever retroactively classified 
anticorruption or rule of law reports after Congress has requested such 
reports?
    Answer. SIGIR is aware of reports that draft documents were made 
available to the media and that subsequently drafts were marked as 
classified. SIGIR has not formally reviewed these incidents, however, 
and we would encourage the committee to discuss the issue with the U.S. 
Mission.
                                 ______
                                 
               Questions Submitted by Senator Larry Craig

    Question. You estimated that Iraq will have upwards of a $50 
billion windfall in the coming year, even as the Comptroller General 
estimates that Iraq spent as little as 24 percent of its capital 
project budgets and 4.4 percent of its investment budgets in 2007. As 
the United States and Iraq continue the ``Year of Transfer,'' where is 
Iraq most capable of assuming financial control of reconstruction 
projects?
    Answer. Given the current price of oil and record levels of Iraqi 
exports, the GOI is poised to realize over $60 billion in revenue for 
2008, well above the $35 billion that Iraq estimated it would receive 
when it developed its $48 billion 2008 budget. In addition, there is 
$30 billion in reserves in the Central Bank of Iraq and at least $7 
billion rolled over in unspent funds from 2007. Regarding these funds, 
there exists a continuing question about the government's capacity to 
obligate and expend that money on capital projects. There have been 
recent improvements in Iraq's procurement and contracting regulations 
aimed at enhancing the GOI's ability to invest in reconstruction. Some 
progress has been reported by U.S. officials on Iraq's willingness and 
ability to assume an increased role in funding its own needs.
    It is important to also note that SIGIR inspections and audits 
generally find that projects that are jointly funded and administered 
are better quality and have a higher sustainment probability.
    Question. If the United States began a targeted decrease in certain 
types of reconstruction funding, would the Iraqi government be able to 
balance that decrease with its own funds effectively?
    Answer. The key issue is one of unmatched priorities. The Iraqi 
government has its own internal set of priorities concerning how it 
wants to spend its money. If the United States were to cease funding a 
particular project, the Iraqi government may in principle have the 
money to take over the funding, but may not want to invest in that 
particular project. The question then becomes how strategically 
important does the United States view that project and what are the 
chances that Iraq also sees that project as strategically important.
                                 ______
                                 
           Questions Submitted to Judge Radhi Hamza al-Radhi
             Questions Submitted by Senator Robert C. Byrd

    Question. Judge Radhi, do you believe that effective risk 
mitigation measures are in place to control corruption in the use of 
Iraqi funds and if not, what actions would you suggest?
    Answer. There are effective risk mitigation measures with CPI, the 
Board of Supreme Audit and Inspectors General Offices. However, these 
agencies lack the independence mandated under Iraq's constitution. 
Furthermore, corruption mitigation requires cooperation between these 
three agencies and the various local and national government 
organizations. This cooperation allowing the three public integrity 
organizations to function effectively is largely absent at the present 
time.
    Question. Judge Radhi, do you believe that effective risk 
mitigation measures are in place to prevent funds from corrupt 
practices from reaching insurgents and militias and if not, what 
recommendations can you make to improve the situation?
    Answer. No arrangements exist to prevent funds gained through 
corrupt practices from reaching insurgents and militias. Therefore, you 
can see the Sunni insurgents and militias controlling roads in the West 
areas. They are stealing and looting Ministry of Oil trucks and 
Ministry of Trade food trucks. Likewise, you can see Shee's Militias 
smuggling in the South areas.
    Millions of dollars are stolen monthly due to smuggling according 
to our information from collation forces. My suggestion, difficult as 
it may be, is to remove weapons from militias while going through the 
lengthy process of removing sectarian influences from the Ministry of 
Interior and Ministry of Defense.
    Question. Judge Radhi, the Third Interim Report of the 
International Advisory and Monitoring Board (IAMB) on Iraq, covering 
the year 2007, notes that the IAMB is scheduled to conclude its 
oversight role of the financial positions of the Development Fund for 
Iraq (DFI) by mid-December 2008. The IAMB will hand off its oversight 
role to the Committee of Financial Experts (COFE), established by the 
Council of Ministers in October 2006. The COFE is led by the President 
of the Board of Supreme Audit and includes two independent experts 
``chosen by and reporting to the Council of Ministers.'' Based on your 
experience as the head of the Commission on Public Integrity, do you 
believe that the COFE will be able to operate effectively, 
independently, and securely in such a critical oversight position, and 
if not, what would you recommend to strengthen it?
    Answer. No. While the sectarian distribution exists, these 
oversight agencies cannot work independently. The executive branch of 
the Iraqi government consistently interferes in the duties and limits 
the authority of oversight bodies and the judiciary. Article 136 is a 
clear example of this interference.
    Question. Judge Radhi, has the United States and the international 
community put sufficient energy and resources behind the establishment 
and operation of Iraqi oversight and audit bodies and if not, what 
recommendations would you make to improve the situation?
    Judge Radhi, in previous testimony, you have obliquely referred to 
corruption with non-governmental organizations operating in Iraq. In 
your testimony before the House of Representatives last October, you 
noted that the CPI established a Directorate General for Non-
Governmental Organization Relations, ``which contacted most non-
governmental organizations in Iraq in order to motivate them to achieve 
their objectives and solve their problems honestly.'' What problems 
have you observed within the non-governmental organizations in Iraq, 
and what recommendations, if any, do you have?
    Judge Radhi, do you have any further recommendations to make in 
order to ensure the effective functioning of Iraq's oversight bodies?
    Answer. The United States and the international community put a lot 
of sufficient energy and resources behind the establishment and 
operation of Iraqi oversight and audit bodies. These audit and 
oversight bodies have hundreds of good officials who are technocrats 
and non-sectarian. These technocrats manage their work, but are 
consistently blocked and face strong interference from the executive 
government. Additionally, these oversight bodies are not able to 
function sufficiently due to the terrorists and militias. For example, 
in 2004, the president of Board of Supreme Audit was killed by 
terrorists. The professional cadre of this agency was effectively 
intimidated and sufficient transparency has not appeared in this 
agency.
    Question. Judge Radhi, during your tenure, the Commission on Public 
Integrity (CPI) uncovered $18 billion worth of misspent funds. A 
majority of these funds came from the U.S. government, with additional 
contributions from Iraq oil sales, and contributions from other 
nations. It was CPI's mission to monitor the Iraqi government's use of 
these funds and investigate any related instances of waste, fraud, or 
abuse. Is that all correct? Please explain.
    Answer. CPI's job was to follow the law as laid out in Order 55. I 
refer you to that document.
    CPI started their work in 2004. Eventually 30 teams were formed to 
investigate each specific ministry and governmental body. Our 
investigations were launched after carefully evaluating information 
provided to CPI via our corruption hotline, informants, the Inspectors 
General offices, Parliament and occasionally from citizens walking into 
our offices.
    Investigtions were evaluated and prioritized by my Director General 
for Investigations who met with me daily on the status of 
investigations and management of his department. Once CPI determined 
that a case had merit and had developed a sufficient level of evidence, 
this case was forwarded the courts. Under the Iraqi legal system, an 
investigative judge was then supposed to be assigned who was 
responsible for the court investigation, interviewing of witnesses, 
issuance of arrest warrants, and other aspects relating to the 
prosecution of a case. This investigative judge would then bring the 
corruption case before a trial judge who would determine guilt or 
innocence and penalties as appropriate. and prosecution of the case. 
had developed a case in consultation with me.
    CPI presented 3,000 cases to investigative judges. Trial judges 
presided over 250 cases. Some cases were closed by investigative judges 
citing a lack of sufficient evidence. However, the majority or cases 
were formally or informally closed by the Prime Minister. Additionally, 
many investigative and trial judges were under severe pressure and 
threats to close cases. Also many accused of crimes escaped the country 
due to the weakness, indifference or neglect by the Ministry of 
Interior.
    CPI and the judiciary received many letters and received many 
visitors from the Prime Minster's office for preventing investigations 
of current and former ministers, minister's council or presidency 
council. Ultimately, CPI's work was completely stopped preventing 
follow up on cases included the 18 billion U.S. dollars.
    Question. Judge Radhi, during its existence, the Coalition 
Provisional Authority (CPA) managed the distribution of funds for 
reconstruction contracts to the Iraqi government. An American finance 
office in the CPA handled each of the Iraqi government's requests for 
money. The CPA would often give cash to individual Iraqi ministries for 
operations and to complete reconstruction projects. Is that correct? 
Please explain.
    Answer. That is correct. CPA managed the distribution of funds for 
reconstruction contracts to the Iraqi government. CPA managed the 
distribution of funds by providing checks to the officials responsible 
in each ministry. These checks were exchanged for cash inside the CPA's 
financial office. This process resulted in a lot of money being stolen 
or handled in a corruption manners. Given the situation as it existed, 
CPI's position was that all funds should be transferred to the Ministry 
of Finance for further distribution in accordance with the schedule 
written by the Ministry of Planning.
    Question. Judge Radhi, after the CPA dissolved, the U.S. Embassy 
was responsible for distributing funds to the Iraqi government. Some of 
these funds came from the State Department's office in the U.S. Embassy 
and some came from Department of Defense's office in the Embassy. Each 
Iraqi ministry office had an American ``expert'' from the U.S. Embassy 
who served as a liaison to these offices. Is it your understanding that 
most of these experts knew that the ministries had corruption but you 
are not aware of any examples of the U.S. government cutting off funds 
to an Iraqi entity due to corruption?
    Answer. This information is correct. We did not see oversight done 
by some experts at the time the funds were distributed by the U.S. 
embassy. Some of these experts were good, others were not active, and 
the third kind would stand with the corrupted ministers.
    Question. Judge Radhi, on the last day of its existence, the CPA 
gave you funds to establish an academy to train Iraqis to investigate 
corruption, is that correct? Can you tell us how that payment was made?
    Answer. An American expert came to me at the last days before CPA 
dissolved. He informed me that $11 million was to be transferred to CPI 
to establish an academy to train Iraqis to work in corruption 
investigation. I went to the CPA financial office in the Green Zone the 
cash this check. The funds were locked in my office and I personally, 
with a team of armed guards, protected these funds until it could be 
transported and deposited in the Al-Rafideen Bank the next morning. I 
ensured that I received an accurate receipt from the bank to document 
that the entire amount was deposited. Later, the Minister's Council 
ordered the Ministry of Finance to transfer all government budgets 
containing U.S. dollars to a central fund. CPI was one of these 
ministries whose funds were taken. The Ministry of Finance refused our 
exclusion request and later refused our second request to exchange the 
same amount of funds for Iraqi dinars for the establishment of the 
Public Integrity and Ethics Institute.
    Question. During its existence, the Coalition Provisional Authority 
(CPA) managed the distribution of funds for reconstruction contracts to 
the Iraqi government. An American finance office in the CPA handled 
each of the Iraqi government's requests for money. The CPA would often 
give cash to individual Iraqi ministries for operations and to complete 
reconstruction projects. Is that correct? Please explain.
    Answer. That is correct. My understanding is that most ministries 
spent the funds illegally and in a corrupt manner.
    Question. Judge Radhi, it is my understanding you told U.S. 
officials that direct payments to the ministries and cash transactions 
were the wrong way to disburse money in Iraq. And you recommended 
instead that it was better for all American funds to go to the Ministry 
of Finance instead of directly to each individual ministry. Is that 
correct? Please explain. Do you believe the other ministries did the 
same due diligence with their cash payments? Are you aware of any 
follow-up by the U.S. government to make sure that similar steps were 
taken by other ministries? Are you aware of any oversight of CPA's 
funds once they were distributed?
    Answer. Absolutely Not. I do not believe that CPA could control or 
monitor funds after cash payments were made. If there was any 
monitoring of CPA funds, the situation only further deteriorated after 
the disestablishment of CPA.
    Question. Judge Radhi, besides Iraqi Prime Minister Nouri Al-
Maliki's continued threats of prosecution, have you or your CPI staff 
ever been threatened personally by Prime Minister Nouri Al-Maliki?
    Answer. Yes. I was personally threatened by Prime Minister Nouri 
Al-Maliki. I was personally threatened by the head of the coalition 
bloc, Sheik Jala Al-deen Al-Sagher. I was also personally threatened by 
Sabah Al-Sa'ady, a member of Al-Fadila party. Additionally, I received 
a phone threat from Sheiaa militia when we started our investigation 
into oil smuggling in Basra. Furthermore I received a direct phone 
threat from Al-Qaida. My staff received many more threats. Finally, we 
lost 32 investigators and other CPI officials.
    Question. Judge Radhi, your asylum case has been pending for over 
five months since October 3, 2007. How are you doing in the United 
States?
    Answer. I am awaiting the decision on my asylum case.
    Question. Judge Radhi, you have told us that many additional cases 
against government officials were not prosecuted because the government 
would not allow it. And that because of corruption, despite billions 
and billions of American dollars, Iraq has completed less than one-
tenth of its reconstruction projects. Is that true? Please explain.
    Answer. That is correct. An American expert came to me one day and 
asked me why I was investigating the Ministry of Defense but not 
following up the Ministry of Oil issues in Beji. He traveled to Beji 
with big convoys. We did investigate the Ministry of Oil, but how could 
I send my small number of unarmed investigator to that place?
    Question. Judge Radhi, is it true that the various militias also 
benefit from reconstruction funds, often taking resources by force? 
That in the area of Beiji, Sunni militias commandeer Iraqi government 
oil tankers and the militias then sell the oil on the black market, 
buying weapons with the proceeds?
    Answer. I simply highlight that Shia and Sunni militias benefited 
by the actions of Ziad Al-Qatan and Naier Al-Jumaily. The latter was 
the last link between Al-Qaida and the defense ministry under the 
former minister Hazim Al-Shallan. Naier Al-Jumaily, who is also related 
to the current defense ministry, transferred millions of dollars to 
Jordan and Lebanon. The current minister is there to continue what 
Hazim did.
    The Ministry of Defense purchased weapons made in 1975 with $1.6 
billion. This amount far exceeds the actual value of the weapons. One 
senior American officer correctly observed that Iraqi forces can not 
successfully fight against well armed militias with old weapons.
    The Shiaa militias do not have the same problems as the Sunni 
militias however since their leaders control the Iraqi government and 
support them with money and weapons.
    Question. Judge Radhi, is it true that millions and millions of 
dollars from the Iraqi government have been funneled to the militias?
    Judge Radhi, are there problems or corruption at the Ministry of 
Electricity? Please explain.
    The Ministry of Electricity has been given millions and millions of 
dollars but still provides less than 10 percent, maybe only 5 to 6 
percent of the country's needed electricity. Is that correct? Please 
explain.
    The Minister of Electricity, Aiham Alsammarae, did not register all 
of the funds he received, which is why the Bureau of Supreme Audit 
wrote 13 ``comments'' about him and the CPI filed a case against 
Alsammarae. When the court convicted him, the American security company 
responsible for his protection smuggled him out of the country to the 
United States. Is that correct? Please explain.
    Answer. Questions of electricity ministry.
    Three ministers led this ministry and spent billions of dollars on 
electricity. The result is no power for Iraqi citizens beyond, perhaps, 
an average of three hours a day.
    CPI received information from the Board of Supreme Audit which 
prompted CPI to start investigations against Ayham Al-Samarai and 
Muhsin Shalash. The courts prosecuted and found them guilty. Ayham Al-
Samarai escaped Iraq with the help of an American security company. 
Shalash also escaped Iraq. Both cases were referred to Interpol.
    Question. Judge Radhi, is the Minister of Finance, Bayan Jabr, 
involved in corruption? Please explain.
    Judge Radhi, does Minister Jabr also head the militant wing of the 
al-Dawa party? When the United States recommended to the Ministry that 
it set up a modern accounting system, did Jabr prevent it from being 
established and when the Iraqi parliament asked Jabr to account for 
funds from the 2007 budget, he was unable to provide accurate 
information. Is that your understanding? Please explain in as great 
detail as possible.
    Answer. Bayan Jabur the current finance minister is an engineer. A 
decision to appoint him as housing and constructor minister would 
therefore have been more understandable. His political position and his 
Sheaa abilities were paramount in being chosen for the finance position 
by the Shia coalition bloc despite not being otherwise technically 
qualified for the position.
    Ministry of Finance failed to promote of the Iraqi dinar despite 
Iraq's oil riches. They failed in adhering to a budget and in making 
that budget reflect the needs of Iraq.
    The Minister of Finance is corrupted since he couldn't give the 
parliament any reason for missing the 2007 budget. He uses his power 
instead of using his knowledge.
    One example illustrating the problems in the Ministery of Finance 
under the current minister has to do with the ``e-system.'' It is a 
good system that was brought by the Americans. It provides efficiency 
and transparency. The ministry shut down the e-system. Excuses were 
made that the system failed due to the advisor being kidnapped even 
though hundreds of people had been trained on the system.
    Finally, a huge problem occurred with a mysterious fire that burned 
all of the central bank official papers. Now nobody can explain the 
spending schedule of the Iraqi money. The fire was quickly registered 
as an accident.
    There is no integrity without transparency.
    Question. Does former Iraqi Minister of Defense, Hazim Sha'lan 
provide an example of the nature of government corruption in Iraq? 
Please explain.
    Judge Radhi, is it true that Minister Sha'lam and his friends would 
establish front companies to bid on Ministry projects. Is that correct? 
Please explain in detail.
    Judge Radhi, one example you recounted to the Committee prior to 
the hearing was the al-Ain al-Jariya (Flowing Spring) company, which 
received contracts to provide military equipment from Poland to the 
Iraqi government. The company was owned by a relative of the Deputy 
Prime Minster, Roz Nouri Shawis, and stole money from these contracts 
with the support of Ministry staff. Is that correct? Please explain.
    Judge Radhi, you also recounted that the Deputy Prime Minister's 
brother-in-law laundered the money from these transactions to banks in 
Jordan from Iraq. Millions of dollars went missing from the Ministry, 
and Sha'lan was unable to account for $4 billion worth of expenditures. 
Sha'lan was eventually charged with fraud, but fled to London before 
being prosecuted. Shal'an's former deputy is now Minister of Defense. 
Is that all true? Please explain.
    Answer. These statements are correct. Hazim Al-shalan is corrupt. 
His actions caused the loss of defense ministry money during a time 
when he should have been working to protect the Iraqi people. U.S. 
forces came to Iraq to free our people from a dictator regime. Al-Qaeda 
then fought against Iraqi and U.S. forces. While this was happening, 
defense ministry officials transferred reconstruction money to Jordan 
and Lebanon. Some of this money was transferred by Nori Shawees in his 
own brief case. The Secretary General is the brother of the vice 
president. Furthermore Ziad Al-Qatan and Nair Al-Jumaily are related to 
the current defense minister. Abdulhameed Mirza is Nori Shawes's 
brother in law. Abdulhameed helped this corruption as the Director 
General of Al-Ayeen Al-Jaria construction company. Later they rebuilt 
the scheme under the Sifeen Company. They built all these companies to 
make their defense contracts appear to be legal, while functioning as 
an intermediary between Poland and Ministry of Defense. The Ministry of 
Defense, using contracts to these companies, bought useless airplanes, 
tanks and ambulances from Hungary. The total purchase funds were 
provided in the beginning of the contracts. However, the equipment 
never received, useless or overpriced.
    The court prosecuted and found guilty 26 officials for this 
corruption. However, the Iraqi government helped them to escape the 
country. Hazim Al-Shalan is a U.K. citizen. Ziad Al-qatan he is in 
Paris living like a prince.
    It appears that the current minister of defense will finish what 
Hazim started. He formally worked as a body guard Saddam's son-in-law, 
Hussain Kamil. He spent time in jail for theft. He is totally 
corrupted.
    Question. Judge Radhi, prior to the hearing, you have told us the 
Ministry of Defense also received inferior equipment from contractors. 
There were three contracts for Iraqi Army planes, the first two for 
$113 million and the third for $170 million. General Babekar al-Zibari, 
an Iraqi Army commander, later testified that the proper planes were 
never delivered. A report issued by a technical committee in the 
Ministry of Defense stated that among other things, the company was 
delivering old tanks to the Ministry of Defense and even old planes 
from the 1960s. Is that correct? And these weapons deals were 
engineered by former Ministry of Defense procurement office Ziad 
Cattan, who has since fled the country, is that also correct? Please 
explain in as much detail as possible.
    Answer. That is correct. Babikr Zebari, as Forces General Chief, 
sent an official letter to the Prime Minster explaining this in detail 
including the names of the corrupt officials involved. This letter, 
sent in March 2008, was published on the internet.
    All what I said is notary public in the criminal court and the 
CCCI.

                            COMMITTEE RECESS

    Senator Dorgan. This hearing is recessed.
    [Whereupon, at 1:10 p.m., Tuesday, March 11, the committee 
was recessed, to reconvene subject to the call of the Chair.]


   EXAMINING THE EFFECTIVENESS OF U.S. EFFORTS TO COMBAT CORRUPTION, 
                    WASTE, FRAUD, AND ABUSE IN IRAQ

                              ----------                              


                        WEDNESDAY, JULY 23, 2008

                                       U.S. Senate,
                               Committee on Appropriations,
                                                    Washington, DC.
    The committee met at 10:40 a.m., in room SD-106, Dirksen 
Senate Office Building, Hon. Robert C. Byrd (chairman) 
presiding.
    Present: Senators Byrd, Leahy, Murray, Dorgan, Feinstein, 
Cochran, Craig, and Allard.

              OPENING STATEMENT OF SENATOR ROBERT C. BYRD

    Chairman Byrd. The committee will come to order.
    We meet, today, to examine the adequacy of Defense contract 
oversight in Iraq and Afghanistan and to hear testimony from 
the Deputy Secretary of Defense, Gordon England, Acting 
Inspector General for the Department of Defense (DOD), Gordon 
Heddell, and commanding officer of U.S. Army Materiel Command, 
General Benjamin Griffin.
    Before we begin, I wish to recognize a special observer at 
today's hearing, Mr. Michael Thibault, the co-chairman of the 
new Commission on Wartime Contracting. Co-chairman Thibault has 
a special interest in today's hearing, given his Commission's 
2-year charter to study wartime contracting in Iraq and 
Afghanistan.
    Secretary England, General Griffin, and Mr. Heddell, thank 
you for appearing before the committee today. Each of you is 
responsible for organizations charged with carrying out, 
managing, or auditing the massive contracts to companies that 
supply our forces in the field with everything from ammunition 
and fuel right down to barracks and food. These companies also 
carry out reconstruction projects throughout Iraq and 
Afghanistan.
    This is the second hearing of the full Appropriations 
Committee this year on the topic of fraud, waste, abuse, and 
corruption in Iraq and Afghanistan. In the first hearing, we 
examined the scope and the scale of the problem, which is 
appalling, frankly. Appalling. Tens of billions of taxpayer 
dollars have been lost--gone. Worse, some of those funds and 
unaccounted for weapons are believed to have made their way to 
insurgent groups that have used them against our soldiers.
    Now, Benjamin Franklin once observed that ``a little 
neglect may breed mischief.'' In this case, I'm afraid neglect 
has bred a lot of mischief.
    The Department of Defense and the Department of Justice 
have failed to aggressively investigate, and failed to 
prosecute, fraud and abuse. And I know that my colleagues have 
specific questions about specific cases. Hopefully, our 
witnesses are prepared to answer these questions fully so that 
we can learn from these specific examples how to avoid similar 
mistakes in the future.
    My own concerns include specific examples of neglect, but I 
also want to know how the system broke down, and where the 
system broke down, and how and why the oversight processes that 
were in place failed to operate.
    Now, many have rightfully blamed President Bush and 
Secretary of Defense Donald Rumsfeld and the Director of 
Reconstruction and Humanitarian Assistance for Postwar Iraq, 
Paul Bremer, for the unexpectedly difficult occupation of Iraq. 
But, Army commanders, as well as those in the other services, 
also deserve serious criticism for failing to grasp the 
strategic situation in Iraq and for failing to plan properly to 
implement the massive logistical requirements associated with 
sustained combat and postcombat operations.
    It was General Dwight Eisenhower who said, ``You will not 
find it difficult to prove that battles, campaigns, and even 
wars have been won or lost primarily because of logistics.'' 
The ability to keep troops well supplied is absolutely critical 
to every campaign.
    If appropriate plans had been in place before we went to 
war, we would not have witnessed the scramble to support our 
troops with drivers, cooks, fuel, armored vehicles, bulletproof 
vests, and other tools. Commanders in Iraq should not have had 
to invent, on the spot, the networks of assistance for the new 
Iraqi Government. Had better planning been done, we might not 
have had to sign huge, open-ended, cost-plus contracts with 
civilian companies whose eyes must always be first on profits 
and dividends for stockholders before service to the troops and 
thrift for the taxpayer.
    Because that planning was not done, we found ourselves--
and, yes, we continue to find ourselves--totally dependent upon 
profit-oriented companies for even the day-to-day basics of 
feeding and housing our troops, as well as for carrying out a 
myriad of other functions of the mission, including security. 
These kinds of contracts open the door for every manager to 
game the system in order to maximize profits. Had better 
planning been conducted, and had better oversight been 
instituted from the very beginning, we might not be holding 
this hearing today.
    Secretary England, in your prepared testimony, you focus on 
the progress that has been made. But, a report issued by the 
inspector general's office, just 5 days ago, on July 18, 2008, 
says, and I quote, that ``the DOD oversight community and the 
Government Accountability Office (GAO) continue to report that 
longstanding problems continue to hinder DOD oversight of 
contractors at deployed locations.''
    In another report, released just 2 months ago, the Defense 
Criminal Investigative Service found that there had been only 
limited review of the completeness, the accuracy, and the 
propriety of contingency payment vouchers, and that there 
existed the potential--a great potential for fraud, waste, and 
abuse.
    Now, failing to come to grips with the scope and the 
magnitude of this problem and failure to recognize the urgency 
of this problem points to a lack of leadership.
    It is evident that our oversight resources have been 
strained past the breaking point. Army contracting dollars and 
actions have increased more than 350 percent over the last 11 
years, while the contracting workforce has decreased by more 
than 50 percent. Too few auditors and too few contract managers 
are being asked to oversee too many contracts. Some individuals 
are responsible for contracts totaling in the billions of 
dollars. That's not shutting the barn door after the horses are 
gone, that's like taking the barn doors off the hinges and 
starting a stampede and saying, ``Go to it. Yeah, man.'' This 
lack of planning on the part of the services, not only puts our 
treasure, but it also put our troops, in peril.
    Too few investigators are being tasked with bringing 
perpetrators of fraud, perpetrators of waste, and perpetrators 
of corruption to justice and with recovering the billions of 
dollars that have been stolen from the American taxpayers. 
There are individuals living high on the hog, in the United 
States and in the cities of the Middle East, on these stolen 
funds.
    The Federal Bureau of Investigation (FBI) has a grand total 
of five investigators in Iraq and Afghanistan working these 
cases. Five. As a result of our hearing in March, we included a 
significant increase for FBI investigators, in the supplemental 
appropriations act, to address these problems. But, for too 
long the barn door has been wide open. This is a failure of 
leadership.
    As a result of the lack of enforcement actions, more 
individuals think that they can get away with bilking the U.S. 
Government or the Iraqi Government, embezzling funds, taking 
and making bribes, and substituting inferior goods or inferior 
workmanship, or just plain, old-fashioned stealing. This 
illegal activity takes money directly away from pressing needs 
of our troops and the needs of the Iraqi and the Afghan people.
    We need to make ``collars and dollars,'' our motto--more 
arrests, more indictments, and more funds recovered. We need to 
be more aggressive about minimizing the waste, fraud, and the 
corruption associated with these wars. If that requires a 
reallocation of resources or if it requires new legislation, I 
am certainly open to hearing from each of you about what is 
needed, as long as it results in prosecutions and the recovery 
of the hard-earned dollars that have been stolen from the 
American people.
    Members will be recognized for statements and questions for 
up to 7 minutes in order of seniority.
    I now turn to my distinguished friend and very able and 
learned colleague Senator Thad Cochran for any opening remarks 
he may wish to make.

                   STATEMENT OF SENATOR THAD COCHRAN

    Senator Cochran. Mr. Chairman, thank you very much. I'm 
pleased to join you in welcoming our distinguished panel of 
witnesses this morning. We are interested in learning more 
about what the Department of Defense and related agencies are 
doing to make sure that our contracting efforts in support of 
the global war on terrorism, and specifically our activities in 
Iraq and Afghanistan, are successful.
    The United States is engaged in a serious conflict. It's 
very different from nation-against-nation war that many of us 
grew up understanding. But, in this new era, our forces have 
had to work with emerging governments, and, in some cases, in 
the absence of governments, in countries that are besieged with 
terrorism and graft and unusual challenges. They've had to rely 
on the support of commercial vendors, in many cases, to provide 
everything our soldiers and civilian employees there need--
daily hotel, food services, even military equipment, 
maintenance services, construction assistance, transportation, 
personal security. These efforts have been carried out in a 
very dangerous area of the world, and they've been enormously 
challenging for the Department of Defense. And I think we need 
to acknowledge that right away.
    Last year, there was a report by the Gansler Commission 
that concluded--after the great struggle with the Soviet Union, 
it was assumed that Defense budgets would decrease, urgency 
would decrease, and hence, a drawdown in acquisition 
capabilities could be made. But, then 9/11 changed all that. 
The Department of Defense had to add quickly to the workforce. 
In 1990, there were 500,000 people in the Department's 
workforce for acquisition, but that has decreased by more than 
half.
    During the last few years, the need for those skills has 
grown exponentially. In fact, the Defense Department has 
executed almost 98,000 contracts in Iraq alone. There's been an 
expertise shortage. Mistakes have been made. Problems have 
arisen. A small number of people have been identified as just 
plain crooks. Some have been unscrupulous and have violated 
trust. There has been cheating of our servicemen and women. The 
American taxpayer and the citizens of our Nation, however, are 
supporting our military efforts to restore peace and 
opportunity in that troubled part of the world and to help 
protect our own national security interests in the process.
    I think the Department of Defense and the Department of 
Justice have gotten together now, trying to determine the best 
ways to root out corruption and fraud, put an end to it, 
prosecute those who have profited illegally. There's still much 
work to be done, and I'm confident we'll learn more about that 
at this hearing.
    And, for that, we're grateful for your willingness to be 
here, the work you're doing, and we are anxious to hear your 
views about what our Congress can do to help support you more 
fully.
    You know, our committee was scheduled to mark up two fiscal 
year appropriations bills tomorrow, as well as a second 
supplemental bill. We need to do our work, too. And we are now 
learning that that's been put off, postponed indefinitely. 
Markup has been canceled. I don't want to change the topic for 
debate today, but I need to express my personal disappointment 
that we're not meeting in this committee to do our work, as we 
were scheduled to do tomorrow. Bills that we were supposed to 
mark up, very important to our Nation's well-being and to the 
success of our efforts in the war on terrorism.
    But, I am, again, grateful for the witnesses being here and 
telling us what their reactions are to some of the things that 
are happening in the region that are under their responsibility 
and that are the subject of the hearing today.
    Thank you very much.
    Chairman Byrd. Thank you, Senator Cochran.
    I share the view that the committee ought to do its work. 
That's exactly why I insisted on the committee marking up the 
war supplemental, and we've marked up 9 of the 12 fiscal year 
2009 bills to date. That's why the committee has had multiple 
hearings on the President's budget and on his supplemental 
request and on fraud and corruption in Iraq.
    Regrettably, the House of Representatives has not passed a 
single appropriations bill. Not one. As a result, it was 
necessary to delay the Thursday markup. But, I will continue to 
work with the House and Senate leadership so that we can mark 
up the supplemental and the three remaining 2009 bills.
    I now turn to our witnesses--the Deputy Secretary of 
Defense, Gordon England, Acting Inspector General for the 
Department of Defense, Gordon Heddell, and commanding officer 
of the Army Materiel Command, General Benjamin Griffin--for 
their testimony.
    I thank each of the witnesses.
    Secretary England.

STATEMENT OF HON. GORDON ENGLAND, DEPUTY SECRETARY OF 
            DEFENSE, DEPARTMENT OF DEFENSE
ACCOMPANIED BY SHAY ASSAD, DIRECTOR, DEFENSE PROCUREMENT, DEPARTMENT OF 
            DEFENSE

    Mr. England. Chairman Byrd, I thank you for the opportunity 
to be here----
    Chairman Byrd. We've spent billions of dollars on going to 
the Moon, putting a man on the Moon, and we haven't been able 
to come up with a good public address system.
    Mr. England. Let's try again, here, Mr. Chairman, now that 
the--I think the other mikes are off here on the table. Maybe 
that'll be better and we'll be able to proceed.
    Chairman Byrd. Yes, all right.
    Mr. England. So, I do thank you, and I thank the 
distinguished members of the committee, for the opportunity to 
be here. I mean, hopefully we can answer your questions 
clearly, and also provide a perspective on an update of the 
progress, both how we got here, a little bit, and also an 
update of the progress that we're making regarding our 
contracting activities and the oversight of those activities, 
particularly in Iraq.
    As you commented, I am pleased to have my distinguished 
colleagues with me. Gordon Heddell, from the Department of 
Defense, the Acting IG, will be able, I think, as part of his 
opening statement, to give you some specific statistics, in 
terms of convictions and investigations underway, so we are 
holding people accountable. He will cover that for you.
    I'm also pleased that the commanding general of the U.S. 
Army Materiel Command, General Ben Griffin, is with us, and 
also Mr. Shay Assad, who's the Director of Defense Procurement. 
I believe those gentlemen also--we have representatives, at 
your request, from the Defense Contract Audit Agency and the 
Defense Contract Management Agency with us, so I'm hopeful we 
will be able to address your issues and concerns, many of which 
you've already raised.
    I do have a written statement for the record, and, of 
course, we're all prepared to answer your questions now.
    As you are aware, and as you commented, the Department has 
struggled with our expeditionary contracting and the oversight 
of that contracting. Our expeditionary contracting overseas--in 
this case, specifically, in Iraq--we have struggled with that. 
And by way of perspective, since January 2003 we've obligated 
approximately $71 billion through those contracts. And, as was 
commented, there's been 98,000 expeditionary contract actions 
since 2003. And, unfortunately, this extraordinarily large 
volume of activity was not anticipated. The Department's 
hindsight today is much better than was its ability to predict, 
back in 2003, not to mention, of course, that much of this work 
was performed in a war zone, a dangerous and a very difficult 
environment.
    Now, that said, the Department takes our contract 
accountability and contract oversight responsibilities very 
seriously. Multiple Department of Defense (DOD) agencies have 
engaged in literally thousands of aggressive reviews, audits, 
and oversight, and, in so doing, they have, indeed, uncovered 
instances of fraud and abuse. Those reviews have also led to 
recommended meaningful corrective actions, coupled with holding 
people accountable, and along with structural organizational 
changes. Now, many of those changes are centered in the Army 
and in our agencies, and you'll be hearing about them during 
this hearing.
    Now, the Department will continue to improve the 
effectiveness and the efficiency of our contracting across the 
entire enterprise, but I do need to comment that it will take 
time to rebuild our acquisition and contracting workforce. As 
was commented, these personnel were dramatically reduced during 
the 1990s--some by congressional direction; I expect, some from 
Department initiatives. And these professional personnel are 
hard to replace. It's a lengthy training time involved to bring 
them up to their professional status. So, even today, it will 
likely take a few more years before all of these critical 
skills are fully replenished.
    Looking back, we have learned that there are many demands 
on an expeditionary force. As you will recall, many of the 
discussions regarding length of deployments and dwell times for 
our military, well, those same considerations are applicable to 
our military and civilian contracting personnel. A deployable 
rotational force presents unique challenges and significantly 
more personnel than was anticipated back in 2003.
    Now, the Department is certainly wiser today. We have 
benefited from our own experience, from independent studies, 
and from the results of the thousands of audits that I 
mentioned earlier. And I can assure you that we will continue 
to be aggressive in the pursuit of excellence, and, as you 
said, we owe no less to the American people.
    Now, yesterday was another step forward in this process. 
Yesterday, I did have the pleasure and opportunity to swear in 
the new special inspector general for Afghanistan 
reconstruction, Major General Arnie Fields, United States 
Marine Corps (retired). I'm confident Arnie Fields will help to 
do in Afghanistan for the Departments of Defense and State what 
Stu Bowen has been able to accomplish over the past several 
years in Iraq as part of his special investigative status.
    So, Mr. Chairman and members of the committee, I do thank 
you for your support of the outstanding men and women who wear 
the cloth of our Nation, and their families. I also want to 
thank the people who deployed, and who are deployed today, who 
do this contracting work for America. While the Department has 
problems with some of its processes, we are extraordinarily 
grateful to the brave men and women who deploy to Iraq to 
accomplish this very difficult mission.
    And so, I do look forward to your questions, and hopefully 
we can provide some more visibility during this hearing, Mr. 
Chairman and members.
    Chairman Byrd. Thank you.
    [The statement follows:]

                  Prepared Statement of Gordon England

    Chairman, Members of the Senate Committee on Appropriations, we 
deeply appreciate your concern and steadfast support of our military 
and welcome the opportunity to appear here today to provide an update 
on progress and improvements being made to the oversight of defense 
contracts for Operation Iraqi Freedom (OIF). We are pleased to report 
that while much work remains to be completed, meaningful progress has 
been made.
    This is now the ninth congressional hearing in which the Department 
has participated on this subject, in addition to five briefings and six 
interviews. Additionally, the Department has submitted almost 250,000 
pages of documentation to the various oversight committees. This 
committee is to be commended for the extraordinary amount of time and 
attention you have given to this very important issue.
    We're delighted to have with us Department of Defense Acting 
Inspector General Gordon Heddell, Commanding General, U.S. Army 
Materiel Command, General Ben Griffin, and Director of Defense 
Procurement, Acquisition Policy and Strategic Sourcing, Mr. Shay Assad. 
Also, at the request of this committee, I'm joined by representatives 
from the Defense Contract Audit Agency and the Defense Contract 
Management Agency.
    In addition to this statement for the record, the DOD Acting 
Inspector General, Mr. Gordon Heddell will be submitting a copy of the 
Department of Defense Inspector General's (DOD IG) Report No. D-2008-
086, summarizing 302 Operations Enduring and Iraqi Freedom-related 
audit reports and testimonies issued by the Defense oversight 
community--including the DOD OIG, the Army Audit Agency, the Naval 
Audit Service, the Air Force Audit Agency, the Special Inspector 
General for Iraq Reconstruction (SIGIR), and the Government 
Accountability Office (GAO)--beginning fiscal year 2003 through fiscal 
year 2007.

                   OVERSIGHT OF DOD CONTRACTS FOR OIF

    Since January 2003, DOD has obligated over $450 billion in support 
of OIF \1\. The majority of these funds have been spent on non-contract 
related items, such as personnel costs. However, of this total amount, 
approximately $78.8 billion has been obligated through 103,000 contract 
actions.\2\ The Department of Defense (DOD) has obligated over 90 
percent of these funds--roughly $71 billion--through nearly 98,000 
contract actions.
---------------------------------------------------------------------------
    \1\ Source: Defense Finance and Accounting Service, Cost of the 
Global War on Terror Monthly Report as of May 2008.
    \2\ Contract actions include: contract awards, modifications, and 
purchase/delivery orders above $25,000.
---------------------------------------------------------------------------
    Obviously, the volume and complexity of contracts have increased 
with the war, and DOD takes the accountability and oversight of these 
contracts very seriously. The Department's approach has been to conduct 
and support thorough reviews and investigations of programs and 
operations, to rapidly identify problem areas, and develop and 
implement improvement plans. As such, multiple DOD agencies have 
engaged in aggressive reviews and oversight, uncovering instances of 
fraud, waste, and abuse--as well as recommending corrective actions. 
Since the start of the war in 2003, the Defense oversight community and 
GAO have performed over 300 audits related to the Global War on Terror 
(GWOT). To date, DOD has implemented or is in the process of resolving 
most of the more than 980 proposed recommendations. In addition, the 
largest DOD audit operation--the Defense Contract Audit Agency (DCAA) 
has performed in excess of 2,500 GWOT-related contract audits, taking 
exception to $12 billion as either not acceptable or not supported. The 
monetary result has been savings and restitutions in excess of $1.3 
billion.

            DEPARTMENT OF DEFENSE INSPECTOR GENERAL'S REPORT

    The DOD IG's report summarizes 302 reports and testimonies issued 
by the Defense oversight community and GAO, detailing the systemic 
challenges that have been identified, and prospectively summarizing 
corrective actions taken and still pending, as well as other management 
initiatives taken or underway that impact DOD operations supporting 
Operation Enduring Freedom (OEF) and OIF.

                 SYSTEMIC CHALLENGES BY FUNCTIONAL AREA

    The DOD IG's report categorizes the systemic challenges into four 
areas: Contract Management, Logistics, Financial Management, and Other.
    Contract Management--the Defense oversight community and GAO all 
reported on the challenges DOD has experienced with the lack of 
adequate oversight over contractors in both OEF and OIF.
    Logistics--the Defense oversight community and GAO all reported on 
the challenges DOD has experienced with the logistics operations 
(accountability and visibility of assets, properly equipping forces, 
etc.) supporting OEF and OIF.
    Financial Management--DOD experienced numerous challenges in 
providing accurate and reliable cost reporting for OEF and OIF 
operations.

              SYSTEMIC CHALLENGES ACROSS FUNCTIONAL AREAS

    Aside from challenges in each functional area, the DOD IG's report 
also identified common challenges across functional areas. 
Specifically, training and policy and procedure challenges were 
identified in more than one of the functional areas: Contract 
Management, Logistics, and Financial Management.

                            DOD INITIATIVES

    The Department has initiated many actions to address contract-
related challenges in OEF and OIF. These initiatives included 
establishing and revising guidance, fielding a new contractor 
accountability system, adding new contingency contracting training at 
DOD academic institutions, and looking at contracting challenges 
through commissions and task forces. Additional details are available 
in the DOD IG report.

                    DOD AUDIT COMMUNITY INITIATIVES

    The Defense oversight community has also instituted its own 
initiatives to address the challenges presented to DOD in OEF and OIF 
operations. These initiatives include focused workforces, focused 
coordination groups, and comprehensive and coordinated oversight plans 
in response to statutory requirements. Additional details are available 
in the DOD IG report.

                  DEFENSE CONTRACT AUDIT AGENCY (DCAA)

    DCAA is an integral part of the oversight and management controls 
instituted by DOD to ensure integrity and regulatory compliance by 
contractors performing on government contracts. DCAA's services include 
audits and professional advice to acquisition officials on accounting 
and financial matters to assist them in the negotiation, award, 
administration, and settlement of contracts. Decision-making authority 
on DCAA recommendations resides with contracting officers within the 
procurement organizations who work closely with DCAA throughout the 
contracting process.
    DCAA is the largest DOD audit operation and has, on average, 24 
temporary duty personnel stationed in Iraq and Kuwait. To carry out its 
audit mission, DCAA established an office in Iraq in May 2003 and 
performs Iraq reconstruction audits at over 60 CONUS office locations. 
DCAA anticipates completing nearly 400 audits in fiscal year 2008, 
using approximately 100 work-years, to support Iraq Reconstruction 
efforts.
    As mentioned earlier, to date, DCAA has performed in excess of 
2,500 GWOT-related contract audits, taking exception to $12 billion as 
either not acceptable or not supported. As of March 30, 2008, DCAA is 
responsible for auditing contracts at 105 contractors. These 
contractors hold 226 prime contracts with obligated funding of over $51 
billion. The monetary result has been savings and restitutions in 
excess of $1.3 billion.

       SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION (SIGIR)

    The SIGIR, was created by Congress to provide oversight of the Iraq 
Relief and Reconstruction Fund (IRRF) and all obligations, 
expenditures, and revenues associated with reconstruction and 
rehabilitation activities in Iraq. SIGIR oversight is accomplished via 
independent audits, field inspections, and criminal investigations into 
potential fraud, waste, and abuse of funds.
    Currently, SIGIR has 13 auditors (5 additional auditors are in-
processing), 5 inspectors (3 additional inspectors are in-processing), 
and 4 investigators (1 additional investigator is in-processing) in 
Iraq. To date, SIGIR has produced over 230 audits and inspections that 
have uncovered instances of waste and inefficiency.
    SIGIR auditors report on every major fund supporting the Iraq 
reconstruction program including the Commanders' Emergency Response 
Program (CERP), IRRF, Iraq Security Forces Fund (ISSF), and Economic 
Support Fund (ESF). SIGIR inspectors also travel across Iraq to provide 
on-site reports of project progress.
    SIGIR made the following recommendations in its Contracting Lessons 
Learned Report to improve contingency contracting:
  --Explore the creation of an enhanced Contingency Federal Acquisition 
        Regulation (CFAR). SIGIR observed that agencies have developed 
        agency specific regulations implementing the government wide 
        Federal Acquisition Regulation (FAR).
  --Pursue the institutionalization of special contracting programs 
        such as the CERP which SIGIR noted before have unique roles in 
        post conflict reconstruction.
  --Include contracting and program management staff at all phases of 
        planning for contingency operations.
  --Create a deployable reserve corps of contracting personnel who are 
        trained to execute rapid relief and reconstruction contracting 
        during contingency operations.
  --Develop and implement information systems for managing contracting 
        and procurement in contingency operations.
  --Pre-compete and prequalify a diverse pool of contractors with 
        expertise in specialized reconstruction areas.
actions stemming from sigir contracting lessons learned recommendations
    SIGIR recommendations were key to informing the development of 
updating Emergency Acquisition guidance issued by the Office of 
Management and Budget Office of Federal Procurement Policy in May 2007. 
The guide is designed to help agencies prepare the acquisition 
workforce for emergencies and includes a number of management and 
operational best practices that should be considered in planning 
related to contingency operations, anti-terrorism activities, and 
national emergencies. SIGIR lessons learned directly contributed to the 
development of the guide.
    In addition, the recently passed fiscal year 2008 Supplemental 
Appropriations bill includes three provisions requiring improvements in 
Iraq reconstruction programs that were recommended in SIGIR Audits, 
namely: Improvements in Asset Transfer processes and coordination with 
GOI, provisions to strengthen development and implementation of a 
comprehensive anti-corruption strategy, and development of a longer-
term strategy to guide the future of Provincial Reconstruction Teams in 
Iraq.

                       GANSLER COMMISSION REPORT

    On September 12, 2007, the Secretary of the Army established an 
independent Commission on Army Acquisition and Program Management in 
Expeditionary Operations, headed by former USD (AT&L) Jacques Gansler. 
Dr. Gansler released the Gansler Commission Report on November 1, 2007.
    Subsequently, the Department, led by Under Secretary of Defense 
(AT&L), established the DOD Task Force for Contracting and Contract 
Management in Expeditionary Operations to pursue the Commission 
recommendations so that future military operations achieve greater 
effectiveness, efficiency, and transparency. The DUSD (A&T) then 
established a Steering Committee of Senior Leaders from OSD, the 
Military Departments, the Joint Staff, and the JCC-I/A to provide 
visibility, oversight, and to ensure timely completion of Task Force 
initiatives. The Task Force evaluated the applicability of the 
recommendations and developed long-term, enterprise-wide solutions. 
Today, in order to maintain the momentum achieved to date, the Steering 
Committee continues to oversee and monitor the work of the Task Force. 
Also, to ensure accomplishment of the stated efforts/milestones, the 
Task Force is exchanging information every two weeks on the current 
status of efforts, roadblocks to accomplishment, and changes in 
reported estimated completion dates.
    DOD and the Army reported to Congress on June 2, 2008, providing 
implementation plans and status for the recommendations--many of them 
long-term efforts--provided in the Gansler Commission Report. To date, 
DOD and the Army have completed almost half of the 40 total 
recommendations, including the addition of military and civilian 
structure and senior leadership oversight. Recommendations being 
implemented include the following:
  --On January 30, 2008, the Army decided to establish a new two-star 
        level Army Contracting Command under the Army Materiel Command. 
        The new Command (Provisional stood-up March 31, 2008) includes 
        two subordinate commands:
      --Expeditionary Contracting Command
      --Mission and Installation Contracting Command
  --The Army established a new task force on February 29, 2008 to 
        insure full analysis and fielding of long-term solutions to 
        Army contracting. The work of this Task Force is ongoing and 
        will continue as part of the Army Contracting Campaign Plan.
  --The Army conducted an intensive review of more than 18,000 contract 
        actions executed in Kuwait from 2003-2006 resulting in the 
        settlement of claims that saved the Government over $10.4 
        million.
  --AMC deployed a team of contracting professionals to review 
        contracts at the U.S. Contracting Command Southwest Asia-Kuwait 
        issued between 2003 and 2006 to determine if there may be any 
        additional fraudulent activity. Several contract actions were 
        referred to the Army CID for further evaluation.
    Progress towards completing the remaining Gansler Report 
recommendations is ongoing, including some recommendations requiring 
Congressional action, such as the authority to acquire products and 
services produced in a contingency theater of operations outside the 
United States.
               defense contract management agency (dcma)
    DCMA's mission is to perform Contract Administration Services for 
DOD, other Federal Agencies, foreign governments, and authorized 
international organizations. As the eyes and ears of the Department in 
contractor facilities, and as a Combat Support Agency, DCMA is 
responsible for ensuring the integrity of the government contracting 
process and providing a broad range of acquisition management services. 
DCMA services include acquisition planning support, contract 
management, quality assurance and product acceptance, engineering 
support services, software acquisition management, and property 
management. DCMA's contract management mission provides acquisition 
life-cycle support to our military services worldwide, as well as 
contingency contract support in Iraq and Afghanistan.
    In fiscal year 2008 alone, DCMA has conducted over 14,500 on-site 
quality assurance visits in Iraq and Afghanistan, discovering 13,000 
quality defects and issuing 128 corrective reports.
    Based on recommendations by the Gansler Commission, DOD is re-
examining DCMA's staffing to determine if they are appropriately 
resourced to manage the current level of activity and their expanded 
role in support of contingency contracting.

                EXCELLENCE IN THE PURSUIT OF PERFECTION

    There is one point that I would like to emphasize in this statement 
for the record. The Department of Defense, consisting of our military 
Services and inter-agency and industry partners, constitutes one of the 
largest and most complex enterprises in the world. So, despite our best 
efforts, it is inevitable that problems will occur and people will make 
mistakes--intentionally or otherwise. Nevertheless, our goal is to 
achieve excellence in the pursuit of perfection. So, we very much 
appreciate the many, dedicated people who spend countless hours 
carefully performing audits to help identify issues and problems that 
must be resolved and recommending actions to be taken. Without 
question, the audit process makes our system better.
    We also appreciate the hard work of the hundreds of people who 
administer contracts on behalf of the Department of Defense. These 
individuals have a responsibility to serve the warfighting needs of our 
men and women in uniform, while protecting the best interests of the 
American taxpayers. By having DOD auditors work in partnership with 
these contracting officers as they negotiate, administer, and settle 
contracts we're better able to ensure all charges and claims are valid.

         COMBATING CORRUPTION, WASTE, FRAUD, AND ABUSE IN IRAQ

    Unfortunately, in an imperfect world--there will be people who will 
attempt to abuse the system through fraud, corruption, theft, or other 
criminal behavior. But, what is important is that the Department has a 
system and a process in place that ensures we are alerted to any 
violations and we are able to identify, prosecute, and convict the 
offenders.
    Investigations of possible offenses are conducted by DOD IG's 
Defense Criminal Investigative Service (DCIS) and partnering federal 
enforcement agencies, including Air Force Office of Special 
Investigations (AFOSI), Army Criminal Investigation Command (CID), U.S. 
Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF), FBI, 
Immigration and Customs Enforcement (ICE), IRS-CID, Naval Criminal 
Investigative Service (NCIS), SIGIR, USAID-OIG, and USDA-OIG.
    In total, since May 2003, there have been over 160 criminal 
investigations resulting in 22 indictments, 32 informations, and 32 
convictions. 124 of those investigations are currently ongoing within 
DOD IG and its partner enforcement agencies. The majority of 
investigations were performed jointly with other enforcement agencies, 
including Army CID and SIGIR.
    In accordance with Generally Accepted Government Auditing 
Standards, DCAA auditors have a responsibility to refer matters that 
raise a reasonable suspicion of fraud to the appropriate investigative 
agency. DCAA takes this responsibility very seriously and has 
established comprehensive procedures to report all potential instances 
of fraud. In addition, DCAA auditors support fraud investigations. 
During the first nine months of fiscal year 2008, DCAA auditors were 
involved in 84 completed investigations which resulted in DOD 
recovering $97 million.
    While the cases of fraud found in Iraq have been deplorable, their 
discovery and the subsequent indictments and convictions of offenders, 
sends a clear message that abuse of this kind will not be tolerated.

                               CONCLUSION

    Overall, the many lessons learned in the areas of human capital 
management, contracting and procurement, and program and project 
management have led to significant process and organizational 
improvements across the Department.
    On today's modern battlefield, ``contracting'' has clearly become 
one of many Battlefield Operational Systems. Improving the quality of 
this system is not just the responsibility of contracting officers, 
auditors, and investigators; rather it's the responsibility of all 
officers and military planners. To this end we are placing increased 
emphasis in our schools on every officer's knowledge of and 
responsibility for ensuring a quality contracting system.
    DOD has increased oversight and accountability of deployed 
contractors and project requirements in expeditionary operations. The 
formation of the Joint Contracting Command-Iraq (JCC-Iraq) has provided 
a centralized point for the oversight of $13 billion in hard 
construction contracts and several billion more in non-construction 
spending that was part of the Iraq Relief and Reconstruction Fund. 
Other contractor-related initiatives have included establishing an 
Executive Director for LOGCAP--a more than $30 billion Services 
program--to provide program management oversight of logistical support. 
In an effort to expand transparency, the Department has also granted 
SIGIR direct access to JCC-Iraq's electronic contractual documents, 
thus allowing for real-time review and oversight of contractual 
actions. In February 2007, I--as Deputy Secretary of Defense, 
established the Cost of War Senior Steering Group to oversee the timely 
resolution of policy, system, and procedural issues that impact the 
reporting of the cost of war. The objective is to improve the 
credibility, transparency, and timeliness of Cost of War reporting, to 
include the Commanders' Emergency Response Program (CERP). The 
Department has also deployed finance support teams to assist forward-
deployed DOD elements, and we're reviewing and revising our federal 
financial management regulations to ensure proper and sufficient 
oversight and accountability of funds.
    The Department continues to strive for excellence. In pursuit of 
this goal, the Department has made meaningful progress in efforts to 
address the challenges posed by oversight of defense contracts. We will 
continue to make improvements to ensure better effectiveness, 
efficiency, and accountability of resources and efforts across U.S. 
forces.
    Chairman, Members of the Committee, thank you again for your 
continued and generous support of the outstanding men and women of our 
armed forces and their families. We look forward to your questions.

    Chairman Byrd. Mr. Heddell.

STATEMENT OF HON. GORDON S. HEDDELL, ACTING INSPECTOR 
            GENERAL, DEPARTMENT OF DEFENSE
ACCOMPANIED BY MARY UGONE, DEPARTMENT OF DEFENSE

    Mr. Heddell. Yes, sir, Mr. Chairman and distinguished 
members of this committee. Thank you for the opportunity to 
appear before you this morning.
    My name is Gordon Heddell, and I am, as of last week, the 
Acting Inspector General for the Department of Defense.
    The magnitude and complexity of the Department of Defense 
requires nothing less than a full-time effort. We are in a time 
of war, and our work not only saves taxpayer dollars, but also, 
and much, much more importantly, the lives of U.S. 
servicemembers.
    The Department of Defense Inspector General has the primary 
responsibility within the Department of Defense for providing 
oversight of programs and appropriated funds. We spearhead the 
DOD oversight community in auditing, investigating, and 
inspecting accountability processes and internal controls. We 
work in close partnership with other oversight organizations, 
such as the Government Accountability Office, the Special 
Inspector General for Iraq Reconstruction, the Department of 
State, and the U.S. Agency for International Development.
    The global war on terror, especially operations in 
Southwest Asia, continues to be a top priority of the DOD 
inspector general. We have 238 ongoing or completed projects 
that provide oversight of various functions and activities, 
such as acquisition, contracts and contract fraud, readiness, 
logistics, funds management, accountability, theft, corruption, 
and intelligence efforts.

                              IG STRATEGY

    We have adopted an expeditionary workforce model to support 
efforts throughout Southwest Asia. We have core staff forward 
deployed to our field offices in Iraq, Afghanistan, Qatar, and 
Kuwait.
    Expeditionary team members deploy to complete reviews. The 
number fluctuates on a daily basis depending on requirements. 
During April, May, and June, we had an average of 55 personnel 
in theater supporting Operation Iraqi Freedom (OIF) and 
Operation Enduring Freedom (OEF), and at one point during May, 
we had over 100 personnel in theater. As inspector general, I 
will evaluate our current and planned staff levels for our 
presence in Southwest Asia, and will make adjustments as 
necessary.
    The goals of our expeditionary model are to minimize 
disruption to the warfighter, facilitate timely reviews and 
reports, and minimize risk to personnel.
    We have completed, or are conducting, audit oversight 
efforts that cover approximately $158.9 billion related to DOD 
efforts in Iraq. Currently, we have 38 ongoing Iraq-related 
audit projects reviewing mission-critical support functions.
    As of June 30, 2008, the Defense Criminal Investigative 
Service (DCIS) had 124 ongoing investigations related to 
Southwest Asia. These investigations involved 286 subjects. 
Thirty-two of these DCIS investigations have been adjudicated, 
resulting in 22 Federal criminal indictments, 32 Federal 
criminal informations, and 32 felony convictions. The 
adjudications have resulted in 54 years confinement, 44 years 
probation, debarment of 10 individuals and four companies, and 
suspension of 28 persons. The U.S. Government has accepted 
three settlement agreements, received $13.5 million in 
restitution, levied $374,125 in fines and penalties, received 
$1.76 million in forfeitures, and seized another $2.65 million 
in assets.

                              SECTION 842

    On June 18, 2008, my office released the Comprehensive 
Audit Plan for Southwest Asia. The plan was facilitated by the 
DOD IG Joint Planning Group Southwest Asia, and includes the 
individual audit plans of my office and the inspectors general 
of the Department of State and USAID, as well as the Special 
Inspector General for Iraq Reconstruction, the Army Audit 
Agency, the Air Force Audit Agency, and the Defense Contract 
Audit Agency. The audits in the plan will help to identify 
abuses and defects in contracts, systems, and processes. The 
plan will be updated on a periodic basis.

                    LESSONS LEARNED AND INITIATIVES

    On July 18, 2008, we issued a reported entitled 
``Challenges Impacting OIF and OEF Reported by Major Oversight 
Organizations Beginning in Fiscal Year 2003 Through Fiscal Year 
2007.'' We compiled 302 reports and testimonies, given or 
issued, by the Defense oversight community and GAO.
    Our analysis identified that, over the course of OIF and 
OEF, the Department of Defense experienced recurring challenges 
in contract management, logistics, and financial management.
    We also captured many of the initiatives that DOD has 
underway, such as issuing updates to the Federal acquisition 
regulations and DOD policies regarding the oversight of 
deployed contractors, increasing the oversight of contractors 
performing logistical support work, deploying Defense finance 
and accounting service personnel to Southwest Asia to support 
personnel in financial operations, and assessing which business 
operations can be removed from in theater.
    I would like to submit these two reports for the record.
    In closing, thanks to your budgetary support, we are able 
to dedicate more resources to fight waste, fraud, and abuse. 
The office is on a firm footing to provide the necessary 
oversight. We look forward to working with this committee, and 
we will continue to keep Congress and our leadership fully and 
promptly informed.
    Thank you for the opportunity to appear before the 
committee today to address our ongoing oversight work regarding 
Iraq.
    Chairman Byrd. Thank you.
    [The information follows:]
                Prepared Statement of Gordon S. Heddell

    Mr. Chairman, Senator Cochran, and distinguished members of this 
committee, thank you for the opportunity to appear before you this 
morning and address corruption, fraud, waste, and abuse in Iraq. This 
testimony will cover the accomplishments of the Department of Defense 
Office of the Inspector General (DOD IG) and the other DOD 
organizations that have the mission to combat illegal and improper 
expenditures and to improve accountability of DOD resources that 
support operations in Iraq. Since February 2003, the United States has 
obligated an estimated $435 billion in support of Operation Iraqi 
Freedom \1\. The U.S. military presence in Iraq is aimed at providing a 
secure environment which will enable the Iraqi people to establish a 
stable government that upholds the rule of law and good governance. 
Corruption undermines the efforts of both the Iraqi people to establish 
effective institutions of government and undermines the United States 
ability to support this effort.
---------------------------------------------------------------------------
    \1\ Source: Defense Finance and Accounting Service, Cost of the 
Global War on Terror Monthly Report as of May 2008.
---------------------------------------------------------------------------
    As this committee knows, the DOD IG has the primary responsibility 
within the Department of Defense for providing oversight of defense 
programs and funds appropriated to the Department at home and around 
the world, to include Southwest Asia (SWA). In this role, the DOD IG 
office oversees, integrates, and attempts to ensure there are no gaps 
in the stewardship of DOD resources. We spearhead the DOD oversight 
community in auditing, investigating, and inspecting accountability 
processes and internal controls, in areas such as acquisition, 
contracting, logistics, and financial management. Collectively, the 
community has dedicated over 470 auditors and over 190 investigators 
that have reviewed a wide range of issues pertaining to SWA. We also 
work in close partnership with other oversight organizations, such as 
the Government Accountability Office (GAO), the Special Inspector 
General for Iraq Reconstruction (SIGIR), the Department of State, and 
the U.S. Agency for International Development (USAID). In addition, we 
provided the core staff for the Coalition Provisional Authority IG, and 
later assisted the stand-up of the SIGIR. Since 2003 the DOD IG has 
provided 141 full or part-time personnel in support of both 
organizations.
    Adequate management controls and oversight to verify that proper 
safeguards are in place and working as intended are essential in the 
fight controls are severely lacking or proper oversight is minimal 
create opportunities for corruption, fraud, waste, and abuse. 
Additionally, individuals must be held accountable for violating laws 
and regulations and for mismanagement of DOD resources.

                              OIG STRATEGY

    To accomplish its oversight mission, the DOD IG has adopted a 
strategy that is based on maintaining the optimal presence in theater, 
but which also recognizes that much of our work can be done away from 
the war zones. This strategy minimizes disruption to the warfighter 
ensuring they can meet their primary mission to fight and win the war, 
facilitates timely reviews and reporting of results in theater, as well 
as ensures the safety of personnel. An important part of our oversight 
effort is to improve inter-service and interagency coordination and 
collaboration to minimize duplication of effort and ensure that we have 
only the staff needed in theater to accomplish the mission.
    The DOD IG has adopted an expeditionary workforce model to support 
efforts throughout all of SWA. The DOD IG has core staff forward 
deployed at all times. The core contingent is composed of individuals 
serving between 6 and 12 month deployments. Expeditionary team members 
deploy on temporary duty orders for as long as needed to complete 
reviews. The actual number of auditors, investigators, and inspectors 
in SWA fluctuates on a daily basis depending on the requirements. In 
June 2008, the DOD IG had 46 personnel in theater supporting OIF/OEF.
    To provide a more effective and efficient oversight role, the DOD 
IG has established field offices in strategic SWA locations and 
continues key placement of DOD IG personnel in SWA. Our SWA field 
offices have been extremely active in supporting the personnel deployed 
into theater as well as their own assignments being performed.
    In Iraq, our full time staff are working a joint audit with the 
Multi-National Force--Iraq Inspector General on Equipment Status for 
deployed forces. The auditors in Iraq also provide support to DOD IG 
teams based in the continental United States performing oversight 
related to Iraq such as the Munitions Assessment Team--II, management 
of contractor issues within SWA, and the validation of contracted 
construction projects.
    In Afghanistan, our full time staff have been working two audits as 
well as providing support to our other teams coming into the country to 
perform other oversight work in areas such as Afghanistan Security 
Forces Funds, Controls over Army Cash and Other Monetary Assets, 
Contractor Common Access Cards in SWA, and Medical Equipment.
    The following is a discussion of our SWA field offices.

Iraq Field Offices
    In coordination with the Commanding General, Multi-National Force--
Iraq and the U.S. Central Command, the DOD IG established field offices 
in Iraq at Camp Victory and the International Zone. The Iraq offices 
are staffed with up to five auditors at a time. In addition, the DOD IG 
has assigned auditors in Iraq to provide the Defense Criminal 
Investigative Service (DCIS) support for ongoing criminal 
investigations pertaining to contract fraud. The DCIS has established a 
permanent presence in Iraq. Two special agents are currently assigned 
to Iraq. An additional special agent has been temporarily deployed to 
support a special cell investigating issues relating to weapons 
accountability.

Afghanistan Field Office
    In coordination with the U.S. Central Command, the DOD IG 
established a field office in Afghanistan at Bagram Air Base. The DOD 
IG Afghanistan Field Office is staffed by three full time auditors, 
who, along with expeditionary teams conduct projects in Afghanistan. 
One Special Agent was deployed to Afghanistan in April 2008. Two 
additional special agents will be deployed to Afghanistan in August of 
2008. These agents will work alongside partner agencies, such as the 
U.S. Army Criminal Investigation Command and the Federal Bureau of 
Investigation to investigate fraud, waste, and abuse impacting theater 
operations.

Qatar Field Office
    The DOD IG established a field office in Qatar collocated with the 
U.S. Central Command Air Forces on Al Udeid Air Base, Qatar. The Qatar 
office provides administrative operations support to the DOD IG SWA 
field offices. The Qatar office can also conduct audits as required in 
Iraq, Afghanistan, or throughout the U.S. Central Command area of 
responsibility. Additionally, the Qatar office staff facilitates, and 
may augment, other teams that require temporary travel in theater to 
conduct specific reviews.

Kuwait Field Office
    The DOD IG field office in Kuwait is staffed by two DCIS special 
agents who are focused on contract fraud and other potential criminal 
activities in Kuwait that impact SWA efforts.

                          NEW OIG INITIATIVES

    GWOT, especially operations in SWA, continues to be a top priority 
of the DOD IG and its five operational components. Our Auditing, 
Investigations, Intelligence, Policy and Oversight, and Special Plans 
and Operations components have 238 ongoing or completed projects; 84 in 
Auditing, 124 in Investigations, 13 in Intelligence, 13 in Policy and 
Oversight, and 4 in Special Plans and Operations,. Those 238 projects 
provide oversight of various functions and activities such as contracts 
and contract fraud, readiness, logistics, funds management, 
accountability, theft, corruption, and intelligence efforts. DOD IG has 
completed or is conducting audit oversight efforts that cover 
approximately $158.9 billion related to DOD efforts in SWA.

Establishment of the Special Plans and Operations Component
    Our support to the Department of Defense involves a complex 
operational environment that includes changing requirements and the 
need for rapid and focused responses to challenging issues. As a 
result, we established a new Component, the Office for Special Plans 
and Operations (SPO) to augment the GWOT work being currently conducted 
by the DOD IG components. The new component is headed by the Principal 
Deputy Inspector General, who also serves as the Special Deputy 
Inspector General for SPO. The component focuses on the Global War on 
Terror and other high-value, high-visibility assessment missions as 
assigned. This office performs quick-assessment missions on critical, 
time-sensitive national security issues identified by the Secretary of 
Defense, Deputy Secretary of Defense, Chairman of the Joint Chiefs of 
Staff, and other members of the senior DOD leadership, as well as 
members of Congress. The goal of SPO is to focus on issues of critical 
importance to management and in a relatively short time provides 
answers to questions regarding a specific issue such as ``What is the 
status?'' and ``What is going on right now?''
    SPO was established by realigning current OIG resources and is 
composed of twenty interdisciplinary staff, evenly divided between 
civilian and military personnel. SPO has completed one project and 
currently has two others ongoing. The Inspector General and the 
Principal Deputy Inspector General have both been actively involved in 
the work being performed by SPO. The completed and ongoing work within 
the SPO directorate is discussed later in the testimony.
            Section 842
    The fiscal year 2008 National Defense Authorization Act requires 
the DOD IG and the Special Inspectors General for Iraq Reconstruction 
and Afghanistan Reconstruction to develop comprehensive plans for a 
series of audits respective to their outlined areas of oversight 
responsibilities in Iraq and Afghanistan (Public Law 110-181, Section 
842, ``Investigation of Waste, Fraud, and Abuse in Wartime Contracts 
and Contracting Processes in Iraq and Afghanistan'').
    In response to this statutory requirement, on June 18, 2008, the 
DOD IG, on behalf of the member Federal and DOD oversight agencies 
included in the plan, released the ``Comprehensive Audit Plan for 
Southwest Asia.'' The plan was facilitated by the DOD IG Joint Planning 
Group--SWA and includes the individual audit plans of my office and the 
Inspectors General the Department of State and USAID and SIGIR. It also 
includes the planned audit work of the Army Audit Agency, Air Force 
Audit Agency, and Defense Contract Audit Agency because their major 
contributions to improve the efficiency and effectiveness of support to 
the military.
    The audits in the plan will help to identify abuses and defects in 
contracts, systems and processes that can be promptly remedied. 
Developing the plan has enabled us to expand and refocus our audit 
efforts to support the war fighters. The plan will be updated on a 
periodic basis. Updates will include the Special Inspector General for 
Afghanistan Reconstruction plan.
    The group identified areas or gaps in need of audit coverage. 
Examples of areas that require audit work are: maintenance service 
contracts, security service contracts, air transportation contracts, 
DOD financial systems used in Iraq and Afghanistan, and staffing and 
training of contract oversight personnel.
    With the development of the Section 842 plan, our number of planned 
GWOT related audits increased 96 percent (from 27 planned projects in 
fiscal year 2008 to 53 planned projects identified in response to 
Section 842). However, since issuing the comprehensive Section 842 
plan, other external factors have caused us to defer nine Section 842 
projects. External factors include performing statutory requirements 
(such as the continuation of reviews on Interagency Purchases) and 
Congressional requested projects (such as DOD and DOD Contractor 
Efforts to Prevent Sexual Assault/Harassment Involving Contractor 
Employees in OEF/OIF), and performing the necessary audit work to opine 
on DOD financial statements (such as the Defense Information Systems 
Agency General Fund and Working Capital Fund Balance Sheets as of 
September 30, 2007). We deferred five planned Section 842 projects to 
assign 50 DOD IG auditors to perform the audit field work necessary to 
opine on the Defense Information Systems Agency financial statement.

Lessons Learned and Initiatives
    On July 18, 2008, the DOD IG issued a summary report entitled, 
``Challenges Impacting Operations Iraqi Freedom and Enduring Freedom 
Reported by Major Oversight Organizations Beginning fiscal year 2003 
through fiscal year 2007.'' The summary effort compiles 302 reports and 
testimonies given by the Defense Oversight Community and GAO. Our 
analysis identified that over the course of conducting Operations 
Enduring and Iraqi Freedom, DOD experienced, at times, significant and 
recurring challenges in contract management; logistics; and financial 
management. These areas have been reported as challenges within DOD 
since the early 1990s so it is not surprising that DOD is experiencing 
these challenges in Iraq and Afghanistan.
    We also have captured many of the initiatives that DOD has underway 
that we believe address the challenges DOD is experiencing in its Iraq 
and Afghanistan operations. These DOD initiatives include issuing 
updates to the FAR and DOD policies regarding the oversight of deployed 
contractors, increase in oversight of contractors performing logistical 
support work, deploying DFAS personnel to Iraq, Afghanistan, and Kuwait 
to support the deployed personnel in financial operations, and 
assessing which business operations can be removed from the dangerous 
areas in theater and be performed outside of the dangerous areas.

                         ONGOING OVERSIGHT WORK

Investigations
    The DCIS, the criminal investigative arm of the DOD Inspector 
General, has been engaged in investigating waste, fraud, abuse, and 
corruption pertaining to the Iraqi theater since the start of the war, 
and will continue to prioritize investigations involving the SWA 
theater. While the Inspector General Act of 1978 provides DCIS with 
broad criminal investigative jurisdiction regarding DOD programs and 
operations, effectively countering fraud in SWA requires the 
cooperative efforts of other DOD investigative agencies, Federal law 
enforcement partners, and the audit community.
    DCIS has primary jurisdiction over matters involving most contract 
and procurement actions awarded by Defense Agencies, Office of the 
Secretary of Defense components, and field activities. Additionally, 
DCIS has jurisdiction over, ``any allegations [involving DOD] that the 
IG DOD considers appropriate for investigation by DCIS.'' This broad 
authority affords DCIS the ability to easily partner with other 
agencies in an effort to protect the integrity of the entire DOD 
procurement and acquisition process--from countering fraud impacting 
initial research and development, to investigating fraud during 
contract execution, to ensuring the appropriate disposal of products no 
longer needed by DOD components. The Service-specific Military Criminal 
Investigative Organizations--the Army Criminal Investigation Command 
(USACIDC or Army CID), the Naval Criminal Investigative Service (NCIS), 
and the Air Force Office of Special Investigations (AFOSI) typically 
focus upon allegations involving the award of contract and procurement 
actions of their respective military department. Non-DOD law 
enforcement partners in Iraq include the FBI, which has overarching 
authority to investigate violations of various Federal statutes 
relating to fraud and corruption; U.S. Department of State, Office of 
the Inspector General; the SIGIR; and the USAID Office of the Inspector 
General.
    DCIS protects America's warfighters by vigorously investigating 
alleged and suspected procurement fraud, corruption, and other breaches 
of public trust that impact critical DOD programs. Our investigations 
focus on matters such as bribery, theft, procurement fraud, illegal 
receipt of gratuities, bid-rigging, defective and substituted products, 
and conflicts of interest. DCIS' investigative activities in the region 
have identified corrupt business practices, loss of U.S. funds through 
contract fraud, and theft of critical military equipment. For example, 
DCIS is a participating agency in a task force operation, initiated in 
January 2004, which investigates matters pertaining to the LOGCAP III 
contract awarded to Kellogg Brown and Root (KBR) in December 2001. This 
is a 10-year contract, administered by the Army Containment Command in 
Rock Island Arsenal, Illinois, that incorporates various task orders 
for support of Operation Iraqi Freedom. The task force is comprised of 
DCIS, FBI, Army CID, Internal Revenue Service, Defense Contract Audit 
Agency, U.S. Attorney's Office for the Central District of Illinois, 
and the Department of Justice Criminal and Civil Divisions. The task 
force is organized into five major categories: kickbacks; food service; 
reutilization of Iraq oil or RIO; qui tams; and other allegations. The 
task force has processed approximately 50 separate matters for 
investigation and initiated approximately 30 investigations resulting 
in 9 criminal indictments, 6 criminal informations, and 10 convictions. 
The convictions have resulted in approximately 6 years confinement and 
14 years probation.
    DCIS works closely with other components of the IG DOD and our 
federal and military partners to oversee ongoing operations in SWA 
relative to fraud and corruption. DCIS plays a significant and pivotal 
role with partner agencies in the National Procurement Fraud Task Force 
(NPFTF) and the International Contract Corruption Task Force (ICCTF). 
Under the auspices of the Department of Justice, the NPFTF was created 
in October 2006 to promote the prevention, early detection, and 
prosecution of procurement fraud nationwide and abroad. This multi-
disciplinary and multi-agency coalition comprised of agencies from the 
Federal Inspectors General, U.S. Attorneys Offices, and Federal law 
enforcement agencies such as the FBI, has been extremely effective in 
fostering and better coordinating procurement fraud investigations.
    The ICCTF, an offshoot of the NPFTF, was formed in November 2006, 
to specifically target fraud and corruption involving SWA. The primary 
goal of the ICCTF is to combine the resources of multiple investigative 
agencies to effectively and efficiently investigate and prosecute cases 
of contract fraud and public corruption related to U.S. Government 
spending in Iraq, Kuwait, and Afghanistan. The participating agencies 
in the ICCTF are DCIS; Army CID's Major Procurement Fraud Unit; the 
FBI; the Department of State Office of the Inspector General, USAID 
Office of the Inspector General, and SIGIR. Formation of the ICCTF has 
resulted in unprecedented cooperation in detecting, investigating, and 
prosecuting corruption and contract fraud. The ICCTF established a 
Joint Operations Center (JOC) in furtherance of achieving maximum 
interagency cooperation.
    The JOC, which is located in Washington, D.C., serves as the nerve 
center for the collection and sharing of intelligence regarding 
corruption and fraud relating to funding for the GWOT. The JOC 
coordinates intelligence-gathering, de-conflicts case work and 
deployments, disseminates intelligence, and provides analytical and 
logistical support, such as laboratory services, polygraphs, and 
specialized equipment. The JOC is the vital link into the intelligence 
community and provides a repository from which to disseminate 
intelligence indicators of criminal activity. Case information and 
criminal intelligence are shared without reservation, and statistical 
accomplishments are reported jointly. The agency heads meet regularly 
to collectively provide policy, direction, and oversight.
    In addition to investigating allegations of fraud, waste, and 
abuse, DCIS launched a proactive project which will analyze over $14 
billion in payment vouchers related to U.S. Army purchases in Iraq. The 
vouchers are currently stored at the Defense Finance & Accounting 
Service (DFAS), Rome, NY. The project is being coordinated with DFAS, 
the DOD IG's Audit component, the Defense Contract Audit Agency, the 
U.S. Army Audit Agency, and the FBI. The project will attempt to 
identify fraudulent activity related to the war effort in Iraq and 
Afghanistan through data mining techniques. To date, more than 90,000 
payment vouchers, amounting to $1.5 billion, have been scanned into a 
searchable database, representing 11 percent of the total 800,000 
records that will be reviewed for fiscal completeness or propriety. The 
recent hiring of 60 temporary DFAS employees to scan documents will 
eliminate the accumulated historical records at DFAS--Rome, NY, while 
current documents are being scanned in theater. While the initiative is 
in its infancy, several questionable transactions have been identified 
and referred for preliminary review or further investigation. In 
addition to these analytical efforts to develop cases, the 
investigative team assigned to the project is also supporting ongoing 
investigations involving fraud and corruption in Iraq.
    From May 2003 through October 2004, DCIS deployed teams of two to 
three agents to Baghdad. From October 2004 to present, the DCIS 
European Post of Duty and multiple CONUS DCIS offices have conducted a 
wide variety of investigations related to Iraq and the SWA theater. In 
September 2006, DCIS re-established a permanent presence in Iraq by 
deploying four special agents to the theater--two special agents are 
currently assigned to Iraq and two special agents are assigned to 
Kuwait. A special agent has been deployed to Iraq to lead a special 
cell investigating issues relating to weapons accountability with a 
second agent identified to report in September. One special agent is 
currently deployed to Afghanistan and will be replaced by two special 
agents in August/September 2008. These in-theater agents are the 
forward-deployed elements of the 85 DCIS special agents in CONUS and 
OCONUS participating in SWA investigations.
    As of June 30, 2008, DCIS has 124 ongoing investigations related to 
SWA; 12 are being investigated by agents in theater; and 112 are being 
investigated by DCIS offices in CONUS and Germany. DCIS attempts to 
transfer investigations developed in SWA to an appropriate CONUS venue 
as soon as practical to maximize the best use of in-theater 
investigative resources and to facilitate prosecution efforts.
    As previously mentioned, investigations conducted in SWA are 
cooperative efforts. Of the 85 DCIS special agents working on SWA 
investigations, 78 special agents (CONUS and OCONUS) are jointly 
working the majority (97 percent) of these investigations in 
conjunction with one or more law enforcement partner agencies. DCIS' 
primary partner in countering DOD-related fraud in SWA is the Army 
CID's Major Procurement Fraud Unit (MPFU). The MPFU conducts 
investigations into allegations of fraud associated with the Army's 
major acquisition programs. The hiring of an additional 43 special 
agents and 5 staff has provided DCIS the opportunity to plan for 
expanded operations in theater with our U.S. Army partners.
    DCIS is currently investigating 286 subjects, both U.S. and foreign 
personnel. Thirty-two DCIS investigations have been adjudicated, 
resulting in 22 federal criminal indictments, 32 federal criminal 
informations, and 32 felony convictions. The adjudications have 
resulted in a total of 54 years confinement and 44 years probation. Ten 
individuals and four companies have been debarred from contracting with 
the U.S. Government, and twenty-eight persons have been suspended from 
contracting with the Government. The U.S. Government has accepted three 
settlement agreements, received $13.5 million in restitution, levied 
$374,125 in fines and penalties, received $1.76 million in forfeitures, 
and seized another $2.65 million in assets. Much more is anticipated as 
investigation ready for prosecution mount.
    Investigations in a war zone are affected by countless challenges, 
such as the complexity of the fraud or corruption scheme, the 
prevalence of conspiracies, the multi-national and multi-cultural 
aspect of investigations involving foreign contractors, working with 
foreign governments and foreign security forces, operational tempo 
requirements and insurgent activity, translation and evaluation of 
foreign evidence, and precautionary transportation restrictions imposed 
by the U.S. Forces. Despite these challenges, DCIS aggressively pursues 
its important mission to investigate DOD-related criminal activity 
concerning fraud and public corruption and to devote substantial 
resources to projects and investigations designed to proactively 
identify potential fraud, waste, and abuse relating to SWA operations.

                                 AUDIT

    Our expeditionary model combined with our regional strategy in 
approaching our work in Iraq raises issues that often require solutions 
at the systemic level, as already illustrated by the munitions 
assessment team findings and recommendations. Further, we continue to 
evolve our comprehensive plan for audits of contracts, subcontracts, 
and task and delivery orders in support of coalition forces in Iraq and 
Afghanistan. Given that the Army Audit Agency is focusing on the 
Commander's Emergency Response Program and contracts for basic life 
support activities and that SIGIR focus is on reconstruction contracts, 
we have begun and will to continue to conduct a series of audits and 
report on financial and contracting systems in Iraq that support 
Coalition Forces and Iraq operations including contracts for 
maintenance service, transportation, and fuel.
    Additionally, we continue to focus on the training and equipping of 
the Iraqi military and police mission, acquisitions of key operational 
support assets such as body armor, fielding of mine resistant ambush 
protected vehicles, medical equipment, use of GWOT supplemental funds, 
controls over cash, monitoring of sensitive equipment, and out-of-
country payments to name a few.
    In November 2007, we realigned internal core mission assets to 
support SWA audit operations by establishing an expeditionary audit 
division comprised of about 30 people. This audit division is 
complemented by other work conducted by U.S. based teams. In total, we 
have 218 personnel conducting audits related to Iraq. In June 2008, we 
had 32 audit personnel deployed in support of OIF/OEF.
    We have 38 ongoing Iraq-related audit projects reviewing mission-
critical support functions that directly impact the warfighter, such 
as: contract surveillance, contract payments, resetting of returning 
U.S. forces equipment, and acquisition of armored vehicles. Our audits 
also include oversight of cash and other monetary assets within Iraq 
and Afghanistan as well as the whether the funds processed through the 
foreign military trust fund are managed properly. A complete list of 
completed reports, on-going projects, and planned projects is attached 
to this statement.
    The following are examples of significant completed and ongoing 
planned audits supporting DOD SWA operations.

Completed
    Internal Controls Over Payments Made in Iraq, Kuwait and Egypt (D-
2008-098). Contract and vendor payments lacked minimum supporting 
documentation and information for proper payment. When payments were 
not properly supported, the Army lacked assurance that funds were used 
as intended. On May 20, 2008 we testified on this project before the 
Committee on Oversight and Government Reform United States House of 
Representatives.
    Management of the Iraq Security Forces Fund in Southwest Asia--
Phase III (D-2008-026). The Multi-National Security Transition 
Command--Iraq was not able to demonstrate proper accountability for and 
management of the Iraq Security Forces Fund and could not always 
demonstrate that the delivery of services, equipment, and construction 
was properly made to the Iraq Security Forces. As a result, the Multi-
National Security Transition Command--Iraq was unable to provide 
reasonable assurance that Iraq Security Forces Fund achieved the 
intended results, that resources were used in a manner consistent with 
the mission, and that the resources were protected from waste and 
mismanagement. On May 20, 2008 we testified on this project before the 
Committee on Oversight and Government Reform United States House of 
Representatives.
    Potable and Nonpotable Water in Iraq (D-2008-060). We identified 
deficiencies in water operations and government oversight at three 
contractor-operated facilities and two military-operated facilities. 
Contractors provided bottled drinking water and bulk water to U.S. 
forces. Military water purification units only provided bulk water. 
From March 2004 to February 2006, the quality of water provided by 
contractors, through treatment or distribution at three of the sites we 
visited, was not maintained in accordance with field water sanitary 
standards as specified in Department of Army guidance. Although 
required, KBR did not maintain the quality of the water it distributed 
to point-of-use storage containers at Camp Ar Ramadi, Camp Q-West, and 
Camp Victory.
    Additionally, at Camp Q-West, KBR improperly provided chlorinated 
wastewater from its Reverse Osmosis Water Purification Unit to personal 
hygiene facilities. Specifically, operators of the military water 
production sites we visited were not performing all required quality 
control tests nor did they maintain appropriate production, storage, 
and distribution records.
    Because of corrective actions taken, contractor processes for 
providing potable and nonpotable water were adequate as of November 
2006 when internal quality control procedures and DOD oversight were in 
place to provide quality assurance for the processes of water 
production, production site storage, distribution, and storage at 
point-of-use facilities. However, military water purification units at 
LSA Anaconda and Camp Ali did not perform required quality control 
tests and did not maintain appropriate records of water produced, 
stored, and issued during the period reviewed. Therefore, water 
suppliers exposed U.S. forces to unmonitored and potentially unsafe 
water. Although there was no way to determine whether water provided by 
the contractors and military water purification units caused disease, 
contractors and military units responsible for water operations must 
always ensure that water provided to the forces meets all established 
standards and is safe to use.

Ongoing
    Controls Over the Contractor Common Access Card Life Cycle in 
Southwest Asia. We have two ongoing audits related to Common Access 
Cards (CAC) issued to contractors. The first CAC audit is being 
performed in the United States to determine whether controls over CACs 
provided to contractors are in place and work as intended. 
Specifically, we will determine whether DOD officials issue CACs to 
contractors, verify the continued need for contractors to possess CACs, 
and whether cards are being revoked or recovered from contractors in 
accordance with DOD policies and procedures. The team has visited 67 
CAC-related sites in the United States.
    The second audit on the Contractor CAC lifecycle was conducted in 
Iraq, Afghanistan, Kuwait and Qatar. The objective is to determine if 
CAC issued to contractors were done in accordance with policies and 
instructions as set forth by DOD and Federal Regulations. This audit 
also includes a review of the Contractor Verification System, the 
system set forth as the DOD way of implementing Homeland Security 
Presidential Directive-12. Prior to returning to the United States, the 
staff provided memorandums to the commanders in the field addressing 
issues we found present in SWA.
    The importance of this series of reviews is to also ensure we are 
not providing contractors access to benefits that are not called for in 
specific contracts. For example, over compensating contractors by 
providing them daily expenses for basic life support items and 
simultaneously issuing them an improper CAC providing the same life 
support items for free.
    War Reserve Materiel.--From April 28, 2008 through May 30, 2008, we 
deployed an 8 person team (6 auditors and 2 investigators) to Oman, 
Qatar, Bahrain, and Kuwait to examine whether Air Force contracting 
officials managed and administered the DynCorp International War 
Reserve Materiel contract (valued at over $600 million) in accordance 
with Federal and DOD contracting policies. The War Reserve Materiel 
contract ensures U.S. Air Force Central Command readiness to support 
deployed forces by pre-positioning, maintaining, reconstituting, 
deploying and supporting war reserve materiel required to support U.S. 
Central Command operational plans and contingencies. The audit was 
initiated based on issues identified during a DCIS investigation. The 
team has visited U.S. Air Force Central Command headquarters, the Air 
Force contract oversight officials in Oman, the DynCorp program office 
in Oman, and two war reserve materiel storage facilities in Oman. 
Additionally, they visited war reserve materiel storage facilities in 
Qatar, Bahrain, and Kuwait. The team is continuing to focus on the 
administration and oversight of the contract by the Air Force.
    Medical Equipment Used to Support Operations in Southwest Asia.--
From April 23, 2008 through May 24, 2008, we deployed a four person 
team to SWA to evaluate the internal controls over medical equipment 
used to support operations in SWA. Specifically, we are determining 
whether controls are in place for acquiring mission-essential medical 
equipment and whether the recording and reporting of medical equipment 
are accurate and complete. The scope of this audit not only includes 
the medical equipment necessary for our military and coalition forces, 
but also the medical equipment necessary for detainees. During 
deployment, our auditors made site visits to medical facilities in 
Baghdad, Balad, Mosul, Al Taqaddum Iraq; Bagram, Afghanistan; as well 
as to a detainee medical facility in Baghdad, Iraq. Additionally, we 
visited medical logistics sites in Baghdad and Balad, Iraq; Bagram, 
Afghanistan, and Qatar. The team continues to work issues related to 
the audit objectives, and inconsistencies noted during site visits in 
the procurement, inventory, and maintenance processes. Additionally, we 
will focus on the incompatibility between the information systems used 
by the military departments to support the management of medical 
equipment and those processes.
    Funds Appropriated for Afghanistan and Iraq Processed Through the 
Foreign Military Sales Trust Fund Funds appropriated for Afghanistan 
and Iraq processed through the Foreign Military Sales Trust Fund.--The 
overall objective is to determine whether funds appropriated for the 
security, reconstruction, and assistance of Afghanistan and Iraq and 
processed through the Foreign Military Sales Trust Fund are being 
properly managed. Specifically, we will determine whether the transfer 
of appropriated funds from the Army's accounts into the Foreign 
Military Sales Trust Fund was properly authorized, accounted for, and 
used for the intended purpose. In addition, we will verify whether the 
appropriated funds are properly reported in DOD financial reports.
    Assignment and Training of Contracting Officer's Representatives at 
Joint Contracting Command-Iraq/Afghanistan.--This audit is being 
accomplished by our auditors forward-deployed in Iraq. The DOD IG is 
determining whether personnel assigned to the Joint Contracting 
Command--Iraq/Afghanistan as Contracting Officer's Representatives have 
the training and expertise to perform their duties. There are 
approximately 825 Contracting Officer's Representatives performing 
contractual efforts within Iraq. The audit team will review the process 
for assigning Contracting Officer's Representatives to the Joint 
Contracting Command in Iraq. We will review their records to determine 
what training they completed and whether they had prior experience as 
Contracting Officer's Representatives. The team will conduct audit 
fieldwork within the Victory Base Complex and the International Zone in 
Iraq.
    Afghanistan Security Forces Fund Phase III Air Force Real Property 
Accountability.--The initial DOD IG Expeditionary Team was in 
Afghanistan from February 23 to June 28, 2008. The team is conducting 
the third phase of a multiphase audit in response to Public Law 109-
234, which directed the Inspector General to provide oversight of the 
Afghanistan Security Forces Fund (ASFF). The objective is to determine 
whether organizations in SWA that the U.S. Central Command assigned 
with the responsibility for managing the ASFF properly accounted for 
the goods and services purchased for the Afghanistan Security Forces 
(ASF) using the ASFF and whether the goods and services were properly 
delivered to the ASF. Based out of Camp Eggers and accompanied by staff 
from the Command, the team visited forward operating bases in Bagram, 
Gardez, Herat, Kandahar, Mazir-e-Sharif and Shindan, Afghanistan. We 
reviewed construction projects from three of the five Public Laws (109-
13, 109-234, and 109-289) that appropriated about $4.7 billion to the 
ASF Fund. We reviewed 44 contract sites totaling $524.7 million. In 
addition, we reviewed the accountability of vehicles, communication 
equipment including computers and radios, and weapons. The senior U.S. 
military commanders were briefed on the preliminary findings and 
recommendations and we intend to issue the draft reports in the Fall.
    Class III Fuel Procurement and Distribution in Southwest Asia.--The 
second DOD IG Expeditionary Team is scheduled to be in SWA from August 
2008 to December 2008. The DOD IG is determining whether fuel used for 
ground operations in SWA to support Operations Iraqi Freedom and 
Enduring Freedom is procured and distributed efficiently and 
effectively. The audit team is reviewing 29 Defense Energy Supply 
Center contracts used to procure fuel in support of operations in SWA. 
The team will determine whether fuel is procured at fair and reasonable 
prices, whether fuel is distributed economically and efficiently to 
operational commands, and whether fuel supply points maintain accurate 
inventories. The team will conduct audit fieldwork in Kuwait, 
Afghanistan, Iraq and select forward operating locations.

                          POLICY AND OVERSIGHT

    Beginning in November 2003, the DOD IG assigned Policy and 
Oversight inspectors and evaluators as advisors to Iraq--first to 
augment the Coalition Provisional Authority, then to support the SIGIR 
operation, then to facilitate the Embassy's Iraqi Reconstruction 
Management Office mission, and since July 2005, to provide resources 
for the Multi-National Security Transition Command--Iraq (MNSTC-I) 
transition teams. The advisors detailed to MNSTC-I assisted the Iraqi 
Ministers of Defence and Interior to establish, coordinate and develop 
a viable, self-sustaining Inspector General system--which was designed 
to help combat corruption, fraud, waste, and mismanagement. During this 
long-term effort, the advisors facilitated training for the respective 
IG staffs and mentored their leadership in the development of operating 
policies and procedures. In addition, the Inspections and Evaluations 
Directorate established a ``Reach-Back'' office to support the in-
country advisors.
    The following are examples of significant completed and ongoing 
planned audits supporting DOD SWA operations.

Completed
    In addition to the deployment of advisors to Iraq, the Policy and 
Oversight component completed eight projects in support of the U.S. 
mission in SWA. Most of these projects were interagency engagements or 
included augmentees and subject matter experts external to the DOD IG 
organization. Overall, our partnerships with other departments and 
agencies served to promote U.S. security interests through improved 
coordination, planning, and implementation for reconstruction and 
stabilization assistance for OIF and OEF. The following project titles 
provide an overview of the scope and breadth of these completed 
assessments:
  --Interagency DOD-DOS IG Assessment of Iraqi Police Training;
  --Combined Forces Command--Afghanistan Management Decision Model [for 
        the Afghanistan National Army];
  --Evaluation of Support to Mobilized Army National Guard and U.S. 
        Army Reserve Units;
  --Interagency DOD/DOS Assessment of Afghan National Police;
  --Interagency [DOD, DOS, DOJ] Assessment of the Counternarcotics 
        Program in Afghanistan;
  --Review of the Investigative Documentation Associated with the Death 
        of Army Corporal Stephen W. Castner in Iraq;
  --Observations and Critique of the DOD Task Force on Mental Health;
  --DOD/VA Care Transition Process for Service Members Injured in OIF/
        OEF; and
  --Review of an Army investigation into a shooting by U.S. Forces in 
        Baghdad that injured a Reuter's cameraman and killed a Reuter's 
        driver.
    Overall, these reports included over 110 recommendations to improve 
DOD strategies and program processes.

Ongoing Projects
    Policy and Oversight has four ongoing projects related to DOD's 
activities in SWA and the global war on terrorism.
    Assessment of the Section 1206 of the National Defense 
Authorization Act, Global Training and Equipment Program.--Requested by 
the Joint Staff and Office of the Under Secretary of Defense for 
Policy, the purposes of this project are to examine management's 
compliance with the legislation and identify recommendations for 
program improvements. Section 1206 authorized DOD to obligate up to 
$200 million in fiscal year 2006 and $300 million annually in fiscal 
years 2007 and 2008 to help partner nations combat terrorism or to 
cooperate with the U.S. military in stabilization or other military 
operations. As of fiscal year 2007, 44 countries are participating in 
the Section 1206 program.
    Examination of Allegations Involving Outreach Efforts by the DOD 
Public Affairs Office.--The allegations were reported in the New York 
Times on April 20, 2008, and the review was requested by members of 
Congress. We are examining the allegations that the DOD Public Affairs 
Office gave special treatment to retired military personnel who 
provided media commentary on Global War on Terror policies and 
strategies. We are also investigating the allegation that these 
personnel were employed by Defense contractors and their special access 
to Pentagon leaders gave them a competitive advantage.
    Review of Contracting Actions Relating to an Electrocution Fatality 
in Iraq.--This review was requested by the Deputy Under Secretary of 
Defense for Acquisition and Technology, in response to a memo from 
Congressman Jason Altmire. The fatality occurred on January 2, 2008, 
when the soldier was taking a shower. Our review will examine the 
relevant facility management, contracting, and maintenance actions 
prior and subsequent to the electrocution. We have also reviewed 
investigations conducted by service investigative agencies into 
electrocution deaths of other service members.
    Evaluation DOD Management of Sexual Assault Complaints in Combat 
Areas.--The objectives are to determine whether DOD policies and 
procedures are adequate to respond to sexual assault complaints 
involving U.S. contractors and to ensure complaints are properly 
processed and referred for investigation.

                      SPECIAL PLANS AND OPERATIONS

    The SPO Component has completed one assessment and is currently 
working on two additional reviews. The two ongoing reviews will result 
in three separate reports. The following are descriptions of the 
completed and ongoing planned SPO work supporting DOD SWA operations.

Completed Project
    Assessment Team on Munitions Accountability I (MAT I).--From 
September 4, 2007 through October 22, 2007, the twenty-two person, 
interagency Assessment Team on Munitions Accountability deployed to 
Afghanistan, Kuwait, Qatar and Iraq to review the accountability and 
control of munitions being supplied by the United States to the Iraq 
Security Forces. While in Iraq, the team also reviewed the development 
of the Iraqi logistics sustainment base and the U.S.-managed Foreign 
Military Sales program.
    This assessment was triggered, in part, by a Hotline complaint that 
a senior U.S. Army officer was receiving illegal gratuities and 
allegations from the Government of Turkey that munitions we had 
supplied the Iraq Security Forces were finding their way into the hands 
of terrorists, insurgents and criminals in Turkey. Subsequently, the 
Secretary of Defense and Congress requested that the DOD IG review the 
current state of arms and ammunition accountability and control in 
Iraq.
    The team visited the Multinational Forces--Iraq, Multinational 
Security Transition Command--Iraq, Multinational Corps--Iraq, and 
elements of the Iraqi Ministry of Defense and the Iraqi Ministry of 
Interior. Members visited Abu Ghraib warehouse, Taji National Depot, 
Baghdad International Airport, the Baghdad Police College, the 
Logistics Management Control Center and several Iraqi Army and police 
units and installations.
    A key finding was that DOD and the Iraq Security Forces have a 
system in place for controlling and accounting for weapons and 
ammunition being supplied to the Iraq Security Forces; however, there 
still remains work to be done. As the team deployed, it out-briefed 
senior in-country leadership who initiated immediate corrective actions 
in response to the preliminary observations and recommendations. The 
team's report was signed by the Inspector General on July 3, 2008 and 
copies were provided to the Secretary, Deputy Secretary, Chairman of 
the Joint Chiefs, and Under Secretaries for Policy and AT&L. It 
included 45 recommendations, with which management concurred with 42 
(91 percent) of those recommendations. Progress has been made 
implementing all in-country recommendations.

Ongoing Projects
    Munitions Assessment Team II (MAT II).--At the request of the 
Secretary of Defense, the Munitions Assessment Team returned to Iraq 
and Afghanistan from April 5 to May 25, 2008 to conduct a six-month 
follow-up. Specifically, the team reviewed the status of corrective 
actions initiated by management in response to MAT I's preliminary 
observations and recommendations in the areas of the current status of 
munitions accountability and control in Iraq and Afghanistan, the 
Foreign Military Sales program in Iraq and Afghanistan, and the 
development of the logistics sustainment bases, including the status of 
medical logistics capability for the security forces in Iraq and 
Afghanistan. The team out-briefed senior U.S. military commanders in 
both Iraq and Afghanistan upon its departure. The team continues to 
analyze the data collected and is preparing two draft reports covering 
approximately 50 observations and more than 100 recommendations.
    Pakistan Assessment Team I.--The Pakistan Assessment Team visited 
Pakistan from April 16-26, 2008 to assess certain DOD funded programs 
supporting the Government of Pakistan. Congressional concern has been 
raised, reinforced by press reporting, that U.S. security assistance 
programs were not sufficiently well-focused to advance U.S. counter-
terrorism interests in Pakistan and its Federal Administered Tribal 
Area (FATA) along the border with Afghanistan. In response to requests 
from the Secretary of Defense, U.S. Ambassador to Pakistan, Chairman, 
Joint Chief of Staff, USD(P), USD(C), and the Commander, U.S. Central 
Command, the DOD IG deployed an assessment team to Pakistan. The team 
assessed a number of DOD funded and managed bilateral assistance 
programs that support Pakistan's security development. Specifically, 
this included Coalition Support Funds, the Section 1206 Global Train 
and Equip program, Section 1206-like Train and Equip program for the 
Frontier Corps, International Military Education and Training, Foreign 
Military Financing, Counterterrorism Fellowship Program, and 
Counternarcotics. The team also reviewed the organizational 
capabilities and structure of the Office of Defense Representative--
Pakistan, which is the umbrella organization for most DOD elements in 
Pakistan. The Secretary, Deputy Secretary and Chairman of the Joint 
Chiefs have been briefed on the preliminary findings and 
recommendations. The report is in the final stage of drafting.

                              INTELLIGENCE

    The Office of Intelligence has organized multiple, narrowly focused 
GWOT evaluation projects around one core objective. That core objective 
is to assess how the DOD intelligence community is supporting the 
warfighter in Operation Enduring Freedom and Operation Iraqi Freedom. 
The plan is dynamic and may be readily modified based on changing 
national priorities (including taskings from Congress) and the 
operations tempo in the respective areas of operation.
    We have 5 ongoing GWOT-related intelligence projects reviewing 
mission-critical functions that directly impact the warfighter, such 
as: intelligence collection activities, intelligence resources, and 
analytic and language training programs.

                         INTERAGENCY OVERSIGHT

    The DOD IG is the lead oversight agency for accountability in DOD, 
and as such, is committed to maintaining an effective working 
relationship with other oversight organizations to minimize duplication 
of efforts and to provide more comprehensive coverage. Effective 
interagency coordination, collaboration, and partnerships within the 
oversight community are essential to providing comprehensive reviews of 
wartime expenditures to identify whether critical gaps exist, and then 
to recommend actions to fix those gaps.

Southwest Asia Joint Planning Group
    The DOD IG has jointly established and chairs an interagency SWA 
Joint Planning Group that meets quarterly and provides oversight of 
fraud, waste, abuse, and criminal activities in the SWA region. The JPG 
provides a chance for collaboration and teamwork with the organizations 
engaged in this effort, including the military inspectors general and 
service auditors general, combatant commands inspectors general, the 
Defense Contract Audit Agency, the Defense Finance and Accounting 
Service, the Defense Contract Management Agency, the Inspectors General 
of State and the USAID, and the SIGIR. The mission of the JPG is to 
better coordinate and integrate oversight activities in the region. The 
SWA JPG leads the coordination and oversight required to identify and 
recommend improved mission support to military units conducting 
operations.
    In conjunction with the SWA Joint Planning Group, the DOD IG also 
participates in the Afghanistan Working Group and the Iraq Inspectors 
General Council.
  --The Afghanistan Working Group was established by the DOD IG, along 
        with the Government Accountability Office, the Department of 
        State Inspector General, and the USAID, established a working 
        group on oversight activities in Afghanistan to minimize the 
        impact on forward command operations, eradicate overlapping and 
        duplicate oversight requests, and facilitate the exchange of 
        oversight information. The DOD IG, as the Department of Defense 
        representative of the group, also incorporates the ongoing and 
        planned Afghanistan-related oversight efforts of the Service 
        Auditors General into the working group.
  --The Iraq Inspectors General Council chaired by the SIGIR, was 
        established to minimize the impact on forward command 
        operations, deconflict overlapping and duplicate oversight 
        requests, and facilitate the exchange of oversight information 
        unique to Iraq.

GWOT Cost of War Senior Steering Group
    The DOD IG is an invited observer to the GWOT Cost of War Senior 
Steering Group that DOD established on February 26, 2007, to improve 
and standardize cost of war reporting. Attending the meetings helps the 
DOD IG remain apprised of DOD efforts for cost of war reporting and 
furthers its oversight regarding financial aspects of GWOT to ensure 
timeliness and value to the DOD. DOD IG representatives attended the 
December 2007 and March 2008 meetings. In December 2007, the DOD IG was 
invited by the Under Secretary of Defense (Comptroller) to perform 
quick-look reviews of the execution of GWOT funding patterns. Our 
support efforts were included in the Comptroller overall focused 
analysis of execution of funding. According to Comptroller officials, 
Comptroller personnel now perform monthly analysis of DOD execution of 
funding and reports the results to the Comptroller. The monthly 
analysis provides timely awareness of funding trends and potential 
funding execution concerns to the attention of the Comptroller.

Panel on Contracting Integrity
    The DOD IG participates in the Panel on Contracting Integrity which 
was established under Section 813 of the National Defense Authorization 
Act for Fiscal Year 2007. The Panel is chaired by the Deputy Under 
Secretary of Defense for Acquisition, Technology, and Logistics to 
conduct reviews of DOD progress in eliminating vulnerabilities in the 
Defense contracting systems that allow fraud, waste, and abuse and 
affect Operations Iraqi and Enduring Freedom. The DOD IG representative 
is a member of the overall Panel on Contracting Integrity, a member of 
the subcommittee on Adequate Pricing, and is Chairperson of the 
Procurement Fraud Indicators subcommittee. The Procurement Fraud 
Indicators subcommittee is identifying what these indicators are and 
how they should best be addressed and used for the contracting/
acquisition workforce.

Joint Investigative Partnerships
    DCIS works jointly with other federal law enforcement agencies, 
participates in various working groups and has agents assigned to FBI 
Joint Terrorism Task Forces throughout the nation. Examples of 
partnerships between DCIS and other agencies include:
  --Joint cases with the Federal Bureau of Investigation; Immigrations 
        and Customs Enforcement; United States Secret Service; United 
        States Marshals Service; Alcohol Tobacco and Firearms; United 
        States Postal Inspection Service; and various IGs including 
        National Aeronautics and Space Administration; General Services 
        Administration; Health and Human Services; Veterans Affairs; 
        Department of Transportation; Department of State; Housing and 
        Urban Development; and the Military Criminal Investigative 
        Organizations including the United States Army Criminal 
        Investigation Command; Naval Criminal Investigative Service; 
        and Air Force Office of Special Investigations.
  --Member of the National Procurement Fraud Task Force, created in 
        October 2006 to promote the prevention, early detection and 
        prosecution of procurement fraud.
  --Member of the International Contract Corruption Task Force with 
        full time agent assigned to the Joint Operations Center.
  --Member of the Defense Enterprise Working Group.
  --Excellent working relationships with agencies in the SWA theater of 
        operations.

                                CLOSING

    Thanks to Congressional support, we are dedicating more resources 
to provide oversight on munitions control and accountability, 
acquisition, corruption, waste, fraud, abuse, and expanding our 
footprint SWA. We will continually evaluate the lessons learned. We are 
providing effective and meaningful oversight that assists DOD to 
address its challenges in conducting operations, safeguarding and 
deterring taxpayer monies from waste, fraud, and abuse, and most 
importantly, ensuring our brave military, civilian, coalition, 
contractors and the Iraqi and Afghanistan citizens supporting a free 
and sovereign democratic state are as safe as possible. We recognize 
there is a vast and important mission to support DOD's efforts and are 
proud to be part of this historic and important effort. This office is 
on firm footing to provide the necessary oversight. We look forward to 
working with this Committee. We will continue to keep Congress and our 
leadership fully and promptly informed.
    Thank you for the opportunity to appear before the committee today 
to address our ongoing oversight work regarding Iraq.
                                 ______
                                 
              Comprehensive Audit Plan for Southwest Asia
                                                         June 2008.

    Additional copies of this Audit Plan can be obtained by contacting: 
Office of the Deputy Inspector General for Auditing, Attn: Corporate 
Planning Branch, Room 801, 400 Army Navy Drive, Arlington, VA 22202-
2884. (703) 604-9142 (DSN 664-9142)
    This plan is also available on our Web site at: http://
www.dodig.mil/audit
    If you need additional information for the following agencies, 
please contact them directly.
    Inspector General, Department of State
    (202) 663-0378
    http://oig.state.gov/
    Inspector General, U.S. Agency for International Development
    (202) 712-1020
    http://www.usaid.gov/oig
    Special Inspector General for Iraq Reconstruction
    (703) 428-1058
    www.sigir.mil
    U.S. Army Audit Agency
    (703) 681-8178
    www.hqda.army.mil/aaaweb
    Air Force Audit Agency
    (703) 696-7904
    www.afaa.hq.af.mil
    Defense Contract Audit Agency
    (703) 767-2236
    www.dcaa.mil

                                FOREWORD

    The Fiscal Year 2008 National Defense Authorization Act Section 
842, ``Investigation of Waste, Fraud, and Abuse in Wartime Contracts 
and Contracting Processes in Iraq and Afghanistan,'' January 28, 2008, 
requires the Inspector General of the Department of Defense to develop 
a comprehensive plan for a series of audits of Department of Defense 
contracts, subcontracts, and task and delivery orders for the 
logistical support of coalition forces in Iraq and Afghanistan. The Act 
also requires that the Special Inspector Generals for Iraq 
Reconstruction and Afghanistan Reconstruction develop a comprehensive 
plan for a series of audits of Federal agency contracts, subcontracts, 
and task and delivery orders for the performance of security and 
reconstruction functions in Iraq and Afghanistan.
    We have expanded this audit plan beyond the statutory mandate to 
show all of the audit work for Iraq and Afghanistan, including other 
key issue areas, such as financial management, systems contracts, and 
human capital for contract administration. This plan incorporates the 
planned audit work of the Inspectors General of the Department of State 
and the U.S. Agency for International Development and the Special 
Inspector General for Iraq Reconstruction. It also includes the planned 
audit work of the Army Audit Agency, Air Force Audit Agency, and 
Defense Contract Audit Agency because of the major contributions they 
make to improve the efficiency and effectiveness of support to the 
military. We continue to coordinate audit plans through existing 
working groups and councils.

                INSPECTOR GENERAL, DEPARTMENT OF DEFENSE
                            PLANNED PROJECTS

Third Quarter Fiscal Year 2008 Start
    Award of Urgent Procurements for Linguistics in Support of the 
Global War on Terror. Objective: To review whether the awards of urgent 
procurements for linguistics were properly justified and whether prices 
were appropriately established as fair and reasonable.
    Contract Award and Administration of Security Services Contracts 
for Afghanistan. Objective: To determine whether security services 
contracts for Afghanistan are awarded and administered in accordance 
with the Federal Acquisition Regulation.
    Contracting for Clothing Requirements for Civilian and Contractor 
Personnel Deployed to Iraq and Afghanistan. Objective: To determine how 
much the Central Issuing Facilities contracts fulfill the clothing 
requirement for both DOD civilian and contractor personnel deployed to 
Iraq and Afghanistan; how contract requirements, terms, and conditions 
were developed; and the adequacy of cost controls.
    Contractor Reimbursement for Medical Care Provided by the Military 
in Southwest Asia. Objective: To examine the monetary burden on the 
military medical community in country to provide health care for 
contractor personnel as well as review contracts to determine whether 
reimbursement arrangements are addressed when contracts are bid and 
awarded. There are more civilians, particularly contractor personnel, 
than military personnel in Iraq and Afghanistan, and if these persons 
are injured and require medical attention or require refills for their 
medicines, those medical needs are provided by the military hospitals 
and trauma centers.
    Contractors Indebted to the U.S. Government Performing Work in 
Support of the Global War on Terror. Objective: To review the DOD 
contractor debt collection process and the controls associated with the 
List of Contractors Indebted to the United States who are performing 
work in support of the Global War on Terror. Specifically, we will also 
identify if the Government is in a position to collect monies due to 
the Government prior to making any contract payments.
    Controls over Contractor Common Access Cards in the U.S. Central 
Command. Objective: To evaluate the controls over the issuance, 
revocation, reverification, and recovery of contractor common access 
cards in the U.S. Central Command area of responsibility. We also plan 
to determine whether the CAC database will be a good source to identify 
the number of contractors in-country.
    Defense Finance and Accounting Service Personnel Support for the 
Global War on Terror. Objective: To determine whether the current level 
of Defense Finance and Accounting Service personnel assigned to support 
the mission in Iraq, Afghanistan, and Kuwait is adequate to ensure 
accurate and timely accounting and contract payments.
    Deferred Maintenance on DOD Weapon Systems as a Result of the 
Global War on Terror. Objective: To assess the extent and causes of 
deferred maintenance that result from the Global War on Terror.
    DOD Compliance with Federal Tax Reporting Requirements for 
Contractors Supporting Global War on Terror. Objective: To determine 
whether payments to contractors and individuals performing work in 
support of the Global War on Terror were properly reported to the 
Internal Revenue Service.
    Equipment Repairs and Maintenance Contracts in Support of Operation 
Iraqi Freedom and Operation Enduring Freedom. Objective: To evaluate 
the development of contract requirements, award of contracts and task 
orders, and the administration of the contracts and task orders for 
equipment repairs and maintenance within Iraq and Afghanistan.
    Funds for Iraq Processed through the Security Assistance Program. 
Objective: To determine whether funds for Iraq processed through the 
Security Assistance Program and the Foreign Military Sales Trust Fund 
are properly managed.
    Information Assurance of the Outside the Continental United States 
Navy Enterprise Network as it Relates to the Global War on Terror. 
Objective: To assess the integrity, confidentiality, and availability 
of the Outside the Continental United States Navy Enterprise Network 
particularly as it is used in Global War on Terror deployments. The 
information assurance testing will include examining continuity, 
enclave boundary defense, identification and authentication, personnel, 
security design and configuration, enclave computing environment, 
vulnerability and incident management, and physical and environmental 
information assurance control subject areas.
    Marine Corps Military Pay in Support of the Global War on Terror. 
Objective: To determine whether Marine Corps military payroll disbursed 
in support of the Global War on Terror is paid in accordance with 
established laws and regulations.
    Requirements Determination at the Defense Supply Center Columbus. 
Objective: To determine whether quantities of items being purchased by 
the Defense Supply Center Columbus matched anticipated Global War on 
Terror requirements and whether internal management controls over the 
determination of the procurement requirements were effective.
    Review of Funds Transferred to Iraq and Afghanistan Security Forces 
through the State and Justice Departments. Objective: To evaluate the 
DOD oversight procedures over funding for the Iraq and Afghanistan 
Security Forces made through the Department of Justice and the State 
Department.
    Transition Planning for the Logistics Civil Augmentation Program IV 
Contract. Objective: To determine whether the Army properly planned for 
acquisition transition from Logistics Civil Augmentation Program III 
contract to the Logistics Civil Augmentation Program IV contract.
Fourth Quarter Fiscal Year 2008 Start
    Accounting Systems Used in Southwest Asia. Objective: To determine 
the adequacy of the accounting systems used in Southwest Asia to 
include capability for processing properly supported and recorded 
transactions.
    Acquisition Workforce at the Defense Contract Management Agency. 
Objective: To assess the amount of DOD civilian, military, foreign 
national, and contracted support services within the Defense Contract 
Management Agency devoted to support the Global War on Terror. We will 
also evaluate whether the Defense Contract Management Agency 
Acquisition Workforce is adequately trained and certified.
    Army and Air Force Military Pay in Support of the Global War on 
Terror. Objective: To determine whether the Army and Air Force military 
payroll disbursed in support of the Global War on Terror is paid in 
accordance with established laws and regulations.
    Civilian Pay in Support of Global War on Terror. Objective: To 
determine whether civilian pay disbursed in support of the Global War 
on Terror is paid in accordance with established laws and regulations.
    Controls Over the Funds to Refit Equipment at the Army Depots. 
Objective: To evaluate controls over the funds to refit equipment at 
the Army depots.
    Controls Over Unliquidated Obligations on Contracts Supporting the 
Global War on Terror. Objective: To determine the amount of 
unliquidated obligations on contracts and whether DOD has established 
adequate management controls over the unliquidated obligations.
    DOD Counter Narcoterrorism Technology Program Office, Program and 
Operations Support, Indefinite Delivery/Indefinite Quantity Contract. 
Objective: To determine whether the DOD Counter Narcoterrorism 
Technology Program Office support contract for Southwest Asia is 
consistent with the Federal Acquisition Regulation.
    Durability and Sustainability of Body Armor. Objective: To evaluate 
the durability and sustainability of body armor. Specifically, we will 
evaluate the life cycle management of body armor components to include 
maintenance, repair, and durability.
    Ground Standoff Mine Detection System Contract. Objective: To 
evaluate the manner in which Ground Standoff Mine Detection System 
contract requirements were developed, the procedures under which 
contracts or task or delivery orders were awarded, and the efficiency 
of DOD management and oversight of the contract.
    High Mobility Multipurpose Wheeled Vehicle Contract. Objective: To 
determine whether American General charged fair and reasonable prices 
for noncommercial modifications under contract DAAE07-01-C-S001.
    Internal Controls over Contract Systems Used in Southwest Asia. 
Objective: To determine the adequacy of internal controls of 
contracting systems used in Southwest Asia.
    Logistics Support for the U.S. Special Operations Command. 
Objective: To determine whether contracts providing logistics support 
to the U.S. Special Operations Forces were properly awarded and 
administered.
    Military Construction Projects Executed Through the Army's 
Logistics Civil Augmentation Program Contract. Objective: To survey the 
military construction projects for Iraq and Afghanistan performed under 
the Army's Logistics Civil Augmentation Program contracts and determine 
which projects need reviews.
    Mine Resistant Ambush Protected Repair and Maintenance Contracts. 
Objective: To determine whether contracts for maintenance and repair of 
Mine Resistant Ambush Protected vehicles were properly awarded and 
administered.
    Operation and Maintenance of Permanent Facilities in Afghanistan. 
Objective: To review the award and administration of contract W912ER-
04-D-0003 task order 0015 for the operation and maintenance of 
facilities in Afghanistan.
    Purchasing and Leasing of Vehicles in Support of Operation Iraqi 
Freedom and Operation Enduring Freedom. Objective: To examine contracts 
and task orders for vehicles either purchased or leased to support 
Operation Iraqi Freedom and Operation Enduring Freedom and to evaluate 
the development of the requirements, award of the contract or task 
order, the administration of the contract or task order, and the 
reasonableness of the cost to DOD.
    Quality Assurance Procedures for Kevlar Helmets. We are initiating 
this project as a result of a Congressional request. Objective: To 
determine whether DOD was aware of prior defects with Kevlar helmets 
produced by Sioux Manufacturing, and whether DOD provided oversight to 
ensure the contractor met quality standards.
    Rapid Development and Fielding of Material Solutions Within the 
Navy. Objective: To evaluate the management of the Navy process used to 
rapidly develop and field material solutions to meet urgent needs in 
support of the Global War on Terror.
    Selection of Mode of Transportation of Materials in Support of 
Operation Iraqi Freedom and Operation Enduring Freedom. Objective: To 
examine contracts and task orders for ground, air, and sealift 
transportation modes and evaluate how the shipping requirements were 
determined, the procedures used to select the transporting company, the 
terms of the contract and task orders, and the oversight provided.
    Survey of Kellogg Brown and Root Services Logistics Support for 
Contingency Operations. Objective: To determine the full extent of 
Kellogg Brown and Root Services logistics efforts and associated DOD 
costs in support of Contingency Operations.
    Times and Material Contracts in Southwest Asia. Objective: To 
determine whether time and material contracts were awarded and 
administered in accordance with the Federal Acquisition Regulation.
    U.S. Central Command Government Purchase Card Program. Objective: 
To assess whether the U.S. Central Command's use of government purchase 
cards complies with applicable laws and regulations. The audit helps 
meet the statutory mandate to perform periodic audits of the Department 
of Defense management of purchase cards per Title 10, United States 
Code, Section 2784.
    Use of Contractor to Provide Food Service or Food in Support of 
Operation Iraqi Freedom and Operation Enduring Freedom. Objective: To 
examine contracts and task orders awarded for the Army Subsistence 
Program and evaluate whether the Defense Personnel Support Center, 
Philadelphia, PA, properly defined the requirements, awarded the 
contracts, and administered the contracts in support of Operation Iraqi 
Freedom and Operation Enduring Freedom.
    Use of Contracts to Provide Fuels in Support of the Warfighter. 
Objective: To determine the extent to which contractors are providing 
fuels instead of the Defense Energy Supply Center; how contract 
requirements, terms and conditions were developed; and the adequacy of 
cost controls.
    Use of Other Transaction Authority for Prototypes. Objective: To 
determine whether the Military Departments and Defense Agencies are 
properly using the other transactions for prototypes to bring new 
contractors into the Department to support the Global War on Terror 
efforts.

First Quarter Fiscal Year 2009 Start
    Contracting for Facilities Operations Support Services for 
Operation Iraqi Freedom and Operation Enduring Freedom. Objective: To 
examine contracts and task orders for facilities operations support 
services (housekeeping, trash/garbage removal, landscaping, etc.), 
development of contract requirements, award of contracts and task 
orders, and the administration of the contracts and task orders.
    Controls Over Contractor Common Access Cards in the U.S. European 
Command. Objective: To evaluate the controls over the issuance, 
revocation, reverification, and recovery of contractor common access 
cards in the European theater.
    Controls Over Unliquidated Obligations on U.S. Army Corps of 
Engineers Contracts Supporting the Global War on Terror. Objective: To 
determine the amount of unliquidated obligations on contracts and 
whether the U.S. Army Corps of Engineers has established adequate 
management controls over the unliquidated obligations.
    Management and Accountability of Class III Bulk JP-8 Fuel 
Supporting the U.S. Central Command Operations in Qatar. Objective: To 
evaluate the management of Bulk Class III JP-8 fuel operations in Qatar 
supporting U.S. Central Command Global War on Terror missions.
    Medical Prime Vendor Contracts in Support of Operation Iraqi 
Freedom and Operation Enduring Freedom. Objective: To examine contracts 
and task orders under the Defense Supply Center-Philadelphia Medical 
Prime Vendor Program for terms and conditions, price controls given 
increased demand, and the ability of contractors to provide supplies in 
a timely manner to the warfighter.
    Private Security Contractors Use in Operation Iraqi Freedom. 
Objective: To determine whether terms and conditions for private 
security services are clearly defined in contracts, whether security 
services are performed in accordance with the requirements of the 
contract, and whether oversight of security contracts is adequate.
    Use of Priority Air Cargo Transportation to Provide Materials and 
Supplies in Support of Operation Iraqi Freedom and Operation Enduring 
Freedom. Objective: To evaluate how the shipping requirement was 
determined in the award and terms of contracts and delivery orders and 
associated costs for the use of priority air transportation.

                            ONGOING PROJECTS

Reports Projected Third Quarter Fiscal Year 2008
    Contingency Construction Contracting Procedures Implemented by the 
Joint Contracting Command--Iraq/Afghanistan (D2007-D000LQ-0261 .000). 
Objective: To determine the efficiency of contingency construction 
contracting procedures implemented by the Joint Contracting Command--
Iraq/Afghanistan in the Afghanistan Area of Operations. Specifically, 
we will review the effectiveness of practices related to solicitation, 
award, quality assurance, oversight, and final acceptance of 
constructions projects.
    DOD Supplemental and Cost of War Execution Report Sections 
Pertaining to Procurement and Research, Development, Test, and 
Evaluation Funds (D2006-D000AE-0241.001). Objective: To determine how 
effectively the Office of the Secretary of Defense and the DOD 
Components prepared the DOD Supplemental and Cost of War Execution 
Report for procurement and research, development, test, and evaluation 
funds.
    DOD Use of Global War on Terror Supplemental Funding Provided for 
Procurement and Research, Development, Test, and Evaluation (D2006-
D000AE-0241.002). Objective: To evaluate the adequacy of the DOD 
financial controls over use of Global War on Terror supplemental 
funding provided for procurement and research, development, test, and 
evaluation.
    Internal Controls and Data Reliability in the Deployable Disbursing 
System (D2007-D000FL-0252.000). Objective: To determine whether the 
internal controls over transactions processed through the Deployable 
Disbursing System are adequate to ensure the reliability of the data 
processed. The audit will include financial information processed by 
disbursing stations supporting the Global War on Terror and will also 
include the recording of related obligations. This audit is a follow up 
on our ``Audit of Internal Controls Over Out-of-Country Payments,'' 
D2006-D000FL-0208.000.
    Summary of Issues Impacting Operations Iraqi Freedom and Enduring 
Freedom Reported by Major Oversight Organizations Beginning Fiscal Year 
2003 Through Fiscal Year 2007 (D2007-D000XA-0249.000). Objective: To 
summarize contract, funds management, and other accountability issues 
identified in audit reports and congressional testimonies that discuss 
mission critical support to Operations Iraqi Freedom and Enduring 
Freedom.

Reports Projected Fourth Quarter Fiscal Year 2008
    Contracts for Supplies Requiring Use of Radio Frequency 
Identification (D2008-D000AS-0022.000). Objective: To determine whether 
DOD Components are complying with policies on radio frequency 
identification. Specifically, we will determine whether DOD Components 
have prepared and implemented plans to use radio frequency 
identification. Additionally, we will assess whether DOD contracts 
issued since January 1, 2005, include requirements for using passive 
and active radio frequency identification tags and whether contractors 
are complying with those requirements.
    Controls Over the Contractor Common Access Card Life Cycle (D2007-
D000LA-0199.001). Objective: To determine whether controls over Common 
Access Cards provided to contractors are in place and work as intended. 
Specifically, we will determine whether DOD officials issue Common 
Access Cards to contractors, verify the continued need for contractors 
to possess Common Access Cards, and revoke or recover Common Access 
Cards from contractors in accordance with DOD policies and procedures.
    Defense Hotline Allegations Concerning Contracts Issued by U.S. 
Army TACOM Life Cycle Management Command to BAE Systems Land and 
Armaments, Ground Systems Division (D2007-D000CK-0256.000). Objective: 
To review the allegations to the Defense Hotline concerning contracts 
issued by U.S. Army TACOM Life Cycle Management Command to BAE Systems 
Land and Armaments, Ground Systems Division. Specifically, we will 
determine whether contract award and administrative procedures were in 
compliance with Federal and DOD policy.
    Distribution of Funds and the Validity of Obligations for the 
Management of the Afghanistan Security Forces Fund--Phase II (D2007-
D000LQ-0161.001). Objective: To determine whether the distribution of 
the $1.9 billion from the Afghanistan Security Forces Fund complied 
with the 11 provisions of Public Law 109-234 and applicable 
appropriations law. In addition, we will determine whether the 
Afghanistan Security Forces Fund was obligated in accordance with 
legislative intent and applicable appropriations law.
    DOD Training for U.S. Ground Forces Supporting Operation Iraqi 
Freedom (D2007-D000LH-0108.001). Objective: To determine whether U.S. 
Ground Forces supporting Operation Iraqi Freedom are receiving training 
necessary to meet operational requirements. This project is addressing 
the adequacy of equipment levels at Army and Marine Corps combat 
training centers and mobilization stations for ground forces units 
deploying in support of Operation Iraqi Freedom.
    Expeditionary Fire Support System and Internally Transportable 
Vehicle Programs (D2008-D000AB-0091.000). Objective: To determine 
whether contract competition and program administration for the United 
States Marine Corps Expeditionary Fire Support System and Internally 
Transportable Vehicle were in accordance with the Federal Acquisition 
Regulation and supporting DOD guidance.
    Funds Appropriated for Afghanistan and Iraq Processed Through the 
Foreign Military Sales Trust Fund (D2007-D000FD-0198.000). Objective: 
To determine whether the funds appropriated for the security, 
reconstruction, and assistance of Afghanistan and Iraq and processed 
though the Foreign Military Sales Trust Fund are being properly 
managed. Specifically, we will determine whether the transfer of 
appropriated funds from the Army's accounts into the Foreign Military 
Sales Trust Fund was properly authorized, accounted for, and used for 
the intended purpose. We will also determine whether Foreign Military 
Financing funds granted to Afghanistan and Iraq are properly accounted 
for and used for their intended purpose. In addition, we will verify 
whether the appropriated funds are properly reported in DOD financial 
reports.
    Hiring Practices Used to Staff the Iraqi Provisional Authorities 
(D2007-D000LC-0051.000). Objective: To evaluate the hiring practices 
that DOD used to staff personnel to the provisional authorities 
supporting the Iraqi government from April 2003 to June 2004. 
Specifically, we will determine the Process DOD used to assign 
personnel to the Office of Reconstruction and Humanitarian Assistance 
and the Coalition Provisional Authority in Iraq.
    Joint Follow-on Evaluation of Equipment Status (D2008-D000LQ-
0111.000). Objective: To determine whether forces deployed in support 
of Operation Iraqi Freedom have the equipment to complete their 
missions and to evaluate whether units completing combat missions had 
the proper equipment in accordance with mission requirements.
    Marine Corps' Management of the Recovery and Reset Programs (D2007-
D000LD-0129.000). Objective: To evaluate the effectiveness of the 
Marine Corps' Recovery and Reset Programs for selected equipment. 
Specifically, we will review how the Marine Corps met its equipment 
requirements through the Reset and Recovery Programs, whether it 
effectively repaired or replaced selected equipment, and whether the 
Marine Corps used funds for their intended purpose.
    Military Construction Funds Related to the Global War on Terror 
(D2007-D000CK-0201.000). Objective: To determine whether DOD Components 
followed requirements for using operations and maintenance funds for 
Global War on Terror military construction. Specifically, we will 
determine whether DOD followed proper procedures for administering, 
executing, and reporting the use of operations and maintenance funds on 
Global War on Terror military construction contracts.
    Procurement and Delivery of Joint Service Armor Protected Vehicles 
(D2007-D000CK-0230.000). Objective: To determine whether the Mine 
Resistant Ambush Protected vehicle program office is procuring armored 
vehicles in accordance with the Federal Acquisition Regulation and DOD 
requirements. Specifically, we will review Mine Resistant Ambush 
Protected program administration to determine whether the program 
office is taking appropriate actions to accelerate vehicle delivery to 
users. An additional objective will be to review the Services' 
requirements for Mine Resistant Ambush Protected and High Mobility 
Multipurpose Wheeled Vehicles.
    Procurement and Use of Nontactical Vehicles at Bagram Air Field 
(D2008-D000LQ-0063.000). Objective: To determine the effectiveness of 
the process for procuring and leasing nontactical vehicles at Bagram 
Air Field, Afghanistan. We will also review the cost of operating and 
maintaining nontactical vehicles and determine whether the amount of 
use complies with DOD guidance.
    Security Over Radio Frequency Identification Information (D2008-
D000AS-0044.000). Objective: To determine whether DOD implemented 
security controls to protect radio frequency identification 
information. Specifically, we will assess the implementation and 
effectiveness of those security controls over the information.
    Small Arms Ammunition Fund Management in Support of the Global War 
on Terror (D2008-D000FJ-0014.000). Objective: To determine whether the 
Military Departments properly managed small arms ammunition funds in 
support of the Global War on Terror. Specifically, we will determine 
whether financial management officials fully supported and properly 
incurred obligations and expenditures. We will also determine whether 
funds for small arms ammunition were accurately recorded in financial 
systems for reporting to the Office of the Secretary of Defense.

Reports Projected Fiscal Year 2009
    Acquisition of Ballistic Glass Contracts for the High Mobility 
Multipurpose Wheeled Vehicle Variants (D2008-D000CE-0187.000). 
Objective: To determine whether the award and administration process of 
the High Mobility Multipurpose Wheeled Vehicle ballistic glass 
contracts comply with the Federal Acquisition Regulation.
    Air Force Combat Search and Rescue Helicopter (D2008-D000AB-
0133.000). Objective: To determine whether changes to Combat Search and 
Rescue Helicopter Key Performance Parameters were made in accordance 
with applicable DOD and Air Force acquisition guidelines. Specifically, 
we will determine whether key performance parameter changes were 
properly designated and appropriately vetted through the Joint 
Requirements Oversight Council. In addition, we will determine whether 
key performance parameter changes will affect Air Force special 
operations capabilities in the Global War on Terror.
    Air Force Contract Augmentation Program in Southwest Asia (D2008-
D000JC-0202.000). Objective: To evaluate controls over Air Force 
Contract Augmentation Program. We will determine what contracts have 
been awarded, whether contracts were properly awarded, whether 
contracted services were provided in accordance with the statement of 
work and whether contract payments were appropriate.
    Assignment and Training of Contracting Officer's Representatives at 
Joint Contracting Command--Iraq/Afghanistan (D2008-D000JC-0203.000). 
Objective: To determine whether personnel assigned as Contracting 
Officer's Representatives to the Joint Contracting CommandIraq/
Afghanistan have proper training and expertise to perform their duties.
    Class III Fuel Procurement and Distribution in Southwest Asia 
(D2008-D000JC-0186.000). Objective: To determine whether fuel used for 
ground operations in Southwest Asia to support Operations Iraqi Freedom 
and Enduring Freedom is procured and distributed efficiently and 
effectively. Specifically, we will determine whether fuel is procured 
at fair and reasonable prices, whether fuel is distributed economically 
and efficiently to operational commands, and whether fuel supply points 
maintain accurate inventories.
    Control Over the Reporting of Transportation Costs in Support of 
the Global War on Terror (D2008-D000FI-0083.000). Objective: To 
evaluate the effectiveness of controls over the reporting of 
transportation costs related to the Global War on Terror.
    Controls Over the Department of the Navy Military Payroll Disbursed 
in Support of the Global War on Terror (D2008-D000FC-0189.000) 
Objective: To determine whether the Department of the Navy is 
disbursing military payroll in support of the Global War on Terror in 
accordance with established laws and regulations. Specifically, we will 
determine whether the Department of the Navy maintains adequate support 
for payments related to deployments to an active combat zone.
    Defense Emergency Response Fund for the Global War on Terror 
(D2008-D000FE-0106.000). Objective: To determine if the Defense 
Emergence Response Fund is used as intended and in adherence to the 
Office of Management and Budget guidance for the use of the funds. We 
will also determine if DOD has the ability to track the use of the 
Defense Emergency Relief Fund.
    Defense Logistics Agency Contracts for Combat Vehicle Parts in 
Support of the Global War on Terror (D2008-D000FD-0214.000). Objective: 
To determine whether the Defense Logistics Agency used appropriate and 
effective contracting procedures to provide to customers the combat 
vehicle parts to support the Global War on Terror.
    Distribution of Funds and the Validity of Obligations for the 
Management of the Afghanistan Security Forces Fund--Phase III (D2007-
D000LQ-0161.002). Objective: To determine whether organizations in 
Southwest Asia that the U.S. Central Command assigned with the 
responsibility for managing the Afghanistan Security Forces Fund 
properly accounted for the goods and services purchased for the 
Afghanistan Security Forces using the Afghanistan Security Forces Fund 
and whether the goods and services were properly delivered to the 
Afghanistan Security Forces.
    Marine Corps Implementation of the Urgent Universal Need Statement 
Process for Mine Resistant Ambush Protected Vehicles (D2008-D000AE-
0174.000). Objective: To determine whether the Marine Corps decision 
making process responded appropriately and timely to Urgent Universal 
Need Statements submitted by field commanders for Mine Resistant Ambush 
Protected vehicles.
    Organic Ship Utilization in Support of the Global War on Terror 
(D2008-D000AB-0193.000). Objective: To evaluate the effectiveness of 
policies and procedures used to ensure that activated Government-owned 
and Government-chartered vessels are used to the maximum extent prior 
to procuring commercial transportation to Southwest Asia.
    Price Reasonableness for Contracts at U.S. Special Operations 
Command (D2008-D000CG-0123.000). Objective: To determine whether 
pricing of contracts at U.S. Special Operations Command complied with 
Federal Acquisition Regulation requirements for determining price 
reasonableness.
    War Reserve Materiel Contract (D2008-D000CK-0161.000). Objective: 
To determine whether Air Force contracting officials managed and 
administered the DynCorp International War Reserve Materiel contract in 
accordance with Federal and DOD contracting policies.

                 INSPECTOR GENERAL, DEPARTMENT OF STATE
                            PLANNED PROJECTS

Third Quarter Fiscal Year 2008 Start
            Audit
    Personal Security Detail Contracts--Blackwater (Iraq) (with the 
Special Inspector General for Iraq Reconstruction)--(Financial Related 
& Performance Audit)
    New Embassy Compound Phase I (Performance Audit)
    New Embassy Compound Phase II (Performance Audit)
Fourth Quarter Fiscal Year 2008 Start Audit
    Economic Support Fund--Afghanistan (Financial Related Audit)
Middle East Regional Office
    Personal Security Detail Contracts--Dyncorp and Triple Canopy--Iraq 
(Performance Audit)
  --Kennedy Report on Worldwide Personal Protective Services--Private 
        Security Contractors--Iraq (Program Evaluation)
  --Role, Staffing, and Effectiveness of Diplomatic Security--Iraq 
        (Performance Audit)
First Quarter Fiscal Year 2009 Start
            Audit
    Property Inventory and Accountability at Embassy Baghdad 
(Performance Audit) (concurrent w/Office of Inspections Inspection of 
Embassy Baghdad)
            Middle East Regional Office
    Effectiveness of Worldwide Personal Protective Services contractors 
in Jerusalem
    Emergency Action Plan of Embassies Baghdad and Kabul (Program 
Evaluation)
Second Quarter Fiscal Year 2009 Start
            Audit
    Personal Security Detail Contracts--Dyncorp and Triple Canopy 
(Iraq) (Financial Related)
            Middle East Regional Office
    Personal Security Detail (Worldwide Personal Protective Services) 
Contracts--Blackwater, Dyncorp, Triple Canopy Afghanistan
  --Kennedy Report on Worldwide Personal Protective Services--Private 
        Security Contractors--Afghanistan
  --Role, Staffing, and Effectiveness of Diplomatic Security--
        Afghanistan (Financial Related and Performance Audit)
Third Quarter Fiscal Year 2009 Start
            Inspection
    De-mining Programs in Iraq and Afghanistan (Program Evaluation)
Fourth Quarter Fiscal Year 2009 Start
            Audit
    Economic Support Funds--West Bank
    Logistics Civil Augmentation Program Task Order #100
            Middle East Regional Office
    Refugee Assistance and Human Rights in Afghanistan (Performance 
Audit)
    Governing Justly and Democratically in Afghanistan (Performance 
Audit)
    Embassy Baghdad/DOD Transition Plan (Joint with Inspector General, 
DOD) (Program Review)
Future Starts
            Iraq
    Economic Support Funds--Iraq
    Verbal Notices to Proceed (Task Orders)--Worldwide Personal 
Protective Services
    Diplomatic Security Armored Vehicle Procurement
    Local Security Guard Program
    Public Diplomacy Programs in Iraq
    Democracy and Education Programs in Iraq
    Follow-up Evaluations of Iraq Police Training
    Follow-up Evaluations of Iraq Rule-of-Law Programs
    Follow-up Evaluation of Anticorruption Programs in Iraq
    Role, Function, and Effectiveness of Regional Embassy Offices in 
Iraq
    Rightsizing (Staffing) of Embassy Baghdad
    Follow-up on Role and Effectiveness of Provincial Reconstruction 
Teams in Iraq
    Management of Iraq Security Programs
    Review of Anti-Corruption Training and Development Programs in Iraq
    Follow-up Review of Rule of Law Programs in Iraq
    Review of Communications Security at Embassy Baghdad
    Democracy Building: National Endowment for Democracy
    Implementation of International Cooperative Administrative Support 
Services--Iraq
            Afghanistan
    Public Diplomacy Programs in Afghanistan
    Middle East Partnership Initiative
    Follow-up Evaluation of Afghanistan Police Training
    Follow-up Evaluation of Afghan Rule-of-Law Programs
    Effectiveness of Counter Narcotic Programs in Afghanistan
    Effectiveness of Security Assistance in Afghanistan
    Management of Afghanistan Security Programs
    Implementation of International Cooperative Administrative Support 
Services--Afghanistan
            Pakistan
    Democracy and Education Programs in Pakistan
    Federally Administered Tribal Areas in Pakistan
    Effectiveness of Counter-narcotics Programs in Pakistan
    Effectiveness of Security Assistance in Pakistan
            Other
    Middle East Partnership Initiative
    Democracy and Education Programs in Lebanon
    Security Assistance in Lebanon

                            ONGOING PROJECTS

    Iraqi Special Immigrant VISA (Special Immigrant Visa) (Program 
Evaluation)
    Iraqi Refugee Processing (Program Evaluation)

      INSPECTOR GENERAL, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT
                          PLANNED AUDITS--IRAQ

Performance Audits
    USAID/Iraq's Community Stabilization Program. Objectives: (1) Is 
USAID/Iraq's Community Stabilization Program achieving its intended 
result with regard to activities in the community infrastructure and 
essential services component? (2) How has USAID/Iraq designed and 
implemented its Community Stabilization Program to help ensure that 
Iraqis continue to benefit from its activities after USAID involvement 
has ended? (Completed. Audit Report No. E-267-08-001-P, issued March 
18, 2008)
    USAID/Iraq's Management of the Marla Ruzicka Iraqi War Victims 
Fund. Objective: Is USAID/Iraq complying with provisions contained in 
public laws to help ensure that funds appropriated for the Marla Fund 
are used as intended? (Completed. Audit Report No. E-267-08-002-P, 
issued April 3, 2008)
    USAID/Iraq's Community Action Program II. Objectives: (1) Is USAID/
Iraq accurately measuring the jobs created by its community action 
program activities? (2) Are USAID/Iraq's community action program 
activities achieving intended results and what has been the impact?
    USAID/Iraq's Monitoring and Evaluation Performance Program. 
Objectives: (1) Is the Monitoring and Evaluation Performance Program, 
Phase II program producing monitoring and evaluation reports that are 
timely, relevant, and useful for performance management? (2) Is USAID/
Iraq using Monitoring and Evaluation Performance Program, Phase II 
program results to manage its portfolio?
    USAID/Iraq's Management of Its Official Vehicle Fleet. Objective: 
Has USAID/Iraq acquired, utilized, and disposed of its official 
vehicles in accordance with USAID's Automated Directives System?
    Followup Audit of USAID/Iraq's Local Governance Activities. 
Objective: Are USAID/Iraq's local governance activities achieving 
intended results and what has been the impact?
    USAID/Iraq's National Capacity Development Program. Objective: Is 
USAID/Iraq's national capacity development program achieving its 
intended results and what has been the impact of this program?
    Followup Audit of Provincial Reconstruction Teams in Iraq. 
Objectives: (1) Are USAID/Iraq provincial reconstruction team 
representatives performing their roles as activity managers as 
intended? (2) How is USAID/Iraq assisting the provincial reconstruction 
teams in the transition to traditional USAID activities?
    USAID/Iraq's Agribusiness Program. Objective: Is USAID/Iraq's 
agribusiness program achieving intended results and what has been the 
impact?
    USAID/Iraq's Provincial Economic Growth Program. Objectives: (1) 
Have USAID/Iraq's provincial economic growth activities created an 
enabling environment for business operations and what has been the 
impact? (2) Are USAID/Iraq's grant activities under its provincial 
economic growth program achieving intended results and what has been 
the impact?
Financial Audits
    Objectives: Financial audit objectives include determining whether 
(1) costs incurred and billed by the recipient are allowable, allocable 
and reasonable, (2) the recipient's internal control structure is 
adequate, and (3) the recipient complies with agreement terms and 
applicable laws and regulations. Audits are performed by the Defense 
Contract Audit Agency at the request of OIG, who then reviews and 
issues the reports to USAID with applicable recommendations. The 
following financial audits are planned for fiscal year 2008:
  --Direct Costs Incurred and Billed by Research Triangle Institute 
        under Contract No. GHS-I-04-03-00028-00 from April 26, 2005 to 
        December 31, 2006. (Completed. OIG Report No. E-267-08-001-D, 
        issued October 4, 2007)
  --Costs Incurred and Billed by Sallyport Global Services Ltd. under 
        its Subcontracts with The Louis Berger Group, Inc. under USAID 
        Contract Nos. 267-C-00-04-00417-00 for the Period September 27, 
        2004 through September 30, 2005 and 267-C-00-04-00435-00 for 
        the Period August 1, 2005 through March 31, 2007. (Completed. 
        OIG Report No. E-267-08-002-D, issued December 12, 2007)
  --Costs Incurred and Billed by America's Development Foundation under 
        Contract No. GEW-C-00-04-00001-00 from October 1, 2006 through 
        June 30, 2007. (Completed. OIG Report No. E-267-08-003-D, 
        issued January 23, 2008)
  --Costs Incurred and Billed by Creative Associates International, 
        Inc. under Contract No. EPP-C-00-04-00004-00 from July 1, 2005 
        through February 28, 2007. (Completed. OIG Report No. E-267-08-
        004-D, issued February 4, 2008)
  --Costs Incurred and Billed by Management Systems International under 
        USAID Contract No. AEP I-00-00-00024-00, Task No. 08, from June 
        26, 2003 through May 31, 2005. (Completed. OIG Report No. E-
        267-08-005-D, issued February 4, 2008)
  --Costs Incurred and Billed by Bechtel National, Inc. under Contract 
        Nos. EEE-C-00-03-00018-00 (Phase I) and SPU-C-00-04-0000 1-00 
        (Phase II) from November 1, 2006 to September 30, 2007. 
        (Completed. OIG Report No. E-267-08-006-D, issued February 12, 
        2008)
  --Cost Incurred and Billed by IntraHealth International, Inc. under 
        its Subcontract No. 15-330-0208954 with Research Triangle 
        Institute Contract No. GHS-1-04-03-00028-00 for the Period 
        April 26, 2005 through December 31, 2006. (Completed. OIG 
        Report No. E-267-08-007-D, issued February 24, 2008)
  --Costs Incurred and Billed by International Business and Technical 
        Consultants, Inc. (IBTCI) under Contract No. 267-C-00-05-00508-
        00 from January 1, 2006 through December 31, 2006. (Completed. 
        OIG Report No. E-267-08-008-D, issued March 6, 2008)
  --Costs Incurred and Billed by BearingPoint, Inc. under Contract No. 
        267-C-00-04-00405-00 for the Period October 1, 2006 through 
        September 30, 2007. (Completed. OIG Report No. E-267-08-009-D, 
        issued April 15, 2008)
  --Costs Incurred and Billed by Agricultural Cooperative Development 
        International/Volunteers in Overseas Cooperative Assistance 
        under USAID Cooperative Agreement No. AFP-A-00-03-00003 for the 
        Period August 1, 2004 through March 31, 2007.
  --Costs Incurred and Billed by the International Foundation for 
        Election Systems through the Consortium for Election and 
        Political Process Strengthening under [1] USAID Agreement No. 
        267-A-00-04-00405-00 for the period October 1, 2005 through 
        June 30, 2007, [2] USAID Agreement No. AFP-A-00-04-00014-00 for 
        the period July 9, 2004 through June 30, 2006, and [3] USAID 
        Agreement No. REE-A-00-04-0005 0-00 for the period July 26, 
        2004 through July 31, 2006.
  --Costs Incurred and Billed by America's Development Foundation under 
        USAID Contract No. GEW-C-00-04-00001-05 for the Period October 
        1, 2006 through June 30, 2007.
  --Costs Incurred and Billed by International Relief & Development, 
        Inc. under USAID Agreement No. AFP-A-00-03-0002-00 for the 
        Period November 1, 2005 through March 31, 2007.
  --Costs Incurred and Billed by Cooperative Housing Foundation 
        International under USAID Agreement No. AFP-A-00-0300004-00 for 
        the Period August 1, 2005 through April 30, 2007 and under 
        USAID Agreement No. 267-A-00-06-00507-00 for the Period 
        September 30, 2006 through September 30, 2007.
  --Costs Incurred and Billed by Mercy Corps under USAID Agreement No. 
        AFP-A-00-03-00001-00 for the Period August 1, 2004 through 
        March 31, 2007.
  --Costs Incurred and Billed by Save the Children Federation under 
        USAID Agreement No. AFP-A-00-03-00005-00 for the Period August 
        1, 2004 through April 1, 2006.
  --Agreed-upon Procedures Review of Direct and Indirect Costs Incurred 
        by Research Triangle Institute under USAID Contract Nos. EDG-C-
        00-00010-00, 267-C-00-05-00505-00, and GHS-I-04-03-00028-00 
        Relating to Payments to Business Systems House during the 
        Period March 26, 2003 through September 30, 2007.
  --Costs Incurred and Billed by International Relief & Development, 
        Inc. under USAID Agreement No. 267-A-00-06-00503-00 for the 
        Period May 29, 2006 through September 30, 2007.
  --Costs Incurred and Billed by BearingPoint, Inc. under USAID 
        Contract No. 267-C-00-04-00405-00 for the Period August 1, 2005 
        through September 30, 2006.
  --Costs Incurred and Billed by Louis Berger Group/The Services Group, 
        Inc. under USAID Contract No.267-C-00-04-00435-06 for the 
        Period October 1, 2006 through September 30, 2007.
  --Costs Incurred and Billed by Management Systems International under 
        USAID Contract No. AEP-I-01-05-00221-00 for the Period July 27, 
        2006 through September 30, 2007.
  --Agreed-Upon Procedures Review of Requests for Equitable Adjustments 
        Related to Excusable Delays by Bechtel National, Inc. under 
        USAID Contract No. SPU-C-00-04-00001-00 for the Period January 
        5, 2004 through March 31, 2007 and Contract No. EEE-C-00-03-
        00018-00 for the Period April 17, 2003 through February 28, 
        2006.
  --Costs Incurred and Billed by International Resources Group under 
        USAID Contract No. 517-C-00-04-00106-00 for the Period November 
        1, 2006 through December 31, 2007.
  --Costs Incurred and Billed by Research Triangle Institute under 
        USAID Contract No. 267-C-00-05-00505-00 for the Period January 
        1, 2007 through December 31, 2007.
  --Costs Incurred and Billed by Agricultural Cooperative Development 
        International/Volunteers in Overseas Cooperative Assistance 
        under USAID Cooperative Agreement No. AFP-A-00-03-00003 for the 
        Period August 1, 2004 through March 31, 2007.
  --Costs Incurred and Billed by Louis Berger Group, Inc. for the 
        Period May 14, 2007 through May 13, 2008.
  --Costs Incurred and Billed by the International Foundation for 
        Election Systems through the Consortium for Election and 
        Political Process Strengthening under USAID Agreement No. 267-
        A-00-04-00405-00 from July 1, 2007 through June 30, 2008.
  --Costs Incurred and Billed by International Business & Technical 
        Consultants, Inc. under USAID Contract No. 267-C-00-05-00508-00 
        for the Period January 1, 2007 through December 31, 2007.

                     PLANNED PROJECTS--AFGHANISTAN

Performance Audits
    USAID/Afghanistan's Agriculture, Rural Investment and Enterprise 
Strengthening Program. Objective: Was USAID/Afghanistan's Agriculture, 
Rural Investment and Enterprise Strengthening Program achieving its 
intended results and what has been the impact? (Completed. Audit Report 
No. 5-306-08-001-P, issued January 22, 2008)
    USAID/Afghanistan's Alternative Development Program--Southern 
Region. Objective: Did USAID/Afghanistan's Alternative Development 
Program/South achieve planned results, and what has been the impact? 
(Completed. Audit Report No. 5-306-08-003-P, issued March 17, 2008)
    USAID/Afghanistan's Accelerating Sustainable Agriculture Program. 
Objective: Did USAID/Afghanistan's Accelerating Sustainable Agriculture 
Program achieve planned results, and what has been the impact?
    USAID/Afghanistan's Technical Assistance Services to Implement the 
Small and Medium Sized Enterprise Development Activity in Afghanistan. 
Objective: Did USAID/Afghanistan's Technical Assistance Services to 
Implement the Small and Medium Sized Enterprise Development Activity 
achieve planned results, and what has been the impact?
    USAID/Afghanistan's Higher Education Project. Objective: Did USAID/
Afghanistan's Higher Education Project achieve planned results, and 
what has been the impact?
    USAID/Afghanistan's Local Governance and Community Development 
Project in Northern and Western Regions of Afghanistan. Objective: Did 
USAID/Afghanistan's Local Governance and Community Development Project 
achieve planned results, and what has been the impact?
    USAID/Afghanistan's Building Capacity Program. Objective: Did 
USAID/Afghanistan's Building Capacity Program achieve planned results, 
and what has been the impact?
    USAID/Afghanistan's School and Health Clinic Buildings Completed 
Under the Schools and Clinics Construction and Refurbishment Program. 
Objective: Did USAID/Afghanistan's School and Health Clinic Buildings 
Completed under the Schools and Clinics Construction and Refurbishment 
Program achieve planned results, and what has been the impact?
    Selected Activities Funded Under USAID/Afghanistan's $1.4 Billion 
Infrastructure Rehabilitation Program. Objective: Did Selected 
Activities Funded under USAID/Afghanistan's $1.4 billion Infrastructure 
Rehabilitation Program achieve planned results, and what has been the 
impact?
Financial Audits
    Objectives: Financial audit objectives include determining whether 
(1) costs incurred and billed by the recipient are allowable, allocable 
and reasonable, (2) the recipient's internal control structure is 
adequate, and (3) the recipient complies with agreement terms and 
applicable laws and regulations. Audits are performed by the Defense 
Contract Audit Agency or non-Federal auditors. The OIG reviews and 
issues the reports to USAID with applicable recommendations. The 
following financial audits are planned for fiscal year 2008:
  --Local Costs incurred by the Louis Berger Group, Inc. to Implement 
        the Rehabilitation of Economic Facilities and Services Program, 
        USAID/Afghanistan Contract No. 306-C-00-02-00500-00, for the 
        Period from April 1, 2007, to June 30, 2007. (Completed. OIG 
        Report No. 5-306-08-001-N, issued November 27, 2007)
  --Closeout Audit of the Project Titled ``Business Advisory Services 
        to Small and Medium-Sized Enterprises (SMEs) in Afghanistan,'' 
        USAID/Afghanistan Cooperative Agreement No. 306-A-00-04-00570-
        00, Managed by Acap Management Limited, for the Period from 
        September 30, 2004, to March 29, 2007. (Completed. OIG Report 
        No. 5-306-08-019-R, issued April 25, 2008)
  --Costs Incurred by DEG (Deutsche Ivestitions 
        Entwicklungsgesellschaft mbH), USAID/Afghanistan Agreement No. 
        306-A-00-05-005 12-00, for the Period from February 3, 2005, to 
        August 2, 2008
  --Costs incurred by Bearing Point, Inc. to Implement the Economic 
        Governance in Afghanistan (BP I), USAID/Afghanistan Contract 
        No. 306-C-00-03-00001-00, for the Period from November 17, 
        2002, to December 15, 2005
  --Costs incurred by PTS (Program-e Tahkim-e Solh) to Implement the 
        National Commission For Peace and Reconciliation, USAID/
        Afghanistan Agreement No. 306-PIL-07-3060004-00, for the Period 
        from April 1, 2007, to March 31, 2008
  --Costs incurred by Bearing Point, Inc. to Implement the 
        Strengthening Private Sector through Capacity Building (BP 
        III), USAID/Afghanistan Contract No. GEG-I-00-04-00004-00, for 
        the Period from September 26, 2005, to December 31, 2007
  --Costs incurred by AEAI-Advance Engineering Associates, 
        International to Implement the Afghanistan Energy Assistance 
        Project, USAID/Afghanistan Contract No. EPP-I-OO-03-00004-00, 
        for the Period ended December 31, 2007
  --Quarterly Audits of Local Costs incurred by the Louis Berger Group, 
        Inc. to Implement the Afghanistan Infrastructure Reconstruction 
        Program (AIRP), USAID/Afghanistan Contract No. 306-I-00-06-
        00517-00

                     PLANNED PROJECTS--REST OF ASIA

Performance Audits
    USAID/Indonesia's Tsunami-Related Housing Construction Activities 
Implemented by Cooperative Housing Foundation International. Objective: 
Were USAID/Indonesia's tsunami-related housing construction activities 
being implemented by the Cooperative Housing Foundation International 
(CHF) achieving planned results? (Completed. Audit Report No. 5-497-08-
002-P, issued January 31, 2008)
    USAID/Pakistan's Education Sector Reform Assistance Program. 
Objective: Did USAID/Pakistan's Education Sector Reform Assistance 
program achieve intended results and what has been the impact? 
(Completed. Audit Report No. 5-391-08-004-P, issued March 28, 2008)
    USAID/India's Greenhouse Gas Pollution Prevention Project. 
Objective: Did USAID/India's Greenhouse Gas Pollution Prevention 
Project achieve planned results, and what has been the impact?
    USAID/Mongolia's Economic Policy Reform and Competitiveness 
Project. Objective: Did USAID/Mongolia's Economic Policy Reform and 
Competitiveness Project achieve planned results, and what has been the 
impact?
    USAID/Nepal's Health Program. Objective: Did USAID/Nepal's Health 
Program achieve planned results, and what has been the impact?
    Critical USAID/Philippines' Activities under its Growth with Equity 
in Mindanao II Program Implemented by Louis Berger Group, Inc. 
Objective: Did Critical USAID/Philippines'' Activities under its Growth 
with Equity in Mindanao II Program achieve planned results, and what 
has been the impact?
Financial Audits
    Objectives: Financial audit objectives include determining whether 
(1) costs incurred and billed by the recipient are allowable, allocable 
and reasonable, (2) the recipient's internal control structure is 
adequate, and (3) the recipient complies with agreement terms and 
applicable laws and regulations. Financial audits are conducted 
primarily of non-U.S. based organizations throughout the rest of Asia 
by non-Federal auditors. Non-U.S. recipients are required to have 
financial audits done if they spend more than $300,000 of USAID funds 
during their fiscal year. Financial audit reports conducted by non-
Federal auditors are reviewed by the OIG office in Manila, Philippines, 
and the reports transmitted with applicable recommendations to the 
responsible USAID mission in the region. OIG expects to issue over 30 
financial audit reports to USAID missions in the region, in addition to 
Iraq and Afghanistan, during fiscal year 2008.

           SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
                            PLANNED PROJECTS

Third Quarter Fiscal Year 2008 Start
    Follow-on Review of Iraq Security Forces Strength Accounting 
Methodologies, Including Use of Automated Systems (8024).
    Follow-on Review of the Transition of Iraq Reconstruction Projects 
to the Government of Iraq (8022).
    Iraq Reconstruction Management System (8027).
    Progress and Plans to Transition Infrastructure Development for 
Iraqi Security Forces to the Iraqi Government (8026).
    Reconstruction Contracts/Task Orders Terminated for Convenience or 
Default (8020) (follow-on to 7029).
    Survey of Department of State and U.S. Agency for International 
Development Contracts and Grants for Democracy Building Projects in 
Iraq (8025).
    Survey of Overall Economic Support Fund Programs Management and 
Expenditures (8021).
    Triple Canopy Private Security Contract--Department of State 
(8028). Note: Assignment expected to identify agency unique focus on 
security contracting issues related to Iraq reconstruction under 
Section 842 legislation as well as identify issues that may require 
more in-depth audit focus on a cross-agency basis once results of this 
review are considered along with results from other ongoing reviews.
Start (To Be Determined)
    Assessing Progress, Trends, and Cross-Program Coordination Related 
to Economic Development in Iraq (include DOD economic development 
efforts).
    Individual U.S. Agency for International Development Democracy 
Building Program (Program Effectiveness Reviews). Placeholder for 
potential future program review of individual democracy building 
programs that may be identified in ongoing survey of Department of 
State and U.S. Agency for International Development contracts and 
grants management of democracy building programs related to Iraq 
reconstruction (see project code 8025)
    Iraq Related Operating Expenses of U.S. Agencies Supporting Iraq 
Reconstruction Ministerial Capacity Development Follow-on.
    Progress in Improving Infrastructure Security Across Key Sectors 
(oil, electricity, water, sewer, etc.).
    Provisional Reconstruction Teams/Provisional Reconstruction Teams 
Follow-on
    Selected Commander Emergency Response Program Contracts. 
(Placeholder for individual audits of selected contracts related to 
construction and on-construction projects
    Selected Gulf Region Division Economic Support Fund Contracts. 
(Placeholder--priorities TBD based on results of project code 8025)
    Selected Iraq Security Forces Fund Contracts. (Placeholder--
priorities TBD based on other ongoing Iraq Security Forces Fund 
Contract work)
    Selected Programs' Cash Controls and Cash Payments
    Selected Security Contracts and Subcontracts. (Placeholder pending 
developing of listing of contracts and subcontracts to develop a sample 
of contracts and subcontracts to review)
    Selected U.S. Agency for International Development Economic Support 
Fund Contracts. (Placeholder--priorities TBD based on results of 
project code 8025)
    Survey of Present Use of Sole Source and Limited Competition in 
Contracting.
    Triple Canopy Private Security Contracts--DOD. Note: Assignment 
expected to identify agency unique focus on security contracting issues 
under Section 842 legislation related to Iraq reconstruction as well as 
identify issues that may require more in-depth audit focus on a cross-
agency basis once results of this review are considered along with 
results from other ongoing reviews.
    Washington International and Black and Veatch Contracts--Water 
Sector.

                            ONGOING PROJECTS

    Aegis Private Security Contract (8017). Note: Assignment is 
expected to be used to identify DOD/GRD unique security contracting and 
subcontracting issues that will help frame future security contracting 
reviews, particularly at the subcontractor level.
    First 100 Audit Reports--Capping Report.
    Joint SIGIR Department of State Inspector General Review of 
Spending Under Blackwater Contracts (7018).
    Spending and Performance Under Development Alternatives Inc. (DAI) 
Contracts--Economic Development (7026).
    Spending and Performance Under KBR Contracts--Oil Sector (8003).
    Spending of United States Government Funds in Support of Iraq 
Reconstruction: Fluor-AMEC Joint Venture in the Electric and Public 
Works/Water Sectors (7022).
    Spending of United States Government Funds in Support of Iraq 
Reconstruction: Research Triangle Institute (7023).
    Spending of United States Government Funds Under Parsons, Inc., 
Iraq Reconstruction Contracts (S&J) (8006).
    Survey of U.S. Government Contracts Related to the Performance of 
Security Functions in Iraq (8016). Note: Assignment expected to lead to 
fuller identification of contractors and subcontractors--and data 
needed to identify individual potential contract audits to be done 
under the Section 842 legislation related to Iraq reconstruction--as 
well as individual reviews of selected program and policy issues as may 
be required.

                         U.S. ARMY AUDIT AGENCY
                            PLANNED PROJECTS

Third Quarter Fiscal Year 2008 Start
    Army Reserve Post--Mobilization Training (A-2008-FFS-0504.000). 
Objective: (1) Are post-mobilization training requirements adequately 
identified and executed for the Army Reserve? (2) Are all necessary 
unit and individual training requirements identified and completed 
prior to deployment? (3) Did post-mobilization training requirements 
unnecessarily duplicate pre-mobilization training?
    Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Kabul (A-2008-ALL-0401.000). Objective: Determine if goods 
and services acquired under contract were properly justified, awarded, 
and administered.
    Follow up Audit of Logistics Civil Augmentation Program III Audits 
(A-2008-ALL-0321.000). Objective: Determine if the Army implemented 
agreed to recommendations and corrected the problems identified in the 
previous audit.
    Long Lead Items for Reset (A-2008-ALM-0102.000). Objective: Are 
long lead items requirements valid and aimed at obtaining materiel just 
in time to meet the Army's needs?
    National Guard Post--Mobilization Training (A-2008-FFS-0505.000). 
Objective: (1) Are post-mobilization training requirements adequately 
identified and executed for the National Guard? (2) Are all necessary 
unit and individual training requirements identified and completed 
prior to deployment? (3) Did post-mobilization training requirements 
unnecessarily duplicate pre-mobilization training?
    Sustainment of Left Behind Equipment (A-2008-ALM-0247.000). 
Objective: Did the Army effectively and efficiently manage 
accountability and maintenance of its Continental United States left 
behind equipment?
Fourth Quarter Fiscal Year 2008 Start
    Class V Retrograde Operations (A-2008-ALL-0397.000). Objective: (1) 
Determine if the Army has adequate processes and procedures in place to 
properly retrograde ammunition from Southwest Asia. (2) Determine if 
the Army has adequate accountability and visibility over ammunition.
    Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Fallujah (A-2008-ALL-0400.000). Objective: Determine if 
goods and services acquired under contract were properly justified, 
awarded, and administered.
    Controls Over Logistics Civil Augmentation Program--White Property 
(A-2008-ALL-0398.000). Objective: Determine if the Logistics Civil 
Augmentation Program contractor properly managed and accounted for 
government acquired property.
    Controls Over Vendor Payments--Kuwait (A-2008-ALL-0501.000). 
Objective: Evaluate the controls over vendor payments made on contracts 
awarded in Kuwait.
    Housing Contracts-Area Support Group--Kuwait (A-2008-ALL-0403.000). 
Objective: (1) Determine whether the housing program in Kuwait is 
properly managed. (2) Determine if property or assets provided by the 
Government and acquired by the contractor are adequately managed.
    Managing Reset, U.S. Army Pacific (A-2008-FFP-0506.000). Objective: 
Evaluate development and execution of reset requirements.
    Retrograde Exit Strategy (A-2008-ALL-0402.000). Objective: Evaluate 
the Army's exit strategy to determine if high volume equipment and 
supply retrograde operations were adequately planned and executable for 
Southwest Asia.
First Quarter Fiscal Year 2009 Start
    Single Channel Ground and Airborne Radio System Requirements (A-
2008-ALA-0468.000). Objective: Determine the proper alignment of Single 
Channel Ground and Airborne Radio System requirements to short-term 
needs; and modernization plans to transition to the Joint Tactical 
Radio System.
Second Quarter Fiscal Year 2009 Start
    Controls Over Vendor Pay--Joint Contracting Command (Iraq) (A-2008-
ALL-0399.000). Objective: Evaluate the controls over vendor payments 
made on contracts awarded in Iraq.
    Government Purchase Card Program in Southwest Asia. Objective: 
Evaluate the effectiveness of management controls over the government 
purchase card program. Specifically, determine if use of purchases 
cards were in accordance with established guidance, and goods and 
services acquired were adequately accounted for.
    Information Assurance and Infrastructure in Southwest Asia. 
Objective: Determine whether the Army's controls and procedures protect 
and defend the integrity, confidentiality and availability of 
information and information systems during a contingency operation.
    Logistics Civil Augmentation Program Operations IV in Support of 
Operation Enduring Freedom. Objective: To determine if services awarded 
under Logistics Civil Augmentation Program IV in Afghanistan were 
managed in a reasonable and cost-effective manner.
    Logistics Civil Augmentation Program Operations IV in Support of 
Operation Iraqi Freedom. Objective: To determine if services awarded 
under Logistics Civil Augmentation Program IV in Iraq were managed in a 
reasonable and cost-effective manner.
    Requirements Validation for Continental United States Based 
Mobilized Soldiers (A-2008-FFS-0443.000). Objective: (1) Determine if 
Soldiers mobilized to support contingency operations outside of theater 
continue to have valid mission essential requirements. (2) Determine 
the force structure impacts of the continued use of Soldiers mobilized 
to support contingency operations outside of theater operations.
    Reserve Component Mobilization Strategy. Objective: Is the Reserve 
Component training strategy viable to meet Army Force Generation goals 
and the 12 month mobilization limitations?
    Retrograde Exit Strategy--Continental United States. Objective: 
Evaluate the Army's exit strategy to determine if high volume equipment 
and supply retrograde operations were adequately planned and executable 
for Southwest Asia.
    Transition from Logistics Civil Augmentation Program Operations to 
Sustainment Contracts--Iraq. Objective: Determine if the Army 
implemented best business practices to transition work performed under 
the Logistics Civil Augmentation Program contract to sustainment 
contracts.
    Unit Training to Defeat Improvised Explosive Devices (A-2008-FFF-
0081.000). Objective: Are units conducting appropriate training to 
counter the Improvised Explosive Devices threat?
    Use of Non-Tactical Vehicles--Iraq. Objective: Determine if the 
Army effectively utilized its non-tactical vehicle fleet in a 
contingency environment.

                            ONGOING PROJECTS

Reports Projected Third Quarter Fiscal Year 2008
    Accounting for Seized and Developmental Fund--Iraq Fund Balances 
(A-2007-FFM-0882.000). Objective: (1) What are the residual balances 
for seized and Developmental Fund--Iraq funds? (2) Are the balances 
reasonable and ready for transfer?
    Advanced Training for Explosive Ordnance Disposal Soldiers (A-2008-
FFD-0098.000). Objective: (1) Has Improvised Explosive Device defeat 
methods been fully integrated into advanced training for Explosive 
Ordnance Disposal Soldiers? (2) Has training for new equipment fielded 
during OIF/OEF been fully integrated into advanced training for 
Explosive Ordnance Disposal Soldiers?
    Battle Loss Computations (A-2007-ALM-0305.000). Objective: Did the 
Army properly identify and adjust requirements and funding to replace 
Operational losses?
    Billing for Container Detention Penalties (A-2007-ALR-0259.002). 
Objective: Are container detention charges relating to the Global War 
on Terror billed to the responsible activity?
    Body Armor Requirements (A-2007-FFD-0067.000). Objective: (1) Has 
the Army established adequate quantitative requirements for the 
procurement of body armor? Does the Army have an adequate fielding plan 
for body armor?
    Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Baghdad (A-2007-ALL-0887.001). Objective: Determine if 
goods and services acquired under contract were properly justified, 
awarded, and administered.
    Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Victory (A-2007-ALL-0887.002). Objective: Determine if 
goods and services acquired under contract were properly justified, 
awarded, and administered.
    Contract Operations U.S. Army Accessions Command--Southwest Asia--
Kuwait (A-2007-ALL-0329.000). Objective: (1) Evaluate the effectiveness 
of contracting operations at U.S. Army Contracting Command Southwest 
Asia-Kuwait. (2) Determine whether contracting operations were 
performed in accordance with appropriate laws and regulations.
    Followup Audit of Asset Visibility and Container Management (A-
2007-ALL-0081.002). Objective: Determine if the U.S. Central Command 
implemented agreed to recommendations and fixed the problems identified 
in the previous audit report.
    Management and Use of Contractor Acquired Property Under the 
Logistics Civil Augmentation Program Contract--Power Generators (A-
2007-ALL-0212.001). Objective: Determine if power generators (property) 
acquired were effectively managed and used under the Logistics Civil 
Augmentation Program contract.
    Management of Shipping Containers in Southwest Asia--Afghanistan 
(A-2007-ALL-0081.005). Objective: Determine if the Army maintained 
adequate visibility over shipping containers to, within, and from the 
Southwest Asia Theater of Operations.
    Management of Shipping Containers in Southwest Asia--Continental 
United States (A-2007-ALL-0081.006). Objective: Determine if the Army 
maintained adequate visibility over shipping containers to, within, and 
from the Southwest Asia Theater of Operations.
    Management of Shipping Containers in Southwest Asia--Kuwait (A-
2007-ALL-0081.003). Objective: Determine if the Army maintained 
adequate visibility over shipping containers to, within, and from the 
Southwest Asia Theater of Operations.
    Management of Shipping Containers in Southwest Asia--Summary (A-
2007-ALL-0081.000). Objective: Determine if the Army maintained 
adequate visibility over shipping containers to, within, and from the 
Southwest Asia Theater of Operations.
    Retrograde Operations in Southwest Asia--Iraq (A-2006-ALL-
0397.000). Objective: (1) Determine whether retrograde operations in 
the Southwest Asia area of operations are managed in an effective and 
cost-efficient manner. (2) Determine whether adequate accountability 
and visibility were maintained over retrograded materiel and equipment.
    Retrograde Operations in Southwest Asia--Kuwait (A-2007-ALL-
0858.000). Objective: (1) Determine whether retrograde operations in 
the Southwest Asia area of operations are managed in an effective and 
cost-efficient manner. (2) Determine whether adequate accountability 
and visibility were maintained over retrograded materiel and equipment.
    Retrograde Operations in Southwest Asia--Kuwait (Rear Support) (A-
2007-ALL-0858.001). Objective: (1) Determine whether retrograde 
operations in the Southwest Asia area of operations are managed in an 
effective and cost-efficient manner. (2) Determine whether adequate 
accountability and visibility were maintained over retrograded materiel 
and equipment.
    Temporary Change of Station Orders and Housing for Mobilized 
Soldiers (A-2007-FFS-0917.000). Objective: (1) Are policy and 
procedures governing the development of Temporary Change of Station 
orders adequate to ensure valid travel entitlements and proper 
authorizations? (2) Are policy and procedures governing the approval 
for payment of travel vouchers adequate to ensure care and prudent use 
of travel funds for mobilized Soldiers? (3) Do Army installations have 
sufficient and cost-effective lodging to support Soldiers mobilizing to 
the National Capital Region?
    Theater Maintenance Processes in Europe (A-2008-ALE-0071.000). 
Objective: Were theater maintenance processes structured and 
administered to meet reset goals and provide the best value?
    Use of Role Players at Combat Training Centers (A-2007-FFF-
0415.000). Objective: (1) Is the Army's process for acquiring role-
players for the Combat Training Centers effective and efficient? (2) Is 
the logistical support provided for role-players at the Combat Training 
Centers consistent and cost-effective? (3) Does the Army adequately 
manage its role-players at the Combat Training Centers?
Reports Projected Fourth Quarter Fiscal Year 2008
    Accountability of Contractors on the Battlefield (A-2007-FFS-
0553.000). Objective: (1) Has the Army established direct authority and 
identified the roles and responsibilities for accountability of 
contractors on the battlefield? (2) Does the Synchronized Predeployment 
and Operational Tracker provide accurate, complete and relevant 
information for functional management of deployed Army contractor 
assets in theater? (3) Are the existing and proposed new processes and 
procedures for accounting for Army contractors within Iraq and Kuwait 
adequate?
    Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Bagram (A-2008-ALL-0320.001). Objective: Determine if 
goods and services acquired under contract were properly justified, 
awarded, and administered.
    Contracting Operations at the Joint Contracting Command--Iraq/
Afghanistan--Balad (A-2008-ALL-0319.000). Objective: Determine if goods 
and services acquired under contract were properly justified, awarded, 
and administered.
    Establishing Rates for Shipping Containers (A-2007-ALR-0259.001). 
Objective: Are customer billing rates for break-bulk and container 
shipments based on appropriate costs?
    Follow Up of Offline Purchases (A-2008-ALL-0466.000). Objective: 
Determine if the Army implemented agreed to recommendations and 
corrected the problems identified in the previous audit.
    Government Property Provided to Contractors--Kuwait Base Operations 
(A-2008-ALL-0204.000). Objective: Determine whether the Army has 
adequate management and visibility over Government property provided to 
contractors for base support operations.
    Impact of Mine Resistant Ambush Protected Vehicle Acquisitions on 
Other Systems (A-2007-ALA-0978.000). Objective: Did the Army adequately 
plan, assess, and adjust its requirements for new and existing vehicle 
systems impacted by the acquisition and deployment of the Mine 
Resistant Ambush Protected vehicle system?
    Operational Purchases of Information Technology Equipment, Systems 
and Services--Forces Command (A-2005-FFI-0487.000). Objective: (1) Were 
controls over operational purchases and leases of information 
technology and communications equipment, systems, and services by U.S. 
Army Forces Command deploying units effective and operating? (2) Did 
units utilize appropriate funding sources for information technology 
and communications equipment purchases made in support of deployments?
    Operational Purchases of Information Technology Equipment, Systems 
and Services--Iraq and Kuwait (A-2005-FFI-0487.001). Objective: Were 
controls over purchases and leases of information technology and 
communications equipment, systems, and services in place and operating 
effectively for units deployed in support of Operation Iraqi Freedom?
    Reset Metrics (A-2007-ALM-0733.000). Objective: Did the Army have 
adequate processes to accurately report the status of reset and 
associated funding to Congress?
    U.S. Army Corps of Engineer Contract Functions in Iraq (A-2008-ALL-
0318.000). Objective: (1) Determine if contract requirements were 
correctly identified and resulted in acquisitions that met the needs of 
the Army. (2) Determine if deliverables were monitored to ensure 
products and services were provided in accordance with the terms of the 
contract. (3) Determine if contract closeout practices for terminated 
contracts were adequate and in the best interest of the Army. (4) 
Determine if contract award fee practices were adequate.
Reports Projected First Quarter Fiscal Year 2009
    Army Reserve Pre-mobilization Training (A-2008-FFS-0101.000). 
Objective: (1) Are pre-mobilization training requirements adequately 
identified and executed for the Army Reserve? (2) Are all necessary 
unit and individual training requirements completed prior to 
mobilization? (3) Are training requirements maximized at pre-
mobilization in order to minimize post-mobilization training?
    Automatic Reset Items (A-2008-ALM-0312.000). Objective: (1) Is the 
Automatic Reset Induction effectively supporting equipment requirements 
in the Army Force Generation model?
    Contracts for Reset (A-2007-ALM-0306.000). Objective: Did the Army 
have adequate oversight of field level reset requirements to 
effectively plan for contract maintenance support?
    National Guard Pre-mobilization Training (A-2008-FFS-0353.000). 
Objective: (1) Are pre-mobilization training requirements adequately 
identified and executed for the National Guard? (2) Are all necessary 
unit and individual training requirements completed prior to 
mobilization? (3) Are training requirements maximized at pre-
mobilization to minimize post-mobilization training?
    Property Book Unit Supply Enhanced, 3rd Infantry Division (A-2008-
ALR-0307.000). Objective: Determine if units used the Property Book 
Unit Supply Enhanced system to properly account for equipment and 
maintain accurate data.
    Property Book Unit Supply Enhanced, 10th Mountain Division (A-2008-
ALR-0360.000). Objective: Determine if units used the Property Book 
Unit Supply Enhanced system to properly account for equipment and 
maintain accurate data.
    Property Book Unit Supply Enhanced, I Corps (A-2008-ALR-0357.000). 
Objective: Determine if units used the Property Book Unit Supply 
Enhanced system to properly account for equipment and maintain accurate 
data.
    Property Book Unit Supply Enhanced; Summary Report (A-2008-ALR-
0039.000). Objective: Determine if units used the Property Book Unit 
Supply Enhanced system to properly account for equipment and maintain 
accurate data.
    Rapid Fielding Initiative (A-2007-ALA-0410.000). Objective: 
Validate: rapid fielding initiative requirements; the adequacy of the 
process used to resource rapid fielding initiative acquisitions; and 
plans to institutionalize rapid fielding initiative.
    Use of Role Players Armywide (less Combat Training Centers) (A-
2008-FFF-0148.000). Objective: (1) Is the Army's process for 
acquisition and use of Role-players for training cost-effective? (2) Is 
the logistical support provided to Role-Players consistent and cost 
effective? (3) Is the oversight and administration of Role-Player 
contractors adequate?
Reports Projected Second Quarter Fiscal Year 2009
    Army Foreign Language Program--Contracting (A-2007-ZBI-0344.003). 
Objective: (1) Determine if the Army Foreign Language Program 
adequately identifies and receives contracted linguists to support 
mission requirements. (2) Determine if procedures and practices for 
awarding and justifying language contracts were adequate and in the 
best interest of the Army.
    Directorate of Logistics Workload Supporting Reset (A-2008-ALM-
0311.000). Objective: Did Army garrisons have an adequate process in 
place to identify and meet field level reset requirements in support of 
the Army Force Generation model?
    Management of the Prepositioned Fleet at Combat Training Centers 
(A-2008-FFF-0044.000). Objective: (1) Are the pre-positioned fleets 
adequately configured? (2) Are rotational units effectively using the 
pre-positioned fleets? (3) Are the maintenance costs for the pre-
positioned fleets reasonable?

                         AIR FORCE AUDIT AGENCY
                            PLANNED PROJECTS

Third Quarter Fiscal Year 2008 Start
    AFCENT Deployed Locations Information Technology Equipment 
Accountability and Control (Project Number F2008-FD3000-0418). 
Objective: To evaluate United States Central Command Air Forces 
(AFCENT) information technology equipment accountability and control. 
Specifically, evaluate equipment requirements determination; 
accountability and control; and disposal.
    AFCENT Management of Controlled Drugs (Project Number F2008-FD2000-
0411). Objective: To determine whether medical personnel properly 
manage controlled drugs. Specifically, determine whether personnel 
properly receive, issue, store, and protect controlled drugs.
    AFCENT Area of Responsibility Construction (Project Number F2008-
FD1000-0419). Objective: To determine if AFCENT area of responsibility 
construction efficiently and effectively meets mission requirements. 
Specifically, determine if construction projects provide in-theater 
benefits and meet desired mission capabilities; personnel utilize 
existing, temporary, or movable facilities when possible; and personnel 
properly program, authorize, and document operations and maintenance 
funding for construction.

                            ONGOING PROJECTS

Reports Projected Third Quarter Fiscal Year 2008
    AFCENT Aerial Port Operations (Project Number F2007-FD3000-0725). 
Objective: To determine whether Air Force personnel effectively managed 
aerial port operations within the CENTCOM area of responsibility. 
Specifically, determine whether Air Force personnel efficiently 
utilized airlift capacity, effectively managed cargo and passenger 
travel reimbursements in the area of responsibility, and effectively 
managed cargo and passenger movement.
    AFCENT Civil Engineering Material Acquisition (Project F2007-
FD1000-0830). Objective: To determine whether AFCENT effectively 
managed Civil Engineering material at deployed locations. Specifically, 
determine whether Civil Engineering personnel properly approved 
material purchases, obtained the most cost effective materials, and 
accounted for materials.
Reports Projected Fourth Quarter Fiscal Year 2008
    AFCENT Munitions Management (Project Number F2007-FD3000-0777). 
Objective: To determine whether Air Force personnel properly manage 
munitions in the AFCENT Area of Responsibility. Specifically, determine 
whether personnel (a) properly account for, store and secure munitions 
inventories; and (b) accurately forecast munitions requirements.
    AFCENT Deployed Locations War Reserve Materiel (Project Number 
F2007-FD3000-0781). Objective: To determine whether AFCENT personnel 
effectively manage war reserve materiel in the AFCENT Area of 
Responsibility. Specifically, determine whether AFCENT personnel 
accurately maintain war reserve materiel quantities on-hand to meet 
anticipated mission needs; appropriately use war reserve materiel 
assets for intended purposes; and properly manage war reserve materiel 
inventory by accounting for, maintaining, marking and storing on-hand 
war reserve materiel assets.
    Pallet Management (Project F2007-FC4000-0034). Objective: To 
evaluate pallet management effectiveness. Specifically, evaluate 
requirements computation accuracy and retrograde effectiveness.

                     DEFENSE CONTRACT AUDIT AGENCY

    DCAA's services include professional advice to acquisition 
officials on accounting and financial matters to assist them in the 
negotiation, award, administration and settlement of contracts.
Customer Requested Audits:
    Many of DCAA's audits are performed at the request of contracting 
officers and are most commonly performed during the negotiation and 
award phase. DCAA has no control over the number or timing of these 
audits and must immediately respond to the audit requests as its top 
priority. DCAA issued 57 of these reports between October 2007 and 
March 2008. The major categories of audit services are described below.
    Price Proposals.--Audits of price proposals submitted by 
contractors in connection with the award, modification, or re-pricing 
of Government contracts or subcontracts.
    Agreed-Upon Procedures Price Proposal.--Evaluations of specific 
areas, including actual labor and overhead rates and/or cost realism 
analysis, requested by customers in connection with the award of 
Government contracts or subcontracts.
    Other Special Requested Audits.--Audit assistance provided in 
response to special requests from the contracting community based on 
identified risks.
    Preaward Accounting Surveys.--Preaward audits to determine whether 
a contractor's accounting system is acceptable for segregating and 
accumulating costs under Government contracts.
Contract Required Audits:
    DCAA's audits of cost-reimbursable contracts represent a continuous 
effort from evaluation of proposed prices to final closeout and 
payment. DCAA is able to plan the extent and timing of most of the 
audits performed after the initial contract award. Audits of contractor 
business system internal controls and preliminary testing of contract 
costs are carried out to provide a basis for provisional approval of 
contractor interim payments and early detection of deficiencies. 
Comprehensive contract cost audits are performed annually throughout 
the life of the contract and are used by the contracting activity to 
adjust provisionally approved interim payments and ultimately to 
negotiate final payment to the contractor. DCAA issued 81 of these 
reports between October 2007 and March 2008. As of April 1, 2008 DCAA 
had 285 audits in process and another 68 audits planned for fiscal year 
2008.

------------------------------------------------------------------------
                                                 Fiscal year 2008
         Description of audit area       -------------------------------
                                            In Process        Planned
------------------------------------------------------------------------
Incurred Cost \1\.......................              70               6
Labor Timekeeping \2\...................              37              13
Internal Controls \3\...................              63              20
Purchase Existence and Consumption \4\..              22               6
Cost Accounting Standards \5\...........              62              17
Other \6\...............................              31               6
                                         -------------------------------
      Total.............................             285              68
------------------------------------------------------------------------
\1\ Incurred Cost.--Audits of costs charged to Government contracts to
  determine whether they are allowable, allocable, and reasonable.
\2\ Labor Timekeeping.--Audits to determine if the contractor
  consistently complies with established timekeeping system policies and
  procedures for recording labor costs.
\3\ Internal Controls.--Audits of contractor internal control systems
  relating to the accounting and billing of costs under Government
  contracts.
\4\ Purchase Existence and Consumption.--The physical observation of
  purchased materials and services and related inquiries regarding their
  documentation and verification of contract charges.
\5\ Cost Accounting Standards.--Audits of Contractor Disclosure
  Statements and compliance with Cost Accounting Standards.
\6\ Other.--Significant types of other audit activities include
  compliance with the Truth in Negotiations Act, and audits of economy
  and efficiency of contractor operations.

                                 ______
                                 
                                              Report No. D-2008-086
                                                      July 18, 2008
         Inspector General, United States Department of Defense
  Challenges Impacting Operations Iraqi Freedom and Enduring Freedom 
Reported by Major Oversight Organizations Beginning FY 2003 Through FY 
                                  2007

                   ADDITIONAL INFORMATION AND COPIES

    To obtain additional copies of this report, visit the Web site of 
the Department of Defense Inspector General at http://www.dodig.mil/
audit/reports or contact the Secondary Reports Distribution Unit at 
(703) 604-8937 (DSN 664-8937) or fax (703) 604-8932.

                         SUGGESTIONS FOR AUDITS

    To suggest ideas for or to request future audits, contact the 
Office of the Deputy Inspector General for Auditing at (703) 604-9142 
(DSN 664-9142) or fax (703) 604-8932. Ideas and requests can also be 
mailed to: ODIG-AUD (ATTN: Audit Suggestions), Department of Defense 
Inspector General, 400 Army Navy Drive (Room 801), Arlington, VA 22202-
4704.

                       ACRONYMS AND ABBREVIATIONS

    AAA--Army Audit Agency
    AFAA--Air Force Audit Agency
    CENTCOM--U.S. Central Command
    CERP--Commanders' Emergency Response Program
    DAU--Defense Acquisition University
    DCAA--Defense Contract Audit Agency
    DCMA--Defense Contract Management Agency
    DFAS--Defense Finance and Accounting Service
    DOD OIG--DOD Office of Inspector General
    GAO--U.S. Government Accountability Office
    GWOT--Global War on Terror
    LOGCAP--Logistics Civil Augmentation Program
    OEF--Operation Enduring Freedom
    OIF--Operation Iraqi Freedom
    OUSD(AT&L)--Office of the Under Secretary of Defense for 
Acquisition, Technology, and Logistics
    OUSD(C)--Office of the Under Secretary of Defense (Comptroller)
    SIGIR--Special Inspector General for Iraq Reconstruction
    SPOT--Synchronized Predeployment and Operational Tracker
    UCMJ--Uniform Code of Military Justice

                                 Inspector General,
                                     Department of Defense,
                     Arlington, Virginia 22202-4704, July 18, 2008.
MEMORANDUM FOR DISTRIBUTION:
SUBJECT: Report on Challenges Impacting Operations Iraqi Freedom and 
        Enduring Freedom Reported by Major Oversight Organizations 
        Beginning FY 2003 Through FY 2007 (Report No. D-2008-086)
    We are providing this report for your information and use. We did 
not issue a draft report because this report summarizes material that 
was already published. This report contains no recommendations; 
therefore, no written response to this report is required.
    Questions should be directed to Mr. Paul Granetto at (703) 604-8905 
or Mr. J.T. ``Mickey'' McDermott at (703) 604-8903. The team members 
are listed inside the back cover.

                                             Mary L. Ugone,
                             Deputy Inspector General for Auditing.
Distribution:
    Secretary of Defense
    Deputy Secretary of Defense
    Secretary of the Army
    Secretary of the Navy
    Secretary of the Air force
    Under Secretary of Defense for Acquisition, Technology, and 
Logistics
    Director, Defense Procurement and Acquisition Policy
    Under Secretary of Defense for Personnel and Readiness
    Under Secretary of Defense for Policy
    Under Secretary of Defense (Comptroller)/Chief Financial officer
    Commander, U.S. Central Command
    Commander, Multi-National force--Iraq
    Commander, Multi-National Security Transition Command--Iraq
    Commander, Joint Contracting Command--Iraq/Afghanistan Commander, 
Combined Joint Task Force--101
    Commander, Combined Security Transition Command--Afghanistan Chief, 
National Guard Bureau
    Assistant Secretary of Defense for Networks and Information 
Integration/DOD CIO
    Assistant Secretary of the Air Force (Financial Management and 
Comptroller)
    Director, Joint Staff
    Director, Defense Contract Audit Agency
    Director, Defense Contract Management Agency
    Director, Defense Finance and Accounting Service
    Director, Defense Logistics Agency
    Director, Defense Security Cooperation Agency
    Naval Inspector General
    Auditor General, Department of the Army
    Auditor General, Department of the Navy
    Auditor General, Department of the Air force
    Special Inspector General for Iraq Reconstruction
    Office of Management and Budget
    Government Accountability Office
  Results in Brief: Challenges Impacting Operations Iraqi Freedom and 
 Enduring Freedom Reported by Major Oversight Organizations Beginning 
               Fiscal Year 2003 Through Fiscal Year 2007

                              WHAT WE DID

    We summarized 302 Operations Enduring and Iraqi Freedom related 
audit reports and testimonies issued by the Defense oversight community 
and GAO beginning fiscal year 2003 through fiscal year 2007. Based on 
the content of the reports and testimonies, we categorized the reports 
and testimonies into four areas: Contract Management, Logistics, 
Financial Management, and Other.
    Within the four categories, we retrospectively identified systemic 
challenges. We then prospectively summarized corrective actions taken 
and still pending, as well as other management initiatives taken or 
underway, within the identified functional areas that impact DOD 
operations supporting Operations Enduring and Iraqi Freedom.

                             WHAT WE FOUND

    Over the course of conducting Operations Enduring and Iraqi 
Freedom, DOD experienced, at times, significant and recurring 
challenges in the following functional areas:
  --Contract Management: Contract Oversight and Resource Limitations;
  --Logistics: Asset Accountability, Visibility, and Equipping the 
        Force; and
  --Financial Management: Accuracy of Cost Reporting and 
        Accountability.
    Further, there were challenges that were common in more than one of 
the functional areas. Specifically, shortfalls in DOD training and 
policy and procedures were challenges in more than one functional area.

                            DOD ACTION TAKEN

    DOD took action to resolve Operations Enduring and Iraqi Freedom 
Contract Management, Logistics, and Financial Management, and ``Other'' 
challenges reported by the oversight organizations.
  --From fiscal year 2003 through fiscal year 2007, the Defense 
        oversight community and GAO issued 983 recommendations to 
        improve DOD operations in Operations Enduring and Iraqi 
        Freedom.
  --DOD has resolved most of the recommendations as of September 30, 
        2007. We plan to report on progress made after September 30, 
        2007, in a future report.

                        DOD ONGOING INITIATIVES

    Continuing action is underway to support various initiatives within 
DOD to address the challenges DOD faces for operations supporting 
Operations Enduring and Iraqi Freedom. For example, DOD has:
  --Increased oversight and accountability over deployed contractors 
        and over assessing the needs of its contracting workforce in 
        expeditionary operations;
  --Established an Executive Director to provide program management 
        oversight over contractor logistical support; and
  --Deployed financial support teams to assist the theater Commanders 
        accountability over funds.
    The DOD oversight community has restructured its workforce models 
and developed a comprehensive oversight plan for Operations Enduring 
and Iraqi Freedom which includes logistical support, financial 
management, and contract administration.

                              Introduction

                               OBJECTIVES

    The overall audit objective was to summarize Operation Enduring 
Freedom (OEF) and Operation Iraqi Freedom (OIF) related audit reports 
and testimonies issued beginning fiscal year 2003 through fiscal year 
2007 by the Defense oversight community. This community includes the 
DOD Office of Inspector General (DOD OIG), the Army Audit Agency (AAA), 
the Naval Audit Service, the Air Force Audit Agency (AFAA), the Special 
Inspector General for Iraq Reconstruction (SIGIR) and the Government 
Accountability Office (GAO). Retrospectively, we identified systemic 
challenges and prospectively, reported on the corrective actions taken 
and still pending as well as other management initiatives within the 
identified functional areas to improve DOD operations. See Appendix A 
for a discussion of the scope and methodology and Appendix B for the 
OEF and OIF related reports and testimonies we included in developing 
this summary. See Appendix C for definitions used to categorize OEF and 
OIF related report information.

                               BACKGROUND

Global War on Terror
    The United States is engaged in a comprehensive effort to protect 
and defend the homeland and defeat terrorism. After the terrorist 
attacks of September 11, 2001, military operations began Operation 
Enduring Freedom, which takes place principally in and around 
Afghanistan, but also covers operations in the Horn of Africa, the 
Philippines, and elsewhere. In 2003, DOD began Operation Iraqi Freedom, 
which takes place in and around Iraq. According to GAO estimates, as of 
December 2007, DOD total cumulative reported obligations for the Global 
War on Terror (GWOT) were about $527 billion, of which about $406.2 
billion is for operations for Operation Iraqi Freedom, and about $92.9 
billion is for operations for Operation Enduring Freedom.\1\
---------------------------------------------------------------------------
    \1\ GAO Report No. 08-557R.
---------------------------------------------------------------------------
Systemic Challenges Facing the Department
    This report summarizes the most prevalent of the systemic 
management and performance challenges facing the Department of Defense 
as identified in the audit reports issued fiscal years 2003 through 
2007. Annually, the DOD OIG summarizes what it considers the most 
serious management and performance challenges. The DOD OIG summary and 
a brief assessment of the Department's progress in addressing those 
challenges are reported in the DOD Agency Financial Report.\2\ In the 
fiscal year 2007 Agency Financial Report, the DOD OIG identified and 
reported, as it has in previous years, contract management and 
financial management as two challenge areas that have an impact on OEF 
and OIF as well as on GWOT.
---------------------------------------------------------------------------
    \2\ For fiscal year 2007, the Department has chosen to produce an 
alternative to the consolidated Performance and Accountability Report 
called the Agency Financial Report.
---------------------------------------------------------------------------
    Contract Management.--In the fiscal year 2007 Agency Financial 
Report, the DOD OIG reported that the Department continued to 
experience the management challenge to provide required materiel and 
services that are superior in performance, high in quality, sufficient 
in quantity, and within the time frames needed by the warfighter while 
balancing the cost concerns for the taxpayer. With the war, the volume 
and complexity of purchases have obviously increased. DOD spending in 
fiscal year 2007 (with supplementals) exceeded $600 billion, which is 
more than double the spending from fiscal year 2000. The sheer number 
of contracting actions and the pressures on contracting officials to 
award procurements faster make the challenge of correcting the problems 
more difficult.
    Although the problems encountered in the contracting process are 
not unique to the wartime environment, the risk of critical gaps in the 
contracting process increases during contingency operations. The 
challenge in a wartime environment is to mitigate these gaps. Gaps 
occurred when: user requirements were not met, funds were not spent 
appropriately and were unaccounted for, goods and services were not 
properly accounted for, delivery of goods and services were not made 
properly, individuals involved in the acquisition process lacked 
integrity, and adequate documentation was not retained or prepared.
    Financial Management.--In the fiscal year 2007 Agency Financial 
Report, the DOD OIG stated that the Department faced financial 
management challenges that are complex and long-standing, and pervade 
virtually all its business operations. The DOD OIG had previously 
identified and reported on several material control weaknesses that 
reflect some of the pervasive and long-standing financial management 
issues faced by DOD. These weaknesses, which also affect the 
safeguarding of assets and proper use of funds and impair the 
prevention and identification of fraud, waste, and abuse, include the 
following: Inventory and Government-Furnished material and contractor 
acquired material.
    Logistics.--In the fiscal year 2005 Performance and Accountability 
Report, the DOD OIG stated the challenge of logistics is to provide the 
right force the right personnel, equipment, and supplies in the right 
place, at the right time, and in the right quantity, across the full 
range of military operations. The 2006 Quadrennial Defense Review 
Report discussed efforts to improve visibility into supply chain 
logistics costs and performance. It also stated that DOD sought to:
  --establish a Defense Coalition Support Account to fund and, as 
        appropriate, stockpile routine defense articles such as 
        helmets, body armor, and night vision devices for use by 
        coalition partners;
  --expand Department authority to provide logistics support, supplies, 
        and services to allies and coalition partners to enable 
        coalition operations with U.S. forces;
  --expand Department authority to lease or lend equipment to allies 
        and coalition partners for use in military operations in which 
        they are participating with U.S. forces; and
  --expand the authorities of the Departments of State and Defense to 
        train and equip foreign security forces best suited to internal 
        counterterrorism and counter-insurgency operations.
    The 2006 Quadrennial Defense Review Report also outlined 
initiatives to address challenges such as Radio Frequency 
Identification technologies, which will play a key role in achieving 
the Department's vision for implementing knowledge-enabled logistics 
support to the warfighter through automated asset visibility and 
management.\3\
---------------------------------------------------------------------------
    \3\ Quadrennial Defense Review, February 6, 2006.
---------------------------------------------------------------------------
High-Risk Areas
    Since 1990, the GAO has periodically reported on Government 
programs and operations that it identifies as ``high risk.'' These 
efforts bring focus to a targeted list of major challenges that impede 
effective Government and cost the Government billions of dollars each 
year. Since 1990, GAO has identified DOD Contract Management, 
Logistics, and Financial Management as high-risk areas. Historically, 
high-risk areas have been so designated because of traditional 
vulnerabilities related to their greater susceptibility to fraud, 
waste, abuse, and mismanagement. As the high-risk program has evolved, 
the high-risk designation draws attention to areas associated with 
broad-based transformations needed to achieve greater economy, 
efficiency, effectiveness, accountability, and sustainability of 
selected key Government programs and operations. The DOD has eight of 
its own high-risk areas and shares responsibility for six Government-
wide high-risk areas.\4\
---------------------------------------------------------------------------
    \4\ GAO Report No. 07-310, ``High-risk Series: An Update,'' January 
2007.
---------------------------------------------------------------------------
Oversight
    The Defense oversight community and GAO issued 314 reports and 
testimonies between October 1, 2002, and September 30, 2007, that 
support OEF and OIF. Of the 314 reports and testimonies, 12 reports are 
classified and not included in this report.
    We reviewed the 302 reports and testimonies (246 reports and 56 
testimonies) and categorized them into three main functional areas 
(Contract Management, Logistics, and Financial Management) \5\ based on 
our review of the pertinent areas covered in the reports and the 
subsequent recommendations. We identified 983 recommendations that 
addressed one or more functional areas to improve operations that 
support OEF and OIF. Table 1 shows the number of reports and 
recommendations within the three main functional areas.
---------------------------------------------------------------------------
    \5\ Reports and testimonies that were identified as outside 
Contract Management, Logistics, and Financial Management functional 
areas were categorized as ``Other.''

 TABLE 1.--OEF AND OIF RELATED REPORTS AND TESTIMONIES(FISCAL YEAR 2003-
                            FISCAL YEAR 2007)
------------------------------------------------------------------------
                                           Number of
            Functional Area               Reports and    Recommendations
                                        Testimonies \1\
------------------------------------------------------------------------
Contract Management...................              103              302
Logistics.............................              119              332
Financial Management..................              133              264
Other.................................               73              119
------------------------------------------------------------------------
\1\ The total will exceed 302 because reports and testimonies may cover
  multiple function areas.

    Since fiscal year 2003, the Defense oversight community and GAO 
have steadily increased their oversight of OEF and OIF operations (see 
Table 2). The oversight community has provided a balanced review of 
Contract Management, Logistics, and Financial Management areas 
supporting OEF and OIF.



Recommendations
    As of September 30, 2007, sufficient actions have been taken on 699 
of the 983 recommendations (71 percent) and these recommendations are 
considered completed. We did not report on any recommendations that 
were closed after September 30, 2007, but will do so in a future 
report. Of the 284 recommendations open as of September 30, 2007, 55 
recommendations were to agencies and activities outside of DOD. Table 4 
shows the overall status of recommendations as of September 30, 2007.
Initiatives
    In addition to the actions on OEF and OIF related recommendations, 
DOD has taken other actions, whether required by public law or self-
initiated, to address challenges in Operations Enduring and Iraqi 
Freedom. For the purpose of this report, we focus on discussing 
initiatives that DOD has reported to us that we believe should directly 
help overcome DOD challenges in Contract Management, Logistics, and 
Financial Management.
 Chapter 1. Systemic Challenges During Wartime Contingency Operations 
      for Contract Management, Logistics, and Financial Management
    Over the course of conducting Operations Enduring and Iraqi 
Freedom, DOD experienced significant and recurring systemic challenges 
in the following functional areas:
  --Contract Management: Contract Oversight and Resource Limitations;
  --Logistics: Asset Accountability, Visibility, and Equipping the 
        Force; and
  --Financial Management: Accuracy of Cost Reporting and 
        Accountability.
    Further, systemic challenges were common in more than one of the 
functional areas. Specifically, shortfalls in training and in policy 
and procedures were systemic challenges reported in more than one 
functional area. The Defense oversight community and GAO have 
identified hundreds of millions of dollars in assets that DOD was 
unable to demonstrate adequate accountability for as well as more than 
a billion dollars in inaccurate cost reporting.

                          CONTRACT MANAGEMENT

    DOD has experienced challenges since fiscal year 2003 in providing 
an adequate number of personnel to perform contractor oversight and in 
providing adequate training to the personnel that were performing 
oversight of contractors supporting Operations Enduring and Iraqi 
Freedom. The DOD OIG, AAA, AFAA, SIGIR, and GAO all reported on the 
challenges DOD has experienced with the lack of adequate oversight over 
contractors in both OEF and OIF. As reported by the DOD oversight 
community and GAO, DOD has taken action since fiscal year 2003 to 
improve its guidance on the use of contractors to support deployed 
forces. However, the DOD oversight community and GAO continue to report 
that long-standing problems continue to hinder DOD oversight of 
contractors at deployed locations.

Contract Oversight Personnel
    DOD has experienced challenges in providing an adequate number of 
personnel to perform contractor oversight for OEF and OIF. As reported 
by GAO, a lack of adequate contract oversight personnel was a DOD-wide 
problem; the problem was more severe for more demanding contracting 
environments such as Iraq and Afghanistan, and it presented unique 
difficulties. Without an adequate number of personnel to perform 
oversight of the contractors, DOD increases its risks that contractors 
are not meeting contract requirements.\6\
---------------------------------------------------------------------------
    \6\ GAO Report No. 07-145.
---------------------------------------------------------------------------
    For example, the DOD OIG identified the lack of adequate contractor 
surveillance in fiscal year 2003 for 13 of 24 contracts, valued at $122 
million. These contracts were awarded by the Defense Contracting 
Command--Washington to support the Office of Reconstruction and 
Humanitarian Assistance.\7\ In fiscal year 2004, the GAO also 
identified that the lack of adequate staffing presented challenges to 
several agencies and resulted in inadequate contractor oversight. GAO 
stated that although agencies took action, some of these early contract 
administration issues were not fully resolved.\8\ In fiscal year 2007, 
AFAA identified that U.S. Air Forces Central personnel at three of four 
locations in Southwest Asia did not adequately monitor contract 
performance for seven (out of ten) contracts valued at $27.4 
million.\9\ SIGIR discussed, in fiscal year 2007, the difficulty in 
recruiting qualified Contracting Officer's Technical Representatives 
for appointment in support of Logistics Civil Augmentation Program 
(LOGCAP) Task Order 130. During the SIGIR audit, the Defense Contract 
Management Agency (DCMA) did appoint 18 Contracting Officer's Technical 
Representatives to oversee the task order.\10\ GAO also stated in 
fiscal year 2007 that although DOD took action to improve its guidance 
on the use of contractors to support deployed forces since fiscal year 
2003, a number of long-standing problems continued to hinder DOD 
management and oversight of contractors at deployed locations. Although 
DOD issued the first DOD-wide instruction \11\ on the use of 
contractors to support deployed forces, which addressed some of the 
problems that were previously raised, there were concerns that DOD 
Components were not implementing this instruction. Ultimately, while 
DOD new guidance was a good first step towards improving the 
Department's management and oversight of contractors, the Department 
continued to face problems, including:
---------------------------------------------------------------------------
    \7\ DOD OIG Report No. D-2004-057.
    \8\ GAO Report No. 04-605.
    \9\ AFAA Report No. F-2007-0005-FD3000.
    \10\ SIGIR Report No. 07-001.
    \11\ DOD Instruction 3020.41, ``Contractor Personnel Authorized to 
Accompany the U.S. Armed Forces,'' October 2005.
---------------------------------------------------------------------------
  --limited visibility over contractors and contractor activity,
  --lack of adequate contract oversight personnel,
  --limited collection and sharing of institutional knowledge, and
  --limited or no information on contractor support in predeployment 
        training.\12\
---------------------------------------------------------------------------
    \12\ GAO Report No. 07-145.
---------------------------------------------------------------------------
    As stated by the DOD OIG, appropriate Government surveillance of 
contractor performance is required to give reasonable assurance that 
efficient methods and effective cost controls are being used.\13\
---------------------------------------------------------------------------
    \13\ DOD OIG Report No. D-2004-057.
---------------------------------------------------------------------------
Contract Training
    DOD experienced challenges to provide adequate training necessary 
for contract oversight personnel to perform their respective oversight 
functions. The DOD OIG reported that without adequate contract training 
for personnel assigned oversight duties, DOD cannot be assured that it 
paid fair and reasonable prices for goods and services purchased. For 
example, the DOD OIG identified the lack of adequate training of 
personnel in fiscal year 2003 at the Defense Contract Command--
Washington. Specifically, Defense Contract Command--Washington 
personnel, who did not have contract backgrounds or contract-related 
training, inappropriately approved 13 out of 24 contracts without 
validating the cost data. The DOD OIG determined that Defense Contract 
Command--Washington personnel approved and signed $7 million invoiced 
by a contractor without verifying whether the Government received the 
material.\14\ In another example, in fiscal year 2006, AAA identified 
that although the LOGCAP Support Unit had taken sufficient actions to 
improve training and its effectiveness, the training process did not 
provide enough practical exercises on determining and validating 
requirements and on preparing Statements of Work and Independent 
Government Cost Estimates.\15\ In fiscal year 2007, AFAA identified 
that quality assurance personnel were not provided necessary training 
before they assumed quality assurance responsibilities.\16\
---------------------------------------------------------------------------
    \14\ DOD OIG Report No. D-2004-057.
    \15\ AAA Report No. A-2006-0018-ALL.
    \16\ AFAA Report No. F-2007-0005-FD3000.
---------------------------------------------------------------------------
                               LOGISTICS

    Before OEF and OIF, DOD experienced challenges in logistics 
business processes capabilities and responsibilities. Specifically, DOD 
logistics policies and procedures were inadequate to fully support the 
OEF and OIF contingency operations. A lack of clear and focused 
policies and procedures led to inconsistencies and inefficiencies 
including challenges in accountability and visibility over DOD assets 
and equipment destined for the sovereign governments of Afghanistan and 
Iraq.
    The Defense oversight community and GAO have all reported on the 
challenges DOD has experienced with the logistics operations supporting 
OEF and OIF. The Defense oversight community and GAO have identified 
more than a billion dollars in assets that DOD was unable to 
demonstrate adequate accountability or visibility over. Since the 
1990s, DOD supply chain management has been identified as a high-risk 
area because of high inventory levels and a supply system that was not 
responsive to the needs of the warfighter.
Logistics Accountability and Visibility
    DOD could not demonstrate adequate accountability for more than 
$1.3 billion in deployed assets and could not demonstrate visibility 
over $318 million in assets as reported by the Defense oversight 
community. Accounting for location and disposition of assets, including 
munitions-related assets, was a challenge during OEF and OIF. Logistics 
accountability includes recommendations made to improve establishing or 
maintaining records to identify, acquire, account for, control, store, 
or properly dispose of assets.

                          ASSET ACCOUNTABILITY

    DOD experienced challenges in demonstrating accountability over 
DOD, Government-Furnished, and Iraq and Afghanistan assets. The DOD 
oversight community and GAO identified about $1.3 billion in assets 
that DOD did not demonstrate adequate accountability over.
    DOD Assets.--In fiscal year 2004, AFAA identified that an air 
expeditionary wing's accountability records did not include all weapons 
on hand, did not reflect accurate serial numbers for weapons on hand, 
but included weapons that were not on hand.\17\ In fiscal year 2004, 
GAO identified a $1.2 billion discrepancy in supplies sent to theater 
versus what DOD theater personnel reported.\18\ In fiscal year 2005, 
AFAA discussed another air expeditionary wing that could not locate 14 
equipment assets valued at $8.7 million and did not record more than 
400 on-hand equipment assets on accountable records.\19\ In fiscal year 
2006, AAA found that property records maintained by division units did 
not always accurately account for left-behind equipment and equipment 
returning from OEF and OIF. AAA also found that the property book 
records for 99 out of 879 vehicles contained discrepancies.\20\ Again 
in fiscal year 2007, AFAA identified that the Air Force did not 
adequately account for deployed assets and that estimated activities 
Air Force-wide lost accountability of 5,800 deployed assets valued at 
$108 million.\21\ In fiscal year 2007, AAA found that 8 percent of 
sampled returning equipment was not verified as accounted for on unit 
property records because some Army Reserve unit and installation 
personnel did not follow established procedures and best practices to 
process equipment transactions during the mobilization, deployment, 
demobilization, and redeployment process.\22\ The lack of asset 
accountability impeded DOD visibility over deployed assets.
---------------------------------------------------------------------------
    \17\ AFAA Report No. F-2004-0060-FDE000.
    \18\ GAO Report No. 04-305R.
    \19\ AFAA Report No. F-2005-0058-FDE000.
    \20\ AAA Report No. A-2006-0188-ALL.
    \21\ AFAA Report No. F-2007-0004-FC4000.
    \22\ AAA Report No. A-2007-0061.
---------------------------------------------------------------------------
    Government-Furnished Property and Equipment.--Contractors in 
theater did not always properly account for Government-Furnished 
property and equipment. In fiscal year 2006, AAA identified a systemic 
problem with the accountability and visibility of Government-Furnished 
equipment that the Army transferred to the LOGCAP contractor. 
Specifically, the contractor's property administrator stated he did not 
notify the Army when they removed an asset from their property 
book.\23\
---------------------------------------------------------------------------
    \23\ AAA Report No. A-2006-0083-ALL.
---------------------------------------------------------------------------
    Government of Iraq and Afghanistan Assets.--DOD had a challenge 
accounting for U.S.-provided equipment. Specifically, GAO reported that 
DOD and Multi-National Force--Iraq may not be able to account for Iraqi 
Security Forces receipt of about 90,000 rifles and about 80,000 pistols 
that were reported as issued but were not recorded during the earlier 
phases of training and equipping Iraqi Forces (2004 through 2006).\24\ 
GAO later reported that although DOD took action in December 2005 to 
establish a centralized record of all equipment distributed to Iraqi 
forces, DOD could not account for 190,000 weapons, 135,000 items of 
body armor, and 115,000 helmets reported as issued to Iraqi forces as 
of September 2005.\25\ In fiscal year 2006, SIGIR identified that DOD 
did not have adequate accountability procedures in place over small 
arms procured for Iraq Security Forces. Specifically, SIGIR identified 
material weaknesses because not all weapons procured for the Iraq 
Security Forces were properly accounted for. This may indicate physical 
security concerns over weapons and the lack of accountability 
procedures to track and maintain visibility of small arms, to include 
those transferred.\26\ In fiscal year 2007, GAO indicated that the 
overwhelming size and number of conventional munitions storage sites in 
Iraq, combined with certain prewar planning assumptions that proved to 
be invalid, resulted in U.S. Forces inadequately securing those sites 
and in widespread looting, according to field unit, lessons learned, 
and intelligence reports. Not securing these conventional munitions 
storage sites was costly because, as Government reports indicated, 
looted munitions were used to make Improvised Explosive Devices that 
killed or maimed many people and would likely continue to support 
terrorist attacks in the region. As of October 2006, according to 
Multi-National Corps--Iraq, some remote sites were not revisited to 
verify whether they posed any residual risk or whether they were 
physically secured. DOD did not appear to have conducted (in fiscal 
year 2007) a theater-wide survey and assessment of the risk that 
unsecured conventional munitions represent to U.S. forces and 
others.\27\ Internal sources other than our universe of completed 
reports and testimonies show that in July 2007 the DOD OIG initiated 
and led an effort to assess the status of the lack of accountability 
over munitions in Iraq and Afghanistan.
---------------------------------------------------------------------------
    \24\ GAO Report No. 07-308SP.
    \25\ GAO Report No. 07-711.
    \26\ SIGIR Report No. 06-033.
    \27\ GAO Report No. 07-444.
---------------------------------------------------------------------------
    As stated above in the accountability reports, the lack of 
accountability over assets affects DOD visibility over these assets, 
which can impact DOD ability to transfer equipment to units preparing 
to deploy.

                            ASSET VISIBILITY

    DOD had challenges in demonstrating asset visibility, including 
visibility of about $318 million in assets. Without asset 
accountability, asset visibility was compromised because records 
identifying the location of equipment were not adjusted to reflect the 
redisposition of the assets. Although major combat operations were 
successful during the initial phases of OIF, there were substantial 
logistics support problems. Asset visibility is achieved by using 
timely and accurate information systems that track the distribution of 
assets. Visibility begins at the point from which materiel is shipped 
to the theater of operations and continues until it reaches the user. 
Critical to visibility is the capability to update source data 
dynamically with the near real-time status of shipments from other 
combat service support systems until the shipments arrive at their 
ultimate destinations. Units operating in the theater could not track 
equipment and supplies adequately. The inaccurate records caused DOD 
personnel to spend unnecessary time and energy locating equipment 
needed for units preparing to deploy. According to AAA and AFAA 
reports, higher-tiered asset systems did not contain asset visibility 
data used by Army and Air Force decision makers.
    For example, in fiscal year 2006 and fiscal year 2007, AAA found 
that U.S. Army Forces Command used data recorded in asset visibility 
tools, such as Command Asset Visibility and Equipment Redistribution 
System, to identify and transfer equipment to units preparing to 
deploy. This process was compromised because of the erroneous 
supporting records.\28\ In fiscal year 2007, AFAA reported that Air 
Force leaders did not have total asset visibility and were not always 
able to determine whether the right assets were at the right locations 
to meet mission requirements. AFAA estimated that activities Air Force-
wide incorrectly coded deployed locations for 15,373 assets, valued at 
$213.2 million, and incorrectly reported the deployment status of 2,689 
assets, valued at $104.7 million.\29\
---------------------------------------------------------------------------
    \28\ AAA Report No. A-2006-0188-ALL; AAA Report No. A-2007-0061.
    \29\ AFAA Report No. F2007-0004-FC4000.
---------------------------------------------------------------------------
    The reports show that besides challenges in maintaining adequate 
visibility over assets on-hand, DOD experienced some challenges in 
providing its forces with the equipment necessary to conduct its 
missions.

Equipping the Force
    DOD faced challenges in properly equipping its forces supporting 
OEF and OIF. Specifically, U.S. military forces experienced shortages 
in supplying necessary amounts of equipment such as small arms, armor 
for vehicles, and body armor. The DOD OIG and GAO highlighted various 
challenges for equipping military forces.
    For example, in fiscal year 2007, the DOD OIG identified that the 
Army equipped its deployed forces in support of OIF with the small arms 
necessary to meet Combatant Commanders requirements. However, before 
deployment, some units were not fully equipped with the types of small 
arms required to do their assigned mission and had to obtain those 
small arms from other sources, such as nondeployed units. Nondeployed 
units faced a potential shortage of small arms and may not have had the 
ability to adequately train and maintain equipment and personnel 
readiness at an acceptable level.\30\
---------------------------------------------------------------------------
    \30\ DOD OIG Report No. D-2007-010.
---------------------------------------------------------------------------
    In fiscal year 2007, the DOD OIG surveyed about 1,100 Service 
members who supported OEF and OIF. The DOD OIG found that Service 
members experienced shortages of force-protection equipment, such as 
up-armored vehicles, electronic countermeasure devices, crew-served 
weapons, and communications equipment. As a result, Service members 
were not always able to effectively complete their missions; they had 
to perform missions without the proper equipment, use informal 
procedures to obtain equipment and sustainment support, and cancel or 
postpone missions while waiting to receive equipment.\31\
---------------------------------------------------------------------------
    \31\ DOD OIG Report No. D-2007-049.
---------------------------------------------------------------------------
    DOD also experienced challenges in equipping its forces with 
armored trucks and body armor. Acquisition-related issues caused 
shortages in meeting DOD armored trucks and body armor requirements. 
Specifically, DOD did not adequately leverage acquisition opportunities 
between Army and Marine Corps truck armor procurements. In addition, 
the increased requirement for new body armor exceeded the manufacturing 
increased-production capabilities.
    Armored and Tactical Vehicles.--GAO identified that U.S. military 
forces in Iraq experienced shortages of truck armor. GAO also found 
that although truck armor requirements were determined in November 
2003, the Army did not produce all the armor kits until February 2005 
and did not install the kits to meet the initial requirements until May 
2005.\32\ In fiscal year 2007, the DOD OIG reported that the Marine 
Corps Systems Command continued to award contracts for armored vehicles 
to contractors who repeatedly failed to meet contractual delivery 
schedules for getting vehicles to the theater. In addition, the DOD OIG 
found that TACOM Life Cycle Management Command \33\ awarded a contract 
for crew protection kits to another contractor that did not meet the 
Federal Acquisition Regulation definition of a responsible prospective 
contractor. Specifically, the contractor did not have the necessary 
production control procedures, property control systems, and quality 
assurance measures in place to meet contract requirements for crew 
protection kits. As a result, the TACOM Life Cycle Management Command 
received crew protection kits with missing and unusable components. 
This increased the kit installation time and required additional kit 
inspections.\34\
---------------------------------------------------------------------------
    \32\ GAO Report No. 07-308SP.
    \33\ Referred to in previous DOD Inspector General reports as the 
Tank-Automotive and Armaments Command.
    \34\ DOD OIG Report No. D-2007-107.
---------------------------------------------------------------------------
    Body Armor.--DOD did not have an adequate supply of the new body 
armor in support of its expanded body armor requirements for Operation 
Iraqi Freedom. In fiscal year 2005, GAO reported that new Interceptor 
body armor was not available in sufficient quantities to U.S. Military 
forces in Iraq sometime between October 2002 and September 2004. But, 
according to U.S. Central Command (CENTCOM) officials, all personnel in 
Iraq had the new armor by January 2004. GAO also reported that because 
of the shortages, CENTCOM officials stated they had prioritized the 
issue of the new body armor to those who were most vulnerable. Body 
armor was also not available for all support personnel, such as the 
Army's 377th Theater Support Command, while insurgents were attacking 
and interdicting supply routes in Iraq. GAO further stated that because 
of the shortages, many individuals bought body armor with personal 
funds. The Congressional Budget Office estimated that as many as 10,000 
personnel purchased vests and as many as 20,000 purchased plates with 
personal funds; it estimated the total cost to reimburse them would 
have been $16 million in 2005.\35\
---------------------------------------------------------------------------
    \35\ GAO Report No. 05-275.
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                          FINANCIAL MANAGEMENT

    DOD experienced numerous challenges in its processes for recording 
and reporting its war-related costs. The challenges included long-
standing deficiencies in DOD financial management systems and business 
processes, the use of estimates instead of actual cost data, and the 
lack of adequate supporting documentation. DOD took some steps to 
address these challenges, but problems remain. Without transparent and 
accurate cost reporting, Congress and DOD will not have reliable 
information on how much the war costs, sufficient details on how 
appropriated funds are spent, and the historical data needed to 
consider future funding needs. Reporting the cost of war, internal 
controls over cash, and DOD budget and obligation requirements are 
notable accountability challenges in Financial Management.
Accuracy of Cost Reporting
    DOD experienced challenges in providing accurate and reliable cost 
reporting for OEF and OIF operations. The inadequate processes for 
recording and reporting GWOT costs raised concerns that these data may 
not accurately reflect the true nature of the cost. Specifically, 
neither DOD nor Congress can reliably know how much the war is costing 
or know the details on how appropriated funds are being spent, or have 
historical data useful in considering future funding needs. The Chief 
Financial Officers Act of 1990 requires agencies to ``. . . develop and 
maintain an integrated agency accounting and financial system, 
including financial reporting and internal controls, which . . . 
provides for the development and reporting of cost information.'' \36\ 
DOD Financial Management Regulation, volume 12, chapter 23, paragraph 
230104, as of September 2007, requires that controls, accounting 
systems, and procedures provide in financial records the proper 
identification and recording of costs incurred in supporting 
contingency operations.
---------------------------------------------------------------------------
    \36\ Chief Financial Officers Act of 1990, Section 902.
---------------------------------------------------------------------------
    For example, in fiscal year 2005, GAO found numerous problems in 
DOD processes for recording and reporting costs for GWOT, raising 
significant concerns about the overall reliability of DOD reported cost 
data. Factors affecting the reliability of DOD reported costs included 
long-standing deficiencies in DOD financial systems, the lack of a 
systematic process to ensure that data were correctly entered into 
those systems, inaccurately reported costs, and difficulties in 
properly categorizing costs. In at least one case, reported costs may 
have been materially overstated. Specifically, GAO reported that DOD 
then-reported obligations for mobilized Army reservists in fiscal year 
2004 were based primarily on estimates rather than actual information 
and differed from related payroll information by as much as $2.1 
billion. In addition, GAO found inadvertent double counting in the Navy 
and Marine Corps' portion of DOD reported costs amounting to almost 
$1.8 billion from November 2004 through April 2005. GAO also found some 
incremental base operations costs that appeared, at best, incidental to 
the support of GWOT. In summary, although GAO identified significant 
data reliability problems, GAO did not determine the extent that total 
costs were misstated because it was not feasible to examine all 
reported costs.\37\
---------------------------------------------------------------------------
    \37\ GAO Report No. 05-8 82.
---------------------------------------------------------------------------
    In addition to the double counting GAO found, in fiscal year 2005, 
the Naval Audit Service reported that 17 of the 44 Marine Corps System 
Command contracts (valued at $93.3 million) from fiscal year 2003 and 
fiscal year 2004 did not contain the proper Special Interest Codes. The 
Special Interest Codes indicated that the contracts supported OIF, 
would be reported as OIF-related expenses, and the Service would 
receive reimbursement for the OIF-related expenses.\38\
---------------------------------------------------------------------------
    \38\ Naval Audit Service Report No. N2005-0018.
---------------------------------------------------------------------------
    In fiscal year 2006, SIGIR found that the U.S. Army Corps of 
Engineers over reported its obligations by $362 million for Project and 
Contracting Office obligations recorded in U.S. Army Corps of Engineers 
financial records. The $362 million in obligations were recorded under 
the vendor name ``Dummy Vendor,'' which does not constitute proper 
obligations. This also is not consistent with a 1995 decision by the 
Comptroller General of the United States on appropriations 
availability, the GAO Appropriations Law Manual, and the DOD Financial 
Management Regulation requirements for the recording and reviewing of 
commitments and obligations. These funds would expire if proper 
obligations actions were not taken by September 30, 2006.\39\
---------------------------------------------------------------------------
    \39\ SIGIR Report No. 06-037.
---------------------------------------------------------------------------
Financial Accountability
    DOD had challenges in demonstrating financial accountability in OEF 
and OIF. The GAO, DOD OIG, and SIGIR have reported on accountability 
challenges.
    In fiscal year 2004, GAO reported its concerns over transparency 
and accountability over DOD GWOT cost reporting. It also reported that 
DOD cost reporting included large amounts of funds that were reported 
as obligated in miscellaneous categories and thus provided little 
insight on how those funds were spent. GAO highlighted that an earlier 
fiscal year 2004 report \40\ identified that 35 percent of obligations 
DOD reported in the fiscal year 2003 Operation and Maintenance account 
were in ``other supplies and equipment'' and ``other services and 
miscellaneous contracts.'' \41\
---------------------------------------------------------------------------
    \40\ GAO Report No. 04-668.
    \41\ GAO Report No. 04-915.
---------------------------------------------------------------------------
    In fiscal year 2005, GAO reported that DOD modified its guidance to 
define more clearly some of the cost categories and DOD took additional 
steps to strengthen the oversight and program management of cost 
reporting. GAO reported individual commands took steps to control costs 
and DOD policy advised its officials of their financial management 
responsibilities to ensure the prudent use of contingency funding. 
However, GAO also had concerns that DOD did not systematically call for 
all commands involved in GWOT to take steps to control costs, set 
general parameters to guide cost-control efforts, and keep the Under 
Secretary of Defense (Comptroller) informed of those steps and their 
success. DOD agreed to most recommendations; however, it did not agree 
to establish DOD-wide guidance on cost controls.\42\
---------------------------------------------------------------------------
    \42\ GAO Report No. GAO-05-882.
---------------------------------------------------------------------------
    In fiscal year 2007, GAO reported that DOD and the Military 
Services took specific steps intended to improve the accuracy and 
reliability of their reported GWOT obligation data; however, some 
problems remained with transparency over certain costs and inaccuracies 
in reported obligations. In August 2005, the DOD Comptroller issued 
guidance to help DOD Components more accurately and consistently report 
obligations for contingencies such as GWOT. It directed DOD Components 
to perform a monthly variance analysis to review and validate that 
their reported obligations were accurate and provided a fair 
representation of ongoing activities. The DOD Comptroller also issued 
guidance that directed submitting DOD Components to attest to the 
accuracy of their monthly obligation data in DOD Supplemental and Cost 
of War Execution Report and affirm that the report provided a fair 
representation of ongoing activities. However, because these efforts 
were in the early stages of implementation, GAO did not fully evaluate 
the impact.\43\
---------------------------------------------------------------------------
    \43\ GAO Report No. GAO-07-076.
---------------------------------------------------------------------------
    Again, in fiscal year 2007, GAO reported on its concerns about the 
lack of detail in accounting for obligations and expenditures in the 
DOD procurement account. GAO stated the detailed accounting would 
provide Congress with the visibility it needs to identify the types of 
equipment procured with the reset funds it appropriates, such as 
aircraft, vehicles, or communication and electronic equipment.\44\
---------------------------------------------------------------------------
    \44\ GAO Report No. GAO-07-814.
---------------------------------------------------------------------------
    Commanders' Emergency Response Program.--DOD experienced challenges 
in CERP, such as maintaining program accountability over its CERP 
funding. AAA, SIGIR, GAO, and DOD OIG identified accountability-related 
challenges with the CERP program in Iraq and Afghanistan. The CERP 
supports OEF and OIF by providing ground commanders a source of funds 
to respond to urgent humanitarian relief and reconstruction 
requirements in their areas of responsibility by carrying out programs 
that immediately assist the local population. Table 3 shows the funds 
appropriated or requested (fiscal year 2008) for CERP, in billions of 
dollars.

                          TABLE 3.--FUNDING FOR COMMANDERS' EMERGENCY RESPONSE PROGRAM
----------------------------------------------------------------------------------------------------------------
                                                                          Fiscal year--
                                                          --------------------------------------------    GWOT
                                                              2005       2006       2007       2008      total
----------------------------------------------------------------------------------------------------------------
Iraq.....................................................         .7         .7         .7         .8        2.9
Afghanistan..............................................         .1         .2         .2         .2     \1\ .8
                                                          ------------------------------------------------------
      Total..............................................         .8         .9        1.0        1.0        3.7
----------------------------------------------------------------------------------------------------------------
\1\ The apparent discrepancy for Afghanistan is due to rounding.

Source: CERP data as reported by the Deputy Secretary of Defense during testimony before the House Budget
  Committee on July 31, 2007.

    For fiscal year 2006 and fiscal year 2007, including DOD fiscal 
year 2007 CERP supplemental increase of $.5 billion, the CERP programs 
for OEF and OIF combined was about $1.9 billion.\45\ In fiscal year 
2005, AAA reported challenges with Multi-National Security Transition 
Command--Iraq documentation in the CERP files. It identified shortfalls 
in documenting and maintaining results of coordination with others, 
cost estimates from subordinates, Statements of Work, and requirement 
requests.\46\ A followup report that AAA issued later in fiscal year 
2005 showed that Multi-National Security Transition Command--Iraq had 
implemented previous recommendations, but still had opportunities to 
improve oversight of its CERP program.\47\ Also during fiscal year 
2005, SIGIR issued similar findings; it concluded that while CERP-
appropriated funds were properly used for the intended purposes, 
controls over the distribution of appropriated funds were not 
consistently followed and required documents were not consistently used 
to maintain accountability of projects.\48\
---------------------------------------------------------------------------
    \45\ Fiscal Year 2007 Emergency Supplemental Request for the Global 
War on Terror, DOD, February 2007.
    \46\ AAA Report No. A-2005-0173-ALE.
    \47\ AAA Report No. A-2005-0332-ALE.
    \48\ SIGIR Report No. 05-0 14.
---------------------------------------------------------------------------
    By April 2007, SIGIR found that while Multi-National Corps--Iraq 
had improved its controls over fund accountability for CERP in Iraq, 
project documentation was still a weakness.\49\ Also in fiscal year 
2007, GAO reported that DOD needed to provide greater transparency on 
the use of CERP funds for condolence payments by clarifying the 
definitions as to what should be reported in the two CERP categories: 
(1) condolence payments and (2) battle damage payments. GAO further 
stated DOD needed to include document reference numbers for payments to 
allow DOD to determine whether expenditures of CERP funds were 
appropriately categorized and to permit DOD to obtain detailed 
information for analysis and reporting, as appropriate.\50\ Further, in 
fiscal year 2007, the DOD OIG reported that for CERP in Afghanistan, 15 
of the 16 pay agents reviewed did not have appropriate physical 
security for storing cash; the other pay agent did not hold cash 
because she was collocated with a finance office. Of the 16 pay agents, 
2 inappropriately disbursed cash.
---------------------------------------------------------------------------
    \49\ SIGIR Report No. 07-006.
    \50\ GAO Report No. GAO-07-699.
---------------------------------------------------------------------------
              SYSTEMIC CHALLENGES ACROSS FUNCTIONAL AREAS

    Aside from the challenges in each functional area previously 
discussed, in summarizing this report we identified common challenges 
across the functional areas. Specifically, from our review of the 
Defense oversight community and GAO reports and testimonies, training 
and policy and procedures challenges were identified in more than one 
of these functional areas: Contract Management, Logistics, and 
Financial Management.
Training
    The Defense oversight community and GAO issued 39 reports and 
testimonies that discuss various training challenges DOD faced in 
conducting OEF and OIF operations. In the three functional areas, we 
identified: 15 reports and testimonies that discuss Contract Management 
training challenges; 15 reports and testimonies that discuss Logistics 
training challenges; and 9 reports and testimonies that discuss 
Financial Management training challenges.
Policies and Procedures
    The Defense oversight community and GAO issued 121 reports that 
discuss various policy and procedure challenges DOD faced in conducting 
OEF and OIF operations. In the three functional areas, we identified: 
29 reports that discuss Contract Management policy and procedure 
challenges; 53 reports that discuss Logistics policy and procedure 
challenges; and 39 reports that discuss Financial Management policy and 
procedure challenges.

     Chapter 2. Responsive Actions Taken by Management to Address 
                            Recommendations

    As of September 30, 2007, sufficient actions had been taken on 699 
of the 983 recommendations (71 percent); these recommendations are 
considered completed. We did not report on any recommendations that 
were closed after September 30, 2007, but will do so in a future 
report. Of the 284 recommendations open as of September 30, 2007, 55 
recommendations were to agencies and activities outside of DOD. Table 4 
shows the overall status of recommendations as of September 30, 2007.

                                   TABLE 4.--OVERALL STATUS OF RECOMMENDATIONS
----------------------------------------------------------------------------------------------------------------
                                                                             Percent                   Percent
                                             Recommendations     Closed       Closed        Open         Open
----------------------------------------------------------------------------------------------------------------
Fiscal year:
    2003...................................             28             27         96.4            1          3.6
    2004...................................            105             96         91.4            9          8.6
    2005...................................            257            211         82.1           46         17.9
    2006...................................            282            220         78.0           62         22.0
    2007...................................            311            145         46.6          166         53.4
                                            --------------------------------------------------------------------
      Total................................            983            699         71.1          284         28.9
----------------------------------------------------------------------------------------------------------------

               STANDARDS FOR FOLLOWUP ON RECOMMENDATIONS

    Office of Management and Budget Circular A-50 ``Audit Followup,'' 
September 29, 1982, states that audit followup is an integral part of 
good management and is a shared responsibility of agency management 
officials and auditors. Each agency must establish systems to ensure 
the prompt and proper resolution and implementation of audit 
recommendations. These systems must provide for a complete record of 
action taken on both monetary and nonmonetary findings and 
recommendations.\51\
---------------------------------------------------------------------------
    \51\ Office of Management and Budget Circular A-50, September 29, 
1982.
---------------------------------------------------------------------------
    Generally accepted government auditing standards prescribe followup 
requirements for audit findings and recommendations. Accordingly, for 
performance audits, generally accepted government auditing standards 
state that auditors should evaluate whether the audited entity has 
taken appropriate corrective action to address findings and 
recommendations from previous engagements that are significant. 
Auditors should use this information in assessing risk and determining 
the nature, timing, and extent of current work, including determining 
the extent to which testing the implementation of the corrective 
actions applies to the current engagement objectives.\52\
---------------------------------------------------------------------------
    \52\ GAO-07-731G Government Auditing Standards, July 2007, Chapter 
7 ``Field Work Standards for Performance Audits,'' Section 7.36 
``Previous Audits and Attestation Engagements.''
---------------------------------------------------------------------------
    DOD Directive 7650.3, ``Follow-up on General Accounting Office 
(GAO), DOD Inspector General (DOD IG), and Internal Audit Reports,'' 
October 18, 2006, provides guidance for GAO, DOD OIG, and other DOD 
internal audit organizations. Followup is an integral part of good 
management and is a responsibility shared by DOD managers and auditors. 
Each agency implements its own followup program in accordance with the 
prescribed standards. Further, as described by SIGIR officials, in 
general, SIGIR attempts to follow up on open recommendations 
semiannually to provide current data in the required semiannual reports 
to Congress. According to the SIGIR Deputy Assistant Inspector General 
for Audit, as of April 2008, SIGIR was developing an automated followup 
tracking system.

  Chapter 3. Initiatives Taken by DOD to Address Contract Management, 
             Logistics, and Financial Management Challenges
    Besides taking action on OEF and OIF related recommendations, DOD 
took other actions, whether required by public law or self-initiated, 
to address challenges in Operations Enduring and Iraqi Freedom. For the 
purpose of this report, we focus on discussing initiatives that DOD 
reported to us that we believe should directly help overcome challenges 
in DOD Contract Management, Logistics, and Financial Management in OEF 
and OIF.\53\
---------------------------------------------------------------------------
    \53\ We are not attesting to the adequacy or effectiveness of the 
DOD initiatives reported.
---------------------------------------------------------------------------
                    CONTRACT MANAGEMENT INITIATIVES

    DOD initiated many actions to address contract-related challenges 
in OEF and OIF. These initiatives included establishing and revising 
guidance, fielding a new contractor accountability system, adding new 
contingency contracting training at DOD academic institutions, and 
looking at contracting challenges through commissions and task forces.
    Guidance on Oversight of Contractors.--DOD has issued additional 
guidance to address contracting-related challenges in OEF and OIF, 
which includes jurisdiction over contractors in contingency areas of 
operations, tracking contractors performing work outside the United 
States, as well as managing and integrating contractor support in joint 
and contingency areas of operations.
  --On October 17, 2006, the Uniform Code of Military Justice (UCMJ) 
        was amended to extend UCMJ jurisdiction over persons serving 
        with or accompanying U.S. Armed Forces in the field in times of 
        declared war or contingency operations. The Secretary of 
        Defense's March 10, 2008, memorandum, UCMJ Jurisdiction Over 
        DOD Civilian Employees, DOD Contractor Personnel, and Other 
        Persons Serving With or Accompanying the Armed Forces Overseas 
        During Declared War and in Contingency Operations, provides 
        additional guidance to commanders on exercising their UCMJ 
        authority over civilians and contractors during contingency 
        operations, including those supporting the GWOT.
  --In November 2006, DOD issued implementation for Procedures, 
        Guidance and Information No. 225-74, ``Solicitation and Award 
        of Contracts for Performance in a Foreign Country or Delivery 
        to any Unified Combatant Command Theater of Operation.'' It 
        requires Combatant Command Contracting offices to establish and 
        maintain a Web page listing all prevailing regulations, 
        policies, requirements, host nation laws, Orders/Fragmentary 
        Orders, Combatant Commander's directives, unique clauses, and 
        other considerations necessary for soliciting and awarding 
        contracts for performance in or delivery to that Combatant 
        Command area of responsibility.
  --In January 2007, the Deputy Under Secretary of Defense (Logistics 
        and Materiel Readiness) and the Deputy Under Secretary of 
        Defense (Program Integration) issued guidance instructing the 
        use of the Synchronized Predeployment and Operational Tracker 
        (SPOT) as the central repository for information on contractors 
        deploying with U.S. Forces. On March 19, 2007, the Director, 
        Defense Procurement and Acquisition Policy issued implementing 
        guidance and instructed the use of SPOT. On January 28, 2008, 
        the Director, Defense Procurement and Acquisition Policy issued 
        guidance that requires that DOD contractor personnel data be 
        entered into SPOT for the CENTCOM area of responsibility by 
        August 1, 2008.
  --In October 2007, the acting Under Secretary of Defense for 
        Acquisition, Technology, and Logistics issued a memorandum with 
        procedures for contracting, contract concurrence, and contract 
        oversight for Iraq and Afghanistan. This memo and subsequent 
        policy, procedures, and guidance, issued by the Director, 
        Defense Procurement and Acquisition Policy, instructs 
        contracting officers to have the Joint Contracting Command--
        Iraq and Afghanistan review and clear Statements of Work and 
        terms and conditions of all contracts requiring performance in 
        Iraq or Afghanistan before awarding a contract. Also, upon 
        award of any contract, the procuring contracting officer must 
        assign to the Joint Contracting Command--Iraq and Afghanistan 
        Federal Acquisition Regulation (FAR) Part 42 and Defense 
        Federal Acquisition Regulation Supplement (DFARS) Part 242 
        contract administration of the contract portions that relates 
        to performance in Iraq or Afghanistan.
  --In March 2008, DOD issued DFARS 225.3, ``Contracts Performed 
        Outside the United States.'' It requires contracting officers, 
        when using the clause Federal Acquisition Regulation 52.225-19, 
        ``Contractor Personnel in a Designated Operational Area or 
        Supporting a Diplomatic or Consular Mission Outside the United 
        States,'' to inform the contractor that SPOT is the appropriate 
        automated system to use for the list of contractor personnel 
        required by paragraph (g) of the clause.
  --DOD drafted Joint Publication 4-10, ``Operational Contract Support 
        in Joint Operations,'' which contains detailed content on 
        contracting and contractor management in joint operations. The 
        draft joint publication defines key personnel involved in the 
        contracting process and includes a Contracting Support Plan 
        Checklist and a Contractor Integration Plan Checklist. The 
        Contracting Support Plan Checklist covers the key requirements 
        associated with orchestrating and managing contracting efforts 
        in a joint operations area, including a requirement to ensure 
        that there are adequately trained Contracting Officer 
        Representatives and Contracting Officer Technical 
        Representatives to assist in managing contract performance. The 
        Contractor Integration Plan checklist covers the key 
        requirements associated with managing contractor personnel in a 
        joint operations area and providing Government-Furnished 
        support, when such support is required. DOD expects to issue 
        the joint publication July 2008.\54\
---------------------------------------------------------------------------
    \54\ Deputy Director, Program Acquisition and Contingency 
Contracting, Defense Procurement and Acquisition Policy, April 28, 
2008.
---------------------------------------------------------------------------
  --DOD is updating DOD Instruction 3020.41, ``Integrating Operational 
        Contract Support into Contingency Operations'' (formerly 
        entitled ``Contractor Personnel Authorized to Accompany the 
        U.S. Armed Forces''). The update provides an authoritative and 
        comprehensive roadmap of policy and procedures applicable to 
        contractor personnel authorized to accompany the U.S. Armed 
        Forces. The revised version contains significant changes to the 
        existing instruction including incorporating lessons learned 
        from current operations, requirements for developing contractor 
        oversight plans, and requirements for adequate military 
        personnel needed to execute contract oversight.\55\
---------------------------------------------------------------------------
    \55\ Ibid.
---------------------------------------------------------------------------
    SPOT.--DOD developed SPOT, an automated system, to track 
contractors. SPOT, hosted in the Army network domain (https://
spot.altess.army.mil/default.aspx) and operated by a contractor, has 
been designated as the Joint Enterprise contractor management and 
accountability system to provide a central source of contingency 
contractor information in accordance with DOD Instruction 3020.41, 
``Contractor Personnel Authorized to Accompany the U.S. Armed Forces,'' 
October 3, 2005. Contractor companies are required to maintain by name 
(of each employee) accountability in SPOT while Government 
representatives use SPOT for oversight of the contractors they deploy.
    Contingency Contracting: A Joint Handbook.--Beginning the first 
quarter of fiscal year 2008, DOD distributed Contingency Contracting: A 
Joint Handbook (the Contingency Contracting Joint Handbook) to the 
contingency contracting workforce.\56\ The Contingency Contracting 
Joint Handbook, authorized by the Director, Defense Procurement and 
Acquisition Policy and Strategic Sourcing, provides a consolidated 
source of information for contingency contracting officers conducting 
contingency contracting operations in a Joint environment. The hardcopy 
book and accompanying DVD are intended to be used for training at home 
stations, for reference during deployment, and for training while 
deployed. The handbook and DVD provide useful tools, templates, and 
training that enable the contingency contracting officer to be 
effective in any contracting environment. The Contingency Contracting 
Joint Handbook was prepared by the Office of the Under Secretary of 
Defense for Acquisition, Technology, and Logistics (OUSD[AT&L]), 
Defense Acquisition, Technology, and Logistics contingency contracting 
staff, the Defense Acquisition University, and the Air Force Logistics 
Management Agency.\57\
---------------------------------------------------------------------------
    \56\ Panel on Contracting Integrity, Quarterly Progress Update, 
March 31, 2008.
    \57\ Contingency Contracting: A Joint Handbook.
---------------------------------------------------------------------------
    Contingency Contract Training.--Under the fiscal year 2007 National 
Defense Authorization Act, DOD has expanded contingency contracting 
training modules through the Defense Acquisition University (DAU) as 
required by Section 854 of the Act.\58\ DAU has redesigned the 
contingency contracting curriculum to improve training supporting 
``journeyman-level'' contingency contracting operations. This will 
enable experienced contingency contracting officers to be deployable 
worldwide and be effective immediately upon arriving at the site.\59\ 
One example of specific training DAU already provides is the 
Construction Contract Management course prepared by DAU for the Joint 
Contracting Command--Iraq and Afghanistan. DAU has revised the program 
of instruction for the Joint Contingency Contracting Course, CON 234, 
using the Joint Contingency Contracting Handbook.\60\ DAU is also 
developing an advanced contingency contracting course.\61\
---------------------------------------------------------------------------
    \58\ Mr. Gary Motsek, Assistant Deputy Under Secretary of Defense, 
Office of Program Support, before the Subcommittee on Oversight and 
Investigations, U.S. House of Representatives, on April 25, 2007.
    \59\ Honorable James Finley, Deputy Undersecretary of Defense for 
Acquisition and Technology, before the Subcommittee on Readiness and 
Management Support, Senate Armed Services Committee, April 2, 2008.
    \60\ Panel on Contracting Integrity, Quarterly Progress Update, 
March 31, 2008.
    \61\ Mr. John Young, Under Secretary of Defense for Acquisition, 
Technology, and Logistics, before the House Committee on Armed 
Services, on April 2, 2008.
---------------------------------------------------------------------------
    DAU also hosts the Joint Contingency Contracting Community of 
Practice on its Web site to facilitate collaboration and sharing of 
learning and job support assets, which will result in improved 
efficiencies and support. This initiative also serves as a repository 
for policy and guidance information, predeployment information, tools, 
and after action reports. This community of practice as a Web-based 
tool enables connects the contingency contracting community to share 
expertise and experience. Significant findings concerning contingency 
contracting from staff assistant visits or internal self-inspection 
programs, as well as after action reports and lessons learned, must be 
posted to the DAU Web site.\62\ Additional information on DAU 
contingency contracting related matters can be found at https://
acc.dau.mil/contingency.
---------------------------------------------------------------------------
    \62\ Mr. Richard Ginman, Deputy Director, Program Acquisition and 
Contingency Contracting, Defense Procurement and Acquisition Policy, 
April 28, 2008.
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    Panel on Contracting Integrity.--On February 16, 2007, the 
OUSD(AT&L) established the Panel on Contracting Integrity in accordance 
with the requirements of Section 813 of the fiscal year 2007 National 
Defense Authorization Act (Section 813).
    As required by Section 813, the Panel is reviewing DOD progress to 
eliminate areas of vulnerability that allow fraud, waste, and abuse to 
occur. The Panel established 10 subcommittees to support the review of 
contracting integrity issues: Current Structure of Contracting 
Integrity; Sustained Senior Leadership; Capable Contracting Workforce; 
Adequate Pricing; Appropriate Contracting Approaches and Techniques; 
Sufficient Contract Surveillance; Contracting Integrity in a Combat/
Contingent Environment; Procurement Fraud Indicators; Contractor 
Employee Conflicts of Interest; and Recommendations for Change. Each 
subcommittee completed a formal report documenting the review of their 
designated focus areas and presented recommendations to enhance 
contracting integrity. The Panel reviewed the requirements of Section 
813; the findings and 20 recommendations in the March 2005 Report of 
the Defense Science Board; and the recommendations of GAO Report GAO-
06-838R, ``Contract Management: DOD Vulnerabilities to Contracting 
Fraud, Waste and Abuse,'' July 7, 2006. In its first annual report to 
Congress (December 2007), the Panel identified 21 initial actions in 
2008 in the following areas.
  --Reinforce functional independence of contracting personnel and 
        promptly fill contracting leadership positions with qualified 
        leaders of integrity who expect and enforce ethical behavior.
  --Determine appropriate size of the contracting workforce and ensure 
        that it has the appropriate skills to effectively and 
        efficiently price, award, and manage more than $300 billion in 
        annual contracts.
  --Develop a DOD-wide consistent contract policy-execution review 
        plan, strengthen contracting approaches, and reinvigorate 
        contract surveillance techniques.
  --Improve planning and training for contracting in combat/contingent 
        environments.
    On March 31, 2008, OUSD(AT&L) issued an internal quarterly progress 
update. Additional internal quarterly updates on Panel initiatives are 
scheduled to be issued through the remainder of 2008. The March issue 
provided an update on the Panel and its subcommittees' efforts. The 
overview and efforts of the subcommittees on Contracting Integrity in a 
Combat/Contingent Environment and Procurement Fraud Indicators are 
discussed below.
    Contracting Integrity in a Combat/Contingent Environment 
Subcommittee.--The Contracting Integrity in a Combat/Contingent 
Environment subcommittee is chaired by the Director, Defense 
Procurement and Acquisition Policy and Strategic Sourcing. For fiscal 
year 2008, the Contracting Integrity in a Combat/Contingent Environment 
subcommittee will improve training by leveraging Marine Corps and Air 
Force training capabilities; improve training on how to run a 
contracting office in a combat/contingent environment; and review Fraud 
Indicator Training and Contracting Office Transition Plan. In the March 
2008 Quarterly Progress Update, the subcommittee reported that the 
Department has taken numerous steps forward in improving the quality of 
training offered to contingency contracting workforce members in DOD. 
For example, the Army revised its Functional Area 51 Contracting 
Officer Leader Development program and developed a new training 
strategy after closely reviewing the programs of instruction offered by 
both the U.S. Marine Corps and Air Force. For Fraud Indicator Training, 
the subcommittee reviewed the Contingency Contracting Joint Handbook 
and reported that with the use of the handbook and DAU training 
contracting officers will be able to identify specific indicators of 
contract fraud found most prevalent in a contingency environment. The 
subcommittee also reported that Chapter 4 of the Joint Contingency 
Contracting Handbook provides the initial elements of training to 
prepare the contingency contracting officer for transition planning.
    Procurement Fraud Indicators Subcommittee.--The Procurement Fraud 
Indicators Subcommittee is chaired by the Assistant Inspector General, 
Acquisition and Contract Management, DOD OIG. The Executive Director 
for the Panel on Contracting Integrity initiated this subcommittee to 
identify what the procurement indicators are and how they should be 
addressed. The increased level of DOD spending, especially in a 
contingency or expeditionary environment and without a comparable 
increase in procurement staffing levels, has increased procurement 
risks. The March 2008 Quarterly Progress Update stated that recently 
reported fraud cases have increased visibility in this area. The 
membership of this subcommittee includes representatives nominated by 
the Inspectors General of the Military Departments. Further, in its 
update, the subcommittee reported it plans to evaluate previously 
developed information on procurement fraud indicators both within and 
outside of the Department and determine the best avenues for presenting 
the information to the procurement community. The following are 
examples of the subcommittee plans.
  --Identify all relevant source material previously developed on 
        procurement fraud indicators and:
    --determine the need for a Procurement Fraud Indicators handbook 
            for acquisition personnel similar to the IG Procurement 
            Fraud Indicators Handbook \63\ for auditors;
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    \63\ DOD OIG Handbook 7600.3, ``Handbook on Fraud Indicators for 
Contract Auditors,'' March 31, 1993.
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    --review best practices from existing training courses to determine 
            the potential for a training module for insertion into DAU 
            training; and
    --pursue the feasibility of an acquisition Web site.
  --Conduct research and analysis by implementing the following.
    --Subcommittee members will gather best practices from their own 
            and other organizations.
    --Subcommittee will establish tasks necessary to review the best 
            available information, review the revised IG Procurement 
            Fraud Indicators Handbook, determine the need and contents 
            of a separate acquisition handbook, analyze existing 
            training segments, determine focus and content for DAU 
            training module, and determine the potential for a one-stop 
            acquisition Web site for procurement fraud indicators.
    Commissions and Task Forces.--In an effort to improve its support 
of OEF and OIF and for future contingency operations, DOD has 
established many commissions and task forces. The following highlight a 
few facts on key commissions and task forces.
    Commission on Army Acquisition and Program Management in 
Expeditionary Operations.--The Secretary of the Army established a 45-
day commission led by Jacques Gansler, former Under Secretary of 
Defense for Acquisition, Technology, and Logistics (the Gansler 
Commission). The Gansler Commission will ``. . . review the Army's 
policies, procedures, and operations regarding acquisition and program 
management in expeditionary operations and make findings and 
recommendations as to their effectiveness and compliance with 
applicable laws and regulations.'' In October 2007, the Commission 
issued its report, ``Urgent Reform Required: Army Expeditionary 
Contracting,'' which states:
  --The expeditionary environment requires more trained and experienced 
        military officers and noncommissioned officers. As of October 
        2007, only 3 percent of Army contracting personnel were active 
        duty military, and Army contracting career General Officer 
        positions no longer existed.
  --The Army's acquisition workforce was not adequately staffed, 
        trained, structured, or empowered to meet the Army needs of 
        21st-century deployed warfighters. Only 56 percent of the 
        military officers and 53 percent of the civilians in the 
        contracting career field were certified for their then-current 
        positions.
  --In spite of a seven-Fold workload increase and greater complexity 
        of contracting, the Institutional Army did not support this key 
        capability (effective contract management).
  --In spite of almost as many contractor personnel in the Kuwait/Iraq/
        Afghanistan Theater as there are U.S. military personnel, the 
        Operational Army had not yet recognized the impact of 
        contracting and contractors in expeditionary operations and on 
        mission success.
  --Contracting (from requirements definition, through contract 
        management, to contract closeout) was treated as an operational 
        and institutional side issue instead of as a core competence.
    Task Force on Contracting and Contract Management in Expeditionary 
Operations.--The Under Secretary of Defense for Acquisition, 
Technology, and Logistics established the Task Force on Contracting and 
Contract Management in Expeditionary Operations to address the specific 
Gansler Commission recommendations and to integrate activities 
responding to the Gansler Commission's recommendations with the many 
other relevant activities already underway in DOD. The task force is 
guided by senior leaders in the Acquisition, Technology, and Logistics 
organization, including the Deputy Under Secretary (Acquisition and 
Technology); the Director, Defense Procurement, Acquisition Policy, and 
Strategic Sourcing; and his Principal Deputy. These senior leaders are 
working closely with the Deputy Under Secretary (Logistics and Materiel 
Readiness) and the Assistant Deputy Under Secretary of Defense (Program 
Support). Membership of this task force includes representatives from 
all of the Services, the DCMA, the Joint Staff, the Joint Contingency 
Contracting cell for Iraq and Afghanistan, and various elements of the 
Office of the Secretary of Defense. The task force meets weekly for 
progress-tracking purposes, meets periodically with the Services and 
DCMA to ensure a coordinated and consistent DOD approach, and meets 
about once a month with Dr. Gansler to discuss any points of 
clarification regarding the Gansler Commission's recommendations.
    The task force actions implement Section 849 of the fiscal year 
2008 National Defense Authorization Act, which directed the Secretary 
of Defense, in consultation with the Joint Chiefs of Staff, to evaluate 
the Gansler Commission's recommendations to determine the extent to 
which such recommendations are applicable to the other Armed 
Forces.\64\
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    \64\ Mr. John Young, Under Secretary of Defense for Acquisition, 
Technology, and Logistics, before the House Committee on Armed 
Services, on April 2, 2008.
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    Army Contracting Initiatives.--The Army has implemented several 
initiatives to address contracting challenges. Specifically, in 
February 2008, the Army announced the Army Contracting Campaign Plan to 
address findings and recommendations from two previous independent 
reviews from the Gansler Commission and the Army Contracting Task 
Force. The Army Contracting Campaign Plan will enable the Secretary of 
the Army to execute recommended improvements to Army contracting. 
Further, the Secretary of the Army directed the establishment of the 
Army Contracting Command as a major subordinate command of the Army 
Materiel Command and the realignment of the Army Contracting Agency 
under the Army Materiel Command. The Army Contracting Agency provides 
contracting services for installation-level services and supplies, and 
common-use information technology hardware, software, and services. The 
realignment of Army Contracting Agency to Army Materiel Command places 
the majority of the Army's contracting resources into one Army command, 
which will provide a full range of contracting services.

                         LOGISTICS INITIATIVES

    According to the Executive Director for LOGCAP, the following are 
initiatives in the logistics support program.
    In April 2007, the Army created the Executive Director for LOGCAP, 
a more than $30 billion Services program, which reports to the 
Commanding General of the Army Sustainment Command. Establishing this 
position provides program management oversight of LOGCAP augmentation 
to combat support/combat service support functions for supported units 
in OEF and OIF. The Executive Director has overall executive 
responsibility for LOGCAP, under which contractors from the private 
sector provide a broad range of logistical and life support services to 
U.S. and allied forces during combat operations. The Executive Director 
also stated he provides liaison LOGCAP planners for Army Service 
Component Command worldwide operation planning for support of 
logistical and life support services.
    As of March 2008, LOGCAP is supported by 66 reserve officer billets 
from the LOGCAP Support Unit. One of the LOGCAP initiatives is to 
increase this unit to 137 personnel, broken out into five detachments 
for worldwide deployment. A detachment or its elements would deploy 
with the newly established Army contract support brigades to assist in 
developing requirements.
    The program currently consists of Deputy Program Directors deployed 
in Iraq, Afghanistan, and Kuwait supported by members of the LOGCAP 
Support Unit, the DCMA, and from members of the LOGCAP support 
contractor. According to the Executive Director, he also uses 
continental U.S. assets to augment the requirements of the forward 
deployed elements.
    Development of Future Doctrine for Logistical Support.--Concurrent 
to providing management support for logistic services, the program is 
also developing planning doctrine on including contractor logistical 
services in future contingency operations. The emphasis is ``How to 
plan for, and include, LOGCAP services in operational support plans.'' 
The goal is to align LOGCAP operational planners with the contract 
support brigades to assist the decision-making process for when to use 
and in developing requirements for LOGCAP services.
    Exercises and Deployment.--LOGCAP participates in military training 
exercises to teach awareness of LOGCAP efforts. LOGCAP also provides 
outreach support and awareness to logistics support personnel and DCMA 
officers deploying in theater.
    In-theater Support.--LOGCAP provides in-theater support to military 
operations. LOGCAP personnel provide an overview of the program to 
military commanders, the Joint Contracting Command--Iraq and 
Afghanistan, regional contracting centers, and forward operating base 
mayors. The LOGCAP program personnel meet with division and garrison 
commands to educate them on the process used to seek the services of 
LOGCAP when organic logistics services cannot be used. This includes 
developing requirements, providing support for forward operating bases, 
operating dining facilities, or providing a multitude of field 
services.
    Award Fee.--Because LOGCAP operates in different military 
operations and world-wide, the program has established an initiative to 
standardize the evaluation process across the various groups that 
assess contractors' performances in Iraq, Afghanistan, and Kuwait. It 
also includes an assessment of what efforts the contractors are making 
to improve the quality of operations.

                    FINANCIAL MANAGEMENT INITIATIVES

    DOD Components have implemented many initiatives to address 
financial management challenges in wartime contingency operations such 
as OEF and OIF. The Office of the Under Secretary of Defense 
(Comptroller) (OUSD[C]) has implemented several initiatives such as 
issuing additional financial guidance and focused funding execution 
reviews, and establishing a senior steering group. The Director, 
Defense Finance and Accounting Service (DFAS) has implemented several 
initiatives such as deploying personnel in August 2007 to assist 
forward-deployed DOD elements in preparing and maintaining supporting 
documentation voucher transactions. In addition, DFAS initiatives 
implemented includes reducing the burden on units in Iraq and Kuwait 
and improve controls over documentation supporting commercial payments 
and payments to foreign governments. For some of the DFAS initiatives, 
the U.S. Army partnered with DFAS in implementing the initiative.
    Under Secretary of Defense (Comptroller).--The OUSD(C) has 
initiated several actions to address cost and execution of funds 
challenges in OEF and OIF. Specifically, the OUSD(C) has issued 
additional financial management related guidance for contingency 
operations, performed focused analysis on funding monthly execution, 
and established the Cost of War Senior Steering Group.
    Additional Financial Management Guidance.--The OUSD(C) wrote that 
because of recent reviews of commercial payments for goods and services 
in Iraq and Afghanistan, in September 2007 the OUSD(C) published 
guidance emphasizing the requirements for proper payments in 
contingency operations. The OUSD(C) memorandum prescribes certification 
guidelines for payments made in contingency operation areas including 
11 types of information that certifying officers will typically use to 
certify and make payments.\65\ In May 2008, the OUSD(C) updated the DOD 
Financial Management Regulation to incorporate the certification 
guidelines for commercial payments in contingency operations from the 
September 2007.\66\
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    \65\ OUSD(C) Memorandum, ``Certified Commercial Payments in 
Contingency Operations,'' September 14, 2007.
    \66\ DOD Financial Management Regulation, Volume 10, Chapter 8 
``Commercial Payment Vouchers and Supporting Documents,'' May 2008.
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    Monthly Funding Execution Analysis.--In December 2007, the OUSD(C) 
initiated an effort to increase its overview of DOD execution of OEF 
and OIF related funding. As part of this effort, to gauge whether DOD 
can properly execute the funding requested for the specific fiscal 
years, the Comptroller invited personnel from other DOD Components, 
such as the DOD OIG, to perform quick-look reviews on the execution of 
GWOT funding patterns. These support efforts were included in the 
OUSD(C) overall focused analysis of execution of funding. According to 
OUSD(C) officials, OUSD(C) now performs a monthly analysis of DOD 
execution of funding and reports the results to the Under Secretary of 
Defense (Comptroller). The monthly analysis provides timely awareness 
of funding trends and potential funding execution concerns to the 
attention of the Comptroller.
    Cost of War Senior Steering Group.--In February 2007, the Deputy 
Secretary of Defense established the Cost of War Senior Steering Group 
to provide governance for the timely resolution of policy, system, and 
procedural issues that impact the reporting of the cost of war. The 
objective is to improve the credibility, transparency, and timeliness 
of the Cost of War reporting, to include CERP. The Cost of War Senior 
Steering Group is to: establish and charter the GWOT Cost of War 
Project Management Office; evaluate and approve plans and 
recommendations for the resolution of policy, system, and procedural 
issues that impact the credibility of Cost of War reporting; facilitate 
adoption of Cost of War reporting best business practices throughout 
DOD; and provide oversight and direction to the GWOT Cost of War 
Program Management Office on key metrics, trends, and initiatives that 
measure the improvements in Cost of War reporting.\67\
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    \67\ See memorandum OSD 01647-07.
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    Defense Finance and Accounting Service.--The Director, DFAS has 
initiated a proactive effort both in theater and in the continental 
United States, to support the warfighter and mitigate challenges DOD 
has in OEF and OIF operations. According to the DFAS GWOT Program 
Management Office, since August 2007, DFAS has implemented the 
following financial related initiatives.
    The DFAS GWOT Program Management Office: mapped processes and 
developed standard operating procedures for funding and reporting; 
improved tracking of GWOT funds and budget execution by Services 
leading to greater reliability of data incorporated in the GWOT Cost of 
War report; documented Components' legacy GWOT reporting business 
practices; implemented accuracy and compliance measures and scorecard; 
implemented GWOT Cost of War Status of Funds reporting; achieved a 
Green progress rating on the President's Management Agenda scorecard; 
established proactive, aggressive communication channels for GWOT 
audits; established a viable theater support program; and developed a 
repeatable process for monitoring GWOT audits, which is considered a 
``Best Practice'' in addressing GWOT and financial audits for DOD.
    In-Theater Support:
  --Worked with theater commanders \68\ to support finance operations 
        and have deployed support teams to: perform finance functions; 
        assist with in-depth reviews of commitments, obligations, and 
        disbursements;--assist with conducting joint reviews; 
        retrograde finance functions back to DFAS continental U.S. 
        operations and free soldiers to perform other missions; provide 
        training support on accounting, vendor pay, military pay 
        disbursing, and supporting systems; keep lines of communication 
        flowing between theater finance and DFAS to troubleshoot 
        problems; support audit inquiries; and provide supplemental 
        support during unit rotations.
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    \68\ Such as the Multi-National Corps--Iraq, Multi-National 
Security Transition Command--Iraq, Combined Joint Task Force-82, and 
336th Financial Management Company Kuwait.
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  --Included actions the Program Management Office performed in support 
        of GWOT operations in the theater: improved payment controls 
        and documentation in theater; implemented electronic imaging of 
        documents in the theater of operations to improve the 
        efficiency of reporting and to reduce risk to soldiers who 
        transport documentation; issued guidance and updated policy 
        regulations to improve the communication of requirements in the 
        theater; assisted commands in executing and reporting GWOT 
        budget execution; and participated in training units deploying 
        to the theater.

                    DOD AUDIT COMMUNITY INITIATIVES

    In addition to actions taken by the DOD Components, the Defense 
oversight community has instituted its own initiatives to address the 
challenges presented to DOD in OEF and OIF operations. Some of the 
initiatives within the Defense oversight community are focused 
workforces, focused coordination groups, and comprehensive and 
coordinated oversight plans in response to statutory requirements.
    The Defense oversight community is increasing its partnerships and 
providing support within the Defense community for oversight efforts. 
For example, the DOD OIG and AAA are conducting a joint review of the 
Joint Contracting Command--Iraq and Afghanistan. In addition, the U.S. 
Army Corps of Engineers and AAA have provided personnel to support DOD 
OIG oversight efforts. The Naval Audit Service and AFAA have provided 
support to the DOD OIG munitions accountability assessment effort.
    Audit Plan for Support of Coalition Forces in Iraq and 
Afghanistan.--The fiscal year 2008 National Defense Authorization Act, 
Section 842, ``Investigation of Waste, Fraud, and Abuse in Wartime 
Contracts and Contracting Processes in Iraq and Afghanistan,'' January 
28, 2008, requires the Inspector General of the Department of Defense 
to develop a comprehensive plan for a series of audits of DOD 
contracts, subcontracts, and task and delivery orders for the 
logistical support of coalition forces in Iraq and Afghanistan. The Act 
also requires that the Special Inspector General for Iraq 
Reconstruction and the Special Inspector General for Afghanistan 
Reconstruction develop a comprehensive plan for a series of audits of 
Federal agency contracts, subcontracts, and task and delivery orders 
for the performance of security and reconstruction functions in 
Afghanistan and Iraq.
    To show all of the audit work for Afghanistan and Iraq, the DOD OIG 
has expanded the audit plan beyond the statutory mandate to include 
other key issue areas for Afghanistan and Iraq, such as financial 
management, and human capital for contract administration. The plan 
includes the planned audit work of the Inspectors General of the 
Department of State and the U.S. Agency for International Development 
and the Special Inspector General for Iraq Reconstruction. The plan 
also includes the planned audit work of the Army Audit Agency, Air 
Force Audit Agency, and Defense Contract Audit Agency because of the 
major contributions they make to improve the efficiency and 
effectiveness of support to the military.
    The Inspectors General of Department of Defense, Department of 
State, Agency for International Development, and the Special Inspector 
General for Iraq Reconstruction are coordinating their audit plans 
through existing working groups and councils. Coordination will include 
the Special Inspector General for Afghanistan Reconstruction when, and 
if, one is appointed.
    Workforce.--Within the Defense oversight community, the AAA, AFAA, 
and DOD OIG have instituted an expeditionary workforce structure.\69\ 
The AAA and DOD OIG maintain a footprint of personnel on the ground in 
Afghanistan, Iraq, and Kuwait, whereas the focus of the Special 
Inspector General for Iraq Reconstruction is limited to Iraq. The AFAA 
has no permanent presence in Southwest Asia; however, it uses about 10 
percent of available auditors per year on GWOT-related audits in the 
United States Air Forces Central overseas area of responsibility. The 
audit work is accomplished by using 24 person temporary teams twice a 
year to perform mobile audits for 7 to 8 weeks.
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    \69\ We define expeditionary workforce as mobile personnel 
dedicated to a specific mission and deployable to worldwide locations 
to conduct oversight to complement permanent workforce efforts.
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    Coordination Groups.--The DOD OIG is the lead oversight agency for 
accountability in DOD and, as such, is committed to maintaining an 
effective working relationship with other oversight organizations to 
minimize duplication of efforts and to provide more comprehensive 
coverage. Effective interagency coordination, collaboration, and 
partnerships within the oversight community are essential to providing 
comprehensive reviews of wartime expenditures to identify whether 
critical gaps exist, and then to recommend actions to close those gaps.
    SWA Joint Planning Group.--The DOD OIG has jointly established and 
chairs an intra- and interagency Southwest Asia Joint Planning Group 
that meets quarterly. The Group provides oversight of fraud, waste, 
abuse, and criminal activities in the Southwest Asia region. The 
Southwest Asia Joint Planning Group provides a chance for collaboration 
and team work with organizations engaged in this effort, including the 
Military Inspectors General and Service Auditors General, Combatant 
Commands Inspectors General, DCAA, DFAS, DCMA, the Inspectors General 
of State and the U.S. Agency for International Development, SIGIR, and 
GAO. The mission of the Southwest Asia Joint Planning Group is to 
better coordinate and integrate oversight activities in the region. The 
Southwest Asia Joint Planning Group leads the coordination and 
oversight required to identify and recommend improved mission support 
to military units conducting operations.
    Afghanistan Working Group.--A subgroup of the Southwest Asia Joint 
Planning Group is the Afghanistan Working Group. The DOD OIG, along 
with the GAO, the Inspectors General of State, and the U.S. Agency for 
International Development, established the Working Group to minimize 
the impact on forward command operations, deconflict overlapping and 
duplicate oversight requests, and facilitate the exchange of oversight 
information related to Afghanistan. The DOD OIG, as the DOD 
representative, also incorporates the ongoing and planned Afghanistan-
related oversight efforts of the Service Auditors General into the 
Working Group. The Afghanistan Working Group has convened to discuss 
ongoing, planned, and completed projects that address issues related to 
Afghanistan operations. This group has briefed congressional committees 
and members of the ongoing, planned, and completed Afghanistan 
oversight projects.
    Iraq Inspectors General Council.--In conjunction with the Southwest 
Asia Joint Planning Group, the DOD OIG also participates in the Iraq 
Inspectors General Council chaired by SIGIR to minimize the impact on 
forward command operations, deconflict overlapping and duplicate 
oversight requests, and facilitate the exchange of oversight 
information unique to Iraq.
    The DOD OIG provides an overview of the DOD oversight community in 
its Semiannual Reports \70\ to Congress. The DOD OIG Semiannual Report 
includes a chapter on the DOD oversight community's efforts for GWOT 
and Southwest Asia. Please see http://www.dodig.mil/sar/index.html for 
our published Semiannual Reports to Congress, including DOD oversight 
community's efforts on GWOT and Southwest Asia.
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    \70\ The DOD OIG issues the Semiannual Report to Congress in 
accordance with the Inspector General Act of 1978, as amended.
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                          DOD OIG INITIATIVES

    The DOD IG is committed to supporting the GWOT and the needs of the 
men and women fighting this war. Overall, the DOD IG is responsible for 
providing oversight to more than $655 billion in funds dedicated for 
the GWOT. The DOD OIG identifies and helps correct critical mission 
support problems that impact OEF and OIF. The DOD IG has established 
the following GWOT-related goals:
  --Goal 1.--Increase the DOD OIG presence in Southwest Asia to work on 
        priority issues directly supporting efforts for OEF and OIF.
  --Goal 2.--Expand coverage of the DOD GWOT-related programs and 
        operations by providing oversight in fundamental areas: 
        contract surveillance, financial management, accountability of 
        resources, as well as training and equipping of personnel and 
        developing a logistics sustainment base.
  --Goal 3.--Increase efforts to prevent the illegal transfer of 
        strategic technologies and U.S. Munitions List items to 
        prohibited nations, terrorist organizations, and other criminal 
        enterprises.
    Besides developing a comprehensive plan for a series of audits as 
required by the fiscal year 2008 National Defense Authorization Act, 
Section 842, ``Investigation of Waste, Fraud, and Abuse in Wartime 
Contracts and Contracting Processes in Iraq and Afghanistan,'' January 
28, 2008, the DOD OIG initiated several other actions to support OEF 
and OIF. The DOD OIG established field offices in four countries in 
Southwest Asia, created an expeditionary workforce, and participated in 
interagency focus groups. To accomplish its oversight mission, the DOD 
OIG has adopted a strategy that is based on maintaining the right-size 
presence in theater but also recognizes that much of its work can be 
done out of Iraq and Afghanistan. An important part of the DOD OIG 
oversight effort is to improve interservice and interagency 
coordination and collaboration to minimize duplication of effort and 
ensure that DOD OIG has only the staff needed in theater to accomplish 
the mission.
    Southwest Asia Field Offices.--The DOD OIG has established field 
offices in Afghanistan, Iraq, Kuwait, and Qatar and continues key 
placement of DOD OIG personnel in Southwest Asia. DOD OIG presence 
facilitates timely reviews and reporting of results in theater and 
minimizes disruption to the warfighter.
    Workforce.--The DOD OIG has adopted an expeditionary workforce 
model to support efforts throughout all of Southwest Asia. The DOD OIG 
has core staff forward deployed at all times. The core contingent is 
composed of individuals serving deployments of 6 to 12-months. 
Expeditionary team members deploy for as long as needed to complete the 
review.
    Panel on Contracting Integrity.--The DOD OIG participates in the 
DOD Panel on Contracting Integrity. Established under Section 813 of 
the fiscal year 2007 National Defense Authorization Act, the Panel is 
chaired by the Deputy Under Secretary of Defense for Acquisition, 
Technology, and Logistics to conduct reviews of DOD progress made in 
eliminating areas of vulnerability in the Defense contracting system. 
The DOD OIG is a member of the overall Panel on Contracting Integrity, 
a member of the subcommittee on Adequate Pricing, and is Chair of the 
Procurement Fraud Indicators subcommittee. The Procurement Fraud 
Indicators subcommittee is identifying what these indicators are and 
how they should best be addressed and used for the contracting/
acquisition workforce.
    GWOT Cost of War Senior Steering Group.--The DOD OIG is an invited 
observer to the GWOT Cost of War Senior Steering Group that DOD 
established on February 26, 2007, to improve and standardize cost of 
war reporting. Attending the Senior Steering Group meetings helps the 
DOD OIG remain apprised of DOD efforts for cost of war reporting and 
furthers its oversight regarding financial aspects of GWOT to ensure 
timeliness and value to the DOD.
    Federal Bureau of Investigation Joint Terrorism Task Forces.--As of 
March 2008, the DOD OIG has personnel supporting more than 40 joint 
terrorism task forces, full-time or part-time. These task forces were 
formed to maximize interagency cooperation and coordination by creating 
cohesive units capable of addressing both international and domestic 
terrorism.
    National Procurement Fraud Task Force.--The DOD OIG has been a 
member of the National Procurement Fraud Task Force since 2006. This 
task force promotes the prevention, early detection, and prosecution of 
procurement fraud.
    International Contract Corruption Task Force.--The DOD OIG is a 
member of the International Contract Corruption Task Force. DOD OIG 
personnel are assigned full-time to the task force's Joint Operations 
Center. The International Contract Corruption Task Force was formed to 
specifically target fraud and corruption involving Southwest Asia. The 
primary goal of the task force is to combine the resources of multiple 
investigative agencies and to partner with the Department of Justice to 
effectively and efficiently investigate and prosecute cases of contract 
fraud and public corruption related to U.S. Government spending in 
Iraq, Kuwait, and Afghanistan.
    DFAS-Rome, New York Project.--The DOD OIG initiated this proactive 
effort to analyze more than $10 billion in payment vouchers related to 
U.S. Army purchases in Iraq. The vouchers as of March 2008, were stored 
at DFAS-Rome, New York. This DOD OIG effort includes the Defense 
Criminal Investigative Service, DOD OIG Auditing, AAA, DCAA, and the 
Federal Bureau of Investigation.

                     ARMY AUDIT AGENCY INITIATIVES

    Since June 2002, AAA has been actively involved in audit work in 
support of OEF and OIF. AAA maintains a significant presence in the 
CENTCOM area of responsibility to assist commanders in GWOT and has 
continuously had between 10 to 30 auditors deployed in Afghanistan, 
Iraq, and Kuwait since May 2005.
    Audits in theater have focused primarily on logistics and 
contracting issues. Since the beginning of OEF and OIF, AAA has issued 
31 reports addressing various aspects of Logistics Civil Augmentation 
Program (LOGCAP) operations, and 40 other reports addressing issues 
such as logistics, military pay, and fund management.
    In June 2007, the AAA Auditor General accompanied a congressional 
delegation to Iraq and Kuwait that assessed contracting operations in 
theater. The delegation invited the AAA Auditor General because of the 
Auditor General's testimony to the Senate Armed Services Committee on 
April 19, 2007, about the AAA LOGCAP audit work. The delegation met 
with top Army officials and key representatives from the oversight 
community.
    Currently, AAA is conducting audits in Afghanistan, Iraq, and 
Kuwait of contracting operations, retrograde operations, container 
management, and accountability of contractors on the battlefield. This 
work in theater stems from requests from the Secretary of the Army; the 
Commander, Multi-National Force--Iraq; U.S. Army Criminal Investigation 
Command; the Commanding General, Third U.S. Army and U.S. Army Forces 
Central Command; and the Commander, Joint Contracting Command--Iraq and 
Afghanistan.
    AAA has been proactive in helping senior Army leadership improve 
contracting operations in Southwest Asia.
  --At the request of the Secretary of the Army, AAA assessed 
        contracting operations at the Kuwait Contracting Office. 
        Essentially, AAA recreated contracting events associated with 
        the operation and oversight of the Office from fiscal year 2002 
        through fiscal year 2007. The review identified contracting 
        weaknesses and provided the Secretary with critical information 
        needed to assess whether personnel with oversight 
        responsibilities over the Office's operations performed their 
        duties properly. The Secretary used the results of the review 
        to initiate immediate corrective actions in Army contracting 
        operations for current and future wartime contingencies. 
        Moreover, the results were instrumental in the Secretary 
        establishing the Army Contracting Task Force.
  --AAA materially assisted the operations of the Army Contracting Task 
        Force during fiscal year 2008. Task force members reviewed a 
        statistical sampling of contracts awarded by the Kuwait 
        Contracting Office between fiscal year 2003 and fiscal year 
        2006 that were valued at more than $25,000. To assist the task 
        force, AAA provided the sample size, evaluated the methodology 
        task force members used to review contracts and assess fraud 
        indicators, and provided task force members with training on 
        contract fraud and how to identify fraud indicators.
    AAA has also been extremely active in assisting criminal 
investigators and Federal attorneys in support of contract fraud cases 
related to Southwest Asia operations.
  --AAA provided, and continues to provide, extensive support to the 
        International Contract Corruption Task Force. This task force 
        includes members from U.S. Army Criminal Investigation Command, 
        Defense Criminal Investigative Service, DCAA, DOD OIG, the 
        Federal Bureau of Investigation, Department of Justice, and 
        SIGIR. To support this task force, AAA extracted data from Army 
        automated contracting and financial systems. AAA organized this 
        information into usable databases, provided memorandums 
        describing the scope and methodology used to extract the data 
        from the systems, and trained task force members on how to use 
        the contract and contract payment databases as an investigative 
        tool.
  --AAA provided, and continues to provide, extensive support to the 
        Department of Justice's National Procurement Fraud Task Force 
        to help obtain indictments and prosecutions related to 
        procurement fraud cases in Southwest Asia. AAA obtained 
        documentary evidence and analyzed data needed to prosecute 
        several major procurement fraud cases. AAA also provided the 
        task force a compilation of all the contract and payment 
        information available in Army and DFAS automated systems to 
        support contract and payment amounts for multiple contracts. 
        These contracts were at the center of a nationally publicized 
        procurement fraud case involving about $14 million of kickbacks 
        allegedly paid to a military contracting officer.
  --Currently, AAA is performing a major data-mining effort involving 
        vendor payments in Kuwait. This effort is geared to identify 
        potentially fraudulent payments and control weaknesses in 
        automated and manual contract payment processes. This work 
        supports both the International Contract Corruption Task Force 
        and the Army Task Force on Contracting.
    Establishing the Expeditionary Support Audit Team.--In October 
2007, AAA realigned its staff and established the Expeditionary Support 
Audit Team to enhance audit support for overseas contingency 
operations. Establishing the team enabled AAA to improve its efficiency 
and responsiveness to Army leaders and combatant commanders on the 
ground in Southwest Asia in support of OEF and OIF.
    AAA built the team exclusively from volunteers willing to serve in 
a deployed environment. The team consists of about 40 full-time (core) 
members, half of whom are deployed to Southwest Asia at any given time. 
The AAA continuously augments the core team with about 5 to 10 
additional volunteers who deploy and work with the core members for 
180-day assignments. This enables AAA to continuously operate with 
about 25 to 30 deployed staff and provide timely, relevant audit 
service in Southwest Asia. In fiscal year 2008 and fiscal year 2009, 
the Expeditionary Support Audit Team will concentrate its efforts in 
Southwest Asia on contracting and logistics operations.
    Coordinating and Sharing with Other Oversight Activities.--Senior 
AAA officials have actively participated in the DOD Southwest Asia 
Joint Audit Planning Group since its inception. The planning group 
provides a forum for DOD auditors, inspectors, and investigators to 
share ideas and audit schedules to maximize coverage in the theater 
while avoiding duplication of effort. The AAA has also loaned auditors 
to assist the DOD OIG on several audit initiatives in Iraq. Likewise, 
AAA has maintained close coordination with the SIGIR. AAA is an active 
member of the Iraq Inspectors General Council that meets quarterly to 
discuss and coordinate audit coverage in Iraq. AAA also routinely 
shares audit information with senior Army officials, including U.S. 
Army Corps of Engineers Gulf Region Division personnel in Iraq, through 
regular teleconferences convened by the Assistant Secretary of the Army 
(Acquisition, Logistics, and Technology).
    Army Contracting Campaign Plan Task Force.--The Army Contracting 
Campaign Plan Task Force is a proactive Army response to weaknesses 
identified in Army acquisition and contracting processes and to the 
findings and recommendations of the Gansler Commission on Army 
Acquisition and Program Management in Expeditionary Operations and the 
Army Contracting Task Force. The Army Contracting Campaign Plan Task 
Force is led by the Assistant Military Deputy to the Assistant 
Secretary of the Army (Acquisition, Logistics, and Technology). Its 
mission is to operationalize and institutionalize Army Contracting to 
provide an Army-wide standard for global contracting capability in 
support of warfighter needs across the full spectrum of military 
operations.
    The Acting Under Secretary of the Army established the Army 
Contracting Campaign Plan Task Force and the task force held its 
``kick-off'' meeting on March 26, 2008. The task force is ongoing and 
is supported by acquisition, contracting, and support personnel 
participating in working-level and decision-making forums such as a 
two-star General Officer Steering Committee, Council of Colonels, and 
individual Implementation Planning Teams. AAA representatives have met 
with the task force director and he has requested that AAA provide 
independent and objective audit and attestation services as needed to 
support the development and implementation of the Army Contracting 
Campaign Plan. AAA personnel also attended the initial meetings of the 
Implementation Planning Team and the Council of Colonels.

                   AIR FORCE AUDIT AGENCY INITIATIVES

    Since October 2005, AFAA has taken several initiatives in support 
of OEF and OIF. First, AFAA realigned branches of the Air and Space 
Operations Division to assign a program manager and four audit managers 
the responsibility to perform Air Force-wide audits focusing on 
operations in the U.S. Air Forces Central area of responsibility. As of 
April 2008, the branch has performed 11 multi-site audits focused 
exclusively or primarily on U.S. Air Forces Central operations. This 
branch also assisted other AFAA divisions in performing five multi-site 
audits with U.S. Air Forces Central area of responsibility involvement 
in functional areas such as health care, environmental and engineering, 
and supply.
    Second, AFAA developed expeditionary audit teams to provide audit 
services in the U.S. Air Forces Central area of responsibility. The 
AFAA deploys an expeditionary audit team of volunteer civilian auditors 
into the U.S. Air Forces Central area of responsibility about twice a 
year. The audit team, consisting of 12 to 16 auditors and 3 team 
chiefs, deploys for about 45 days and performs audits at 5 to 7 area-
of-responsibility installations. The AFAA will deploy its fifth 
expeditionary audit team in June 2008. Audits from the past four 
expeditionary audit teams have resulted in 72 installation-level audit 
reports and 17 Air Force audit reports, and have identified more than 
$75 million in potential monetary benefits.
    Finally, AFAA participates in the Southwest Asia Joint Planning 
Group. The group's initial meeting was April 2007 and convenes 
approximately quarterly. The Planning Group coordinates various audit 
activities impacting Southwest Asia. During the meetings, 
representatives from the GAO, DOD OIG, DCAA, SIGIR, and the Service 
audit agencies, briefed recently completed, ongoing, and planned audits 
pertaining to operations in the CENTCOM area of responsibility. 
Attendees included the Combatant Command Inspectors Generals from 
Special Operations Command, Pacific Command, and CENTCOM. Information 
discussed during the meetings provided valuable input to AFAA audit 
efforts in the U.S. Air Forces Central area of responsibility.

               DEFENSE CONTRACT AUDIT AGENCY INITIATIVES

    To better inform the contracting community on the services DCAA can 
provide during contingency contracting operations, DCAA coordinated 
closely with DAU representatives to revise DAU Course 234, Contingency 
Contracting. DCAA also provided extensive support for coordinating the 
draft Expeditionary Contracting Policy, which establishes uniform 
policies and procedures for DOD contingency contracting officers 
deploying to a contingent environment. In addition, DCAA provided input 
and coordinated on the recently issued Joint Contingency Contracting 
Handbook, a pocket-sized handbook and accompanying compact disk, that 
provides the essential information and tools to operate and train 
effectively in a contingency contracting environment.

                           SIGIR INITIATIVES

    The Special Inspector General for Iraq Reconstruction has two 
initiatives to assist in challenges in OIF. Specifically, SIGIR is 
capturing its own lessons learned as well as performing capping 
reports.
    Lessons Learned.--SIGIR is carrying out an initiative to capture 
the lessons learned in Iraq reconstruction. The initiative is designed 
to enhance continuing work in Iraq and to inform future U.S. 
reconstruction efforts. On each of these issues, SIGIR is gathering 
information from extensive research and interviews, collating and 
distilling the information into white papers, and gathering panels of 
experts in three forums to evaluate the findings and make 
recommendations. The Lessons Learned Initiative focuses on three key 
subject areas:
  --``Iraq Reconstruction: Lessons in Human Capital Management,'' 
        February 2006, is the product of SIGIR audits, other research, 
        and the Lessons Learned Forum held in September 2005 at Johns 
        Hopkins University's Washington, D.C., campus. The document 
        identifies and discusses four key components of effective human 
        resource management: policy alignment, workforce planning, 
        recruitment, and continuity.
  --``Iraq Reconstruction: Lessons in Contracting and Procurement,'' 
        July 2006, begins by examining contracting activity early in 
        the Iraq program and traces its evolutionary development 
        through the effort's succeeding phases. The concluding section 
        lays out a series of key lessons followed by six 
        recommendations for improving the U.S. Government's capacity to 
        support and execute contracting and procurement in contingency 
        environments.
  --``Iraq Reconstruction: Lessons in Program and Project Management,'' 
        March 2007, focuses on program and project management during 
        the U.S.-led reconstruction mission, and tracks the evolution 
        of the three organizations responsible for providing the 
        strategic oversight and tactical direction of the 
        reconstruction effort: the Office of Reconstruction and 
        Humanitarian Assistance, the Coalition Provisional Authority, 
        and the U.S. Mission--Iraq.
    Capping Reports.--As reported in its January 30, 2008, report, 
SIGIR plans to present a series of performance audit capping reports 
that summarize the accomplishments in each of these reconstruction 
sectors: security and law enforcement; justice, public safety 
infrastructure, and civil society; electric; oil; water resources and 
sanitation; transportation and telecommunications; roads, bridges, and 
construction; private sector development; and education, refugees, 
human rights, democracy, and governance.
    These reports will build on the information obtained in the focused 
contracting reviews conducted in fiscal year 2008 and provide detailed 
descriptions of the projects completed in each sector and the 
associated costs. SIGIR will also assess how well the Iraqis are 
maintaining the projects and assess the impact of each project on local 
communities.

                   Appendix A. Scope and Methodology

    The Defense oversight community--the DOD Office of Inspector 
General (OIG), the Army Audit Agency (AAA), the Naval Audit Service, 
the Air Force Audit Agency (AFAA), and the Special Inspector General 
for Iraq Reconstruction (SIGIR)--and the Government Accountability 
Office (GAO) issued 314 reports and testimonies (302 unclassified and 
12 classified) beginning fiscal year 2003 through fiscal year 2007 that 
support Operation Enduring Freedom (OEF) or Operation Iraqi Freedom 
(OIF).
    This non-audit service report summarizes 302 OEF and OIF related 
reports and testimonies from fiscal year 2003 through fiscal year 2007 
issued and given by the Defense oversight community and GAO. We 
reviewed the OEF and OIF related reports and testimonies obtained, but 
we did not review the supporting documentation for any of the reports. 
Based on our review, we created functional areas (main categories) to 
categorize the reports and testimonies. The categories resulting from 
our review of the 314 OEF and OIF-related reports and testimonies 
issued by the audit agencies are: Contract Management, Logistics, 
Financial Management, and Other.
    The team then reviewed the causes of the recommendations in the 
unclassified reports in order to determine systemic challenges in the 
reports. See Appendix C for the definitions the team used for each 
category. The categories resulting from our review of causes of the 
recommendations are as follows.
  --Contract Management: Contract Administration; Policy and Procedure; 
        Sourcing; Requirements; and Other/Strategic.
  --Logistics: Policy and Procedure; Accountability; Sustainability; 
        Requirements; and Other.
  --Financial Management: Overall Financial Management; Internal 
        Controls; Obligations; and Execution.
  --Other: Policy and Procedure; Planning; Accountability; and Other.
    The audit team also counted the recommendations in each report and 
determined the status of each recommendation. We obtained the status of 
the DOD OIG and GAO recommendations from the Defense Automated 
Management Information System; the AAA, AFAA, and Naval Audit Service 
status from representatives at those agencies; and the SIGIR status 
from the SIGIR January 30, 2008, quarterly report. The audit team also 
validated the status of GAO recommendations obtained from the Defense 
Automated Management Information System with GAO representatives.
    We then sent the results of categorizing the causes of the 
recommendations into issue areas, the number of recommendations in each 
report, and the status of those recommendations to GAO, DOD OIG, AAA, 
Naval Audit Service, AFAA, and SIGIR for them to verify. Based on the 
other agencies' comments to our initial results, we updated our initial 
categorizations of the causes, number of recommendations, and status of 
the recommendations for the reports and testimonies.
    Using the audit agencies' input of the categorization of the 302 
unclassified reports and testimonies, the team reviewed the reports in 
the respective categories to determine whether any systemic or 
recurring challenges in the categorized areas exist. The team also 
reviewed the status of the recommendations in those reports and 
determined whether DOD took appropriate action to address the 983 
recommendations by determining how many recommendations remain open at 
the end of each fiscal year.
    We sought out DOD initiatives regarding Contract Management, 
Logistics, and Financial Management challenges in OEF and OIF. We 
contacted the Office of the Deputy Under Secretary of Defense for 
Acquisition, Technology, and Logistics; OUSD(C); Executive Director for 
LOGCAP Program, Army Sustainment Command; DFAS GWOT Program Management 
Office; and DCAA. We also sought out initiatives by the DOD oversight 
community and contacted AAA, Naval Audit Service, AFAA, DCAA, and 
SIGIR.
    Use of Computer-Processed Data.--We relied on data that were 
entered into the Defense Automated Management Information System to 
determine the status of the DOD OIG and GAO report recommendations. We 
did not perform any tests of the validity of the data manually entered 
into the Defense Automated Management Information System by DOD OIG 
personnel when compiling information for this report.

   Appendix B. OEF and OIF Reports and Testimonies Fiscal Year 2003 
                        Through Fiscal Year 2007
    From fiscal year 2003 through fiscal year 2007, the Defense 
oversight community and GAO have issued 314 reports and testimonies 
that relate to Operations Enduring Freedom or Iraqi Freedom. Where 
possible, hyperlinks to the complete reports are provided. The reports 
and testimonies are listed by agency, by issue date. The twelve 
classified reports are marked with an asterisk (*).
Army Audit Agency
    The Army Audit Agency issued 77 audit reports or testimonies 
pertaining to Operations Enduring Freedom and Iraqi Freedom. To obtain 
copies of the Army Audit Agency reports, visit their Web site at 
https://www.aaa.army.mil. The site is available only to military 
domains and the Government Accountability Office. Other activities may 
request copies of Agency reports by contacting the Army Audit Agency 
Audit Coordination and Followup Office at 703-693-5679. Where possible, 
hyperlinks to the complete Army Audit Agency reports are provided 
below.
    Army Audit Agency Report No. A-2007-0204-ALL, ``Audit of Defense 
Base Act Insurance for the Logistics Civil Augmentation Program, Audit 
of Logistics Civil Augmentation Program Operations in Support of 
Operation Iraqi Freedom,'' September 28, 2007
    Army Audit Agency Report No. A-2007-0215-FFS, ``Contractor Support 
and Mobilization Stations--Ft. Bragg, North Carolina,'' September 18, 
2007
    Army Audit Agency Report No. A-2007-0210-FFS, ``Contractor Support 
and Mobilization Stations--Ft. Carson, Colorado,'' September 10, 2007
    Army Audit Agency Report No. A-2007-0191-FFM, ``Agreed-Upon 
Procedures Attestation of the Results of the 2007 National Defense 
Authorization Act Audit on Wounded in Action Soldier Pay Accounts, 
Attestation Report,'' August 15, 2007
    Army Audit Agency Report No. A-2007-0184-FFM, ``Civilian Pay in 
Support of Operation Enduring Freedom and Operation Iraqi Freedom,'' 
August 15, 2007
    Army Audit Agency Report No. A-2007-0190-ALM, ``Resource 
Requirements for Reset (FOUO),'' August 8, 2007
    Army Audit Agency Report No. A-2007-0149-ALL, ``Audit of the Army's 
Theater Linguist Program in Afghanistan, Operation Enduring Freedom,'' 
July 23, 2007
    Army Audit Agency Report No. A-2007-0152-ALR, Time-Sensitive 
Report, Audit of Container Detention Billing for Global War on 
Terrorism, June 14, 2007
    Army Audit Agency Report No. A-2007-0131-ALA, ``Rapid Equipping 
Force Initiative,'' May 18, 2007
    Army Audit Agency Report No. A-2007-0126-ALL, ``Asset Visibility in 
Support of Operation Iraqi Freedom and Operation Enduring Freedom--Army 
Reserve Equipment,'' May 9, 2007
    Army Audit Agency Report No. A-2007-0104-ALL, ``Summary Audit 
Report on the Cost-Effectiveness of Transitioning Work Under the 
Logistics Civil Augmentation Program Contingency Contract to 
Sustainment Contracting, Audit of Logistics Civil Augmentation Program 
Operations in Support of Operation Iraqi Freedom,'' March 23, 2007
    Army Audit Agency Report No. A-2007-0093-ALL, ``Audit of the Cost-
Effectiveness of Transitioning Selected Functions Performed at the 
Theater Distribution Center (Task Order 87) From Contingency to 
Sustainment Contracting, Audit of Logistics Civil Augmentation Program 
Operations in Support of Operation Iraqi Freedom,'' March 9, 2007
    Army Audit Agency Report No. A-2007-0088-ALE, ``Reset of Aviation 
Assets; U.S. Army Aviation and Missile Life Cycle Management Command 
(FOUO),'' August 8, 2007
    Army Audit Agency Report No. A-2007-0075-ALL, ``Asset Visibility in 
Support of Operation Iraqi Freedom and Operation Enduring Freedom,'' 
February 15, 2007
    Army Audit Agency Report No. A-2007-0071-ALE, ``Reconstitution of 
Secondary Items,'' February 12, 2007
    Army Audit Agency Report No. A-2007-0061-ALL, ``Asset Visibility in 
Support of Operation Iraqi Freedom and Operation Enduring Freedom--Army 
Reserve Equipment,'' January 30, 2007
    Army Audit Agency Report No. A-2007-0053-ALE, ``Reconstitution--
Supply Management Operations in U.S. Army, Europe and Seventh Army,'' 
January 19, 2007
    Army Audit Agency Report No. A-2007-0052-ALE, ``Reconstitution--
Direct Support and Below Maintenance in U.S. Army, Europe and Seventh 
Army,'' January 17, 2007
    Army Audit Agency Report No. A-2007-0040-ALL, ``Audit of Procedures 
for Managing the Overaged Reparable Items List at the Tactical Wheeled 
Vehicle Refurbished Center,'' January 16, 2007
    Army Audit Agency Report No. A-2007-0039-FFP, ``Global War on 
Terrorism Supplemental Funding,'' December 21, 2006
    Army Audit Agency Report No. A-2007-0019-ALL, ``Distribution 
Functions, Audit of Logistics Civil Augmentation Program Operations in 
Support of Operation Iraqi Freedom,'' November 21, 2006
    Army Audit Agency Report No. A-2007-0011-ALL, ``Nontactical Vehicle 
Usage in the Iraq Area of Operations, Audit of Logistics Civil 
Augmentation Program Operations in Support of Operation Iraqi 
Freedom,'' November 16, 2007
    Army Audit Agency Report No. A-2007-0015-ALE, ``Maintenance of Left 
Behind Equipment in U.S. Army, Europe and Seventh Army,'' October 31, 
2006
    Army Audit Agency Report No. A-2007-0005-FFP, ``Audit of Logistics 
Support for Operation Enduring Freedom--Philippines,'' October 12, 2006
    Army Audit Agency Report No. A-2006-0254-ALL, ``Audit of Procedures 
for Transferring Property During the Base Closure Process in Support of 
Operation Iraqi Freedom,'' September 29, 2006
    Army Audit Agency Report No. A-2006-0237-ALE, ``Funding Reset of 
Aviation Assets in Europe,'' September 29, 2006
    Army Audit Agency Report No. A-2006-0253-ALL, ``Cost-Effectiveness 
of Transitioning the General Support Supply Activity (Task Order 87) 
From Contingency to Sustainment Contracting, Audit of Logistics Civil 
Augmentation Program Operations in Support of Operation Iraqi 
Freedom,'' September 28, 2006
    Army Audit Agency Report No. A-2006-0246-ALL, ``Cost-Effectiveness 
of Transitioning Task Order 66--Kuwait Naval Base Camp Support From 
Contingency to Sustainment contracting, Audit of Logistics Civil 
Augmentation Program Operations In Support of Operation Iraqi Freedom--
Phase II (Kuwait),'' September 27, 2006
    Army Audit Agency Report No. A-2006-0233-ALL, ``Clothing Issue 
Facilities, Audit of Logistics Civil Augmentation Program Operations in 
Support of Operation Iraqi Freedom,'' September 22, 2006
    Army Audit Agency Report No. A-2006-0188-ALL, ``Asset Visibility in 
Support of Operation Iraqi Freedom and Operation Enduring Freedom,'' 
August 11, 2006
    Army Audit Agency Report No. A-2006-0168-ALL, ``Report on the 
Subsistence Prime Vendor Contract, Audit of Logistics Civil 
Augmentation Program Operations in Support of Operation Iraqi 
Freedom,'' August 4, 2006
    Army Audit Agency Report No. A-2006-0158-ALL, ``Report on Class IX 
(Aviation) Warehouse Staffing, Camp Anaconda, Audit of Logistics Civil 
Augmentation Program Operations in Support of Operation Iraqi 
Freedom,'' July 11, 2006
    Army Audit Agency Report No. A-2006-0136-ALL, ``Management Controls 
Over Offline Purchases,'' June 13, 2006
    Army Audit Agency Report No. A-2006-0077-ALE, ``Reconstitution--
General Support Maintenance Within U.S. Army, Europe and Seventh 
Army,'' June 2, 2006
    Army Audit Agency Report No. A-2006-0099-ALL, ``Audit of Program 
Management in the Iraq Area of Operations, Audit of Logistics Civil 
Augmentation Program Operations in Support of Operation Iraqi 
Freedom,'' April 25, 2006
    Army Audit Agency Report No. A-2006-0067-FFM, ``Military Pay for 
Operation Enduring Freedom/Operation Iraqi Freedom--Active Component,'' 
April 5, 2006
    Army Audit Agency Report No. A-2006-0091-ALL, ``Audit of Management 
of the Theater Transportation Mission (Task Order 88), Audit of 
Logistics Civil Augmentation Program Operations in Support of Operation 
Iraqi Freedom,'' April 4, 2006
    Army Audit Agency Report No. A-2006-0090-ALE, ``Followup Audit II 
of the Commanders' Emergency Response Program and Quick Response 
Fund,'' March 31, 2006
    Army Audit Agency Report No. A-2006-0083-ALL, ``Audit of Retrograde 
Operations (Task Order 87), Audit of Logistics Civil Augmentation 
Program Operations in Support of Operation Iraqi Freedom,'' March 21, 
2006
    Army Audit Agency Report No. A-2006-0081-ALL, ``Audit of 
Unliquidated Obligations, Audit of Logistics Civil Augmentation Program 
Operations in Support of Operation Iraqi Freedom,'' March 17, 2006
    Army Audit Agency Report No. A-2006-0073-ALL, ``Management of Force 
Provider Modules: Logistics Civil Augmentation Program,'' March 20, 
2006
    Army Audit Agency Report No. A-2006-0046-ALA, ``Fund Accountability 
for Fiscal Year 2004 Iraq Relief and Reconstruction Funds: Project and 
Contracting Office, Washington, DC,'' January 31, 2006
    Army Audit Agency Report No. A-2006-0047-ALL, ``Base Closure 
Process in the Iraq Area of Operations,'' January 11, 2006
    Army Audit Agency Report No. A-2006-0038-FFM, ``Reserve Component 
Pay--OIF/OEF (FOUO),'' May 25, 2006
    Army Audit Agency Report No. A-2006-0022-ALL, ``Logistics Civil 
Augmentation Program: U.S. Army Materiel Command,'' November 28, 2005
    Army Audit Agency Report No. A-2006-0018-ALL, ``Logistics Civil 
Augmentation Program Support Unit Training: Logistics Civil 
Augmentation Program Support Unit Headquarters Fort Belvoir, 
Virginia,'' November 17, 2005
    Army Audit Agency Report No. A-2005-0332-ALE, ``Followup Audit of 
the Commanders' Emergency Response Program and Quick Response Fund: 
Multi-National Security Transition Command--Iraq,'' September 30, 2005
    Army Audit Agency Report No. A-2005-0264-FFP, ``Audit of Military 
Pay in Support of Operation Enduring Freedom/Operation Iraqi Freedom,'' 
August 23, 2005
    Army Audit Agency Report No. A-2005-0250-ALE, ``Class IX Spare 
Parts--Operation Iraqi Freedom,'' August 15, 2005
    Army Audit Agency Report No. A-2005-0197-ALE, ``Asset Visibility 
and Container Management--Operation Iraqi Freedom,'' July 5, 2005
    Army Audit Agency Report No. A-2005-0206-FFG, ``Validation of the 
Statement of Accountability, Attestation of Disbursing Station Symbol 
Number 8551: 336th Finance Command, Camp Arifjan, Kuwait,'' June 29, 
2005
    Army Audit Agency Report No. A-2005-0194-ALA, ``Program Management 
in Support of Iraq Reconstruction: Project and Contracting Office, 
Washington, DC,'' May 26, 2005
    Army Audit Agency Report No. A-2005-0177-ALS, ``Internal Controls 
Over Cargo Container Payments: Military Surface Deployment and 
Distribution Command,'' May 12, 2005
    Army Audit Agency Report No. A-2005-0173-ALE, ``Commanders' 
Emergency Response Program and Quick Response Fund: Multi-National 
Security Transition Command--Iraq,'' May 2, 2005
    Army Audit Agency Report No. A-2005-0172-ALE, ``Functionality of 
Logistics Automated Systems--Operation Iraqi Freedom,'' April 27, 2005
    Army Audit Agency Report No. A-2005-0168-ALE, ``Theater 
Distribution Capabilities--Operation Iraqi Freedom,'' April 26, 2005
    Army Audit Agency Report No. A-2005-0078-FFG, ``Coalition 
Provisional Authority Travel Process,'' March 2, 2005
    Army Audit Agency Report No. A-2005-0095-FFG, ``Vested and Seized 
Assets, Operation Iraqi Freedom,'' February 16, 2005
    Army Audit Agency Report No. A-2005-0043-ALE, ``Logistics Civil 
Augmentation Program in Kuwait,'' November 24, 2004
    Army Audit Agency Report No. A-2005-0052-ALS, ``Validation of 
Material Weakness In-transit Visibility Policies and Standards,'' 
November 23, 2004
    Army Audit Agency Report No. A-2004-0463-FFC, ``Fiscal Year 2003 
Supplemental Funds and Cash Flow,'' August 27, 2004
    Army Audit Agency Report No. A-2004-0438-AML, ``Definitization of 
Task Orders--Audit of Logistics Civil Augmentation Program,'' August 
12, 2004
    Army Audit Agency Report No. A-2004-0426-IMU, ``Audit of Base Camp 
Commercial Communications,'' July 28, 2004
    Army Audit Agency Report No. A-2004-0305-FFG, ``Time Sensitive 
Report, Audit of Vested and Seized Assets, Operation Iraqi Freedom,'' 
May 18, 2004
    Army Audit Agency Report No. A-2004-0271-IMU, ``Observations of 
Mine Clearing Operations Made at Bagram Airfield, Afghanistan,'' May 3, 
2004
    Army Audit Agency Report No. A-2004-0243-IMU, ``Operation Enduring 
Freedom--Base Camp Construction and Master Plan,'' April 15, 2004
    Army Audit Agency Report No. A-2004-0156-IMU, ``Operation Enduring 
Freedom--Logistics Civil Augmentation Program,'' February 27, 2004
    Army Audit Agency Report No. A-2004-0066-IMU, ``Operation Enduring 
Freedom--Management and Use of Shipping Containers,'' December 9, 2003
    Army Audit Agency Report No. A-2004-0053-IMU, ``Operation Enduring 
Freedom--Management of Class I Supplies,'' December 5, 2003
    Army Audit Agency Report No. A-2004-0033-IMU, ``Management of 
Resources,'' October 23, 2003
    Army Audit Agency Report No. A-2004-0013-IMU, ``Audit of Operation 
Enduring Freedom--Class IX Aviation Spare Parts,'' October 7, 2003
    Army Audit Agency Report No. A-2003-0400-IMU, ``Audit of Operation 
Enduring Freedom--Class IX Aviation Spare Parts,'' August 19, 2003
    Army Audit Agency Report No. A-2003-0371-IMU, ``Audit of Operation 
Enduring Freedom--Use of Automatic Identification Technology for In-
Transit Visibility,'' July 24, 2003
    Army Audit Agency Report No. A-2003-0370-IMU, ``Audit of Operation 
Enduring Freedom--In-Transit Visibility,'' July 24, 2003
    Army Audit Agency Report No. A-2003-0324-FFF, ``Mobilization and 
Pay Record Discrepancies in the Reserve Component,'' June 30, 2003
    Army Audit Agency Report No. A-2003-0294-IMU, ``Operation Enduring 
Freedom--Property Accountability,'' June 2, 2003
    Army Audit Agency Report No. A-2003-01 10, ``Logistics Civil 
Augmentation Program, A-2003 -011 0-IMU,'' December 31, 2002
Naval Audit Service
    The Naval Audit Service issued one audit report pertaining to 
Operations Enduring Freedom and Iraqi Freedom. To obtain copies of 
Naval Audit Service reports, please contact the Naval Audit Service 
FOIA Office at (202) 433-5757 or by e-mail to [email protected]
    Naval Audit Service Report No. N-2005-0018, ``Marine Corps Systems 
Command Contracts Supporting Operation Iraqi Freedom,'' December 22, 
2004
Air Force Audit Agency
    The Air Force Audit Agency issued 15 audit reports or testimonies 
pertaining to Operations Enduring Freedom and Iraqi Freedom. 
Unrestricted Air Force Audit Agency reports can be accessed at this Web 
site address: https://www.afaa.hq.af.mil/afck/plansreports/
reports.shtml. Where possible, hyperlinks to the complete Air Force 
Audit Agency reports are provided below. To obtain releasable copies of 
Air Force Audit Agency reports, please fax your FOIA request to the Air 
Force Audit Agency FOIA Manager at (703) 696-7776 or e-mail to 
[email protected]
    Air Force Audit Agency Report No. F-2007-0008-FD3000, ``Central 
Command Air Forces Deployed Locations Government-Wide Purchase Card 
Program,'' June 27, 2007
    Air Force Audit Agency Report No. F-2007-0007-FD3000, ``Theater 
Battle Management Core System--Unit Level,'' June 8, 2007
    Air Force Audit Agency Report No. F-2007-0006-FD4000, ``Civilian 
Deployments,'' March 15, 2007
    Air Force Audit Agency Report No. F-2007-0006-FD3000, ``Central 
Command Air Forces Deployed Locations Ground Fuels Management,'' April 
27, 2007
    Air Force Audit Agency Report No. F-2007-0005-FD3000, ``Central 
Command Air Forces Deployed Locations Services Contract Management,'' 
April 20, 2007
    Air Force Audit Agency Report No. F-2007-0004-FC4000, ``Deployed 
Assets,'' January 26, 2007
    Air Force Audit Agency Report No. F-2006-0007-FD3000, ``Central 
Command Air Forces Deployed Locations Blanket Purchase Agreements,'' 
August 21, 2006
    Air Force Audit Agency Report No. F-2006-0006-FD3000, ``Central 
Command Air Forces Deployed Locations Cash Management,'' August 3, 2006
    Air Force Audit Agency Report No. F-2005-0058-FDE000, ``Equipment 
Accountability 380th Air Expeditionary Wing Al Dhafra AB, United Arab 
Emirates,'' June 1, 2005''
    Air Force Audit Agency Report No. F-2005-0053-FDE000, ``Blanket 
Purchase Agreements 380th Air Expeditionary Wing Al Dhafra AB,'' United 
Arab Emirates, June 1, 2005
    Air Force Audit Agency Report No. F-2005-0043-FDE000, ``Equipment 
Accountability 379th Air Expeditionary Wing Al Udeid AB, Qatar,'' April 
1, 2005
    Air Force Audit Agency Report No. F-2005-0035-FDE000, ``Blanket 
Purchase Agreements 1st Expeditionary Red Horse Group Al Udeid AB, 
Qatar,'' March 14, 2005
    Air Force Audit Agency Report No. F-2005-0011-FB1000, ``Global War 
on Terrorism Funds Management,'' June 20, 2005
    Air Force Audit Agency Report No. F-2004-0060-FDE000, ``Small Arms 
379th Air Expeditionary Wing Al Udeid AB, Qatar,'' July 1, 2004
    Air Force Audit Agency Report No. F-2004-0057-FDE000, ``Blanket 
Purchase Agreement 379th Air Expeditionary Wing Al Udeid AB, Qatar,'' 
June 22, 2004
DOD Inspector General
    The DOD OIG issued 28 audit reports or testimonies pertaining to 
Operations Enduring Freedom and Iraqi Freedom. To obtain electronic 
copies of DOD OIG reports and testimonies, please visit http://
www.dodig.mil/Audit/reports/index.html. Where possible, hyperlinks to 
the complete DOD OIG reports are provided below.
    DOD OIG Testimony, ``Accountability During Contingency Operations: 
Preventing and Fighting Corruption in Contracting and Establishing and 
Maintaining Appropriate Controls on Materiel,'' September 19, 2007
    DOD OIG Report No. D-2007-107, ``Procurement Policy for Armored 
Vehicles,'' June 27, 2007
    DOD OIG Report No. D-2007-105, ``United States Transportation 
Command Compliance with DOD Policy on the Use of Commercial Sealift,'' 
June 21, 2007
    DOD OIG Testimony, ``Trafficking in Persons,'' June 21, 2007
    DOD OIG Testimony ``War Profiteering and Other Contractor Crimes 
Committed Overseas,'' June 19, 2007
    DOD OIG Report No. D-2007-090, ``Managing Prepositioned Munitions 
in the U.S. European Command,'' May 3, 2007
    DOD OIG Testimony, ``Investigations by the Office of the Inspector 
General, Department of Defense, Concerning the Death of Corporal 
Patrick Tillman and the Rescue of Private First Class Jessica Lynch,'' 
April 24, 2007
    DOD OIG Testimony, ``Combating War Profiteering: Are We Doing 
Enough to Investigate and Prosecute Contracting Fraud and Abuse in 
Iraq,'' March 20, 2007
    DOD OIG Report No. D-2007-064, ``Implementation of the Commanders' 
Emergency Response Program in Afghanistan,'' February 28, 2007
    DOD OIG Report No. D-2007-060, ``Management of the Iraq Security 
Forces Fund in Southwest Asia--Phase II,'' February 12, 2007
    DOD OIG Report No. D-2007-049, ``Equipment Status of Deployed 
Forces Within the U.S. Central Command'' [CLASSIFIED, however, click 
here for an unclassified summary] January 25, 2007
    DOD OIG Testimony, ``Audit of Reconstruction and Support Activities 
in Iraq,'' January 18, 2007
    DOD OIG Report No. D-2007-030, ``Management of the Iraq Security 
Forces Fund in Southwest Asia--Phase I,'' December 8, 2006
    DOD OIG Report No. D-2007-010, ``The Army Small Arms Program that 
Relates to Availability, Maintainability, and Reliability of the Small 
Arms Support for the Warfighter,'' November 2, 2006
    *DOD OIG Report No. D-2007-001, ``Information Operations Activities 
in Southwest Asia'' [CLASSIFIED], October 6, 2006
    DOD OIG Report No. D-2006-010, ``Contract Surveillance for Service 
Contracts,'' October 28, 2005
    DOD OIG Testimony ``Iraq Reconstruction, Governance and Security 
Oversight,'' October 18, 2005
    DOD OIG Report No. D-2006-007, ``Contracts Awarded to Assist the 
Global War on Terrorism by the U.S. Army Corps of Engineers,'' October 
14, 2005
    DOD OIG Report No. D-2005-095, ``DOD Patient Movement System,'' 
July 27, 2005
    DOD OIG Report No. D-2005-045, ``Emergency Supplemental Funding for 
the Defense Logistics Agency'' (FOUO), May 9, 2005
    DOD OIG Report No. D-2005-053, ``Fiscal Year 2004 Emergency 
Supplemental Funding for the Defense Information Systems Agency'' 
(FOUO), April 29, 2005
    DOD OIG Report No. D-2005-024, ``DOD Management of Navy Senior 
Enlisted Personnel Assignments in Support of Operation Iraqi Freedom,'' 
December 15, 2004
    *DOD OIG Report No. D-2004-090, ``Defense Hotline Allegations 
Concerning C-130 Aircraft Use in the U.S. Central Command Area of 
Responsibility'' [CLASSIFIED], June 17, 2004
    DOD OIG Report No. D-2004-086, ``Management of Marine Corps 
Enlisted Personnel Assignments in Support of Operation Iraqi Freedom,'' 
June 16, 2004
    DOD OIG Report No. D-2004-057, ``Contracts Awarded for the 
Coalition Provisional Authority by the Defense Contracting Command--
Washington,'' March 18, 2004
    *DOD OIG Report No. D-2004-045, ``Coalition Support Funds'' 
[CLASSIFIED], January 16, 2004
    DOD OIG Report No. D-2003-070, ``DOD Involvement in Export 
Enforcement Activities'' (FOUO), March 28, 2003
    *DOD OIG Report No. D-2003-028, ``Summary Report on Homeland 
Defense, Chemical/Biological Defense, and Other Matters Related to 
Counter-Terrorist Military Operations'' [CLASSIFIED], November 25, 2002
Special Inspector General for Iraq Reconstruction
    The Special Inspector General for Iraq Reconstruction issued 91 
audit reports or testimonies pertaining to Operations Enduring Freedom 
and Iraqi Freedom. To obtain electronic copies of the reports or 
testimonies, please visit http://www.sigir.mil/reports/audit.aspx.
    SIGIR Report No. 07-005, ``Fact Sheet on Sources and Uses of U.S. 
Funding Provided in Fiscal Year 2006 for Iraq Relief and 
Reconstruction,'' July 27, 2007
    SIGIR Report No. 07-008, ``Fact Sheet on the Roles and 
Responsibilities of U.S. Government Organizations Conducting IRRF-
funded Reconstruction Activities,'' July 26, 2007
    SIGIR Report No. 07-003, ``Cost-to-Complete Reporting for Iraq 
Reconstruction Projects,'' July 26, 2007
    SIGIR Report No. 07-014, ``Status of the Provincial Reconstruction 
Team Program Expansion in Iraq,'' July 25, 2007
    SIGIR Report No. 07-004, ``Transferring Iraq Relief and 
Reconstruction Fund Capital Projects to the Government of Iraq,'' July 
25, 2007
    SIGIR Report No. 07-009, ``Review of Bechtel's Spending under Its 
Phase II Iraq Reconstruction Contract,'' July 24, 2007
    SIGIR Report No. 07-007, ``Status of U.S. Government Anticorruption 
Efforts in Iraq,'' July 24, 2007
    SIGIR Report No. 07-001, ``Logistics Civil Augmentation Program 
Task Order 130: Requirements Validation, Government Oversight, and 
Contractor Performance,'' June 22, 2007
    SIGIR Report No. 07-012, ``Review of Iraq Relief and Reconstruction 
Fund Unmatched Disbursements at the Department of State,'' April 26, 
2007
    SIGIR Report No. 07-006, ``Management of the Commander's Emergency 
Response Program in Iraq for Fiscal Year 2006,'' April 26, 2007
    SIGIR Report No. 07-002, ``Status of the Advanced First Responder 
Network,'' April 25, 2007
    SIGIR Report No. 06-045, ``Status of Ministerial Capacity 
Development in Iraq,'' January 30, 2007
    SIGIR Report No. 06-044, ``Fact Sheet on Major U.S. Contractors' 
Security Costs Related to Iraq Relief and Reconstruction Fund 
Contracting Activities,'' January 30, 2007
    SIGIR Report No. 06-043, ``Review of Iraq Relief and Reconstruction 
Fund Unmatched Disbursements,'' January 30, 2007
    SIGIR Report No. 06-040, ``Improper Obligations Using the Iraq 
Relief and Reconstruction Fund (IRRF 2),'' January 30, 2007
    SIGIR Report No. 06-030, ``Status of Medical Equipment and Other 
Non-construction Items Purchased for PHCs,'' January 30, 2007
    SIGIR Report No. 06-029, ``Review of DynCorp International, LLC, 
Contract Number S LMAQM-04-C-0030, Task Order 0338, for the Iraqi 
Police Training Program Support,'' January 30, 2007
    SIGIR Report No. 06-039, ``Review of USAID/Bechtel National, Inc., 
Property Management Controls for Contract SPU-C-00-04-00001-00,'' 
January 29, 2007
    SIGIR Report No. 06-036, ``Follow-up on SIGIR Recommendations 
Concerning the Development Fund for Iraq (DFI),'' January 29, 2007
    SIGIR Report No. 06-034, ``Status of the Provincial Reconstruction 
Team Program in Iraq,'' October 29, 2006
    SIGIR Report No. 06-033, ``Iraqi Security Forces: Weapons Provided 
by the U.S. Department of Defense Using the Iraq Relief and 
Reconstruction Fund,'' October 28, 2006
    SIGIR Report No. 06-032, ``Iraqi Security Forces: Review of Plans 
to Implement Logistics Capabilities,'' October 28, 2006
    SIGIR Report No. 06-031, ``Management of the Iraqi Interim 
Government Fund,'' October 27, 2006
    SIGIR Report No. 06-035, ``Interim Audit Report on Inappropriate 
Use of Proprietary Data Markings by the Logistics Civil Augmentation 
Program (LOGCAP) Contractor,'' October 26, 2006
    SIGIR Report No. 06-028, ``Review of Administrative Task Orders for 
Iraq Reconstruction Contracts,'' October 23, 2006
    SIGIR Report No. 06-038, ``Unclassified Summary of SIGIR's Review 
of Efforts to Increase Iraq's Capability to Protect Its Energy 
Infrastructure,'' September 27, 2006
    SIGIR Report No. 06-037, ``Interim Audit Report on Improper 
Obligations Using the Iraq Relief and Reconstruction Fund (IRRF-2),'' 
September 22, 2006
    SIGIR Report No. 06-026, ``Review of the U.S. Agency for 
International Development's Management of the Basrah Children's 
Hospital Project,'' July 28, 2006
    SIGIR Report No. 06-025, ``Review of the Medical Equipment 
Purchased for the Primary Healthcare Centers Associated with Parsons 
Global Services, Inc., Contract Number W914NS-04-D-0006,'' July 28, 
2006
    SIGIR Report No. 06-023, ``Changes in Iraq Relief and 
Reconstruction Fund Program Activities--January through March 2006,'' 
July 28, 2006
    SIGIR Report No. 06-021, ``Joint Survey of the U.S. Embassy--Iraq's 
Anticorruption Program,'' July 28, 2006
    SIGIR Report No. 06-020, ``Review of the Advanced First Responder 
Network,'' July 28, 2006
    SIGIR Report No. 06-019, ``Review of the Use of Definitization 
Requirements for Contracts Supporting Reconstruction in Iraq,'' July 
28, 2006
    SIGIR Report No. 06-017, ``Transition of Iraq Relief and 
Reconstruction Fund Projects to the Iraqi Government,'' July 28, 2006
    SIGIR Report No. 06-024, ``Joint Cash Count: Iraq National Weapons 
Card Program,'' July 26, 2006
    SIGIR Report No. 06-018, ``Survey of the Status of Funding for Iraq 
Programs Allocated to the Department of State's Bureau of International 
Narcotics and Law Enforcement Affairs as of December 31, 2005,'' July 
2006
    SIGIR Report No. 06-016, ``Interim Audit Report on the Review of 
the Equipment Purchased for Primary Healthcare Centers Associated with 
Parsons Global Services, Contract Number W914NS-04-D-0006,'' April 29, 
2006
    SIGIR Report No. 06-011, ``Management of the Primary Healthcare 
Centers Construction Projects,'' April 29, 2006
    SIGIR Report No. 06-007, ``U.S. Agency for International 
Development: Management of the Transfer of Iraq Relief and 
Reconstruction Fund Projects to the Iraqi Government,'' April 29, 2006
    SIGIR Report No. 06-006, ``Multi-National Security Transition 
Command--Iraq: Management of the Transfer of IRRF-funded Assets to the 
Iraqi Government,'' April 29, 2006
    SIGIR Report No. 06-015, ``Iraqi Armed Forces Seized Assets Fund: 
Review of Contracts and Financial Documents,'' April 28, 2006
    SIGIR Report No. 06-013, ``Briefing to the International Advisory 
and Monitoring Board for Iraq: Management Controls Over the Development 
Fund for Iraq,'' April 28, 2006
    SIGIR Report No. 06-012, ``Development Fund for Iraq Cash 
Accountability Review: Joint Area Support Group-Central/Falluja,'' 
April 28, 2006
    SIGIR Report No. 06-010, ``Review of the Multi-National Security 
Transition Command--Iraq Reconciliation of the Iraqi Armed Forces 
Seized Assets Fund,'' April 28, 2006
    SIGIR Report No. 06-009, ``Review of Task Force Shield Programs,'' 
April 28, 2006
    SIGIR Report No. 06-008, ``Development Fund for Iraq--Cash 
Accountability Review: Joint Area Support Group--Central,'' April 28, 
2006
    SIGIR Report No. 06-005, ``Follow-up on Recommendations Made in 
SIGIR Audit Reports Related to Management and Control of the 
Development Fund for Iraq,'' April 28, 2006
    SIGIR Report No. 06-004, ``Changes in Iraq Relief and 
Reconstruction Fund Program Activities--October through December 
2005,'' April 28, 2006
    SIGIR Report No. 06-003, ``Review of Data Entry and General 
Controls in the Collecting and Reporting of the Iraq Relief and 
Reconstruction Fund,'' April 28, 2006
    SIGIR Report No. 06-001, ``Management of Iraq Relief and 
Reconstruction Fund Program: The Evolution of the Iraq Reconstruction 
Management System,'' April 24, 2006
    SIGIR Report No. 06-002, ``Prompt Payment Act: Analysis of 
Expenditures Made From the Iraq Relief and Reconstruction Fund,'' 
February 3, 2006
    SIGIR Report No. 05-027, ``Methodologies for Reporting Cost-to-
complete Estimates,'' January 27, 2006
    SIGIR Report No. 05-026, ``Issues Related to the Use of $50 Million 
Appropriation to Support the Management and Reporting of the Iraq 
Relief and Reconstruction Fund,'' January 27, 2006
    SIGIR Report No. 05-029, ``Challenges Faced in Carrying Out Iraq 
Relief and Reconstruction Fund Activities,'' January 26, 2006
    SIGIR Report No. 05-028, ``GRD-PCO Management of the Transfer of 
IRRF-funded Assets to the Government of Iraq 05-028,'' January 23, 2006
    SIGIR Report No. 05-025, ``Management of the Commander's Emergency 
Response Program for Fiscal Year 2005,'' January 23, 2006
    SIGIR Report No. 05-024, ``Management of the Mansuria Electrical 
Reconstruction Project,'' January 23, 2006
    SIGIR Report No. 05-023, ``Management of Rapid Regional Response 
Program Contracts in South-Central Iraq,'' January 23, 2006
    SIGIR Report No. 05-020, ``Management of the Contracts, Grant, and 
Micro-Purchases Used To Rehabilitate the Karbala Library,'' October 26, 
2005
    SIGIR Report No. 05-016, ``Management of the Contracts and Grants 
Used To Construct and Operate the Babylon Police Academy,'' October 26, 
2005
    SIGIR Report No. 05-015, ``Management of Rapid Regional Response 
Program Grants in South-Central Iraq,'' October 26, 2005
    SIGIR Report No. 05-017, ``Award Fee Process for Contractors 
Involved in Iraq Reconstruction,'' October 25, 2005
    SIGIR Report No. 05-022, ``Managing Sustainment for Iraq Relief and 
Reconstruction Fund Programs,'' October 24, 2005
    SIGIR Report No. 05-021, ``Management of Iraq Relief and 
Reconstruction Fund Programs--Cost-to-Complete Estimate Reporting,'' 
October 24, 2005
    SIGIR Report No. 05-018, ``Acquisition of Armored Vehicles 
Purchased Through Contract W914NS-05-M-1189,'' October 21, 2005
    SIGIR Report No. 05-014, ``Management of Commanders' Emergency 
Response Program for Fiscal Year 2004,'' October 13, 2005
    SIGIR Report No. 05-019, ``Attestation Engagement Concerning the 
Award of Non-Competitive Contract DACA63-03-D-0005 to Kellogg, Brown, 
and Root Services, Inc.,'' September 30, 2005
    SIGIR Report No. 05-013, ``Controls Over Equipment Acquired by 
Security Contractors,'' September 9, 2005
    SIGIR Report No. 05-011, ``Cost-to-Complete Estimates and Financial 
Reporting for the Management of the Iraq Relief and Reconstruction 
Fund,'' July 26, 2005
    SIGIR Report No. 05-010, ``Interim Briefing to the Project and 
Contracting Office--Iraq and the Joint Contracting Command--Iraq on the 
Audit of the Award Fee Process,'' July 26, 2005
    SIGIR Report No. 05-012, ``Policies and Procedures Used for Iraq 
Relief and Reconstruction Fund Project Management Construction Quality 
Assurance,'' July 22, 2005
    SIGIR Report No. 05-009, ``Reconciliation of Reporting Differences 
of the Source of Funds Used on Contracts After June 28, 2004,'' July 8, 
2005
    SIGIR Report No. 05-008, ``Administration of Contracts Funded by 
the Development Fund of Iraq,'' April 30, 2005
    SIGIR Report No. 05-007, ``Administration of Iraq Relief and 
Reconstruction Fund Contract Files,'' April 30, 2005
    SIGIR Report No. 05-006, ``Control of Cash Provided to South-
Central Iraq,'' April 30, 2005
    SIGIR Report No. 05-005, ``Compliance with Contract No. W911S0-04-
C-003 Awarded to Aegis Defense Services Limited,'' April 20, 2005
    SIGIR Report No. 05-004, ``CORRECTED--Oversight of Funds Provided 
to Iraqi Ministries through the National Budget Process,'' January 30, 
2005
    SIGIR Report No. 05-003, ``Memorandum Report regarding audit of 
Task Order 0044 of the Logistics Civil Augmentation Program III 
Contract,'' November 23, 2004
    SIGIR Report No. 05-002, ``Accountability and Control of Materiel 
Assets of the Coalition Provisional Authority in Kuwait,'' October 25, 
2004
    SIGIR Report No. 05-001, ``Coalition Provisional Authority Control 
of Appropriated Funds,'' October 22, 2004
    SIGIR Report No. 04-008, ``Coalition Provisional Authority Control 
Over Seized and Vested Assets,'' July 30, 2004
    SIGIR Report No. 04-009, ``Coalition Provisional Authority 
Comptroller Cash Management Controls Over the Development Fund for 
Iraq,'' July 28, 2004
    SIGIR Report No. 04-004, ``Task Orders Awarded by the Air Force 
Center for Environmental Excellence in Support of the Coalition 
Provisional Authority,'' July 28, 2004
    SIGIR Report No. 04-013, ``Coalition Provisional Authority's 
Contracting Processes Leading Up to and Including Contract Award,'' 
July 27, 2004
    SIGIR Report No. 04-011, ``Audit of the Accountability and Control 
of Materiel Assets of the Coalition Provisional Authority in Baghdad,'' 
July 26, 2004
    SIGIR Report No. 04-007, ``Oil for Food Cash Controls for the 
Office of Project Coordination in Erbil, Iraq,'' July 26, 2004
    SIGIR Report No. 04-005, ``Award of Sector Design-Build 
Construction Contracts,'' July 23, 2004
    SIGIR Report No. 04-006, ``Corporate Governance for Contractors 
Performing Iraq Reconstruction Efforts,'' July 21, 2004
    SIGIR Report No. 04-003, ``Federal Deployment Center Forward 
Operations at the Kuwait Hilton,'' June 25, 2004
    SIGIR Report No. 04-002, ``Management of Personnel Assigned to the 
Coalition Provisional Authority in Baghdad, Iraq,'' June 25, 2004
    SIGIR Report No. 04-001, ``Coalition Provisional Authority 
Coordination of Donated Funds,'' June 25, 2004
Government Accountability Office
    GAO issued 102 reports or testimonies pertaining to Operations 
Enduring Freedom and Iraqi Freedom. To obtain electronic copies of GAO 
reports and testimonies, please visit http://www.gao.gov/docsearch/
featured/oif.html. Where possible, hyperlinks to the complete GAO 
reports are provided below. To request hardcopies of GAO reports, 
please visit http://www.gao.gov/cgi-bin/ordtab.pl, or call 202-512-6000 
or fax to 202-512-6061.
    GAO Report No. GAO-07-1048R, ``Enemy-Initiated Attacks in Iraq,'' 
September 28 2007
    GAO Report No. GAO-07-814, ``DEFENSE LOGISTICS: Army and Marine 
Corps Cannot Be Assured That Equipment Reset Strategies Will Sustain 
Equipment Availability While Meeting Ongoing Operational 
Requirements,'' September 19, 2007
    GAO Report No. GAO-07-1235T, ``DOD CIVILIAN PERSONNEL: Medical 
Policies for Deployed DOD Federal Civilians and Associated Compensation 
for Those Deployed, September 18, 2007
    GAO Report No. GAO-07-1195, ``SECURING, STABILIZING, AND REBUILDING 
IRAQ: Iraqi Government Has Not Met Most Legislative, Security, and 
Economic Benchmarks,'' September 4, 2007
    GAO Report No. GAO-07-839, ``Defense Contract Management: DOD's 
Lack of Adherence to Key Contracting Principles on Iraq Oil Contract 
Put Government Interests at Risk,'' July 31, 2007
    GAO Report No. GAO-07-711, ``STABILIZING IRAQ: DOD Cannot Ensure 
That U.S.-Funded Equipment Has Reached Iraqi Security Forces,'' July 
31, 2007
    *GAO Report No. GAO-07-853C, ``Military Readiness: DOD Needs to Set 
Forth an Action Plan, with Measurable Results, to Improve Army and 
Marine Corps Unit Readiness,'' July 20, 2007
    GAO Report No. GAO-07-836, ``Unmanned Aircraft Systems: Advance 
Coordination and Increased Visibility Needed to Optimize 
Capabilities,'' July 11, 2007
    GAO Report No. GAO-07-759, ``Defense Acquisitions: Analysis of 
Processes Used to Evaluate Active Protection Systems'' June 8, 2007
    GAO Report No. GAO-07-801SP, ``Securing, Stabilizing, and 
Reconstructing Afghanistan: Key Issues for Congressional Oversight,'' 
May 24, 2007
    GAO Report No. GAO-07-699, ``Military Operations: The Department of 
Defense's Use of Solatia and Condolence Payments in Iraq and 
Afghanistan,'' May 23, 2007
    GAO Report No. GAO-07-783R, ``Global War on Terrorism: reported 
Obligations for the Department of Defense,'' May 18, 2007
    GAO Report No. GAO-07-677, ``Rebuilding Iraq: Integrated Strategic 
Plan Needed to Help Restore Iraq's Oil and Electricity Sectors,'' May 
15, 2007
    GAO Report No. GAO-07-832T, ``Defense Acquisitions: Improved 
Management and Oversight needed to Better Control DOD's Acquisition of 
Services,'' May 10, 2007
    GAO Report No. GAO-07-827T, ``Stabilizing And Rebuilding Iraq: 
Coalition Support and International Donor Commitments,'' May 9, 2007
    GAO Report No. GAO-07-906R, ``GAO Findings and Recommendations 
Regarding DOD and VA Disability Systems,'' May 5, 2007
    GAO Report No. GAO-07-662R, ``Defense Logistics: Army and Marine 
Corps's Individual Body Armor System Issues,'' April 26, 2007
    GAO Report No. GAO-07-525T, ``Stabilizing And Rebuilding Iraq: 
Conditions in Iraq Are Conducive to Fraud, Waste and Abuse,'' April 23, 
2007
    *GAO Report No. GAO-07-377C, ``Defense Management: A Strategic Plan 
Is Needed to Guide the Joint Improvised Explosive Device Defeat 
Organization's Efforts to Effectively Accomplish Its Mission,'' March 
28, 2007
    GAO Report No. GAO-07-639T, ``Operation Iraqi Freedom: DOD Should 
Apply Lessons Learned Concerning the Need for Security Over 
Conventional Munitions Storage Sites to Future Operations Planning,'' 
March 22, 2007
    GAO Report No. GAO-07-637T, ``Stabilizing Iraq: Preliminary 
Observations on Budget and Management Challenges of Iraq's Security 
Ministries,'' March 22, 2007
    GAO Report No. GAO-07-444, ``Operation Iraqi Freedom: DOD Should 
Apply Lessons Learned Concerning the Need for Security over 
Conventional Munitions Storage Sites to Future Operations Planning,'' 
March 22, 2006
    GAO Report No. GAO-07-612T, ``Stabilizing Iraq: Factors Impeding 
the Development of Capable Iraqi Security Forces,'' March 13, 2007
    GAO Report No. GAO-07-582T, ``Operation Iraqi Freedom: Preliminary 
Observations on Iraqi Security Forces' Logistical Capabilities,'' March 
9, 2007
    *GAO Report No. GAO-07-120C, ``Operation Iraqi Freedom: Preliminary 
Observations on Iraqi Security Forces' Support Capabilities,'' March 7, 
2007
    GAO Report No. GAO-07-426T, ``Rebuilding Iraq: Reconstruction 
Progress Hindered by Contracting, Security, and Capacity Challenges,'' 
February 15, 2007
    GAO Report No. GAO-07-144, ``Defense Logistics: Improved Oversight 
and Increased Coordination needed to Ensure Viability of the Army's 
Prepositioning Strategy,'' February 15, 2007
    GAO Report No. GAO-07-439T, ``Defense Logistics: Preliminary 
Observations on the Army's Implementation of Its Equipment Reset 
Strategies,'' January 31, 2007
    GAO Report No. GAO-07-385T, ``Securing, Stabilizing, And Rebuilding 
Iraq: GAO Audit Approach and Findings,'' January 18, 2007
    GAO Report No. GAO-07-308SP, ``Securing Stabilizing, And Rebuilding 
Iraq: Key Issues for Congressional Oversight,'' January 9, 2007
    *GAO Report No. GAO-07-71C, ``Operation Iraqi Freedom: DOD Should 
Apply Lessons Learned Concerning the Need for Security Over 
Conventional Munitions Storage Sites to Future Operations Planning,'' 
December 20, 2006
    GAO Report No. GAO-07-145, ``Military Operations: High-Level DOD 
Action needed to Address Long-standing Problems with Management and 
Oversight of Contractors Supporting Deployed Forces,'' December 18, 
2006
    GAO Report No. GAO-07-30R, ``Rebuilding Iraq--Status of DOD's 
Reconstruction Program,'' December 15, 2006
    GAO Report No. GAO-07-78, ``Afghanistan Drug Control: Despite 
Improved Efforts, Deterioration Security Threatens Success of U.S. 
Goals,'' November 15, 2006
    GAO Report No. GAO-07-76, ``Global War On Terrorism: Fiscal Year 
2006 Obligation Rates Are Within Funding Levels and Significant 
Multiyear Procurement Funds Will Likely Remain Available for Use in 
Fiscal Year 2007,'' November 13, 2006
    GAO Report No. GAO-07-40, ``Rebuilding Iraq: Status of Competition 
for Iraq Reconstruction Contracts,'' October 6, 2006
    GAO Report No. GAO-06-1085, ``DOD Civilian Personnel: Greater 
Oversight and Quality Assurance Needed to Ensure Force Health 
Protection and Surveillance for Those Deployed,'' September 29, 2006
    GAO Report No. GAO-06-1130T, ``Rebuilding Iraq: Continued Progress 
Requires Overcoming Contract Management Challenges,'' September 28, 
2006
    GAO Report No. GAO-06-1132, ``Iraq Contract Costs: DOD 
Consideration of Defense Contract Audit Agency's Findings,'' September 
25, 2006
    GAO Report No. GAO-06-1094T, ``Stabilizing Iraq: An Assessment of 
the Security Situation,'' September 11, 2006
    GAO Report No. GAO-06-928R, ``Defense Logistics: Changes to Stryker 
Vehicle Maintenance Support Should Identify Strategies for Addressing 
Implementation Challenges,'' September 5, 2006
    *GAO Report No. GAO-06-673C, ``Briefing on Iraq Stabilization,'' 
July 27, 2006
    GAO Report No. GAO-06-885T, ``Global War On Terrorism: Observations 
on Funding, Costs, and Future Commitments,'' July 18, 2006
    GAO Report No. GAO-06-953T, ``Rebuilding Iraq: More Comprehensive 
National Strategy Needed to help Achieve U.S. Goals and Overcome 
Challenges,'' July 11, 2006
    GAO Report No. GAO-06-788, ``Rebuilding Iraq: More Comprehensive 
National Strategy Needed to Help Achieve U.S. Goals,'' July 11, 2006
    GAO Report No. GAO-06-274, ``Defense Logistics: Lack of 
Synchronized Approach between the Marine Corps and Army Affected the 
Timely Production and Installation of Marine Corps Truck Armor,'' June 
22, 2006
    GAO Report No. GAO-06-865T, ``Rebuilding Iraq: Actions Still Needed 
to Improve the Use of Private Security Providers,'' June 13, 2006
    GAO Report No. GAO-06-397, ``Post-Traumatic Stress Disorder: DOD 
Needs to Identify the Factors Its Providers Use to make Mental Health 
Evaluation Referrals for Service Members,'' May 11, 2006
    GAO Report No. GAO-06-711T, ``United Nations: Oil for Food Program 
Provides lessons for Future Sanctions and Ongoing Reform,'' May 2, 2006
    GAO Report No. GAO-06-697T, ``Rebuilding Iraq: Governance, 
Security, Reconstruction, and Financing Challenges,'' April 25, 2006
    GAO Report No. GAO-06-330, ``United Nations: Lessons Learned from 
Oil for Food Program Indicate the Need to Strengthen U.N. Internal 
Controls and Oversight Activities,'' April 25, 2006
    GAO Report No. GAO-06-604T, ``Defense Logistics: Preliminary 
Observations on Equipment Reset Challenges and Issues for the Army and 
Marine Corps,'' March 30, 2006
    GAO Report No. GAO-06-160, ``Defense Logistics: Several Factors 
Limited the Production and Installation of Army Truck Armor during 
Current Wartime Operations,'' March 22, 2006
    GAO Report No. GAO-06-428T, ``Rebuilding Iraq: Stabilization, 
Reconstruction, and Financing Challenges,'' February 8, 2006
    GAO Report No. GAO-06-134, ``Military Personnel: DOD Needs Action 
Plan to Address Enlisted Personnel Recruitment and Retention 
Challenges,'' November 17, 2005
    *GAO Report No. GAO-06-217C, ``Rebuilding Iraq: DOD reports Should 
Link Economic, Governance, and Security Indicators to Conditions for 
Stabilizing Iraq,'' October 31, 2005
    *GAO Report No. GAO-06-152C, ``Rebuilding Iraq: DOD Reports Should 
Link Economic, Governance, and Security Indicators to Conditions for 
Stabilizing Iraq,'' October 31, 2005
    GAO Report No. GAO-06-179T, ``Rebuilding Iraq: Enhancing Security, 
Measuring Program Results, and Maintaining Infrastructure Are Necessary 
to Make Significant and Sustainable Progress,'' October 18, 2005
    GAO Report No. GAO-05-819, ``Defense Transportation: Air Mobility 
Command Needs to Collect and Analyze Better Data to Assess Aircraft 
Utilization,'' September 29, 2005
    GAO Report No. GAO-05-882, ``Global War On Terrorism: DOD Needs to 
Improve the Reliability of Cost Data and Provide Additional Guidance to 
Control Costs,'' September 21, 2005
    GAO Report No. GAO-05-932R, ``Rebuilding Iraq: U.S. Assistance for 
the January 2005 Elections,'' September 7, 2005
    GAO Report No. GAO-05-872, ``Rebuilding Iraq: U.S. Water and 
Sanitation Efforts Need Improved Measures for Assessing Impact and 
Sustained Resources for Maintaining Facilities,'' September 7, 2005
    GAO Report No. GAO-05-672, ``Radiological Sources In Iraq: DOD 
Should Evaluate its Source Recovery Effort and Apply Lessons Learned to 
Future Recovery Missions,'' September 7, 2005
    GAO Report No. GAO-05-775, ``Defense Logistics: DOD Has Begun to 
Improve Supply Distribution Operations, but Further Actions Are Needed 
to Sustain These Efforts,'' August 11, 2005
    GAO Report No. GAO-05-876, ``Rebuilding Iraq: Status of Funding and 
Reconstruction Efforts,'' July 28, 2005
    GAO Report No. GAO-05-742, ``Afghanistan Reconstruction: Despite 
Some Progress, Deterioration Security and Other Obstacles Continue to 
Threaten Achievement of U.S. Goals,'' July 28, 2005
    GAO Report No. GAO-05-737, ``Rebuilding Iraq: Actions needed to 
Improve Use of Private Security Providers,'' July 28, 2005
    GAO Report No. GAO-05-575, ``Afghanistan Security: Efforts to 
Establish Army and Police Have Made Progress, but Future Plans need to 
be Better Defined,'' June 30, 2005
    GAO Report No. GAO-05-293, ``Defense Management: Processes to 
Estimate and Track Equipment Reconstitution Costs Can Be Improved,'' 
May 5, 2005
    GAO Report No. GAO-05-280R, ``Defense Base Act Insurance: Review 
Needed of Cost and Implementation Issues,'' April 29, 2005
    GAO Report No. GAO-05-201, ``Interagency Contraction: Problems with 
DOD's and Interior's Orders to Support Military Operations,'' April 29, 
2005
    GAO Report No. GAO-05-275, ``Defense Logistics: Actions Needed to 
Improve the Availability of Critical Items during Current and Future 
Operations,'' April 8, 2005
    GAO Report No. GAO-05-328, ``Defense Logistics: High-Level DOD 
Coordination Is Needed to Further Improve the Management of the Army's 
LOGCAP Contract,'' March 21, 2005
    GAO Report No. GAO-05-431T, ``Rebuilding Iraq: Preliminary 
Observations on Challenges in Transferring Security Responsibilities to 
Iraqi Military and Police,'' March 14, 2005
    GAO Report No. GAO-05-392T, ``United Nations: Sustained Oversight 
Is Needed for Reforms to Achieve Lasting Results,'' March 2, 2005
    GAO Report No. GAO-05-125, ``Military Pay: Gaps in Pay and Benefits 
Create Financial hardships for Injured Army National Guard and Reserve 
Soldiers,'' February 17, 2005
    GAO Report No. GAO-05-346T, ``United Nations: Oil for Food Program 
Audits,'' February 15, 2005
    GAO Report No. GAO-05-79, ``Army National Guard: Inefficient, 
Error-Prone Process Results in Travel Reimbursement Problems for 
Mobilized Soldiers,'' January 31, 2005
    GAO Report No. GAO-05-120, ``Defense Health Care: Force Health 
Protection and Surveillance Policy Compliance Was Mixed, but Appears 
Better for Recent Deployments,'' November 12, 2004
    GAO Report No. GAO-04-1031, ``Military Personnel: DOD Needs to 
Address Long-term Reserve Force Availability and Related Mobilization 
and Demobilization Issues,'' September 15, 2004
    GAO Report No. GAO-04-1006, ``Foreign Regimes' Assets: The United 
States Faces Challenges in Recovering Assets, but Has Mechanisms That 
Could Guide Future Efforts,'' September 14, 2004
    GAO Report No. GAO-04-915, ``Military Operations: Fiscal Year 2004 
Costs for the Global War on Terrorism Will Exceed Supplemental, 
Requiring DOD to Shift Funds from Other Uses,'' July 21, 2004
    GAO Report No. GAO-04-854, ``Military Operations: DOD's Extensive 
Use of Logistics Support Contracts Requires Strengthened Oversight,'' 
July 19, 2004
    GAO Report No. GAO-04-609, ``Defense Infrastructure: Factors 
Affecting U.S. Infrastructure Costs Overseas and the Development of 
Comprehensive Master Plans,'' July 15, 2004
    GAO Report No. GAO-04-953T, ``United Nations: Observations on the 
Oil for Food Program and Areas for Further Investigation,'' July 8, 
2004
    GAO Report No. GAO-04-902R, ``Rebuilding Iraq: Resource, Security, 
Governance, Essential, Services, and Oversight Issues,'' June 28, 2004
    GAO Report No. GAO-04-880T, ``United Nations: Observations on the 
Oil for Food Program and Iraq's Food Security,'' June 16, 2004
    GAO Report No. GAO-04-869T, ``Contract Management: Contracting for 
Iraq Reconstruction and for Global Logistics Support,'' June 15, 2004
    GAO Report No. GAO-04-403, ``Afghanistan Reconstructions: 
Deteriorating Security and Limited Resources Have Impeded Progress; 
Improvements in U.S. Strategy Needed,'' June 2, 2004
    GAO Report No. GAO-04-605, ``Rebuilding Iraq: Fiscal Year 2003 
Contract Award Procedures and Management Challenges,'' June 1, 2004
    GAO Report No. GAO-04-746R, ``Iraq's Transitional Law,'' May 25, 
2004
    GAO Report No. GAO-04-668, ``Military Operations: DOD's Fiscal Year 
2003 Funding and reported Obligations in Support of the Global War on 
Terrorism,'' May 13, 2004
    GAO Report No. GAO-04-559, ``State Department: Issues Affecting 
Funding of Iraqi National Congress Support Foundation,'' April 30, 2004
    GAO Report No. GAO-04-730T, ``United Nations: Observations on the 
Management and Oversight of the Oil for Food Program,'' April 28, 2004
    GAO Report No. GAO-04-484, ``Operation Iraqi Freedom: Long-standing 
Problems Hampering Mail Delivery need to be Resolved,'' April 14, 2004
    GAO Report No. GAO-04-651T, ``United Nations: Observations on the 
Oil for Food Program,'' April 7, 2004
    GAO Report No. GAO-04-562T, ``Military Propositioning Observations 
on Army and Marine Corps Programs During Operation Iraqi Freedom and 
Beyond,'' March 24, 2004
    GAO Report No. GAO-04-579T, ``Recovering Iraq's Assets: Preliminary 
Observations on U.S. Efforts and Challenges,'' March 18, 2004
    GAO Report No. GAO-04-305R, ``Defense Logistics: Preliminary 
Observations on the Effectiveness of Logistics Activities during 
Operation Iraqi Freedom,'' December 18, 2003
    GAO Report No. GAO-03-1088, ``Military Operations: Fiscal Year 2003 
Obligations Are Substantial, but May Result in Less Obligations Than 
Expected,'' September 17, 2003
    GAO Report No. GAO-03-980T, ``Foreign Assistance: Observations on 
Post-Conflict Assistance in Bosnia, Kosovo, and Afghanistan,'' July 18, 
2003
    GAO Report No. GAO-03-792R, ``Rebuilding Iraq,'' May 15, 2003
Appendix C. Definitions Used for Categorization of OEF and OIF Reports 
       and Testimonies Fiscal Year 2003 Through Fiscal Year 2007
    To categorize the 302 OEF and OIF reports and testimonies, we 
developed definitions to categorize the causes that resulted in the 
recommendations issued by the Defense oversight community and GAO. We 
provided our definitions to the other oversight agencies when we vetted 
our initial categorizations. Our goal was to create categories and 
definitions that were simple and easily understood to provide common 
reference points as follows:
Contract Management
    Administration.--This category includes recommendations that 
address oversight responsibilities, including Quality Assurance, 
Performance Monitoring, and Results, to ensure that the contractor 
provides the requirements requested. We consider this category as 
Government specific function.
    Policy and Procedure.--This category includes recommendations that 
address implementing guidance, policy, and procedures for future 
contracts and is not limited to one specific contract.
    Sourcing.--This category includes recommendations that address 
improving the negotiation and documentation of actions between the 
Government (customer) and the contractor (developer). This function 
involves both Government and contractor.
    Requirements.--This category includes recommendations that address 
the development of requirements (what is needed by the customer). This 
function is Government specific with no contractor involvement in 
developing the requirements.
    Other.--This category includes recommendations that are more 
general and address a more strategic approach to resolving systemic 
challenges.
Logistics
    Policy and Procedures.--This category includes the recommendations 
made to improve the general goals and directives of a program, process, 
or plan including the steps, activities, and decisions made to 
accomplish those goals and directives.
    Accountability.--This category includes recommendations made to 
improve establishing or maintaining records to identify, acquire, 
account for, control, store, or properly dispose of assets; including 
whether the cause addressed equipment on hand or on order, the status 
of the equipment, and the location of the equipment.
    Sustainability.--This category includes recommendations to ensure 
maintaining a certain level or state of a process, program, or 
activity. It includes what needs to be done in order to keep a process, 
program, or activity running smoothly and efficiently.
    Requirements.--This category includes recommendations made in order 
to improve determining the needs or conditions to meet a specific 
outcome. This includes required equipment, storage facilities, 
supplies, and personnel.
    Other.--This category includes causes categorized as Other. (1) The 
causes do not specifically relate to Policy and Procedures, 
Accountability, Sustainability, or Requirements. (2) Many of the causes 
were very specific to a certain program and could not be applied to any 
other program. (3) Some of the recommendations were not tied to a 
specific cause, so those recommendations were categorized as Other.
Financial Management
    Overall Financial Management.--This category includes overall 
financial management. The cause addressed by the recommendation covers 
the category of financial management but the cause was not specific 
enough to be classified in one of the other categories.
    Internal Controls.--This category addresses anything that could 
involve the lack of checks and balances in the system. The Yellow Book 
describes internal controls as ``The extent to which internal controls 
that are significant to the audit depend on the reliability of 
information processed or generated by information systems.'' We used 
this Yellow Book definition to guide our judgment.
    Obligations.--This category addresses a cause that is directly 
related to obligations or involved obligation type challenges, for 
example, if a report spoke about command not doing a sufficient job of 
planning for a known expenditure. We considered information from the 
DOD Comptrollers office as it pertained to the Planning, Programming, 
Budgeting, and Execution system. In particular, the Budgeting phase 
(formulation and justification) as it provides a platform for a 
detailed review of a program's pricing, phasing, and overall capability 
to be executed on time and within budget. The budgeting process 
addresses the years to be justified in the President's budget 
(including the current and upcoming execution years) and provides a 
forum to develop the Secretary's budget position.
    Execution.--This category addresses the execution phase and 
everything involved with the actual spending of funds.
Other
    Policy and Procedures.--This category addresses a cause related to 
general goals and directives of a program, process, or plan including 
the steps, activities, and decisions made to accomplish those goals and 
directives.
    Planning.--This category includes a cause if it addressed providing 
a framework for developing anything; including processes for setting 
goals, developing strategies, and outlining tasks and schedules to 
accomplish a goal.
    Accountability.--This category includes a cause that addressed 
establishing or maintaining records to identify, acquire, account for, 
control, store, or properly dispose of assets; including if the cause 
talked about equipment on hand or on order, the status of the 
equipment, and the location of the equipment.
    Other.--This category includes causes that do not specifically 
relate to policy and procedures, planning, or accountability and causes 
that were very specific to a certain program and could not be applied 
to any other program.

                              TEAM MEMBERS

    The Department of Defense Office of the Deputy Inspector General 
for Auditing prepared this report. The following personnel of the 
Department of Defense Office of Inspector General significantly 
contributed to this report: Joseph S. Dobish, Michael J. Guagliano, 
Cathy M. Mitchell, William G. Vannurden.
    Additional contributors within the DOD OIG were: Jack L. Armstrong, 
Donald. A. Bloomer, Bruce A. Burton, Erin S.-E. Hart, James L. 
Kornides, Andrew L. McRell, Craig W. Michaels, Timothy E. Moore, Monica 
Noell, David K. Steensma, Richard B. Vasquez.
    Members from Southwest Asia Joint Planning Group also contributed 
to this summary report: Mr. J.T. Mickey McDermott, Chair--Joint 
Planning Group, Southwest Asia/GWOT; Mr. Joseph P. Mizzoni, U.S. Army 
Audit Agency; Mr. John D. Lombardo, U.S. Army Audit Agency; Mr. James 
Durbin, Naval Audit Service; Mr. Charles E. Atkinson, Jr., U.S. Air 
Force Audit Agency; Mr. Joe Garcia, Defense Contract Audit Agency; Mr. 
Greg Schmalfeldt, Defense Finance and Accounting Service.

    Chairman Byrd. General Griffin.

STATEMENT OF GENERAL BENJAMIN S. GRIFFIN, COMMANDING 
            GENERAL, U.S. ARMY MATERIEL COMMAND
ACCOMPANIED BY:
        JEFFREY PARSONS, EXECUTIVE DIRECTOR, U.S. ARMY MATERIEL COMMAND
        LEE THOMPSON, PROGRAM DIRECTOR, LOGISTICS CIVIL AUGMENTATION 
            PROGRAM, U.S. ARMY SUSTAINMENT COMMAND
    General Griffin. Yes, sir.
    Chairman Byrd, Senator Cochran, and distinguished members 
of the committee, thank you for the opportunity to be here 
today with our Deputy Secretary of Defense, The Honorable 
Gordon England, and other key members of the Department of 
Defense, to discuss the adequacy of Defense contract oversight 
for Operation Iraqi Freedom.
    As you know, our Nation has been at war for over 6 years. 
The length of the conflict and the operational requirements for 
our forces have created significant challenges in sustaining 
our warfighters.
    I will state up front that we are not where we want to be 
today, in terms of contracting, but we have made significant 
progress.
    We are committed to improve our ability and capability to 
provide not only first-class expeditionary contracting, but 
also to implement improvements across the entire contracting 
system.
    I want to assure you that we are continuously improving our 
ability to meet the needs of our troops in conflict and are 
implementing many of the recommendations identified by the 
Gansler Commission and the Army Contracting Task Force.
    As the commanding general of the U.S. Army Materiel Command 
(AMC), my number one priority is support to soldiers, sailors, 
airmen, and marines who are warfighters. In pursuit of that 
goal, our contracting employees play a critical role in 
supporting our Nation at war. We have never fought an extended 
conflict that required such extensive reliance on contractor 
support. This is not to say that we have not had contractors 
since the Revolutionary War. We have extensive contract support 
inside of the United States and overseas supporting the global 
war on terrorism--food, maintenance, and security, a couple of 
things you mentioned, Mr. Chairman. These dedicated people are 
working 24/7 in Iraq and Afghanistan. Many have been severely 
wounded, and some have made the ultimate sacrifice in service 
to our Nation.
    We are aggressively moving out to implement many of the 
Gansler Commission's recommendations. AMC's most significant 
action is the recent establishment of the Army Contracting 
Command, which we stood up in March. And the new Director sits 
to my left. The Army Contracting Command includes two 
subordinate commands, a deployable, one-star-level 
Expeditionary Contracting Command focused on support to 
forward-deployed forces, and a one-star-level Installation 
Contracting Command focused on support for Conus installations 
and other missions support.
    The Expeditionary Contracting Command will include our 
contracting support brigades, contingency contracting 
battalions, senior contingency contracting teams, and 
contingency contracting teams. Our five major contracting 
centers that support our Army Materiel Commands, Life Cycle 
Management Commands, and other major subordinate commands will 
also be realigned under this new command. All of this is 
designed to improve contracting, Army-wide.
    Additionally, Army Materiel Command will realign the 
Logistics Civil Augmentation Program (LOGCAP) office as a 
direct-report to the Army Contracting Command executive 
director.
    Today, the Army Sustainment Command has the following 
structure in place to provide management and overwatch of 
LOGCAP in Iraq and Afghanistan: a colonel in Iraq, a colonel in 
Afghanistan, and a GS-15 on the ground in Kuwait, leading over 
100 personnel in the oversight of LOGCAP. In addition, the 
Defense Contracts Management Agency (DCMA) has 97 personnel, 
primarily in Iraq and Afghanistan, performing LOGCAP contract 
management. It has appointed over 500 contracting officer 
representatives in Iraq and Afghanistan from operational 
supporting units to assist in day-to-day oversight of 
contractor performance.
    We also assigned two senior executive service personnel to 
further enhance our leadership and management of LOGCAP. One is 
responsible for LOGCAP program management--Mr. Lee Thompson, 
who sits to Mr. Parsons's left--and one is responsible for the 
acquisition center that awards and manages the LOGCAP contract. 
The alignment of the LOGCAP program under the new Army 
Contracting Command places emphasis on a single advocate with 
accountability and responsibility for contracting in theater 
and for expanding our surge and contingency capability. I think 
everybody here understands you need accountability, 
responsibility, and authority.
    Here with me today are Mr. Jeff Parsons, the executive 
director of the newly established Army Contracting Command, and 
Mr. Lee Thompson, the program director for the Logistics Civil 
Augmentation Program, LOGCAP. These gentlemen are an integral 
part of Army Materiel Command's contracting role in Iraq.
    We are also working with the Department of the Army and the 
Secretary of Defense in the implementation of other Gansler 
Commission recommendations to improve doctrine, training, and 
workforce development. To that end, we have developed a number 
of training initiatives to better prepare our military and 
civilian contract personnel, prior to their deployment, to 
support the Joint Contracting Command in Iraq and Afghanistan. 
We are capturing lessons learned as the soldiers and civilians 
return from deployments in Iraq and Afghanistan, and are using 
this feedback to improve our training.
    I appreciate the Senate's support of our Army's efforts to 
provide our Nation's warfighters and allies with quality 
products and services. We need your support for our efforts to 
increase the size, the structure, and the training of our 
Government contracting workforce, both military and civilian, 
as outlined in my written statement, which I respectfully 
request be submitted for the record.
    You have my commitment that we will continue to pursue 
improvements in our contracting process and workforce. Our 
warfighters and our taxpayers deserve no less.
    I look forward to your questions.
    Thank you.
    Chairman Byrd. Without objection, the item will be included 
in the record.
    General Griffin. Thank you, sir.
    [The statement follows:]

           Prepared Statement of General Benjamin S. Griffin

    Mr. Chairman, Senator Cochran, and members of the Committee, I 
thank you for the opportunity to appear before you today to discuss the 
adequacy of defense contract oversight for Operation Iraqi Freedom. To 
do this, I will describe how AMC is addressing the issues identified by 
the Commission on Army Acquisition and Program Management in 
Expeditionary Operations, which released its final report, ``Urgent 
Reform Required: Army Expeditionary Contracting,'' on October 31, 2007; 
and by the Army Contracting Task Force which completed its work in 
March 2008.
    Before I begin, however, I would like to ensure that the Committee 
understands the role of the Army Materiel Command's contract oversight 
and authority in U.S. Central Command's theater of operations. As shown 
in Table 1, Command authority flows from the Central Command (CENTCOM) 
Commander to the Multi National Force--Iraq (MNF-I) Commander, to the 
Joint Contracting Command Iraq-Afghanistan (JCC-I/A) Commander. 
Contracting authority flows from the Secretary of the Army to the 
Assistant Secretary of the Army, Acquisition, Logistics, and 
Technology, designated as the Army Senior Procurement Executive to the 
Head of the Contracting Activity.
    The Army Heads of Contracting Activities engaged in the writing and 
the execution of contracts in support of Operation Iraqi Freedom: the 
Joint Contracting Command Iraq-Afghanistan (JCC-I/A); the Army Materiel 
Command's Life Cycle Management Commands; the Army Materiel Command's 
Army Sustainment Command; and the U.S. Army Corps of Engineers. Today, 
neither the Army Materiel Command nor the Army Contracting Command has 
contracting authority for any of these contracting activities. 




    Army Materiel Command's engagement in the CENTCOM theater of 
contracting operations primarily consists of the management and 
execution of the Logistics Civil Augmentation Program (LOGCAP) III 
contract, managed by the Army Sustainment Command located at Rock 
Island Arsenal, Illinois, a subordinate command of the Army Materiel 
Command. Additionally, equipment, maintenance and repair contracts are 
managed by the Army Materiel Command's Life Cycle Management Commands. 
These 2-star commands receive their contracting authority and oversight 
directly from the Assistant Secretary of the Army for Acquisition, 
Logistics, and Technology who is also the Army Senior Procurement 
Executive.
    The Defense Contract Management Agency (DCMA), one of the Defense 
Contracting Agencies under the authority of the Under Secretary of 
Defense for Acquisition, Technology and Logistics has the 
responsibility for contract management of task orders awarded by the 
Army Sustainment Command under the LOGCAP III contract.
    As you are aware, Secretary Geren chartered the Commission on Army 
Acquisition and Program Management in Expeditionary Operations chaired 
by Dr. Jacques Gansler, the former Under Secretary of Defense for 
Acquisition, Technology and Logistics, on August 30, 2007. The Gansler 
Commission provided an independent, long-term, strategic assessment of 
the Army's acquisition and contracting system and its ability to 
support expeditionary operations and sustain high operational demand in 
an era of persistent conflict.
    To complement the work of the Commission, the Army Contracting Task 
Force was established in early September 2007, co-chaired by LTG N. 
Ross Thompson III, Military Deputy to the Assistant Secretary of the 
Army for Acquisition, Logistics and Technology and Ms. Kathryn Condon, 
Executive Deputy to the Commanding General at the Army Materiel 
Command. The task force mission was to take an intensive look at 
current Army operations and future plans for providing contracting 
support to contingency or other military operations. The task force 
findings and recommendations were consistent with those of the Gansler 
Commission. The Army Contracting Task Force final report was completed 
on March 17, 2008 and was presented to the Secretary of the Army.
    The details of the report were included in the Army's submission of 
Section 849 of the National Defense Authorization Act for Fiscal Year 
2008's report to Congress which also addresses all of the Army's 
actions underway to address Gansler Commission recommendations. 
Additionally, the report is being utilized by the Army Contracting 
Campaign Plan Task Force, established by Secretary of the Army in 
February 2008, to ensure that the Task Force and Gansler Commission's 
finding and recommendations are implemented as quickly as possible 
without the loss of momentum. This Army-wide contracting campaign plan 
will improve doctrine, organization, training, leadership, materiel, 
personnel and facilities. Achieving this objective will require 
resources, time, and sustained leadership focus.
    The Gansler Commission made four overarching recommendations to 
ensure the success of future expeditionary operations: (1) increase the 
stature, quantity, and career development of military and civilian 
contracting personnel, particularly for expeditionary operations; (2) 
restructure organizations and restore responsibility to facilitate 
contracting and contract management; (3) provide training and tools for 
overall contracting activities in expeditionary operations; and (4) 
obtain legislative, regulatory, and policy assistance to enable 
contracting effectiveness in expeditionary operations.
    With regard to the first Gansler Commission recommendation--to 
increase the stature, quantity, and career development of the Army's 
contracting personnel--we have a number of initiatives underway. In 
June 2006, the Army approved a new force design structure consisting of 
19-person Contracting Support Brigades, 8-person Contingency 
Contracting Battalions, 4-person Senior Contingency Contracting Teams, 
and 4-person Contingency Contracting Teams composed of Active Duty, 
Reserve, and Army National Guard personnel. Each Contracting Support 
Brigade will be commanded by a colonel. These brigades oversee 
Contingency Contracting Battalions commanded by lieutenant colonels, 
and Contingency Contracting Teams in the execution of the Army Service 
Component Commander's contracting support plan.
    Prior to the Gansler Commission and the work of the Army 
Contracting Task Force, AMC had already taken action to increase the 
number of Contracting Support Brigades from four to seven; the number 
of Contingency Contracting Battalions from six to eleven; the number of 
Senior Contingency Contracting Teams from 15 to 18; and Contingency 
Contracting Teams from 105 to 153. This represents a potential increase 
of over 300 military personnel for a total of over 900 deployable 
military officers and non-commissioned officers. Sourcing for the 
proposed increases is currently being worked as part of the Department 
of Army Total Army Analysis process. Based upon the scope of the 
mission, we plan to augment the Contracting Support Brigades with 
deployable civilian personnel, including support from Army Criminal 
Investigative Division agents and Army Audit Agency officials to 
enhance and improve our ability to execute and manage contracts for 
expeditionary operations. Contracting Support Brigades will be located 
in the United States and overseas supporting operations in Southwest 
Asia, Korea, Europe, Africa, the Pacific, South America, and North 
America.
    This new contingency contracting structure will provide ample 
professional development and growth opportunities for our military 
officers and non-commissioned officers, allowing them to progress in 
capability and experience from captains and sergeants, to colonels and 
sergeants major. This structure did not exist prior to Operation 
Enduring Freedom and Operation Iraqi Freedom. Not only will it enhance 
the development of our military contracting personnel, but also 
increase their stature once they are fully resourced.
    Army Materiel Command has also identified the need to establish a 
Contracting Warrant Officer Corps. The Department is currently 
assessing this requirement. The technical expertise of Warrant 
Officers, coupled with contracting training and experience, would make 
them exceptionally qualified to fulfill the contract management and 
oversight role. If approved, this Warrant Officer Corps will consist of 
approximately 150 deployable military personnel with contracting 
expertise.
    When deployed, Contracting Support Brigades, Battalions, and Teams 
will coordinate and integrate their plans with our seven Army Field 
Support Brigades, located in Afghanistan, Iraq, Korea, Hawaii, Germany, 
Fort Bragg, North Carolina, and Fort Hood, Texas, which provide 
logistical equipment support to deployed commanders--Army Materiel 
Command's face-to-the-field. These two brigade designs support the Army 
modular force in the execution of acquisition support, logistics, and 
technology activities needed to support and enable the full spectrum of 
operations.
    In terms of career development, plans are also underway to move the 
accession point for contracting military officers two to three years 
earlier immediately following their Branch qualification at the captain 
level. This allows professional development and experience to begin 
earlier. For contracting non-commissioned officers, the accession point 
will occur upon achieving the rank of sergeant. We must also ensure the 
requisite training is accomplished prior to deploying on an 
expeditionary contracting mission, and it is our intent to defer 
deployment of military members during their first year in contracting.
    In keeping with the Gansler Commission's second recommendation--to 
restructure Army contracting organizations and restore responsibility 
to better facilitate contracting and contract management in 
expeditionary and U.S. based operations--the Army Materiel Command, 
based upon direction from Secretary Geren on January 30, 2008, took 
action to establish a 2-star Army Contracting Command. At the same 
time, the Secretary directed the realignment of the Army Contracting 
Agency from the Assistant Secretary of the Army for Acquisition, 
Logistics, and Technology to the Army Materiel Command to become part 
of the Army Contracting Command. This new command is a major 
subordinate command to the Army Materiel Command. On March 13, 2008, 
the Army Contracting Command was activated in a provisional status, and 
on July 15, 2008 the Department of the Army approved the concept plan 
for the new command. When fully resourced, this plan will increase our 
civilian personnel by more than 900 and our military personnel by more 
than 500. We anticipate initial operational capability on October 1, 
2008 with a goal of full operational capability on October 1, 2009.
    Our challenge will be to quickly resource and fill these new 
positions. This will take time. We are actively recruiting civilians 
and increasing accessions of military officers and non-commissioned 
officers into the Army Acquisition Corps. To enhance our hiring ability 
of civilian contracting personnel, we are pursuing direct hire 
authority from the Office of Personnel Management.
    The Army Contracting Command includes two subordinate commands--a 
deployable 1-star level Expeditionary Contracting Command focused on 
support to forward deployed forces (including providing contracting 
personnel support for the Joint Contracting Command--Iraq and 
Afghanistan) and OCONUS installations; and a 1-star level Installation 
Contracting Command focused on support for CONUS installations and 
other mission support. The Expeditionary Contracting Command will 
include our Contracting Support Brigades, Contingency Contracting 
Battalions, Senior Contingency Contracting Teams, and Contingency 
Contracting Teams. Our five major acquisition contracting centers will 
be realigned under the Army Contracting Command to facilitate 
appropriate training, manning and work force development.
    Additionally, the Army Materiel Command will realign the LOGCAP 
Program Office from the Army Sustainment Command to the Army 
Contracting Command as a direct report to the Executive Director. This 
realignment will place emphasis on a single advocate with the 
accountability and responsibility for contracting in addition to 
expanding our surge and contingency capability to resource staffing 
requirements with trained, skilled, designated and responsive 
expeditionary contracting capability.
    The Army is moving out quickly to implement the third Gansler 
Commission recommendation--to provide training and tools. The Army is 
assessing opportunities to improve contingency contracting training at 
our Combined Training Centers. In April 2008, one of our Contingency 
Contracting Battalions participated in a situational training exercise 
held at the Battle Command Training Center on Fort Lewis, WA. This 
exercise focused on preparing military contingency contracting officers 
for rotation and integration into the Joint Contracting Command--Iraq/
Afghanistan's current battle rhythm and contracting methodology. 
Training included tasks such as preparing a contracting support plan, 
coordinating with supported units, and the award, administration and 
close-out of service contracts. Through this exercise, participants 
gained ``cradle to grave'' knowledge of the contracting process in 
theater. Detailed after action reports are conducted after each 
training exercise and a survey is conducted 3-4 months after deployment 
to capture lessons learned. Our intent is to institutionalize such 
training in our Combined Training Centers and Battle Command Training 
Programs.
    Several training and doctrine initiatives are underway and have 
continued to be a major focus for the Army. A final draft of the Joint 
Publication 4-10, Operational Contract Support was completed. The 
completion date for Field Manual Interim 4-93.42, Contract Support 
Brigade, was accelerated. The Army also worked with the Department of 
Defense to distribute the recently released ``Joint Contingency 
Contracting Handbook.'' Leader education related to contracting and 
contractor management was accelerated. Development of FM 4-10, 
Commander's Guide to Contracting and Contractor Management was also 
accelerated.
    The Army is continuing to modify and expand its leadership 
education curriculum related to the planning and management of 
Operational Contract Support with an enhanced focus on expeditionary 
operations. We have modified or added sixteen officer and non-
commissioned officer professional military education courses to improve 
knowledge and skills in Operational Contract Support. The Army is also 
developing a 2-week resident course to train selected staff members 
(Brigade through Army Service Component Command levels) on how to plan 
for and manage Operational Contract Support and how to develop 
requirements packages.
    To reduce knowledge gaps in training venues, the U.S. Army Training 
and Doctrine Command has developed a concept plan to add acquisition 
personnel to the Battle Command Training Program to support the Combat 
Training Centers. This new collective training capability will 
stimulate commanders and their staffs to solve expeditionary related 
tactical problems, will apply emerging doctrine to these tactical 
situations, and will promote a better appreciation of the challenge of 
integrating contractor support into military operations for both the 
Contingency Contracting Officer and the unit requiring the contract 
support.
    At present the Army has put into place an intensive training and 
management program for our Contracting Officer Representatives which 
requires all Army Contracting Officer Representatives to complete the 
Defense Acquisition University's on-line continuous learning module, 
``COR with a Mission Focus,'' prior to appointment. Army Materiel 
Command is working with the Department of the Army to ensure 
enforcement of this training.
    In addition, Army Materiel Command has implemented a three-day 
Contracting Officer Representative training course for deployed forces 
in Kuwait. This training course requires nominated personnel to 
complete the Defense Acquisition University on-line training prior to 
attending onsite training. A performance assessment is conducted three 
to four weeks after a Contracting Officer Representative's (COR) 
appointment to evaluate how well he/she comprehends his/her roles and 
responsibilities in contract performance oversight. Since October 1, 
2007, 485 CORs have been trained in Kuwait and as of June 1, 2008, 100 
percent of service contracts in Kuwait have trained and appointed CORs 
providing contractor oversight.
    To improve our contingency contracting training and doctrine, the 
Army is formally interviewing units as they return from theater to 
capture ``expeditionary contracting'' lessons learned and incorporate 
the findings into doctrine, training guides, and user handbooks. We are 
accelerating efforts to enhance leader education in contracting and 
contractor management and re-examining the training curriculum and 
timing for all newly accessed acquisition officers and civilians.
    AMC is developing and fielding a Virtual Contracting Enterprise to 
provide electronic, web-based tools to enable visibility and analysis 
of our worldwide contracting mission.
    In response to the fourth Gansler Commission recommendation 
regarding legislative proposals, the Army worked with the staff of the 
Office of the Secretary of Defense to develop legislative proposals to 
improve contracting effectiveness in expeditionary operations, 
including the Army's legislative proposal to establish five new general 
officer positions. Army Materiel Command requested three of those 
general officer positions for the Army Contracting Command; one, a 
seasoned contracting expert, would serve as a Major General Commander. 
This proposal will be presented to Congress during this session.
    The work of the Army's Contracting Task Force has culminated in the 
implementation of significant reforms and corrective actions to 
eliminate deficiencies. These reforms and corrective actions resulted 
in significant improvements in the Kuwait contracting operations. 
Several new leaders are now in place; staffing was increased from 27 to 
55 personnel through temporary duty assignment (TDY) augmentation and 
volunteers, including dedicated lawyers; ten additional military 
officers were sent to Kuwait for 90 days to review prior contracts; and 
new internal control processes for effective checks and balances were 
developed.
    We also established a U.S. based office at the Army Materiel 
Command's Army Sustainment Command, located in Rock Island, Illinois to 
provide contracting support to Kuwait operations in the management and 
execution of $800 million in active contracts. Army Sustainment Command 
established a dedicated 15-member team, supported by legal 
professionals, charged to assist in resolving a number of claims, 
definitizing unpriced actions, and negotiating new contracts for 
requirements in ways that will result in significant cost avoidance or 
savings. The establishment of this capability leverages Army Materiel 
Command leadership and expertise. Our work continues with the orderly 
transfer of additional existing and future major contract actions from 
Kuwait to the Army Sustainment Command and eventually to the Army 
Contracting Command.
    Finally, prior to the efforts of the Gansler Commission and the 
Army Contracting Task Force, Army Materiel Command recognized the need 
to make improvements in its contracting support to Operation Iraqi 
Freedom and Operation Enduring Freedom. We have learned many lessons 
from our early experiences with LOGCAP and are taking necessary steps 
to improve the execution and management of LOGCAP.
    In 2004, Army Materiel Command took aggressive action to increase 
the number of personnel in the LOGCAP program office to better manage 
and execute the program. This allowed us to eliminate billions in 
unpriced task orders and reduce the cost risk to the Government.
    In early 2005, the Army established a Senior Executive Service 
position to serve as the contracting and program director and provide 
overarching leadership/AMC established program offices in Iraq, Kuwait, 
and Afghanistan that are managed by Deputy Program Directors, who are 
all acquisition logistics professionals. In April 2007, the Army 
established a second Senior Executive Service position to separate 
contracting support from program management. This further enhanced our 
ability to provide oversight.
    Additionally, we worked with the Defense Contract Management Agency 
to increase its support in theater. Today, there are 97 Defense 
Contract Management Agency personnel deployed in Southwest Asia 
augmenting our LOGCAP program offices with contract management 
personnel. In addition to conducting reviews of the contractor's 
purchasing, billing, estimating, procurement and property systems, 
field personnel augment the program management teams with 
administrative contracting officers, quality assurance representatives, 
and property administrators whose responsibility it is to ensure 
contract compliance with contract terms and conditions. We also took 
action to deploy in excess of 50 U.S. Army Reserve Logistics Support 
Officers who augment the program office by assisting supported command 
units in developing their requirements. Furthermore, there are over 500 
Contracting Officer Representatives, provided by the supported command 
units, who provide daily oversight of contractor performance.
    Award fee boards are conducted every six months evaluating the 
contractor's performance, identifying areas for improvement, and 
assessing overall performance as it is measured against the award fee 
criteria. Board Membership consists of representatives from the 
supported commands, the LOGCAP Deputy Program Directors and the Defense 
Contract Management Agency. It is chaired by LOGCAP Program Director. 
Besides the Award Fee Evaluation Boards conducted every six months, 
there are monthly performance evaluation boards chaired by the 
supported unit. The Department of the Army also established a 
Contractor Acquired Property Review Board that ensures excess contract 
property is distributed to needed locations.
    Based on lessons learned under the LOGCAP III contract, the Army 
developed a new acquisition strategy for LOGCAP IV that will utilize 
the services of three performance contractors to execute LOGCAP 
requirements and one contractor to support the LOGCAP Program Director 
in the management of the program and to conduct worldwide planning. 
LOGCAP IV contracts were awarded and task orders will be competed among 
the three performance contractors to ensure competitive pricing for 
required services. The award to three performance contractors provides 
the Army with increased capacity to respond to other contingencies 
foreign or domestic. The additional performance contractors minimize 
risk and ensure combat support/combat service support capability is 
responsive to worldwide contingencies.
    In conclusion, while I primarily address the initiatives and 
resources AMC is pursuing to improve our Expeditionary Contracting 
capability, the success of future operations is a joint responsibility 
and will require DOD solutions and resourcing. To this end, we continue 
to work with our sister Services, the Joint Staff and other defense 
agencies.
    Expeditionary military operations in Iraq and Afghanistan have 
placed extraordinary demands on our contracting system and the people 
who make it work. The vast majority of our military and civilian 
contracting personnel perform well in tough, austere conditions. We 
know that the success of our warfighters and those who lead them is 
linked directly to the success of our contracting workforce, and we are 
working hard to ensure that contracting is a core competency within the 
Army. The Army's focus on contracting is not just for contracting 
professionals. Warfighters set requirements and help manage contract 
execution--their involvement in the contracting process is critical.
    My number one priority is support to our Soldiers, Sailors, Airmen 
and Marines. Our contracting professionals are focused on supporting 
these warfighters and inspiring the confidence and trust of the 
American people. We must never lose sight of the outstanding work to 
support the war in Iraq and Afghanistan that our contracting and 
contractor personnel are doing 24/7. This support at times results in 
the potential for and reality of loss of life and injury.
    Our challenge is to ensure we have adequate structure, policy, and 
personnel who are trained to do the job in the right place at the right 
time--continually performing at an ethical standard that upholds Army 
values. This will not be easy. It will take time, but getting it done 
is essential. We cannot and will not fail--our warfighters and our 
taxpayers deserve no less.
    Thank you for providing us with this opportunity to address the 
Army's oversight of contracting to support expeditionary operations. I 
look forward to answering your questions.

                       WEAPONS MISPLACED IN IRAQ

    Chairman Byrd. Secretary England, in a July 2007 report, 
the Government Accountability Office found that unclear DOD 
guidance, inadequate staff, and insufficient technology 
resulted in poor accountability of over 190,000 weapons 
provided to Iraqi security forces. DOD concurred with GAO's 
recommendation to identify accountability procedures with a 
program to train and equip the Iraqi security forces. However--
I stress this, and I want to speak loudly and clearly--however, 
as of March 2008, DOD had not developed the necessary 
procedures.
    Can you tell the committee whether or not those procedures 
have been developed and implemented yet? Have all the missing 
weapons been accounted for? And what additional oversight is 
planned to ensure that weapons accountability continues?
    Mr. England. Chairman Byrd, as I recall, we started this 
investigation, we turned it over to the DOD IG, because there 
were some fundamental issues. We did work to put procedures in 
place in parallel, but I can't tell you today exactly if they 
went out or not, so I don't have the specific status; I will 
have to get back with you on that.
    [The information follows:]

    The National Defense Authorization Act, 2008, Public Law 
No. 110-181, Section 1228, requires the President to implement 
a policy to control the export and transfer of defense articles 
into Iraq, including the implementation of a registration and 
monitoring system. The Department of Defense, through Multi-
National Force--Iraq (MNF-I) has implemented many policies and 
procedures which will help meet the intent of this law as it 
comes into effect in late July 2008. First, Multi-National 
Security Transition Command--Iraq (MNSTC-I) implemented a 
database tracking system for weapons accountability. Following 
the Government Accountability Office (GAO) report of July 2007, 
MNSTC-I requested that the Department of Defense Inspector 
General (DODIG) conduct an inspection in October 2007. In 
implementing GAO and DODIG recommendations, MNSTC-I reconciled 
serial numbers of weapons and created a weapons database. All 
small arms procured for the Government of Iraq (GoI) through 
MNSTC-I, either from Iraqi Security Forces Fund (ISFF) or 
Foreign Military Sales (FMS), are now registered by serial 
number in this database, which is managed by MNSTC-I logistics 
personnel. Additionally, 100 percent serial number inventories 
were completed on all weapons held at Taji National Depot and 
Abu Ghraib Warehouse, enabling reconciliation of the database. 
MNF-I has worked to establish an unbroken chain of custody for 
the accountability and control of munitions under U.S. control 
from entry into Iraq to issuance to the ISF. The number of 
logistics and property accountability specialists in country 
(in MNSTC-I, in particular) has increased and increased 
security procedures throughout the chain of custody have been 
implemented. MNF-I has worked with the ISF to build their 
property accountability systems and structures. In July 2007, 
MNF-I partnered with the ISF to establish an M-16 Biometrics 
Program that links individual soldiers to the particular 
weapons they are issued. Prior to weapons issue, each soldier 
is required to provide biometric data in the form of a retinal 
scan, a voice scan, and fingerprints. In addition, soldiers' 
personnel and payroll data are verified before a weapon is 
issued. The final step in the process is to take a picture of 
each soldier holding his new weapon with the serial number 
visible. Similar biometric procedures have been implemented for 
Iraqi police badge and weapon issue, as well, and the Ministry 
of Interior requires policemen to present their identification 
card and weapon in order to receive monthly pay. The fidelity 
of data and level of detail captured in these accountability 
procedures are significant.
    In coordination with the Iraqi Ground Forces Command 
(IGFC), MNSTC-I established an Iraqi/Coalition joint inspection 
team in October 2007 to inspect and assess Iraqi Divisions' 
equipment records and verify on-hand quantities. MNSTC-I was 
able to establish a baseline of where weapons are located and 
provide an operational snapshot of accountability in several 
Iraqi divisions. This data was utilized to reconcile the 
Coalition issue log with Iraqi hand receipts and assess the 
effectiveness of ISF accountability procedures.
    Contractor delivery of weapons in theater has been further 
regulated. Since September 13, 2007, the Joint Contracting 
Command Iraq/Afghanistan (JCC-I/A) has ensured that all weapons 
contracts to procure and deliver munitions include a number of 
clauses to increase accountability. Contracts now require 
vendors and shippers to do the following: deliver munitions to 
Iraq through U.S. controlled ports of entry within Iraq; 
provide serial number lists electronically in advance of any 
weapons shipments to Iraq; post serial numbers on the inside 
and outside of weapons shipping containers; and provide en 
route visibility of weapons and munitions, to include the 
arrival dates and times of munitions cargo being delivered to 
Iraq.

    Mr. England. I do know there's a specific effort that was 
underway by the DOD IG to look into this whole matter. The 
impression I have is that we did take the corrective action to 
track those, and we do have a requirement, I believe, now by 
the National Defense Authorization Act (NDAA) to actually track 
those individual weapons. So, I will get back with you on the 
specific status, but I believe that was a requirement of last 
year's NDAA, in terms of tracking of each individual weapon in 
Iraq--not just pistols, but every kind of weapon. So, I will 
get back with you, sir, on the specific status in complying 
with that legislation.
    Chairman Byrd. Do you know if the 190,000 weapons have been 
recovered?
    Mr. England. Mr. Chairman, I recall these conversations, 
but, I'll tell you, I can't--I cannot tell you the specifics 
right now. I mean, this is--I was--I'm just not prepared to 
discuss that subject with you. That's not something I looked at 
in preparation for this hearing. Maybe one of my colleagues 
here has a specific on----
    We'll just--I expect we'll have to get back with you on 
this subject, unless somebody has a very detailed status today.
    Chairman Byrd. Can somebody answer that question?
    [No response.]
    Mr. England. Looks like we'll have to get back with you on 
that, Senator. So, we will close the loop with you after this 
hearing.
    Chairman Byrd. All right.

       LOSS OF U.S. COALITION PROVISIONAL AUTHORITY FUNDS IN IRAQ

    Secretary England, a few months ago the Appropriations 
Committee held a hearing on fraud and corruption in Iraq. 
Several issues were raised relating to missing Coalition 
Provisional Authority (CPA) funds. But, DOD's responses to 
these questions remain unclear. Unclear. There was the 
suggestion that these funds were Iraqi funds and were no 
concern to the Department of Defense. But, when these funds 
disappeared, U.S. taxpayers were, and they continue to be, 
called upon to pay for Iraqi reconstruction. Since, at the time 
those funds disappeared, the Coalition Provisional Authority 
was answerable to the Department of Defense, I want to ask you 
to tell me the amount of Coalition Provisional Authority 
assistance and reconstruction funds doled out prior to the 
transition of power in Iraq that cannot be accounted for, and 
who is responsible for ensuring that those funds are accounted 
for, and what level of confidence is there that these funds did 
not make their way into--to join insurgent groups or militias.
    Mr. England. So, Mr. Chairman, I would tell you the person 
best capable of answering that is Mr. Stu Bowen, the special 
investigator for the Iraq reconstruction, so the SIGIR. And in 
my discussions with Stu Bowen in my office, this is one of the 
issues that they investigated in detail. And so, I would 
recommend we have Stu Bowen address that in detail with you, 
because that was specifically under his purview, and I 
believe--that is covered in one of his reports. So, there's 
been a number of reports by the SIGIR. I have to go back and 
take a look at those reports, but I believe that that is one of 
the issues that was covered by Stu Bowen, and I'll be happy to 
talk to Stu Bowen and get that data together for you.
    [The information follows:]

    The Coalition Provisional Authority (CPA) funds to which 
you refer are the $8.8 billion Development Fund for Iraq (DFI), 
an account that includes oil export sales from Iraq, balances 
from the U.N. Oil-for-Food Program, and frozen Saddam-era 
funds. The CPA, operating in a high threat environment, 
distributed DFI money to reconstruction projects and to Iraqi 
ministries.
    Since December 2003, under U.N. mandate, the International 
Advisory and Monitoring Board (IAMB) has served as the 
oversight body for the DFI. The IAMB's July 15, 2004 audit 
report, after reviewing the CPA's management of DFI funds, 
concluded that all known oil proceeds, reported frozen assets, 
and transfers from the Oil-for-Food Program have been properly 
and transparently accounted for in the DFI.
    Acknowledging that CPA operated under challenging 
circumstances, the IAMB report noted that the lack of oil 
metering and other problems made it difficult to determine that 
all DFI disbursements were made for the purposes intended.

    Chairman Byrd. Senator Cochran.
    Senator Cochran. Mr. Chairman, thank you.
    General Griffin, last fall the Gansler report was released, 
and it contained some recommendations for changes in personnel, 
organization, and training of the Army's contracting forces. I 
understand that, in response to this report, the Army recently 
established a new Contracting Command that reports directly to 
you. Can you tell us how this effort will improve the Army's 
contracting oversight efforts?

                        ARMY CONTRACTING COMMAND

    General Griffin. Yes, sir. There were four areas that the 
Gansler Commission recommended: legislative, personnel, 
structure, and training. The Secretary of the Army wrote a 
letter transferring the Army Contracting Agency from the 
Assistant Secretary of the Army (Acquisition, Logistics, and 
Technology (ASA/ALT)) to AMC. With that transfer, we picked up 
the Army Contracting Agency.
    We stood up the command. It'll be led by a future two star. 
Today, Mr. Parsons is the Senior Executive Service member who 
sits in that leadership position. We have come back to the 
Congress, now, asking for five general officer positions in the 
area of acquisition and contracting. One of those positions 
will be a two-star general officer who will follow Mr. Parsons. 
In addition, we have two subordinate commands there, one in 
charge of installation contracting and one in charge of 
expeditionary contracting.
    This organization will give us a leadership contracting 
expertise level that we have not had before. We asked for 1,500 
additional personnel; 900 of those are civilians and 500-and-
some military. It will give us noncommissioned officers, 
officers, and now, for the first time, we've asked for warrant 
officers, and we will bring in a warrant officer corps, which 
will give us a technical level of expertise, not unlike what we 
have in our aviation community, that we've not had in the past.
    On the personnel side, we've asked for direct-hire 
authority. That's now with the Office of Personnel Management 
(OPM). We've asked for direct-hire authority to speed up the 
process of bringing these folks onboard. But, we have a concept 
plan that's been approved inside the Department of the Army, 
which gets at the structure. The recommendation I made to the 
Secretary of the Army, and he approved, was a 3-year plan, 
which would bring the folks on, get them trained, and start 
getting them into the field. That will tremendously augment the 
capability we have around the world today, both Conus and 
overseas, to augment our contracting.
    Senator Cochran. One observation has been made, by someone 
in the region, that a major problem was the lack of adequately 
trained personnel. These are Army people who are involved in 
contracting with individuals and concerns in Iraq and 
Afghanistan. Do you have in place now a contracting process 
that is staffed with people who are better trained, or who will 
be? How have you addressed this concern?

                     ACQUISITION WORKFORCE TRAINING

    General Griffin. Well, for the training aspect, which I 
mentioned in my opening statement, we're capturing lessons 
learned from units as they redeploy. What we're trying to do is 
incorporate that into our training centers. We've expanded our 
training program in Kuwait for contracting-officer 
representatives who go into theater. I think we've trained in 
the neighborhood of 500, now, of those personnel. We've 
expanded some training at the Defense Acquisition University. 
But, across the board, we've looked at training at each level 
where we need the expertise.
    What the Army Contracting Command will give us, which we've 
not had in the past, is the expertise and the oversight and a 
command structure for our acquisition workforce--for, really, 
contracting folks, unlike we've had in the past. And it'll help 
us, both from an expeditionary, as well as an installation, 
because we have some challenges, from an installation 
standpoint, as well in contractor oversight.
    Senator Cochran. Secretary England, let me ask you if, 
departmentwide, there has been an effort to look at lessons 
learned, in terms of well-trained, capable contracting officers 
in the region to deal with this issue across the Department of 
Defense. Apparently, the Army has made changes, and is making 
an effort to deal with some of these problems. What's being 
done at the Department level?
    Mr. England. So, Senator, as you comment, the primary 
responsibility is in the Army, because they are the agent for 
the Department of Defense to do that. So, almost all the 
responsibility lies within the Army, but we have--in response 
to the Army, adjust whatever policies we need to, to support 
'em. So, for example, they need more general officer slots, and 
so, legislation has come forward to the Congress to provide 
those particular slots in the Army. So, whenever we need DOD 
actions--we meet regularly on this subject--whenever there's 
actions needed at the Office of the Secretary of Defense (OSD) 
level, we work to support the Army, in terms of broader 
policies or legislation. We will continue to do that. If we 
need to expand--for example, IG or other organizations, DCMA or 
organizations like that--then we handle--agree with that--we 
handle the budget, we make sure they have slots available. So, 
we do whatever we can to facilitate the actions that people 
feel they have to do to have broader capability across the 
Department. But, it is specifically within the Army, in this 
case. And then the oversight, of course, are in many agencies, 
including the investigative agencies, while our primary 
investigative agency is the Defense investigative agencies--we 
have those in the Air Force, in the Army, in the Navy--so, we 
have a number of investigative services. They are also all 
involved in this process, obviously, when we're going to have 
convictions or investigations. So, however we can work across 
that whole range of capabilities, we do so at the OSD level.
    Senator Cochran. Great, thank you.
    Thank you, Mr. Chairman.
    Chairman Byrd. Senator Leahy.
    Thank you. Thank you.

              LACK OF OVERSIGHT OF U.S. CONTRACTS IN IRAQ

    Senator Leahy. Thank you, Mr. Chairman.
    Chairman, I'm a strong believer in the inspectors general 
procedures in the various departments. When they work 
effectively, I think they're very, very good.
    Secretary England, I know you've expressed similar views. 
And, seeing Mr. Heddell here, I have a couple of questions--
there's a recent audit by the Inspector General's Office that 
examined more than $10 billion spent on various commercial 
contracts related to the war in Iraq, found, out of those $10 
billion, about $1.4 billion didn't have sufficient documents 
showing how the money was spent, more than $7 billion failed to 
meet the Defense Department's own requirements for payments. 
They ended up referring 1 out of every 25 of them for criminal 
investigations. And that's shocking enough, but that's on a 
very small sample even, about 1 percent of the total payments.
    And, according to the same audit, more than 180,000 similar 
payments were never reviewed or audited, and those could 
involve billions of dollars of losses. When will those 
remaining payments be audited?
    Mr. Heddell. Senator Leahy, any inspector general--and, I 
think, particularly the inspector general for the Department of 
Defense--would be very concerned about any of these. And, of 
course, with Defense we're talking about extremely large 
amounts. And we have a number of ongoing initiatives. Some are 
in the criminal investigative arena, many others are in the 
audit arena.
    To give you a complete answer, referring to some of the 
things that you specifically mentioned, I'm going to, with your 
permission, ask Deputy Inspector General Mary Ugone----
    Senator Leahy. And my----
    Mr. Heddell [continuing]. To answer part of that----
    Senator Leahy [continuing]. My basic----
    Mr. Heddell [continuing]. If it's okay, but----
    Senator Leahy [continuing]. My basic question is, Will 
these others be audited?
    Mr. Heddell. The answer to that is, yes, sir. We are 
concerned about any issues that you mention, and they're 
concerns to us.
    [The information follows:]

    Defense Finance and Accounting Service--Rome retains 
approximately 800,000 vouchers pertaining to the contingency 
expenditures for the military's activities in Iraq, Kuwait and 
Afghanistan. These vouchers contain over 8 million pages of 
records with an approximate value of $14 billion. The effort 
that would be required to do a full audit of each voucher is 
not practical. To perform a full audit of each voucher would 
require an inordinate amount of our audit resources at the cost 
of other ongoing projects. Instead of individually auditing 
each voucher we will be utilizing digitized versions of the 
records and applying data mining techniques, as well as 
traditional investigative methods to review the records.
    To accomplish this, we have initiated a cooperative effort 
with the Defense Finance and Accounting Service. The Defense 
Finance and Accounting Service is the documents. These records, 
once scanned will be readily available for the Defense Criminal 
Investigative Service (DCIS), the criminal investigative arm of 
the DOD IG, and DOD IG auditors to review.
    The Defense Finance and Accounting Service agreed that all 
of these historical records need to be scanned into a 
searchable database. This database is known as the Corporate 
Electronic Data Management System. Scanning the documents is a 
labor intensive process that is very time consuming. This 
spring, DFAS hired 65 summer employees to prepare and scan the 
vouchers into the Corporate Electronic Data Management System.
    Once the vouchers are scanned, federal oversight 
organizations (to include DCIS) will be able to search millions 
of pages of records for information specific to subjects of 
investigations and other reviews. The DOD IG auditors and the 
Army Audit Agency are developing data mining protocols based 
upon the experience of the agents in the field. These offices 
are working together to avoid duplication of effort and to 
increase the likelihood of detecting fraud. Once fully 
developed the data mining protocols will be used by 
investigative and audit organizations to identify suspect 
vouchers and payments. The suspect vouchers will then be 
reviewed for sufficiency and appropriateness of the payments. 
All suspected illegal payments that are identified will be 
investigated.
    While we are not performing a 100 percent review of all the 
vouchers, we feel our current approach is the best use of our 
time and resources. DFAS is in the process of scanning all 
voucher documentation which will allow oversight organizations 
ready access to all support documentation and will also enable 
the use of data mining protocols on a near real time basis. 
This will enable oversight organizations to identify 
potentially suspect payments much earlier in the process.

    Senator Leahy. And how long was that going to take?
    Mr. Heddell. Well, I'd have to look at each individual 
issue. Mary, here, may be able to answer specifically on each 
one, but these audits, I can tell you, generally take--from 
beginning to end, you're talking at least 6 months. I know 
that's a long time. It depends on the issues, the scope of the 
audit, and what kinds of resources are available. But, these 
are very important issues to us, and so, they would get top 
priority.
    Senator Leahy. But, your testimony today is that they all 
will be completed.
    Mr. Heddell. They will be, yes, sir.
    Senator Leahy. Ms. Ugone, did you want to add anything to 
that?
    Ms. Ugone. I just wanted to say, the context of that audit, 
it was started in May 2006 because the Defense Criminal 
Investigative Service (DCIS) was concerned about $10.7 billion 
of vouchers in a warehouse, Defense Finance and Accounting 
Service (DFAS) room. And we came in to look at completeness and 
accuracy. We drew a statistical sample, based on dollars, and 
we had a 90-percent confidence level. But, we were still 
working with our agents. The agents and DFAS are scanning every 
voucher. That's going to take quite a bit of time, I think--if 
you work two shifts, it might take--24 hours a day--it would 
probably take 9 months to look at it. So, it's been a joint 
effort.
    And the issue with us was, these are commercial vouchers, 
mostly, that we looked at that were out of Kuwait. We were 
concerned with the supporting documentation to provide the 
basis for a payment. So, we are going to be looking at it from 
an Office of the Inspector General (OIG) standpoint, yes.
    Senator Leahy. Do you need more----
    Ms. Ugone. Scanning every payment voucher----
    Senator Leahy. Do you need more investigators? I mean, if 
we're talking about billions of dollars that may have been 
wasted or lost in fraud, do you need more investigators? 
Because I think most taxpayers would say it would be kind of 
nice to find out who defrauded whom and that somebody should go 
to jail.
    Mr. Heddell. Senator Leahy, you know, any inspector general 
is going to say that they need more resources. But, when you 
look--I mean, the answer to your question is, yes, sir--but, 
when you look at the responsibility that the inspector general 
covers at the DOD, when you're talking about issues like 
defective products, terrorism, technology transfer, healthcare, 
financial crimes, the whole range of issues, those are just on 
the criminal side----
    Senator Leahy. Mr. Heddell, I'm--you know, I'm aware of 
that. And I'm aware of how they--the criminal law works. I was 
a prosecutor for 8 years, and I know that you can't cover every 
single thing. But, if these audits show, already, the potential 
of billions of dollars that's lost and defrauded, I'm far more 
worried about that than I am that somebody who may have, at a 
military base somewhere, topped off their personal car and--
although with the price of gas today, I guess that does mount 
up. But, somebody who did that improperly--I'm far more 
interested in these billions of dollars, I'm far more 
interested if there were people, whether in the contractors or 
individual subcontractors or whatever, thought they could get 
away with it. And I'm far more interested in seeing some 
people, not just have to pay back a fine, which they may 
consider just a cost of doing business, but I'd like to see 
some people go to jail. You know, again, I--maybe I'm putting 
my own background of a prosecutor, but I always felt that, in 
some of these major commercial frauds, people are very willing 
to pay a fine, it's the cost of doing business; when they 
actually thought they were going to spend some time behind 
bars, they tightened up their procedure.
    So, are we going to get to those kind of things?
    Mr. Heddell. Well, I'd like to tell you yes, and I intend 
to make it possible, Senator Leahy, but a lot of these 
investigations are led by the United States attorneys' offices, 
and so, the timelines, to some extent, are affected----
    Senator Leahy. Well, then let me ask you----
    Mr. Heddell [continuing]. By that.

                  EXTENDING THE STATUTE OF LIMITATIONS

    Senator Leahy [continuing]. About that, because during past 
wars, we found--World War I, World War II--we've been in Iraq 
now longer than we were in World War II--but in World War I, 
World War II, when Congress was afraid that auditors might not 
be able to complete the investigation of contracting fraud in 
time--remember the Truman Commission, things of that nature--
they passed a law to suspend the statute of limitations during 
wartime, to make sure no one illegally profited by fraud. And I 
have introduced, along with Senator Grassley, bipartisan 
legislation, the Wartime Enforcement Fraud Act, S. 2892, that 
would extend the statute of limitations, just as we've done in 
past wars.
    So, my question is, would such legislation give you enough 
of a breather and give you more time to do your investigations?
    Mr. Heddell. I'm aware of that legislation, sir. And 
absolutely that proposal would be very beneficial to my office, 
and probably other inspectors general.
    Senator Leahy. Secretary England, do you agree?
    Mr. England. Sounds appropriate--Senator, it sounds 
appropriate to me. I mean, there's no question, we don't want 
waste, fraud, and abuse, and if people are guilty of it, they 
need to be prosecuted and indicted and convicted. So, whatever 
facilitates that, I'll definitely support.
    Senator Leahy. And I understand, in a war zone, it's not 
easy to complete these, and that's why I want to give you more 
time. Thank you.
    Thank you, Mr. Chairman.
    [The statement follows:]

             Prepared Statement of Senator Patrick J. Leahy

    Today, the Appropriations Committee continues rigorous 
oversight of how the Defense Department has spent more than 
$600 billion authorized for the wars in Iraq and Afghanistan. 
The stories of billions lost to fraud, waste, and abuse during 
these wars are now all too familiar. This Committee, as one of 
the main checks on this administration's wasteful war spending, 
must not only follow-up on these outrageous reports, but dig 
deeper and ask tougher questions to make sure that those who 
are responsible for this fraud, waste, and abuse are held 
accountable under the law.
    I want to thank Chairman Byrd for calling this hearing, and 
I will continue to support his longstanding and consistent 
efforts to make sure this Committee carries out its oversight 
duties, particularly over wasteful wartime spending.
    Just two months ago, the Defense Department's Inspector 
General issued a new audit of $10.7 billion in payments on 
basic commercial contracts during the wars in Iraq and 
Afghanistan. This audit confirmed yet again that American 
taxpayers have no clear picture of how billions of dollars have 
been spent in Iraq and Afghanistan. This audit found that there 
were no documents to show how $1.4 billion was spent, and more 
than $7 billion was spent without following the law or the 
Defense Department's rules. In some cases, there was no invoice 
showing what services were provided; in other cases, there was 
no record of who received the payment or for what purpose. 
These individual contracts often involved millions of taxpayer 
dollars, yet the Defense Department had no record of how the 
money was spent. The findings were so serious that the 
Inspector General referred one out of every 25 contracts for 
criminal investigation. This is unacceptable, this is wrong, 
and this is another example of this administration's 
mismanagement of the wars in Iraq and Afghanistan.
    We need to do more than ask tough questions. We need to 
start holding those responsible for this fraud accountable, and 
I hope our witnesses today will shed new light on the steps 
being taken to investigate and prosecute those who improperly 
received money or defrauded the government. I was particularly 
concerned that this audit was based on a review of only a small 
sample of contracts, less than 1 percent of the total. 
According to the audit, there are still more than 180,000 
similar contracts to review that would lead to more than 700 
new criminal investigations involving hundreds of millions of 
dollars. I hope that our witnesses today will explain what 
efforts they have taken to carefully review all these remaining 
contracts, particularly where there's such a high risk for 
fraud.
    I expect that we will also hear today how the task for 
reviewing and investigating these contracts during times of war 
is difficult and time-consuming. While this may be true, it is 
no less important that we continue these reviews. I have 
introduced legislation to give the government more tools to 
address this problem. In the last three Congresses, I have 
introduced the War Profiteering Prevention Act, which would 
give prosecutors and investigators the ability to pursue war 
profiteers overseas and those who take advantage of so-called 
``cost plus'' contracts to defraud our Nation.
    Along with Senator Grassley, I have also introduced the 
Wartime Enforcement of Fraud Act, which would extend the 
statute of limitation for contract fraud offenses during 
wartime. In past wars, Congress has suspended the criminal 
statute of limitations in order to give auditors and 
investigators more time to complete their reviews of wartime 
contracts. This bill would do the same thing for the wars in 
Iraq and Afghanistan.
    This bill is important to make sure that those who have 
taken advantage of our nation during times of war shall not 
escape unpunished.
    I look forward to hearing from out witnesses today, and I 
encourage them to redouble their efforts to combat fraud, 
waste, and abuse in Iraq and Afghanistan, it continues to 
undermine the efforts of our troops and to squander American's 
hard earned money overseas.

    Chairman Byrd. Senator Craig.
    Senator Craig. Mr. Chairman, thank you.

               ARMY REQUESTS ADDITIONAL GENERAL OFFICERS

    General Griffin, our ranking member has discussed the 
Gansler Commission and its recommendation, and you've 
responded, speaking to the needed positions--five general 
officers recommendations sent up and four other proposals that 
you've mentioned. Let me fast-forward here. Given the 
uncertainty of legislative movement on The Hill at this time, 
and a near shutdown by Congress on any further activity this 
year, would you fast-forward for me, Who are you working with? 
I assume, the Armed Services Committee. And do you have any 
commitments to move this forward? And what is the importance of 
the timeliness of these actions so that you can proceed with 
those recommendations?
    General Griffin. Well, sir, the Secretary and the Chief 
made a decision very early on to move some senior personnel to 
the Army Contracting Command. So, those three leadership 
positions inside of the Army Contracting Command are filled 
today; one by a two-star equivalent SES, Mr. Parsons, one by a 
colonel newly promotable acquisition contracting officer, and 
one by a one-star SES equivalent acquisition contracting 
expert. So, first I want to leave you with the idea that they 
are, all three--very competent people there today.
    The plan for the future, with the five general officer (GO) 
positions, is to have a position where we will promote a 
general officer into that two-star level that would be the 
commander of the Army Contracting Command. And we're still 
working this, in the specific allocations, but we envision two 
other GO positions in that Army Contracting Command--two one-
star positions. Then, a fourth general officer position would 
be in the ASA/ALT from the Office of the Army Staff, Assistant 
Secretary of the Army (Acquisition, Logistics, and Technology) 
and that would be a two-star position. And one, I believe the 
plan is to put it in the Corps of Engineers. We submitted the 
request through OSD, and it was sent over to the Office of 
Management and Budget (OMB). And OMB now has passed it to the 
Congress. But, sir, I don't know the status of it right now, 
but we--I will come back to you. But, we are aggressively 
working the resourcing of those five GO positions.
    [The information follows:]

    On March 14, 2008, the Secretary of the Army, Pete Geren 
submitted a memorandum for the General Counsel of the 
Department of Defense on submission of legislative proposal to 
implement recommendations of the Commission on Army Acquisition 
and Program Management in Expeditionary Operations (Gansler 
Report).
    This memorandum requested the establishment of five new 
Army General Officer positions in the Active Component and 
requested that it be staffed and submitted as a fiscal year 
2009 legislative proposal. Prior to submission this request was 
reviewed by the Office of the Judge Advocate General, Army, the 
Officer of Army General Counsel, and coordinated with Army 
leadership.
    On June 27, 2008, Acting General Counsel of the Department 
of Defense, Daniel J. Dell'Orto submitted formal correspondence 
to the President of the Senate, the Honorable Richard B. Cheney 
and Speaker of the House of Representatives, the Honorable 
Nancy Pelosi that Congress enact the request for five new Army 
General Officer positions as part of the National Defense 
Authorization Bill for fiscal year 2009.

    Senator Craig. Well, my point here is, as we shut down 
for----
    General Griffin. Yes, sir.
    Senator Craig [continuing]. In late September----
    General Griffin. Yes, sir.
    Senator Craig [continuing]. Obviously, and we may not be 
back----
    General Griffin. Yes, sir.
    Senator Craig [continuing]. Until early next year, or the 
Congress may not, depending--I would hope that--if there is 
some sense of urgency, it's expressed, and we can work with the 
chairmen of the appropriate committees to make this happen.
    General Griffin. Thank you. Thank you.
    Senator Craig. Mr.--Heddell, is it?
    Mr. Heddell. Yes, sir, it is.

                 CONSTRUCTION CONTRACTS IN AFGHANISTAN

    Senator Craig. GAO cited serious problems with construction 
contracts in Afghanistan as far back as 2005, buildings that 
had not been started, had been left unfinished, even though the 
contractor involved had been paid for a completed project. 
Where I'm headed here is that, if we are moving personnel into 
Iraq, if there is going to be an intensive--a more intensive 
effort there, where are we with the facilities now? Where are 
you going, or have you looked forward into that situation to 
understand exactly where we might be--where these delays have 
put us? And are we prepared to meet those needs?
    Mr. Heddell. I appreciate that question, Senator Craig. 
Being relatively new at the DOD, I'm aware of the issues that 
you've mentioned. I'd like to ask, with your permission, Deputy 
Inspector General Ugone, who is aware of that and can answer 
that question.
    Senator Craig. Thank you.
    Please.
    Ms. Ugone. Thank you, sir.
    With respect to Afghanistan, we have ongoing coverage. 
Particularly of importance to us is the Afghanistan Security 
Forces Fund, which is used to equip the Afghan police and army 
forces. We have ongoing work now. The team just redeployed back 
to the States. They spent 4 months there, looking at various 
types of issues, real property transfer, equipment 
accountability, and we also coordinated with the munitions 
assessment team on weapons accountability. And we think that's 
a very important country in the region. We have a regional 
strategy when we do our audit work, and we also are looking at 
contractor common-access cards, which, frankly, give 
contractors access to pretty much any facility here in the 
States, as well as forward, and that's of importance to us, as 
well.
    So, there's quite a bit of initiatives that we're moving 
into Afghanistan, and we plan to also increase in Iraq, as 
well.
    I hope that answers your question.
    Senator Craig. Well, I--it may. You talk about what you're 
doing. Where are the problems you now see that need to be 
corrected if there are some that relate to a potential surge or 
a substantial deployment of U.S. personnel additionally into 
Afghanistan?
    Ms. Ugone. Well, the issue that we have is similar to the 
issues that we have identified in a summary report. And as 
we've said before, we haven't reported out yet. We haven't 
drafted our report. Our preliminary observations, we have 
alerted the command in country, Combined Security Transition 
Command. We've alerted them to some preliminary issues. And 
those issues are not dissimilar to what we've already 
identified in our summary report, lessons learned. We have not 
yet drafted our report. Our team just returned at the end of 
June, and they had been there 4 months.
    Senator Craig. When do you expect that report to be drafted 
and available?
    Ms. Ugone. We're going to be doing a series of reports, 
draft reports. Normally, what happens is, in accordance with 
our standards, as well as to obtain management comments, there 
will be a series of drafts, starting in July, then August, then 
September; finals should be coming out beginning in, I believe, 
September, for the real property transfer issue that we are 
working on.
    Senator Craig. Thank you.
    Thank you, Mr. Chairman.
    Ms. Ugone. Thank you, sir.
    Chairman Byrd. Thank you.
    Senator Murray.

                  ACCOUNTABILITY FROM U.S. CONTRACTORS

    Senator Murray. Thank you very much, Mr. Chairman, for 
holding this really critical committee hearing. Obviously, this 
committee appropriates a lot of money, and we have a 
responsibility for oversight, and I really appreciate your 
taking the time to allow us to look at this closely.
    I know my colleague Senator Dorgan has done an incredible 
amount of work on the issue of electrocution, and is going to 
focus on some of that in his questioning. And I want to thank 
him publicly for his work on that. I look forward to his--your 
responses to his questions.
    But, let me ask a broader question to you, Secretary 
England. And I understand that this contract oversight is very 
difficult for our military. You're--you've been asked to fight 
two wars in a period of immense transition, and I--we know the 
military doesn't have the resources to carry out every task 
associated with this conflict. And that is, of course, why we 
do have contractors today.
    Ideally, they provide a service for a cheaper amount for 
taxpayers, and do it well. But, I think we're all deeply 
concerned about the stories that we're hearing about tax 
dollars being wasted on fraudulent billing, on dead-end 
projects, on lack of accountability. And I understand that 
Defense contractors don't have to respond to the same chain of 
command as our servicemembers, and the oversight is difficult. 
However, it's just difficult for me to believe that the DOD is 
helpless in using any kind of leverage against these--in order 
to secure favorable outcomes from them.
    Can you tell us, or describe to this committee, what 
processes or leverages you do have in order to have 
accountability and make sure that tax dollars are being spent 
more wisely than what we--what it appears we have been seeing?
    Mr. England. Certainly, Senator.
    Senator, first let me say--I mean, I firmly believe almost 
all of our contractors are forthright, honest, and do a very 
good job for us. The ones we hear about are the cases where 
people do bad things, and that's the way it always is; you 
always hear about the bad things, but there's a lot of good 
things. And without the contractors, frankly, we couldn't do 
these jobs that we do, in terms of DOD and for our military.
    A comment about a lot of the functions that the contractors 
do for us when our military is not as large as it was, but 
also, it's now an All Volunteer Force, and, frankly, a lot of 
these types of jobs contractors do, our military people did not 
join the military to do these kind of jobs. They joined the 
military to be fighters and do a military job. So, we have come 
to rely on contractors. And, frankly, I believe that is 
appropriate as an adjunct to an All Volunteer Force.
    That said, there are always situations where people either 
mis-bill--maybe deliberately, sometimes inadvertently--maybe 
they don't have sufficient data. A lot of these cases are 
looking for sufficient justification. It's not that they've 
done something wrong, it's there's not sufficient 
justification, so we need to have additional justification for 
the billing.
    But, we have contracts that we have DCMA, here, our audit--
not the audit agency, but our contracting, across the board, 
that assists--and they can discuss this somewhat--that assists 
all of our contract personnel. But, when people overbill, one, 
we correct that, and we get those monies back. So, if there's 
been an error, or even deliberate, we get that money back. So, 
if there's an overbilling, it comes back to us.
    Now, if people do something fraudulent--I mean, if they 
break the law--and there are people who obviously break the 
law, like they do in any other endeavor--then we do have 
investigative agencies, starting with the Defense Criminal 
Investigative Agency that comes under IG. And, as I've said, we 
have those in all of our services.
    Senator Murray. Well, yeah, I understand that. Is----
    Mr. England. And we prosecute----
    Senator Murray [continuing]. It is a problem--are you----
    Mr. England. And we prosecute----
    Senator Murray. And are we----
    Mr. England [continuing]. Those people. It just----

                  AGRESSIVE PROSECUTION OF WRONGDOING

    Senator Murray [continuing]. Aggressive about that? I mean, 
I can see a case where the military is very reliant now on 
private contractors to do an incredible amount of work, and 
it's important--I can see a tendency for the military not to 
aggressively prosecute or go after any of these contractors 
because of the close reliant relationship. Should that be a 
concern?
    Mr. England. Senator, I hope it's not a concern. I mean, 
when we know of cases of people who break the law, we have 
investigations, and we work with the Department of Justice, and 
we work to go prosecute those cases. I mean, I, somebody made 
that comment--I guess, Senator Leahy--I mean, we do make 
examples of people, so people understand that this system works 
appropriately and properly. And so, we do prosecute people, 
every opportunity, and when we have the information. I will 
say, sometimes it's harder in a war zone, so maybe the data's 
not--you know, it's harder to come by, in some circumstances. 
But, I can tell you, all the discussions I've had--I mean, this 
has been a very serious effort by all of our IG and 
investigative agencies to make absolutely certain that we 
prosecute people who have willfully done something wrong.
    Senator Murray. Okay. Well, I--and I know Senator Dorgan's 
going to ask about the electrical situation, but it seems like 
when you've known something for that long, the question is, 
Where has the aggressiveness been? But, I want to let him focus 
on that question to you, unless you want to answer it really 
quickly here.
    Mr. England. No, I--I mean, we will talk about the--I think 
Mr. Shay Assad is better qualified than I am. But, in the 
electrical issue, I mean, the data is right, but not fully, I 
think, understood. While there have been significant--well, 16 
people electrocuted--I mean, it's for a variety of causes, and 
I think it's important that we sit down and understand the 
variety of causes. I mean, we do have the one case of a fellow 
in the shower, but the cases are not people in showers. I mean, 
people sometimes grabbing a hot electrical wire when they're in 
their Humvee in the combat zone. There's people who literally 
fall into electrical wires. There's people working on the 
equipment. So, I think it's important to understand the source 
of all that. Mr. Assad has more of that to deal with.
    If there is criminal negligence, then we definitely follow 
up on that. I mean, in most cases, when we investigate, we find 
out----
    Senator Murray. Yeah. And my question was to----
    Mr. England [continuing]. That's not the case.
    Senator Murray [continuing]. To the larger point, that 
there's a very close relationship now between the military and 
these private, very large companies, and your reliance on them 
to provide essential services for our military. Does that put 
the military in a tough situation in trying to prosecute any 
fraud that occurs with those, because of that important 
relationship?
    Mr. England. Senator, I would say not. I would say that 
companies themselves--they're like us, they do not want 
fraudulent people on their payrolls. I mean, they want to do 
the job right, because they're in business, most of these 
companies, for a long time. I mean, they want to do business 
with us, so they try to do a very high-quality, excellent job 
for us every day. And when they have employees that break the 
law or do inappropriate things, they have the same incentive we 
have, to go prosecute those people. I mean, they do not want 
people--I would say that's true with companies across America, 
you do not want employees that are not honest and forthright, 
in terms of doing their job every day. So, I think those 
companies are aligned with us, in terms of prosecuting people 
who break the law.
    Senator Murray. Well, thank you, Mr. Chairman. My time is 
up. I appreciate it.
    Chairman Byrd. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you. And thank you for 
holding this hearing.
    Chairman Byrd. Thank you.
    Senator Dorgan. Mr. Secretary, thank you for being here, 
and--appreciate all the witnesses.

             POORLY EXECUTED CONTRACTS ENDANGER OUR TROOPS

    I must say, I find all of this a pretty depressing 
situation. We are shoveling money out the door, and have been 
for a long while--almost three-quarters of $1 trillion, at this 
point, with very little oversight. We've barely scratched the 
surface on oversight. And the cases that I am well aware of--
you know, the--it gives me precious little confidence that 
we're doing the right thing to address these issues. And I--
what I'd like to do is ask questions about several areas. I 
don't know that we'll have sufficient time to get through them 
all.
    But, on the issue of electrocutions, two mothers came to a 
hearing I held--I've held 17 hearings on these issues, only 
because there are precious few oversight hearings--two mothers 
came, whose sons were electrocuted in Iraq--one power-washing a 
Humvee, the other taking a shower. Originally, the Army 
suggested maybe the one taking a shower had taken a small 
portable appliance into the shower with him. It turns out that, 
of course, was not true. But, we had electricians, hired by the 
company that was involved in the electrical contracting, who 
left the company because they were upset about what the company 
was doing. They indicated that Kellogg Brown & Root was hiring 
people who were not qualified, didn't even know what basic 
grounding was, and so on. The testimony was pretty depressing, 
actually.
    And so, it's clear that there was a lot of problems with 
the electrical wiring, and the contractor that had that 
contract--people have been electrocuted. And now, General 
Petraeus has asked the contractor that is the subject of 
allegations of shoddy work by employees who work for the 
contractor--has asked that contractor to go back now and do a 
review of all the wiring in Iraq.
    Mr. Secretary, do you think that's an appropriate way to do 
a review of what's happening, to have the contractor that's the 
subject of the allegations go back and take a look at whether 
the work is good work?
    Mr. England. Senator, again, I'll let Mr. Assad cover this 
in more detail, but my understanding is, we're not going to 
just do that, we actually are going to have a group that will 
go out and independently audit, at least on a sample basis, to 
make sure that this work is being done appropriately. But, I 
think it's also to under--I think we do need to understand, 
maybe more fundamentally, how this whole system works with KBR 
and also the facilities, et cetera, because they do not have 
master electricians--I mean, everyone's not a master 
electrician. I mean, typically the way they work anywhere--and, 
I think, even here in housing and all--there would be a master 
electrician, and people work for them.
    That said, we are going to go audit this. We've also asked 
our organizations to go off and look at other buildings and 
start sampling other buildings in Iraq, not necessarily ones 
that KBR contracted. A lot of the buildings were just there 
when our military and personnel showed up. So, there is a lot 
of independent auditing that will be accomplished to ensure the 
safety of those buildings.
    And perhaps I could have Mr. Assad say a few more words 
about that.
    But, I agree with you, we want to have absolute confidence 
before our people use these facilities----
    Senator Dorgan. Well----
    Mr. England [continuing]. That they're safe.
    Senator Dorgan. Well, was General Petraeus not--I mean, my 
understanding is that General Petraeus made a decision and 
issued an order that KBR should go back and do a review of all 
the wiring contracted in Iraq. Is that not the case?
    Mr. England. No, I believe that's the case, but I believe 
that, also, the decision's been made that we will also then 
have other people sample that work to make absolutely certain 
it's been done correctly.
    And so, can--someone else has more detail, I think, and----
    Senator Dorgan. Well----
    Mr. England [continuing]. Can you help me, Assad?
    So, we will sample that work to make sure that it is 
appropriate.
    Mr. Assad. We're actually going to do two things: the 
sampling that the Secretary talked about and ensuring that we 
get more folks, from the Army Corps of Engineers and maybe Navy 
Facilities Command, on the ground who, in fact, can oversee the 
electrical work that is being done.
    The principal work that KBR is doing, in the opinion of 
DCMA, was that the most important thing to do was to get an 
idea of what exactly was the total problem. And so, the most 
immediate way to do that was to get the contractor who is 
responsible for the maintenance of the buildings--most of the 
buildings that KBR oversees, they didn't construct, nor have 
they, frankly, done a lot of work in. They oversee the 
maintenance, and the maintenance is done primarily on an on-
call basis. What we're doing is, we're changing that. In fact, 
we're inspecting all of the buildings, ground up, not just for 
electrical, but all safety issues, and then----
    Senator Dorgan. Mr. Assad, my question--I apologize for 
interrupting.
    Mr. Assad. Yeah.
    Senator Dorgan. I may only get one question asked, if this 
is the case. My question was, Do you think it appropriate to 
ask the contractor, whose own employees have turned 
whistleblowers, saying that the contractor, among other things, 
is hiring third-country nationals who can't do the work because 
they don't know what to do, they're not skilled and qualified--
to ask that contractor to go back and review the work? I--it 
just seem illogical to me.
    Mr. Assad. I think it's appropriate to ensure that the 
contractor has qualified folks to do that work. And then--it's 
just as appropriate--and we will oversee what it is he's doing. 
And, as the Secretary mentioned, on a sample basis, ensure that 
those inspections that he did are, in fact, accurate.

                        AEY AMMUNITION CONTRACTS

    Senator Dorgan. Let me go to another case, if I might. Let 
me show a picture of Efraim Diveroli. This was an 
embarrassment, regrettably, on the front page of the New York 
Times, a 22-year-old chief executive officer of a company that 
was--essentially had been a shell company of the man's father 
in Florida, doing operations from behind a--an unmarked door in 
Miami Beach. He's 22 years old. He's the CEO of the company. He 
has a vice president that was a massage therapist, named David 
Packouz, 25 years old. And so, these two folks got $300 million 
in contracts. They're now--they've now been charged criminally.
    But, I had Mr. Parsons in, in fact, with Mr.--with General 
Mortensen, the previous Deputy Commanding General of the Army 
Materiel Command, and the more I have looked at this, the more 
disgusted I have become. In fact, Mr. Parsons, you indicated--
to me, I believe--that this company, AEY, looked good on paper, 
and you look at companies, not individuals. In fact, you and 
General Mortensen told me that even if the criminal charges 
were dropped, the Army Sustainment Command could reinstate the 
contract.
    Let me ask a question about this. How is it that a $300 
million set of contracts goes to a company that has a 22-year-
old CEO and a 25-year-old massage therapist as a vice 
president, and they've done small contracting with the State 
Department, and found to be unfit, and, at that point, they get 
contracts for the Army Sustainment Command? Is that an 
embarrassment? It should be, in my judgment.
    Mr. Parsons. Sir, I'll address that. Yes, it is. After 
taking more time, looking at the investigation of this, we did 
find a flaw in the procurement process, in that we only require 
contracting officers to do past-performance reporting on 
contracts from $5 million. At the time, this company had held a 
lot of smaller-dollar contracts, where they had not performed 
well. That information was not in what we call our past-
performance information retrieval system. So, when the 
contracting officer was making the selection of this 
contractor, that poor-past-performance information was not 
visible to her.
    Now that we've seen that, we've seen that that is a--that's 
a mistake--it's a flaw in the process. The Army has initiated 
action, and so has the Office of the Secretary of Defense, to 
fix that. In the future, regardless of the dollar value, if 
somebody's performance results in a termination for default or 
a determination for cause, that information will be, now, 
included in the past-performance information retrieval system. 
I'm confident that if the contracting officer had seen that 
information, her decisions in that selection would have been 
different.
    Senator Dorgan. Well, that's a different answer than you 
and General Mortensen gave to me in my office, is it not?
    Mr. Parsons. Yes, it is, sir. After we had met with you, we 
were still trying to gather additional data on AEY. That's when 
we discovered they had a lot of small-dollar contracts. Many of 
these were $3,000, $13,000, $200,000. And, again, because of 
that reporting threshold requirement of only $5 million and 
above, these things weren't annotated in our database.
    Senator Dorgan. Yeah.
    Mr. Parsons. And it is a flaw. And we appreciate your 
interest in it. It identified the flaw we had in that system. 
We've taken action to fix that in the future.

                   FAIR TREATMENT OF WHISTLEBLOWERS?

    Senator Dorgan. And it just lacks common sense. I mean, it 
seems to me you'd take a look at a record of a company. And 
this just, on its face, looked foolish. I--you know, Mr. 
Secretary, you indicated that there's a lot of investigation 
going on, but, I have to tell you, I talked to you personally 
about the Bunnatine Greenhouse case. We've since had a case 
with Charles Smith. Bunnatine Greenhouse had the courage to 
speak publicly. She said the original contracts that were 
awarded over at the Corps of Engineers--she was the highest 
civilian contract official in the Corps--it was the most 
blatant contract abuse she had witnessed in her career.
    And, incidentally, I called the person that hired her. She 
was, by all accounts, a terrific contracting officer. I called 
General Ballard, since retired, at home at night, and said to 
him, ``General Ballard, tell me about Bunnatine Greenhouse, 
because she's just lost her job for speaking publicly about 
contracting abuse.'' And he said she was one of the finest 
people that he had ever hired. She was replaced by a person 
that had no contracting experience, and they had to send that 
person to school at night to get some experience. So, she was 
demoted because she spoke publicly about contracting abuse.
    Now, 1 week ago--2 weeks ago, Charles Smith, who was the 
contracting officer for LOGCAP III, told us he was demoted, he 
lost his job--from General Johnson, by the way, who I'll 
mention in a moment--he lost his job because he indicated there 
was $1 billion of billing from Kellogg Brown & Root that was 
unsupported, and he was going to hold up the billing. And the 
folks from KBR said to him, ``That's not going to happen.'' The 
next morning, he found he was demoted by General Jerome 
Johnson.
    So, do you understand why someone who looks----
    Mr. England. So----
    Senator Dorgan [continuing]. At all this and understands 
it, and gets no responses, really, is----
    Mr. England. So----
    Senator Dorgan [continuing]. Concerned about it?
    Mr. England. So, Senator--but, that's not the way I 
remember it. Now----
    Senator Dorgan. All right.
    Mr. England  [continuing]. I know you called me about the 
young lady who was, at that time, talking--and I guess her name 
was Greenhouse; this was, maybe, 2 years ago, I'm not sure 
exactly--but, at your request, I did go back, and I had the 
whole case investigated. It turns out that particular lady was 
an SES, and 2 years prior to her testimony, she had gotten an 
unsatisfactory or something rating. That requires, if you have 
two or three of those ratings, that you be reduced to a GS-15 
level. So, that action was before her testimony. I mean, it was 
not as a consequence of a--reporting contract abuse. I mean, it 
was before that incident.
    But, I did ask the Army to investigate it. The Army IG 
looked at the case. In addition, it was reviewed by another 
party on--several times--because I wanted to make absolutely 
certain that we were not taking action against somebody because 
they were reporting issues. And I was convinced that what was 
happening was fair and equitable, in terms of the ratings, 
based on prior performance. So, I did not ever see a connection 
between those cases. And, I'll tell you, I was very scrupulous, 
in terms of working that with the Army at that time. So, I 
mean, I understand we disagree on that subject, but, at least 
from my point of view, I felt like we did investigate that 
thoroughly to make sure there was no connection.

                       CHARLES SMITH ALLEGATIONS

    Senator Dorgan. If I might--I know I'm taking some extra 
time here; if you--if I might, I've seen all of those 
performance evaluations, and they started--she had 
``outstanding'' performance evaluations--they started turning 
sour when the general who was heading the Corps of Engineers 
had a--the top contracting officer say, ``You can't have these 
companies in the room while you're talking about the kind of 
contract you're going to construct for them. That's improper.'' 
And she began to blow the whistle. At that point, he began to 
decide, ``You know what? We need to get her out of here, and so 
I'll do that with bad performance reviews.''
    But, even if one sets that aside, address the issue of 
Charles Smith, also on the front page of the New York Times, 
who was dismissed--in fact, never told he was dismissed, he 
simply showed up at a meeting, and General Jerome Johnson had 
replaced him overnight because he contested $1 billion in 
billings he thought were inappropriate from Kellogg Brown & 
Root.
    General Griffin. Senator, based upon Mr. Smith's 
allegations, which we take very seriously, the Department of 
the Army IG is investigating that incident, and I would--I 
would ask you that--once that investigation is complete, we'll 
come back to you and update you on the status.
    Senator Dorgan. General, I appreciate that. And if I might 
just make two other comments.
    As you know, we have contractors, that are doing work for 
the Department of Defense, that are employing their employees 
through the Cayman Islands. That is, U.S. employees being 
employed through the Cayman Islands in order to avoid paying 
payroll taxes. I wrote to the Secretary about that, and--I 
mean, I don't know why we would hire contractors who decide 
that they're going to have their employees paid through Cayman 
Island subsidiaries, through a postal box, in order to avoid 
paying payroll taxes. I think, simply, if I were running the 
Defense Department, I'd say, ``You know what? You want to 
contract with us? You hire Americans. You run' em through your 
company in this country, and do it now.'' That ought to stop 
immediately. That's also an embarrassment. And I just--I don't 
understand why that continues.
    And one more point. In this very room, General Jerome 
Johnson sat at that table and testified to the Senate Armed 
Services Committee that the issue--and this is just another 
issue, one of a dozen or so--the issue of providing 
contaminated water to the Army camps in Iraq--we know that 
happened, by KBR, because of a 21-page internal report, and 
that was done by Will Granger, who was in charge of that 
function for the entire company, paid for by the taxpayer--he 
said this was a near miss, could have caused mass sickness or 
death, because they were providing water to the Army camps that 
were twice as contaminated as raw water from the Euphrates 
River. We had three whistleblowers from that company, an 
internal report from the company, and the company--and the 
Department of the Army said it never happened, it did not 
happen.
    So, the--we knew it happened, because we had the internal 
document--in this case, from KBR--and three whistleblowers. 
Never happened.
    So, the Army sent General Jerome Johnson to come to that 
table to tell the Senate Armed Services Committee it never 
happened.
    I asked the inspector general to investigate it. Took the 
inspector general about 1\1/2\ years, and they issued the 
report. They said it did happen, and soldiers got sick as a 
result of it. And further, they said something very important. 
They said, ``We notified the Department of Defense of our 
interim report 3 weeks before General Johnson came to the--this 
room to,'' apparently, deceive the Congress, saying it never 
happened.
    I don't understand all these things. I don't understand why 
there wouldn't be a furious anger about contaminated water 
going to the troops or about someone being electrocuted in a 
shower because somebody forgot to ground a--I mean, I just--you 
know, I--my point is, we are spending so much money, and we 
need so much better work, in my judgment, both by the 
Department of Defense and the United States Congress in 
oversight. We just do. This not only fleeces the taxpayers, 
what's happening, but I think it undermines and disserves our 
soldiers.
    You run a Pentagon, and you also--you've got a lot of folks 
serving in uniform. We deeply admire them. You know, these 
soldiers protect America. And I--my concern here, and my anger 
about all this, is not directed at our soldiers, it is, I 
think, a process that is undermining the work of our soldiers.
    Mr. England. Yes, sir.
    Senator Dorgan. It----
    Mr. England. Senator, let me just say, I do not disagree. I 
mean, look, I do not disagree. I mean, by and large, I think 
all of our people and our contractors try to do what's right 
for America, and there are instances where people don't do 
what's right. And, in those cases, we do try, to the best of 
our ability, to find out what the problem is, correct it, and 
then put new processes in place so those problems won't happen 
again. I think we diligently work at that, and we have an 
enormous number of people who work that, in terms of our 
oversight. I don't know how many tens and tens of thousands of 
people just try to do that, to make this system better. I'll 
tell you, that's why we're all here, to make the system better.
    So, all I can tell you is, we work at this. It is our 
fundamental responsibility to make the system work right. It 
doesn't always work right, but we do try to fix the problems 
when they are identified in a systemic way.
    Senator Dorgan. But, in most cases, they deny--I mean, the 
young woman whose son was killed taking a shower, she was so 
upset, because they said, ``Well, maybe he took an electrical 
appliance into the shower.'' That's not what happened to him. 
He was killed because of bad wiring. And yet, the Army was the 
one who said, ``You know, we think it was something else.''
    And then, when I see General Johnson show up here and--so, 
you understand my angst about this.
    Mr. England. No, I understand. I mean, I hope you're 
dealing with the exceptions, though, and not the way the 
process works every day, Senator. I'm----
    Senator Dorgan. Yeah, except that when Mr. Parsons tells me 
the way they used to select companies for these contracts, and 
you get a 22-year-old with precious experience, who's been 
defaulting--I don't know, defaulting--but has been deemed not 
to have been a good contractor on small contracts in the State 
Department, and he gets a much bigger contract from DOD--I'm 
saying the processes are broken and don't work, and we need to 
do better.
    Mr. England. And I'm telling--and I agree with you. I mean, 
I think that is an embarrassment, that shouldn't happen. I 
mean, I'm sort of shocked that that happened, frankly, that 
that could happen in our system. And when something that 
shocking happens, we take action to fix it, because it's a 
great embarrassment and shock to us. I mean, look, I don't 
disagree with you on that. When we have those kind of problems, 
we absolutely have to fix them. And what I can tell you is, we 
work every day to do that. I mean, we do work every day to do 
that. I hope what you're hearing are the exceptions. By and 
large, I believe the system works well, but there are 
exceptions, and we work very hard to fix those.
    Senator Dorgan. I think----
    Mr. England. And we will continue to do that, Senator. I 
mean, that's----
    Senator Dorgan. When General Mortensen came to see me, I 
mean, it was circle-the-wagons time, ``They did everything 
right in this case. In fact, they'd do it again.'' And I said, 
``Are you kidding me?'' That's unbelievable.
    Mr. England. Senator, let me just make one comment. When I 
was confirmed, in 2001 before the committee, I said, every 
time, we will be forthright, honest, and direct with everybody 
in every circumstance, and I tell this to everybody in the 
Department of Defense every day--forthright, honest, and 
direct, ``You have a problem, deal with it, and--just deal with 
it. That's the way it is.'' So, I can tell you that is the way 
we try to run this Department. If there's exceptions, we also 
deal with that, because they're not acceptable to us.
    Senator Dorgan. Well, you know that I like you and have 
been happy to be supportive of your nominations, so it's not 
about you. But, let me just--one final point.
    Mr. Heddell, would you confirm that you all did the 
investigation in which the Army and the contractor said nothing 
happened, and, in fact----

                         KBR WATER ALLEGATIONS

    General Griffin. We've--Senator, we've got the 
investigation--I've got the--March 2007 memoranda, and I've got 
it--answers to where actions were taken in each case. We've 
also got the March 2008 final IG report. I've got that with me. 
We've been through that.
    General Johnson is being investigated by the DOD IG with 
respect to your comments on his testimony. And then, at the end 
of that investigation, then I would be able to tell you more 
about that. But, we have the results of the IG inspection 
you're talking about. I've got exactly what was done in 
theater. And we've got, now, the latest report, as well.
    Senator Dorgan. Mr. Chairman, thank you for holding this 
hearing. Congress needs to do a lot more, and we need to expect 
a lot more. And I think the Pentagon, the Army, and the 
inspector general--Mr. Inspector General, you're new. You and I 
have visited, but good luck on your work. We need your help 
badly.
    Mr. Heddell. Well, I appreciate that, Senator. And I 
appreciate the conversation we had the other day. The issues 
you brought to my attention, I consider very important, and I'm 
addressing them.
    Senator Dorgan. Mr. Secretary, thanks for your indulgence.
    And, Mr. Chairman, I've well run out the clock, here, and 
you and the Senator from Mississippi have been very good to let 
me take the time.
    Chairman Byrd. Thank you, Senator.
    Mr. England. Senator, I do appreciate your comments. I do 
appreciate 'em. They're helpful, and I appreciate your 
comments. And I appreciate your good work. Thank you.
    Chairman Byrd. By prior agreement, Secretary England needs 
to leave at this time, but the other witnesses are prepared to 
continue for any further questions.
    Senator Cochran.
    Senator Cochran. Mr. Chairman, I have no further questions.
    Chairman Byrd. General Griffin, given the large dollar 
amount of unaccounted-for expenditures, why has KBR been 
permitted to continue to contract with the Department of 
Defense?

                     LOGCAP IV ACQUISITION STRATEGY

    General Griffin. Sir, I will attempt to answer that, and 
then I will ask Mr. Parsons to also help me, here.
    Chairman Byrd. All right.
    General Griffin. As you're aware, we have--now have a 
LOGCAP IV. And under LOGCAP IV, we have three major suppliers 
of contract services. And so, we are not dependent upon a 
single contractor for services, as we are today under LOGCAP 
III.
    We believe that, under LOGCAP IV, with three different 
suppliers of services, we will be able to, number one, have a 
different leverage with respect to the services that are 
provided to us, and hopefully get a better product at a very 
competitive price. But, we went at LOGCAP IV because of some of 
the problems we were having in only having a single contractor 
supplying those services.
    With that, I will turn it over to Mr. Parsons, let him 
specifically talk about KBR today.
    Mr. Parsons. Sir, I would just add that, you know, anytime 
one of these incidents is brought to our attention, where it 
appears that there's some egregious act or some kind of an 
issue going on with the LOGCAP contract, that we do take those 
seriously and look into them.
    What we tend to find when we really start peeling the 
onionskin back is that there may not have been a real clarity 
in the definition of the requirements, there's not always a 
real clarity in the contract scope of work, in the statement of 
work. And so, trying to, you know, find the KBR totally 
accountable for some of these actions isn't always the case. In 
fact, in many cases, it's a shared responsibility, because of 
some of the work that we did on the Government side, getting 
back to why we need to better train our people, we need to get 
more people on board to execute this work.
    And, as General Griffin said, you know, we initiated 
action, back in late 2004, early 2005, to come up with a new 
acquisition strategy so that we're no longer dependent upon one 
single contractor. We're confident, in the future as we compete 
these actions, that the competition will force better cost 
control, better quality, and better performance.
    Chairman Byrd. So, a good question to end on,
    Senator Dorgan, you have another question?
    Senator Dorgan. Mr. Chairman, just one additional question. 
Maybe it's to Mr. Assad.
    I described the issue of Mr. Peter--Mr. Smith, rather, who 
was replaced by General Johnson the morning after the 
Halliburton or KBR folks told him, ``Well, we will get this--we 
will get this judgment changed.'' He was--he said there was 
about a billion--$1 billion that was not justifiable, or at 
least the evidence didn't--wasn't available for payment. And, 
the next morning, he came to a meeting and discovered that he 
was no longer in his position, he had been demoted. And it--he 
discovered something else, and that was that the DCAA, the 
audit agency, would also be replaced, and the auditing of that 
would be done by a private contractor.
    Who can tell me about why that would have happened? And my 
understanding is, some of that still occurs on LOGCAP IV. But, 
is the Defense Contracts Audit Agency (DCAA) not capable of 
doing those audits? Why would a private company have--brought 
in to do the audits, who----

                          RCI AUDIT ASSISTANCE

    Mr. Parsons. Sir, I'll address that concern. I think you're 
making reference to RCI/SERCO. They----
    Senator Dorgan. Yes.
    Mr. Parsons [continuing]. Did not replace DCAA in the 
auditing of KBR's books. They were brought in to assist the 
Government. They brought some technical expertise in to the 
Government during that timeframe to determine, one, what should 
a reasonable amount of money be paid for many of the costs that 
had been incurred by KBR, but, more importantly, to come up 
with an estimate for us, in the Government, help us develop an 
estimate on what the estimate to complete that work was. So, 
they did not replace DCAA, they came in to provide some 
technical expertise that we just lacked in the Government, 
again getting back to the importance of finding ways to 
increase our personnel and increase our training so that we 
develop that expertise in the future. And they're filling that 
void, and, to some extent, filling that void today. But, 
assuredly, we did not replace DCAA----
    Senator Dorgan. I'm going to submit a list of questions on 
that subject to DCAA and to you.
    And we also had testimony from, oh, for example, a KBR 
employee named Rory, who was a food service supervisor, saying 
that they were charging for--his company was charging for 
10,000 meals a day and serving 5,000 meals a day. You know, the 
more public allegation, of 42,000 meals being charged every 
day, when 14,000 meals were served--I don't know what the 
disposition of that was, but that's 28,000-meals-a-day 
overcharge.
    You know, I don't--we have sent all of that over to the 
DOD. Some of it goes in--I get letters back, saying, ``We're 
looking into this. The Criminal Investigation Service is 
looking into it.'' And some of this is 4 years old, 3 years 
old, and you never hear back. And my hope is that, Mr. 
Inspector General, you'll be able to take a look at some of 
those older cases, because it seems to me that one of the 
lessons here from Mr. Smith and Ms. Greenhouse, is, if you 
speak up about this and complain about it, you're going to 
quickly lose your job. And I think that's an awful lesson for 
those in public service. I would hope we have people that have 
the courage to say--you know what? If we've got sweetheart 
contracts being awarded, we've got payments being made that 
aren't supportable, I hope we've got people that are willing to 
speak up. At least the two that have testified publicly did so 
at the cost of their job, regrettably.
    General Griffin. Senator, I would----
    Mr. Parsons. Senator----
    General Griffin [continuing]. Appreciate copies of anything 
like that you get, and I promise you we'll sort out the 
response and----
    Senator Dorgan. I'll be happy to do that. And thanks--you 
have just taken over the Army Sustainment Command, I believe. 
Is that----
    General Griffin. No, sir. Actually, General Radin took it 
over, a year ago.
    Senator Dorgan. Oh.
    General Griffin. So, General Johnson changed command at 
the--almost a year to date. So, General--Major General Radin 
is----
    Senator Dorgan. All right.
    General Griffin [continuing]. Is the commander.
    Senator Dorgan. Does General Mortensen report to you?
    General Griffin. Sir, General Mortensen is--has also 
retired.
    Senator Dorgan. He's retired, yes.
    General Griffin. And General Dunwoody replaced General 
Mortensen.
    Senator Dorgan. Mr. Chairman, thank you very much.
    And I thank the witnesses.
    General Griffin. Yes, sir.
    Senator Dorgan. Thanks for being here.
    Chairman Byrd. Thank you, Senator.
    Mr. Heddell, in response to my second question, concerning 
lost CPA funds, Secretary England referred the matter to Stuart 
Bowen, our Iraq inspector general. It was Stuart Bowen who 
testified before this committee in March about the lost funds. 
Given that the CPA funds may have found their way into the 
hands of insurgents who wish to do our soldiers harm, are you 
committed to tracking down those lost funds?
    Mr. Heddell. Absolutely, Mr. Chairman. That obviously--it 
concerns me. I will say that, on that particular matter, the 
special inspector general for Iraqi reconstruction is 
investigating that. However, we're concerned about anything 
along that line that we become aware of.
    Now, the fact that they are looking at that, we would defer 
to them to complete what they are doing so as not to confuse 
the issue. But, yes, sir, we would take any action that we can 
to save the American taxpayers' money; that shouldn't be 
wasted, lost, stolen, or abused.
    Chairman Byrd. All right.
    I thank each of the witnesses for appearing before the 
committee today. This committee cannot allow taxpayers' money 
to be wasted or stolen, nor can we tolerate the diversion of 
funds or weapons to insurgents or terrorists. Therefore, we 
will continue to aggressively investigate the matter.

                     ADDITIONAL COMMITTEE QUESTIONS

    I'd ask that all members of the committee submit statements 
and questions for the record by close of business on Friday, 
July 25, 2008.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
               Questions Submitted to Hon. Gordon England
             Questions Submitted by Senator Robert C. Byrd

    Question. Secretary England, in a July 2007 report, the Government 
Accountability Office (GAO) found that ``unclear DOD guidance, 
inadequate staff, and insufficient technology resulted in poor 
accountability over 190,000 weapons provided to Iraqi security forces. 
DOD concurred with GAO's recommendation to identify accountability 
procedures for the program to train and equip the Iraqi security 
forces. However, as of March 2008, DOD had not developed the necessary 
procedures.'' Can you tell the Committee if those procedures have been 
developed and implemented yet, have all of the missing weapons been 
accounted for, and what additional oversight is planned to ensure that 
weapons accountability continues?
    Answer. The National Defense Authorization Act, 2008, Public Law 
No. 110-181, Section 1228, requires the President to implement a policy 
to control the export and transfer of defense articles into Iraq, 
including the implementation of a registration and monitoring system. 
The Department of Defense, through Multi-National Force--Iraq (MNF-I) 
has implemented many policies and procedures which will help meet the 
intent of this law as it comes into effect in late July 2008. First, 
Multi-National Security Transition Command--Iraq (MNSTC-I) implemented 
a database tracking system for weapons accountability. Following the 
Government Accountability Office (GAO) report of July 2007, MNSTC-I 
requested that the Department of Defense Inspector General (DODIG) 
conduct an inspection in October 2007. In implementing GAO and DODIG 
recommendations, MNSTC-I reconciled serial numbers of weapons and 
created a weapons database. All small arms procured for the Government 
of Iraq (GoI) through MNSTC-I, either from Iraqi Security Forces Fund 
(ISFF) or Foreign Military Sales (FMS), are now registered by serial 
number in this database, which is managed by MNSTC-I logistics 
personnel. Additionally, 100 percent serial number inventories were 
completed on all weapons held at Taji National Depot and Abu Ghraib 
Warehouse, enabling reconciliation of the database. MNF-I has worked to 
establish an unbroken chain of custody for the accountability and 
control of munitions under U.S. control from entry into Iraq to 
issuance to the ISF. The number of logistics and property 
accountability specialists in country (in MNSTC-I, in particular) has 
increased and increased security procedures throughout the chain of 
custody have been implemented. MNF-I has worked with the ISF to build 
their property accountability systems and structures. In July 2007, 
MNF-I partnered with the ISF to establish an M-16 Biometrics Program 
that links individual soldiers to the particular weapons they are 
issued. Prior to weapons issue, each soldier is required to provide 
biometric data in the form of a retinal scan, a voice scan, and 
fingerprints. In addition, soldiers' personnel and payroll data are 
verified before a weapon is issued. The final step in the process is to 
take a picture of each soldier holding his new weapon with the serial 
number visible. Similar biometric procedures have been implemented for 
Iraqi police badge and weapon issue, as well, and the Ministry of 
Interior requires policemen to present their identification card and 
weapon in order to receive monthly pay. The fidelity of data and level 
of detail captured in these accountability procedures are significant.
    In coordination with the Iraqi Ground Forces Command (IGFC), MNSTC-
I established an Iraqi/Coalition joint inspection team in October 2007 
to inspect and assess Iraqi Divisions' equipment records and verify on-
hand quantities. MNSTC-I was able to establish a baseline of where 
weapons are located and provide an operational snapshot of 
accountability in several Iraqi divisions. This data was utilized to 
reconcile the Coalition issue log with Iraqi hand receipts and assess 
the effectiveness of ISF accountability procedures.
    Contractor delivery of weapons in theater has been further 
regulated. Since September 13, 2007, the Joint Contracting Command 
Iraq/Afghanistan (JCC-I/A) has ensured that all weapons contracts to 
procure and deliver munitions include a number of clauses to increase 
accountability. Contracts now require vendors and shippers to do the 
following: deliver munitions to Iraq through U.S. controlled ports of 
entry within Iraq; provide serial number lists electronically in 
advance of any weapons shipments to Iraq; post serial numbers on the 
inside and outside of weapons shipping containers; and provide en route 
visibility of weapons and munitions, to include the arrival dates and 
times of munitions cargo being delivered to Iraq.
    Question. Secretary England, a few months ago, the Appropriations 
Committee held a hearing on fraud and corruption in Iraq. Several 
issues were raised relating to missing Coalition Provisional Authority 
funds, but DOD's responses to these questions remain unclear. There was 
the suggestion that these funds were Iraqi funds and of no concern to 
the Department of Defense. However, when these funds disappeared, U.S. 
taxpayers were--and continue to be--called upon to pay for Iraqi 
reconstruction. Since at the time those funds disappeared the 
Coalitional Provisional Authority was answerable to the Department of 
Defense, I would like you to tell me the amount of Coalition 
Provisional Authority assistance and reconstruction funds doled out 
prior to the transition of power in Iraq that cannot be accounted for, 
who is responsible for ensuring that these funds are accounted for, and 
what level of confidence is there that these funds did not make their 
way to insurgent groups or militias?
    Answer. The Coalition Provisional Authority (CPA) funds to which 
you refer are the $8.8 billion Development Fund for Iraq (DFI), and 
account that includes oil export sales from Iraq, balances from the 
U.N. Oil-for-Food Program, and frozen Saddam-era funds. The CPA, 
operating in a high threat environment, distributed DFI money to 
reconstruction projects and to Iraqi ministries.
    Since December 2003, under U.N. mandate, the International Advisory 
and Monitoring Board (IAMB) has served as the oversight body for the 
DFI. The IAMB's July 15, 2004 audit report, after reviewing the CPA's 
management of DFI funds, concluded that all known oil proceeds, 
reported frozen assets, and transfers from the Oil-for-Food Program 
have been properly and transparently accounted for in the DFI.
    Acknowledging that CPA operated under challenging circumstances, 
the IAMB report noted that the lack of oil metering and other problems 
made it difficult to determine that all DFI disbursements were made for 
the purposes intended.
    Question. At what point does the development of information that 
suggests that stolen funds may have found their way to the insurgents 
or militias shift from an inspection mission to an operational issue? 
Since in this case, the SIGIR can only point to their findings, it 
would seem that at some point operational, intelligence, or enforcement 
actions would fall to the Coalition military forces.
    Answer. [Deleted].
    Question. Secretary England, who specifically are the Iraqi and 
U.S. officials responsible for ensuring that Iraqi oil and oil revenues 
are not stolen and that oil production is metered and not diverted to 
the insurgents, as has been reported by GAO and others?
    Answer. The Iraqi Ministry of Interior (MoI) is responsible for 
security at oil facilities. Over the past year, the MoI has 
consolidated the disparate oil security entities--most recently the 
Strategic Infrastructure Brigades--into as single Oil Protection Force. 
This step, along with other ministry-wide reforms, will continue to 
improve both professionalism and performance. In support, the Multi-
National Security Transition Command--Iraq (MNSTC-I) provides small 
amounts of police equipment and training assistance.
    Oversight of oil distribution and oil revenues is the 
responsibility of the Iraqi Ministry of Oil (MoO) and the individual 
state-owned operating companies. The MoO's metering department, which 
is best positioned to identify theft and smuggling, receives training 
in administration and financial accounting through USAID's ministerial 
capacity building program.
    Question. Secretary England, since smuggled oil may have been 
funding both insurgents and terrorists over the last 5 years, I expect 
that stopping this is a key priority in the Department of Defense and 
therefore I expect that you should be able to answer this question: 
When can we expect to see effective metering and accounting process in 
place to ensure that all of the oil pumped from the ground in Iraq is 
accounted for?
    Answer. Oil metering is essential to achieve financial transparency 
and accountability over oil resources in Iraq. The Iraqi Ministry of 
Oil (MoO), which is responsible for oil metering policy, and the 
individual state-owned companies, which install and use the metering 
systems, all have developed timelines to install and use oil meters. 
The Government of Iraq (GoI) is making slow but steady progress on 
installing oil meters at terminals across the country. However, USG 
advisors report that none of these timelines are being closely followed 
and that it cannot be determined when all planned meters will be in 
place and able to account for all of Iraq's oil.
    Moreover, while the South Oil Company is using the metering system 
in Al Basrah for fiscal purposes, most individual operating companies 
use what meters have been installed monitor oil flow and not reconcile 
accounts. The MoO gathers and summarizes reports from the individual 
operating companies but does not verify the accuracy of the data or 
reconcile the quantities with the records maintained by the companies.
    To address these issues, USAID provides training in administration 
and financial accounting to the MoO's metering department.
    Question. Secretary England, because of the snail's pace at which 
investigations are initiated or are moving, the statute of limitation 
on many of the contracting offenses that have occurred in Iraq and 
Afghanistan will soon expire. Do you support current Congressional 
efforts to extend the statutes of limitation in cases involving these 
war zones?
    Answer. The Department of Defense strongly believes that persons 
who commit crimes should be held accountable as appropriate. To the 
extent that an applicable statute of limitations serves to impede that 
effort, it should be extended to enable that effort to be successful.
    Question. Secretary England, on July 18, 2008, just days after 
Senator Dorgan held a hearing about the electrocution deaths of 13 
American personnel in Iraq due to faulty electrical work, the New York 
Times provided additional insight into the shoddy electrical work 
performed by U.S. contractors in Iraq. The article, citing internal 
Army documents, noted that in one six-month period from August 2006 
through January 2007, at least 283 electrical fires destroyed or 
damaged American military facilities in Iraq and killed at least 3 
other soldiers. In addition to the 13 deaths by electrocution, many 
more personnel have been injured, some seriously, by electrical shocks. 
Internal Army reports said KBR did a study and found a ``systemic 
problem'' with electrical work, although a KBR spokeswoman said the 
company found no evidence of a link between its work and the 
electrocutions. A Defense Contract Management Agency official, however, 
testified in a sworn statement that KBR and Army officials were well 
aware of the widespread electrical problems, including at the locations 
where individuals were killed. How is it that these widespread problems 
that rendered our troops unsafe in their own barracks were permitted to 
continue for so long, and what are you doing to correct the problem, 
jail those responsible for creating or permitting unsafe conditions to 
exist, and recover the payments made for this defective work?
    Answer. Facilities contracts for Iraq and Afghanistan that the Army 
is responsible for are administered by three agencies: the Joint 
Contracting Command--Iraq/Afghanistan; the Army Corps of Engineers; and 
the Army Sustainment Command (a subordinate Command of the Army 
Materiel Command). Each of these three contracting activities receive 
their Contracting Authority from the Senior Procurement Executive, the 
Assistant Secretary of the Army for Acquisition, Logistics and 
Technology, Mr. Dean Popps. I have been asked to answer these questions 
on behalf of the Army.
    The overall responsibility for life, health and safety issues for 
soldiers in Iraq within the U.S. Central Command's area of operations 
(USCENTCOM AOR) rests with the Multi-National Force--Iraq (MNF-I). 
AMC's involvement with electrical issues within the USCENTCOM AOR is 
confined to the management of LOGCAP III contract with KBR (Kellogg 
Brown and Root Services). Under that contract, KBR is responsible for 
maintaining a multitude of facilities across Iraq in accordance with 
the terms and conditions of the base contract and applicable Statements 
of Work under specific Task Orders. The current Task Order, Number 139, 
spells out the various maintenance levels for facilities to be 
maintained by KBR. These levels of maintenance were established by the 
customer, Multi-National Corps--Iraq (MNC-I).
    Actions taken:
  --As a result of SSG Maseth's tragic death, the LOGCAP Executive 
        Director in conjunction with DCMA (Defense Contract Management 
        Agency) coordinated the inspection and repair of a number of 
        facilities across the RPC (Radwaniyah Palace Complex).
  --In addition, the LOGCAP Executive Director and the Army Sustainment 
        Command commander are actively engaged with MNF-I as a member 
        of Task Force SAFE (Safety Awareness for Fire and Electrical) 
        which was stood up in order to understand the electrical and 
        fire hazards in theater and develop the plan and critical tasks 
        to ensure the future safety of military and civilian personnel 
        in buildings and facilities in theater.
    In order to ensure properly trained and certified personnel are 
provided by KBR in the performance of their maintenance requirements, 
the LOGCAP Procurement Contracting Officer modified the LOGCAP III 
contract to clearly define the Army's expectations for properly trained 
and certified personnel. This modification was issued on July 22, 2008.
    Currently, there is not enough known information on defective work 
on any LOGCAP contract to determine what remedies will be taken. As 
current assessments are conducted, and it is determined there are 
contract remedies that are appropriate these actions will be pursued.
    We are working hard to document the audit trail of events that led 
to these tragic events and will take appropriate action based on our 
findings.
    Question. Secretary England, in a recent article in the Journal of 
Public Integrity, it was reported that the Army CID's Major Procurement 
Fraud Unit concluded by late 2005 that for a number of reasons, 
conditions in Iraq were highly conducive for fraud. Similarly, a 
recently published Defense Criminal Investigative Service assessment 
found that there had been only limited review of the completeness, 
accuracy, and propriety of contingency payment vouchers and that there 
existed the potential for fraud, waste, and abuse. While these reports 
were just recently published, both examined periods of time prior to 
June 2006. Over two years have passed. Can you explain what 
specifically has been done in your organizations to change these 
conditions and what is being done to identify and prosecute individual 
cases of fraud that occurred during this period?
    Answer. In June of 2006, a key problem was inconsistency by Field 
Ordering Officers in the interpretation of authority for use of 
Standard Form 44 purchase orders. In response, DCMA now works closely 
with ordering officers to provide oversight and administration of the 
contracting and ordering agreements process to include the 
establishment of Task Force--Business and Stability Operations. This 
Task Force reviews purchase orders on a monthly basis to ensure proper 
use of and interpretation of contractual authorities.
    Question. The Special Inspector General for Iraq Reconstruction 
(SIGIR) has testified about one problem in contracting in which large 
contracts are repeatedly ``descoped'' or scaled back by the government 
so that projects can be declared complete and the contractor rewarded 
although only a small percentage of the work originally envisioned has 
been completed. The Army Corps of Engineers was responsible for a 
number of these contracts. One notable case involved a $243 million 
contract for 150 primary healthcare centers in Iraq awarded to Parsons 
Global, Inc., in March 2004. By March 2006, despite the expenditure of 
$186 million, only six centers had been completed and 135 were 
partially constructed. The Army Corps of Engineers then issued a 
``termination for convenience'' of the contract for 121 of the 135 
partially completed centers, requiring the contractor to deliver only 
20 of the original 150 centers, including the 6 that had already been 
accepted. As of April 2007, only 15 of the now-planned 142 health 
centers were completed, and only 8 were open to the public. Secretary 
England, can you update the committee on the status of this program, 
and can you estimate the loss to taxpayers for projects initiated in 
Iraq but never completed?
    Answer. We do not believe the facts show that contracts have been 
repeatedly descoped or scaled back for the purpose of declaring 
projects as complete or for the purpose of rewarding the contractor. In 
the most part, projects have been descoped or scaled back to ensure 
that projects remain within budgeted costs. In many cases, contracts 
have been terminated so that more cost-effective alternatives can be 
undertaken to achieve the goals of the program.
    For the Primary Healthcare Centers (PHC) program, the Army Corps of 
Engineers (COE) terminated Parsons for convenience due to cost overruns 
caused by construction delays. The termination of Parsons has allowed 
the U.S. Government to continue construction of the PHCs through firm 
fixed price contracts with local Iraqi contractors.
    As of August 7, 2008, COE has a new contract; 117 PHC have now been 
completed and turned over to the Iraq Ministry of Health. Another two 
PHCs are awaiting acceptance by the Iraq Ministry of Health. The final 
target is to complete 132 centers. The last of these is expected to be 
completed in September 2008. Ten centers have since been deprogrammed 
due to security issues.
    In a challenging and constantly changing environment such as Iraq, 
there will inevitably be some projects that do not meet original goals 
or cannot be completed by other means. In these cases, we work with 
Iraqi officials to try to achieve the best outcome for U.S. taxpayers. 
In a number of cases, the Iraqis have stepped up to complete projects 
using Iraq funds. In such cases, we do not consider that they represent 
a loss to the U.S. taxpayer.
    Question. Secretary England, what is the number of contracts 
awarded in connection with the wars in Iraq and Afghanistan that were 
considered complete only because the original contract was 
significantly descoped?
    Answer. We have no way to readily determine to what extent, if any, 
contracts awarded in connection with our operations in Iraq and 
Afghanistan may have been considered complete as a result of a 
reduction in scope. The Department of Defense uses the Federal 
Procurement Data System--Next Generation (FPDS-NG), the database for 
Federal procurement actions, to record contract actions. Unfortunately, 
FPDS-NG, while collecting up to 200 separate data elements on each 
contract, does not contain this specific information.
    Question. Secretary England, can you tell the Committee how many 
investigations are pending at the agencies you are responsible for, and 
is this number the total of all investigations that have been referred 
to these agencies, or just the number they can reasonably execute with 
available resources?
    Answer. It is my understanding that in fiscal year 2007, the DOD IG 
through its Defense Criminal Investigative Service (DCIS) initiated 622 
criminal investigative cases and projects. In fiscal year 2008, through 
July 31, 2008, DCIS initiated 543. Presently, the DCIS has a total of 
1,685 investigative actions pending, a number which closely follows 
their historical trend.
    Question. Secretary England, in October 2007, the report of the 
Commission on Army Acquisition and Program Management in Expeditionary 
Operations stated that the Army lacked the leadership and military and 
civilian personnel to provide sufficient contracting support to either 
expeditionary or peacetime missions. According to the Commission, Army 
contracting personnel experienced a 600 percent increase in their 
workload and were performing more complex tasks, while the number of 
Army civilians and military in the contracting workforce had remained 
stagnant or declined. As a result, post-award contract management was 
rarely being done. The Commission recommended that the Army increase 
the number of civilian and military personnel in its contracting 
workforce by 1,400 individuals. Has the number increased, by how much, 
and what more needs to be done to rectify this problem?
    Answer. As a result of the Gansler Commission recommendations, the 
Secretary of the Army directed the Army Materiel Command on January 30, 
2008, to establish a two-star level Army Contracting Command (ACC). The 
Secretary also directed the transfer of the Army Contracting Agency 
from the Assistant Secretary of the Army (Acquisition Logistics and 
Technology) to AMC. The ACC was established in a provisional status on 
March 13, 2008 and a concept plan to implement the new command was 
approved by the Army on July 15, 2008. That concept plan creates two 
new commands: the Mission and Installation Contracting Command and the 
Expeditionary Contracting Command which will be led by brigadier 
generals and provide the leadership and focus necessary to support the 
peacetime and expeditionary contracting missions. This concept plan, 
when fully implemented, will provide an additional 921 civilians and 
523 military personnel to improve contracting operations in contracting 
organizations that execute 70 percent of all Army contracting dollars. 
The ACC has established a three year plan to fill these new 
requirements. To date, approximately 300 additional civilians have been 
hired and the Army continues to fill authorized military positions with 
the qualified personnel that are currently serving. In order to fill 
the remaining military positions, we need to access additional military 
personnel into the Acquisition Corps. A request for direct hire 
authority is currently at OPM for consideration. The Department of 
Defense has requested Congress to enact legislation that will provide 
Direct Hire Authority to the Department of Defense for acquisition 
personnel. The Department also requests Congressional support in 
enacting legislation to authorize an increase of 5 General Officer 
positions within the Army to fill contracting leadership positions. The 
Department's legislative proposal for these General Officer positions 
was submitted to Congress on June 27, 2008.
    Question. Secretary England, I am aware of at least one case of a 
U.S. company, Wye Oak Technologies, in which a U.S. contractor went to 
Iraq, contracted with the Iraqi government for services amounting to 
$25 million, performed the work, and never received payment. While the 
contract involved Iraqi government, U.S. military officials acted as 
advisors on the project. When the contract was completed, the payment 
was made, in full, to an Iraqi intermediary assigned by the Iraqi 
government who did not pass on any of the payment to the U.S. company. 
When Wye Oak officials returned to Iraq to collect their payment, they 
were murdered, and the Iraqi intermediary to whom the money had been 
paid fled the country and is believed to be in Jordan.
    How common is this situation, and what recourse do American 
contractors have when they contract with the Iraqi government rather 
than the U.S. government? Was there an investigation into this matter 
and if not, why?
    Answer. Wye Oak Technologies did not receive DOD funding and 
therefore would not be under the Department's purview. The company in 
question contracted directly with the Iraq government, who in turn 
appointed the Iraqi intermediary.
    Question. Secretary England, how many contractors, as a result of 
their performance or practices, have been barred from future contracts 
and what types of issues were involved?
    Answer. Since 2005, the Army has suspended 50 individuals and 
companies based on allegations of fraud and misconduct in Iraq in 
accordance with Federal Acquisition Regulation (FAR) 9.407. In 
addition, the Army has proposed 32 individuals and companies for 
debarment under FAR 9.406, resulting in 18 finalized debarments at this 
time. The Army is the Executive Agency for contracting in Iraq, and the 
Army Procurement Fraud Branch monitors in-theater fraud investigations, 
coordinates remedies with the Joint Contracting Command--Iraq/
Afghanistan and the Department of Justice, and recommends to the Army 
Suspension and Debarment Official appropriate administrative remedies 
for perfected fraud cases. The types of cases most frequently occurring 
in Iraq relate to payment of bribes and kickbacks to U.S. military and 
civilian personnel, theft, false claims, false statements, and 
incomplete or deficient contract performance. The Procurement Fraud 
Branch also has processed a limited number of product substitution 
cases. Also notable are a number of actions involving the theft of fuel 
by military personnel and local nationals and the payment of kickbacks 
associated with management of warehouses for the Iraqi armed forces and 
police, resulting in multiple suspension and debarment actions over the 
past 12 months. The Department of the Navy's Acquisition Integrity 
Office has placed one individual on the Excluded Parties List System 
for offenses related to contracting in Iraq. That individual was a 
Marine Gunnery Sergeant who entered a guilty plea at a Special Court-
Martial to two specifications of violations of Article 107 of the 
Uniform Code of Military Justice (UCMJ) and three specifications of 
violations of Article 134 of the UCMJ. The Air Force has debarred 11 
companies and individuals. These relate to a company that was found to 
have sham subsidiaries and used a non-existing company to submit 
fraudulent invoices in furtherance of a scheme to overcharge the 
Coalition Provisional Authority. It also includes one individual who 
was found to have had a conflict of interest with respect to a 
personal/business relationship with a U.S. Government contractor. 
Defense Logistics Agency has had no cases involving conduct or 
misconduct related to an Iraq contract.
    Question. Secretary England, the recent AEY case represents all 
that is wrong in defense contracting. A small, unqualified 3-person 
firm with minimal experience in arms exports, either inaccurately or 
fraudulently misidentified as a small disadvantaged business is awarded 
a contract worth almost $300 million to supply ammunition to Afghan 
security forces, even though its performance history was not very good. 
AEY then goes through suspected arms traffickers to Albania to purchase 
aged ammunition made in China, a clear violation of U.S. law, and 
repackages it as Hungarian. It appears that the American ambassador to 
Albania may have endorsed a plan to remove evidence of the Chinese 
origin of the ammunition. AEY has been barred from future contracts, 
and its president, Efraim Diveroli, has been indicted, but what further 
efforts are underway to uncover and indict other individuals involved 
in perpetrating this fraud and to improve the contractor review and 
approval process?
    Answer. During AMC's review of the AEY, Inc. contract award, AMC 
discovered that the Procuring Contracting Officer (PCO) was not aware 
of AEY, Inc.'s previous poor performance on other Government contracts. 
This occurred because DOD policy did not require the reporting of a 
contractor's performance on contract actions under $5 million. As a 
result, there were numerous small dollar contracts where AEY, Inc. had 
been terminated for cause that were not reported into the Contractor 
Performance Assessment Reporting System which feeds the DOD Past 
Performance Information Retrieval System. After AMC notified the 
Department of the Army and the Director of Defense Procurement, 
Acquisition Policy and Strategic Sourcing (DPAP) of this issue, DPAP 
promulgated new policy guidance on July 23, 2008, that now requires 
contracting officers to report all contracts terminated for cause or 
terminated for default, regardless of dollar value, to the DPAP. This 
policy change will allow a PCO to see all negative past performance 
information for future actions regardless of dollar value. This was not 
the case when the AEY contract was awarded.
    In addition, in June 2008, the Department of Justice also indicted 
three of Mr. Diveroli's business associates, including Mr. David 
Packouz (Director and Vice President of AEY), Mr. Alexander Podrizki 
(an agent of AEY stationed in Albania) and Mr. Ralph Merrill (a 
business associate who provided financial and managerial assistance to 
AEY). AMC began working with law enforcement agencies on AEY more than 
12 months prior to these indictments.
    To preclude some of these problems in the future, the Commander, 
Joint Munitions and Lethality, Life-Cycle Management Command formed a 
Non-Standard Ammo Task Force (NSA-TF), with members from all key 
organizations, to implement policy and command guidance. To date we 
have accomplished the following:
  --Developed general specifications for non-standard ammunition that 
        provides among other things criteria for technical data package 
        identification, quality assurance requirements, reliability 
        thresholds, test requirements, and packaging/transportation 
        requirements. PEO Ammo also has created a database of technical 
        data (commercial & WARSAW specs), performance parameters, 
        sources of manufacture, etc. for Non-Standard Ammunition (NSA).
  --The Defense Contract Management Agency (DCMA) is conducting Source 
        inspection at both CONUS and OCONUS sites. Point of inspection 
        can be either a depot/staging area or the place of manufacture. 
        The DCMA will have ``eyes on'' the NSA prior to it being 
        delivered into the theatre.
  --We are conducting theater visits to work the new specifications/
        standards/procedures with all the parties in the theater 
        involved.
  --We held an industry day with over 20 companies to get industry 
        feedback on the generic specification concept and requirements.
  --We created a database of all current NSA contracts specifying item, 
        delivery dates, location and place of manufacture ensuring 
        efficiency of inspection prior to shipment to theatre.
  --We arranged for a team of subject matter experts (SMEs) to tour 
        Arsenal Inc., in Bulgaria who is a major supplier of NSA. The 
        TF will visit other major NSA suppliers as well.
  --We are working to stand-up a Product Director's office within 
        Program Executive Office for Ammunition to manage NSA issues 
        and concerns. We expect this office to implement the 
        appropriate program discipline and execution that we have with 
        our US programs.
  --We are working with outside agencies like DCMA, who provide QA/QC 
        before and after the contract, to share lessons learned.
    Question. Secretary England, what changes have occurred in the 
organizations under your command to improve contract management and 
oversight, and do you require any legislative assistance to meet your 
workload or to improve your operations?
    Answer. The Department has taken a myriad of actions, spanning the 
domains of policy, doctrine, organization, training, material, 
leadership, education, and personnel, to better manage contracted 
support in deployed operations. These efforts are being overseen at the 
enterprise level, with broad participation of the Military Departments, 
Defense Agencies, and Joint Staff, to ensure the Department derives 
holistic solutions. Key actions are detailed in the report to Congress 
on the Department of Defense Program for Planning, Managing and 
Accounting for Contractor Services and Contractor Personnel during 
Contingency Operations that was submitted in April 2008 in response to 
section 854 of the National Defense Authorization Act for Fiscal Year 
2007 (NDAA-07) and the report to Congress on the Department of Defense 
Task Force on Contracting and Contractor Management in Expeditionary 
Operations that was submitted in response to section 849 of NDAA-08.
    In its October 2007 report, the Commission on Army Acquisition and 
Program Management in Expeditionary Operations (the ``Gansler 
Commission'') expressed concern about post-award contract management in 
theater. At the time, in-theater contracting resources were focused on 
awarding contracts, primarily due to staffing constraints. Since then, 
the Department has made much progress on this issue. Based on a 
December 2007 workload and resource analysis conducted by the Joint 
Contracting Command--Iraq/Afghanistan (JCC-I/A) and the Defense 
Contract Management Agency (DCMA), DCMA significantly increased its 
personnel in-theater to meet the current contract management and 
oversight needs. In June 2008, JCC-I/A and DCMA re-evaluated the 
resources needed in theater to provide theater-wide contract 
administration. A Joint Contracting Command Joint Manning Document has 
been put into place, and the Military Departments are in the process of 
taking over about half of those positions. In addition to resource 
analysis, the Department has been working with key organizations 
responsible for large (over $1 million) in-theater contracts for 
services for purposes of sharing data, lessons learned, and business 
rules to enable effective conduct of post-award administration in the 
theater of operations.
    Question. Secretary England, are you aware of any White House 
involvement or queries in the Halliburton or KBR contract awards?
    Answer. I am not aware of any White House involvement in the 
Halliburton or KBR contract awards.
    Question. Secretary England, we keep hearing that Halliburton and 
KBR were the only companies with the necessary infrastructure to 
perform the original massive Iraq support contracts. However, once 
Halliburton and KBR were awarded the contracts, they then went out and 
subcontracted or hired everyone to perform the contract. Could those 
contracts have been bid as multiple smaller contracts, allowing more 
qualified companies to participate?
    Answer. In the case of LOGCAP III, MNC-I is the primary customer 
for contract requirements generated in Iraq through their Joint 
Acquisition Review Board (JARB). The JARB process is designed to find 
alternate ways to satisfy requirements before resorting to LOGCAP. This 
includes the execution of smaller ``theater'' level contracts issued by 
the Joint Contracting Command--Iraq/Afghanistan. While many 
requirements have been executed through ``theater'' level contracts, 
MNC-I continues to rely upon LOGCAP in the execution of their larger 
contract requirements, in part, because the LOGCAP prime contractor 
plays a critical role by integrating and overseeing the complementary 
efforts of many subcontractors. With the recent award of three 
performance contracts in support of LOGCAP IV, the Army, working with 
its customers, will begin executing new contract requirements through 
the competition of task orders amongst three contractors. The size of 
the requirements for each contract will still be determined by the 
customer.
    Question. Secretary England, we have received reports that 
companies contracting with DOD are off-shoring their assets and hiring 
to avoid providing benefits to U.S. citizens and paying payroll, 
unemployment, Medicare, and income taxes. In many cases, these hiring 
practices are deceptive, with the employee believing that he is working 
for a U.S. company. We have also heard that DOD condones this practice 
as a cost saving matter. The fiscal year 2009 National Defense 
Authorization bill will make it unlawful for companies engaging in this 
practice to receive an unfair competitive advantage because of this 
practice. Other proposals would ban these companies from contracting 
with DOD.
    Do you support these legislative measures and if not, why?
    Answer. While we understand the concern expressed by the committee 
regarding the practice of U.S. companies using off-shore subsidiaries 
to avoid certain taxes and costs, the manner in which a corporation 
organizes itself for tax purposes is not within the control of the 
Department of Defense. We note, however, that section 302 of the 
``Heroes Earnings Assistance and Relief Tax Act of 2008,'' Public Law 
110-245, enacted on June 17, 2008, closes many of the off-shore tax 
``loopholes'' identified by the committee. Section 302 will require 
that any foreign entity that is part of a U.S. ``controlled group'' (as 
defined for tax purposes) and that has employees performing services 
under a contract with the U.S. government, shall be treated as an 
American employer for purposes of FICA and Social Security taxes. 
Incorporating a subsidiary off-shore will no longer allow companies to 
avoid these employment taxes on U.S. government contracts. This 
provision should abrogate the necessity for language in the DOD 
authorization legislation.
                                 ______
                                 
             Questions Submitted by Senator Byron L. Dorgan

    Question. At the hearing, you stated that you had determined that 
Bunnatine Greenhouse's demotion stemmed entirely from poor performance 
reviews that she received prior to her becoming a whistleblower.
    Were you aware that that those poor performance reviews initiated 
when Ms. Greenhouse began to internally challenge contracting 
improprieties in the Pentagon, beginning in 2002?
    Answer. Ms. Greenhouse was employed by the Army Corps of Engineers 
and the Army is unable to respond to this question because this matter 
is in active litigation at the Department of Justice.
    Question. How do you reconcile Ms. Greenhouse's excellent 
evaluations for years after her appointment by General Ballard to the 
much different evaluations she received in the ramp-up to the Iraq war?
    Answer. Ms. Greenhouse was employed by the Army Corps of Engineers 
and the Army is unable to respond to this question because this matter 
is in active litigation at the Department of Justice.
    Question. In your consideration of Ms. Greenhouse's case, did you 
consult with the officers who had written Ms. Greenhouse's excellent 
performance reviews from 1999 to 2002?
    Answer. Ms. Greenhouse was employed by the Army Corps of Engineers 
and the Army is unable to respond to this question because this matter 
is in active litigation at the Department of Justice.
    Question. Quite apart from the question of whether Ms. Greenhouse 
suffered retaliation for being a whistleblower, how do you respond to 
her core allegations that KBR received inappropriate favoritism in the 
awarding of the RIO contract, as described in her testimony of June 27, 
2005?
    Answer. There was no inappropriate favoritism exercised in the 
awarding of the RIO contract and all requirements of the Federal 
Acquisition Regulation (FAR) were strictly followed. KBR was determined 
to be the only contractor in a position to provide the services within 
the required timeframe given classified prewar planning requirements. 
Both the acquisition strategy and the supporting source selection plan 
were thoroughly reviewed and approved by various Army officials. In 
separate reviews, both the Government Accountability Office (GAO) and 
the Special Inspector General for Iraq Reconstruction (SIGIR) have 
found that the sole source justification and approval was properly 
conducted.
    The RIO contract was always intended to be a bridge to a 
competitive contract award arrangement and was structured accordingly. 
In fact, the follow-on contracts were competitively awarded in January 
2004. Task orders issued under the RIO contract were restricted to work 
required in the near term, leaving as much as possible for performance 
under the competitively awarded contracts. KBR's performance under the 
RIO contract has no relationship with their efforts under the LOGCAP 
contract.
    Question. At the hearing, you testified that the Army would send 
``a group that will go out and independently audit, at least on a 
sample basis,'' the electrical work that KBR is doing. Mr. Assad added 
that thi