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U.N. Audit Finds U.S. owes Iraq money

An international auditing board called on the United States to repay Iraq $208 million in disputed fees for Kellogg, Brown & Root, a Halliburton subsidiary that received nearly $1.4 billion in contracts without having to compete for the delivery of fuel and the repair of Iraq`s oil infrastructure.

The firm KPMG was hired to do the audit, which included Kellogg, Brown & Root`s $1.4 billion deal. However, KPMG, which also is employed by KBR, recused itself from auditing KBR`s contract, citing a conflict of interest. KPMG`s audit of the 23 other contracts uncovered problems, including instances in which there was insufficient evidence to "justify noncompetitive" contracts and "discrepancies" in the billed amounts.

The U.N. board, which was established in May 2003 by the U.N. Security Council to monitor the use of Iraq`s oil revenue by the U.S.-led coalition, struck a compromise in December with the United States. The deal required the appointment of an independent auditor to examine 24 contracts valued at more than $1.9 billion between June 2003 and June 2004. The contracts, which were funded largely through Iraqi oil revenue, were administered by the Army Corps of Engineers.