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The private contractor that trains the Afghan police force, a U.S. military program long criticized for wasting money, has failed to document millions of dollars in expenses, according to a leading defense audit agency.

A November 2009 audit by the Defense Contract Audit Agency, made public Friday by a Senate subcommittee on contracting oversight, uncovered serious deficiencies in how DynCorp International tracks payroll, bills from subcontractors, cost vouchers and millions of dollars in labor costs. In sum, the audit found many of DynCorp’s billing and financial controls to be inadequate.

The audit is notable for providing the first hard look at the company’s financial accountability in Afghanistan, where since 2004 it has played a key role training the Afghan National Police. This effort is critical to the drawdown of U.S. troops.

DynCorp is likely to continue its work in Afghanistan through the end of the year. Its current multi-million dollar contract, which had been expected to expire in January, was extended until August because of a dispute over how the Defense Department would choose a new contractor. Now the Pentagon is promising a full and open competition, which could begin within two weeks.

DynCorp spokesman Jason Rossbach said the Nov. 27, 2009 audit was outdated and that “many of the corrective actions were completed.” He added that Defense auditors are still validating DynCorp’s fixes.

However, a statement from the audit agency on Friday underscored unresolved problems with the contractor. “The internal control deficiencies in the audit report are serious and need to be addressed by DynCorp,” Dthe agency stated, adding, “DynCorp is not yet compliant with many of deficiencies cited in the audit report.”

Lawmakers estimate the total investment in the police, including construction of police facilities across Afghanistan, adds up to $6 billion so far. In recent months, audits by inspectors general have faulted the State and Defense Departments for poor management of the contract, specifically for not having enough staff on the ground in Afghanistan to inspect, monitor and to ensure quality control. DynCorp’s performance was not criticized in any of those audits and DynCorp executives have repeatedly said the company is proud of its work in the warzone.

The audit released this week focused on DynCorp’s own controls and found potential for waste and some large overpayments. In one instance, a linguist division run by DynCorp inadequately monitored subcontractor invoices, causing the government to overpay by $1.8 million, according to the audit. The government was reimbursed once auditors detected the overpayment in September 2009. In another instance, the government was wrongly charged for car expenses totaling $270,000 for a number of years.

The amount of money at risk of being lost because of overpayment is not clear from the released report because many of the dollar amounts of questionable payments are redacted to provide proprietary protection to DynCorp. But the report notes a broad range of deficiencies. There were no procedures for determining pay rates systemically. There was no training on how to keep track of work hours. There were no records of labor costs in many cases.

The report also notes, in one circumstance, that DynCorp “was unable to reconcile annual labor costs” for three years, from 2005 to 2008.

Dyncorp, a publicly traded company, announced last week that it agreed to be acquired by private-equity firm Cerebus Capital Management. Dyncorp said the deal would be worth about $1.5 billion. Rep. Jan Schakowsky (D-IL), the watchdog group Project on Government Oversight and others have complained that Dyncorp’s privatization could make it harder to scrutinize the company.

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