The Department of Defense (DoD) regularly fudges its budget numbers to the tune of billions of dollars and wastes huge amounts of money and equipment while doing so, a new report by Reuters claims.
Although Defense budgets have long been a black hole in an increasingly transparent federal budget — the DoD is the only agency that fails to conduct an annual audit of its finances — the depth of the Pentagon’s deception is nevertheless surprising.
According to former officials at the Defense Finance and Accounting Service, workers routinely doctor thousands of blank, incomplete or incorrect spending documents in order to comply with Treasury records.
Officially called “unsubstantiated change actions” — unofficially, “plugs” — the reconstructions come from all defense agencies and together add up to around ten billion per year, at least. A Pentagon report found $9.22 billion in “reconciling amounts” for 2012 alone.
Pentagon officials — including the Secretary of Defense and the chiefs of staff — know these numbers are wrong, but approve them year after year anyway. “I don’t think they’re lying and cheating necessarily, but it’s not the right thing to do,” Pentagon Comptroller Robert Hale told Reuters. “We’ve got to fix the processes so we don’t have to do that.”
But fixing processes is no easy task. The DoD operates a stunning array of accounting systems, at least 2,200 by the Pentagon’s own estimate but possibly as many as 5,000. Each operates differently, and most are in some way incompatible with each other. “It’s like if every electrical socket in the Pentagon had a different shape and voltage,” one official said.
The DoD has tried to improve these systems in time and again, sinking money into programs that invariably end in failure. One, the Air Force’s Expeditionary Combat Support System, was cancelled in late 2012 after racking up a $1.03 billion price tag.
The vast information gap has cost the taxpayer dearly in both waste and fraud. Without accurate numbers for equipment purchased, the Pentagon has no way of knowing if it has enough weapons and supplies to get the job done. So it just keeps buying.
In one example, the DoD bought over 7,000 “vehicular control arms” for the front of their Humvees — despite having over 15,000 of them already in stock, a 14-year supply. Pentagon regulations define “excess inventory” as a greater than 3-year supply.
According to a DoD document provided to Congress, in 2012 alone the department had over $733 million in excess supplies and equipment. Often that equipment sits unused for decades until the government is forced to destroy it, again at cost to the taxpayers.
Fraud is also a serious concern. Without an ability to track where the money is going, the Pentagon simply doesn’t know if contractors are overbilling for crucial goods and services. $573.3 billion dollars worth of contracts stretching back to 1996 have never been audited; contractors could have effectively fleeced the government out of tens of billions without the DoD ever catching on.
Viewed from this angle, the vast corruption scheme now wracking the U.S. Navy makes sense. Glenn Defense Marine Asia, the Singapore-based contractor that bribed naval officials into steering ships to ports where they could be easily defrauded, apparently kept up the scheme for nearly a quarter of a century. The Pentagon hasn’t kept accurate track of its spending for at least that long.
Congress passed a law in 2009 finally requiring the DoD to be audit-ready by 2017. But despite the estimated $10 billion spent per year on accounting systems and computer modernization, analysts interviewed by Reuters believe the Pentagon will miss this deadline as well.
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