Via Laura Rozen.... That's the total amount of Army accounting entries that hadn't been properly reviewed and substantiated in the first three quarters of 2007.
Since 2004, the Pentagon has spent roughly $16 billion annually to maintain and modernize the military's business systems, but most are as unreliable as ever--even as the surge in defense spending is creating more room for error. The basic defense budget for 2007 was $439.3 billion, up 48 percent from 2001, excluding the vast additional sums appropriated for the wars in Iraq and Afghanistan. According to federal regulators and current and former Pentagon officials, the accounting process is so obsolete and error prone that it's virtually impossible to tell where much of this money ends up. While the department's brass has made a few patchwork improvements, billions are still unaccounted for. The problem is so deeply rooted that, 18 years after Congress required major federal agencies to be audited, the Pentagon still can't be.
For the first three quarters of 2007, $1.1 trillion in Army accounting entries hadn't been properly reviewed and substantiated, according to the Department of Defense's inspector general. In 2006, $258.2 billion of recorded withdrawals and payments from the Army's main account were unsupported. It's as if the Army had submitted multibillion-dollar expense reports without any receipts.Preoccupied with protecting their turf, the Army, Navy, Air Force, and Marines continue to maintain separate, increasingly outdated systems that can't talk to each other, trace disbursements, or detect overbilling by contractors. At the Indianapolis facility, as at the Defense Department's four other main U.S. centers for financial operations, accounting programs under the same roof can't share information without extensive jury-rigging, as though contracts, payments, and accounting had nothing to do with one another.
"In the Defense Department, what you have now are material weaknesses that are in every single area, in every part of the department, so deep and so wide you do not really have any way of figuring out where money is being spent," says Linda Bilmes, a federal budget expert at Harvard's Kennedy School of Government.
Every year, the Pentagon tries to justify its budget request to Congress by submitting three years of financial data: "actual" performance for the past fiscal year plus projections for the current year and the next. But because of the lack of reliable accounting, these totals are largely fictional. That, in turn, raises major questions about whether the government will be able to meet skyrocketing commitments for future spending on ships, planes, and high-tech ground weapons, especially given the expected growth in spending on Social Security and Medicare, and the impact of tax cuts.
According to David Walker, who recently left his post as head of the Government Accountability Office, the failure of the Pentagon's outdated and incompatible systems to keep tabs on expenditures--even as the wars in Iraq and Afghanistan eat up an ever-bigger chunk of the federal budget--puts several Defense Department agencies high on the G.A.O.'s list of federal programs that are mismanaged and prone to fraud, waste, and abuse.
John Evans, a retired Pentagon official who oversaw more than half of the defense budget, says that all this just encourages the military branches to conceal spending. "If you want to know how much one of the services is paying, you have to ask them," he says. "They say, 'Why do you want to know?'" When Evans did a formal review to see if spending was on track, he says "it was like a C.S.I. crime drama to find out where the services spent money and where they squirreled it away."
If you can believe this, it actually gets worse from there. But here's my question: does it make be too cynical to think that this is a feature, and not a bug?
More:
In 1990, Congress enacted legislation requiring all federal agencies to pass independent audits. Every year, the Defense inspector general dispatched dozens of auditors to the military's financial and accounting centers. Every year, they reported back that the job couldn't be done. Defense Department records were in such disarray and were so lacking in documentation that any attempt would be futile. In 2000, the inspector general told Congress that his auditors stopped counting after finding $2.3 trillion in unsupported entries made to force financial data to agree.
In 2002, Congress relented. Until the Pentagon can get its records in order, no comprehensive audit is required. Instead, the department writes each year to the inspector general certifying that "material amounts" in its financial reports can't be substantiated.That it can't be audited "goes to the heart of the department's credibility," says Dov Zakheim, who was Defense Department chief financial officer and comptroller under Rumsfeld. "Nobody would trust even a half-million-dollar enterprise if its books weren't clean."
The Pentagon has repeatedly assured Congress that it is working toward an audit. Yet the projected date continues to slip further away. In 1995, Pentagon officials testified that it could be audited by 2000. In 2006, an audit wasn't envisioned until 2016.
Without an audit, anecdotal evidence suggests, contractor fraud is likely to go undetected for years. Two South Carolina sisters who supplied small parts to the military bilked it of more than $20 million by charging wildly inflated shipping costs for low-priced items, like $998,798 for shipping two 19-cent washers to an Army base in Texas. The scheme lasted six years before they were caught in 2006.
And that's why I think many people see this as a feature. Over the past few yeas, there have been plenty of high profile stories of waste, fraud, and abuse in Iraq that never got investigated. If you were the CEO of Halliburton or KBR, and you knew that there was no way of tracking payments and receipts, it would make economic sense to commit fraud. It would also be immoral, but hey - this is war, right?
Please tell me that I'm being too cynical. Please?
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