WASTE, GREED AND FRAUD
When the Defense Department flunked its first-ever fiscal review in December, 2018,, one of our government’s greatest mysteries was exposed: Where does the DoD’s $700 billion annual budget go?
Whom can we trust to find the missing trillions, FIX THE SYSTEM and set the record straight?
There isn't ANYONE trustworthy in government, is there?
Hard to believe that any 'survey', such as the Pew results charted above, show that even 20% of Americans STILL trust the government.
FROM A 3-PART INVESTIGATIVE REPORT BY REUTERS, 2013:
"Linda Woodford spent the last 15 years of her career inserting phony numbers in the U.S. Department of Defense's accounts.
Every month until she retired in 2011, she says, the day came when the Navy would start dumping numbers on the Cleveland, Ohio, office of the Defense Finance and Accounting Service, the Pentagon's main accounting agency. Using the data they received, Woodford and her fellow DFAS accountants there set about preparing monthly reports to square the Navy's books with the U.S. Treasury's - a balancing-the-checkbook maneuver required of all the military services and other Pentagon agencies.
And every month, they encountered the same problem. Numbers were missing. Numbers were clearly wrong. Numbers came with no explanation of how the money had been spent or which congressional appropriation it came from. "A lot of times there were issues of numbers being inaccurate," Woodford says. "We didn't have the detail … for a lot of it.
To trim its backlog, the DCAA last year raised to $250 million from $15 million the threshold value at which a contract is automatically audited. DCAA says that by concentrating its auditors on the biggest contracts, it will recoup the largest sums of money, and that it will conduct selective audits of smaller contracts, based on perceived risk and other factors. Still, hundreds of thousands of contracts that would eventually have been audited now won’t be.
“Having billions of dollars of open, unaudited contracts stretching back to the 1990s is clearly unacceptable, and places taxpayer dollars at risk of misuse and mismanagement,” Senator Thomas Carper
[Related: Pentagon Has No Idea What 108,000 Contractors Are Doing]
The data flooded in just two days before deadline. As the clock ticked down, Woodford says, staff were able to resolve a lot of the false entries through hurried calls and emails to Navy personnel, but many mystery numbers remained. For those, Woodford and her colleagues were told by superiors to take "unsubstantiated change actions" - in other words, enter false numbers, commonly called "plugs," to make the Navy's totals match the Treasury's."
DOWN THE RABBIT HOLE
Mark Skidmore, an economics professor at Michigan State University ,doesn't trust the government much and he's been tracking federal budget statistics for years.
What he found was $21 trillion in "unsupported budget adjustments" at the Pentagon for fiscal years 1998 to 2015.
$21 TRILLION of taxpayer money appears to have mysteriously vanished from the Department of Defense and the department's comptroller admits these are 'budgetary moves' that "lack supporting documentation ... or are not tied to specific accounting transactions."
IN DECEMBER, 2017, FORBES ASKED:
Has Our Government Spent $21 Trillion Of Our Money Without Telling Us?
I am co-authoring this column with Mark Skidmore, a Professor of Economics at Michigan State University.
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.” ~ Article I, Section 9, Clause 7, The US Constitution
On July 26, 2016, the Office of the Inspector General (OIG) issued a report “Army General Fund Adjustments Not Adequately Documented or Supported”. The report indicates that for fiscal year 2015 the Army failed to provide adequate support for $6.5 trillion in journal voucher adjustments.
Often these journal vouchers are unsupported, meaning they lack supporting documentation to justify the adjustment or are not tied to specific accounting transactions…. For an auditor, journal vouchers are a red flag for transactions not being captured, reported, or summarized correctly."
(Note, after Mark Skidmore began inquiring about OIG-reported unsubstantiated adjustments, the OIG's webpage, which documented, albeit in a highly incomplete manner, these unsupported "accounting adjustments," was mysteriously taken down. Fortunately, Mark copied the July 2016 report and all other relevant OIG-reports in advance and reposted them here.)
Given that the entire Army budget in fiscal year 2015 was $120 billion, unsupported adjustments were 54 times the level of spending authorized by Congress. The July 2016 report indicates that unsupported adjustments are the result of the Defense Department's "failure to correct system deficiencies." The result, according to the report, is that data used to prepare the year-end financial statements were unreliable and lacked an adequate audit trail. The report indicates that just 170 transactions accounted for $2.1 trillion in year—end unsupported adjustments. No information is given about these 170 transactions. In addition many thousands of transactions with unsubstantiated adjustments were, according to the report, removed by the Army. There is no explanation concerning why they were removed nor their magnitude. The July 2016 report states, "In addition, DFAS (Defense Finance and Accounting Service) Indianapolis personnel did not document or support why DDRS (The Defense Department Reporting System) removed at least 16,513 of 1.3 million feeder file records during the Third Quarter."
YES, IT REALLY AMOUNTED TO $21 TRILLION 'MISSING'.
Despite being legally required to conduct audits since the early 90s and holding a staggering 2.2 trillion in assets, the Pentagon held its first-ever audit in December, 2018...and failed it.
What happens to "Average Citizen" who fails an audit by, say, the IRS?
Why is the Pentagon above the LAW?
If the DoD can't document $21 TRILLION in expenditures, who can?
Some in business call this "creative accounting" or "cooking the books" and, if one gets caught being overly 'creative' with their cooking in the business world, one can wind up in a federal prison for a long, long time.
But not our federal government.
About those "specific accounting transactions"... sometimes they don't exist.
For further understanding, here's some help from the Inspector General's DOD IG report.
The following are highlights from the DOD IG “Summary of DOD Office of the Inspector General Audits of Financial Management”:
--The financial management systems DOD has put in place to control and monitor the money flow don’t facilitate but actually “prevent DOD from collecting and reporting financial information… that is accurate, reliable, and timely.” (p. 4)
--DOD frequently enters “unsupported” (i.e. imaginary) amounts in its books (p. 13) and uses those figures to make the books balance. (p. 14)
Inventory records are not reviewed and adjusted; unreliable and inaccurate data are used to report inventories, and purchases are made based on those distorted inventory reports. (p. 7)
--DOD managers do not know how much money is in their accounts at the Treasury, or when they spend more than Congress appropriates to them. (p. 5)
--Nor does DOD “record, report, collect, and reconcile” funds received from other agencies or the public (p. 6),
--DOD tracks neither buyer nor seller amounts when conducting transactions with other agencies. (p. 12)
--“The cost and depreciation of the DOD general property, plant, and equipment are not reliably reported….” (p. 8);
--“… the value of DOD property and material in the possession of contractors is not reliably reported.” (p. 9)
-- DOD frankly does NOT know who owes it money, nor how much. (p. 10.)
Technically, all this is a violation of the Anti-Deficiency Act, which carries felony sanctions of fines and imprisonment.
Here's an accounting (pun intended) of the latest "deficiencies" they admitted to in 2017.
It's a PDF, 'only' 33 pages long.
Both Congress and the Pentagon report and hold hearings annually on DoD’s utter lack of financial accountability and sometimes the "Cons" enact new laws, but many of those new laws simply allow the Pentagon to ignore the old ones
GIVEN 8 YEARS TO PREPARE FOR THIS AUDIT
The 2009 law requiring the Defense Department to be audit-ready by 2017 provides for no penalties if it misses the deadline. Senators Tom Coburn, an Oklahoma Republican, and Joe Manchin, a West Virginia Democrat, introduced legislation earlier this year that would, among other things, limit new weapons programs, if the Pentagon misses the target. The bill has attracted co-sponsors, but otherwise has gone nowhere in the Senate.
From 1995 through 2002, Senator Charles Grassley pushed through an amendment to the annual defense appropriations bill requiring the Pentagon to account for its expenditures by following one seemingly simple procedure: match each payment to the expense it covered. The order was ignored, and Grassley gave up. “The goal was for the practice to become self-sustaining,” Grassley said in an email to Reuters. “It was wishful thinking.”
John Hamre became Defense Department comptroller in 1993, three years after Congress passed the law requiring that the Pentagon be audit-ready by 1996. He didn’t think upgrading accounting systems was vital to the Pentagon’s ability to fulfill its mission. “Would I like a better accounting system? Absolutely,” said Hamre, who left his post in 1997 and now is chairman of the Pentagon’s Defense Policy Board and chief executive of the Center for Strategic and International Studies, a bipartisan, nonprofit think tank in Washington, D.C. But, he said, “we’re getting military missions done every day. We just don’t use accounting for that.”
Many of the people interviewed, involved at all levels of the Pentagon’s accounting modernization program, said that until recently, lack of interest or attention from the very top - from secretaries of defense and the civilian secretaries of the individual military services - has meant that no one steps in to impose order and consistency.
William Hartung, Director of the Arms and Security Project at the Center for International Policy, summed up the accountability crisis at the Pentagon by saying:
“Call it irony or call it symptomatic of the department’s way of life, but an analysis by the Project on Government Oversight notes the Pentagon has so far spent roughly $6 billion on ‘fixing’ the audit problem — with no solution in sight.
If anything, the Defense Department’s accounting practices have been getting worse.”
The following was written in March, 2019, by Matt Taibbi, a contributing editor for Rolling Stone and winner of the 2008 National Magazine Award for columns and commentary.
It's just a small bit of the article so be sure to go read the rest?
"A retired Air Force auditor - we’ll call him Andy - tells a story about a thing that happened at Ogden Air Force Base, Utah. Sometime in early 2001, something went wrong with a base inventory order. Andy thinks it was a simple data-entry error. “Someone ordered five of something,” he says, “and it came out as an order for 999,000.” He laughs. “It was probably just something the machine defaulted to. Type in an order for a part the wrong way, and it comes out all frickin’ nines in every field.” Nobody actually delivered a monster load of parts. But the faulty transaction - the paper trail for a phantom inventory adjustment never made — started moving through the Air Force’s maze of internal accounting systems anyway.
A junior-level logistics officer caught it before it went out of house. Andy remembers the incident because, as a souvenir, he kept the June 28th, 2001, email that circulated about it in the Air Force accounting world, in which the dollar value of the error was discussed. "Wanted to keep you all informed of the massive inventory adjustment processed at [Ogden] on Wednesday of this week. It isn’t as bad as we first thought ($8.5 trillion). The hit . . . $3.9 trillion instead of the $8.5 trillion as we first thought."
The Air Force, which had an $85 billion budget that year, nearly created in one stroke an accounting error more than a third the size of the U.S. GDP, which was just over $10 trillion in 2001. Nobody lost money. It was just a paper error, one that was caught. “Even the Air Force notices a trillion-dollar error,” Andy says with a laugh. “Now, if it had been a billion, it might have gone through.”
Years later, Andy watched as another massive accounting issue made its way into the military bureaucracy. The Air Force changed one of its financial reporting systems, and after the change, the service showed a negative number for inventory - everything from engine cores to landing gear - in transit. This suspicious number is still there. You can see a sudden spike in the Air Force’s working-capital fund’s stagnant spare-parts numbers. It was $23.2 billion in 2015, $23.3 billion in 2016, $24.4 billion in 2017, and then suddenly $28.8 billion in September 2018. That doesn’t mean money was lost, or stolen. It does, however, mean the Air Force probably has less inventory on hand than it thinks it does.
Now retired, Andy sometimes visits his neighborhood library, which uses RFID smart labels, or radio frequency identification, allowing it to know where all its books are at all times.
Meanwhile, the Air Force, which has a $156 billion annual budget, still doesn’t always use serial numbers. It has no idea how much of almost anything it has at any given time. Nuclear weapons are the exception, and it started electronically tagging those only after two extraordinary mistakes, in 2006 and 2007.
BIG MISTAKES
In the first, the Air Force accidentally loaded six nuclear weapons in a B-52 and flew them across the country, unbeknownst to the crew. In the other, the services sent nuclear nose cones by mistake to Taiwan, which had asked for helicopter batteries.
NOT JUST THE PENTAGON
It’s impossible to overstate the enormity of the problem the DoD’s stalled audit poses. The fact that it can’t pass audit means the entire government is in the same boat. Until the Pentagon gets a passing grade, the whole United States will annually receive what’s called a “disclaimer of opinion” on its finances, which is accounting-ese for “Incomplete.”
Just over 50 years ago, Dwight Eisenhower gave his famous farewell address warning of the power of the “military-industrial complex.” The former war commander bemoaned the creation of a “permanent armaments industry of vast proportions,” and said the “potential for the disastrous rise of misplaced power exists and will persist.”
Eisenhower’s warning is celebrated by the left as a caution against the overweening political power of warmakers, but as we’re now seeing, it was predictive also as a fiscal conservative’s nightmare vision of the future. The military has become an unstoppable mechanism for hoovering up taxpayer dollars and deploying them in the most inefficient manner possible. Schools crumble, hospitals and obstetric centers close all over the country, but the armed services are filling warehouses for some programs with “1,000 years’ worth of inventory,” as one Navy logistics officer recently put it.
It’s the ultimate example of the immutability of the American political system. Even when there’s broad bipartisan consensus, and laws passed, and both money allocated for changes and agencies created to enact them - if the problem is big enough, time bends toward corruption, and chaos always outlasts reform. Eisenhower couldn’t have predicted how right he was."
HOW MANY PEOPLE DOES IT TAKE TO RUN SUCH A SHODDY SHOW?
OVER A MILLION ?"Based on reams of personnel and cost data, [a] report revealed for the first time that the Pentagon was spending almost a quarter of its $580 billion budget on overhead and core business operations such as accounting, human resources, logistics and property management. …the Defense Department was paying a staggering number of people — 1,014,000 contractors, civilians and uniformed personnel — to fill back-office jobs far from the front lines. That workforce supports 1.3 million troops on active duty, the fewest since 1940."
As Skidmore and Laurence Kotlikoff wrote in the Forbes article,
"The ongoing occurrence and gargantuan nature of unsupported, i.e., undocumented, U.S. federal government expenditures as well as sources of funding for these expenditures should be a great concern to all tax payers.
Taken together these reports point to a failure to comply with basic Constitutional and legislative requirements for spending and disclosure. We urge the House and Senate Budget Committee to initiate immediate investigations of unaccounted federal expenditures as well as the source of their payment."
BUT, STILL, WHY DOES CONGRESS DO NOTHING TO PUNISH ANYONE WHEN THIS MUCH MONEY IS IN LIMBO SOMEWHERE?
$21 TRILLION WOULD ALMOST PAY OFF THE NATIONAL DEBT!
AND WHY AREN'T WE, THE PEOPLE DEMANDING ANSWERS AND CHANGE?
___________________________________
SOME SOURCES FOR THIS BLOG, FOR FURTHER READING:
--http://www.thefiscaltimes.com/Articles/2013/12/24/High-Cost-Pentagon-s-Poor-Bookkeeping
--https://msutoday.msu.edu/news/2017/msu-scholars-find-21-trillion-in-unauthorized-government-spending-defense-department-to-conduct/
--https://www.globalresearch.ca/how-21-trillion-in-u-s-tax-money-disappeared-full-scope-audit-of-the-pentagon/5638534
--https://www.mintpressnews.com/search-for-missing-21-trillion-comes-up-empty-as-pentagon-fails-first-audit-in-71-year-history/253272/
--https://www.dailyherald.com/news/20181204/fact-check-alexandria-ocasio-cortez-makes-a-21-trillion-mistake
--https://media.defense.gov/2019/Jan/08/2002077454/-1/-1/1/UNDERSTANDING%20THE%20RESULTS%20OF%20THE%20AUDIT%20OF%20THE%20DOD%20FY%202018%20FINANCIAL%20STATEMENTS.PDF
--http://www.thefiscaltimes.com/Articles/2013/12/24/High-Cost-Pentagon-s-Poor-Bookkeeping
--WASTE, GREED AND FRAUD is a fine read that focuses briefly on the Middle East money pit and under-the table deals with big name government contractors that some in Congress are quite attached to. http://harvardpolitics.com/united-states/waste-greed-fraud-business-makes-worlds-greatest-army/
ALSO:
"The Pentagon Labyrinth, 10 Short Essays to Help You Through It". It was written by, “10 Pentagon Insiders, Retired Military Officers and Specialists With Over 400 Years of Defense Experience.”
//WW
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